Essay Trans Pacific Regional Trade Agreement

1178 Words Jun 5th, 2015 null Page
1. INTRODUCTION Over the past three decades, the Trans-Pacific region has grown to become the main trading partner of the US. This region, made up of over 40 countries spread across Asia, Oceania, and the Americas, accounts for roughly two-thirds of the US trade volume. The fast growth in trade is due to various factors such as improved air transportation, increased use of computers in manufacturing, industrial agglomeration, and reduction in tariffs through free trade agreements in the Trans-Pacific region. The US administration has repeatedly made remarks about the economic importance of the region (e.g., “the pivot to Asia” and “America’s Pacific Century”) and is currently negotiating a regional trade agreement known as the Trans-Pacific Partnership (TPP). While being economically tied to the region is good for the US economy in the long run (Petri and Plummer, 2012), there are also concerns among the public that this would subject the US economy to external shocks, such as the Asian Financial Crisis of the late 1990’s and the Japanese Tohoku Earthquake and Tsunami in 2011. Thus, it is of primary interest to the US policymakers to study how shocks in the Trans-Pacific region affect the US economy.
Our main purpose is to quantify how the US economy at the aggregate and the sector level react to shocks from the Trans-Pacific region. Specifically, we are interested in answering the following questions: how does an overall Trans-Pacific shock affect the US? Which…

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