Supply chains and free trade agreements

==============
To read the full text:
https://www.rieti.go.jp/en/columns/v01_0234.html
==============

Studies examining the effects of free trade agreements on the activities of multinational enterprises have tended to focus on trade between home countries and their FTA partner countries. This column examines the effects of free trade agreements on local sales and exports to third countries by overseas affiliates of Japanese manufacturing multinationals. While the effects on local sales are ambiguous, regional trade agreements have positive effects on exports to other countries, suggesting that that Japanese multinationals have optimised their cross-border supply chain networks by utilising various forms of free trade agreements.

Over the last several decades, the offshore activities of multinational enterprises (MNEs) have increased as a result of technological progress, including new information and communication technologies (ICT), construction of large-scale transport infrastructure in developing countries, and an increase in global competition. MNEs have formed cross-border supply chain networks to enhance their efficiency and competitiveness by splitting production processes and moving these processes to other locations to give them competitive advantages. In this environment of economic globalisation, many governments have used free trade agreements (FTAs) to increase trade with their partners because policymakers believe that such agreements help to integrate foreign economies into their own country’s economy and improve economic efficiency by reducing tariffs and constructing cross-border supply chain networks based on MNEs, enhancing institutional transparency, and protecting foreign direct investment (FDI). According to the WTO, 375 FTAs have been implemented as of 1 September 2025.

Related Papers

"Supply Chains and FTAs"
KATO Atsuyuki (Research Associate, RIETI) / NISHIYAMA Hiroyuki (University of Hyogo)
https://www.rieti.go.jp/en/publications/summary/25070006.html

"The Direct and Indirect Effects of the Belt and Road Initiative on Exports to China"
LI Haonan (Waseda University) / TODO Yasuyuki (Faculty Fellow, RIETI)
https://www.rieti.go.jp/en/publications/summary/25040009.html

"Economic Security in Japan: Evolution, context and emerging questions"
Shiro ARMSTRONG (Non-Resident Fellow, RIETI)
https://www.rieti.go.jp/en/publications/summary/24120015.html

"The Impact of Policy Uncertainty on Foreign Direct Investment in Services: Evidence from firm-level data and the role of regional trade agreements"
INADA Mitsuo (Miyazaki Municipal University) / JINJI Naoto (Faculty Fellow, RIETI)
https://www.rieti.go.jp/en/publications/summary/23030019.html

Related Articles

"Fragmented “Turnberry System” Marks a Transitional Era in Trade Order"
MUNAKATA Naoko (Consulting Fellow, RIETI)
https://www.rieti.go.jp/en/papers/contribution/munakata/04.html

"How to Handle the Tariff Man? Japan’s Strategy"
URATA Shujiro (Distinguished Senior Fellow (specially appointed), RIETI)
https://www.rieti.go.jp/en/papers/contribution/urata/14.html

"Trade Rules & the WTO – Present & Future"
NAKATOMI Michitaka (Consulting Fellow, RIETI)
https://www.rieti.go.jp/en/papers/contribution/nakatomi-michitaka/01.html

"Asia-Pacific Regional Integration in the Age of Economic Security"
KATADA Saori N. (University of Southern California)
https://www.rieti.go.jp/en/special/p_a_w/212.html

"The Fate of the CPTPP: Effective use case as leader in free trade"
KIMURA Fukunari (Consulting Fellow, RIETI)
https://www.rieti.go.jp/en/papers/contribution/kimura-fukunari/04.html

Our Latest Discussion Papers

"Overseas Expansion of Japanese Firms and Domestic Women’s Active Engagement"
NI Bin (Hosei University) / OBASHI Ayako (Keio University) / YIN Ting (Fellow (Specially Appointed), RIETI)
https://www.rieti.go.jp/en/publications/summary/25110008.html

"The Effect of Import Shocks on Internal Migration in Japan"
ENDOH Masahiro (Keio University) / MATSUURA Toshiyuki (Faculty Fellow, RIETI) / SASAHARA Akira (Keio University)
https://www.rieti.go.jp/en/publications/summary/25110007.html

"Performance of Firms Using COVID-19-related Support Policies: Ex-post evaluation"
MORIKAWA Masayuki (Distinguished Senior Fellow (specially appointed), RIETI)
https://www.rieti.go.jp/en/publications/summary/25110006.html

"Are Productivity and Wages Decoupling in Japan? Divergence between macro and micro relationships"
MORIKAWA Masayuki (Distinguished Senior Fellow (specially appointed), RIETI)
https://www.rieti.go.jp/en/publications/summary/25110005.html

"Personality Traits and Career Success: Understanding Workplace Dynamics"
WANG Liya (Waseda University) / ZHANG Yingchao (Durham University) / ASAI Yukiko (University of Chicago) / OWAN Hideo (Faculty Fellow, RIETI)
https://www.rieti.go.jp/en/publications/summary/25110004.html

"Do Daughters Change Their Fathers? Evidence from the first-daughter effect in Japan"
CHIBA Daina (University of Macau) / ONO Yoshikuni (Faculty Fellow, RIETI)
https://www.rieti.go.jp/en/publications/summary/25110003.html

"Service-oriented Structural Transformation of Manufacturing Firms: An analysis using panel data for Japanese firms "
MORIKAWA Masayuki (Distinguished Senior Fellow (specially appointed), RIETI)
https://www.rieti.go.jp/en/publications/summary/25110002.html

"Compliance Costs of Government Rules and Regulations"
MORIKAWA Masayuki (Distinguished Senior Fellow (specially appointed), RIETI)
https://www.rieti.go.jp/en/publications/summary/25110001.html

List of Discussion Papers:
https://www.rieti.go.jp/en/publications/act_dp.html
List of Upcoming and Past Symposiums:
https://www.rieti.go.jp/en/events/symposium.html
List of Upcoming and Past BBL Seminars:
https://www.rieti.go.jp/en/events/bbl/

* To subscribe, please go to SHANON's website.
Subscribe