The Effects of China’s Participation in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP): A Quantitative Assessment

Abstract

This paper aims to quantify the effects of China’s participation in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), in particular by focusing on the possible productivity effects through the endogenous assignment of skills to technologies. In this paper, we develop a large-scale global computable general equilibrium (CGE) model in which firms are heterogeneous in technologies and workers are heterogeneous in individual skill levels so that equilibrium skill–technology assignments are endogenously determined. This study contributes to the literature with the new CGE modeling and application to the recent important issue in international trade. By calibrating the model to 23 countries and regions, we quantify the effects of China’s participation in the CPTPP. Due to the positive real productivity effects and the reallocation of workers, the results show that China’s participation in the CPTPP may generate significantly higher productivity, GDP, and welfare effects compared to previous conventional CGE models based on simplistic representative agent frameworks at a given productivity. Globally, on average, the real productivity of the manufacturing sector, the number of exporting firms, real GDP, and welfare increase by 0.52%, 19.62%, 1.36%, and USD 3.41 billion, respectively.