Estimating the TPP's Expected Growth Effects

Prime Minister Shinzo Abe on March 15 announced Japan's bid to enter the Trans-Pacific Partnership (TPP) trade talks. Estimates of the TPP's effects on the gross domestic product (GDP) in the past have been conducted using various approaches. In the April issue of the RIETI Report, we present Faculty Fellow Yasuyuki Todo's "Estimating the TPP's Expected Growth Effects," in which he discusses the previous TPP analysis approaches and provides his estimates of the future potential of the TPP's effects on Japan's economy.

Todo recaps on the past analyses of the estimates of the TPP's effects, which were undervalued as they focused only on the direct impact. He then addresses the TPP's growth effects from the viewpoint of "two heads are better than one," in which connections between diverse groups of people lead to innovation. Furthermore, another important issue is how the TPP will increase the growth rate of GDP per capita by 1.5%--possibly making it the key policy measure for Japan's economic growth. Finally, Todo expresses his reservations and conclusions including that the estimates are based on the assumption that the TPP is completed and done without exceptions to the liberalization of trade and foreign direct investment. Todo believes that it is in Japan's national interest that the government leads the TPP negotiations without setting excessive exceptions so that the country can maximally benefit from its growth effect based on the "two heads are better than one" principle and fully utilize ties with other participating countries.