Economic Analysis on Trade Agreements

Since the mid-1990s, the number of preferential trade agreements (PTAs) has burgeoned throughout the world. The failure of the Doha Development Agenda (DDA) has resulted in the renewal of a widely-embraced perspective that free-trade negotiations under the World Trade Organization (WTO) have reached an impasse. Extending PTA-networks is a primary measure for trade liberalization around the world. Japan is no exception and has increased its PTAs also known as economic partnership agreements (EPAs). However, such worldwide policy reliance on PTAs underlines at least two issues. The first is how to delineate the role of the WTO given the nexus of PTAs. For example, should the WTO be confined to a mere organization handling trade dispute settlement? Is it appropriate to forego the two pillars of the WTO trade negotiations--the principles of nondiscrimination and reciprocity? The second issue is how to handle relatively new trade agenda such as trade in services, foreign direct investment (FDI), and worker mobility. Exploiting the flexibility of negotiations, recent PTAs tend to emphasize these relatively new agenda along with trade in goods. However, they are controversial. Even some policy makers (and people) have criticized them for eroding national sovereignty.

The goal of this research project is to provide economic analysis of trade agreements with particular attention to topics other than trade in goods, including trade in services, FDI, and worker mobility. Trade agreements have long been an important subject of economic research, and a great deal of economic insights on them is available. Such insights broadly cover issues ranging from their roles to their economic impact. However, many of these insights are derived from the framework of trade in goods. There is still plenty of room to examine what role trade agreements may play in the economic activities mentioned above. In addition, the accumulation of empirical analysis on trade agreements is still lagging relative to theoretical analysis. Another aim is to contribute to filling this gap. This research project is composed of the following six topics:

(i) Economic analysis of PTAs and FDI
(ii) The impact of deregulation of multinational activities on firms' behavior
(iii) Free trade agreements and service industries
(iv) EPA effect on trade: Investigating the effect of non-tariff liberalization
(v) The impact of production factor mobility enhanced by EPAs
(vi) Empirical analysis of MFN free-riding

May 29, 2012 - September 30, 2013