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Assessing the economic impact and welfare effects of RCEP: A case study of Malaysia's progress in the ASEAN-China Free Trade Agreement

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  • Yang Jiang
  • Hartini Husin

Abstract

This paper employs the WITS-SMART model to analyze the potential impacts of the Regional Comprehensive Economic Partnership (RCEP) on specific industries in Malaysia and China. By modifying the Armington elasticity and the parameter ‘a’ in the Swiss formula, five distinct scenarios are established to simulate the effects of various tariff reduction schemes. The analysis reveals positive and significant overall trade effects. In a scenario of complete tariff elimination, Malaysia experiences higher trade and welfare effects compared to China, addressing the longstanding trade deficit between the two countries. Finally, recommendations are made to gradually reduce tariffs in stages and sectors, prioritize tariff reduction on specific goods, implement zero tariffs in China first, focus on products with international competitiveness, and address potential asymmetric industrial output effects.

Suggested Citation

  • Yang Jiang & Hartini Husin, 2024. "Assessing the economic impact and welfare effects of RCEP: A case study of Malaysia's progress in the ASEAN-China Free Trade Agreement," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 33(8), pages 1600-1625, November.
    • Handle: RePEc:taf:jitecd:v:33:y:2024:i:8:p:1600-1625
    DOI: 10.1080/09638199.2023.2285861
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