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

Kenichi Kawasaki ()
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Kenichi Kawasaki: National Graduate Institute for Policy Studies

No 16-27, GRIPS Discussion Papers from National Graduate Institute for Policy Studies

Abstract: 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 will withdraw the US from the Trans-Pacific Partnership (TPP). This paper presents a quantitative comparison of the economic impact 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 will no longer gain, and may even lose, if it withdraws from TPP. The benefits of the bilateral Free Trade Agreement (FTA) and Economic Partnership Agreement (EPA) with Japan will be smaller than those of TPP. Higher tariffs on US imports from China and Mexico will lead to significant deterioration of the economic welfare of not only China and Mexico but also the US. Furthermore, China fs benefit from the Regional Comprehensive Economic Partnership (RCEP) may be relatively limited depending on the levels of the agreement and weighed against the adverse impacts of the possible US tariffs. The UK economy will 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 measures (NTMs) reductions are much larger than those arising from tariff removals. Global best efforts are required to achieve larger scale RTAs and the resulting predictably larger economic benefits.

Pages: 21 pages
Date: 2017-01
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