The Relative Significance of EPAs in Asia-Pacific 10 November 2015 Kenichi Kawasaki GRIPS/JIIA/RIETI 29 October 2011
Overview The relative significance of EPAs in Asia-Pacific TPP and RCEP are shown to complement each other rather than be competitors toward the establishment of FTAAP. Trade diversion effects will deteriorate the economic welfare of the nonmember economies of regional EPAs. Larger economic benefits are expected from NTMs reductions in addition to tariff removals. ASEAN countries and others will primarily benefit from their own EPA policy measures. East Asian economies would remain benefit largely from future trade liberalization. 1
Estimated impacts of EPAs Estimated economic impacts of trade liberalization are compared with business as usual without liberalization at some time in the future. Those will be achieved over medium-term, after around 10 years. GDP Economic impacts of trade liberalization Withoit trade liberalization With trade liberalization Impacts (%) Trade liberalization Future Source: Author 2
Regional integration in Asia-Pacific Negotiations on the Regional Comprehensive Economic Partnership (RCEP) began in 2013. The members of the Trans-Pacific Partnership (TPP) have increased. Source: Author s compilation Framework of EPAs in Asia-Pacific APEC Hong Kong, China RCEP Chinese Taipei China Russia Korea TPP US Japan India Canada Australia Mexico New Zealand Chile ASEAN Peru Burunei Malaysia Singapore Viet Nam Papua New Guinea Indonesia Cambodia Philippines Laos Thailand Myanmar 3
Impacts of Asia-Pacific EPAs: Japan Higher levels of achievement in TPP including NTMs reductions. Larger gains from RCEP by growing and large Asian markets. Complementary benefits from FTAAP participating in TPP and RCEP. 2.0 1.5 1.0 0.5 0.0 Japan s income gains from the Asia-Pacific EPAs % of GDP 3.5 removals 3.0 removals and NTMs reductions 2.5 TPP12 RCEP FTAAP 4
Japan s source of economic benefits Japan s own contribution will be relatively large in TPP. China s contribution will be major in RCEP. Japan s gains from FTAAP will largely be given by Japan an China. % 100 80 Contributions to Japan s income gains by economies Malaysia US Russia China Japan 60 40 20 0 TPP RCEP 5 FTAAP
Impacts of Asia-Pacific EPAs: US Income gains from TPP mainly from NTMs reductions. Income losses from RCEP due to trade diversion effects Much larger economic benefits from FTAAP than from TPP. % of GDP 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0-0.2 US income gains from the Asia-Pacific EPAs removals removals and NTMs reductions TPP12 RCEP FTAAP 6
US source of economic benefits Japan s contribution to tariff removals will be large in TPP. Meanwhile, the US s own NTMs reductions will be significant. Income gains from FTAAP will firstly be influenced by China. % 100 80 Contributions to US income gains by economies Japan Mexico Russia US China 60 40 20 0-20 TPP RCEP 7 FTAAP
Impacts of Asia-Pacific EPAs: China Income losses from TPP due to trade diversion effects. Large gains from RCEP, in which tariff removals remain important. Further income gains from FTAAP expanding the members of EPAs. 4.0 3.0 2.0 1.0 0.0-1.0 China s income gains from the Asia-Pacific EPAs % of GDP 7.0 6.0 removals 5.0 removals and NTMs reductions TPP12 RCEP FTAAP 8
China s source of economic benefits Income gains from FTAAP will primarily be driven by own measures. India s contribution in RCEP and Russia s contribution in FTAAP will be noted. % 100 80 Contributions to China s income gains by economies Japan India US Russia China 60 40 20 0 TPP RCEP 9 FTAAP
Impacts of Asia-Pacific EPAs: Chinese Taipei Income losses from TPP due to trade diversion effects. Much larger income losses from RCEP. Significant economic benefits from FTAAP. % of GDP 12.0 10.0 8.0 6.0 4.0 2.0 0.0-2.0-4.0 Chinese Taipei s income gains from the Asia-Pacific EPAs removals removals and NTMs reductions TPP12 RCEP FTAAP 10
Impacts of Asia-Pacific EPAs: EU May benefit from the spill-over effects of NTMs reductions. However, income losses from FTAAP will be sizable compared with expected gains from TTIP and EU-Japan EPA. % of GDP 0.2 EU s income losses from the Asia-Pacific EPAs 0.0-0.2-0.4-0.6 removals removals and NTMs reductions -0.8 TPP12 RCEP FTAAP 11
Significance of domestic reforms in FTAAP In ASEAN countries and others, contributions through their own initiatives will be much larger than those by partners in FTAAP. % 100 80 60 Contributions to income gains from FTAAP by own policies removals removals and NTMs reductions 40 20 0 12
concessions in East Asia concessions in East Asian EPAs have not substantially been high enough in effect. % 100 Comparison of tariff concessions Numbers of commodoties Average tariff rates 80 60 40 20 0 Sources: Authors estimates 13