Technical Report Emergent Uncertainty in Regional Integration -Economic impacts of alternative RTA scenarios-


16-282017-01 , GRIPS Policy Research Center
Recently a number of large-scale uncertainties have emerged as threats to the development of regional integration. Most notably, the UK has decided to leave the EU, and the new US president has stated that he would withdraw the US from the Trans-Pacific Partnership (TPP). This paper presents a quantitative comparison of the economic impacts of a number of alternative regional trade agreement (RTA) scenarios. The impacts were estimated using a Computable General Equilibrium (CGE) model of global trade. It is estimated that the US would no longer gain and might even lose, if it withdraws from TPP. The benefits of the bilateral Free Trade Agreement (FTA) and Economic Partnership Agreement (EPA) with Japan would be smaller than those of TPP. Higher tariffs on US imports from China and Mexico would lead to significant deterioration of the economic welfare of not only China and Mexico but also the US. Furthermore, China’s benefits from the Regional Comprehensive Economic Partnership (RCEP) might be relatively limited depending on the levels of the agreement and weighed against the adverse impacts of the possible US tariffs. The UK economy would suffer as a result of BREXIT, but the cost of BREXIT could be smaller than the possible benefits of joining TPP. All in all, it has been shown that income gains resulting from non-tariff measure (NTM) reductions are much larger than those arising from tariff removals. Global best efforts are required to achieve higher level RTAs and the resulting larger economic benefits.
JEL classification Codes: D58, F13, F14, F15, F17

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