Recent trends in Asian integration and Japanese participation

In East Asia, de facto integration is taking place because Free Trade Agreements (FTAs) and Economic Partnership Agreements (EPAs) are flourishing in the region. ASEAN aims to form an ASEAN Economic Community (AEC) by 2015 with the completion of the ASEAN Free Trade Area (AFTA). Surrounding countries have been competing with each other to forge FTAs or EPAs with ASEAN, including China, Japan, Korea, Australia and New Zealand, and India. As a result, ASEAN has become a trading hub in East Asia. Bilateral FTAs/EPAs are also partly in place among 16 countries (ASEAN + 6). These economic ties in trade, services and investment are accelerating this region’s development as the world’s largest production base and biggest consumption market, helping to turn around the global recession in the aftermath of the so-called Lehman Shock. However, some problems also need to be pointed out in the East Asian integration such as the spaghetti bowl effect, severe competition, labor issues, environmental destruction and power struggles.

Impacts of FTA utilization on firm performance

The international export and investment activities of firms have been widely studied by scholars. In particular, prior studies have focused on two main hypotheses about firms engaged in international activities such as exporting and investing abroad; namely, self-selection of more productive firms into international activities and learning-by-doing international activities. This paper is the first study that explores these hypotheses in regard to firms’ use of free trade agreements (FTAs). We first estimate the propensity score for firms’ use of FTA schemes, and find that larger firms are more likely to participate. Then, by conducting matching analysis using the propensity scores, we find that the use of FTA schemes does not change employment in firms, but does result in more local inputs used and increased exports.

Impacts of common rules of origin on FTA utilization

This paper examines empirically the impacts of sharing rules of origin (RoOs) with other ASEAN+1 free trade agreements (FTAs) on ASEAN-Korea FTA/ASEAN-China FTA utilization in Thai exports in 2011. Our careful empirical analysis suggests that the harmonization of RoOs across FTAs play some role in reducing the costs yielded through the spaghetti bowl phenomenon. In particular, the harmonization to "change-in-tariff classification (CTC) or real value-added content (RVC)" will play a relatively positive role in not seriously discouraging firms’ use of multiple FTA schemes. On the other hand, the harmonization to CTC or CTC&RVC hinders firms from using those schemes.

New measures of FTA liberalization level

This paper proposes new measures of the liberalization level of free trade agreements (FTAs). Our measures take three issues into account. First, in order to identify the differences in FTA liberalization level over time, we compute the annual liberalization level rather than the level during the whole period. Second, our measure includes information on tariff margins, i.e. the difference between FTA rates and most favoured nation rates. Third, the restrictiveness of rules of origin (RoOs) is also taken into account in order to penalize the liberalization level of products with more restrictive RoOs. In this paper, we compute such measures of FTA liberalization level for three FTAs in Thailand.

Service liberalization in Lao PDR

Service liberalization is emerging as a high-priority issue in various parts of the world for mega free trade agreements as well as national policy. Lao PDR is no exception. To examine the level of service liberalization in Lao PDR, we first compare the Hoekman Indices of Lao PDR, Cambodia, and Vietnam on the ASEAN Framework Agreement on Services (AFAS 8). Lao PDR has lower commitment in many subsectors. In particular, we list the sectors in which Lao PDR made a lower commitment than Cambodia and Vietnam in Mode 3 (supply of services through commercial establishments abroad). Second, a simulation analysis using the Geographical Simulation Model (IDE-GSM) from the Institute of Developing Economies at the Japan External Trade Organization (IDE-JETRO) reveals how service liberalization benefits the economic development of Lao PDR. The two analyses clearly reveal that it is essential for Lao PDR to promote further service liberalization since such liberalization will contribute to the country's development.

Dynamics of investment negotiations between China and Japan : the China-Japan-Korea trilateral investment treaty and beyond

The investment agreement relationship between China and Japan is complex. The many intersecting and overlapping agreements can rightly be described as a "noodle bowl of agreements." The 1989 bilateral investment treaty (BIT) between China and Japan still stands. Japan can also free-ride on the negotiation outcome of China's BITs and free trade agreements (FTAs) with other countries by using the most-favored-nation (MFN) provision in the 1989 China-Japan BIT, which does not contain regional economic integration organization (REIO) exception rules. However, because the China-Japan BIT does not have investor-state dispute settlement (ISDS), it may face implementation problems. The China-Japan-Korea trilateral investment treaty (CJK TIT), in force since 2014, made improvements upon the 1989 BIT, but Japan is not entirely satisfied with the outcome. For Japan, pre-establishment national treatment (NT) and prohibition of various types of performance requirements are the most important negotiation items, but the CJK TIT insufficiently addressed those problems. Moreover, because the CJK TIT has MFN provisions with an REIO exception rule, better access to investment markets brought about by future FTAs such as the China-Korea FTA and the EU-China FTA cannot be imported into CJK TIT. Hence, in the long run, Japan needs to pursue an FTA investment chapter with China that covers both MFN and ISDS.

Looking Toward the “New Era” Features and Background of the Japan-Thailand Economic Partnership Agreement

This paper examines Thai-Japanese relations through analysis of EPA. There are two questions. The first involves the features of JTEPA as an EPA. By scrutinizing the features of the EPA, we would like to approach the institutional framework of the “new era” which will be brought about by JTEPA. The second question is how did the governments of Thailand and Japan come to conclude JTEPA? By reviewing the focal points of the negotiations, we will describe the background of the formation and aims of JTEPA. Finally, we conclude that JTEPA is a culmination of the existing Thai-Japanese relations, and was built based upon the existing divergence of economic institutions. At the same time it upgrades the bilateral partnership to a framework for multilateral cooperation by considering assistance toward Cambodia, Laos and Myanmar and Vietnam. The author would like to emphasize that JTEPA was designed based on the idea of a further integration of CLMV and Thailand, an original member of ASEAN.

The Policy Making Process in FTA Negotiations: A Case Study of Japanese Bilateral EPAs

This paper analyzes Japanese bilateral EPA negotiations, focusing on the areas that each country decided were most important, as well as which actors played the most important roles in each set of negotiations. The negotiations with Mexico and Thailand, which tried to increase agricultural exports to Japan through FTAs, will be discussed. Japan, one should note, still seeks to protect its agricultural sector in spite of the spread of liberalization. The Philippines, Thailand and Malaysia’s efforts to improve and compete in developing their automotive industries, in the face of the completion of AFTA in 2010, are also examined. In addition, this paper discusses whether economic cooperation, the essential Japanese strategy in EPA negotiations, alters the negotiation process in any significant way.

The Japan-Peru FTA : antecedents, significance and main features

The Economic Partnership Agreement (EPA) between Japan and Peru came into effect on March 1, 2012. This paper provides background information about this agreement's significance, mostly from a Peruvian point of view. It focuses on the following subjects: the statistical trends showing Peru's declining shares in Japan's trade and investment flows with Latin American countries between the mid-1970s and mid-2000s, the main explanatory factors of such a deterioration in Peru's economic position over that period, the changes of trade policy strategy in both countries since the 2000s, and the EPA negotiation process and some of its key results as featured in the text of the agreement.

Impact of diagonal cumulation rule on FTA utilization : evidence from bilateral and multilateral FTAs between Japan and Thailand

In this paper, we empirically investigate the effect of diagonal cumulation on free trade agreement (FTA) utilization by exploring Thai exports to Japan under two kinds of FTA schemes. While the one scheme adopts bilateral cumulation, the other scheme does diagonal cumulation. Comparing trade under these two kinds of FTAs, we can examine the effect of diagonal cumulation without relying on not only the variation in cumulation rules across country pairs but also the variation across years. In short, our estimates do not suffer from biases from time-variant elements and country pair-specific elements. As a result, our estimates show around 4% trade creation effect of diagonal cumulation, which is much smaller than the estimates in the previous studies (around 15%).

Harmonization of trade in services by APEC members

This study maps out the degree of services trade liberalization by the APEC members toward achieving a Free Trade Area of the Asia-Pacific (FTAAP) and makes some comparative analyses. The study finds that the commitment level differs greatly between sensitive and less sensitive sectors, and that the commitment level under the ASEAN Framework Agreement (AFAS) package 8 is the highest among the four FTAs studied. It also finds that there are cross-country and sector-wide similarities in the pattern of service sector commitment under and across each of the FTAs; this implies that the shared domestic sensitivities can be overcome by an APEC-wide economic cooperation scheme for enhancing competitiveness (through, e.g., the Trans-Pacific Strategic Economic Partnership Agreement or TPP).

FTA utilization : certificate of origin data versus customs data

This paper empirically examines what kinds of elements affect the gap in free trade agreement (FTA) utilization with regard to customs data and certificates of origin (CoOs) data. We focus on Thai exports to Korea under the ASEAN-Korea FTA in 2011. As a result, we found that the products with the higher demand volatility or those with a larger number of tariff-line products within the same harmonized system (HS) six-digit code have the larger gap. Another important finding is that the difference between the HS version at the time of the FTA negotiation and the current HS version does not have significant association with the gap. These findings have important implications.

Measuring the costs of FTA utilization : evidence from transaction-level import data of Thailand

In this study, we measure the utilization costs of free trade agreement (FTA) tariff schemes. To do that, we use shipment-level customs data on Thai imports, which identify not only firms, source country, and commodity but also tariff schemes. We propose several measures as a proxy for FTA utilization costs. The example includes the minimum amount of firm-level savings on tariff payments, i.e., trade values under FTA schemes multiplied by the tariff margin, in all transactions. Consequently, the median costs for FTA utilization in 2008, for example, are estimated to be approximately US$2,000 for exports from China, US$300 for exports from Australia, and US$1,000 for exports from Japan. We also found that FTA utilization costs differ by rule of origin and industry.

Accession clause of TPP : Is it really open?

One of the most important policy questions relating to the future impact of the Trans-Pacific Partnership on the global and regional economy is whether other countries in the region, particularly China, will join the partnership. While several commentators have made some observations regarding the future prospects of TPP expansion, little scholarly analysis has been conducted. To go beyond the speculation of a certain country's accession to TPP, we first attempt to generalize the issue before moving on to a specific question. We conduct a comparative analysis of a large number of regional trade agreements for a better understanding of the parameters of RTAs that are critical for membership expansion. This general framework enables us to conduct a systematic examination of specific membership expansion cases, such as China's membership in TPP. The paper also proposes a necessary "accession practice" that truly facilitates new members' participation.