China and the TPP: A Numerical Simulation Assessment of the Effects Involved
AbstractThe Trans-Pacific Partnership (TPP) is a new negotiation on cross border liberalization of goods and service flows going beyond WTO disciplines and focused on issues such as regulation and border controls. Though the US, Australia and other pacific countries are included, China is notable for its exclusion from the process thus far. This paper uses numerical simulation methods to assess the potential effects of a TPP agreement on China and the other participating countries. We use a numerical five-country global general equilibrium model with trade costs and monetary structure incorporating inside money to allow for impacts on trade imbalances. Trade costs are calculated using a method based on gravity equations. Simulation results reveal that China will be hurt by TPP initiatives, but the negative effects are relatively small given the geographical and commodity composition of China’s trade. Other non-TPP countries will be hurt but member countries will all gain. Japan’s joining TPP would be beneficial to both herself and all other TPP countries, but negative effects on China and other non-TPP countries will increase further. If China takes part in TPP, it will increase China’s and other TPP countries’ gain, but non-TPP countries will be hurt more. As a regional free trade arrangement, TPP effects are different from global free trade effects which will benefit all countries (not just member countries) in the world, and the positive effects of global free trade are stronger than TPP effects.
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Date of creation: May 2012
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Find related papers by JEL classification:
- C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
- F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications
- F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-05-29 (All new papers)
- NEP-CMP-2012-05-29 (Computational Economics)
- NEP-INT-2012-05-29 (International Trade)
- NEP-TRA-2012-05-29 (Transition Economics)
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