Economic and Distributional Impacts of CPTPP: The case of Vietnam


Date: March 2018

By: World Bank Group

Vietnam is evaluating the economic gains from deepening regional trade integration under free trade agreements. The two major new agreements include Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) to be signed in March 2018 following the US departure from the Trans-Pacific Partnership (TPP) in January 2017 and the Regional Comprehensive Economic Partnership (RCEP) in its 21st round of negotiations.

At the cross-roads, this paper contributes to the ongoing discussion on further trade integration of Vietnam by evaluating the economy-wide and distributional implications supporting the continuation of CPTPP despite the US departure and following up with RCEP. The innovative use of a global dynamic computable general equilibrium model (CGE) linked with a top-down microsimulation model allow us to assess winners and losers within the country. It is well understood that the gains from trade are not equally shared by all segments of the population. In such circumstances, analyzing the distributional consequences of each FTAs opens the discussion towards the implementation of policies to ameliorate the negative consequences of FTAs.

This paper is organized as follows. Section II covers the main methodological aspects behind the simulations. This section describes the main assumptions of the CGE model and the top-down microsimulation model; defines broadly interventions in each scenario, and quantifies expected sectoral reductions in tariffs and non-tariff measures (NTMs) in Vietnam and other FTA signatory countries. Section III presents economy-wide simulations results, trade diversion and creation effects and distributional impacts associated with each FTA. Section IV concludes.

The publication is attached below: