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GTAP Resource #1445

"An East Asian FTA and Japanfs Agricultural Policy: Simulation of a Direct Subsidy"
by Nakajima, Tomoyoshi

There has been an obvious change in Japan's trade policy in the last few years. Traditionally, multilateral negotiations through the GATT and WTO frameworks have occupied a dominant role in its trade policy. However, free trade agreements (FTA) have recently come to be considered to be another essential part of trade policy. Those East Asian countries that are in geographic proximity to Japan maintain close economic relations with it, so it is understandable that Japan's trade policy has assigned a high priority to the conclusion of FTAs with them.
Japan's first FTA, the Japan-Singapore Economic Partnership Agreement (JSEPA), came into effect in 2002. Following on from that, an official joint research group for a Japan-Korea FTA, which had been established in 2002, finally came to a positive conclusion and the two governments officially began negotiations concerning the FTA in 2003. Japan began preliminary negotiations with the whole of ASEAN in 2003. At the same time, Japan agreed to begin formal negotiations regarding bilateral FTAs with three ASEAN member countries: Malaysia, the Philippines and Thailand. These FTAs are expected to be established before the FTA with the whole of ASEAN.
Other than the above, China has made an approach to Japan about the possibility of a trilateral FTA among three Northeast Asian countries: Japan, China and the ROK. Japan has not made any commitment to the FTA with China yet, but it is likely to be unavoidable in the next stage.
Issues relating to agricultural products will be a crucial point in these negotiations. The abolition of tariffs and other import barriers to agricultural products is not included in JSEPA, having been set aside as a matter to be handled in the new round of WTO talks. However, it is not realistic to expect that potential partners in East Asia will accept such conditions in an FTA with Japan. For instance, Thailand and Vietnam are major exporters in the world rice market, while exports of agricultural products from China to Japan have been increasing rapidly in the last few years. Japan could be one of the most important markets for agricultural products from these countries.
On the other hand, it might be necessary to maintain a certain level of agricultural production in Japan, given the gmulti-functionalityh of agricultural sectors. They are known to provide some externalities, including positive effects on the environment. In order to facilitate the conclusion of FTAs with these countries and maintain a certain level of agricultural production, it is necessary to introduce a new support policy that replaces tariffs and other boundary barriers.
In the previous paper, we conducted a number of analyses of the case of simple direct production subsidies in the rice sector. We found that some welfare improvements in the case with a production subsidy are comparable to the case with an import tariff.
Recently, the Japanese government announced the introduction of production subsidies for farms above a certain size. These subsidies are expected to improve the productivity of the agricultural sector by increasing the average size of farms.
In this paper, we will apply the CGE model maintained by the GTAP database in order to analyze the effects of subsidies, including this improvement in productivity.

Resource Details (Export Citation) GTAP Keywords
Category: 2004 Conference Paper
Status: Published
By/In: Presented at the 7th Annual Conference on Global Economic Analysis, Washington DC, USA
Date: 2004
Created: Nakajima, T. (4/27/2004)
Updated: Nakajima, T. (6/10/2004)
Visits: 3,135
No keywords have been specified.

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