The Importance Of Trade Liberalization

1410 Words 6 Pages
2-1. FTA/EPA and the current trade
In terms of the classical theory, FTA is the first step of economic integration, which is a ‘fusion of national markets’, and abolishment of tariffs and allotment of quotas among the member countries (Balassa, 1962: 2). Particularly, under perfect competition, trade liberalisation may enable economic welfare to maximise (ibid, 59). Due to open markets, reallocation of productive resources from less to more efficient countries could occur and national industries tend to be specialised as comparative advantage; this leads a rise in average productivity (Baldwin, 2008: 2, 33). In the long run, trade liberalisation can prosper national economy of member countries by expanding economy of scale. However, liberalisation
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Abenomics is the economic strategy, aiming at overcoming deflation and revitalising the national economy, introduced in the end of 2012; it is composed of ‘three-arrows strategy’: monetary policy, fiscal policy and long-term growth strategy (WTO, 2015: 11). There are three goals of trade policy: strengthening economic partnership agreements; strategic approaches to developing countries; and promoting inward FDI (WTO, 2015: 21). The government expects FTAs to develop ‘high-level economic partnership with major trading powers’ (Hamamoto, 2015: 206). It also seeks to improve FTA ratio, which is the volume of FTA trade in total, by 2018 and shows positive attitude towards participating in mega-FTAs, albeit there seems to be some issues such as NTMs reduction and liberalisation in service sector (WTO, 2015: 21). After all, though key factor in trade policy is joining mega-FTAs, namely TPP, RCEP, CJK-FTA and the EU-Japan FTA/EPA, the core goal is enhancement of multilateral system by supporting WTO negotiations similar to the EU (MOFA, …show more content…
Japan had experienced the strong-yen strategy since GFC and encouraged outward FDI particularly in East Asia; this has also promoted labour of division there (Hamamoto, 2015: 193; Shimizu and Sato, 2014: 15). Besides, more Japanese firms have started local manufacture in Western countries, instead of exporting finished products (Shimizu and Sato, 2014: 4). However, inward FDI is low (Masuda, 2015: 33). Abenomics has introduced the weak-yen strategy to expand inward FDI, which is the centre pillar of the new economic policy, for making Japan a world-class business centre; to achieve this, the government has tended to reduce the rate of cooperation tax step by step (ibid: 41; WTO, 2015: 17, 49). Hence, the current trade policy in Japan could play a tool for FDI for the purpose to get out of serious deflation and revitalise Japanese economy. Moreover, the government recognises trade policy as a tool for national security; indeed, East Asia is the most important region for Japan; the government considers that stabilisation and development in East Asia can greatly contribute to peace and stability in Japan (Lee, 2010: 42; Wissenbach, 2013: 211). Especially, CJK-FTA and RCEP are expected as the main drivers for political and diplomatic relationship in East Asia, beyond economy (Shimizu, 2014: 25). Accordingly, trade policy in Japan tends to be more inclusive, beyond trade;

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