The Impact of Taiwan's TPP Accession on Canada

Abstract

This paper analyzes the impact on Canada’s economy of Taiwan’s accession to the Trans-Pacific Partnership (TPP) Agreement. While the TPP is to be concluded by the twelve current negotiating parties, it will allow accession by other regional economies, consistent with APEC’s endorsement of the TPP as a “pathfinder” approach to an FTAAP, which contemplates APEC economies that are ready to do so proceeding faster than others in deepening trade relations. Taiwan has clearly signaled its interest in acceding to the agreement. The approach in this study includes descriptive analysis of the commercial relationship between Taiwan and Canada and an analysis of the impact of Taiwan’s accession using computable general equilibrium model simulations that take in to account tariff liberalization, preference under-utilization and utilization costs, liberalized rules of origin, reduction of non-tariff barriers (NTBs) on goods and on cross-border services, and liberalization of foreign direct investment in services and the resulting implications for services trade through foreign affiliates (“commercial presence” or “Mode 3” services trade in WTO terminology). The liberalization assumptions are based on “best guesses” as to what the TPP agreement and the terms of Taiwan’s accession would actually be. The study concludes that Taiwan’s accession would generate over $20 billion of economic welfare gains for the incumbent TPP12 parties while Taiwan would enjoy a 2.8% increase in real GDP and $29 billion in economic welfare gains. For Canada, Taiwan’s TPP accession has some small structural/sectoral effects but no significant net impact on GDP or economic welfare. The results reported here suggest that Taiwan may need a “Canada strategy” to support its accession bid.

Keywords: Taiwan, Canada, Trans-Pacific Partnership, TPP, Asia-Pacific, trade liberalization, computable general equilibrium modelling, CGE

JEL Classification: F14, F15, F17