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China and the Trans‐Pacific Partnership: A Numerical Simulation Assessment of the Effects Involved
Author(s) -
Li Chunding,
Whalley John
Publication year - 2014
Publication title -
the world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/twec.12123
Subject(s) - economics , welfare , china , international economics , negotiation , general partnership , free trade , international trade , trade diversion , production (economics) , international free trade agreement , macroeconomics , market economy , political science , finance , law
The Trans‐Pacific Partnership ( TPP ) is a new negotiation on cross‐border liberalisation of goods and service flows going beyond WTO disciplines and focused on issues such as regulation and border controls. This paper uses numerical simulation methods to assess the potential effects of a TPP agreement on C hina and also C hina's inclusion or exclusion on other countries. We use a numerical 11‐country global general equilibrium model with trade costs and inside money. Trade costs are calculated using a method based on gravity equations. TPP barriers potentially removable are trade costs less tariffs. Simulation results reveal that C hina will be slightly hurt by TPP initiatives in welfare when C hina is out, but the total production and export will be increased. Other non‐ TPP countries will be mostly hurt in welfare, but member countries will mostly gain. If C hina takes part in TPP , she will significantly gain and increase other TPP countries' gain as well. The comparison of TPP effects and global free trade effects show that the positive effects of global free trade are stronger than TPP effects. Japan's joining TPP would be beneficial to both herself and most of other TPP countries, but which negative effects on China's welfare when out of TPP will increase further.