The Trans-Pacific Partnership: Evaluating the 'Landing Zone' for Negotiations

Abstract

The Trans-Pacific Partnership (TPP) negotiation is searching for a “landing zone” – a set of compromises that will allow a deal to be concluded. We assess the potential impact of the TPP based on a “best guess” as to what the landing zone will look like, taking into account such information as has been made public on the state of the negotiations (including unofficially released texts) as well as what participating states have been prepared to offer in other recently concluded FTAs. The assessment takes into account the conclusion of the Australia-Japan FTA, which reduces the quantitative impact of the TPP and draws on the outcomes of that negotiation as an indication of how other key negotiating issues might be decided. The assessment is based on a dynamic specification of the GTAP model, modified to directly represent services trade conducted through foreign affiliates as well as on a cross-border basis, and to reflect the impact of liberalization of FDI in the services sectors. The simulations take into account tariff reductions, preference utilization, the compliance cost of using preferences, the regionalization of rules of origin, and the reduction of non-tariff barriers to goods, services and investment. We report overall impacts and comment specifically on Canada’s interests.