metadata: authors: 0: author: Ferrantino,Michael Joseph
1: author: Maliszewska,Maryla
2: author: Taran,Svitlana
count: East Asia and Pacific
docna: 0: docna: Actual and Potential Trade Agreements in the
            Asia-Pacific : Estimated Effects
docty: Policy Research Working Paper
subtopic: International Trade and Trade Rules,Transport Services,Food Security,Construction Industry,Trade and Multilateral Issues,Trade Policy,Rules of Origin
teratopic: Industry,Agriculture,International Economics and Trade,Transport
abstracts: cdata!: This paper assesses and compares the
            economic impacts of four actual and potential free trade
            agreements in the Asia-Pacific Region: the Comprehensive and
            Progressive Agreement for Trans-Pacific Partnership, the
            original Trans Pacific Partnership, the Regional
            Comprehensive Economic Partnership, and the Free Trade Area
            of the Asia-Pacific. Free trade areas with a larger scale
            and wider membership are expected to produce higher
            aggregate gains in increased gross domestic product and
            trade flows. U.S. withdrawal from the original Trans-Pacific
            Partnership reduced estimated gross domestic product gains
            for the Comprehensive and Progressive Agreement for
            Trans-Pacific Partnership countries by about half.  For
            countries belonging to the Comprehensive and Progressive
            Agreement for Trans-Pacific Partnership and also negotiating
            the Regional Comprehensive Economic Partnership, the
            potential gains from an agreement with China and the
            Republic of Korea are substantial, but not as large as if
            the United States were to rejoin the original Trans-Pacific
            Partnership.  On a sectoral basis, significant structural
            shifts are observed for food processing, wearing apparel,
            textiles, and transport equipment.
repnme: repnme: Actual and Potential Trade Agreements in
            the Asia-Pacific : Estimated Effects
display_title: Actual and Potential Trade
            Agreements in the Asia-Pacific : Estimated Effects
listing_relative_url: /research/2020/12/32666691/actual-potential-trade-agreements-asia-pacific-estimated-effects
topicv3: Transport Equipment m1326014 1812,Agriculture and Food Security m1326205 435,Transport m1326661 135,Trade m1326924 698,Non-Tariff Measures m1326926 778
publishtoextweb_dt: 2020-12-14T00:00:00Z
historic_topic: Industry,Agriculture,International Economics and Trade,Transport
origu: EFI-MTI-TIC-Trade and RI (ETIRI)
no_of_pages: 46
author_keys: 0: author_key: 1275680
1: author_key: 545393
2: author_key: 1755625
model_extractions: Policy Research Working Paper 9496 Actual and Potential Trade Agreements in the Asia-Pacific

# Estimated Effects

_Michael Joseph Ferrantino Maryla Maliszewska Svitlana Taran_ Macroeconomics, Trade and Investment Global Practice December 2020
Policy Research Working Paper 9496

# **Abstract**

This paper assesses and compares the economic impacts of four actual and potential free trade agreements in the Asia-Pacific Region: the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the original Trans Pacific Partnership, the Regional Comprehensive Economic Partnership, and the Free Trade Area of the Asia-Pacific. Free trade areas with a larger scale and wider membership are expected to produce higher aggregate gains in increased gross domestic product and trade flows. U.S. withdrawal from the original Trans-Pacific Partnership reduced estimated gross domestic product gains for the Comprehensive and Progressive Agreement for Trans-Pacific Partnership countries by about half. For countries belonging to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and also negotiating the Regional Comprehensive Economic Partnership, the potential gains from an agreement with China and the Republic of Korea are substantial, but not as large as if the United States were to rejoin the original Trans-Pacific Partnership. On a sectoral basis, significant structural shifts are observed for food processing, wearing apparel, textiles, and transport equipment.

This paper is a product of the Macroeconomics, Trade and Investment Global Practice. It is part of a larger effort by the World Bank to provide open access to its research and make a contribution to development policy discussions around the world. Policy Research Working Papers are also posted on the Web at http://www.worldbank.org/prwp. The authors may be contacted at mmaliszewska@worldbank.org.

_The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent._ Produced by the Research Support Team
Actual and Potential Trade Agreements in the Asia-Pacific: Estimated Effects Michael Joseph Ferrantino Maryla Maliszewska Svitlana Taran Keywords: Regional trade agreements, CPTPP, RCEP, TPP. JEL classifications: F15, D58
2

# **Introduction**

This paper assesses and compares economic impacts of four actual and potential free trade agreements in the Asia-Pacific Region; Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP, sometimes also called TPP11), which entered into force for seven of its members as of January 2019<sup>1</sup> ; the original Trans Pacific Partnership (TPP12), which ended when the United States withdrew in January 2017; the Regional Comprehensive Economic Partnership (RCEP), which has been under negotiation since 2012; and the Free Trade Area of the Asia-Pacific (FTAAP), which represents an aspiration among the 21 member economies of APEC but is not currently under negotiation.<sup>2</sup> Our simulation results suggest some of the following key impacts from these four agreements, as measured against a 2030 baseline in which none of the agreements are in place, i.e. a pre-CPTPP baseline. One implication of doing the analysis this way is that the marginal additional gains from TPP12, RCEP, or FTAAP would be smaller for most countries than those estimated here, now that CPTPP is in place.

- **GDP:** FTAs with a wider membership and larger scale are expected to produce higher aggregate GDP growth. The CPTPP is projected to increase the overall members’ GDP by 0.4% as compared to baseline scenario for 2030, TPP12 – by 0.7%, RCEP – by 1.5%, FTAAP – by 1.6%.   If trade liberalization is assumed also to boost productivity, the estimates of these gains become larger.<sup>3</sup>

- **Global impact:** If ranked in terms of changes in global GDP, the relative magnitude of impacts is the same – FTAAP, followed by RCEP, TPP12, and CPTPP. The ranking of the agreements is driven almost entirely by effects on members.  Losses of excluded countries from trade diversion are minimal; the Republic of Korea would have lost 0.3% of GDP from a TPP12 including the United States, while Cambodia, which is not part of APEC, would lose 0.4% of GDP in the event of FTAAP.

- **Trade flows:** Estimated increases in exports for members range from 2.8% for CPTPP to 9.4% for FTAAP in standard simulations without productivity effects. Again, these are larger if it is assumed that trade liberalization boosts productivity.

- **Country performance in CPTPP and TPP12:** All CPTPP members would experience estimated GDP increases, with the highest in percentage terms for Brunei Darussalam (1.9%),<sup>4</sup> Vietnam (1.1%), Peru (1.0%) and Malaysia (1.0%).  Had the United States remained in TPP (TPP12), estimated gains for Vietnam would have more than tripled to 3.6%, and gains for Malaysia would have nearly been doubled to 1.8%.   The largest estimated gains from the broader RCEP and FTAAP agreements are for China, both in absolute terms ($438 billion and $682 billion against a 2030 baseline, respectively) and in relative terms (2.0% and 3.1% of GDP respectively.)  Other significant gainers from either RCEP or FTAAP are Japan (0.7% of GDP under RCEP, 1.6% under

> 1 Australia, Canada, Japan, Mexico, New Zealand, Singapore, and Vietnam. At the time of writing (October 2019), Brunei, Chile, Malaysia, and Peru have yet to ratify the CPTPP. See <u>https://www.international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/cptppptpgp/index.aspx?lang=eng</u> 2 Within APEC, the aspiration to establish free and open trade and investment in the Asia-Pacific by 2020 was first stated in the Bogor Goals of 1994, and made specific in the Lima Declaration on FTAAP in 2016.  The Lima Declaration envisioned a process “outside of APEC, parallel with the APEC process,” of which TPP and RCEP could be potential “pathways” leading to the FTAAP.  See <u>https://www.international.gc.ca/trade-commerce/trade-agreements-accordscommerciaux/agr-acc/cptpp-ptpgp/index.aspx?lang=eng.</u>

> 3 Unless otherwise specified, the figures below are derived from standard simulations without assumptions about extra productivity gains associated with trade liberalization.

> 4 Because of the small size of Brunei’s economy, further reporting of results for this country will be restricted to the tables.
3 FTAAP), Malaysia (0.8% under RCEP, 1.5% under FTAAP), Korea (1.7% under both RCEP and FTAAP), and India (1.7% under RCEP. 0.2% under FTAAP).

- **Trade barriers:** Although applied tariffs between Asia-Pacific countries at the aggregate country level are in most cases already low due to existing bilateral and regional FTA agreements, there is room for trade liberalization among countries that did not have bilateral or regional FTAs between themselves before. In addition, tariff protection still can be high for certain sectors. Overall, initial tariff and non-tariff barriers were the highest and are expected to observe the largest reductions in food processing, apparel and textiles, agriculture, and services under all considered FTAs. NTMs are greater obstacles to trade than tariffs across all FTAs.

- **Trade liberalization:** Under CPTPP and TPP12 tariffs are reduced to minimum levels and NTMs are reduced significantly across all countries. Although assumptions on trade opening for TPP12 member states are the same as per CPTPP, for many of them (Canada, Chile, Mexico, Peru, Singapore, and Australia) the initial trade weighted average tariffs are lower due to large trade volumes with the United States that already shares bilateral FTAs and low tariffs. Less tariff and non-tariff liberalization is expected in the RCEP as compared to the CPTPP/TPP, however initial tariff protection is higher in many RCEP countries (India, China, Australia, and Korea), which is supposed to be reduced considerably under the agreement. Trade liberalization under the FTAAP is expected to be the most significant assuming that all members will maintain average tariff rates no greater than 1% by 2030.

- **Sectoral changes:** The highest growth of exports and output under the considered FTAs are projected to occur in food processing, wearing apparel, and textiles due to a relatively high reduction in tariffs and NTMs in these sectors.

- **Trade creation and diversion:** The increases in trade for all considered FTAs are projected to be significantly larger, both in dollar and percentage terms, than any trade diversion observed by nonmembers. Gains in total exports of FTAs members are also much higher compared to exports losses of non-members, exceeding them in more than five times. As a result, all FTAs are expected to boost  global exports, with larger FTAs having greater positive impact on global trade.

In general, the multilateral FTAs with a wider country coverage in terms of number and size of economies are expected to produce higher aggregate economic gains in terms of GDP growth and trade growth. The FTAAP (with 21 countries producing about half of global GDP) can be the most economically successful, if concluded. Liberalization of trade barriers on the huge market under the RCEP (16 members producing almost a third of global output) is also promising, while results for CPTPP (with 11 countries accounting for about 13% of global GDP) are expected to bring relatively lower GDP and trade growth.

Instead of operating under many bilateral FTAs in the region, it is more efficient and easier to follow common rules of origin and other trade-related rules within one multilateral trade block for establishing regional supply chains.

All of the FTAs analyzed here are comprehensive and imply a rather high level of trade liberalization. CPTPP/TPP provides for the broader scope and deeper commitments as compared to the RCEP. This will result in 99% of all tariff lines becoming duty-free and considerably lower non-tariff barriers among CPTPP/TPP participants. Upon the RCEP implementation, countries are expected to end up with higher tariff and non-tariff protection than in the CPTPP/TPP.
4 However, since the initial levels of tariff and non-tariff protection were higher in many RCEP countries, they are going to experience greater tariff and non-tariff cuts as compared to the already liberalized countries under the CPTPP/TPP.

In one sense, our estimates can be considered conservative, since many actual or potential features of the FTAs are not captured by the model, e.g., the impact on foreign direct investment, endogenous productivity gains or impact of measures such as government procurement, harmonization of labor or environmental standards. On the other hand, our estimates of potential NTM liberalization go beyond what is plainly readable from the text of FTAs and may be considered to be optimistic by some (cf. USITC 2016).

This paper is organized as follows. Section I briefly describes the considered FTAs including signatory parties and scope of disciplines. Section II covers the review of related literature and the main methodological aspects behind the simulations. This section describes the main assumptions of the CGE model, defines broadly interventions in each scenario, and quantifies expected sectoral reductions in tariffs and non-tariff measures (NTMs) for FTA signatory countries. Section III presents economy-wide simulation results, sectoral changes, and trade diversion and creation effects associated with each FTA.

# **I. Signatory countries and the scope of each FTA**

The TPP was originally negotiated with 12 economies in the Americas, Asia, and the Australian continent. In the Americas, it included the NAFTA signatories (United States, Canada, and Mexico) plus Peru and Chile. The TPP12’s largest economy in Asia is Japan, followed by Malaysia, Vietnam, Singapore, and Brunei Darussalam. Early in 2017, the United States, the largest economy in the TPP block, formally withdrew its participation. The remining countries reopened the negotiations of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and signed it in March 2018. The CPTPP agreement came into force for the initial six ratifying countries on 30 December 2018 (Australia, Canada, Japan, Mexico, New Zealand, and Singapore). On 14 January 2019, the agreement entered into force for Vietnam. Brunei Darussalam, Chile, Malaysia and Peru have not yet completed the domestic ratification process.

The TPP12/CPTPP is regarded as a “next-generation” trade agreement addressing new trade challenges and incorporating ambitious and innovative commitments on the digital economy, investment, services, state-owned enterprises, labor protection and the environment. For example, the agreement prohibits data localization and customs duties on electronic transmissions and calls for adaptation of international labor laws and environmental commitments (Corr et al, 2019).

The TPP12/CPTPP provides for comprehensive market access and reduction of tariff and non-tariff barriers across almost all trade in goods and services. Upon its full implementation, 99% of tariff lines among TPP12/CPTPP members will become duty-free. Its provisions on trade in services go beyond the members’ WTO commitments (Caporal, 2019).

In addition, it aims to facilitate regional supply chain development, as well as to promote inclusive trade (through SME support and trade capacity building). In particular, the TPP/CPTPP includes 30 chapters covering trade in goods, customs and trade facilitation; standards and technical barriers to trade; sanitary and phytosanitary measures; investment; services; intellectual property; e-commerce; government
5 procurement; state-owned enterprises; labor; environment; transparency; regulatory coherence, etc. (USTR, 2015).

The CPTPP maintains most of the provisions and the degree of trade liberalization of the original TPP12 including market access commitments on goods, services and investment, state-owned enterprises, government procurement, etc. However, 22 of the original TPP provisions were suspended in the CPTPP, with the most significant revision and narrowing of commitments in the investment and intellectual property chapters (such as investor-state dispute settlement, copyright enforcement, protection and enforcement of patents, etc.) (Goodman, 2018). Tariff protection for most CPTPP countries were already rather low on average, with Canada, New Zealand and Peru having the lowest levels of import tariffs. Still, there is a room for trade liberalization under the CPTPP for those members that did not have bilateral FTAs, as well as for some agricultural products in all CPTPP countries (Government of Canada, 2018).

In terms of market size, the CPTPP represented approximately half a billion people and about 13% of global GDP (2018). Including the United States, the TPP would represent about 37% of global GDP.

The RCEP is a proposed free trade agreement between the ten member states of the Association of Southeast Asian Nations (ASEAN) (Brunei, Cambodia, Indonesia, the Lao People’s Democratic Republic, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam) and the six states with which ASEAN has existing free trade agreements (Australia, China, India, Japan, Korea and New Zealand). RCEP negotiations were formally launched in November 2012. Twenty-eight rounds of negotiations have been held by the end of 2019. In November 2019, the RCEP countries announced the completion of negotiation on the text. However, India had significant outstanding issues, which remain unresolved.

RCEP is a comprehensive FTA with 20 chapters covering trade in goods, technical barriers to trade, trade in services, investment, economic and technical cooperation, intellectual property, competition, e- commerce, government procurement, SME, dispute settlement, etc. It provides for a high level of tariff liberalization and the creation of common rules of origin for all members. Its provisions on intellectual property are also a good achievement (Reinsch & Caporal, 2019).

However, as compared to the CPTPP, the scope and depth of the RCEP is smaller. Tariff reductions are expected to occur for only about 80-90 percent of tariff lines among members. It lacks environment and labor protection commitments, regulatory coherence and state-owned enterprises clauses, etc. RCEP provisions on services, investment, standards, and e-commerce are more limited that under the CPTPP (Reinsch & Caporal, 2019). Nevertheless, the RCEP is “the most ambitious FTA ever negotiated by developing countries” (Petri and Plummer, 2018) amid initial levels of tariff and non-tariff protection in many RCEP countries were rather high. Trade liberalization applied for such a large market of the 16member RCEP (3.6 billion people and more than 30% of global GDP) are expected to offer huge opportunities for the intensification of trade and economic cooperation in the region.

The Free Trade Area of the Asia-Pacific (FTAAP) is a long-term goal to link 21 Pacific Rim economies from China to Chile, including the United States. APEC first formally started discussing the concept of the FTAAP at its summit in 2006. In 2014, APEC leaders adopted the FTAAP Beijing Roadmap aimed to achieve the goal. In accordance with the roadmap, "a collective strategic study" on the FTAAP was conducted in 2016. Based on the study, the Lima Declaration on FTAAP were issued, with recommendations on how to move towards the realization of the FTAAP as a major instrument to further APEC’s regional economic integration agenda.
<!-- Start of picture text --> Russian Federation<br>United States TPP12<br>RCEP Cambodia sustraltai<br>7 China Brunei<br>Anal Indonesia Japan<br>ue net Korea Malaysia Canada<br>aaa Philippines New Zealand Chile CPTPp<br>Thailand Singapore Mexico<br>Vietnam Peru<br><!-- End of picture text -->
7 Important economy-wide benefits of multilateral trade agreements for Asian-Pacific countries include more coherent trade rules to facilitate international business operations in the region; trade, income and output creation; productivity and welfare gains, as well spillover effects from reductions in non-tariff barriers (NTMs) and regulatory harmonization.<sup>5</sup> Quantitative studies on economic impacts of multiregional free trade agreements employ global CGE models that estimate effects of different multilateral integration scenarios on their member countries. Integration scenarios are differentiated in the number of participants, as well as the scope and coverage of multilateral agreements (more or less ambitious provisions), including TPP with different number of potential members (such as CPTPP, TPP12 or TPP16), as well as RCEP and potential FTAAP. Simulations also differ by incorporating different set of trade barriers (tariff and non-tariff) and by the use of different assumptions about the size of NTM reductions, economic growth projections, incorporating positive “spillover” effects for non-member countries from the liberalization of nontariff barriers under TPP, etc. Although the results of simulations may differ in average gains and relative position of some countries, overall projections of expected impacts of Asia-Pacific multilateral agreements are rather consistent.

Petri and Plummer (2016) mapped provisions of the TPP12 via projected changes in tariffs, NTMs on goods and services, and barriers on Foreign Direct Investment (FDI). They estimated that TPP12 would have increased total member countries’ real income by $465 billion or 1.1 percent over baseline scenario by 2030, while their exports are expected to grow by $1,025 billion or 11.5 percent. TPP12 would have generated considerable benefits for all members, with the most substantial gains for Vietnam and Malaysia – their annual real incomes would have increased by 8.1 and 7.6 percent of GDP, respectively, over baseline scenario estimates by 2030. The United States was projected to be the largest beneficiary in absolute terms – its real income will grow by $131 billion, or 0.5 percent of GDP.

These estimates coincide with World Bank (2016a) projections of the impacts of TPP12, projecting an increase of GDP in members states by an average of 1.1 percent by 2030, as well as member countries’ trade by 11 percent by 2030. It also highlights that the benefits of the TPP12 would mostly be derived from reduction in non-tariff measures in goods and services (accounting for 69% and 16% of the total increase in GDP) rather than from decreased tariffs (explains 15% of GDP increase).

In Petri et al. (2017), simulations are expanded by including more integration alternatives such as TPP12, CPTPP, TPP16, US-Japan FTA and RCEP. When comparing projected effects of these integration options, it is concluded that in general ‘wide-membership’ and ‘high-quality’ TPP-like multiregional agreements are usually expected to provide Asia-Pacific countries with greater benefits compared to other integration alternatives. For example, the highest benefits among the considered options can come from TPP16 (adding five more countries to CPTPP – Indonesia; Korea; Philippines; Taiwan, China; and Thailand), with real income increasing by 2.2 percent over baseline scenario estimates by 2030 – vs 1.1% for TPP12, 1% for CPTPP and 0.4% for RCEP. In absolute terms, expected benefits for members from CPTPP (without the United States) are only about one-third as large as those expected from the TPP12 – $465 billion vs $157 billion of real income gains (Petri et al., 2017). Moreover, multilateral options would yield benefits greater than bilateral agreements between individual

> 5 Due to the nature of most regulation, it may be difficult or costly for one country to discriminate among trading partners.  Thus, benefits from liberalization of NTMs or regulatory coherence agreed in a regional trade agreement can be multilateralized and accrue to non-members.
8 Asian-Pacific countries and the United States alone (Petri et al., 2017, p.1). In particular, the estimates suggest that US-Japan bilateral trade agreement can generate a 0.4% real income gain for members.

Studies also consider country-specific implications of multilateral agreements. The USITC’s report concludes that TPP12 would have had positive effects for the US economy, with an US annual real income of $57.3 billion (0.23 percent) higher than the baseline projections, real GDP would be $42.7 billion (0.15 percent) higher relative to a baseline projection by 2032. U.S. total exports would be $27.2 billion (1.0 percent) higher, and U.S. exports to TPP partners would grow by $34.6 billion (18.7 percent). Among broad sectors of the U.S. economy, agriculture and food processing would see the greatest percentage gain relative to the baseline projections (USITC, 2016). However, smaller USITC’s estimated benefits for the United States from TPP12 as compared to results by Petri and Plummer (2016) can be explained by differences in major modeling assumptions For example, USITC was conservative in terms of not attributing liberalization of NTMs that are not explicitly referenced in the text, and was also more conservative in a number of other assumptions (USITC, 2016).

Cerdeiro, D. A. (2016) applies a CGE model with perfect competition to investigate internal and spillover effects of the trade liberalization under the TPP12 on Latin American countries (LAC). The study finds that the effect of the TPP is heterogeneous across members. Namely, that developing TPP countries with stronger existing trade links within the TPP (like Malaysia, Singapore, Vietnam, and Mexico) will experience larger spillover effects and gains from the agreement, especially due to the reductions of NTMs in goods (Cerdeiro, D. A., 2016). The study also finds that effects of TPP on LAC non-members will be small, however some of these countries (Colombia and Guatemala) may experience relatively large benefits from potential joining the TPP.

Maliszewska, Olekseyuk, & Osorio-Rodarte (2018) assess economic and distributional impacts on Vietnam of Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and compare them with the potential impacts of RCEP and TPP12. This study employs a global CGE model LINKAGE to estimate macroeconomic and sectoral changes, along with the Global Income Distribution Dynamics (GIDD) microsimulation tool to model distributional consequences of multilateral agreements for Vietnam. In addition, for each of the three FTA alternatives the study elaborates two scenarios (standards and productivity kick) to capture possible productivity gains as a result of the decrease in trade protection (Maliszewska, Olekseyuk & Osorio-Rodarte, 2018). This study estimates that both CPTPP and RCEP will yield economic gains for Vietnam (1.1% and 0.4% increase of GDD by 2030, respectively), though they will be lower compared to TPP12 (3.6%). When assuming extra productivity gains, Vietnam’s gains are even higher (3.5% for CPTPP, 6.6% for TPP12 and 1% for RCEP). Moreover, it is estimated that all income groups of the population will benefit under CPTPP, with higher-skilled workers in the top 60% of the income distribution being the greater beneficiaries.

# **Methodology**

## **Scenario analysis in a general equilibrium setting**

A global dynamic computable general equilibrium (CGE) model LINKAGE is applied to study the impacts of potential free trade agreements on member economies. The analysis includes 17 production
9 sectors and 35 countries/ regions (see Table A1) and simulates the impacts of policy changes up to 2030, including reduction of tariffs, Non-Tariff Measures (NTMs) in goods and services trade.

The effects of trade agreements are estimated by constructing one baseline and four alternative scenarios that simulate reductions of multilateral tariffs and NTMs under CPTPP, TPP12, RCEP, and FTAAP. The net effects of tariff and non-tariff reduction intervention under each scenario are measured as deviations with respect to baseline scenario. The baseline simulation depicts a continuation of usual conditions – without signing new trade agreements, but with the implementation of commitments on tariff reductions under the existing FTAs.

Standard simulation results of the model represent a lower-bound estimate for the gains from trade openness, as many features of the FTAs are not captured by the model e.g. impact on foreign direct investment, endogenous productivity gains, development of new products. The modeling framework also does not cover the impacts of measures such as government procurement, harmonization of labor or environmental standards, which tend to have important impacts on productivity and welfare gains.

Under standard simulations, gains from the FTA scenarios will only capture the effect of international reallocation of production to the most cost-efficient sectors, they do not account for additional gains in productivity associated with trade liberalization and increased openness. To account for possible productivity gains from trade liberalization we follow the findings of Topalova & Khandelwal, (2011) assuming that a 10% decrease in trade protection leads to a 0.5 percentage point productivity gain. As such, each of the four FTA scenarios has an alternative version constituting a potential upper bound of welfare gains including higher productivity, or productivity kick, based on trade-weighted average reduction of multilateral tariffs (simulations with productivity kick).

Annex 1 includes full details of the methodology and scenarios.

# **Assumptions for reductions in tariffs and NTMs**

Changes in tariff and NTMs assumptions for each scenario are outlined below:

- **Baseline scenario:** key macro indicators such as GDP and current account follow projections from the World Bank (2016a) until 2018, then the productivity growth remains fixed to be consistent with historical trends. The baseline includes the future reduction of tariffs as a result of existing FTA commitments up to 2030. For TPP members, tariff cuts follow the database of the International Trade Centre (2015). The rest of the FTA commitments for the baseline (e.g., NAFTA, AFTA, the ASEAN-Japan FTA, the ASEAN-Australia-New Zealand FTA and the P4 Agreement among Brunei Darussalam, Chile, Singapore and New Zealand) come from Petri and Plummer (2016).

- **CPTPP and TPP12:** implementation of the TPP agreement among its members with and without the United States begins in 2017.<sup>6</sup> Tariff reductions in CPTPP and TPP12 are based on the actual TPP tariff commitment schedules compiled by ITC  (2015) and NTMs reductions in goods and services follow estimates from Petri et al., (2016). As such, the CPTPP scenario assumes the same level of ambition as the original TPP12, simply excluding the United States.

> 6 2017 is not a realistic date for the start of implementation of commitments of FTAs, but the results would not be much affected if we selected date 2-3 years in the future due to long period of implementation, backloading of commitments and assuming that the economy would not undergo dramatic changes over the next few years. As such the results in 2030 should be interpreted as the impacts 12 years after the beginning of the implementation period.
<!-- Start of picture text --> GDP Exports Imports<br>eee cep Ds<br>CPTPP CPTPP CPTPP<br>=. Standard wm Productivitykick —.<br>4 1 3 5 0 5 10 15 0 5 10 15<br><!-- End of picture text -->
11

**Table 1. Aggregate impact of potential FTAs on their member states by 2030 (deviations from the baseline in billion $ and percent)**

|||**S**|**tandard**|**simulation**|**s**|**Simulat**|**ions with**|**producti**|**vity kick**|
|---|---|---|---|---|---|---|---|---|---|
|||**_CPTPP_**|**_TPP12_**|**_RCEP_**|**_FTAAP_**|**_CPTPP_**|**_TPP12_**|**_RCEP_**|**_FTAAP_**|
|**GDP**|%|0.4|0.7|1.5|1.6|1.1|0.9|4.6|4.6|
||_bln$_|_74.3_|_261.1_|_653.5_|_1,151.9_|_183.6_|_373.6_|_2,074.8_|_3,226.9_|
||%|0.9|1.1|2.1|2.8|1.4|1.3|4.5|5.0|
|**Income**|_bln$_|_168.7_|_482.5_|_966.7_|_2,082.4_|_266.1_|_595.5_|_2,039.1_|_3,774.8_|
|**Et**|%|2.8|4.1|4.9|9.4|3.4|4.6|7.8|12.5|
|**xpors**|_bln$_|_127.5_|_322.8_|_561.1_|_1,459.5_|_155.5_|_354.2_|_903.1_|_1,945.2_|
|**I**|%|2.7|3.7|4.9|9.3|3.3|4.1|8.0|12.4|
|**mports**|_bln$_|_127.2_|_324.8_|_552.9_|_1,487.6_|_154.8_|_356.8_|_890.3_|_1,985.9_|

Source: Authors’ estimates (Note: GDP - Real GDP at market price, Income - Nominal GDP at market price, Exports - Nominal exports excl intl trade and transport, Imports - Nominal imports CIF).

The model simulations project positive aggregate macroeconomic impacts for all potential integration alternatives – CPTPP, TPP12, RCEP and FTAAP. According to Table 1, **FTAs with a wider**

**membership and larger scale are expected to produce higher aggregate economic gains in terms of increased GDP and trade flows.** Wider agreements enable a better access to a larger number of growing Asia-Pacific markets and therefore a better engagement in global value chains. In addition, the magnitude of FTA benefits depends on projected declines in trade barriers, as well as the level of trade protection prior to multilateral FTAs, the extent of trade flows not previously covered by other preferential trade agreements. If a significant part of members’ trade was already liberalized and subject to prior agreements, trade liberalization shocks from new FTA agreements will be lower.

The recently concluded **CPTPP (after US withdrawal) has the lowest number of member countries among other scenarios, though it is quite ambitious in terms of trade openness** . However, without the United States it will generate the lowest gains among potential integration alternatives. CPTPP is projected to increase the overall members’ GDP by 0.4% as compared to baseline scenario for 2030 (or by $74 billion in absolute terms). All CPTPP members will be able to improve their economic performance, with Vietnam, Malaysia, Peru, and Singapore reaping the highest benefits (see Tables 4-7). Their GDP expansion will be driven by significant tariff and NTMs reductions and improved market access to their main CPTPP trading partners. Japan (the greatest economy within the CPTPP) presents the highest GDP increase in absolute terms – by $31 billion. While Mexico and Chile will experience the lowest GDP growth due to low share of trade with CPTPP in Mexico and already liberalized trade with Chile.

In case the United States joins the TPP, it would generate additional $261 billion of overall GDP or a 0.7% GDP growth with respect to baseline conditions by 2030. Under TPP12 scenario, Vietnam, Malaysia, Japan, and Brunei would demonstrate the fastest growth among members, while Japan and the United States will be the main beneficiaries in absolute terms ($107 billion and $87 billion, respectively). With TPP12 markets being a destination for about one-third of total US exports, the United States would have improved access to these markets – e.g., the estimated trade weighted NTMs that the United States faces in TPP12 will decrease by 2 p.p. At the same time, Vietnam will enjoy the highest GDP and export growth of 3.6% and 20.7% respectively under TPP12 due to the biggest trade barriers reduction, both faced and imposed (e.g., trade weighted average tariffs faced by Vietnamese exporters in TPP12 markets would drop from 4.2% to 0.1%). Among all, Vietnamese exporters will
12 benefit the most from improved market access to the US market, accounting for about 50% of Vietnamese exports within TPP12 (apparel and textiles).

# **A 16-member RCEP agreement is expected to be the largest multiregional FTA currently under**

**negotiation** , with a collective GDP of more than $25 trillion. The RCEP has a wider membership than CPTPP, including as it does, China and India, which account for over 60% of the collective GDP of the treaty, as well as all of the economies of ASEAN.  However, unlike TPP-12, it does not include the United States.

We assume that **RCEP would entail less ambitious commitments on trade barriers reduction compared to both the CPTPP and TPP12** (e.g., we assume that tariffs will be reduced by about 80% under the RCEP compared to almost 100% under CPTPP and TPP12). Also, the initial level of protection is generally higher in RCEP countries (mainly, in India, China, and Korea), while many TPP12 countries have liberalized among themselves on a bilateral basis.<sup>7</sup> Aggregate economic impacts from trade liberalization are predicted to be higher for the RCEP than to the CPTPP and the TPP12. RCEP’ GDP gain is projected at $654 billion, a GDP increase of 1.5% by 2030 compared to the baseline. China, India, and Korea are projected to enjoy the highest GDP increase in relative terms. These countries’ growth potential is stemming from the expected reduction in tariff and nontariff protection, both imposed and faced by them on RCEP markets – e.g., trade weighted average tariffs faced in RCEP markets by China will drop from 2.2% to close to zero (0.4%), while China’s trade weighted average tariffs imposed on RCEP members will be reduced from 2.7% to 0.5%. In absolute terms, China, India, Japan and Korea will reap the highest income benefits.

**A potential FTAAP agreement would have the highest membership of 21 countries**<sup>**8**</sup> **and is expected to employ more ambitious trade liberalization** as compared, for example, to the RCEP. According to the model estimations, the estimated increase of GDP would amount to 1.6% or $1,152 billion under standard assumptions - the highest level among all integration options in relative and absolute terms, which is due to high significance of trade with FTAAP members (FTAAP share in total members’ trade exceeds 60%). China, Russia, Philippines, Korea, and Japan have the greatest potential to increase the GDP under the FTAAP, with highest gains for China and Russia amid their implementation of the expected ambitious trade liberalization, both in terms of tariff and nontariff barriers. China’s GDP increase is estimated to amount 3.1% and Russia’s 2.8% by 2030 as compared to the baseline. US participation in the FTAAP will also be beneficial – its GDP will increase by 0.6% or $134 billion in absolute terms.

**Assumptions on a productivity boost from trade liberalization may considerably increase members’ benefits as compared to the standard simulations** (see Table 1). For example, the estimates of GDP gains with productivity kick assumptions can be more than doubled for CPTPP members and tripled for FTAAP members.

**Apart from GDP, trade liberalization will facilitate the increase in total exports and imports of the considered FTAs ranging from almost a 3% increase for CPTPP members to over 9% for FTAAP members as compared to the baseline by 2030.** Again, the FTAAP is expected to be the most successful agreement in boosting its members’ international trade due to its great coverage and trade

> 7 For example, the United States already has FTAs with Canada and Mexico (NAFTA), Australia, Chile, Peru, and Singapore.

> 8 In our simulation we include 18 of 21 countries negotiating FTAAP: Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, the United States, Vietnam, Singapore, the Republic of Korea, Indonesia, Philippines, Thailand, China and the Russian Federation. We are not able to include Taiwan, China; Hong Kong SAR, China; and Papua New Guinea as those are part of the rest of the word (ROW) in the model aggregation.
13 links among members (see Table 1). The highest percentage increase in exports will be observed in Vietnam, Malaysia and New Zealand under the CPTPP and TPP12; in Japan, New Zealand, Australia – under the RCEP, and in Japan, Vietnam and Russia under the FTAAP (see Tables 6 and 7). In dollar terms, the largest increases in exports and imports are expected to go mostly to relatively large markets, as well as countries that will experience the greatest reductions of faced and imposed trade barriers (see Figures 3-6). For example, the largest market opportunities caused by the RCEP market access will be in China, India, Japan and Korea, at the same time these countries will experience the largest increases in their exports.
<!-- Start of picture text --> CPTPP, ESTIMATED INCREASES IN EXPORTS CPTPP, ESTIMATED INCREASES IN IMPORTS<br>Viet Nam, 14.2 Canada, 10.3Chile, 1.0 Viet Nam, 14.0 Canada, 10.6<br>a Chile, 1.1<br>Mexico, 8.3 .<br>Mexico, 8.3<br>Peru, 1.5 P 1.7<br>Singapore, 17.2 Singapore,. 15.6 eru, 1.<br>Australia, 20.6 New Zealan<br>New Zealand, 4.5} 4.7 Australia, 21.7<br>Brunei<br>Darussalam, 0.2 Brunei<br>Malaysia, 24.0 Malaysia,alaysia, 24.224. Darussalam, 0.2<br>Japan, 25.8 Japan, 25.1<br><!-- End of picture text --> <!-- Start of picture text --> TPP12, ESTIMATED INCREASES IN EXPORTS TPP12, ESTIMATED INCREASES IN IMPORTS<br>Canada, 24.1 _Mexico, 9.1 Canada, 24.4 Mexico, 9.1<br>Chile, 0.6 7 ‘ Pa i<br>/ Peru, 2.1 “cg a 2s<br>USA, 90.1 Australia, 17.1 Australia, 17.9<br>Brunei Darussalam, USA, 93.9 sa<br>0.3<br>_ Brunei Darussalam,<br>0.3<br>Japan, 57.3 Japan, 55.1<br>Viet Nam, 59.1 Viet Nam, 58.6<br>Malaysia, 41.9 Malaysia, 42.3<br>Singapore, 15.8 — Zealand, 5.3 Singapore, 14.7 \ New Zealand, 5.6<br><!-- End of picture text -->
<!-- Start of picture text --> RCEP, ESTIMATED INCREASES IN EXPORTS RCEP, ESTIMATED INCREASES IN IMPORTS<br>Australia, 26.7 , Australia, 28.1<br>Brunei Darussalam, Brunei Darussalam,<br>0.2 0.1<br>China, 202.6 Japan, 144.0 China, 196.5 Japan, 138.5<br>Malaysia, 24.4<br>Malaysia, 24.8<br>New Zealand, 4.4 New Zealand, 4.6<br>Southeast Asia, 0.6 Singapore, 7.4 Southeast Asia, 0.5 Singapore, 7.8<br>Viet Nam, 10.0 Viet Nam, 9.9<br>India, 80.4 Korea, 42.5 Thailand, 1.4 India, 81.4 Korea, 42.4 Thailand, 1.5<br>Indonesia, 7.7 Indpnesia)\7.9<br>Laos, 0.3 Philippines, 7.9 Cambodia, 0.7 Philippines, 7.7<br>Cambodia, 0.7 aos, 0.3<br><!-- End of picture text --> <!-- Start of picture text --> FTAAP, ESTIMATED INCREASES IN EXPORTS FTAAP, ESTIMATED INCREASES IN IMPORTS<br>Russion0Federation, aaa\ 38.9Chile,~s a a6Mexico,Australia,30.9 26.5 Russion 76.7Federation,Canada, 40.4 Chile, 2.7erMexico, af ___Brunei31.3 Darussalam, 0.4<br>runei Darussalam, 0.4 ustralia, 27.8<br>Japan, 213.4 Japan, 208.5<br>Malaysia, 57.9<br>China, 544.2 Malaysia, 56.9 Sno<br>New Zealand, 7.4 ~~ New Zealand, 7.8<br>\ gg\_ Singapore, 14.6 \‘\ singapore, 16.2<br>\Viet Nam, 41.5<br>\Viet Nam, 41.2<br>USA, 254.3 Indonesia, 24.5___ USA, 288.8<br>Indonesia, 24.1 _——<br>Philippines, 25.4 9 ghailand, 18.3 Philippines, 24.9 |thaitand, 18.3<br>Korea, 79.8<br><!-- End of picture text -->
16

# Assumed tariffs and non-tariff measures

Figures 7-14 summarize changes in market access based on trade weighted average tariffs and NTMs calculated for each FTA using constant GTAP trade flows between trading partners. Although applied tariffs between Asia Pacific countries at the aggregate country level are in most cases already low due to existing bilateral and regional FTA agreements, ex ante tariff protection is still high for certain sectors (like for agriculture in Japan). In addition, the prior level of trade protection was higher under the RCEP compared to CPTPP/TPP, mostly due to greater trade barriers in RCEP’s largest markets – India and China. Overall, NTMs are greater obstacles to trade than tariffs across all FTAs. The implementation of FTA provisions on sanitary and phytosanitary measures, technical barriers to trade, investment, trade in services, custom administration, trade facilitation, and others are expected to align regulatory requirements and to reduce NTMs among members. Since CPTPP/TPP agreements have stronger commitments in these spheres, it is projected that CPTPP/TPP agreements will result in greater reduction of NTMs compared to the RCEP.

## **Under CPTPP and TPP12 tariffs are reduced to minimum levels and NTMs are reduced**

**significantly across all countries.** However, some CPTPP members (such as Peru, Chile, Mexico, and Singapore) already face modest or close to zero tariffs when trading with CPTPP and TPP partners. At the same time, Canada, New Zealand, Vietnam, and Japan will benefit from the greatest declines in average trade weighted tariffs faced in exporting to CPTPP economies (e.g. from 3.1% to 1.7% for Canada). In turn, Vietnam, Malaysia, Canada will reduce their tariff protection the most (e.g. Vietnam’s average trade weighted tariffs imposed over CPTPP partners will be down by 2.8 percentage points). **In the sectoral breakdown, Food processing, Textiles, and Transport equipment are the most protected across most CPTPP member countries and will face the greatest tariff reductions.** Certain countries apply higher tariff protection for some specific sectors, like Japan for Agriculture (import tariff will be reduced from 7.5% to 0.4%), Canada and Mexico for Wearing apparel (from 20.8% to 0.9% in Mexico), Vietnam for Other manufacturing (from 4.3% to 0.2%). Trade regimes of CPTPP countries are more restrictive in terms of applied NTMs, with Malaysia, New Zealand and Peru having the highest level of imposed NTMs over CPTPP partners. Exports from Canada, New Zealand, Singapore, Australia, and Vietnam observe the highest NTMs on CPTPP markets (up to 16% for New Zealand and 14% for Canada) and will experience the greatest NTMs declines. It is projected that there will be significant reductions of the most restrictive NTMs in Food processing (the CPTPP establishes high sanitary and phytosanitary requirements), Agriculture, Machinery and equipment nec., and all Services exports (services face the highest NTMs in most TPP countries).

Although assumptions on trade opening for TPP12 member states are the same as per CPTPP, for many of them (Canada, Chile, Mexico, Peru, Singapore, and Australia) the initial average trade weighted tariffs (both imposed and especially faced on TPP12 markets) are lower. This is due to **large trade volumes with the United States that already shares bilateral FTAs and low tariffs with them** (initial US average trade weighted tariff imposed to TPP12 partners was 0.5%). That is why the greatest tariff and non-tariff changes on TPP12 markets would happen to countries that are not FTA partners with the United States, such as Vietnam, Malaysia, Japan, Brunei, and New Zealand (with the highest imposed tariff reductions in Vietnam, Malaysia, Japan and Brunei; non-tariff reductions - in Malaysia, Vietnam, Japan, and New Zealand). Overall, tariff and non-tariff barriers will observe the largest reductions in Food processing, Wearing apparel and Textiles, Agriculture, and Services on TPP12 markets. Vietnamese exporters would have the largest benefit from the decline in both tariff and NTM barriers faced in TPP12 (tariffs from 4.2% to 0.1%, NTMs from 10.5% to 5.1%) due to significant
17 decline of the existing tariff and NTMs in the United States on wearing apparel and textiles - Vietnamese major exports to the United States. The United States already imposes on average lower tariff and non-tariff restrictions than its TPP12 trade partners (except specific sectors like Textiles, Wearing apparel, and Services). By joining TPP12, US access to TPP12 markets would be further improved: tariff restrictions for the United States on TPP12 markets will go down from 1.1% to 0.2%; NTMs faced by US exports in TPP12 partners will also decline – from 8.6% to 6.4%.

**Less tariff liberalization is projected in the RCEP as compared to the CPTPP/TPP, however initial tariff protection is higher in many RCEP countries. The largest RCEP markets - India, China, Australia, and Korea - maintain the greatest tariff protection,** which is supposed to be reduced considerably under the agreement. For example, initial average trade weighted tariffs imposed by India and China over RCEP countries are 5.2% and 2.7% (which are assumed to decline to 1.3% and 0.4% respectively). The most protected sectors in India from RCEP imports include: Food processing, (17.2%), Textiles (12.1%), Wearing apparel (9.3%), Agriculture (8.9%); while China protects the most: Transport equipment (11.3%), Agriculture (7.5%), and Textile (4.5%). Such tariffs pose important restrictions for other RCEP countries that have large trade volumes with India and China. At the same time, such countries as Indonesia, Philippines, Thailand, Cambodia, and Lao PDR already maintain and face low level of tariff protection of about or lower than 1% average trade weighted tariffs on those markets. **Trade among RCEP member states is still heavily restricted by NTMs.** The highest level of imposed NTMs occur in India, Philippines, Malaysia, New Zealand, Myanmar, and Vietnam – up to 15% in ad-valorem equivalents (15.3% in India). However, NTMs are much higher in some specific sectors such as Food processing(40% in India, 26% in Malaysia), Wearing apparel (17% in India and 19% in Malaysia), Electronic equipment (29% in India), Textiles (24% in Philippines), Services (communication and business services - 99% in India, 73% in Philippines), etc. As a result of the RCEP, barriers will be reduced, with the biggest reductions expected in India, Philippines, and Malaysia. However, their final NTMs will still be substantial.

**Trade liberalization under the FTAAP is expected to be the most significant assuming that all members will maintain average tariff rates no greater than 1% by 2030.** As such, FTAAP implies ambitious tariff liberalization plans for Russia, Korea, and China, whose initial tariffs applied for FTAAP members were substantial compared to other members (9.9%, 4.8% and 2.9% respectively). Russia is expected to open its market the most, mainly in sectors such as Food processing, Transport equipment, Other manufacturing, Textiles, and Wearing apparel, where its initial average trade weighted tariffs exceeded 10%. China is supposed to decrease most of its tariffs on Transport equipment, Textiles, and Agriculture; Korea – on Agriculture, and Food processing. At the same time, Russia already faces very low tariffs protection on its products to FTAAP markets (1.1%), due to its export structure dominated by energy products. NTMs will also decline substantially within FTAAP from their initial levels, especially in Russia, Philippines, Malaysia, Japan and China. By participating in this agreement, countries will also benefit from reduced NTMs and improved market access to huge FTAAP markets, especially in in Food processing, Electronic equipment, Machinery and equipment nec, Transport equipment, Agriculture, Textiles, and Services.
18

# **Figure 7. Trade barriers faced by CPTPP members before and after trade liberalization within the block, trade weighted averages in %**

<!-- Start of picture text --> CPTPP, Tariffs faced CPTPP, NTBs faced<br>Vietnam<br>Singapore<br>New Zealand<br>Malaysia<br>Japan<br>Brunei Darussalam<br>Australia<br>Peru<br>Mexico<br>2015 2030<br>Chile<br>Canada<br>0 1 2 3 4 5 0 5 10 15 20<br><!-- End of picture text --> Source: Authors’ estimates

**Figure 8. Trade barriers faced by TPP12 members before and after trade liberalization within the block, trade weighted averages in %**

<!-- Start of picture text --> TPP12, Tariffs faced TPP12, NTBs faced<br>USA<br>Vietnam<br>Singapore<br>New Zealand<br>Malaysia<br>Japan<br>Brunei Darussalam<br>Australia<br>Peru<br>Mexico<br>Chile<br>Canada 2015 2030<br>0 1 2 3 4 5 0 5 10 15 20<br><!-- End of picture text --> Source: Authors’ estimates
19

# **Figure 9. Trade barriers faced by RCEP members before and after trade liberalization within the block, trade weighted averages in %**

<!-- Start of picture text --> RCEP, Tariffs faced RCEP, NTBs faced<br>China<br>India<br>Indonesia<br>Philippines<br>Korea<br>Thailand<br>Vietnam<br>Singapore<br>New Zealand<br>Malaysia<br>Japan<br>Brunei Darussalam<br>Australia<br>Laos<br>2015 2030<br>Cambodia<br>Southeast Asia<br>0 1 2 3 4 5 0 5 10 15 20<br><!-- End of picture text --> Source: Authors’ estimates

**Figure 10. Trade barriers faced by FTAAP members before and after trade liberalization within the block, trade weighted averages in %**

<!-- Start of picture text --> FTAAP, Tariffs faced FTAAP, NTBs faced<br>Russion Federation<br>China<br>Indonesia<br>Philippines<br>Korea<br>Thailand<br>USA<br>Vietnam<br>Singapore<br>New Zealand<br>Malaysia<br>Japan<br>Brunei Darussalam<br>Australia<br>Peru<br>Mexico 2015 2030<br>Chile<br>Canada<br>0 1 2 3 4 5 0 5 10 15 20<br><!-- End of picture text --> Source: Authors’ estimates
<!-- Start of picture text --> a |<br>iii<br>=i<br>—iii<br>pe<br>ee | el<br>aa<br>=mi<br>rr a<br>f a a |e<br>— pe<br><!-- End of picture text -->

<!-- Start of picture text --> TPP12, Tariffs imposed TPP12, NTBs imposed<br>USA TM EE<br>Viena ON Eee<br>Singapore _—_<br>New Zealand TM iii<br>Malaysia === Eee<br>Japan PE OO —=Eeee<br>Brunei Darussa]aQ a<br>Austtala ar ———<br>Peru = Se<br>Mexico TM Se—="e<br>Chile! |<br>Canada "0015 m 2030 ———_<br>0123 45 67 8 9 10 0 5 10 15 20<br><!-- End of picture text -->
21 <!-- Start of picture text --> RCEP, Tariffs imposed RCEP, NTBs imposed<br>China<br>Southeast Asia<br>India<br>Laos<br>Cambodia<br>Indonesia<br>Philippines<br>Korea<br>Thailand<br>Vietnam<br>Singapore<br>New Zealand<br>Malaysia<br>Japan 2015 2030<br>Brunei Darussalam<br>Australia<br>0 2 4 6 8 10 0 5 10 15 20<br><!-- End of picture text --> Source: Authors’ estimates

**Figure 14. Trade barriers imposed by FTAAP countries before and after trade liberalization to imports from member states, trade weighted averages in %**

<!-- Start of picture text --> FTAAP, Tariffs imposed FTAAP, NTBs imposed<br>Russion Federation<br>China<br>Indonesia<br>Philippines<br>Korea<br>Thailand<br>USA<br>Vietnam<br>Singapore<br>New Zealand<br>Malaysia<br>Japan<br>Brunei Darussalam<br>Australia<br>Peru<br>Mexico<br>2015 2030<br>Chile<br>Canada<br>0 2 4 6 8 10 0 5 10 15 20<br><!-- End of picture text --> Source: Authors’ estimates
22

# Sectoral changes

Figures 15 to 18 show sectoral effects of the simulated FTAs on output and trade flows of the members states as compared to the baseline in 2030.

**The highest growth of exports and output under the CPTPP are projected to occur in food processing, wearing apparel, and textiles.** Due to a strong reduction in tariffs and NTMs, food processing will benefit the most in terms of growth rates and in absolute/dollar increases. Their collective exports will expand by 28% relative to baseline conditions in 2030, boosting production within the CPTPP by almost 5%. Exports of Wearing apparel and Textiles will expand by 13% and 6% in total, originating mostly from Vietnam and Malaysia. Reduction of barriers will further deepen Vietnam and Malaysia specialization in these sectors. Other sectors that will see a substantial output and export increase in dollar value include: Transport equipment (largely from Japan) and Chemical, rubber, plastic products (from Malaysia and Singapore), Machinery and equipment nec (from Malaysia and Singapore). The CPTPP will also stimulate the growth of services sectors, especially Trade and transport services - mainly due to a higher demand on these services by all other sectors as they are used as an intermediate input in all sectors. Reduction of imposed trade barriers is also projected to increase imports in all sectors, with the highest changes in Food processing, Agriculture, Wearing apparel, Textiles, and all Services. Import expansion in these sectors will be partly induced by a stronger demand on cheaper intermediate inputs from other CPTPP members (especially in Textiles and Wearing apparel having high shares of intermediate inputs in their output). For instance, textile sector in Vietnam will observe significant increases in imports of textile products due to higher demand in the booming apparel sector.

**Under the TPP12, the estimated largest gains in exports and production would be observed in**

**Wearing apparel, Textiles, and Food processing.** Due to a significant decline of trade barriers in the US market, Wearing apparel will have the highest growth - a 88% increase in exports ($79 billion) that will boost its production by 21% ($89 billion). Exports and production of Textiles under the TPP12 were estimated to grow rapidly as well – by 35% and 9% respectively. Vietnam will be the major beneficiary of this expansion - its production of Wearing apparel and Textiles will increase by more than $100 billion. At the same time, the US and Malaysia will also increase their exports and production of Wearing apparel due to better market access and booming trade in these products among TPP12 members. However, production of textile products will decrease in the United States as a result of increased imports of cheaper inputs and intermediates for apparel and textile production. Food processing will provide largest benefits for TPP2 members in dollar terms – their exports will increase by $130 billion (up by 32%). The United States, Australia, Malaysia, and Japan are projected to contribute the most to this expansion after significant decline in trade barriers faced by them on TPP12 markets. Other important sectors with significant dollar gains include Chemical, rubber, plastic products in Japan, Malaysia, and the United States and transport equipment in Japan, Mexico, and Peru. At the same time, declines in exports and production are expected for Chemical, rubber, plastic products in Vietnam, and for Transport equipment in the United States and Vietnam. All services sectors will expand, especially Trade and transport services (mostly in Japan and the United States).

The model simulations suggest that due to better access to large RCEP markets the most dynamic export growth will be experienced by the following sectors: Food processing – by 23.4%, driven by increases in Korea, Australia, Malaysia, Indonesia, and China; Textiles – by 6.7%, driven by in Japan, China, and India; Natural resources/mining – by 6.2%, driven by in Japan, China, and India; Metals – by 5.8%,
<!-- Start of picture text --> CPTPP Output, billion $ CPTPP Output, %<br>Wearing apparel and leather fll: Oe<br>Textiles [iin TE<br>Food, beverages, tobacco [tttttle es<br>Other agriculture |<br>Machinery and equipment nec [illus —<br>Electronic equipment "passes —<br>Transport equipment IT sss Eee<br>MetalsTM pes a<br>Natural resources/mining UNNI css =<br>Chemical, rubber, plastic products UIINIIIT sss a————<br>Other manufacturing \pesess —|<br>Social services [css =<br>Communication services (UUIIUUIIIIIIIIIIT —<br>Finance & other business services IIIT sss —<br>Trade and transport SS Pn<br>Utilities Milnes ——<br>Construction [SUSI sss Penh<br>-20 0 20 40 60 80 100 -1 2 4 6 8 10<br>mStandard mTM Productivity kick Standard TM Productivity kick<br><!-- End of picture text -->
<!-- Start of picture text --> Exports, billion $ Exports, %<br>Wearing apparel and leather [Sas es<br>Textiles [il Ee,<br>Food, beverages, tobacco [I. I—C—C“C:CC‘*SS<br>Other iO a<br>Machinery and equipment nec [ies ;=<br>Electronic equipment ay =<br>Transport equipment [ces iL.<br>Metals By a]<br>Natural resources/mining [Us EL<br>Chemical, rubber, plastic products [SUSUcs EL.<br>Other manufacturing my —<br>Social services § Ls|<br>Communication services iy =z...<br>Finance & other business services |] , |<br>Trade and transport ‘y ,<br>Utilities , |<br>Construction a<br>-20 0 20 40 60 80 100 “5 0 5 10 15 20 25 30<br>@Standard m Productivity kick @Standard TM Productivity kick<br><!-- End of picture text -->

<!-- Start of picture text --> Imports, billion $ Imports,%<br>Wearing apparel andleather ('. Pd<br>Textiles NIL Ee<br>Cher agicutre TT, —<br>Machinery and equipment nec [UT |<br>Electronic equipment [ces EZ<br>Transport equipment [cs |<br>Metals es =<br>Natural resources/mining (TT... |<br>Chemical, rubber, plastic products (TT. a<br>Other manufacturing SL. a<br>Sodal services JF | ti‘(‘é és<br>Communication services ('., Pd<br>Finance & other business services [i<br>Trade andtranspot 9. |<br>Utilities | EE<br>Construction § |<br>oO 5 10 15 20 25 30 35 40 45 sO 0 2 4 6 8 10 12 14 16 18 20<br>@Standard mTM Productivity kick m@ Productivity kick Standard<br><!-- End of picture text -->
<!-- Start of picture text --> TPP12 Output, billion $ TPP12 Output, %<br>Wearing apparel and leather 2.<br>Textiles DT<br>Food, beverages, tobacco a<br>Machinery Other agriculture Hh “7<br> and equipment nec [haus Lk<br>Electronic equipment [ikeas _<br>Transportequipment [ilies LL<br>MetaBTM 5 5<br>Natural resources/ mining ilies L<br>Chemical, rubber, plastic products [INN | =<br>Other manufacturing [hems le<br>Social services [ccc L<br>Communication and business services nec [XE x<br>Finance and other business services [UUcs =<br>Trade and transport Sg =<br>Utilities Mies =<br>Construction [Ts =<br>20 0 20 40 60 80 100 120 140 160 180 1 4 8 4 19 24<br>mStandard m Productivity kick mStandard m Productivity kick<br><!-- End of picture text -->

<!-- Start of picture text --> TPP12 Exports, billion $, Exports, %<br>Wearing apparel and leather EE. cs<br>Textiles DI. PrrC“(‘;‘SC”TM<br>Food, beverages, tobacco TT. es<br>Other agriculture (.. |<br>Machinery and equipment nec SE... | 5<br>Electronicequipment —... L<br>Transport equipment ST. L<br>Metals ies 4<br>Natural resources/ mining ET... \<br>Chemical, rubber, plastic products I... | 4<br>Other manufacturing SL 4<br>Sodal services SN 4<br>Communication and business services nec =z<br>Finance and other business services [NIL Li<br>Trade and transport =<br>Utilities | 1<br>Construction ff \<br>0 10 20 30 40 50 60 70 80 90 ©6100 5 15 35 55 75 95<br>@Standard TM Productivity kick mStandard m Productivity kick<br><!-- End of picture text -->

<!-- Start of picture text --> TPP12 Imports, billion $ TPP12 Imports, %<br>Wearing apparel and leather ST... eeeecrcrcrrrCU<br>Textiles ts as<br>Food, beverages, tobacco i. POeeeeeereeCSS<br>Other agriculture LT a<br>Machinery and equipment nec [IIe ;keltc<br>Electronicequipment [ills ll.<br>Transport equipment SL ; ss ke<br>Metals [ills =z<br>Natural resources / mining [EL a.<br>Chemical, rubber, plastic products —'. a.<br>Other manufacturing SE a.<br>Social services SE Fl<br>Communication and business services nec SE, pee“SS<br>Finance and other business services ST. a.<br>Trade and transport S' Ft C(t<br>Utilities ,<br>Construction [ies Le<br>0) 5 10 15 20 25 30 0 5 10 15 20 25 30<br>mStandard TM Productivity kick mStandard _TM Productivity kick<br><!-- End of picture text -->
<!-- Start of picture text --> RCEP Output, billion $ Output, %<br>Wearing apparel and leather Mikes 7<br>Textiles [les C—O<br>Food, beverages, tobacco Nc ee<br>Other agriculture [Milles |<br>Machinery and equipment nec MIRIINIIIIII 7eee_.<br>Electronic equipment libs ———<br>Transport equipment Mil Cy<br>Metals SII ee<br>Natural resources / mining MENNININUU Ts EE_ eee<br>Chemical, rubber, plastic products NINN ES<br>Other manufacturing Milles lee<br>Social services ills ed<br>Communication and business services neC Milissssssss lee<br>Finance and other business services ERIM ccs: —O—————E<br>Trade and trarsport SIIIIIUUIUINIIIIIIIIIID :ttttt eee<br>Utilities Miles: eee<br>Construction EET..." 7<br>0 100 200 300 400 500 600 700 800 0 5 10 15 20<br>mStandard mi Productivity kick mStandard mTM Productivity kick<br><!-- End of picture text -->

<!-- Start of picture text --> RCEP Exports, billion $ Exports, %<br>Wearing apparel and leather [lees ;tese<br>Textiles a<br>Food, beverages, tobacco StTTT ss es<br>Other agriculture [iy Pl<br>Machinery and equipment nec St 0 Ee<br>Electronic equipment RRINIIIIIIIIIT sss Cs<br>Transport equipment SST Le]<br>Metals SSSI ee<br>Natural resources/ mining [SSS es<br>Chemical, rubber, plastic products [INSU 000 BN<br>Other manufacturing [ilies C—O<br>Social services "ss 2<br>Communication and business services NEC | Le<br>Finance and other business services 2<br>Trade and transport [es Ee<br>Utilities =,<br>Construction , —<br>20 0 20 40 60 80 100 120 140 160 180 6 0 5 10 15 20 25 30<br>Standard m Productivity kick mStandard TM Productivity kick<br><!-- End of picture text -->

<!-- Start of picture text --> RECP Imports, billion $ Imports, %<br>Wearing apparel and leather [ills ee<br>Textiles TL. es<br>Food, beverages, tobacco tttttt ttt tt ttt ttttt sss reereee<br>Other agriculture EEE.<br>Machinery and equipment nec RSS<br>Electronic equipment [UT pl<br>Transport equipment [Ts es<br>Metals EES cs NS<br>Natural resources / mining S ESSSSSUSSS T es<br>Chemical, rubber, plastic products SSNScesses es<br>Other manufacturing ML aes<br>Socialservices [iF ee<br>Communication and business services nec [ENN ees ee<br>Finance and other business services [ills Ly<br>Trade and transport [ETes EE<br>Utilities | Pl<br>Construction fh ee<br>te) 20 40 60 80 100 120 140 160 te) 5 10 15 20 25 30<br>m@Standard mTM Productivity kick Standard mTM Productivity kick<br><!-- End of picture text -->
<!-- Start of picture text --> FTAAP Output, billion $ Output, %<br>Wearing apparel and leather Mla en ieee<br>Textiles [bees es<br>Food, beverages, tobacco [UNNI css ee<br>Other agriculture (ilies Ea<br>Machinery and equipment nec II a<br>Electronic equipment [ills 7.<br>Transport equipment RRIIIIIIIIID css: , eT<br>Metals SII 7.<br>Natural resources / mining [RNIN cccsssssssss Hee<br>Chemical, rubber, plastic products [UUUUIUUIUIIUIIIIIT es<br>Other manufacturing [ilies a FE—<br>Social services (UNNI :: ——<br>Communication and business services nec RUNNIN ss [PaO<br>Finance and other business services (UNNI OE<br>Trade and transport RRS eee<br>Utilities MiB OS<br>Construction Si 2<br>0 200 400 600 800 1000 1200 oO 2 4 6 8 10 12 14 16 18 20<br>Standard TM Productivity kick Standard TM Productivity kick<br><!-- End of picture text --> <!-- Start of picture text --> FTAAP exports, billion $ Exports, %<br>Wearing apparel andleather SE... aes<br>Teties DI. De]<br>Food, beverages, tobacco [IIS De]<br>Other agriculture SL PS<br>Machinery and equipment nec INSIST se PS<br>Electronic equipment [SUNT Hille<br>Transport equipment NNN Dn]<br>Metals [RUSS ss Oe<br>Natural resources/ mining [NUUNNccss A<br>Chemical, rubber, plastic products [IIINNUUIUININNNNINIINII<br>Other manufacturing [Us EE<br>Social services ow hes<br>Communication and business servicesnec [Nn EE<br>Finance and other business services [, Pe<br>Trade and transport SL. po<br>Utilities | a]<br>Construction » hes<br>-50 0 50 100 150 200 250 300 350. -5 0 5 10 15 20 25 30 35 40 45<br>mStandard mTM Productivity kick mStandard TM Productivity kick<br><!-- End of picture text -->

<!-- Start of picture text --> FTAAP Imports, billion $ Imports, %<br>Wearing apparel andleather Ir eccclrclrlrlrlrC( SS<br>Textiles DI. ars<br>Food, beverages, tobacco es<br>Other agriculture SI a]<br>Machinery and equipment nec RT es<br>Electronic equipment [QRNNINNNNNIIITcss ES<br>Transport equipment ST pollllcltrttLCULDWN<br>Metals Ts es<br>Natural resources / mining SSSI Le<br>Chemical, rubber, plastic products SST —...<br>Other manufacturing ST. a]<br>Social services IN Ss...<br>Communication and business services nec ET... es<br>Finance and other business services [AL es<br>Trade and transport SE. ....<br>Utilities cl<br>Construction FF<br>0 50 100 150 200 250 300 ie) 5 10 15 20 25 30 35 40<br>mStandard m Productivity kick @Standard mTM Productivity kick<br><!-- End of picture text -->
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# Trade creation and diversion

Tables 2, 3, and 8 and Figures 19-22 show the decomposition of export changes by destinations and sectors in absolute and relative terms with respect to the baseline in 2030. As can be seen, the simulation results confirm that FTAs tend to increase export flows toward signatory countries: exports within the CPTPP will increase by 27% as compared to the baseline scenario in 2030, TPP12 – by 15.4% RCEP – by 11.7%, FTAAP – by 18.1%.

The importance of FTA markets as destination for its members’ exports is growing both at the aggregate and country level (see Tables 2, 3 and 8) as exporters from signatory countries gain more competitive advantage in the member markets compared to the non-members, as well as exports from non-members become relatively less competitive. On the aggregate level, signatory countries’ share in total members’ trade will expand from 14.8% to 18.3% under the CPTPP; from 35.7% to 39.5% under the TPP12; from 45.4% to 48.3% under the RCEP; from 59.9% to 64.7% under the FTAAP. Therefore, exports from nonmembers tend to divert from member markets countries. However, the changes in trade for all considered FTAs are projected to be significantly larger, both in dollar and percentage terms, that any trade diversion observed by non-members. For example, CPTPP exports within the treaty will go up by $185 billion, while non-members exports to the CPTPP markets will go down by $63 billion. Gains in total exports of FTAs members are also much higher compared to exports losses of non-members (see Tables 6 and 7), exceeding them by more than five times. As a result, all FTAs are expected to boost the global exports, with larger FTAs having greater positive impact on global trade.

## **Table 2. Exports of FTA Members by destinations (FTA Members vs Non-members markets) compared to the baseline in 2030**

|||**CPT**|**PP**|**TP**|**P12**|**RC**|**EP**|**FT**|**AAP**|
|---|---|---|---|---|---|---|---|---|---|
|||**Members**|**Non-**<br>**members**|**Members**|**Non-**<br>**members**|**Members**|**Non-**<br>**members**|**Members**|**Non-**<br>**members**|
|**Members’**<br>**exports in**<br>**2030**|$ billion<br>share,<br>%|869.0<br>_18.3_|3,882<br>_81.7_|3,207.1<br>_39.5_|4,907.4<br>_60.5_|5,867.4<br>_48.3_|6,288.8<br>_51.7_|10,998.2<br>_64.7_|6,011.1<br>_35.3_|
|**Change to**|$ billion|184.9|-57.3|427.6|-104.8|616|-27.7|1,685.3|-225.8|
|**baseline**<br>**in 2030**|in<br>shares|_3.5_|_-3.5_|_3.9_|_-3.9_|_2.9_|_-2.9_|_4.8_|_-4.8_|
||in p.p.|||||||||

Source: Authors’ estimates (*share in total FTA members’ exports)
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**Table 3. Exports of Non-members by destinations (FTA Members vs Non-members markets) compared to the baseline in 2030**

|||**CPT**|**PP**|**TPP**|**12**|**RC**|**EP**|**FT**|**AAP**|
|---|---|---|---|---|---|---|---|---|---|
|||**Members**|**Non-**<br>**members**|**Members**|**Non-**<br>**members**|**Members**|**Non-**<br>**members**|**Members**|**Non-**<br>**members**|
|**Non-**<br>**members’**|$ billion|3,756.6|24,087.0|5,497.1|19,149.3|5,292.1|15,573.8|5,718.6|11,011.3|
|**exports in**<br>**2030**|share,<br>%|_13.5_|_86.5_|_22.3_|_77.7_|_25.4_|_74.6_|_34.2_|_65.8_|
|**Change to**|$ billion|-63.2|38.3|-117.2|63.3|-65.8|7.7|-276.7|64.5|
|**baseline**<br>**in 2030**|in<br>shares<br>in p.p.|_-0.2_|_0.2_|_-0.4_|_0.4_|_-0.2_|_0.2_|_-1.2_|_1.2_|

Source: Authors’ estimates (*share in total Non-members’ exports) Under CPTPP exports to signatory countries would increase from $684 billion to $869 billion by 2030 as compared to the baseline, however, there will be some trade diversion with a reduction of CPTPP exports to non-member countries by $57.3 billion. The CPTPP countries that benefit the most from this export creation are New Zealand, Australia, Vietnam, Canada, and Singapore (their exports to CPTPP will increase by more than 25%) –as a result of facing the highest reductions in trade barriers on CPTPP markets. As to major destination markets, there will be the greatest increases of flows to RCEP/TPP joint members (as the most numerous group) in absolute terms ($141 billion), and to Other TPP members - Canada, Chile, Mexico, and Peru - in relative terms (by 31.7%). At the same time, CPTPP exports will decline for China, the European Union, the United States, Russia, and the Rest of the world. CPTPP exports directed to CPTPP markets would increase the most in Food processing - up by 143.6%, Wearing apparel and leather by 93%, Chemical, rubber, plastic products by 29%, and Textiles by 55%. Exports of services (Trade and transport, and Communication) will also observe a growth to CPTPP markets – by 29% and 12.7% respectively. Noticeable, exports of Food processing will enjoy growth to both member and non-member countries. At the same time, trade diversion from non-members is expected mostly in sectors such as Agriculture (e.g. -9% from China), Electronics (-2% from Other RCEP countries), Machinery and equipment (-1.8% from Rest of the world), and Other manufacturing (- 2.7% from the United States).

The TPP12 is projected to boost exports to signatory countries from $2,779.5 billion to $3,207.1 billion by 2030 as compared to the baseline, while exports to non-members will go down by 105$ billion. Vietnam is expected to observe the largest reorientation of exports to member states (mostly to the United States) – by more than 20 percentage points. The importance of TPP12 markets as export destinations will also noticeably increase for New Zealand, Australia, and Malaysia. For the United States, 35.7% of its exports would be directed to TPP12 members by 2030 as compared to 32.4% under baseline conditions. In turn, more exports of member countries will be destined to the US market – the US share in total exports of member states will elevate from 13.7% to 14.9%. As to other export destinations, TPP12 members will increase their exports the most at RCEP/TPP joint members market – by 27%, the United States - by 13.8% (mostly, wearing apparel and textiles), and Other TPP market – by 5.6%, while contracting to all other regions. Exports directed to TPP12 members would increase in all
30 sectors, with the greatest increases in Wearing apparel and leather 171%, textiles 91%, Food processing 64%, Agriculture 26%, as well as Communication and Trade/Transport services 26% and 14.5% with respect to the baseline. It can be seen from the Figure 15 that most of the market reallocation of TPP12 exports would take place in Agriculture, Natural resources/mining, Machinery and equipment, and Chemical, rubber, plastic products shifting from other regions to most RCEP/TPP joint members. For the Food processing, the Wearing apparel, and the Textiles sectors, there will be strong export creation effect with increasing export flows within the TPP12 (without significant decreases to other markets). Particularly, increased exports of Wearing apparel and Textiles will be directed mostly to the United States and other TPP markets, while food products will be more supplied to RCEP/TPP joint members and Other TPP markets.

Under the RCEP, export flows of signatory countries to RCEP markets will increase by $616 billion compared to the baseline in 2030. Japan, India, and China – are expected to reorient their exports towards RCEP members the most. For instance, Japan will increase the RCEP share in its total exports by 7.8 percentage points. By major destination markets, increased members’ exports will be directed the most to China (export increase of 13.5%) and to RCEP/TPP joint members (13.3%) followed by Other RCEP (9%). However, RCEP member exports to non-members in total will be almost unchanged as compared to the baseline (-0.4%) revealing the low trade diversion effect. Moreover, RCEP exports will even slightly increase to such non-member markets as Other TPP and the United States (mostly, in Wearing apparel, Textiles, and Chemical, rubber, plastic products). Exports directed to RCEP members would increase in all sectors compared to baseline conditions, with the greatest expansions in Food processing (by 26.6%), Textiles (25.8%), Transport equipment (15.4%), Wearing apparel and leather (13.6%), Metals (12%), Trade and transport services (16.6%), and Chemical, rubber, plastic products (11.4%). The relocation of export flows towards RCEP markets from other markets will be the most evident in Agriculture, Natural resources/mining, Transport equipment, Other manufacturing, and Services. At the same time, exports of Food processing , Textiles, Wearing apparel and leather, and Chemical, rubber, plastic products will grow at almost all destinations.

The FTAAP will boost the largest shift of member exports towards the signatory countries. Exports within the treaty will grow by $1,685 billion in total, while exports to non-members will go down by $225.8 billion. Japan, the Russian Federation, Vietnam, the United States, and China will orient most of their exports toward FTAAP markets – FTAAP shares will grow by more than 5 percentage points in their total exports. Exports destinations for these growing export flows would be located within Other TPP (increase of 36.5%), China (20%), RCEP/TPP joint members (15.7%), and the United States (15%), diverting from Rest of the world (-2.4%), and the EU (-3.5%). The greatest increase of exports from the FTAAP will occur in the Russian market – up by 87% as compared to the baseline in 2030 due to the high initial level of trade protection for FTAAP countries and highest expected reductions of trade barriers that used to restrict trade with FTAAP members. Compared to other simulated FTAs, FTAAP sectoral changes and exports destinations will be much more diversified.
31

# **Figure 19. Export changes by sectors and destinations under the CPTPP compared to the baseline in 2030, in billion $ and %**

<!-- Start of picture text --> Agriculture Agriculture<br>Natural resources/mining Natural resources/mining<br>Food, beverages, tobacco Food, beverages, tobacco<br>Textiles Textiles<br>Wearing apparel and leather Wearing apparel and leather<br>Chemical, rubber, plastic products Chemical, rubber, plastic products<br>Metals Metals<br>Transport equipment Transport equipment<br>Electronics Electronics<br>Machinery and equipment Machinery and equipment<br>Other manufacturing Other manufacturing<br>Utilities Utilities<br>Construction Construction<br>Trade and transport Trade and transport<br>Finance and other business services Finance and other business services<br>Communication and business services Communication and business services<br>Social services Social services<br>-20 0 20 40 60 80 0 1 2 3 4<br>China EU China EU<br>Other RCEP Other TPP Other RCEP Other TPP<br>RCEP/TPP join members Rest of the world RCEP/TPP join members Rest of the world<br>Russia USA Russia USA<br><!-- End of picture text --> Source: Authors’ estimates. *Other TPP – Canada, Chile, Mexico, Peru; RCEP/TPP joint members – Australia, Brunei, Japan, Malaysia, New Zealand, Singapore, Vietnam; Other RCEP – Indonesia, South Korea, Philippines, Thailand, Cambodia, India, Lao PDF, Myanmar.

**Figure 20. Export changes by sectors and destinations under the TPP12 compared to the baseline in 2030, in billion $ and %**

<!-- Start of picture text --> Agriculture Agriculture<br>Natural resources/mining Natural resources/mining<br>Food, beverages, tobacco Food, beverages, tobacco<br>Textiles Textiles<br>Wearing apparel and leather Wearing apparel and leather<br>Chemical, rubber, plastic products Chemical, rubber, plastic products<br>Metals Metals<br>Transport equipment Transport equipment<br>Electronics Electronics<br>Machinery and equipment Machinery and equipment<br>Other manufacturing Other manufacturing<br>Utilities Utilities<br>Construction Construction<br>Trade and transport Trade and transport<br>Finance and other business services Finance and other business services<br>Communication and business services Communication and business services<br>Social services Social services<br>-50 0 50 100 150 0 1 2 3 4<br>China EU China EU<br>Other RCEP Other TPP Other RCEP Other TPP<br>RCEP/TPP join members Rest of the world RCEP/TPP join members Rest of the world<br>Russia USA Russia USA<br><!-- End of picture text --> Source: Authors’ estimates. *Other TPP – Canada, Chile, Mexico, Peru; RCEP/TPP joint members – Australia, Brunei, Japan, Malaysia, New Zealand, Singapore, Vietnam; Other RCEP – Indonesia, South Korea, Philippines, Thailand, Cambodia, India, Lao PDF, Myanmar.
32

# **Figure 21. Export changes by sectors and destinations under the RCEP compared to the baseline in 2030, in billion $ and %**

<!-- Start of picture text --> Agriculture Agriculture<br>Natural resources/mining Natural resources/mining<br>Food, beverages, tobacco Food, beverages, tobacco<br>Textiles Textiles<br>Wearing apparel and leather Wearing apparel and leather<br>Chemical, rubber, plastic products Chemical, rubber, plastic products<br>Metals Metals<br>Transport equipment Transport equipment<br>Electronics Electronics<br>Machinery and equipment Machinery and equipment<br>Other manufacturing Other manufacturing<br>Utilities Utilities<br>Construction Construction<br>Trade and transport Trade and transport<br>Finance and other business services Finance and other business services<br>Communication and business services Communication and business services<br>Social services Social services<br>0 50 100 150 -.5 0 .5 1<br>China EU China EU<br>Other RCEP Other TPP Other RCEP Other TPP<br>RCEP/TPP join members Rest of the world RCEP/TPP join members Rest of the world<br>Russia USA Russia USA<br><!-- End of picture text --> Source: Authors’ estimates. *Other TPP – Canada, Chile, Mexico, Peru; RCEP/TPP joint members – Australia, Brunei, Japan, Malaysia, New Zealand, Singapore, Vietnam; Other RCEP – Indonesia, South Korea, Philippines, Thailand, Cambodia, India, Lao PDF, Myanmar.

# **Figure 22. Export changes by sectors and destinations under the FTAAP compared to the baseline in 2030, in billion $ and %**

<!-- Start of picture text --> Agriculture Agriculture<br>Natural resources/mining Natural resources/mining<br>Food, beverages, tobacco Food, beverages, tobacco<br>Textiles Textiles<br>Wearing apparel and leather Wearing apparel and leather<br>Chemical, rubber, plastic products Chemical, rubber, plastic products<br>Metals Metals<br>Transport equipment Transport equipment<br>Electronics Electronics<br>Machinery and equipment Machinery and equipment<br>Other manufacturing Other manufacturing<br>Utilities Utilities<br>Construction Construction<br>Trade and transport Trade and transport<br>Finance and other business services Finance and other business services<br>Communication and business services Communication and business services<br>Social services Social services<br>0 50 100 150 200 0 1 2 3 4 5<br>China EU China EU<br>Other RCEP Other TPP Other RCEP Other TPP<br>RCEP/TPP join members Rest of the world RCEP/TPP join members Rest of the world<br>Russia USA Russia USA<br><!-- End of picture text --> Source: Authors’ estimates. *Other TPP – Canada, Chile, Mexico, Peru; RCEP/TPP joint members – Australia, Brunei, Japan, Malaysia, New Zealand, Singapore, Vietnam; Other RCEP – Indonesia, South Korea, Philippines, Thailand, Cambodia, India, Lao PDF, Myanmar.