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Licensed Unlicensed Requires Authentication Published by De Gruyter April 26, 2017

The Trans-Pacific Partnership and Japan’s Agricultural Trade

Andrew Schmitz, Manhong Zhu and David Zilberman

Abstract

The Trans-Pacific Partnership Agreement (TPPA) was concluded on October 5, 2015, by twelve countries that include the United States, Japan, Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. Under the TPPA, Japan will partially liberalize its five politically sensitive agricultural subsectors: (1) rice, (2) beef and pork, (3) wheat and barley, (4) sugar, and (5) dairy, none of which contain any genetically modified (GM) content. Under full liberalization, Japanese producers in these subsectors will lose (e. g., rice producers will lose over $6 billion and beef producers will lose over $2 billion). Excluding butter, the trade impact of the TPPA on the Japanese government will be negative because of tariff and resale-revenue losses. Our empirical results provide the full effects of complete trade liberalization. However, because the TPPA negotiations of 2015 resulted in only partial trade liberalization, our results can be easily modified to deal with the degree to which trade distortions are removed for each of the above agricultural subsectors. In terms of producers who lose from trade liberalization, the Japanese government will provide compensation.

JEL Classification: F13; F14; Q17; Q18

Acknowledgements

The authors gratefully acknowledge the helpful comments and valuable advice from two anonymous reviewers and the editors of JAFIO Special Issue on GMOs and Trade Agreements, David Bullock and Norbert Wilson. The authors also thank Helen Carole Schmitz and Carol Fountain for their editorial help.

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Appendix

A

To empirically estimate the net social welfare effect, we first need values for Q3 and Q4 in Figure 2). If we assume the demand price elasticity is constant, then Q4=Q2(PwP1)εd in which εd is the

demand price elasticity (εd<0), and the area of bfc is

bfc=PwP1Q2(PP1)εddP=11+εd(P1Q2PwQ4).forε1,and

for, and

bfc=PwP1Q2(PP1)εddP=11+εd(P1Q2PwQ4).forε1,and

for

If we also assume a constant supply price elasticity, then we will need the cutoff price P0. If it is known, then Q3=Q1(PwP0P1P0)εs. But it is difficult to calculate the cutoff price, and the resulting area ade. Thus we use the following method to calculate the welfare effect. The Supply price elasticity can be calculated from points d and a:

[(Q1Q3)Q3][(P1Pw)Pw]=εs in which (P1Pw)Pw=tand εs>0, and thus

Q3=Q11+tεs;

The demand price elasticity can be calculated from points b and c:

[(Q2Q4)Q4][(P1Pw)Pw]=εd in which (P1Pw)Pw=tand εd<0, and thus

Q4=Q21+tεd.

The area of ade is given by

ade12(Q1Q3)(P1Pw)=12t2PwεsQ3;
bfc12(Q4Q2)(P1Pw)=12t2PwεdQ4.
Published Online: 2017-4-26

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