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2 - The Economics of the CPTPP and RCEP: Asia Pacific Trade Agreements without the United States
- Edited by Cassey Lee, Pritish Bhattacharya
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- Book:
- The Comprehensive and Progressive Agreement for Trans-Pacific Partnership
- Published by:
- ISEAS–Yusof Ishak Institute
- Published online:
- 08 October 2021
- Print publication:
- 15 January 2021, pp 12-29
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Summary
Introduction
The withdrawal of the United States from the Trans-Pacific Partnership (TPP) dramatically disrupted the long-standing trade agenda of the Asia Pacific. The region's governments have pursued trade and investment liberalization strategies for at least a quarter of a century, and many recently participated in both the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and Regional Comprehensive Economic Partnership (RCEP) negotiations. Since the withdrawal of the United States, not all of the remaining members have ratified the CPTPP. Should these countries still move forward with the agreement? Should they, instead, seek bilateral agreements that the United States still seems interested in concluding? Or should the region simply just focus on RCEP?
This chapter explores the choices facing Asia Pacific governments from the economic and political economy perspectives. The economic analysis presented here confirms that US withdrawal has been costly not only for the United States, but also for its Asia Pacific partners. But, in addition, it shows that significant gains are possible from less rigorous but wide-membership trade agreements such as the RCEP, and from high-quality trade agreements such as the CPTPP without the United States. As Schott (2017) noted, “bigger is better” with respect to Asia Pacific trade agreements, but this analysis also shows that “better is bigger” in the sense that higher-quality agreements generate larger benefits. As explained below, these results are supported by simulation studies similar to those conducted earlier for the TPP including the United States (Petri and Plummer 2016; Petri, Plummer, and Zhai 2012).
From a geopolitical perspective, new Asia Pacific agreements will increase the leverage of individual countries against bilateral pressures and help keep trade liberalization on the global agenda. In time, these agreements will likely attract other partners, too. For example, if an eleven-member CPTPP agreement later admitted the five Asia Pacific economies that have expressed interest in the alliance in the past (thus creating a TPP16), the total gains would rival those from the original agreement with the United States. Benefits could be further amplified if China, Europe, and/or the United States sought membership in the future. New agreements would also give members expanded influence over global rules.
On the Use of FTAs by Japanese Firms: Further Evidence
- Katsuhide Takahashi, Shujiro Urata
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- Journal:
- Business and Politics / Volume 12 / Issue 1 / April 2010
- Published online by Cambridge University Press:
- 20 January 2017, pp. 1-15
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The paper examines the use of free trade agreements (FTAs) by Japanese firms. The FTAs analyzed include Japan's FTAs with Mexico, Malaysia and Chile. Based on 1,688 responses to a questionnaire survey conducted in 2008, the study finds that the utilization rate of FTAs ranges between 32.9% (Japan-Mexico FTA) and 12.2% (Japan-Malaysia FTA). The survey results and the statistical analysis of the determinants of the use of FTAs reveal obstacles to using FTAs that include difficulty in obtaining the certificate of origin that is required to use the FTA, lack of knowledge of FTAs, and the small FTA tariff preference that is the difference between the most-favored-nation (MFN) and FTA tariff rates.
75 - Japan's Trade Policy with Asia
- from ASEAN's Major Power Relations
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- By Shujiro Urata, Waseda University
- Edited in consultation with Kee Beng Ooi, Sanchita Basu Das, Terence Chong, Malcolm Cook, Cassey Lee, Michael Chai Ming Yeo
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- Book:
- The 3rd ASEAN Reader
- Published by:
- ISEAS–Yusof Ishak Institute
- Published online:
- 22 June 2017
- Print publication:
- 17 August 2015, pp 388-391
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Summary
THE IMPORTANCE OF EAST ASIA IN JAPAN's EXPANDING TRADE
Japanese trade with East Asia greatly expanded from 1990 to 2011. Exports from Japan to East Asia grew 4.9-fold from $96.3 billion to $469.2 billion, while imports from East Asia expanded 5.3-fold from $66.2 billion to $354.1 billion. East Asia's share of Japanese exports to the world was 32.7% in 1990, but grew to 56.9% in 2011. East Asia's share of Japanese imports from the world rose 14 percentage points from 28.4% to 42.9%, which was lower than that of exports both in terms of the rate of increase and the actual share. These figures indicate that to Japan, East Asia is more important as an export destination than as a source of imports.
THE COMMODITY COMPOSITION OF JAPANESE TRADE WITH EAST ASIA: EXPANSION OF PRODUCTION NETWORKS
The Japanese import commodity composition from the East Asian countries changed from 1990 to 2011. While the share represented by products using natural resources in the form of food products, wood pulp, petroleum/coal products decreased, the share of machine products such as general machinery and electrical machinery rose greatly. These changes reflect the fact that industrialization has made progress in East Asia.
In contrast to the composition of Japanese export commodities, the Japanese import commodity composition contains large differences between imports from China, the NIEs, and ASEAN. Among import commodities from China, the share represented by food products, textile products, and petroleum/coal products fell significantly, while the share represented by electrical machinery, general machinery, and chemical products, expanded greatly. The largest share in 2011 was held by textile products, electrical machinery, and general machinery.
In the import commodity composition from the NIEs, similar changes to those of the import commodity composition from China can be observed. Nevertheless, the import commodity composition in 2011 was very different from that from China. While electrical machinery had the highest share, intermediate goods such as ferrous and non-ferrous metal products, petroleum/coal products, chemical products, and the like also accounted for high shares.
Intermediate goods hold a significant position among Japanese exports to East Asia. In fact, the intermediate good share of Japanese exports to East Asia rose from 61.5% to 69.1% from 1990 to 2011.
A6 - Japan's contribution to an open trading system
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- By Shujiro Urata, Waseda University
- Edited by Jean-Pierre Lehmann, Fabrice Lehmann
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- Book:
- Peace and Prosperity through World Trade
- Published online:
- 05 July 2011
- Print publication:
- 30 September 2010, pp 27-31
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Trade and high living standards
The quality of Japanese people's lives would be significantly lower without international trade. Poorly endowed with natural resources, Japan depends on foreign countries for the supply of natural resources and the products using natural resources such as food. In terms of calorie intake, Japan's dependence on foreign supply for its food consumption is higher than 60 per cent. Japan's dependence on foreign supply for oil, which is essential for leading a modern life as it is a main source of heating and air-conditioning as well as a major input for the production of vital goods such as drugs and foods, is as high as 99 per cent.
These statistics indicate the crucial importance of international trade for Japanese people to enjoy their high standard of living. Imagine the deterioration in the quality of life of the Japanese if foreign supply of vital imports were cut. The prices of food, oil and oil-related products would soar, and the budget of Japanese citizens for the purchase of other products would be significantly reduced, thereby lowering their living standard. It should be emphasized that the limitation of import opportunities would particularly hurt the poor, as their share of income for purchasing essential products is high. This point is especially relevant during a period of recession and when a widening income gap between rich and poor becomes an important social problem.
5 - Japan's FTA Strategy and a Free Trade Area of the Asia-Pacific
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- By Shujiro Urata, Waseda University
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- Book:
- An APEC Trade Agenda?
- Published by:
- ISEAS–Yusof Ishak Institute
- Published online:
- 21 October 2015
- Print publication:
- 02 July 2007, pp 99-126
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Summary
INTRODUCTION
Japan enacted its first free trade agreement (FTA) in November 2002 with Singapore. The formal name of the agreement is the Agreement between Japan and the Republic of Singapore for a New-Age Economic Partnership, or Japan-Singapore Economic Partnership Agreement (JSEPA). JSEPA is a comprehensive economic partnership agreement (EPA), which includes not only the removal of tariff and non-tariff barriers — the traditional elements of FTAs — but also the liberalization of foreign direct investment (FDI), trade and FDI facilitation, economic and technical cooperation in a wide range of areas including development of human resources, information and communications technology (ICT), small and medium enterprises (SMEs), tourism and others. Both Japan and Singapore realized the importance of a broad-ranging comprehensive agreement, in order to have significant impacts on economic activities in the emerging international economic environment where not only goods but also people, funds, and information cross borders freely. Since then Japan has enacted two more FTAs (EPAs), one with Mexico in April 2005 and the other with Malaysia in July 2006. Japan is currently negotiating or studying a number of FTAs.
Japan had pursued trade liberalization under the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO) until the late 1990s, and therefore, the recent pursuit of FTAs by Japan is a reflection of the change in its trade policy from a single track approach based on the GATT/WTO multilateral trade liberalization to a multi-track approach including bilateral and plurilateral liberalization. The White Paper on international trade 2003 published by Japan's Ministry of Trade and Industry argued the need for pursuing a multi-track approach. Several reasons can be identified for Japan's emerging interest in FTAs.
One important reason is new developments in global trade, the scene where multilateral trade negotiations under the WTO are making little progress and regional trade agreements such as FTAs are rapidly increasing. Faced with this situation, the Japanese government recognized FTAs as an option for achieving trade liberalization.
9 - East Asia and options for negotiations on investment
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- By Bijit Bora, World Trade Organization, Chia Siow Yue, Head The Institute of Southeast Asian Studies, Singapore, Nick Freeman, Researcher The Institute of Southeast Asian Studies, Shujiro Urata, Professor of Economics, School of Social Sciences Waseda University; Research Fellow Japan Center for Economic Research
- Edited by Will Martin, The World Bank, Mari Pangestu, The World Bank
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- Book:
- Options for Global Trade Reform
- Published online:
- 22 September 2009
- Print publication:
- 27 March 2003, pp 194-217
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Global flows of foreign direct investment (FDI) continued to rise throughout the 1990s, maintaining their momentum despite the onset of the East Asian financial and economic crisis in mid-1997. According to UNCTAD data, global FDI inflows rose by 44 percent in 1998, to $680 billion, and by 27 percent in 1999, to $865 billion (figure 9.1). FDI flows to developing countries declined by 4 percent in 1998, the first decline since 1985, mainly owing to the sharp economic slowdown in East Asia. The decline of FDI flows to developing countries was more than offset by a rise in cross-border merger and acquisition (M&A) activity in developed countries. The 1998 rise in global FDI flows occurred despite a largely unfavorable backdrop: a decline in world economic growth from 3.4 percent in 1997 to 2 percent, a parallel contraction in world trade (in value terms), and major financial crises in East Asia, Russia, and parts of Latin America.
In the pre-crisis period (1993–1996), East Asia received around 24 percent of global FDI inflows each year (table 9.1). However, it saw a 7 percent decline in FDI inflows between 1997 and 1998, from $94 billion to $87 billion, the first drop since the mid-1980s. The decline was attributed to sharp falls in FDI inflows for Indonesia and Taiwan, and caused the region's share of the global FDI stock to fall to 16.1 percent in 1999 (table 9.2).
8 - Are Trade and Direct Investment Substitutes or Complements? An Empirical Analysis of Japanese Manufacturing Industries
- Edited by Hiro Lee, Nagoya University, Japan, David W. Roland-Holst, Mills College, California
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- Book:
- Economic Development and Cooperation in the Pacific Basin
- Published online:
- 19 May 2010
- Print publication:
- 28 September 1998, pp 251-296
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INTRODUCTION
Interdependence among countries has increased substantially since the end of World War II. The main force behind this growing interdependence is international trade. Indeed, it is the rapid expansion in world trade, resulting largely from liberalization of manufacturing trade, that has led to substantial growth of the world economy. In recent years, however, foreign direct investment (FDI) has become a major contributor to deepening interdependence among countries. Between 1980 and 1996, world FDI grew at an annual average rate of 12.6 percent, significantly higher than the corresponding growth rate of 6.5 percent for world trade (both in nominal terms).
Rapid FDI expansion has given rise to an important and interesting question regarding the relationship between FDI and international trade. Does international trade promote or discourage FDI? Does FDI facilitate or restrict international trade? These questions concern whether FDI and trade are complements or substitutes (i.e., whether they exert positive or negative influences on each other).
Theoretically, FDI and trade can be either complements or substitutes. Within the framework of the Heckscher-Ohlin (H-O) model, Mundell (1957) showed that FDI and trade are perfect substitutes; in other words, trade reduces incentives for FDI and vice versa. In contrast, by relaxing the assumptions used in the H-O model, Markusen (1983) obtained a case where FDI and trade can be complements. Specifically, he demonstrated that FDI expands trade when trade is induced by non-H-O factors, such as differences in technologies between trading partners. A crucial determinant of this relationship is whether FDI is undertaken in an export industry or import-competing industry in the host country.