AN EMPIRICAL STUDY OF THE TRADE CREATION EFFECTS AND TRADE POTENTIAL OF RCEP
DOI:
https://doi.org/10.18623/rvd.v22.5156Keywords:
Rcep, Trade Creation, Trade Potential, Tariff Reduction, Free Trade AgreementAbstract
Developing countries sign free trade agreements aimed to expand their access to markets, improve trade balance, revitalise their economies by increasing production and create jobs opportunities. Keeping in view these objectives, the RCEP agreement was signed by 15 countries which collectively account for 30% of economic production of the whole world and 25% of global trade. Thus, it became the biggest FTA of the world. This study answers two questions. First, what are the trade creation effects of RCEP? and second, what is the trade potential of the RCEP? Results of this study show that RCEP is helping member countries strengthen their trade and increased market access. The 90% tariff reductions serving under RCEP determine its effects on trade, both inside and beyond the union. Intraregional exports are supposed to increase 2%, or 42 billion dollars. This is due to two forces: trade creation and trade diversion. Trade creation is expected to crease trade among member by 17 billion dollars while the trade diversion will increase trade 25 billion dollars among the member countries. On country level China will obtain the highest benefits in terms of improved trade, followed by Japan. While least will go to Cambodia followed by Loas.
References
ADB Briefs. (2020. December). Regional Comprehensive Economic Partnership: Overview and Economic Impacts. ADB Briefs No. 164.
Anderson. J. E.. & Wincoop. E. V. (2003). Gravity with Gravitas: A Solution to the Border Puzzle. American Economic Review. 93(1). 170-192.
Baier. S. & Standaert. S. (2020). Gravity Models and Empirical Trade. Economics and Finance.
Bergstrand. J. H. (1985). The Gravity Equation in International Trade: Some Microeconomic Foundations and Empirical Evidence. The Review of Economics and Statistics. 67(3). 474-481.
Donaubauer. J.. Glas. A.. Meyer. B. & Nunnenkamp. P. (2018). Disentangling the impact of infrastructure on trade using a new index of infrastructure. Review of World Economics. 154. 745-784.
Ferrantino. M. J.. Maliszewska. M. & Taran. S. (2019). Actual and Potential Trade Agreements in the Asia-Pacific: Estimated Effects. World Bank.https://documents1.worldbank.org/curated/en/171731585114146413/pdf/Actual-and-Potential-Trade-Agreements-in-the-Asia-Pacific-Estimated-Effects.pdf
Flach. L.. Hildenbrand. H. & Teti. F. (2021). The Regional Comprehensive Economic Partnership Agreement and Its Expected Effects on World Trade. Intereconomics. 56(2). 92-98.
Gilbert J. Furusawa T. & Scollay R. (2018). The economic impact of the Trans‐Pacific Partnership: What have we learned from CGE simulation? The World Economy. 41(3). 831-865.
Gourieroux. C.. Monfort. A. & Trognon. A. (1984). Pseudo Maximum Likelihood Methods: Theory. Econometrica. 52(3). 681-700.
Hausmann. R.. Hwang. J. & Rodrik. D. (2017). What You Export Matters. Journal of Economic Growth. 12(1). 1-25.
Helpman. E. (1984). The Factor Content of Foreign Trade. The Economic Journal. 94(373). 84-94.
Li. Q.. Scollay. R. & Gilbert. J. (2017). Analyzing the effects of the Regional Comprehensive Economic Partnership on FDI in a CGE framework with firm heterogeneity. Economic Modelling. 67. 409-420.
Nicita. A. (2021). An Assessment of the Regional Comprehensive Economic Partnership (RCEP) Tariff Concessions. UNCTAD Research Paper No. 73. 1-22.
Nicita. A. et al. (2021. December 15). The Regional Comprehensive Economic Partnership and its trade Effects. United Nations Conference on Trade and Development (UNCTAD).
Park. Y. P.. Das. S. B. & Crivelli. P. (2021). Three Areas Where RCEP May Help the Region’s Post-Pandemic Recovery. Asian Development Blog. https://blogs.adb.org/blog/three-areas-where-rcep-may-help-region-s-post-pandemic-recovery
Petri. P. and Plummer. M. (2020. June). East Asia Decouples from the United States: Trade War. COVID-19. and East Asia’s New Trade Blocs. PIIE Working Paper. Washington. DC: Peterson Institute for International Economics. https://www.piie.com/system/files/documents/wp20-9.pdf
Poyhonen. P. (1963) A Tentative Model for the Volume of Trade between Countries. Weltwirtschaftliches Archive. 90. 93-100.
Ratna. R. S.. & Huang. J. (2016). Regional Comprehensive Economic Partnership (RCEP) FTA: Reducing Trade Cost through Removal of Non-Tariff Measures. Korea and the World Economy. 17(2). 213-242.
Santos. S. & Silvana. T. (2006). The Log of Gravity. The Review of Economics and Statistics. 88(4). 641-658.
Shimizu. K. (2021). The ASEAN Economic Community and the RCEP in the world economy. Journal of Contemporary East Asia Studies. 10(1). 1-23.
Soloaga. I. & Winters. L. A. (1999). Regionalism in the Nineties: What Effect on Trade? CEPR Discussion Paper 2183.
Tinbergen. J.. & Dobb. M. (1962). An Essay on Economic Growth and Planning. Econometrica. 30(2). 399-400.
Vijayasri. G. (2013). The Importance of International Trade in the World. International Journal of Marketing. Financial Services and Management Research. 2. 111-119.
World Bank. (2010). Trade Effects. https://wits.worldbank.org/wits/wits/witshelp/Content/SMART/Trade%20Effects.htm
Downloads
Published
How to Cite
Issue
Section
License
I (we) submit this article which is original and unpublished, of my (our) own authorship, to the evaluation of the Veredas do Direito Journal, and agree that the related copyrights will become exclusive property of the Journal, being prohibited any partial or total copy in any other part or other printed or online communication vehicle dissociated from the Veredas do Direito Journal, without the necessary and prior authorization that should be requested in writing to Editor in Chief. I (we) also declare that there is no conflict of interest between the articles theme, the author (s) and enterprises, institutions or individuals.
I (we) recognize that the Veredas do Direito Journal is licensed under a CREATIVE COMMONS LICENSE.
Licença Creative Commons Attribution 3.0
