Abstract
Before the Trans-Pacific Partnership (TPP) was scheduled to enter into force, the United States withdrew from the trade accord. Eleven other TPP signatories decided to revive the agreement, which led to the implementation of the Comprehensive and Progressive Agreement for TPP (CPTPP). The objectives of this paper are threefold: (i) estimating economic welfare effects under alternative scenarios of the TPP/CPTPP, (ii) evaluating the extent of losses to the US from its withdrawal from TPP and expected gains from rejoining the Trans-Pacific trade accord, and (iii) examining whether the US economy would have to undergo extensive sectoral adjustments from its participation. To examine these issues, we employ a dynamic computable general equilibrium (CGE) model that incorporates agent-specific import preferences. The results suggest that the US loses an opportunity to gain approximately $100 billion per year in its long-run economic welfare by withdrawing from the TPP. However, it could recover most of its projected welfare gains by reengaging with the CPTPP. Since sectoral output adjustments in the US are relatively small, its adjustment costs from participation in the CPTPP would be limited.
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Notes
Since only 33 days were left in 2022 when the CPTPP came into force in Malaysia, we assumed Malaysia started implementing CPTPP in 2023.
The founding members of the IPEF are Australia, Brunei, Fiji, India, Indonesia, Japan, Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, the US, and Vietnam.
The government is contained in consumers since the final demand includes its spending.
CPTPP7: Australia, Canada, Japan, Mexico, New Zealand, Singapore, and Vietnam. CPTPP8: CPTPP7 plus Peru. CPTPP9: CPTPP8 plus Malaysia. CPTPP13: CPTPP9 plus Brunei, Chile, Korea, and the UK.
TPP8: Australia, Canada, Japan, Mexico, New Zealand, Singapore, the United States, and Vietnam. TPP9: TPP8 plus Peru. TPP10: TPP9 plus Malaysia. TPP14: TPP10 plus Brunei, Chile, Korea, and the UK.
A representative household’s utility is another welfare measure often used.
Although not reported in Table 5, percent changes in sectoral employment are similar to those in sectoral output.
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Acknowledgements
We thank James M. Brady, two anonymous reviewers, and the participants at the 24th Annual Conference on Global Economic Analysis, 23–25 June 2021, for their helpful comments.
Funding
We gratefully acknowledge financial support from the Japan Society for the Promotion of Science (JSPS) KAKENHI, Grant Numbers JP16H03616 and JP19K01677.
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Itakura, K., Lee, H. Should the United States rejoin the Trans-Pacific trade deal?. Int Econ Econ Policy 20, 235–255 (2023). https://doi.org/10.1007/s10368-023-00559-8
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DOI: https://doi.org/10.1007/s10368-023-00559-8