Impacts of tariff reform policies on the economy and environment of Malaysia

What is it about?

Malaysia is among the relatively more open economies in Asia. Many economic and environmental effects resulting from trade liberalization is cause of caution for more open economies like Malaysia. This study, by applying a computable general equilibrium, investigates the economic and environmental effects resulting from trade liberalization on Malaysia. By considering 50 per cent and 100 per cent tariff reforms, this study concluded that greater liberalization leads to a greater increase in the overall real gross domestic product and Malaysian trade flows. These tariff reforms also increase household income and consumption leading to an increase in the welfare of all household groups. Moreover, we found that these policies would lead to greater reduction in poverty in the urban households in compared to other household groups. Results indicate that emissions of four more local air pollutants, (i.e. Particular Matter, CO, SO2 and NOx) are predicted to decrease as a result of trade liberalization, whilst emissions of carbon dioxide (CO2), as a global air pollutant, increase. The results also suggest that the environmental impacts will be considerably greater with a higher rate of tariff reform.

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Why is it important?

It provides a good viewpoint for policymakers.

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