Project Leader

WAKASUGI Ryuhei, Faculty Fellow

Sub-Leader

TOMIURA Eiichi, Faculty Fellow

OHASHI Hiroshi, Faculty Fellow

Overview

The globalization is bringing great changes to the international economic environment for Japan. We will review the current state of globalization in Japan from three perspectives: (1) market institutions, (2) international trade structures, and (3) trade policy. (1) Market conditions are major determinants of international trade, foreign direct investment, and technology transfers, but their quantitative analysis is inadequately developed. In our research we will study the importance of market conditions by developing indicators, and analyze the impact on trade, investment, and research and development (R&D). One topic includes the impact of cross-country differences in the intellectual property rights (IPR) protection on technology transfers. (2) Amid the globalization, the Japanese international division of labor is becoming more complex. By analyzing the split of manufacturing processes by Japanese firms and relating it with the firms' R&D and scale, we will cast light on the state of outsourcing, in particular the outsourcing of production. (3) The advance of economic globalization is making it increasingly important to seriously consider the costs and benefits of safeguard measures in trade policy. We take up the United States' experience as a case study, and re-examine the importance of these policies.

Major Research Results

RIETI Discussion Papers

• "Factors Determining the Mode of Overseas R&D by Multinationals: Empirical Evidence" (ITO Banri and WAKASUGI Ryuhei)
• "Did U.S. Safeguard Resuscitate Harley Davidson in the 1980s?" (KITANO Taiju and OHASHI Hiroshi)
• "R&D and Export Intensities in Automotive Parts Firms in China, Malaysia, Philippines and Taiwan: Does Ownership Matter?" (Rajah RASIAH)

International Workshop

• "Empirical Studies of Trade, FDI and Firm in East Asia" (2007/03/16-17)

Project Leader

SAWADA Yasuyuki, Faculty Fellow

Sub-Leader

KIMURA Hidemi, Fellow

Overview

The core of the debate about foreign aid is reaching a major turning point characterized by shifts from projects to budget support, from financing to an emphasis on debt forgiveness and grants, and from bilateral to multilateral. However, the policy tools for achieving the Millennium Development Goals (MDGs - the international aid community's fundamental development goals) are not particularly clear, and the debate continues as to the relative efficacy of direct poverty reduction and growth-mediated strategies. In addition, whereas the debate about the quantity of aid is unfolding, there has been no deepening of the debate about the quality of aid. In light of these various stances, the objective of this research is to elucidate systematically the foreign aid governance* based on the evidence. Specifically, based on this approach our research will include quantitative analysis using the "trinity model," which links foreign direct investment (FDI), trade, and aid, in regard to disparities in the impact of foreign aid in Asia and Africa, and the causes thereof.

* "The foreign aid governance" here refers to the governance structure of development assistance (foreign aid) in the form of public international funds flows, comprising the structure of decision-making by donors, the structure of decision-making by aid recipient countries, and the modality of aid.

Major Research Results

RIETI Discussion Papers

• "Is Foreign Aid a Vanguard of FDI? A Gravity-Equation Approach" (KIMURA Hidemi and TODO Yasuyuki)

Project Leader

KAWASE Tsuyoshi, Faculty Fellow

Overview

Amid the burgeoning of regional economic integration (FTAs, EPAs, customs unions) since the second half of the 1990s, there are some aspects that require scrutiny. This phenomenon has been arousing intense interest in many fields of the social sciences, but generally the analysis of its legal aspects has lagged behind. Similarly to the WTO, regional economic integration is conducted with large amounts of legal documentation, and this constitutes a trade "agreement" pursuant to GATT Article 24. Accordingly, legal analysis must be a core policy tool with regard to the design of the systems and to their operation after they have come into being. On this basis, in our research we make issue-specific comparative studies of the systems in the major cases of regional economic integration that have been in force up till now, and elucidate the classification of the designs of legal systems in regional economic integration, and their special characteristics. In this way we will show what options are possible for orderly integration from a legal perspective, and how these can aid the effectiveness of economic integration.

Major Research Results

RIETI Discussion Papers

• "Treatment of Technical Standards in Regional Trade Agreements - Some lessons for mutual recognition arrangements" (NAIKI Yoshiko)
• "Competition Policy and Law in Regional Economic Integration" (SERYO Shingo)
• "Disciplines on the Application of Antidumping Measures in Regional Economic Integration: A Quest of prerequisites for introducing disciplines through horizontal comparison" (KAWASHIMA Fujio)
• "Liberalization of Movement of Natural Persons in Regional Trade Agreements: A Convenient Framework of International Cooperation for Managing Cross-Border Labor Mobility" (TOJO Yoshizumi)

Project Leader

Willem THORBECKE, Senior Fellow

Overview

Our work this year involved seeking a deeper understanding of the characteristics of international production networks in Asia and of the effects of exchange rate changes on processing trade. In the paper with Dr. Masaru YOSHITOMI we presented a detailed analysis of Trade-FDI-Technology Linkages in East Asia. In the paper with Mizanur RAHMAN we investigated the effects of unilateral RMB appreciations and joint appreciations among countries supplying intermediate inputs on China's processed exports. In both cases we also tried to draw relevant policy conclusions from our results.

Major Research Results

RIETI Discussion Papers

• "How Would China's Exports be Affected by a Unilateral Appreciation of the RMB and a Joint Appreciation of Countries Supplying Intermediate Imports?" (Mizanur RAHMAN and Willem THORBECKE)

Project Leader

ITO Takatoshi, Faculty Fellow

Sub-Leader

OGAWA Eiji, Faculty Fellow

Overview

The U.S. current account deficit widened from 2004 through 2005, reaching as high as 7% of the GDP, while China's current account surplus expanded, exceeding 5% of the GDP. If we combine China's figures with those of Japan, South Korea, and the ASEAN countries it can be seen that East Asia is recording a very large trade surplus with the U.S. If the U.S. dollar were to fall during the course of resolving this imbalance, in the absence of a cooperative relationship in the currency system in East Asia a number of countries could have an excessive appreciation burden imposed upon them, or to avoid that would have to spend massively on market intervention. However, if East Asian countries could cooperate to build a joint float mechanism (e.g. a common currency basket), then any shocks felt by East Asia in the course of resolving global imbalances could be mitigated. This research considers a common currency basket to be a desirable long-term option, and our objective is to conduct research linked directly with policy, studying the management of monetary and exchange-rate policies up to the transition to a basket, and seeking the desirable configuration of a basket system.

Major Research Results

RIETI Discussion Papers

• "Analysis of China's Exchange Rate Reform" (ITO Takatoshi)
• "Exchange Rate Changes and Inflation in Post-Crisis Asian Economies: VAR Analysis of the Exchange Rate Pass-Through" (ITO Takatoshi and SATO Kiyotaka)
• "The Chinese Yuan after the Chinese Exchange Rate System Reform" (OGAWA Eiji and SAKANE Michiru)
• "On Determinants of the Yen Weight in the Implicit Basket System in East Asia" (ITO Takatoshi and ORII Keisuke)
• "Chinese Exchange Rate Regimes and the Optimal Basket Weights for the Rest of East Asia" (SHIOJI Etsuro)
• "Adopting a Common Currency Basket Arrangement into the 'ASEAN Plus Three'" (OGAWA Eiji and KAWASAKI Kentaro)
• "Progress toward a Common Currency Basket System in East Asia" (OGAWA Eiji and SHIMIZU Junko)

International Workshop

• "Regional Monetary Coordination and Regional Monetary Unit" (Dec 23, 2006)

RIETI-TIER Workshop

• "Strengthening Asian Economic and Financial Integrations" (Dec 8, 2006)

Project Leader

URATA Shujiro, Faculty Fellow

Overview

Free trade agreements (FTAs) have assumed a dominant status within the global trading system, and the number of them involving East Asia and Japan is increasing. Given this situation, our research examines major FTAs worldwide and in East Asia including Japan, evaluating the content of the FTAs and analyzing their impact. The results of these analyses will provide valuable information for constructing desirable FTAs. The results of the analyses and evaluations will identify the aspects of the FTAs to be improved. In addition, the impact analysis will provide valuable information for the formulation of FTA strategies.

Major Research Results

RIETI Discussion Papers

• "An Analysis of the Potential Economic Effects of Bilateral, Regional, and Multilateral Free Trade" (KIYOTA Kozo)
• "Market Access in FTAs: Assessment Based on Rules of Origin and Agricultural Trade Liberalization" (Inkyo CHEONG and Jungran CHO)
• "An Analysis of the Restrictions on Foreign Direct Investment in Free Trade Agreements" (URATA Shujiro and John SASUYA)
• "Services in Free Trade Agreements" (OCHIAI Ryo, Philippa DEE and Christopher FINDLAY) [PDF:360KB]

International Workshop

• "FTA Study Project" (Nov 10, 2006)

RIETI Policy Symposium

• "Assessing Quality and Impacts of Major Free Trade Agreements" (Mar 22-23, 2007)

Project Leader

SHIRAISHI Takashi, Faculty Fellow

Overview

The emergence of China as an economic powerhouse has been transforming the regional order in East Asia, particularly in the areas of economy, politics, and security. The project will address the question of how to manage these transformations. Project members will examine Japan's and other countries' engagement with China from the so-called "realist" (which emphasizes balance of power politics) and "liberal" (which emphasizes economic interdependence and institution-building) perspectives. The project will underline the importance of balancing and regional cooperation for managing the regional transformations.

Project Leader

KOTERA Akira, Faculty Fellow

Sub-Leader

MATSUMOTO Kayo, Fellow

Overview

Foreign investments are exposed to considerable risk, depending on factors such as the conditions in the recipient countries. Among these risks, those (political and social risks) that may cause business failure as a direct result of acts by the recipient country need to be addressed through a public framework, and in recent years investment agreements have been attracting attention as such frameworks. Of particular note is that the procedure for resolving disputes between investors and states (investment agreements arbitration) provided in investment agreements functions as real investor protection. In our research we will analyze the legal principles of arbitration awards and will study legal protection for overseas investment. The analysis of legal principles will have considerable implications for the drafting of the investment-related provisions in future investment agreements or economic partnership agreements that Japan concludes in the future. At the same time, it will serve as a reference for company management when choosing investment targets or investment methods. In addition, this will influence the design of investment insurance schemes offering similar functions.

Major Research Results

RIETI Discussion Papers

• "Transparency and International Investment Treaties - Definition and Responses" (KOTERA Akira)
• "Possibility of Inefficient Breaches under WTO Dispute Settlement Procedures: Analysis from the Viewpoint of Law and Economics" (SHIMIZU Takashi)
• "On the Comparison of Safeguard Mechanisms of Free Trade Agreements" (KOTERA Akira and KITAMURA Tomofumi)

Project Leader

JINJI Naoto, Faculty Fellow

Overview

With the progress of globalization, issues such as trade and the environment, and food, agriculture and the WTO have become major points of contention. We take a comprehensive and interdisciplinary approach to these issues from the standpoint of both economics and jurisprudence. In particular, our research project focuses primarily on (1) the effects of environmental policies in an open economy, (2) sustainable forest management policies, including illegal deforestation issues and related countermeasures, (3) the impact of trade liberalization on the environmental, and (4) legal analysis of consistency between multilateral environmental agreements (MEAs) and the GATT/WTO. Both theoretical and empirical studies are conducted, and case-study and historical research are also incorporated.

Major Research Results

RIETI Discussion Papers

• "Illegal Extractions of Renewable Resources and International Trade with Costly Enforcement of Property Rights" (JINJI Naoto)

Project Leader

KUWAHARA Satoshi, Senior Fellow

Overview

The phenomenon in which previously individual production processes are split up and dispersed geographically through the progress of modularization is, if seen from the supply side, the consequence of dealing with differences in inputs of factors of production or differences in production technologies in each process. In the East Asian region at present, industrial clusters have highly fragmented production processes, straddle national borders, and are spread among dispersed locations, resulting in considerable change in the structure of comparative advantage. Premised on this, our research will use relevant data to study the impact the progress of modularization is having on the trade structure of the East Asian region.

Major Research Results

RIETI Discussion Papers

• "Empirical Analysis of the Trading Structure Changes in East Asia under the Modularization of Product Architecture" (KUWAHARA Satoshi)

Project Leader

SHIRAISHI Shigeaki, Senior Fellow

Overview

Amid the advance of economic globalization, Japan and other industrialized countries are facing the issue of how to enhance productivity. With the intention of making effective policy proposals concerning this issue, by understanding and identifying companies' international business activities in the form of the cyclical model "resource and risk as a companies' strategic base," and "redefinition and relocation as companies' strategic actions," (the "2R-2R" model, which cyclically amalgamates positioning theory and resource base theory relating to corporate strategy), we will extract the real facts and issues of economic globalization at the micro level, namely the company level. At the same time, from the perspective of enhancing productivity in the context of globalization, we will also study the relationship between the government (policies) and companies (business activities). This study will be conducted as a joint project with the Organisation for Economic Co-operation and Development (OECD).