The TPP, China and the FTAAP: The Case for Convergence

Abstract

While the Trans-Pacific Partnership (TPP) and Regional Comprehensive Economic Partnership (RCEP) negotiations are progressing slowly, China’s interest in regional trade agreements has intensified. This paper brings together our computable general equilibrium model estimates of the benefits of various regional initiatives and adds a new set of estimates for the enlargement of the TPP to include China. This scenario would benefit all TPP members, and especially China and the United States, producing gains nearly as large as a region-wide Free Trade Area of the Asia Pacific. Several pathways to a consolidated regional agreement are examined, including the enlargement of the TPP or RCEP, and the negotiation of a new umbrella agreement that provides general and progressively higher region-wide standards. Still, a region-wide agreement poses very difficult challenges in terms of negotiations, politics and adjustment; China and the United States, as the countries expected to benefit the most, will have to cooperate intensively to make it a reality.

Keywords: Trans-Pacific Partnership, China, FTAAP, trade policy, free trade areas, regional economic integration

JEL Classification: F12, F13, F14, F15, F17