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Economy-wide impact of TPP: new challenges to China

Author

Listed:
  • Chandrima Sikdar

    (Narsee Monjee Institute of Management Studies)

  • Kakali Mukhopadhyay

    (Gokhale Institute of Politics and Economics
    McGill University
    Academy of Mathematics and Systems Science, Chinese Academy of Science)

Abstract

The Trans-Pacific Partnership (TPP) agreement as originally announced in October 2015 was undoubtedly the largest regional trade accord in history and, if approved, could have set new terms for the nearly US $28 trillion in trade and business investment between the parties to the deal. But the deal hit a roadblock when the USA decided to withdraw from the agreement in January 2017. While some of the countries are interested in taking the TPP forward without the USA, there are others which are still looking at convincing the USA to reconsider its position on the deal. Thus, while all the debate and deliberation around the prospect of TPP continues, an important point to note is that the TPP deal does not include China, world’s largest merchandise trader, which had combined exports and imports worth US $3963.5 billion in 2015. Against this backdrop, the present paper seeks to analyze the impact of the TPP agreement on various trade and other economic variables of China both if the USA continues to be a part of TPP and if the USA withdraws from TPP using the Global Trade Analysis Project. The unique contribution of the present study lies in analyzing the trade integration scenarios among the TPP member countries involving all of tariff and non-tariff liberalization and improved market access between the countries, without the USA. The results indicate that China’s trade with TPP region, both exports and imports, will suffer post-TPP implementation. Exports which are likely to be hit are leather and leather products, motor vehicles, meat products, processed food, iron and steel. Imports of oilseeds, paper and paper products, nonmetallic minerals and machinery are also expected to suffer. More than the loss in trade, China will experience substantial welfare loss due to all of allocative inefficiency, worsening terms of trade and endowment effect. Of these, worsening terms of trade explain the largest part of welfare loss to the country. With the withdrawal of the USA from the deal, China’s trade with the region and its welfare is likely to suffer less.

Suggested Citation

  • Chandrima Sikdar & Kakali Mukhopadhyay, 2017. "Economy-wide impact of TPP: new challenges to China," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 6(1), pages 1-29, December.
    • Handle: RePEc:spr:jecstr:v:6:y:2017:i:1:d:10.1186_s40008-017-0082-y
    DOI: 10.1186/s40008-017-0082-y
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    References listed on IDEAS

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    1. World Bank, 2016. "World Development Indicators 2016," World Bank Publications - Books, The World Bank Group, number 23969, December.
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    3. Peter A. Petri & Michael G. Plummer & Fan Zhai, 2012. "The Trans-Pacific Partnership and Asia-Pacific Integration: A Quantitative Assessment," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 6642, October.
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    5. Jeffrey J. Schott & Barbara Kotschwar & Julia Muir, 2013. "Understanding the Trans-Pacific Partnership," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 6727, October.
    6. Li Xin, 2014. "A General Equilibrium Analysis of the TPP Free Trade Agreement With and Without China," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 8(2), pages 115-136, May.
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    Cited by:

    1. Beckman, Jayson & Ivanic, Maros & Shaik, Saleem, 2022. "How Bilateral Trade Deals Get in the Way of Multilateral Agreements," Conference papers 333437, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    2. Kobylianska, A.V., 2019. "Enterprises’ openness to global economy: mega-regional framework," Journal of Applied Management and Investments, Department of Business Administration and Corporate Security, International Humanitarian University, vol. 8(4), pages 189-195, December.

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    More about this item

    Keywords

    TPP; China; CGE modeling; GTAP; Trade; Welfare;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration

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