Do Japan's Free Trade Agreements (FTAs) Increase Its International Trade?

This paper analyzes the impacts of Free Trade Agreements (FTAs) on bilateral trade, focusing on Japan's FTAs. We first examined the effects of Japan's FTAs, using a dataset of Japan's exports and imports, not only on all products as a whole but also on major products for a period 1995-2016. From the analysis at the aggregate level, we found that effects of Japan's FTAs are heterogeneous among the FTA partners, and that Japan enjoyed trade creation effects of FTAs on exports/imports with more than half of the FTA partners. We also investigated the dynamic effects of FTAs by the period of years from the enforcement. The results demonstrate that positive effects tend to increase gradually for some products. Moreover, we conducted the corresponding analysis for the same period, incorporating not only Japan's trade but also trade between third countries. We found that unlike the analysis only for Japan's exports or imports, the trade creation effects of FTAs disappeared for some FTA partners, while they were robust for others. These findings suggest that Japan's FTAs did not make sufficient contributions to the expansion of Japan's trade with FTA partners when we consider FTA partners' trade with other countries. In other words, even when Japan's trade with FTA partners increased, FTA partners' trade with countries other than Japan increased more. As we have emphasized in a series of our studies on FTAs, to realize the trade expansion effects of FTAs, it is crucial to facilitate the use of FTAs, for instance, by constructing user-friendly rules of origin or provide support for the use of the FTAs.