Impacts of deep trade agreements on trade and welfare – An application to China joining the RCEP and CPTPP

Abstract

Using a quantitative trade model, this paper evaluates the trade and welfare effects of deep trade agreements in an application to China joining the RCEP and CPTPP. By feeding trade cost shocks from the changes in RTA deepness into the model, we find substantial gains from incorporating legal enforceability and dispute settlement provisions in both agreements. With the CPTPP being deeper than the RCEP, our counterfactual exercise of China joining the CPTPP shows that 69% of its welfare gains come from deepening RCEP provisions to the CPTPP level. For the RCEP members, the gains from deepening non-tariff-related core provisions are quantitatively important.