Economic De-integration in North America and Foreign Direct Investment from Japan

Nobuhiro Hosoe

No 20-02, GRIPS Discussion Papers from National Graduate Institute for Policy Studies

Abstract: We investigate the impact of US steel and aluminum tariffs, and the resumption of auto tariffs under the revised North American Free Trade Agreement, on trade in North America and foreign direct investment (FDI) from Japan, from the perspective of the auto industry. The results of policy simulation analyses with a recursive dynamic computable general equilibrium model are as follows. Canada and Mexico would benefit from US steel and aluminum tariffs, being alternative trade partners with both the US and other countries. Due to the auto tariffs on intra- North America exports, Canada and Mexico would lose a large part of the windfall benefits from the US steel and aluminum tariffs. Japan’s FDI in Canada and Mexico would fall sharply. The more de-integrated North American economies become, the more Japan would regain its auto production, although at a painful cost in terms of welfare. That negative welfare impact would be neutralized by abolition of auto tariffs with the US.

Keywords: Economic de-integration; foreign direct investment; auto industry; computable general equilibrium analysis (search for similar items in EconPapers)
Pages: 40 pages
Date: 2020-07
New Economics Papers: this item is included in nep-cmp and nep-int
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Journal Article: Economic de-integration in North America and foreign direct investment from Japan (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:ngi:dpaper:20-02

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