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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.

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  • 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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    References listed on IDEAS

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    Cited by:

    1. Kakali Mukhopadhyay & Paul J. Thomassin, 2018. "The impact of Trans-Pacific Partnership agreement on the Canadian economy," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 7(1), pages 1-29, December.
    2. Lee, Hiro & Itakura, Ken, 2013. "What Might be a Desirable FTA Path towards Global Free Trade for Asia-Pacific Countries?," Conference papers 332391, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    3. 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.
    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.
    6. 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.
    7. Paramita Dasgupta & Kakali Mukhopadhyay, 2017. "The impact of the TPP on selected ASEAN economies," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 6(1), pages 1-34, December.
    8. Yang, Gaoju & Huang, Xianhai & Huang, Jiahui & Chen, Hangyu, 2020. "Assessment of the effects of infrastructure investment under the belt and road initiative," China Economic Review, Elsevier, vol. 60(C).
    9. Christopher S.P. Magee, 2017. "The Increasing Irrelevance of Trade Diversion," Kyklos, Wiley Blackwell, vol. 70(2), pages 278-305, May.

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    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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