Emergent Uncertainty in Regional Integration - Economic impacts of - - PowerPoint PPT Presentation

29 October 2011

Emergent Uncertainty in Regional Integration

• Economic impacts of alternative RTA scenarios -

March 2017 Professor and Senior Fellow, GRIPS Kenichi Kawasaki

• The US would no longer gain and might even lose, if the

US withdraws from TPP.

• The benefits of the bilateral FTA with Japan would be

smaller than those of TPP.

• China would lose seriously, if the US imposes a high tariff
• n imports from China either unilaterally or bilaterally.
• China’s benefits from RCEP might be relatively limited

depending on the levels of the agreement.

• The UK’s cost of BREXIT could be smaller than the

possible benefits of joining TPP.

1

Overview

Impacts of EPAs

The impacts of structural reforms measures including EPAs will be achieved over medium-term and contributing to sustainable growth.

Economic impacts of trade liberalization

2

Trade liberalization Future Without liberalization With trade liberalization GDP Impacts (%)

Regional integration in Asia-Pacific

Negotiations on the Regional Comprehensive Economic Partnership (RCEP) began in 2013. The Trans-Pacific Partnership (TPP) negotiations concluded in 2015.

Framework of EPAs in Asia-Pacific

3

Hong Kong, China Chinese Taipei China Russia Korea US Japan India Canada Australia Mexico New Zealand Chile Peru Burunei Malaysia Singapore Viet Nam Papua New Guinea Indonesia Cambodia Philippines Laos Thailand Myanmar APEC RCEP TPP ASEAN

Impacts of Asia-Pacific EPAs

TPP and RCEP are shown to complement each other rather than be competitors towards the establishment of FTAAP.

Changes in real GDP: APEC economies

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 TPP12 RCEP FTAAP % Tariff removals Tariff removals and NTM reductions

4 ________________ Source: Kawasaki (2017), “Emergent Uncertainty in Regional Integration”, GRIPS Discussion Paper 16-28

Key economies of FTAAP

China would generate the largest income gains from FTAAP followed by the US.

Contributions to real GDP gains of FTAAP: APEC economies

0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 % Tariff removals Tariff removals and NTM reductions

5 ________________ Source: Kawasaki (2017), “Emergent Uncertainty in Regional Integration”, GRIPS Discussion Paper 16-28

Alternative scenarios of TPP: US

The US’ gains not joining TPP would be limited. The US might lose by tariff reductions of the other TPP countries. The US’ benefits by the bilateral FTA with Japan would be a half of TPP.

Changes in real GDP: US

• 0.1

0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 TPP12 TPP11 JA-US % Tariff reductions NTM reductions

6 ________________ Source: Kawasaki (2017), “Emergent Uncertainty in Regional Integration”, GRIPS Discussion Paper 16-28

Alternative scenarios of TPP: Japan

Income gains by tariff reductions would largely be reduced, if the US would not join TPP. That said, the benefits by NTM reductions would not be so smaller including spill-over effects to third countries.

Changes in real GDP: Japan

0.0 0.2 0.4 0.6 0.8 1.0 1.2 TPP12 TPP11 JA-US % Tariff reductions NTM reductions

7 ________________ Source: Kawasaki (2017), “Emergent Uncertainty in Regional Integration”, GRIPS Discussion Paper 16-28

Impacts of US tariffs: US

A 45% tariff on imports from China would much more significantly deteriorate the US real GDP than a 35% tariff on imports from Mexico.

Changes in real GDP: US

• 2.0
• 1.5
• 1.0
• 0.5

0.0 0.5 TPP China Mexico % unilateral reciprocal

8 ________________ Source: Kawasaki (2017), “Emergent Uncertainty in Regional Integration”, GRIPS Discussion Paper 16-28

Impacts of US tariffs: China

The US’ 45% tariff on imports from China will seriously deteriorate Chinese real GDP compared with the possible gains from RCEP tariff and NTM reductions.

Changes in real GDP: China

• 4.0
• 3.0
• 2.0
• 1.0

0.0 1.0 2.0 US' tariff RCEP % Tariffs Tariffs and NTMs

9 ________________ Source: Kawasaki (2017), “Emergent Uncertainty in Regional Integration”, GRIPS Discussion Paper 16-28

Impacts of BREXIT: UK

The UK’s BREXIT cost would be serious depending on the EU border measures, those adverse impacts could be more than offset by tariff reductions joining TPP.

Changes in real GDP: UK

• 1.0
• 0.8
• 0.6
• 0.4
• 0.2

0.0 0.2 0.4 BREXIT WTO BREXIT EFTA EPA JA-UK EPA US-UK EPA TPP-UK %

10 ________________ Source: Kawasaki (2017), “Emergent Uncertainty in Regional Integration”, GRIPS Discussion Paper 16-28

Impacts of BREXIT: EU

The EU’s BREXIT cost would be limited smaller than the trade diversion effects from TPP.

Changes in real GDP: EU

• 0.2
• 0.1

0.0 0.1 0.2 BREXIT WTO BREXIT EFTA EPA JA-EU EPA US-EU EPA TPP-UK %

11 ________________ Source: Kawasaki (2017), “Emergent Uncertainty in Regional Integration”, GRIPS Discussion Paper 16-28

Impacts of EPAs: US

Income gains from bilateral tariff reductions with the EU would be 15 per cent smaller after BREXIT. The spillover effects of NTM reductions with the UK would be large enough.

Changes in real GDP: US

0.00 0.05 0.10 0.15 US-EU-UK US-EU US-UK %

Tariff removals

12

0.0 0.1 0.2 0.3 0.4 0.5 US-EU-UK US-EU US-UK %

NTM reductions

________________ Source: Kawasaki (2017), “Emergent Uncertainty in Regional Integration”, GRIPS Discussion Paper 16-28

Impacts of EPAs: Japan

Income gains from bilateral tariff reductions with the EU would be 15 per cent smaller after BREXIT. The spillover effects of NTM reductions with the UK would be large enough.

Changes in real GDP: Japan

0.0 0.1 0.2 0.3 JA-EU-UK JA-EU JA-UK %

Tariff removals

13

0.0 0.2 0.4 0.6 0.8 JA-EU-UK JA-EU JA-UK %

NTM reductions

________________ Source: Kawasaki (2017), “Emergent Uncertainty in Regional Integration”, GRIPS Discussion Paper 16-28

Significance of domestic reforms in RCEP

ASEAN countries, China and India will benefit more by their own tariff removals and NTM reductions than those by trade partners in RCEP.

Contributions to income gains from RCEP by own policies

20 40 60 80 100 % Tariff removals Tariff removals and NTM reductions

14 ________________ Source: Kawasaki (2015), “The Relative Significance of EPAs in Asia-Pacific”, Journal of Asian Economics 39

Tariff concessions in East Asia

Tariff concessions in East Asian EPAs have not substantially been high enough in effect.

Comparison of tariff concessions

20 40 60 80 100 % Numbers of commodoties Average tariff rates

15 ________________ Source: Kawasaki et al. (2016), “Analysis of the Role of Tariff Concessions in East Asia”, GRIPS Discussion Paper 16-21