This month's featured article
Japan Must Form a Bulwark to Protect Globalization
TODO YasuyukiFaculty Fellow, RIETI
Vicious cycle between closed networks and economic stagnation
U.S. President-elect Donald Trump has announced his intention to withdraw from the Trans-Pacific Partnership agreement (TPP). A wave of protectionist policies is rising around the world, as evidenced, for example, by Britain's decision to leave the European Union (EU) and Indonesia's imposition of export restrictions to raw mining resources. Against this background, at the Asia-Pacific Economic Cooperation (APEC) meeting held on November 20, 2016, Japan's Prime Minister Shinzo Abe stressed that free trade is the wellspring of growth in the world economy, and expressed his opinion that protectionism should be opposed by economic policies that promote inclusive growth (as reported in the Nihon Keizai Shimbun on November 21, 2016). I would like to express my wholehearted agreement with Prime Minister Abe's statements. Further, Japan must form a bulwark to protect globalization and contribute to world development.
A great deal of empirical research supports the prime minister's contention that free trade promotes economic growth. This is not merely because free trade leads industries with comparative advantage to efficient production, as David Ricardo claimed. Engaging with overseas "outsiders" via trade enables domestic businesses to absorb new knowledge, which has a significant effect in promoting innovation. In addition, foreign direct investment (FDI) can also promote innovation, as it establishes ties with the outside world.
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http://www.rieti.go.jp/en/columns/a01_0462.html
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