Potential Economic Effects on the Philippines of the Trans-Pacific Partnership (TPP)

The TPP is a potential economic block in Asia Pacific. If the negotiations are successful, the TPP can have important implications for the Philippines whether it decides to join or not because countries in TPP are important markets for Philippine exports and sources of imports, investments, and technology. The paper simulates a reduction in trade barriers within the TPP using a global CGE model. The results indicate trade creation within the TPP and trade diversion from the non-TPP. Philippine non-participation will generate small negative effects on the economy, but the economic opportunity cost of non-participation is larger. If the inflows of investments into the country improve with participation, the welfare gain is higher. While higher investments lead to real exchange rate appreciation, the majority of Philippine sectors benefit from the scale production effect of larger capital inflows.