June 2015
GTAP is the standard approach to modeling gains from trade agreements – The standard GTAP model is a multi-region, multi-sector, computable general equilibrium model, with perfect competition and constant returns to scale. This was developed over the last 25 years or so by economists who were frustrated with the limitations of the previous CGE models. This is made possible by a comprehensive global data base describing bilateral trade patterns, production, consumption and intermediate use of commodities. The latest date extends only to 2007 having been released in March 2012 however.
The VEPR ran three scenarios for TPP and then published the expected outputs from one of those scenarios.
- Real GDP increase by 1.32%;
- Export decreases 1.93% while import surges 11.7%;
- Investment and consumption increases by 9.18% and 5.09%, respectively;
- Output welfare in Vietnam, which is the largest among the region, increases 5.4% compared with the current state without TPP.
The supporting explanation was quite limited however. These appear to be one-off gains and the timetable is not clearly specified. It captures the general benefit of TPP although at the same time we would argue it misses the point on exports. And also perhaps well illustrates the general limitations of using a GTAP model when (1) details about key in-puts are still unknown or undecided; and the (2) the international database itself is 7-8 years behind the real data. So at best the model only captures some if the likely impact. HSC for example would be far more optimistic on the long term impact on Vietnam’s exports.
These submissions are extracted from reports accomplished by Ho Chi Minh City Securities Corporation (HSC)’s Research Division team led by Fiachra Mac Cana, Managing Director, Head of Research
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