2017 Fiscal Year Annual Research Report
Do Global Value Chains Enlarge the Economic Effects of the TPP? A Multi-country CGE Analysis
| Project/Area Number |
16H03616
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| Research Institution | Osaka University |
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Principal Investigator |
利 博友 大阪大学, 国際公共政策研究科, 教授 (40283460)
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| Co-Investigator(Kenkyū-buntansha) |
大槻 恒裕 大阪大学, 国際公共政策研究科, 教授 (40397633)
板倉 健 名古屋市立大学, 大学院経済学研究科, 教授 (90405217)
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| Project Period (FY) |
2016-04-01 – 2019-03-31
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| Keywords | 経済政策 / TPP / RCEP / グローバル・バリューチェーン / CGE |
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| Outline of Annual Research Achievements |
After giving presentations at the 20th Annual Conference on Global Economic Analysis at Purdue University in June 2017, Lee, Itakura and Oyamada met with van der Mensbrugghe, overseas research collaborator of the project, at the Center for Global Trade Analysis. We obtained helpful advice from van der Mensbrugghe about how a world input-output table can be calibrated to a dynamic CGE model. During FY2017, we made good progress on constructing the model that incorporates sourcing of foreign inputs by country of origin.
The U.S. withdrawal from the TPP in January 2017 and subsequent agreement by 11 other TPP signatories to proceed with TPP11 without U.S. participation necessitated the modification of our policy scenarios. Specifically, in Scenario 1 we assume that the Regional Comprehensive Economic Partnership (RCEP) among the 16 countries will be implemented over the 2019-2028 period, followed by RCEP + Taiwan from 2024-2033 and a Free Trade Area of the Asia-Pacific (FTAAP) from 2028-2035. In Scenario 2, we assume that TPP11 countries implement the TPP without U.S. participation over the 2019-2028 period, followed by an enlarged TPP from 2024-2033 and the FTAAP from 2028-2035. In Scenario 3 we assume that the two sequences develop at the same time.
The results of our simulation experiments show that by 2035 Japan will realize an increase in economic welfare of 1.5-2.0 percent a year under these scenarios compared with the baseline. By 2035 Singapore, Thailand and Vietnam's economic welfare will increase by more than 3.0 percent a year.
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| Current Status of Research Progress |
Current Status of Research Progress
2: Research has progressed on the whole more than it was originally planned.
Reason
We feel that we made satisfactory progress during FY2017 for the following reasons. First, we made good progress on constructing a global CGE model that incorporates sourcing of foreign inputs by country of origin after receiving valuable advice from van der Mensbrugghe. Second, we changed our policy scenarios that reflect the change in U.S. trade policy after Donald Trump became the U.S. president. Our results indicate that the United States will lose an opportunity to gain 0.7% in its economic welfare by 2035 when it never participates in the TPP, and that its welfare gain will be reduced by 0.3 percentage point when its participation in the TPP is delayed by five years. Thus, an important policy implication of the results is that by withdrawing from a region-wide FTA, a country will incur a loss in its welfare.
Lee, Itakura, Otsuki and Oyamada presented their papers and findings at various conferences during FY2017, including the 20th Annual Conference on Global Economic Analysis, the International Conference on Economic Modeling (EcoMod2017), and the Workshop of ERIA-UNCTAD.
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| Strategy for Future Research Activity |
During the first three months of FY2018, we will complete the construction of a global CGE model that incorporates sourcing of foreign inputs by country of origin. Using this model, we will analyze the effects of global value chains on welfare gains from mega-regional trade agreements, such as the RCEP and TPP11. In addition, we will try to conduct sensitivity analysis using different trade specifications -- i.e. Armington, Krugman and Melitz specifications -- to determine to what extent the results would change.
We plan to complete several papers and present them at the 21st Annual Conference on Global Economic Analysis, the International Conference on Economic Modeling (EcoMod2018), and the 16th International Convention of the East Asian Economic Association. The presented papers will be revised, and we will try to submit them in refereed international journals.
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