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A Trade and Welfare Analysis of Tariff Changes Within the TPP

Author

Listed:
  • Cheong Juyoung

    (School of Economics, University of Queensland, Level 6 – Colin Clark Building (39), St Lucia, QLD 4072, Australia)

  • Takayama Shino

    (School of Economics, University of Queensland, Level 6 – Colin Clark Building (39), St Lucia, QLD 4072, Australia)

Abstract

This paper examines the effects of the Trans-Pacific Partnership (TPP) tariff reductions on trade flows and welfare of the TPP members and nonmembers following the Caliendo and Parro (2015) method. We use comprehensive sectoral data on 39 countries and the rest of the world, including those in the Association of Southeast Asian Nations (ASEAN) and the Organization for Economic Co-operation and Development (OECD). Our results show that many TPP nonmembers along with the TPP members gain from the TPP tariff reductions, suggesting the existence of a positive externality, with the welfare gains mainly arising from the changes in the terms of trade. Our analysis also shows that the TPP members increase their imports from other TPP members and decrease from non-TPP members, but the trade creation effects exceed the trade diversion effects. Our calibration results under various assumptions of the model emphasize the role of multiple sectors and sectoral linkages in the welfare analysis of the TPP tariff reductions.

Suggested Citation

  • Cheong Juyoung & Takayama Shino, 2016. "A Trade and Welfare Analysis of Tariff Changes Within the TPP," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 16(1), pages 477-511, January.
    • Handle: RePEc:bpj:bejeap:v:16:y:2016:i:1:p:477-511:n:4
    DOI: 10.1515/bejeap-2014-0119
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    References listed on IDEAS

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    1. Kimberly A. Clausing, 2001. "Trade creation and trade diversion in the Canada - United States Free Trade Agreement," Canadian Journal of Economics, Canadian Economics Association, vol. 34(3), pages 677-696, August.
    2. Juyoung Cheong & Do Won Kwak & Kam Ki Tang, 2015. "Can Trade Agreements Curtail Trade Creation and Prevent Trade Diversion?," Review of International Economics, Wiley Blackwell, vol. 23(2), pages 221-238, May.
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    Cited by:

    1. Tsang, Cheuk Yan & Shakur, Shamim, 2017. "New Zealand’s Trade Prospects in an Uncertain Trans-Pacific Partnership (TPP) Environment: Results from Gravity Model," 2017 Conference, October 19-20, Rotorua, New Zealand 269528, New Zealand Agricultural and Resource Economics Society.

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    More about this item

    Keywords

    preferential trade agreements; Trans-Pacific Partnership; welfare;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration

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