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China and the TPP: A Numerical Simulation Assessment of the Effects Involved

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  • Chunding Li
  • John Whalley

Abstract

The 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.

Suggested Citation

  • Chunding Li & John Whalley, 2012. "China and the TPP: A Numerical Simulation Assessment of the Effects Involved," NBER Working Papers 18090, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:18090
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    1. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 691-751, September.
    2. Dennis Novy, 2013. "Gravity Redux: Measuring International Trade Costs With Panel Data," Economic Inquiry, Western Economic Association International, vol. 51(1), pages 101-121, January.
    3. Keith Head & John Ries, 2001. "Increasing Returns versus National Product Differentiation as an Explanation for the Pattern of U.S.-Canada Trade," American Economic Review, American Economic Association, vol. 91(4), pages 858-876, September.
    4. Shoven,John B. & Whalley,John, 1992. "Applying General Equilibrium," Cambridge Books, Cambridge University Press, number 9780521266550.
    5. Whalley John & Yu Jun & Zhang Shunming, 2012. "Trade Retaliation in a Monetary-Trade Model," Global Economy Journal, De Gruyter, vol. 12(1), pages 1-29, March.
    6. 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.
    7. Ken Itakura & Hiro Lee, 2012. "Welfare Changes And Sectoral Adjustments Of Asia-Pacific Countries Under Alternative Sequencings Of Free Trade Agreements," Global Journal of Economics (GJE), World Scientific Publishing Co. Pte. Ltd., vol. 1(02), pages 1-22.
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    Cited by:

    1. repec:spr:jecstr:v:7:y:2018:i:1:d:10.1186_s40008-017-0102-y is not listed on IDEAS
    2. Buhara Aslan & Merve Mavus Kutuk & Arif Oduncu, 2015. "Transatlantic Trade and Investment Partnership and Trans-Pacific Partnership: Policy Options of China," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 23(6), pages 22-43, November.
    3. repec:spr:jecstr:v:6:y:2017:i:1:d:10.1186_s40008-017-0086-7 is not listed on IDEAS
    4. Hiro Lee & Ken Itakura, 2014. "TPP, RCEP, and Japan's Agricultural Policy Reforms," OSIPP Discussion Paper 14E003, Osaka School of International Public Policy, Osaka University.
    5. Fan He & Panpan Yang, 2015. "China's Role in Asia's Free Trade Agreements," Asia and the Pacific Policy Studies, Wiley Blackwell, vol. 2(2), pages 416-424, May.

    More about this item

    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

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