Ever since protectionist tendencies began to appear on an increasing scale during the 1970s, Project LINK has tried to estimate the effects on the world economy. At first, there was general consideration of the effects of the increased tariffs (see Klein and Su, 1979). Not surprisingly, the system validated the arguments in favor of free trade, in the sense that protectionism generated overall economic loss in the form of reduced global production and trade volume. The microeconomic effects of trade barriers are argued to be welfare losses and departures from (Pareto) optimality. It was, however, the objective of LINK to examine the macroeconomic effects.

Trade barriers extend far beyond the imposition of tariffs, but, for understandable reasons of quantification and also ease of computation, tariff changes served as the instrument of protectionism. In principle, non-tariff barriers to international trade can be approximated by a corresponding tariff rate, but we did not undertake the extensive analysis that would be necessary to pair non-tariff and tariff barriers.

For the present exercise, tariffs are imposed on total imports of given groups of countries, specifically, the EEC (Common Market) and the ROW (Rest of the World). On occasion, within the context of LINK simulations we have further examined tariff influences on classes of imports, manufactures, e.g., crude oil, or combinations excluding some primary products (see Klein, Pauly, and Petersen, 1987).