Academic journal article East Asian Economic Review

Quantifying the Comprehensive and Progressive Agreement for Trans-Pacific Partnership *

Academic journal article East Asian Economic Review

Quantifying the Comprehensive and Progressive Agreement for Trans-Pacific Partnership *

Article excerpt

I. INTRODUCTION

Following the withdrawal by the Trump Administration of the United States from the Trans-Pacific Partnership (TPP) agreement, the other eleven TPP parties ("the Eleven") entered into negotiations to implement the agreement largely as negotiated, but without the United States. Agreement on the core elements of a revised TPP - renamed the Comprehensive Progressive Agreement for Trans-Pacific Partnership (CPTPP) - was reached on the margins of the Asia-Pacific Economic Cooperation (APEC) summit in Da Nang in November 2017.

The original TPP aspired to rewrite the ground rules of international commerce for the 21st Century, modelled on the US economic governance regime. The CPTPP preserves the original text of the TPP agreed in October 2016, but suspends a number of provisions and leaves open a number of specific issues to be resolved.

The suspended provisions impact on the CPTPP regime in the following areas:

* Express shipments;

* Investment (in particular, the investor-state dispute settlement or ISDS mechanism);

* The intellectual property (IP) property rights regime, in particular measures covering, inter alia:

* patentable subject matter,

* patent term restoration,

* protection of undisclosed data for pharmaceutical approvals,

* extended term of protection for data used to developed biologic medicines,

* technological protection measures (TPMs) and rights management information (RMI), and

* copyright extension;

* Resolution of telecommunications disputes.

The issues that remain outstanding for further negotiations (with the CPTPP Member requiring modifications in parentheses) include:

* State-owned enterprises (Malaysia);

* Services and investment non-conforming measures (Brunei Darussalam);

* Dispute settlement trade sanctions (Vietnam); and

* Cultural exception (Canada)

This paper assesses the quantitative implications of the CPTPP going forward. The CPTPP policy shock consists of the liberalization commitments made by the parties in the original TPP for tariffs and non-tariff barriers (NTBs) in goods and services and foreign direct investment (FDI). These commitments are evaluated against the OECD's Trade Facilitation Index (TFI), Services Trade Restrictiveness Index (STRI), and Foreign Direct Investment Restrictiveness Index (FDIR) for goods trade, cross-border services trade, and investment, respectively. For goods trade, we take into account the impacts of rules of origin (ROOs) in terms of a lessthan-full rate of preferences utilization, but assume a high rate of utilization to reflect a key TPP outcome, namely ROOs regionalization. For services trade, we take account of the value of binding commitments. The services estimates now constitute an upper bound depending on the extent of derogations from the final TPP text originally negotiated, if and when the CPTPP is implemented.

The CPTPP is simulated on a dynamic version of the Global Trade Analysis Project's (GTAP) computable general equilibrium (CGE) model that incorporates FDI by introducing a foreign-owned representative firm into each GTAP regionsector. FDI responds in tandem with domestic investment to changes in expected rates of return (RORs) in each region-sector due to trade liberalization and reductions in NTBs facing investment. To bring out the relative contribution of the CPTPP's various quantifiable elements, we simulate the shocks on a sequential basis for each policy measure, such that the marginal effect of each set of measures is brought out.

The rest of this paper is organized as follows: section 2 sets out some basic background on the TPP economies; section 3 provides an overview of the quantitative modeling; section 4 describes the policy shock; section 5 sets out the results; and section 6 provides a discussion and draws conclusions.

A similar calculus applies in terms of the CPTPP's role as a market for imports and a source of outward FDI. …

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