Computational analysis of the menu of U.S.-Japan trade policies

Drusilla K. Brown, Kozo Kiyota, Robert M. Stern

Research output: Chapter in Book/Report/Conference proceedingChapter

Abstract

We have used the Michigan computable general equilibrium (CGE) model of World Production and Trade to calculate the aggregate welfare and sectoral employment effects of the menu of U.S.-Japan trade policies. The menu of policies encompasses the various preferential U.S. and Japan bilateral and regional free trade agreements (FTAs) negotiated and in process, unilateral removal of existing trade barriers by the two countries, and global (multilateral) free trade. The U.S. preferential agreements include the FTAs approved by the U.S. Congress with Chile and Singapore in 2003, those signed with Central America, Australia, and Morocco and awaiting Congressional approval in 2004, and prospective FTAs with the Southern African Customs Union (SACU), Thailand, and the Free Trade Area of the Americas (FTAA). The Japanese preferential agreements include the bilateral FTA with Singapore signed in 2002 and prospective FTAs with Chile, Indonesia, Korea, Malaysia, Mexico, Philippines, and Thailand. The welfare impacts of the FTAs on the United States and Japan are shown to be rather small in absolute and relative terms. The sectoral employment effects are also generally small in the United States and Japan, but vary across the individual sectors depending on the patterns of the bilateral liberalization. The welfare effects on the FTA partner countries are mostly positive though generally small, but there are some indications of potentially disruptive employment shifts in some partner countries. There are indications of trade diversion and detrimental welfare effects on nonmember countries for some of the FTAs analyzed. Data limitations precluded analysis of the welfare effects of the different FTA rules of origin and other discriminatory arrangements. In comparison with the welfare gains from the U.S. and Japan bilateral FTAs, the gains from both unilateral trade liberalization by the United States, Japan, and the FTA partners and global (multilateral) free trade are shown to be rather substantial and more uniformly positive for all countries in the global trading system. The U.S. and Japan FTAs are based on "hub" and "spoke" arrangements. We show that the spokes emanate out in different and often overlapping directions, suggesting that the complex of bilateral FTAs may create distortions of the global trading system.

Original languageEnglish
Title of host publicationFrontiers of Economics and Globalization
PublisherEmerald Group Publishing Ltd.
Pages303-355
Number of pages53
Volume7
ISBN (Print)9780857241412
DOIs
Publication statusPublished - 2010
Externally publishedYes

Publication series

NameFrontiers of Economics and Globalization
Volume7
ISSN (Print)15748715

Fingerprint

Trade policy
Menu
Computational analysis
Free trade agreements
Japan
Bilateral
Welfare effects
Trading systems
Thailand
Singapore
Employment effects
Chile
Free trade
Central America
Malaysia
Hub-and-spoke
Customs union
Computable general equilibrium model
Philippines
Rules of origin

Keywords

  • Bilateral trade liberalization
  • Multilateral
  • Regional

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

Cite this

Brown, D. K., Kiyota, K., & Stern, R. M. (2010). Computational analysis of the menu of U.S.-Japan trade policies. In Frontiers of Economics and Globalization (Vol. 7, pp. 303-355). (Frontiers of Economics and Globalization; Vol. 7). Emerald Group Publishing Ltd.. https://doi.org/10.1108/S1574-8715(2010)0000007014

Computational analysis of the menu of U.S.-Japan trade policies. / Brown, Drusilla K.; Kiyota, Kozo; Stern, Robert M.

Frontiers of Economics and Globalization. Vol. 7 Emerald Group Publishing Ltd., 2010. p. 303-355 (Frontiers of Economics and Globalization; Vol. 7).

Research output: Chapter in Book/Report/Conference proceedingChapter

Brown, DK, Kiyota, K & Stern, RM 2010, Computational analysis of the menu of U.S.-Japan trade policies. in Frontiers of Economics and Globalization. vol. 7, Frontiers of Economics and Globalization, vol. 7, Emerald Group Publishing Ltd., pp. 303-355. https://doi.org/10.1108/S1574-8715(2010)0000007014
Brown DK, Kiyota K, Stern RM. Computational analysis of the menu of U.S.-Japan trade policies. In Frontiers of Economics and Globalization. Vol. 7. Emerald Group Publishing Ltd. 2010. p. 303-355. (Frontiers of Economics and Globalization). https://doi.org/10.1108/S1574-8715(2010)0000007014
Brown, Drusilla K. ; Kiyota, Kozo ; Stern, Robert M. / Computational analysis of the menu of U.S.-Japan trade policies. Frontiers of Economics and Globalization. Vol. 7 Emerald Group Publishing Ltd., 2010. pp. 303-355 (Frontiers of Economics and Globalization).
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