Pros and Cons of Bio-ethanol Trade under Policy Coordination in East Asia: Application of Inter-regional Input-Output Analysis

Bio-ethanol (BE) plays an important role in the reduction of greenhouse gas emissions. The production area of raw materials and consumption area for BE production are not geographically even, so it is crucial to optimize production and trade in East Asia. This paper aims to show the economic effects and consideration points on BE trade under policy coordination within the region. The East Asian inter-regional I/O table is estimated from the GTAP 7 database and used for a policy simulation. The results demonstrated that, first, the policy coordination brought about a greater net profit calculated by induced production minus input costs than self-sufficient BE production. Second, Japan greatly benefited from policy coordination even though the increase in BE production was small. This is because Japan provides machinery for plant construction and chemical materials for BE production. Third, BE production and trade contributed to pro-poor growth in developing countries such as Cambodia, Laos, Myanmar and Vietnam by improving agricultural production. Therefore, Japan as a member of East Asia should take the initiative to encourage policy coordination for achieving a win-win situation.