Project Leader

WAKASUGI Ryuhei, Faculty Fellow

Sub-Leader

TOMIURA Eiichi, Faculty Fellow

OHASHI Hiroshi, Faculty Fellow

Overview

Notable research topics in the field of international economics include the growth of foreign direct investment, expansion of overseas production and outsourcing; technology licensing and the protection of intellectual property rights; the trade expanding effects of FTAs; and, the effectiveness of trade restrictive measures based on tariffs and anti-dumping actions. These issues have already been analyzed in the context of trade theory, theory of the firm and contract theory. However, not enough has been done in empirical examinination. This applies to Japan as well as to other countries. The purpose of this project is to quantitatively analyze current issues in the above topics based on international trade data by commodity industry-level data and firm-level data for Japanese firms. In addition, we will quantitatively assess the effects of policies and systems, and discuss the implications for trade and industrial policies.

Major Research Results

RIETI Discussion Papers

• "Offshoring and Trade in East Asia: Statistical Evidence" (WAKASUGI Ryuhei, ITO Banri and TOMIURA Eiichi)
• "Foreign Direct Investment, Intra-Regional Trade and Production Sharing in East Asia" (Nathalie AMINIAN, K. C. FUNG and IIZAKA Hitomi)
• "Dissecting Offshore Outsourcing and R&D: A Survey of Japanese Manufacturing Firms" (ITO Banri, TOMIURA Eiichi and WAKASUGI Ryuhei)
• "Product Cycle and Industrial Hollowing-out: The Case of the Electrical and Electronics Sector of Taiwan" (Tzu-Han YANG and Yueh-Po LIAO)
• "Enforceability in Trade Credit: Financial Aspects of Transactions with FDI" (ITOH Seiro, WATANABE Mariko and YANAGAWA Noriyuki)
• "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)
• "Global Sourcing, Technology, and Factor Intensity: Firm-level Relationships" (TOMIURA Eiichi)
• "The Effect of Imports and Exports on Total Factor Productivity in Korea" (Sangho KIM, Hyunjoon LIM and Donghyun PARK)
• "Does Foreign Direct Investment Have an Impact on the Growth in Labor Productivity of Vietnamese Domestic Firms?" (LE Thanh Thuy)

International Symposium

• "Intellectual Property Rights and East Asian Renaissance"

Project Leader

SAWADA Yasuyuki, Faculty Fellow

Overview

International discussions on foreign aid are now at a major turning point. This reflects the transitions from support for macroeconomic growth to direct assistance for micro-level poverty reduction; from project-based to budget support aid; from loan-centered to debt reduction and grant aid; and from bilateral to multilateral aid. This research project in fiscal 2006 aimed at empirically investigating the systematic differences in the macro impacts of aid between Asia and Africa. Building on the results of these macro studies, this project will extend its scope to the following areas in fiscal 2007: (1) basic research on the development of insurance schemes for the pooling of disaster risks in international cooperation; and (2) econometric impact evaluation of technical assistance aid using firm-level micro-data.

Major Research Results

RIETI Discussion Papers

• "Foreign Aid and Recurrent Cost: Donor Competition, Aid Proliferation and Budget Support" (ARIMOTO Yutaka and KONO Hisaki)
• "The Millennium Development Goals and Aid Allocation: Which donors give high-quality aid?" (KASUGA Hidefumi)
• "Intertemporal Distribution of Foreign Aid" (TAKASE Koichi)
• "On the Role of Technical Cooperation in International Technology Transfers" (SAWADA Yasuyuki, MATSUDA Ayako and KIMURA Hidemi)
• "Aid Proliferation and Economic Growth: A Cross-Country Analysis" (KIMURA Hidemi, SAWADA Yasuyuki and MORI Yuko)

RIETI Policy Discussion Papers

• "Index of Donor Performance (2006 Edition): Selectivity and Project Proliferation Reconsidered" (TOGO Ken and WADA Yoshio)

Project URL

• The Foreign Aid Governance (Japanese)

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

• "Assessment and Prospects of Intellectual Property Rights Provisions in RTAs" (SUZUKI Masabumi)
• "Legitimacy and Transparency of the WTO Dispute Settlement Procedures: An analysis of the present state of the DSU negotiations using private-interest/public-interest models" (KOBAYASHI Kenichi)
• "Homogeneity of Law in the European Economic Area: A Case of Integration of Multiple Regional Communities and Implementation of Common Rules in the Integrated Community" (OBASE Takuma)
• "Competition and Coordination in Dispute Settlement Procedures between WTO and Regional Economic Communities: Comparative Review of Forum-choice Clauses" (KAWASE Tsuyoshi)
• "Relationships between Investor-State Arbitration and Local Remedy Procedures in Bilateral Investment Treaties/Economic Partnership Agreements" (ABE Yoshinori)
• "Current status of tariff liberalization under regional trade agreements and the implications for the clarification of the discipline of GATT Article XXIV" (UENO Asako)
• "Comparison of the Economic Partnership Agreements Concluded by Japan: Features Regarding Institutional Arrangement" (KOBAYASHI Tomohiko)
• "Denial of Benefit Provisions in FTAs Accompanying the Liberalization of Trade in Services: Does the "Backdoor" Open for Signatory Countries Faced with FTA Inflexibility?" (WATANABE Shintaro)

Policy Symposium

• "Quo Vadis the WTO? The Future of the Doha Round and the Management of the International Trade Regime"

Project Leader

KAWASE Tsuyoshi, Faculty Fellow

Overview

Subsidies are widely used throughout the world as a standard tool for the achievement of domestic policy goals. However, subsidies can create distortions in resource allocation as seen in the impact of export subsidies on international trade. For this reason, subsidies are subject to regulation under the WTO Subsidies and Countervailing Measures (SCM) Agreement and Agriculture Agreement. Since the establishment of the WTO, more than 30 adjudications have been handed down on the issue of subsidies by WTO Panels and Appellate Body. Moreover, the number of subsidy-related disputes referred to the WTO is expected to increase with the expiration of provisions temporarily suspending the application of related agreements ("Peace Clause"). This project has the following three objectives: to research the interpretations and applications of relevant rulings made under the SCM Agreement and Agriculture Agreement; to examine the problems that may exist in the subsidy systems of Japan and Japan's major trading partners from the perspective of the WTO Agreement; and to gain insight into how Japan can develop its subsidy and countervailing duty systems while assuring compliance with the WTO Treaty.

Project Leader

THORBECKE, Willem, Senior Fellow

Overview

The work this year has sought to understand the relationship between East Asian Production Networks, Exchange Rate Changes, and Global Imbalances. The paper "How Would an Appreciation of the RMB and Other East Asian Currencies Affect China's Exports?" looks at how appreciation in China and other supply chain countries would affect China's exports. The paper "The Effects of Exchange Rate Changes on Fragmentation in East Asia: Evidence from the Electronics Industry" presents evidence that exchange rate volatility decreases the flow of electronic components within East Asia. The paper "Trade Interdependence and Exchange Rate Coordination in East Asia" presents an analytical description of these production networks and examines empirical evidence concerning the factors that affect triangular trading patterns. The paper "Production Sharing, Exchange Rate Changes, and the Trade Balance: Evidence from the East Asian Electronics Industry" reports that exchange rates appreciation in countries supplying intermediate electronics goods inputs would decrease final electronics goods exports from East Asia, but appreciation in assembly economies would not.

Project Leader

ITO Takatoshi, Faculty Fellow

Sub-Leader

OGAWA Eiji, Faculty Fellow

Overview

This project takes the position that the adoption of a common currency basket constitutes a desirable and highly promising choice for the Asian region in the future. Given this point of departure, this project focuses on matters linked directly to policy, such as foreign exchange policies and monetary policy management leading up to a transition to a common currency basket, and the desired composition and structure of the basket. One of the research products of this project is the Asian Monetary Unit (AMU) Data, which has been posted on the RIETI website since September 2005 and is being visited from Japan and overseas (768 average monthly visits during fiscal 2007). Among various issues emerged from the above themes, we have researched the pass-through problem or the impact of currency fluctuations on domestic prices, and the problem of the invoicing currency or the choice of the currency of denomination in export and import trade. In addition to conventional methods based on macroeconomic models, we did microeconomic analysis during fiscal 2007 featuring interviews with Japanese-affiliated companies concerning their foreign exchange strategies (invoicing currency, risk management) in export and import trade. For fiscal 2008, the project aims to obtain microeconomic and macroeconomic results pertaining to the optimal currency basket and the pass-through and invoicing currency problems, and to use these in formulating policy recommendations that are consistent with administrative needs.

Major Research Results

RIETI Discussion Papers

• "Widening Deviation among East Asian Currencies" (OGAWA Eiji and YOSHIMI Taiyo)
• "Exchange Rate Pass-Through and Domestic Inflation: A Comparison between East Asia and Latin American Countries" (ITO Takatoshi and SATO Kiyotaka)
• "Bank Restructuring in Asia: Crisis management in the aftermath of the Asian financial crisis and prospects for crisis prevention -Malaysia-" (ITO Takatoshi and HASHIMOTO Yuko)
• "Bank Restructuring in Asia: Crisis management in the aftermath of the Asian financial crisis and prospects for crisis prevention -Korea-" (ITO Takatoshi and HASHIMOTO Yuko)
• "Macroeconomic Implications of Declines in Nominal Exchange Rate Pass-through Rates" (SHIOJI Etsuro, VU Tuan Khai,and TAKEUCHI Hiroko)

Project URL

• AMU and AMU Deviation Indicators

Project Leader

URATA Shujiro, Faculty Fellow

Overview

In recent years, there has been a rapid increase in the number of free trade agreements (FTAs) in which trade is liberalized between designated countries. While FTAs expand the level of trade between member countries, they are very likely to divert and suppress trade with non-members. FTAs affect the economies of member and non-member countries through these two effects. The purpose of this project is to examine the impact of FTAs on trade and domestic economic activities by undertaking pre- and post-FTA analysis. Pre-FTA analysis is based on data from the period prior to the establishment of an FTA and features the running of simulations using general equilibrium models. Post-FTA analysis is based on actually observed data and uses gravity models to examine the determinants of bilateral trade. This project covers the FTAs established by Japan and other FTAs established throughout the world. For Japan's FTAs, the project also analyzes the level of use of the FTA by firms. Drawing on the results of these analyses, this project aims to determine the impact of FTAs on trade and domestic economic activities, and to provide useful information for the design of FTA policies by the Japanese government.

Major Research Results

RIETI Discussion Papers

• "On the Use of FTAs by Japanese Firms" (TAKAHASHI Katsuhide and URATA Shujiro)
• "Assessing the Economic Impacts of Free Trade Agreements: A Computable Equilibrium Model Approach" (ABE Kazutomo)
• "The Impacts of Free Trade Agreements on Trade Flows: An Application of the Gravity Model Approach" (URATA Shujiro and OKABE Misa)
• "Impacts of Japanese FTAs/EPAs: Post Evaluation from the Initial Data" (ANDO Mitsuyo)

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 "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.

Major Research Results

RIETI Discussion Papers

• "The Rise of China and the Transformation of Southeast Asia - A preliminary study" (SHIRAISHI Takashi)

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 a type of public framework. 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.

Project Leader

JINJI Naoto, Faculty Fellow

Overview

"Trade and the environment" and "food safety and trade" have emerged as critical issues in international trade. The purpose of this project is to approach these issues from the perspectives of both economics and law and to conduct comprehensive and interdisciplinary research. The following research will be conducted in the area of trade and the environment: empirical study on the effects of trade liberalization on the environment; theoretical study on illegal logging; and, theoretical study on voluntary corporate environmental action. The following research will be conducted in the area of food safety and trade: legal and economic analysis of the application of provisions of the WTO Agreement on Sanitary and Phytosanitary Measures (SPS Agreement); case studies on WTO disputes related to the SPS Agreement. In addition, the consumer benefits of food safety regulations will be estimated in the case of Japan's BSE countermeasures.

Major Research Results

RIETI Discussion Papers

• "MEAs in WTO Dispute Settlement Proceedings: Can They Become Applicable Law?" (TAIRA Satoru)

Project Leader

SHIRAISHI Shigeaki, Senior Fellow

Overview

The aim of this project is to develop effective policy recommendations for improving productivity in the context of economic globalization by interpreting the process of economic globalization to be a multiple game involving the following types of players acting on different sets of principles:

(1) firms acting to maximize profits whose behavior can be explained in terms of a "2R-2R model" (cyclical model of "resources and risks as the strategic basis" and "redefinition and relocation as the strategic action"); (2) governments acting to maximize national interests based on the principle of realism; and (3) international organizations acting to maximize overall interests transcending the framework of nations based on the principle of liberalism. This framework is used for analyzing current conditions and identifying salient issues in globalization and productivity. Particular attention is paid to cross-border M&As as a specific form of economic globalization, and the reorganization of Europe's electric power and gas industries is analyzed as a case study. This project is conducted jointly with the OECD.

Major Research Results

RIETI/ADBI Symposium

• "Ten Years After: Learning From the Asian Financial Crisis - Are Prevention Mechanisms Sufficient to Avoid Another Financial Crisis?"

Japan-China Economic Conference

• 7th Japan-China Economic Conference

CEPR-RIETI International Seminar

• "Global Network and Outsourcing"