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Quantifying the EU-Japan Economic Partnership Agreement

12th November 2019
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Authors: Gabriel Felbermayr, Fukunari Kimura, Toshihiro Okubo and Marina Steininger (Journal of the Japanese and International Economies, 2019, Vol. 51, 110-128.)

This paper provides a quantitative analysis of the new EU-Japan Economic Partnership Agreement (EPA), the biggest bilateral deal that both the EU and Japan have concluded so far. It employs a generalized variant of the Eaton-Kortum (2002) model, featuring multiple sectors, input-output linkages, services trade, and non-tariff barriers (NTBs). It uses the results of an econometric ex post analysis of a related existing FTA, the one between the EU and Korea, to approximate the expected reductions in the costs of NTBs. This approach yields long-run welfare effects for Japan of about 18 bn USD per year (0.31% of GDP) and of about 15 bn USD (0.10%) for the EU. On average, the agreement does not appear to harm third countries. 14% of the welfare gains inside the EPA stem from tariffs, the remaining 86% from NTB reform, and the services sector account for more than half. In the EU, value added in the agri-food sector goes up most, while in Japan the manufacturing and services sectors gain.

 

Keywords: free trade agreements, general equilibrium, quantitative trade models, Japan, European union

JEL: F15, F17, N74

 

DOI: https://doi.org/10.1016/j.jjie.2018.12.007

 

 


Involved External Research Fellows

  • Prof. Gabriel Felbermayr, Ph.D.

Projects

Project 1
Cross-cultural differences in the perception of corporate social responsibility and consumer social responsibility along global supply chains
Project 1
Experimental studies of moral responsibility in global supply chains
Project 1
Modelling economic and social dimensions of global supply chains
Project 1
Global supply chains, environmental regulation and green innovation

Other Projects

Cross-cultural differences in the perception of corporate social responsibility and consumer social responsibility along global supply chains Experimental studies of moral responsibility in global supply chains
Modelling economic and social dimensions of global supply chains Global supply chains, environmental regulation and green innovation Further KCG Projects

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