Estimating the Effects of the CPTPP and RCEP in a General Equilibrium Framework with Global Value Chains
2019
We have witnessed increasing prominence of trade in intermediate products. International fragmentation of production chains has been motivated by sourcing intermediate inputs from more cost-efficient producers to enhance efficiency. In order to estimate the effects of trade agreements on countries linked to global value chains (GVCs) more accurately, we utilize the GTAP database and inter-country input-output tables to construct a global computable general equilibrium (CGE) model that disaggregates imports of intermediate products by country of origin. Using this modified model, we estimate the welfare and sectoral output effects of two mega-regional trade agreements (MRTAs) involving Asian countries -- the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership (RCEP). The initial results suggest that while incorporating the GVC structure does not significantly affect the overall welfare results, the magnitudes of changes in sectoral output become considerably greater in several industries.
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