Trade Model Development at the OECD

In its capacity of providing trade policy advice to its 34 member countries, the OECD is often called upon to provide input with a relatively short turn-around or in answer to a specific set of traderelated policy concerns. Currently, we rely on ‘off-the-shelf’ models of trade which are not, by definition, tailored to suit our needs. Starting from our current and foreseeable future needs for trade modelling we identify design options in areas of particular concern to the OECD including: services trade and protection, global value chains and trade in value added, and the capacity to add specialized and detailed sectoral modules if and when required. Thus the OECD aims to develop a flexible framework within which technical developments can be more easily incorporated but not necessarily maintained, in anexisting model. Given that best practices in empirical trade modelling are still evolving, in particular those relating to firm-level trade, national origin of firms, value added trade, and trade in services, there is a need to maintain an open structure. This need for flexibility is further compounded by the uncertainties relating to the availability of the data required to accomplish these extensions. It is not obvious exactly which of the recent theoretical advances will be supported by data collection efforts and become standard features of the models of tomorrow.