Options and Implications of Free Trade Arrangements in Asia. Jun Ma, Deutsche Bank AG Zhi Wang, ERS, USDA June 2002

Transcription

1 Options and Implications of Free Trade Arrangements in Asia Jun Ma, Deutsche Bank AG Zhi Wang, ERS, USDA June 2002

2 Content Our CGE Model China s WTO entry implies smaller world market shares for some ASEAN countries Free Trade Arrangement (FTA) involving ASEAN and China FTA involving ASEAN plus Japan FTA involving ASEAN plus three (China, Japan, and Korea) Conclusion: There is a strong economic case for China and Japan to support a more inclusive FTA in Asia Slide 1

3 Our Computable General Equilibrium Models Model design: 18 region, 26 sector computable general equilibrium model Recursive dynamics, solves from annually Linked to a macro-econometric model which provides baseline macroeconomic forecasts Capable of forecasting and simulating the impact of policy changes on trade, consumption, investment, employment, output and prices at the aggregate and sectoral levels Policy effects are analysed by comparing the baseline scenario and the FTA scenario Slide 2

4 Impact of China and Taiwan s WTO Entry China and Taiwan s WTO entry implies smaller market shares for some ASEAN countries CHINA: Impact of China and Taiw an's WTO Entry on Annual GDP Growth, CN SG KR HK EU US JP TW MY ID IN (% ) Source: DB Global M arkets Research Slide 3

5 Impact of China and Taiwan s WTO Entry China and the US are the biggest gainers as a result of China s WTO entry, in terms of real purchasing power Net Benefits of China's WTO Entry in Billions of 1997 USD, CHN US EU JPN KOR TWN HKG SGP MYS IDN IND (Change in real purchasing power, in billions of 1997 USD) Source: DB Global Markets Research Slide 4

6 Impact of China and Taiwan s WTO Entry Winners and Losers in the Chinese industries CHINA: Impact of WTO Entry on China s Production, 2006 Total Electricity, gas, water manf. and distribution Financial services Telecommunication Trade and transportation Other machinery Electronic products and equipment Other transport equipment Motor vehicles and parts Other mineral products Metal products Ferrous metals Chemical rubber plastic products Petroleum and coal products Wood and paper products Other light manufacturing Leather, shoes and sport goods Wearing apparel Textile Oil and gas Processed food Other agricultural products Cot ton Wheat Rice Percentage difference between entry scenario and baseline scenario Source: DB Global Markets Research Slide 5

7 Impact of China and Taiwan s WTO Entry Change in share of world apparel market due to China s WTO entry, Share of World Exports Baseline-China Baseline-ANICs Baseline-Asia & S. America MFA Baseline-Other developing Baseline-OECD Accession-China Accession-ANICs Accession-Asia & S. American MFA Accession-Other Developing Accession-OECD Slide 6

8 FTA involving ASEAN plus China China intends to provide assurance to ASEAN countries that its rapid economic expansion and WTO entry will not be detrimental to the ASEAN region, and China has the willingness to open up its potentially vast market to ASEAN ASEAN, with disappointing growth performance within the region, is looking to find additional engine for growth, including import demand and investment opportunities from China Singapore, in particular, sees limited prospects from its hinterland and is increasingly interested in sharing the growth in China Strategically, further economic integration between ASEAN and China will help increase China s political influence in the region and balance out the traditionally strong US and Japanese presence Slide 7

9 New Growth Engine in Asia China is clearly the single most important engine for Asia growth Contribution to GDP growth ( )-GDP weighted China Japan Korea Taiw an Singapore Other Asia 24 Source: DB Global Markets Research, CEIC Contribution to GDP growth ( )-PPP Weighted 24 China Japan Korea 1 Taiw an Singapore Other Asia 5 Slide 8 Source: DB Global Markets Research, CEIC

10 ASEAN+China FTA Simulation Simulation assumptions China and Taiwan s WTO entry commitments will be used to construct the baseline scenario In the FTA scenario, all tariff and NTB barriers to trade among China, Hong Kong, and ASEAN countries will be reduced to zero within ten years from 2003; Trade barriers of ASEAN FTA members against other countries will remain the same as today; and China and Taiwan s import barriers against non-fta members will be based on these WTO commitments Policy implications will be derived from a comparison between the FTA scenario and the baseline scenario. Assume Hong Kong will be part of the China+ASEAN FTA, but Taiwan will be excluded. Slide 9

11 Initial trade barriers Trade Weighted Average Protection Rate by Region, 2002, Percent of c.i.f. Value China Hong Kong Singapore Malaysia Thailand Philippine Indonisia Vietnam Japan Korea USA Taiwan India EU 15 Other OECD FSU Latin Rest of America World Land-intensive agriculture Other agriculture Processed agriculture Food & agricultural average Forestry& fishery Oil and natural gas na Other mineral products Paper & wood products Resource based product average Textile Wearing apparel Leather, shoes & sports goods Other light manufactures Labor-intensive product average Chemical rubber plastic products Petroleum products Metals Other mineral products Metal products Motor vehicles and parts Other transport equipment Electronic equipment Other machinery Capital-intensive product average Trade & transportation services Communication services Financial service Other traded services Utility Housing & construction Services average Average Slide 10

12 Trade barriers in 2012 Trade Weighted Average Protection Rate Region, 2012, Percent of c.i.f. Value, ASEAN + China FTA China Hong Kong Singapore Malaysia Thailand Philippine Indonisia Vietnam Japan Korea USA Taiwan India EU 15 Other OECD FSU Latin Rest of America World Land-intensive agriculture Other agriculture Processed agriculture Food & agricultural average Forestry& fishery Oil and natural gas na Other mineral products Paper & wood products Resource based product average Textile Wearing apparel Leather, shoes & sports goods Other light manufactures Labor-intensive product average Chemical rubber plastic products Petroleum products Metals Other mineral products Metal products Motor vehicles and parts Other transport equipment Electronic equipment Other machinery Capital-intensive product average Trade & transportation services Communication services Financial service Other traded services Utility Housing & construction Services average Average Slide 11

13 Impact of FTA (ASEAN+China) on growth All FTA members gain in terms of GDP growth from the FTA with Singapore benefit the most, but Japan & Korea are a small losers Impact of FTA (ASEAN+China) on GDP Growth, Cumulative % SG HK TH ID CN MY VN TOT PH US EU JP TW IN KR Source: DB Global Markets Research Slide 12

14 Welfare gains and losses due to FTA (ASEAN+China) Must of these gains can be explained by the increase in exports to member countries Increase in Exports due to FTA, Cumulative USD bn CN MY SG TH PH ID VN HK IN TW JP KR US EU Source: DB Global Markets Research Slide 13

15 Sectoral Implications of ASEAN+China FTA Impact of ASEAN + China FTA: Percentage Changes of Production in Final Year, 2012 China Hong Kong Singapore Malaysia Thailand Philippine Indonisia Vietnam Japan Korea USA Taiwan India EU 15 Other OECD FSU Latin Rest of America World Lnad-intensive agriculture Other agriculture Prpcessed agriculture Forestry& fishery Oil and Natral Gas Other mineral products Paper & wood products Textile Wearing apparel Leather, shoes & sports goods Other light manufactures Chemical rubber plastic products Petroleum products Metals Other mineral products Metal products Motor vehicles and parts Other transport equipment Electronic equipment Other machinery Trade & transpotation services Comunication services Financial service Other traded services Utility Housing & construction Total Slide 14

16 Sectoral Implications of ASEAN+China FTA Impact of ASEAN + China FTA: Changes in Net Trade in Billion 1997 US dollar, China Hong Kong Singapore Malaysia Thailand Philippine Indonisia Vietnam Japan Korea USA Taiwan India EU 15 Other OECD FSU Latin Rest of America World Land-intensive agriculture Other agriculture Processed agriculture Food & agricultural total Forestry& fishery Oil and natural gas Other mineral products Paper & wood products Resource based product total Textile Wearing apparel Leather, shoes & sports goods Other light manufactures Labor-intensive product total Chemical rubber plastic products Petroleum products Metals Other mineral products Metal products Motor vehicles and parts Other transport equipment Electronic equipment Other machinery Capital-intensive product total Trade & transportation services Communication services Financial service Other traded services Utility Housing & construction Services total Total Slide 15

17 Comparison of Three FTA proposals Welfare Changes due to FTAs China Japan Korea Additional GDP Grow th, , Accumulated China-ASEAN FTA Japan-ASEAN FTA ASEAN + China, Japan & Korea ASEAN + China, Japan & Korea + USA Additional Real Export Grow th Rate, %, , Accumulated China-ASEAN FTA Japan-ASEAN FTA ASEAN + China, Japan & Korea ASEAN + China, Japan & Korea + USA Changes of Real Purchasing Pow er (EV) from Baseline, Billion US dollars, China-ASEAN FTA Japan-ASEAN FTA ASEAN + China, Japan & Korea ASEAN + China, Japan & Korea + USA Slide 16

18 Conclusions ASEAN+China benefits all its members but Japan and Korea are losers ASEAN+Japan benefits Japan at the expense of China and Korea Under ASEAN+Three FTA, all members gain more than the FTA proposals with more limited memberships, as it offers a substantially larger market for all members. In other words, ASEAN plus three should be a Pareto improvement for China, Japan, and Korea These FTAs will lead to an increase in intra-regional trade and reduced inter-regional trade, but total world trade and welfare will rise At the sectoral level, China will import more capital and land intensive products and export more labor intensive goods to its FTA partners Slide 17