Policy simulation of the TPP impact on China’s economy

LI Chunding1 SHI Xiaojun2

(1.Institute of World Economics and Politics,CASS, Beijing , China 100732)
(2.School of Finance, Renmin University of China, Beijing , China 100872)

【Abstract】Trans-Pacific Partnership negotiation had already reached an agreement, a high standard regional trade agreement who aims to construct international economics and trade new rules will take effect soon. China is an important and big economic and trade country in Asia-Pacific region but is not in TPP, then the main topic will be how TPP influence China economy. This paper constructed a 29-country (or region) global general equilibrium model,introduced trade cost and disposed into tariff and non-tariff, and added a monetary supply structure to endogenously determine trade imbalance. We used 2013 as our benchmark data year to calibrate model and simulate the TPP influence under different scenarios. The simulation results find that present 12-country TPP will negatively influence China but the effects are weak. As more countries take part in TPP in the future, negative effects to China will further decrease. But if TPP forms a new international economics and trade rule, it will give China more negative shock. Meanwhile, the joint effects of TPP and Trans-Atlantic Trade and Investment Partnership(TTIP) will generate more negative influence to China. In general, TPP's influences to China are limited, and cannot restrain China.

【Keywords】 Trans-Pacific Partnership; general equilibrium; numerical simulation; impact;

【DOI】

【Funds】 Supported by Project of China Postdoctoral Science Foundation (2013M540202) Project of the National Natural Science Foundation (71673281)

Download this article

    Footnote

    [1]. (1)The statistics was calculated based on the data from the databases of the World Bank and the World Trade Organization. [^Back]

    [2]. (1)The choice and the data of the 29 countries or regions does not only take the need to study TPP into account by including all of the member states of TPP, but it also takes the important major member states into consideration to fulfil the need to study other regional integration for the future reference. [^Back]

    [3]. (1)If any reader is interested in the data, please contact the author for the detail. [^Back]

    [4]. (2)There are often differences between the import and export trade statistics of the United Nations Comtrade database, which challenges the authenticity of trade data. However, but it is difficult to solve this problem regardless of which trade statistics are used. [^Back]

    [5]. (3)In this paper, the selection of alternative elasticity is arbitrary, but this paper will select different elasticity values to analyze the sensitivity of the simulation results to test the sensitivity and robustness of the simulation results for elasticity. [^Back]

    [6]. (4)If any reader is interested in the data, please contact the author for the detail. [^Back]

    [7]. (5)The advantage of this trade cost calculation method is it is easy to calculate and the amount of data required is not high. The data required in this paper contains the trade costs of 29 countries or regions, and the estimation by this method can simplify the calculation cumbersome to a certain extent. Of course, the use of large-scale statistical data and measurement methods to estimate the cost of trade, to a certain extent, will be more accurate. Nevertheless, due to the limitation of the workload and data access restrictions of this paper, it is difficult to put into practice. [^Back]

    [8]. (1)The determination of the extent to which non-tariff is reduced is based on a reasonable assumption. There is a certain extent of arbitrariness, but to what extent TPP non-tariff barriers are reduced is difficult to measure. A more reasonable approach is to assume several different settings so as to have several outcomes to compare with each other. Nevertheless, due to the limitation of the length of the paper, it is impossible to set too many kinds of situations to simulate. As a result, this paper has chosen a relatively reasonable set of simulation; at the same time, the sensitivity of the core analog part of the current agreement to the impact of non-tariff reduction analysis, found that the simulation results are only numerical changes, regular changes stay constantly unchanged. [^Back]

    References

    [1] Li, X. International Economic Review (国际经济评论), (2): 17–27 (2012).

    [2] Shen, M. Contemporary Asia Pacific (当代亚太), (1): 6–34 (2012).

    [3] USTR. Summary of the Trans-Pacific Partnership Agreement. USTR News, 2015.

    [4] Petri, P. A., M. G. Plummer, and F. Zhai. The Trans-Pacific Partnership and Asia-Pacific Integration: A Quantitative Assessment. East-West Center Working Papers, 2011.

    [5] Li, C., and J. Whalley. China and the Trans-Pacific Partnership: A Numerical Simulation Assessment of the Effects Involved. The World Economy, 2014, 37 (2): 169–192.

    [6] Strutt, A., P. Minor and A. Rae. A Dynamic Computable General Equilibrium Analysis of the Trans-Pacific Partnership Agreement: Potential Impacts on the New Zealand Economy. New Zealand Ministry of Foreign Affairs & Trade (MFAT) Report, 2015.

    [7] Areerat, T., HS Ito Kameyama, and K. Yamauchi. Trans Pacific Strategic Economic Partnership with Japan, South Korea and China Integrate: General Equilibrium Approach. American Journal of Economics and Business Administration, 2012, 4 (1): 40–46.

    [8] Itakura, K., and H. Lee. Welfare Change and Sectoral Adjustments of Asia-Pacific Countries under Alternative Sequencings of Free Trade Agreements. OSIPP Discussion Paper, 2012.

    [9] Petri, P. A., and M. G. Plummer. The Trans-Pacific Partnership and Asia-Pacific Integration: Policy Implications. Peterson Institute for International Economics, 2012.

    [10] Williams, B. R. Trans-Pacific Partnership Countries: Comparative Trade and Economic Analysis. CRS Report for Congress, 2013.

    [11] Banga, R. Trans-Pacific Partnership Agreement: Implications for Malaysia’s Domestic Value-Added Trade. UNCTAD Working Paper, 2015.

    [12] Deardorff, A. V. Trade Implications of the Trans-Pacific Partnership for ASEAN and Other Asian Countries. University of Michigan Working Paper, 2013.

    [13] Wan, L. Contemporary Asia Pacific (当代亚太), (4): 60–73 (2011).

    [14] Peng, Q. & NZhang, B. Journal of International Trade (国际贸易问题), (4): 83–95 (2013).

    [15] Zhou, R. World Economy and Politics Forum (世界经济与政治论坛), (6): 45–57 (2014).

    [16] Wang, Y. China Industrial Economics (中国工业经济), (12): 40–45 (2004).

    [17] Whalley, J., and L. Wang. The Impact of Renminbi Appreciation on Trade Flows and Reserve Accumulation on a Monetary Trade Model. Economic Modeling, 2010, 28 (1): 614–621.

    [18] Shoven, J. B., and J. Whalley. Applying General Equilibrium. Cambridge: Cambridge University Press, 1992.

    [19] Betina, V. D., R. A. McDougall, and T. W. Herel. GTAP Version 6 Documentation: Chapter 20 ‘Behavioral Parameters. Working Paper, 2006.

    [20] Novy, D. Gravity Redux: Measuring International Trade Costs with Panel Data. Economic Inquiry, 2013, 51(1): 101–121.

    [21] Wong, A. Measuring Trade Barriers: An Application to China’s Domestic Trade. University of Chicago, Job Market Paper, 2012.

    [22] Chaney, T. Distorted Gravity: The Intensive and Extensive Margins of International Trade. American Economic Review, 2008, 98 (4): 1707-1721.

    [23] Anderson, J., and E. V. Wincoop. Borders, Trade and Welfare. Susan Collins and Dani Rodrik, eds., Brookings Trade Forum 2001. Washington: The Brookings Institute, 2003.

    [24] Eaton, J., and S. Kortum. Technology, Geography, and Trade. Econometrica, 2002, 70 (5): 1741–1779.

    [25] Jin, B. China Industrial Economics (中国工业经济), (11): 5–12 (2008).

This Article

ISSN:1006-480X

CN: 11-3536/F

Vol , No. 10, Pages 57-73

October 2016

Downloads:0

Share
Article Outline

Abstract

  • 1 Introduction
  • 2 Theoretical Model
  • 3 Data and parameter calibration
  • 4 Simulation of TPP impact
  • 5 Conclusions and policy implications
  • Footnote

    References