F12, R12, R13,

This paper presents a simulation of the reduction of several components in trade cost for Asia and examines its impact on the economy. Our simulation model based on the new economic geography embraces seven sectors, including manufacturing and non-manufacturing sectors, and 1,715 regions in 18 countries/economies in Asia, in addition to the two economies of the US and the European Union. The geographical course of transactions among regions is modeled as determined based on firms' modal choice. The model also includes estimates of some border cost measures such as tariff rates, non-tariff barriers, other border clearance costs, transshipment costs and so on. Our simulation analysis for Asia includes several scenarios involving the improvement/development of routes and the reduction of the above-mentioned border cost. We have shown that the contribution of physical and non-physical infrastructure improvements conducted together is larger than the sum of the contribution by each when conducted independently.

In this article, we attempt to estimate the economic impacts of the US–China trade war that began in 2018. We used IDE-GSM, a computational general equilibrium simulation model, to estimate the economic impacts of a ‘full-confrontation’ scenario wherein both countries impose 25% additional tariffs on all goods imported from each other for 3 years 2019 onwards. In our calculation, the economic impact for the United States is −0.4% and −0.5% for China. Some Asian countries benefit from the trade war. As far as it remains bilateral, the trade war is only an issue for the concerned parties. We also ran the US–world trade war scenario, wherein the United States and all other countries impose a 25% additional tariff on all goods. The negative impact on the global economy is –0.8%, much more significant than the 0.1% impact from the US–China trade war. Thus, it is clear that the world cannot afford to engage in a multilateral trade war. JEL Codes: C68, F13

We compare the prioritized projects of the Master Plan on ASEAN Connectivity (MPAC) and the Comprehensive Asia Development Plan (CADP) by utilizing the Institute of Developing Economies/Economic Research Institute for ASEAN and East Asia Geographical Simulation Model. The prioritized projects of the MPAC mainly focus on specific hard or soft infrastructure projects connecting one remote area of an ASEAN member state to another and thus fail to capture the full potential of the infrastructure because of neglected important links within a state. On the other hand, the CADP emphasizes the importance of economic corridors or linkages between a large cluster and another cluster. Our simulation analysis shows that CADP projects will result in an addition to gross domestic product (GDP) of $US 1544bn over the period from 2021 to 2030 (in 2010 dollars) or an impact on ASEAN countries that is 12 times larger than MPAC projects. The results strongly suggest that the CADP projects should be adopted and implemented to fully realize the potential economic growth of the ASEAN countries. Moreover, the CADP will contribute more to narrowing the development gaps among the ASEAN countries than MPAC prioritized projects.

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