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.

Measuring the usage of preferential tariffs in the world

The preference utilization ratio, i.e., the share of imports under preferential tariff schemes out of total imports, has been a popular indicator for measuring the usage of preferential tariffs vis-à-vis tariffs on a most-favored-nation basis. A crucial shortcoming of this measure is the data requirements, particularly for import value data classified by tariff schemes, which are not available in most countries. This study proposes an alternative measure for preferential tariff utilization, termed the "tariff exemption ratio." This measure offers the unique advantage of needing only publicly available data, such as those provided by the World Development Indicators, for its computations. We can thus calculate this measure for most countries for an international comparison. Our finding is that tariff exemption ratios differ widely across countries, with a global average of approximately 50%.

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.

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.

Is It Worthwhile for Indonesia to Rush into a Free Trade Deal with Japan?

This report represents a preliminary attempt to refine some basic ideas on the potential impact Indonesia might experience from a free trade arrangement with Japan, using a forward-looking, multi-regional, multi-sectoral applied general equilibrium model of global trade to capture growth effects through capital accumulation paying attention to the changes in the patterns of interregional capital flows that might happen even before the policy change occurs. The simulation results revealed that the welfare gains of rushing into trade liberalization with Japan are not so large. This makes out that taking time over negotiations might be the best choice for Indonesia if the government places priority on convincing the Indonesian people that a free trade deal with Japan will definitely bring positive effects, while proceeding rapidly might be the answer if the country is serious about recovering the welfare levels that might be lowered by free trade arrangements among Malaysia, the Philippines, and Japan.

Measuring fixed costs for firms' use of a free trade agreement : threshold regression approach

In this paper, by employing the threshold regression method, we estimate the average tariff equivalent of fixed costs for the use of a free trade agreement (FTA) among all existing FTAs in the world. It is estimated to be 3.2%. This global estimate serves as a reference rate in the evaluation of each FTA’s fixed costs.

Selection and utilization of the early harvest list : evidence from the Free Trade Agreement between China and Taiwan

In this paper, we conducted an empirical investigation into the determinants of FTA utilization in exports from Taiwan to China. To do this, we first estimated the selection equation to see what kinds of products are included in the early harvest list. As a result, we found that Taiwan includes products with a medium magnitude of benefits from tariff removal in the early harvest list. Taiwan also includes products for which ASEAN countries have better access to the China market. We then estimated the equation for the determinants of FTA utilization by introducing an inverse of the Mills ratio estimated in the selection equation. The findings are that, as usual, the FTA rates are more likely to be utilized for products with a larger tariff margin. In addition, some rules of origin are found to be relatively restrictive in terms of discouraging trade.