A Computable General Equilibrium Analysis of the Potential Impacts of TPP/TPP-11 and RCEP on Agriculture in Vietnam

As most of the member countries of the Trans Pacific Partnership Agreement (TPP) are increasingly searching for economic liberalization and integration, the withdrawal of the United States from the TPP could not stop the efforts but has seeded the idea of a TPP-11 without the United States. On the other hand, the member states of the Regional Comprehensive Economic Partnership (RCEP) have since accelerated the process of negotiations as it is regarded as a more viable alternative. Being a member of the two mega free trade agreements (FTAs), the Vietnamese government may see its economy change structurally and substantially, thus, there is a need to anticipate the potential outcomes of the TPP-11 and the RCEP. In this study, we estimate the impacts of tariff elimination and non tariff barriers (NTBs) reductions in ten scenarios considering singular and joint implementations of the TPP, the TPP-11, and the RCEP on Vietnam and, in particular, its agricultural sector using the Global Trade Analysis Project (GTAP) model. The focus of this study on the agricultural sector stems from the observation that it still plays an important role to reduce the country's trade deficit. Our simulation results suggest that Vietnam would be one of the best beneficiary countries in terms of changes in real GDP in all scenarios. Trade liberalization in the TPP, TPP-11, and the RCEP is expected to increase the level of trade deficit of Vietnam and decrease its trade surplus of agricultural goods. Accordingly, the three free trade agreements may end up encouraging Vietnam to focus more on manufacturing sector with a decreased output of agricultural products. The U.S. withdrawal from the TPP would reduce the potential damages to Vietnam's agriculture remarkably. In general, this study expects that while Vietnam would benefit from the pacts, its agricultural sectors may suffer sizeable losses.