Impacts of FTAs and BITs on the Locational Choice of Foreign Direct Investment: The case of Japanese firms

Author Name URATA Shujiro  (Faculty Fellow, RIETI)
Creation Date/NO. May 2015 15-E-066
Research Project Economic Impacts of Free Trade Agreements: The case of Japan
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This paper examines the impacts of Japan's free trade agreements (FTAs) and bilateral investment treaties (BITs) on the locational choice of Japanese firms' foreign direct investment (FDI). Japan's FTAs have comprehensive coverage, as they cover not only trade liberalization in the form of tariff elimination/reduction but also FDI liberalization and facilitation in the forms of granting foreign firms national treatment, non-application of performance requirements, etc. In light of the inclusion of provisions concerning FDI liberalization/facilitation in Japan's FTAs, the paper analyzes whether Japan's FTAs have expected positive impacts on Japanese firms' decision of the location of FDI by applying the conditional logit model. The paper also examines the impacts of BITs. The analysis finds that both FTAs and BITs have positive impacts on Japan's FDI.