Define endogenous and exogenous variables. The standard closure of the GTAP was considered for this analysis. Hertel and Tsigas (1997) and Burfisher (2016) discuss the detailed structure of the closure of the GTAP and how to change the closure of a specific analysis. To change the standard closure instructions for the model, exogenous variables must be replaced by an endogenous variable. In this study, we assume that there is perfect competition in all areas. Factors of production, i.e. capital and labour, are considered to be entirely mobile between sectors, while land and natural resources are considered slow (Burfisher 2016). The fixed trade balance, i.e. for a country, allows domestic savings to be adjusted to maintain a fixed ratio between the trade balance and national income. Public spending is considered a constant share of government revenue. The expected return stimulates investment as in the standard GTAP model and total domestic savings are obtained through the sum of household savings and the state budget. As a result, the trade balance is endogenous. Dr.
Prabir De is a professor in the Research and Information System for Developing Countries (SIF). He is also coordinator of the ASEAN-India Centre (AIC) at SIF. He works in the field of international economics and has research interests in international trade and development. He is editor-in-chief of the South Asia Economic Journal, published by Sage. Bilateral import tariffs between these countries are shown in Table 2. The average bilateral import tariffs of Australia and the United States are much lower than the others. However, Australia imposes relatively higher tariffs on imports from Japan and India, particularly on food grains and processed foodstuffs. Japan`s import tariffs on Australia and the United States are also lower, but Japan maintains higher tariffs on imports from India. The United States maintains high tariffs on imports from Japan and India.
Surprisingly, the Average Indian Tariff on Imports from Australia, Japan and the United States is relatively low relative to its trading partners. The RCEP will connect about 30% of the world`s population and production and make significant profits in the right political context. According to recent computer simulations, RCEP could add $209 billion a year to global revenues and $500 billion to world trade by 2030. The CGE results show that the four-year alliance between the United States, Japan, Australia and India is showing positive economic benefits. However, if South and Southeast Asia joined the Indo-Pacific area, the economic benefits would be enormous. Given that much of the intra-Pacific trade has remained unrealized, the results of this study also indicate that improved trade facilitation could generate huge benefits for this region. The cost of trade is one of the major obstacles to the growth of Intra-Regional Indo-Pacific trade.