A Contemporary Investigation into the Economic Impacts of RTAs: Case Study of the AFTZ and the TPP
Assandé Désiré Adom

This paper is an attempt to explore the economic impacts of regional trade agreements (RTAs) through the prisms of the recently endorsed African Free Trade Zone (AFTZ) and Trans-Pacific Partnership (TPP). In the process, a methodology involving a 3SLS and 50 Monte Carlo-type simulations is used to assess the long-term behaviors of three key macroeconomic variables, namely, the unemployment rate, net trade, and the manufacturing base, for a total of 31 countries – 20 from the AFTZ along with 11 from the TPP. With a broad dataset spanning from 1980 to 2015, results show that economic impacts vary as some countries sustain losses, when some others experience gains. In the AFTZ, most countries (13) observe a worsening of the unemployment rate with various degrees, but the bulk of them boast an expansion in both net trade (12) and the manufacturing base (15).In the TPP, the unemployment rate modestly ticks up for most economies (seven) except for Malaysia and Peru where these increases are roughly 2.4 and 2 percentage points, respectively, higher compared to their long-term values. Net trade, on the other hand, shrinks in most economies (seven) with Singapore being the hardest hit, while Mexico and Japan secure the largest improvements. Likewise, the manufacturing base as a share of output grows in most economies (eight) with Mexico, and to some extent Vietnam, leading the way. Most importantly, in the world’s largest economy – the United States –the unemployment rate falls by 1.1 percentage points during the simulation period, whereas net trade dips marginally by 0.05 percentage points with the manufacturing base contracting moderately by roughly 1.4 percentage points. In sum, this paper reveals no strong evidence of momentous economic impacts of the TPP on unemployment, net trade, and the manufacturing base in this major country.

Full Text: PDF     DOI: 10.15640/jeds.v5n1a2