Quantifying the TPP Without the United States

Abstract

We assess the outcomes for the negotiating parties in the Trans-Pacific Partnership (TPP) if the TPP11 go ahead with the agreement as negotiated without the United States, as compared to the outcomes under the TPP12 agreement as signed in October 2016. Both the TPP11 and TPP12 are assessed on the basis of commitments in the actual text and liberalization schedules, supplemented by the technical summaries provided by various governments interpreting the outcome of the negotiations. The difference is the US withdrawal. This assessment is based on a dynamic specification of the Global Trade Analysis Project model, modified to directly represent goods and services trade conducted through foreign affiliates, as well as on a cross-border basis, and to reflect the impact of foreign direct investment liberalization. We find that the TPP11 is a much smaller deal in aggregate than the TPP12, but that some parties do better without the United States in the deal, in particular the TPP11 parties in the Western Hemisphere – Canada, Mexico, Chile, and Peru. This sets up a complex negotiating situation for all parties going forward, as the United States seeks to re-negotiate one-on-one outside the TPP framework what it had already negotiated one-on-one inside the TPP framework. For the politically relevant medium term, the United States stands to be less well-off without the TPP12 than with the TPP11 in force and the Eleven stand to be better off. Since provisional deals can be in place for a long time, the results of this study suggest that the Eleven are better off to continue with the deal without the United States on a provisional basis, leaving aside the controversial governance elements, the implications of which for national interests are unclear and, in any event, may be substantially affected by parallel bilateral negotiations between individual TPP parties and the United States.

Keywords: Trans-Pacific Partnership, TPP, United States, Canada, CGE

JEL Classification: F13, F15