The Opportunity Cost of the U.S. Withdrawal from the TPP: A CGE Approach

Abstract

The objective of this paper is to quantify the opportunity cost of the U.S. withdrawal from the Trans-Pacific Partnership (TPP) trade deal signed by Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnamy comparing the likely economic effects of the TPP with those of the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (CPTPP) without the United States, for which a global computable general equilibrium model is used. The opportunity costs of the U.S. withdrawal from the TPP for not only the United States and the CPTPP 11 members but non-members of the TPP are measured in terms of real GDP, equivalent variation (EV) as a measure of welfare, export and import values, and trade balance. In particular, the simulation results reveal that the opportunity costs that the United States has to pay for its withdrawal from the TPP would be a loss of real GDP of 0.76% and a loss of welfare of $107 billion,which is supported by a decrease in its total exports of 8.43% and a decrease in its total imports of 6.31%.