ifo Center for International Economics
Institutional Affiliation: Ifo Center for International Economics
NBER Working Papers and Publications
|July 2018||Quantifying the EU-Japan Economic Partnership Agreement|
with Gabriel Felbermayr, Fukunari Kimura, Toshihiro Okubo
in Globalization and Welfare Impacts of International Trade, Shin-ichi Fukuda, Takeo Hoshi, and Fukunari Kimura, organizers
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 remain...