Estimating the effects of regional value chains of the RCEP in a GVC-CGE model

The Regional Comprehensive Economic Partnership (RCEP) is regarded as a value chain accelerator that will support global value chains (GVCs) and unlock regional value chains (RVCs) in particular. However, there is a lack of quantitative evidence to support this claim. This paper constructs a GVC-CGE model with embedded GVC trade structure and RVC participation measurement to assess the comprehensive impact of RCEP's tariff and non-tariff reductions on global trade and RVCs. The simulation results show a significant expansion of bilateral trade among member countries that only have trade agreements through RCEP, and the trade of intermediate goods boosts more than final goods for most member countries. The participation in RVCs among member countries has increased while the participation in extra-RVCs has decreased. This trend is especially noticeable in the textile, wearing apparel, motor vehicle, and food sectors in most member countries, except for the ASEAN apparel sector, which has seen a decrease in forward RVC participation. The financial and pharmaceutical sectors have experienced an increase in forward RVC participation in both member and non-member countries. The RCEP has significantly reconfigured regional production networks more than demand networks. China, Japan, and Korea have shifted their part of production and demand value chains from global to regional, which has elevated their importance in the RVCs at both the overall and sectoral levels.