Understanding the relationship between Pacific Alliance and the mega-regional agreements in Asia-Pacific: what we learned from the GTAP simulation

The Asia-Pacific region is the epicenter for the emergence of a series of mega-regional agreements such as the Trans-Pacific Agreement (TPP), the Regional Comprehensive Economic Partnership (RCEP), and the Pacific Alliance (PA) established in 2011 among Chile, Colombia, Mexico and Peru. However, since early 2017 the region has experience rising protectionism, as seen in the decision of the United States to withdraw from TPP, sending shockwaves across the region.

The PA has decided to continue with its process, recently launching negotiations with four associated members (Australia, Canada, New Zealand and Singapore). This is the context of structural changes and uncertainty that the Pacific Alliance must now face. This raises questions such as: What role should the Pacific Alliance play in the new regional architecture in the Asia Pacific? How should the Pacific Alliance prepare to maintain its relevance in a context of mega-regional agreements that include several of its members? Based on these and other questions, the authors formulated a total of six scenarios that describe possible interactions among the Pacific Alliances and the other mega- regional agreements.

These scenarios were tested using GTAP to understand which of them would have a more positive impact on regional exports via both tariff reduction and trade facilitation measures. The results from these scenarios, suggest that the one that would have the greatest effect on exports would be the Integration of the Pacific Alliance economies to the Regional Comprehensive Economic Partnership (RCEP), followed by the Comprehensive and Progressive Trans-Pacific Partnership with the participation of Colombia and China (CPTPP 13). These scenarios offer significant increases in the aggregate exports of the group, both in the face of the tariff reduction and in response to trade facilitation reforms.

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Authors: José Bernardo García, Camilo Pérez-Restrepo, María Teresa Uribe Jaramillo
Full document:2018, García et al, Understanding the relationship between Pacific Alliance and the mega – regional agreements in Asia – Pacific – what we learned from the GTAP simulation