Estimating the economic impacts of the regional comprehensive economic partnership

Abstract

This paper links the ENVISAGE computable general equilibrium model with a microsimulation to assess the economic effects of implementing the Regional Comprehensive Economic Partnership (RCEP). Reductions of tariffs and non-tariff measures, implementation of a rule of origin, together with productivity gains stemming from trade cost reductions strengthens regional trade among RCEP members. The analysis indicate that tariff liberalization alone brings little benefit, with real income gains of 0.21 percent relative to the baseline (without the RCEP) in 2035. With liberal rules of origin, the gains in real income could double to 0.49 percent. The biggest benefits accrue when the productivity gains are considered, increasing real income by 2.5 percent and trade among RCEP members by 12.3 percent in 2035 relative to the baseline. RCEP has the potential to lift 27 million additional people to middle-class status by 2035. These aggregate effects mask large variety of outcomes across countries.