<p>The Philippine government pursued major structural economic reforms in the last one and a half decades. One of the sectors where reforms were vigorously pursued is the foreign trade, in which policies of tariff reduction, simplification of tariff structure, and “tariffication” of quantitative restrictions were implemented.</p>
<p>While some of these reforms were pursued unilaterally, others were done under various multilateral agreements such as the World Trade Organization (WTO), as well as regional agreements under the Association of Southeast Asian Nations (ASEAN) such as the ASEAN Free Trade Area (AFTA).</p>
<p>The paper analyzes the possible effects of tariff reduction in the 1990s on unemployment, household income and household welfare using a computable general equilibrium model calibrated to the 1994 social accounting matrix. The series of simulation experiments indicate that tariff reduction is welfare improving. The transmission channel is not so much through the improvement in household income, but through the reduction in domestic and consumer prices.</p>
<p>In terms of resource reallocation effects and fact or movements, the non-food manufacturing sector benef its the most. As a result, unemployment in production labor declines while its wages improve. However, agriculture sector contracts which results in higher unemployment in the sector and lower agriculture wages.</p>