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

Timo Walter

No 16-2018, Hohenheim Discussion Papers in Business, Economics and Social Sciences from University of Hohenheim, Faculty of Business, Economics and Social Sciences

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%.

Keywords: Trade agreements; Gravity model; Counterfactual equilibrium; Intermediate goods; Input-output linkages; Japan; United States (search for similar items in EconPapers)
JEL-codes: F13 F14 F17 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-cmp and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:hohdps:162018

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