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Should the United States Rejoin the Trans-Pacific Trade Deal?

Itakura, Ken and Lee, Hiro (2021): Should the United States Rejoin the Trans-Pacific Trade Deal?

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Before the Trans-Pacific Partnership (TPP) entered into force, the United States withdrew from the trade accord. Eleven other TPP signatories decided to revive the agreement, which led to the implementation of the Comprehensive and Progressive Agreement for TPP (CPTPP). The objectives of this paper are to estimate economic welfare effects under alternative scenarios of TPP/CPTPP, to evaluate the extent of losses to the US from its withdrawal from TPP and expected gains from rejoining the Trans-Pacific trade accord, and to examine whether the US economy would have to undergo extensive sectoral adjustments from its participation. We employ a dynamic computable general equilibrium (CGE) model to examine these issues. The results suggest that the US loses an opportunity to gain 0.4 percent in its economic welfare by withdrawing from TPP, but it would be able to recover most of its projected welfare gains by reengaging with CPTPP. Since sectoral output adjustments in the US are small, its adjustment costs from participation in CPTPP would be limited. In addition, there exist political incentives for the US to become a member of this trade accord.

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