Quantifying the EU-Japan Economic Partnership Agreement

42 Pages Posted: 31 Oct 2018

See all articles by Gabriel J. Felbermayr

Gabriel J. Felbermayr

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute

Fukunari Kimura

Keio University - Faculty of Economics

Toshihiro Okubo

Keio University

Marina Steininger

CESifo (Center for Economic Studies and Ifo Institute)

Date Written: 2018

Abstract

This paper provides a quantitative analysis of the new EU-Japan free trade agreement (FTA), the biggest bilateral deal that both the EU and Japan have concluded so far. It employs a generalized variant of the Eaton-Kortum (2002) model, featuring multiple sectors, input-output linkages, services trade, and non-tariff barriers (NTBs). It uses the results of an econometric ex-post analysis of a related FTA, the one between the EU and Korea, in force since 2011, to approximate the expected reductions in the costs of NTBs. This approach yields long-run welfare effects for Japan of about 18 bn. USD per year (0.31% of GDP) and of about 15 bn. USD (0.10%) for the EU. On average, the agreement does not appear to harm third countries, but the Americas, Africa and MENA countries slightly lose. 14% of the welfare gains inside the FTA stem from tariffs, the remaining 86% from NTB reform, and the services sector accounts for more than half. In the EU, value added in the agri-food sector goes up most, while in Japan the manufacturing and services sectors gain.

Keywords: free trade agreements, general equilibrium, quantitative trade models, Japan, European Union

JEL Classification: F150, F170, N740

Suggested Citation

Felbermayr, Gabriel J. and Kimura, Fukunari and Okubo, Toshihiro and Steininger, Marina, Quantifying the EU-Japan Economic Partnership Agreement (2018). CESifo Working Paper No. 7241. Available at SSRN: https://ssrn.com/abstract=3275415

Gabriel J. Felbermayr (Contact Author)

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute ( email )

Poschinger Str. 5
Munich, 01069
Germany

Fukunari Kimura

Keio University - Faculty of Economics ( email )

2-15-45 Mita, Ninato-ku
Tokyo 1088345
Japan

Toshihiro Okubo

Keio University ( email )

2-15-45 Mita
Minato-ku
Tokyo, 108-8345
Japan

Marina Steininger

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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