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Trade and welfare effects of a potential free trade agreement between Japan and the United States

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  • Walter, Timo

Abstract

This paper deals with the trade and welfare effects of a potential bilateral trade agreement between the US and Japan. A possible agreement is currently being discussed between Washington and Tokyo, although, there is also the alternative for the US government joining Trans-Pacific Partnership (TPP). Based on the theoretical model of Caliendo and Parro (2015) I analyse the welfare gains of such a bilateral free trade agreement (FTA) in the style of Aichele et al. (2014). In particular, I simulate three scenarios with different levels of integration: The reduction of tariffs only, the scenario of a shallow FTA, and a deep FTA. In addition, the paper compares the trade and welfare changes of a deep FTA to the welfare effects of TPP. The findings are that Japan has the highest welfare gains with a FTA (0.085%), whilst the United States benefits the most from TPP with a welfare gain of 0.05%.

Suggested Citation

  • Walter, Timo, 2018. "Trade and welfare effects of a potential free trade agreement between Japan and the United States," Hohenheim Discussion Papers in Business, Economics and Social Sciences 16-2018, University of Hohenheim, Faculty of Business, Economics and Social Sciences.
    • Handle: RePEc:zbw:hohdps:162018
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    References listed on IDEAS

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    Cited by:

    1. Antrà s, Pol & Chor, Davin, 2021. "Global Value Chains," CEPR Discussion Papers 15908, C.E.P.R. Discussion Papers.

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    More about this item

    Keywords

    Trade agreements; Gravity model; Counterfactual equilibrium; Intermediate goods; Input-output linkages; Japan; United States;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation

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