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

Author

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  • Drusilla K. Brown
  • Alan V. Deardorff
  • Robert M. Stern

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 a prospective new 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 on agricultural and industrial products and services barriers by 33 percent in a new WTO trade round would increase world welfare by $613.0 billion, with gains of $177.3 billion for the United States, $123.7 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 $1.9 trillion, with gains of $537.2 billion (5.9 percent of GNP) for the United States and $374.8 billion (5.8 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 a new WTO 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.
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Suggested Citation

  • Drusilla K. Brown & Alan V. Deardorff & Robert M. Stern, 2001. "Multilateral, Regional, and Bilateral Trade-Policy Options for the United States and Japan," Discussion Papers Series, Department of Economics, Tufts University 0112, Department of Economics, Tufts University.
  • Handle: RePEc:tuf:tuftec:0112
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    References listed on IDEAS

    as
    1. 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, vol. 9(2), pages 262-286, May.
    2. 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.
    3. 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.
    4. 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.
    5. repec:wsi:wschap:9789812701350_0018 is not listed on IDEAS
    6. 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.
    7. 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.
    8. 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.
    9. 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.
    10. 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..
    11. Wolfgang F. Stolper & Paul A. Samuelson, 1941. "Protection and Real Wages," Review of Economic Studies, Oxford University Press, vol. 9(1), pages 58-73.
    12. 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.
    13. 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, vol. 18(1), pages 3-32.
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    Citations

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    Cited by:

    1. Eromenko, Igor, 2010. "Accession to the WTO. Computable General Equilibrium Analysis: the Case of Ukraine. Part I," MPRA Paper 67476, University Library of Munich, Germany.
    2. Alan V. Deardorff & Robert M. Stern, 2004. "Enhancing the Benefits for India and Other Developing Countries in the Doha Development Agenda Negotiations," Working Papers 512, Research Seminar in International Economics, University of Michigan.
    3. Siebert, Horst, 2005. "TAFTA - a dead horse or an attractive open club?," Kiel Working Papers 1240, Kiel Institute for the World Economy (IfW).
    4. ANDO Mitsuyo, 2009. "Impacts of FTAs in East Asia: CGE Simulation Analysis," Discussion papers 09037, Research Institute of Economy, Trade and Industry (RIETI).
    5. Anderson, Kym & Martin, Will & van der Mensbrugghe, Dominique, 2013. "Estimating Effects of Price-Distorting Policies Using Alternative Distortions Databases," Handbook of Computable General Equilibrium Modeling, Elsevier.
    6. Kokko, Ari & Mathä, Thomas & Gustavsson Tingvall, Patrik, 2006. "Regional Integration And Trade Diversion In Europe," EIJS Working Paper Series 231, Stockholm School of Economics, The European Institute of Japanese Studies.
    7. Mousumi Bhattacharya & Sharad Nath Bhattacharya, 2013. "Software Services Export And Its Implications On Economic Growth In India: An Empirical Study," Economic Review: Journal of Economics and Business, University of Tuzla, Faculty of Economics, vol. 11(1), pages 17-26.
    8. Raymond Robertson & Antoni Estevadeordal., 2009. "Gravity, Bilateral Agreements, and Trade Diversion in the Americas," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 46(133), pages 3-33.
    9. Brown, Drusilla K. & Kiyota, Kozo & Stern, Robert M., 2005. "Computational analysis of the Free Trade Area of the Americas (FTAA)," The North American Journal of Economics and Finance, Elsevier, vol. 16(2), pages 153-185, August.
    10. Drusilla K. Brown & Kozo Kiyota & Robert M. Stern, 2004. "Computational Analysis of the U.S FTA with the Southern African Customs Union (SACU)," Working Papers 514, Research Seminar in International Economics, University of Michigan.
    11. Drusilla K. Brown & Kozo Kiyota & Robert M. Stern, 2006. "Computational Analysis of the Menu of US-Japan Trade Policies," The World Economy, Wiley Blackwell, vol. 29(6), pages 805-855, June.
    12. Drusilla Brown & Kozo Kiyota & Robert Stern, 2006. "An Analysis of the U.S.-SACU FTA Negotiations," Working Papers 545, Research Seminar in International Economics, University of Michigan.
    13. Eromenko, Igor, 2011. "Accession to the WTO. Computable General Equilibrium Analysis: the Case of Ukraine," MPRA Paper 67535, University Library of Munich, Germany.
    14. Alan V. Deardorff & Robert M. Stern, 2003. "Enhancing the Benefits for Developing Countries in the Doha Development Agenda Negotiations," Working Papers 498, Research Seminar in International Economics, University of Michigan.
    15. Lee, Hiro & Roland-Holst, David & van der Mensbrugghe, Dominique, 2004. "China's emergence in East Asia under alternative trading arrangements," Journal of Asian Economics, Elsevier, vol. 15(4), pages 697-712, August.
    16. Romulo Chumacero & Rodrigo Fuentes, 2004. "Chile's Free Trade Deals with the EU and the US: A Big Deal?," Econometric Society 2004 Far Eastern Meetings 661, Econometric Society.
    17. Drusilla K. Brown & Alan V. Deardorff & Robert M. Stern, 2003. "Developing Countries' Stake in the Doha Round," Working Papers 495, Research Seminar in International Economics, University of Michigan.
    18. Robert M. Stern, 2002. "An Economic Perspective on Russia's Accession to the WTO," Working Papers 480, Research Seminar in International Economics, University of Michigan.
    19. Tsung-Chen Lee & Chia-Hsuan Wu & Paul T.-W. Lee, 2010. "Impacts of the ECFA on seaborne trade volume and policy development for shipping and port industry in Taiwan," Maritime Policy & Management, Taylor & Francis Journals, vol. 38(2), pages 169-189, December.
    20. Anderson, Kym & Valenzuela, Ernesto & van der Mensbrugghe, Dominique, 2009. "Welfare and Poverty Effects of Global Agricultural and Trade Policies Using the Linkage Model," Agricultural Distortions Working Paper 52785, World Bank.
    21. Suresh MOKTAN, "undated". "Assessing the Economic Impacts and Welfare Implications of SAFTA and SAFTA+3+2: The South Asian Experience," EcoMod2008 23800090, EcoMod.
    22. repec:ebl:ecbull:v:6:y:2004:i:9:p:1-12 is not listed on IDEAS
    23. Kawai, Masahiro, 2005. "East Asian economic regionalism: progress and challenges," Journal of Asian Economics, Elsevier, vol. 16(1), pages 29-55, February.
    24. Brown, Drusilla K. & Kiyota, Kozo & Stern, Robert M., 2008. "An Analysis of a US-Southern African Customs Union (SACU) Free Trade Agreement," World Development, Elsevier, vol. 36(3), pages 461-484, March.
    25. Rómulo A. Chumacero & Rodrigo Fuentes & Klaus Schmidt-Hebbel, 2004. "Chile’s Free Trade Agreements: How Big is The Deal?," Working Papers Central Bank of Chile 264, Central Bank of Chile.

    More about this item

    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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