Download Global Trade Analysis Project (GTAP) cont`d

Trans-Pacific Partnership Agreement (TPPA)
Opportunities and Impacts for Taiwanese and Malaysian
Companies
Study undertaken by the Asian Strategy and Leadership Institute (ASLI) on behalf of
the Taipei Economic and Cultural Office in Malaysia (TECO)
Analysis approaches
taken:
1. GTAP
2. RCA
3. Perception Survey
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Global Trade Analysis Project (GTAP)
Quantitative Assessment on the Likely Economic Effects of Taiwan’s
Potential Entry Into the TPPA on Selected Industries in Malaysia
• A general equilibrium approach (widely used
by trade economists)
• Used to examine the effects of various
regional trade agreements
• The GTAP database contains wide coverage of
140 countries/regions in the world and 57
sectors
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Global Trade Analysis Project (GTAP)
cont’d
• Specifically Examines Impacts on:
o Outputs
o Imports
o Exports
*On Selected Malaysian Industries
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Global Trade Analysis Project (GTAP)
cont’d
• The GTAP analysis looks for:
o Possible positive and/or negative effects on Malaysia’s
firms in various goods and services industries
• Gains to Malaysia’s industries:
o Inputs from Taiwanese firms used in the production
chain by Malaysian firms
• Losses to Malaysia’s industries:
o Goods and services produced by Taiwan in
competition in destination markets
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Effects on Malaysia’s Overall
Economy by Taiwan entering TPPA
• Malaysia will gain from :
– GDP growth
– Welfare improvements
• This is consistent with the survey findings in
which the majority of firms interviewed
indicated they would benefit from Taiwan
entering the TPPA
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Effects on Malaysia and Taiwan’s
Welfare (change in USD millions)
Without Taiwan’s Entry
With Taiwan’s Entry
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Effects on Malaysia and Taiwan’s
GDP (change in USD million )
Without Taiwan’s Entry
With Taiwan’s Entry
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Exports of Electronics Goods
• Both Malaysia and Taiwan are large exporters
of manufactured good (esp. electronics)
o Will Taiwan in TPPA pose a threat to Malaysia’s
electronics sector?
• GTAP indicates that Taiwan’s entry strengthens
Malaysia’s electronics and electrical industry.
o Consistent with survey feedback – e.g. some firms
acquire raw materials from Taiwan and do not see
Taiwan as a threat or competitor
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Effects on Financial, Insurance and
Business Services
• GTAP analysis indicates Malaysia’s financial,
insurance and business services will expand
under the TPPA and only be very slightly
negatively impacted by Taiwan’s entry
o Survey feedback from Malaysian firms in these
industries reported mixed results
o Taiwanese firms were more optimistic on this
question
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Effects on Financial, Insurance and
Business Services cont’d
• Further liberalising this sector will expand
Malaysia’s service output
o Output expansion from increased foreign firms
operating in Malaysia
• GTAP general equilibrium analysis shows
potential for financial and insurance industries
to be slightly negatively affected by Taiwan’s
entry into the TPPA
o Other industries are greatly enhanced
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Effects on the Agriculture Sector
• GTAP indicates that the agriculture sector will
contract with the implementation of the
current 12-member TPPA
o This is consistent if Taiwan were to enter the TPPA
o Survey feedback indicated there is a worry from
Taiwanese firms that generous government
assistance given to the industry would be affected
by joining the TPPA
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Revealed Comparative Advantage
(RCA) Index
• Measures a country’s exports of a service relative
to its own total exports, and to the corresponding
exports of all countries in the world
• If a country has comparative advantage, their
export share in the particular service in question
is higher than the world’s average share
• RCA can examine strengths and weakness in
various services provisions on the world platform
o Will also show if Taiwan and Malaysia are in direct
competition in the world on services exports
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Revealed Comparative Advantage (RCA)
Index cont’d
Comparative Advantage in Services
Malaysia
Taiwan
Transport Services
No (and Deteriorating)
No (but Improving)
Travel Services
Yes (and Improving)
No (but Improving)
Construction Services
Yes (in some years)
No
Insurance and Pension
Services
No
No
Financial Services
No
No
Charges for the use of
Intellectual property
Services
No
Yes (in some years)
Telecommunication,
No
Computer and Information
Services
Other Business Services
No (but Improving)
No
No (but Improving)
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*Transport – includes sea, air, rail road, internal waterway, pipeline, space transport as well as electricity transmission.
Revealed Comparative Advantage
(RCA) Index cont’d
• This is a simple analysis not to be taken on its
own, but to compliment the GTAP and survey
analysis
• RCA shows that Taiwan’s entry into the TPPA
does not pose significant competition towards
Malaysia’s services sector
o The two economies possess comparative
advantage in different service subsectors
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Policy Recommendations for
Consideration
• Increase awareness, as well as understanding
about the TPPA among industry players
• Policy makers should see Taiwan’s potential entry
into TPPA as an overall positive development for
Malaysia
• Further study on detailed industry impact is
needed. This will be useful, particularly when
more transparent information regarding
Malaysia’s negotiations with other TPPA
members are available
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Conclusions
Key Takeaway:
• The Positive effects of Taiwan entering the
TPPA outweigh the negatives - both on
Malaysia’s imports and exports, as well as on
Taiwan’s
o Malaysia’s overall welfare, GDP, total output levels,
exports and imports are expected to increase
when Taiwan is added to the TPPA coalition
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Conclusions cont’d
• When Taiwan is not part of the TPPA, trade
diversion is expected.
• Malaysia’s services subsectors, particularly:
Financial, Insurance and Business Services are
expected to expand (in outputs, exports and
imports)
o For Financial and Insurance Services, the increases in
imports are expected to be larger than the rise in its
exports
o For Business Services, the rise in exports is larger than
its increase in imports
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Conclusions cont’d
• Taiwan’s entry into TPPA further strengthens
Malaysia’s Electronics and Electrical Subsector
o Output and exports in this subsector expand
significantly with Taiwan’s entry
• Malaysia’s Agriculture Sector is expected to
contract in the current 12-member TPPA
o With Taiwan’s entry, the extent of impact is more or
less the same
• Malaysia is expected to rely more on imports
from its partner TPPA members, including Taiwan
if it were to join the TPPA
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Thank you
For more information please email:
Jordan Heng: [email protected]
or
Yap Yee Chern: [email protected]
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