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Multilateral, Regional, and Bilateral Trade-Policy Options for the United States and Japan

Author

Listed:
  • Drusilla K. Brown

    (Tufts University)

  • Alan V. Deardorff

    (University of Michigan)

  • Robert M Stern

    (University of Michigan)

Abstract

We have used the Michigan Model of World Production and Trade to simulate the economic effects on the United States, Japan, and other major trading countries/regions of the Doha Round of WTO multilateral trade negotiations and a variety of regional/bilateral free trade agreements (FTAs) involving the United States and Japan. We estimate that an assumed reduction of post-Uruguay Round tariffs and other barriers on agricultural and industrial products and services by 33 percent in the Doha Round would increase world welfare by $686.4 billion, with gains of $164.0 billion for the United States, $132.6 billion for Japan, and significant gains for all other industrialized and developing countries/regions. If there were global free trade with all post-Uruguay Round trade barriers completely removed, world welfare would increase by $2.1 trillion, with gains of $497.0 billion (5.5 percent of GNP) for the United States and $401.9 billion (6.2 percent of GNP) for Japan. Regional agreements such as an APEC FTA, an ASEAN Plus 3 FTA, and a Western Hemisphere FTA would increase global and member country welfare but much less so than the Doha multilateral trade round would. Separate bilateral FTAs involving Japan with Singapore, Mexico, Chile, and Korea and the United States with Chile, Singapore, and Korea would have positive, though generally small, welfare effects on the partner countries, but potentially disruptive sectoral employment shifts in some countries. There would be trade diversion and detrimental welfare effects on some nonmember countries for both the regional and bilateral FTAs analyzed. The welfare gains from multilateral trade liberalization are therefore considerably greater than the gains from preferential trading arrangements and more uniformly positive for all countries.

Suggested Citation

  • Drusilla K. Brown & Alan V. Deardorff & Robert M Stern, 2002. "Multilateral, Regional, and Bilateral Trade-Policy Options for the United States and Japan," Working Papers 490, Research Seminar in International Economics, University of Michigan.
  • Handle: RePEc:mie:wpaper:490
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    File URL: http://fordschool.umich.edu/rsie/workingpapers/Papers476-500/r490.pdf
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    References listed on IDEAS

    as
    1. Thomas W. Hertel & Bernard M. Hoekman & Will Martin, 2002. "Developing Countries and a New Round of WTO Negotiations," World Bank Research Observer, World Bank Group, vol. 17(1), pages 113-140.
    2. Harrison, W Jill & Pearson, K R, 1996. "Computing Solutions for Large General Equilibrium Models Using GEMPACK," Computational Economics, Springer;Society for Computational Economics, vol. 9(2), pages 83-127, May.
    3. Brown, Drusilla K & Stern, Robert M, 2001. "Measurement and Modeling of the Economic Effects of Trade and Investment Barriers in Services," Review of International Economics, Wiley Blackwell, pages 262-286.
    4. Hertel, Thomas W. & Will Martin, 1999. "Would Developing Countries Gain from Inclusion of Manufactures in the WTO Negotiations?," GTAP Working Papers 397, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    5. Hertel, Thomas W. & Terrie Walmsley & Ken Itakura, 2001. "Dynamic Effects of the "New Age" Free Trade Agreement between Japan and Singapore," GTAP Working Papers 823, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    6. Wolfgang F. Stolper & Paul A. Samuelson, 1941. "Protection and Real Wages," Review of Economic Studies, Oxford University Press, vol. 9(1), pages 58-73.
    7. Drusilla K. Brown & Alan V. Deardorff & Robert M Stern, 2001. "Impacts on NAFTA Members of Multilateral and Regional Trading Arrangements and Initiatives and Harmonization of NAFTA's External Tariffs," Working Papers 471, Research Seminar in International Economics, University of Michigan.
    8. Drusilla K. Brown & Alan V. Deardorff & Robert M. Stern, 2000. "Computational Analysis of the Accession of Chile to the NAFTA and Western Hemisphere Integration," The World Economy, Wiley Blackwell, vol. 23(2), pages 145-174, February.
    9. repec:wsi:wschap:9789812701350_0018 is not listed on IDEAS
    10. Drusilla K. Brown & Alan V. Deardorff & Robert M. Stern, 2001. "CGE Modeling and Analysis of Multilateral and Regional Negotiating Options," Discussion Papers Series, Department of Economics, Tufts University 0108, Department of Economics, Tufts University.
    11. Bernard Hoekman, 2000. "The next round of services negotiations: identifying priorities and options," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 31-52.
    12. Thomas W. Hertel & Terrie Walmsley & Ken Itakura, 2005. "Dynamic Effects Of The "New Age" Free Trade Agreement Between Japan And Singapore," World Scientific Book Chapters,in: Quantitative Methods For Assessing The Effects Of Non-Tariff Measures And Trade Facilitation, chapter 18, pages 483-523 World Scientific Publishing Co. Pte. Ltd..
    13. Thomas W. Hertel, 2000. "Potential gains from reducing trade barriers in manufacturing, services and agriculture," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 77-104.
    14. Warwick McKibbin & Jong-Wha Lee & Inkyo Cheong, 2004. "A dynamic analysis of the Korea-Japan free trade area: simulations with the G-cubed Asia-Pacific model," International Economic Journal, Taylor & Francis Journals, pages 3-32.
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    More about this item

    Keywords

    WTO; Trade Liberalization;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration

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