The OECD’s trade model, METRO, is a computable general equilibrium (CGE) model that uses data to explore the economic impact of changes in policy, technology and other factors. CGE models are powerful tools that show how different sectors are linked, both within and between economies. As such, METRO tracks the myriad ways multiple economies are connected, how production and trade are linked in global value chains and how resources such as labour, capital and natural resources are best allocated across all economic activities.
Currently, the METRO database covers 64 economies across 65 economic sectors. It relies on the Global Trade Analysis Project (GTAP) database, and uniquely incorporates recent OECD statistical developments in non-tariff measures, services trade and trade in value added. For example, METRO allows users to analyse global value chains by drawing on the OECD Trade in Value Added (TiVA) database, providing a platform to more fully integrate structural policy issues in the analysis of trade policy.
METRO also features an extensive library of trade-related policies, including current border tariff rates, non-tariff measures, export restrictions, domestic taxes and support programmes. Using METRO, it is possible to track trade flows by their use (i.e. intermediate, household, government, and investment) in addition to the bilateral links between source and destination markets. This innovation greatly enhances the ability to model movements of goods and services, especially along global value chains.
OECD analysts are using METRO to trace how a given policy can affect outcomes such as prices, production and employment by sector and across countries. Identifying important indirect and flow-on effects through these linkages is a crucial part of assessing the net impacts of a policy change on growth and jobs.
The model has already been used in a variety of topical analyses, including to highlight the impact that local content requirements have on intermediate inputs and the development of GVCs. It showed, for instance, that countries are in fact worse off when they impose export restrictions on their own steel and steel-related raw materials, due to the ensuing effects across critical supply chains. It was also used for analysing economic effects of the exit of the UK from the European Union; and most recently, to show that trade protection has a limited role to play in lowering global current account imbalances.
The model is available under a Creative Commons license and free; review the METRO Model Documentation for a detailed description of the model.
Trade scenario analysis using the OECD Metro Model
The OECD METRO model has been most recently used to explore a series of illustrative policy-change scenarios designed to examine both long standing and recently emerged issues in the trade policy debate. Drawing upon analysis from the OECD METRO Model, these briefs address:
Analysing the costs and benefits of global value chains
The economic effects of the COVID-19 pandemic have contributed to renewed discussions on the benefits and costs of global value chains (GVCs), and in particular on whether GVCs increase risks and vulnerabilities to shocks. To serve as a starting point for an informed conversation around these questions, this note presents the results of a set of economic model simulations, using the OECD’s trade model, METRO. We explore two stylised versions of the global economy, one with production fragmentation in GVCs, much as we see today, and another where production is more localised and businesses and consumers rely less on foreign suppliers.