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Forward-Looking Effects of Trade Liberalization between Japan and ASEAN Members: In the Framework of Ramsey-Cass-Koopmans Type Economic Growth

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  • Oyamada, Kazuhiko

Abstract

This report clarifies the potential impact of trade liberalization between Japan and ASEAN members, using a forward-looking, multi-regional, multi-sectoral Applied General Equilibrium (AGE) model of global trade. We perform simulations with the model to evaluate several trade-liberalization programs under prospective consideration by the Japanese government, and offer some insights into the dynamic side of the impact. The simulation results revealed that: (i) trade liberalization between Japan and ASEAN4 has a tendency to cause trade diversion into the union followed by steady capital accumulation, while the case between China and ASEAN4 changes the trend of interregional investment flows through announcement effects that may significantly affect patterns of trade; (ii) the announcement effects and the subsequent changes in patterns of interregional investment, caused by trade liberalization between China and ASEAN4, are sufficiently large, but sensitive and may be easily affected by other policy changes such as those induce steady capital accumulation through removal of distortions in trade markets; (iii) Japan has a possibly important role in the Asian region in the linking of China and ASEAN4 through close and complementary relationships of Japanese and Chinese industries, particularly in the manufacturing sector, since the initial relationship between China and ASEAN4 is not very strong; and (iv) the benefit that ASEAN4 would receive from trade liberalization with Japan might be amplified by free trade between China and ASEAN4.

Suggested Citation

  • Oyamada, Kazuhiko, 2004. "Forward-Looking Effects of Trade Liberalization between Japan and ASEAN Members: In the Framework of Ramsey-Cass-Koopmans Type Economic Growth," Conference papers 331249, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:331249
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    References listed on IDEAS

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