nep-int New Economics Papers
on International Trade
Issue of 2010‒11‒27
twenty-two papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Quality-adjusted similarity of EU-countries´ export structure By Ville Kaitila
  2. Timeliness and contract enforceability in intermediate goods trade By Gamberoni, Elisa; Piermartini, Roberta; Lanz, Rainer
  3. Do Natural Resources Attract FDI? Evidence from non-stationary sector-level data By Steven Poelhekke; Rick van der Ploeg
  4. Entry dynamics and the decline in exchange-rate pass-through By Christopher Gust; Sylvain Leduc; Robert Vigfusson
  5. Regional trade policy options for tanzania : the importance of services commitments By Jensen, Jesper; Tarr, David G.
  6. The Availability and Cost of Short-Term Trade Finance and its Impact on Trade By Jane Korinek; Jean Le Cocguic; Patricia Sourdin
  7. Global Sourcing of Complex Production Processes By Schwarz, Christian; Suedekum, Jens
  8. A comparative analysis of automobile parts trade exchange between France and Germany: crossing international economics and industrial dynamics (In French) By Vincent FRIGANT (GREThA, UMR CNRS 5113); Jean-Bernard LAYAN (GREThA, UMR CNRS 5113)
  9. How labor market rigidities shape business taxation in a global economy? By Nelly Exbrayat; Carl Gaigné; Stéphane Riou
  10. Currency wars & international trade By Punabantu, Siize
  11. Chinese networks and tariff evasion By Pierre-Louis Vézina; Lorenzo Rotunno
  12. Beggar Thy Neighbour: British Imports during the Inter-War Years and the effect of the 1932 tariff By Nicholas Horsewood; Somnath Sen; Anca Voicu
  13. Short- and long-term impact of remarkable economic events on the growth causes of China-Germany trade in agri-food products By Zhichao Guo; Yuanhua Feng; Xiangyong Tan
  14. The rationale for South-South trade; An Alternative Approach By Shafaeddin, Mehdi
  15. The "distance-varying" gravity model in international economics: is the distance an obstacle to trade? By Vêlayoudom Marimoutou; Denis Peguin; Anne Peguin-Feissolle
  16. The Demand for Skills and the Labor Cost in Partner Countries: Evidence from the Enlarged EU By Alessia LO TURCO; Aleksandra PARTEKA
  17. Pricing-to-market and business cycle synchronization By Luciana Juvenal; Paulo Santos Monteiro
  18. Multilateral Versus Regional Trading Arrangements: Substitutes Or Compliments? By Richard Lipsey; Murray Smith
  19. Offshoring bias in U.S. manufacturing: implications for productivity and value added By Susan Houseman; Christopher Kurz; Paul Lengermann; Benjamin Mandel
  20. Offshoring to High and Low Income Countries and the Labour Demand. Evidence from Italian Firms By Alessia LO TURCO; Daniela MAGGIONI
  21. Increasing the Impact of Trade Expansion on Growth: Lessons from Trade Reforms for the Design of Aid for Trade By Jean-Jacques Hallaert
  22. Changing Commercial Policy in Japan During 1985-2010 By Kawai, Masahiro; Urata, Shujiro

  1. By: Ville Kaitila
    Abstract: We propose a new way to measure the extent to which countries compete in their exports. We augment the similarity index proposed by Finger and Kreinin (1979) with product quality. Quality is measured using unit export prices in the tradition of the horizontal/vertical intra-industry trade literature. We analyse the EU27 countries’ export structures using 1) overall similarity à la Finger and Kreinin, 2) same-quality similarity, and 3) quality-adjusted similarity that combines the first two measures. We find that the similarity of the export structures of the new member countries and the cohesion countries vis-à-vis the non-cohesion EU15 countries has increased, but that there remains a divide between them especially in terms of same-quality exports.
    Keywords: exports, similarity, quality
    JEL: F14 F15
    Date: 2010–11–15
  2. By: Gamberoni, Elisa; Piermartini, Roberta; Lanz, Rainer
    Abstract: This paper shows that the institutional environment and the ability to export on time are sources of comparative advantage as important as factors of production. In particular, the ability to export on time is crucial to explain comparative advantage in intermediate goods. These findings underscore the importance of investing in infrastructure and fostering trade facilitation to boost a country's participation in production networks. Furthermore, the paper contributes to the so-called"distance puzzle"by showing that the increasing importance of distance over time is in part driven by trade in intermediate goods.
    Keywords: Economic Theory&Research,Free Trade,Environmental Economics&Policies,Trade Policy,Transport Economics Policy&Planning
    Date: 2010–11–01
  3. By: Steven Poelhekke; Rick van der Ploeg
    Abstract: A new and extensive panel of outward foreign direct investment (FDI) at the sector level is used to estimate the determinants of non-resource and resource FDI. Since FDI is I(1), we estimate panel error-correction models of FDI with spatial lags for FDI and market potential. Our main result is that subsoil assets boost resource FDI, but crowd out non-resource FDI. The effect on non-resource FDI dominates, so that aggregate FDI is less in resource-rich countries. Spatial lags aggravate this crowding out of non-export-fragmentation variety: (ii) trade openness, free trade agreements and institutional quality do not impact non-resource FDI but institutional quality does have a positive effect on resource FDI; and (iii) the short-run dynamics comes mostly from shocks to FDI itself. Our main and ancillary results are robust to different measures of resource reserves and the oil price and to allowing for sample selection bias.
    Keywords: outward sector level FDI, subsoil assets, co-integration tests, spatial econmetrics, hydrocarbon reserves, external margin, sample selection bias
    JEL: C21 C33 F21 Q33
    Date: 2010
  4. By: Christopher Gust; Sylvain Leduc; Robert Vigfusson
    Abstract: The degree of exchange-rate pass-through to import prices is low. An average pass-through estimate for the 1980s would be roughly 50 percent for the United States implying that, following a 10 percent depreciation of the dollar, a foreign exporter selling to the U.S. market would raise its price in the United States by 5 percent. Moreover, substantial evidence indicates that the degree of pass-through has since declined to about 30 percent. ; Gust, Leduc, and Vigfusson (2010) demonstrate that, in the presence of pricing complementarity, trade integration spurred by lower costs for importers can account for a significant portion of the decline in pass-through. In our framework, pass-through declines solely because of markup adjustments along the intensive margin. ; In this paper, we model how the entry and exit decisions of exporting firms affect pass-through. This is particularly important since the decline in pass-through has occurred as a greater concentration of foreign firms are exporting to the United States. ; We find that the effect of entry on pass-through is quantitatively small and is more than offset by the adjustment of markups that arise only along the intensive margin. Even though entry has a relatively small impact on pass-through, it nevertheless plays an important role in accounting for the secular rise in imports relative to GDP. In particular, our model suggests that over 3/4 of the rise in the U.S. import share since the early 1980s is due to trade in new goods. Thus, a key insight of this paper is that adjustment of markups that occur along the intensive margin are quantitatively more important in accounting for secular changes in pass-through than adjustments that occur along the extensive margin.
    Date: 2010
  5. By: Jensen, Jesper; Tarr, David G.
    Abstract: Despite the growing importance of commitments to foreign investors in services in regional trade agreements, there are no applied general equilibrium models in the literature that assess these regional impacts. This paper develops a 52 sector applied general equilibrium model of Tanzania with foreign direct investment, and uses that model to assess Tanzania's regional and multilateral trade options. The model incorporates the features of the modern theory of international trade that has shown empirically that trade and foreign direct investment can increase productivity, and trade and foreign direct investment with technologically advanced countries is especially valuable for that purpose. To assess the sensitivity of the results to parameter values, the model is executed 30,000 times, and the results are reported as confidence intervals of the sample distributions. The analysis finds that a 50 percent preferential reduction in the ad valorem equivalents of barriers in all business services by Tanzania with respect to its African regional partners would be slightly beneficial for Tanzania. But wider liberalization, with larger partners or multilaterally, it will yield much larger gains due to providing access to a much wider set of service providers. Finally, the results show that the largest gains in services would be derived from reduction of regulatory barriers that are geographically non-discriminatory.
    Keywords: Economic Theory&Research,Transport Economics Policy&Planning,Emerging Markets,Environmental Economics&Policies,Banks&Banking Reform
    Date: 2010–11–01
  6. By: Jane Korinek; Jean Le Cocguic; Patricia Sourdin
    Abstract: The systemic nature of the recent financial crisis precipitated a general and synchronized drop of activity in the interbank market, contaminating most banks in almost all regions. The ensuing economic crisis was characterised by a drop in production coupled with a much larger drop in trade flows. There may be a number of reasons for the particularly sharp drop in trade. This paper examines one potential reason for the drop in trade between mid-2008 and the first quarter of 2009 – changes in the cost and availability of trade finance to potential exporters and importers. Results from an econometric model developed to examine this question show that short-term trade finance availability has had an effect on trade flows during the crisis period, but that its impact has been smaller than that of falling demand. It also shows that the availability and cost of trade finance seem to have had a limited impact on trade outside crisis periods. During the crisis period, the cost of financing negatively impacted trade overall due to an increase in spreads. This indicates that financing was probably prohibitively expensive for some traders, thereby severely constraining their ability to trade. This paper however highlights one of the major difficulties regarding policymaking in the area of trade finance – that there is little reliable quantitative information.
    Date: 2010–06–02
  7. By: Schwarz, Christian (University of Duisburg-Essen); Suedekum, Jens (University of Duisburg-Essen)
    Abstract: We develop a theory of a firm in an environment with incomplete contracts. The firm’s headquarter decides on the complexity, the organization, and the global scale of its production process. Specifically, it decides: i) on the mass of symmetric intermediate inputs that are part of the value chain, ii) if the supplier of each component is an external contractor or an integrated affiliate, and iii) if the supplier is offshored to a foreign low-wage country. Afterwards we consider a related scenario where the headquarter contracts with a given number of two asymmetric suppliers. Our model is consistent with several stylized facts from the recent literature that existing theories of multinational firms cannot account for.
    Keywords: multinational firms, outsourcing, intra-firm trade, offshoring, vertical FDI
    JEL: F12 D23 L23
    Date: 2010–11
  8. By: Vincent FRIGANT (GREThA, UMR CNRS 5113); Jean-Bernard LAYAN (GREThA, UMR CNRS 5113)
    Abstract: This paper proposes a new way for analysing the international trade of intermediaries good. We consider the case of automobile parts with the objective to cross analytic tools from international economics and industrial dynamics. Within the Economy of proximity framework, we propose a method for studying the international fragmentation of global value chain. We construct a typology for auto parts based on the modularity approach and we identify three types of parts: components, meso-components and macro-components. Then we study the evolution of trade for France and Germany for 20 parts during the period 2003/2008. Our main empirical conclusion is to stress that the situation of the German part industry is less favourable that we usually consider and that it is more and more dependant from eastern European countries. We conclude we some suggestions for improving this methodology.
    Keywords: modularity; international trade; global value chain; automobile; France; Germany
    JEL: F22 F23 L62 L24
    Date: 2010
  9. By: Nelly Exbrayat (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I); Carl Gaigné (INRA-ESR - Unité d'économie et de sociologie rurales - INRA); Stéphane Riou (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines)
    Abstract: We investigate the impact of trade liberalization upon the taxation of capital within a context of labor market rigidities. Using a model of trade and location, we show that labor market imperfections not only strengthen tax competition but also affect the relationship between trade integration and tax policies. Capital taxation follows a J-shaped relationship with trade costs when labor markets are flexible, whereas it may increase with falling trade costs in the presence of trade unions acting as Stackelberg leaders or playing simultaneously with governments. In addition, we analyze the outcome which arises from di§erences between the various countries' labor market institutions. Trade liberalization reduces the international differences in wage and capital taxation, making the unionized country more attractive.
    Keywords: Tax competition; unions; capital mobility; trade integration
    Date: 2010
  10. By: Punabantu, Siize
    Abstract: This paper examines the contemporary international trade and currency system to determine whether the system is appropriate for the level of knowledge, development and maturity of countries today. International trade and currencies are a key mechanism by which governments manage the livelihoods, standard of living and well-being of national economies including the relationship between countries and their peoples. Therefore, understanding how the international trade and currency system works and not just taking it at face value is important in determining whether a fair trade and currency system can be established between nations. The paper goes on to discuss what changes or reforms can be made which will enhance how countries perceive trade and one another in the currency process, currencies being the mechanism by which countries measure the value and accessibility of goods and services they exchange. It consequently, introduces the role of an Electronic Clearing House (ECH) in the international trade and currency system through which central banks would be able to enhance the trade and currency relationships between governments in order to make them more equal, more effective and relevant to the level of knowledge and development countries have attained.
    Keywords: International trade; currencies; money; banking; banks; central bank; open markets; open economies; closed economies; salve trade; imports; exports; electronic clearing house; ECH; net importers; net exporters; G20; trade deficit; trade balance; imbalance; IMF; World Bank; WTO; free markets;
    JEL: F1
    Date: 2010–11–15
  11. By: Pierre-Louis Vézina; Lorenzo Rotunno (IHEID, The Graduate Institute of International and Development Studies, Geneva)
    Abstract: In this paper we combine the tariff evasion analysis of Fisman and Wei (2004) with Rauch and Trindade’s (2002) study of Chinese trade networks. Chinese networks are known to act as trade catalysts by enforcing contracts and providing market information. As tariff evasion occurs outside the law, market information is scant and formal institutions inexistent, rendering networks the more important. We find robust evidence that Chinese networks, proxied by ethnic Chinese migrant populations, increase tariff evasion, i.e. the tariff semi-elasticity of Chinese missing imports. We suggest the effects takes place through matching of illicit-minded traders, identification of corrupt customs agents and enforcement of informal contracts.
    Keywords: tariff evasion, China, illicit trade, migrant networks
    JEL: F1 K42
    Date: 2010–11
  12. By: Nicholas Horsewood; Somnath Sen; Anca Voicu
    Abstract: With the competitiveness of UK manufacturing declining steadily during the interwar period, and a significant rise in unemployment in the early 1930s, the UK government responded by introducing the General Tariff in February 1932 in an attempt to halt the increase in unemployment and the deterioration of the current account. This paper focuses formally on UK aggregate imports in the inter-war years, by estimating an import demand function on a new data set, and considers the effectiveness of this fundamental change in trade policy.
    Keywords: Trade policy, protectionism, General Tariff, British Trade, inter-war years, open economy macroeconomics
    JEL: F13 F14 F41 N14 N74
    Date: 2010–11
  13. By: Zhichao Guo (University of Paderborn); Yuanhua Feng (University of Paderborn); Xiangyong Tan (Beijing Technology and Business University)
    Abstract: This paper focuses on a systematic quantitative discussion of the short- and long-term impact of remarkable economic events on international trade in a two-stage framework. Firstly, procedures based on dummy variables are proposed to detect structural breaks, types and sizes of jumps caused by such events. Then we propose to apply a hierarchical CMS (Constant Market Share) model to all sub-periods defined by the detected change points to study the short- and long-term impact of those events on growth causes. Application to China-Germany trade in agri-food products shows that China’s accession to WTO had a negative short-term impact on corresponding series. But its long-term impact on China’s export competitiveness was definitely positive. The short-term impact of the EU’s CAP (Common Agricultural Policy) reform on Germany’s exports to China was also negative. Its long-term impact on export competitiveness was sometimes positive and sometimes negative. The financial crisis of 2008 caused a significant reduction of China’s agri-food exports to Germany. But Germany’s exports to China in 2009 were not affected by the financial crisis as much.
    Keywords: Growth causes of agri-food trade; the CMS model; the EU’s CAP reform; China’s accession to WTO; financial crisis
    JEL: Q17 C53
    Date: 2010–11
  14. By: Shafaeddin, Mehdi
    Abstract: Arguing that the theoretical literature on South-South trade is not satisfactory, the author provides an alternative framework and rationale for the South-South trade as a vehicle for industrialization and development of developing countries. He also applies this framework to developing countries in the Asia-Pacific region. In particular, showing that the low-income countries of the region are not benefiting much from the dynamism of the China market for their industrialization, he proposes, inter alia, industrial collaboration among the low-income countries as a necessary condition for benefiting from the potential role of China as a “pole” of industrialization and development of the countries of the region.
    Keywords: International trade; South-South cooperation; industrial collaboration; production sharing; East Asia
    JEL: O1 F1 O14
    Date: 2010–10
  15. By: Vêlayoudom Marimoutou (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579); Denis Peguin (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579, Université de Provence - Université de Provence - Aix-Marseille I); Anne Peguin-Feissolle (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579)
    Abstract: In this paper, we address the problem of the role of the distance between trading partners by assuming the variability of coefficients in a standard gravity model. The distance can be interpreted as an indicator of the cost of entry in a market (a fixed cost): the greater the distance, the higher the entry cost, and the more we need to have a large market to be able to cover a high cost of entry. To explore this idea, the paper uses a method called Flexible Least Squares. By allowing the parameters of the gravity model to vary over the observations, our main result is that the more the partner's GDP is large, the less the distance is an obstacle to trade.
    Keywords: Gravity Equation; Flexible Least Squares; Geographical Distance
    Date: 2010
  16. By: Alessia LO TURCO (Universita' Politecnica delle Marche, Dipartimento di Economia); Aleksandra PARTEKA (Universita' Politecnica delle Marche, Dipartimento di Economia)
    Abstract: We analyse the consequences of trade integration in Europe (1995-2005) detecting how the labor costs in partner countries affects the demand for domestic high- and low-skilled labor in the EU-15 and five new member states. In general, independently on the skill level, the results hint at complementarity between domestic and foreign labor. However, the demand for the high skilled in New EU members' low skill intensive sectors is boosted by the increase of the average labor cost in Old EU members, thus hinting for these sectors at the high skilled in New member countries substituting for labor in Old EU.
    Keywords: EU integration, labor markets, trade
    JEL: F15 F16 J31
    Date: 2010–09
  17. By: Luciana Juvenal; Paulo Santos Monteiro
    Abstract: There is substantial evidence that countries or regions with stronger trade linkages tend to have business cycles which are more synchronized. However, the standard international business cycle framework cannot replicate this finding. In this paper we study a multiple- country model of international trade with imperfect competition and variable markups and embed it into a real business cycle framework by including aggregate technology shocks and allowing for variable labor supply. The model is successful at replicating the empirical relation between trade and business cycle synchronization. High trade costs increase the real exchange rate volatility because firms choose to price-to-market and this volatility decouples countries' business cycle fluctuations. We find empirical evidence supporting this mechanism.>
    Keywords: International trade ; Business cycles
    Date: 2010
  18. By: Richard Lipsey (Simon Fraser University); Murray Smith
    Abstract: We summarise salient developments in the interaction of the multilateral trading system and multilateral trading agreements (MTAs) on the one hand and regional trading agreements (RTAs) on the other. We then consider the economic effects of RTAs, comparing customs unions with free trade agreements. We argue, contrary to much received wisdom, that either may produce more economic benefits than the other, depending on the specific context in which they are introduced. There follows a discussion of the political economy effects of RTAs. Some of these have unfavourable, some neutral and some favourable effects on the progress of further MTAs. We conclude that the case against RTAs as eroding the MTS and inhibiting further MTA negotiations, as expounded by such economists as Krueger and Bhagwati, is not well founded. There remain grounds for optimism that the process of competitive liberalisation in RTAs will lead eventually to further multilateral liberalisation.
    Keywords: customs unions, free trade areas, multilateral agreements, multilateral trading system, regional agreements, rules of origin, scale economies, trade creation, trade diversion.
    JEL: F13 F53 F59
    Date: 2010–11
  19. By: Susan Houseman; Christopher Kurz; Paul Lengermann; Benjamin Mandel
    Abstract: The rapid growth of offshoring has sparked a contentious debate over its impact on the U.S. manufacturing sector, which has recorded steep employment declines yet strong output growth--a fact reconciled by the notable gains in manufacturing productivity. We maintain, however, that the dramatic acceleration of imports from developing countries has imparted a significant bias to the official statistics. In particular, the price declines associated with the shift to low-cost foreign suppliers are generally not captured in input cost and import price indexes. Although cost savings are a primary driver of the shift in sourcing to foreign suppliers, the price declines associated with offshoring are not systematically observed; this is the essence of the measurement problem. To gauge the magnitude of these discounts, we draw on a variety of evidence from import price microdata from the Bureau of Labor Statistics, industry case studies, and the business press. To assess the implications of offshoring bias for manufacturing productivity and value added, we implement the bias correction developed by Diewert and Nakamura (2009) to the input price index in a growth accounting framework, using a variety of assumptions about the magnitude of the discounts from offshoring. We find that from 1997 to 2007 average annual multifactor productivity growth in manufacturing was overstated by 0.1 to 0.2 percentage point and real value added growth by 0.2 to 0.5 percentage point. Furthermore, although the bias from offshoring represents a relatively small share of real value added growth in the computer and electronic products industry, it may have accounted for a fifth to a half of the growth in real value added in the rest of manufacturing.
    Date: 2010
  20. By: Alessia LO TURCO (Universita' Politecnica delle Marche, Dipartimento di Economia); Daniela MAGGIONI (Universita' Politecnica delle Marche, Dipartimento di Economia)
    Abstract: Making use of an original data set we investigate the effects of imports of intermediates from high and low income countries on the conditional labour demand of a panel of Italian manufacturing firms. We estimate a dynamic panel data model by means of System GMM allowing for the endogeneity of our right hand side regressors, especially our offshoring measures. Our results bear a negative offshoring effect which is attributable exclusively to imports of intermediates from low income trading partners and mainly concerns firms operating in Traditional sectors. No statistically significant effect is estimated for imports from high income countries. These findings are robust to the different measures of offshoring and to the inclusion of further controls.
    Keywords: dynamic panel data model, employment, offshoring
    JEL: F14 F16 J23 L23
    Date: 2010–11
  21. By: Jean-Jacques Hallaert
    Abstract: The working paper “Binding Constraints to Trade Expansion: Aid for Trade Objectives and Diagnostics Tools” [OECD Trade Policy Working Paper No. 94] showed that the most common objectives of Aid for Trade have the potential to boost economic growth. However, this growth potential may not always be realized. While most trade reforms had a positive impact, some trade reforms proved unsustainable and some trade reforms did not have a meaningful impact on growth. This working paper discusses the various reasons for these outcomes in order to draw the lessons for the design of aid-for-trade projects and programmes and increase their effectiveness. It argues that the scope of activity of aid-for-trade is broad enough to support the compatible that will make the reform sustainable and the complementary policies that will increase its growth impact. Experience shows that an appropriate macroeconomic environment is essential to make a trade reform sustainable. In an unstable macroeconomic environment, aid for trade can support compatible policies that reinforce the stabilization process. In a stable macroeconomic environment, aid for trade can help preventing trade reform from resulting in macro-economic tensions and can foster a rapid export response. The working paper also argues that many complementary policies fall under the scope of activity of aid for trade and shows that aid-for-trade projects and programmes already support some of the key complementary policies. Supporting compatible and complementary policies is about policy coherence and adequate sequencing. In order to reach its objective, Aid for Trade should not only focus on helping developing countries to turn trade opportunities into trade but also tackle the binding constraints that choke the impact of trade on economic growth. Aid for trade has the means to do so but this requires proper sequencing and policy coherence. As much as possible, proper sequencing and policy coherence should be reflected in the design of aid-for-trade projects and programmes. This cannot be achieved without adequate donor coordination and alignment on country priorities.
    Keywords: trade and growth, trade reform, aid effectiveness, aid for trade, supply-side constraints, trade expansion, complementary policies, sequencing of reforms
    Date: 2010–07–09
  22. By: Kawai, Masahiro (Asian Development Bank Institute); Urata, Shujiro (Asian Development Bank Institute)
    Abstract: In this paper we examine the changing nature of Japan's commercial policy over the last 25 years while reviewing Japan's changing structure of trade, FDI and economy that underlay policy changes. We argue that until the late 1990s Japan adopted a two-track approach of relying on multilateral liberalization under the GATT/WTO and open regionalism under Asia-Pacific Economic Cooperation (APEC) on the one hand and on the bilateral trade relationship with the US on the other. Although the Japan-US bilateralism sometimes resulted in "managed trade" and encountered negative perceptions of the US approach in Japan, overall, it had a positive impact on the Japanese economy in opening domestic markets through various reforms and deregulation measures. Japan's more recent commercial policy focuses on bilateral and plurilateral economic partnership agreements particularly with-but not limited to-East Asian economies. We argue that agricultural sector liberalization is key to the further integration of Japan with the Asian and global economies.
    Keywords: japan commercial policy; economy; trade; gatt; wto; fta
    JEL: F13 F14 F50
    Date: 2010–11–19

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