Incremental Benefit and Risk in TPP Membership from the Perspectives of SMEs

Abstract

Having to comply with the regulations and schemes of a trade environment, it is important for firms to assess the benefits and risks involved with TPP participation. It is the aim of this study to examine to the effectiveness of TPP participation from the perspective of SMEs, focusing on the incremental benefit and risk in TPP participation. Using an AHP analysis, we develop indexes for incremental benefit and risk to identify the relative importance of factors that small and medium sized enterprises (SMEs) expect in TPP participation. Based on the surveys completed by trade-related experts, this study identified the prioritized values in the decision making process towards the TPP participation. Key results show that to SMEs, financial improvement, notably increased sales and trade cost reduction were expected the most as the incremental benefits of TPP participation. Also, it was found that the relative importance of incremental benefit was stronger for firms that have experience exporting to the TPP region, whereas incremental risk was more important to firms without the experience. Based on the findings, theoretical and political implications on the TPP participation are discussed.

Keywords: Analytic Hierarchy Process (AHP), Incremental Benefit, Incremental Risk, Small and Medium Sized Enterprise (SME), Trans-Pacific Partnership (TPP)

JEL Classification: M10, M16