If the countries of Southeast Asia (ASEAN) could join the Indo-Pacific bloc, all these member states could gain significantly in this regional economic cooperation. India`s GDP and growth could benefit the most. Southeast Asian countries will also benefit from the free trade agreement. However, if trade facilitation between these countries increases by 25%, the potential benefits will be enormous. Table 6 presents the simulation results of the macroeconomic impact. The real GDP of Australia and Japan could grow rapidly. The U.S. could benefit from the deal. The Malaysian and Vietnamese economies are significantly boosted by increased trade facilitation. The Indo-Pacific concept has emerged in recent times. This study examines the potential economic benefits of regional cooperation in the Indo-Pacific. Four different scenarios are simulated. Not only are we eliminating tariffs, but we are also simulating whether we could reduce import costs in the region by 25% and explore the potential economic benefits of regional economic cooperation.
The attributes of the Indo-Pacific are very attractive. The region has at least 38 countries that share 44% of the world`s surface area and 65% of the world`s population and account for 62% of world GDP and 46% of world merchandise trade (Table 1). However, the region faces complex challenges in terms of economy, security and the environment. Footnote 3 This paper examines the potential economic impact of regional economic cooperation in the Indo-Pacific area and compares it to the broader CPTPP. The results of the Computable General Equilibrium (CGE) show that while the quadrilateral alliance between the United States, Japan, Australia and India generates considerable economic benefit, while South and East Asia adhere to Indo-Pacific cooperation, the economic benefits would be enormous. The results also indicate that improving trade facilitation in South and East Asia could generate huge benefits, as much of Indo-Pacific trade has not been achieved. The cost of doing business is one of the main barriers to trade that prevent the growth of Intra-Pacific trade. The study confirms that improving infrastructure and connectivity, which leads to a reduction in transport costs, should be a necessary step to realize the Indo-Pacific trade potential.
End-of-model statements define endogenous variables and exogenous variables. The STANDARD GTAP closure was taken into account for this analysis. Hertel and Tsigas (1997) and Burfisher (2016) discuss the detailed structure of the GTAP closure and how to modify the closure for specific analysis. To change the default model end statements, an exogenous variable must be replaced with an endogenous variable. In this study, we assume that there is perfect competition in all sectors. Factors of production, i.e. capital and labour, are entirely mobile between sectors, while land and natural resources are treated as laous (Burfisher 2016). The fixed trade balance, i.e.
for a country, allows domestic savings to adapt to maintain a fixed ratio between the trade balance and national income. Public expenditure is considered as a constant share of government revenue. The expected return stimulates investment, as in the standard GTAP model, and all domestic savings are realized through the sum of household savings and the state budget. As a result, the trade balance is endogenous. South Asia`s exports to Southeast Asia account for only 2.1% of South Asia`s GDP, while Southeast Asia`s exports to South Asia account for 3.2% of Southeast Asia`s GDP in 2016 (World Bank 2018a, b). According to the World Bank`s Ease of Doing Business, trade facilitation for all South Asian countries is mostly underdevelopedNote 7 and most East Asian countries have a similar situation, with the exception of Singapore and JapanGnote 8 (World Bank 2018a, b). Therefore, this mega-agreement could bring huge benefits to the countries of South and Southeast Asia if it were able to reduce trade-related transaction costs, as shown in Table 7. . .