Hiro Lee

The Environment and Welfare Implications of Trade and Tax Policy

Developing countries with comparative advantage in dirty industries face the risk of environmental degradation unless appropriate policies are implemented. Using applied general equilibrium analysis, we examine how trade influences the environment and assess the welfare and environmental implications of alternative pollution abatement policies for Indonesia. Our results indicate that unilateral trade liberalization by Indonesia would increase the ratio of emission levels to real output for almost all major pollution categories. More importantly, when tariff removal is combined with a cost-effective tax policy, the twin objectives of welfare enhancement and environmental quality improvement appear to be feasible. This sheds new and positive light on the role of trade in sustainable development.

Economic Development and Cooperation in the Pacific Basin: Trade, Investment, and Environmental Issues

Part I. Introduction and Overview: 1. Prelude to the Pacific century: overview of the region, leading issues, and methodology Hiro Lee and David Roland-Holst Part II. US-Japan and Asian Trade Patterns: 2. Cooperative approaches to shifting comparative advantage: the case of bilateral trade between the United States and Japan Hiro Lee and David Roland-Holst Comment Peter A. Petri 3. Is there an Asian export model? Marcus Noland Comment Albert Fishlow Part III. Regional Trading: Arrangements in the Pacific Basin: 4. Should East Asia go regional? Arvind Panagariya Comment Barry Eichengreen 5. Political feasibility and empirical assessments of a Pacific free trade area Hiro Lee and David Roland-Holst Comment Alain de Janvry 6. Regionalism in the Pacific basin: strategic interest of ASEAN in APEC Tan Kong Yam Comment Pearl Imada Iboshi Part IV. Foreign Direct Investment: Determinants and Consequences: 7. The determinants of foreign direct investment: a survey with application to the United States Peter A. Petri and Michael G. Plummer Comment Jeffrey H. Bergstrand 8. Are trade and direct investment substitutes or complements? An analysis of the Japanese manufacturing industry Masahiro Kawai and Shujiro Urata Comments Julia Lowell 9. Koreas outward foreign direct investment and the division of labor in the Asia-Pacific Jai-Won Ryou Comment Chung H. Lee 10. Chinas absorption of foreign direct investment Shang-Jin Wei Comment K. C. Fung 11. The impact of foreign investment in Indonesia: historical trends and simulation analysis Iwan Azis Comment William E. James Part V. Trade Resources and the Environment: 12. Economic development and the environment in China Wang Huijiong and Li Shantong Comment Mark Poffenberger 13. Outward orientation and the environment in the Pacific Basin: coordinated trade and environmental policy reform in Mexico John Beghin, David Roland-Holst, and Dominique van der Mensbrugghe Comment David Zilberman and Linda Fernandez.

WELFARE CHANGES AND SECTORAL ADJUSTMENTS OF ASIA-PACIFIC COUNTRIES UNDER ALTERNATIVE SEQUENCINGS OF FREE TRADE AGREEMENTS

In this paper, we compare welfare effects and the extent of sectoral adjustments of the member countries under alternative free trade agreement (FTA) sequencings in the Asia-Pacific region using a dynamic computable general equilibrium (CGE) model. If a Trans-Pacific Partnership (TPP) agreement under one sequencing and an East Asian FTA (EAFTA) under another sequencing will enter into force at the same time, followed by more enlarged FTAs, then a larger number of countries are expected to realize greater welfare gains under the Asia-track sequencing. However, given the uncertainty about the establishment of an Asia-wide FTA in the near future, the TPP-track sequencing appears to be an attractive option for most countries in the Asia-Pacific region. With respect to sectoral adjustments, there seem to be no significant differences among the alternative sequencings considered in this study.

A General Equilibrium Analysis of the Interplay between Foreign Direct Investment and Trade Adjustments

The theoretical literature on trade and foreign direct investment (FDI) indicates that they could be either substitutes or complements. The empirical evidence on U.S.-Japan and Asia-Pacific Economic Cooperation (APEC) countries suggests that trade and FDI exhibit a complementary relationship. In this paper, we employ a multi-region, multisectoral computable general equilibrium (CGE) model that incorporates FDI to evaluate the impact of APEC trade and investment liberalization on economic welfare and the interplay between FDI and trade adjustments.

Trade‐Induced Pollution Transfers and Implications for Japan’s Investment and Assistance

Traded commodities embody an environmental service, namely the amount of pollution emitted domestically when goods are produced for export. Japans extensive economic ties with its Asian Pacific trading partners necessitate special consideration of trade and environment linkages. The data presented in this paper indicate that bilateral trade with Japan has resulted in substantial net transfers of effluent loads during the period 1981-95. To remedy environmental inequality of this kind, we recommend the promotion of technology transfer from Japan to developing countries through foreign direct investment and development assistance. The aAppendix shows that a combination of multilateral trade liberalization and cost-effective environmental policy can result in achieving the twin objectives of higher national income and environmental quality improvement.

Prelude to the pacific century: Overview of the region, leading issues, and methodology

The Pacific Basin is the most robust economic region of the world. Over half the worlds population resides in countries bordering on it, and this regions average economic growth rate has been double that of the rest of the world since 1970. The volume of trade on the Pacific is three times that on the Atlantic and has been growing twice as fast. In less than a generation, this region has become the global pacesetter for market-based economic development and a model of efficient international specialization. This volume examines a number of leading issues facing the Pacific Basin, collecting the research and opinions of experts from around the region on its economic prospects into the next generation. In particular, some of these authors examine the received history of trade rivalry and the new initiatives for regional cooperation in trade. Another series of papers examines Pacific multilateralism from the capital account perspective, detailing a complex web of foreign direct investment linkages that now pervades the region. Finally, two papers examine an important emergent issue in the region and the world - links between trade, sustainable resource use, and the environment. Taken together, these studies cover issues of the highest priority for policy dialogue and research, in this region and in the context of multilateralism generally, now and for the foreseeable future.

Quantitative Assessments of U.S. Safeguards on Steel Products

In March 2002, the United States imposed temporary safeguard measures on 11 steel products in the forms of higher tariffs and tariff-rate quotas. Using a dynamic computable general equilibrium (CGE) model, we evaluate the effects of U.S. safeguards on economic welfare, real GDP, steel trade, and sectoral output and average cost of the United States and its trading partners, with particular attention to those of Japan, China, Korea and Taiwan. The results suggest that the U.S. welfare marginally increased during the two years when the safeguards were in effect because of an improvement in the terms of trade. By contrast, the safeguards had a small negative impact on U.S. real GDP. Japan, Korea and Taiwan incurred some welfare losses, but they were extremely small. China did not suffer any welfare losses. U.S. steel imports from the Northeast Asian countries declined by 9-25 percent, but those from the NAFTA partners and other countries on the exclusion list increased by 10-11 percent, largely offsetting the reductions in the total U.S. steel imports. The safeguards caused output contraction in the steel-consuming industries in the United States and output expansion in those industries in Japan, Korea and Taiwan, but these effects were again extremely small. These results suggest that the impact of U.S. safeguards was minimal.

Economic Development and Cooperation in the Pacific Basin: U.S.-Japan and Asian Trade Patterns

Part I. Introduction and Overview: 1. Prelude to the Pacific century: overview of the region, leading issues, and methodology Hiro Lee and David Roland-Holst Part II. US-Japan and Asian Trade Patterns: 2. Cooperative approaches to shifting comparative advantage: the case of bilateral trade between the United States and Japan Hiro Lee and David Roland-Holst Comment Peter A. Petri 3. Is there an Asian export model? Marcus Noland Comment Albert Fishlow Part III. Regional Trading: Arrangements in the Pacific Basin: 4. Should East Asia go regional? Arvind Panagariya Comment Barry Eichengreen 5. Political feasibility and empirical assessments of a Pacific free trade area Hiro Lee and David Roland-Holst Comment Alain de Janvry 6. Regionalism in the Pacific basin: strategic interest of ASEAN in APEC Tan Kong Yam Comment Pearl Imada Iboshi Part IV. Foreign Direct Investment: Determinants and Consequences: 7. The determinants of foreign direct investment: a survey with application to the United States Peter A. Petri and Michael G. Plummer Comment Jeffrey H. Bergstrand 8. Are trade and direct investment substitutes or complements? An analysis of the Japanese manufacturing industry Masahiro Kawai and Shujiro Urata Comments Julia Lowell 9. Koreas outward foreign direct investment and the division of labor in the Asia-Pacific Jai-Won Ryou Comment Chung H. Lee 10. Chinas absorption of foreign direct investment Shang-Jin Wei Comment K. C. Fung 11. The impact of foreign investment in Indonesia: historical trends and simulation analysis Iwan Azis Comment William E. James Part V. Trade Resources and the Environment: 12. Economic development and the environment in China Wang Huijiong and Li Shantong Comment Mark Poffenberger 13. Outward orientation and the environment in the Pacific Basin: coordinated trade and environmental policy reform in Mexico John Beghin, David Roland-Holst, and Dominique van der Mensbrugghe Comment David Zilberman and Linda Fernandez.

Economic Development and Cooperation in the Pacific Basin: List of Contributors

Part I. Introduction and Overview: 1. Prelude to the Pacific century: overview of the region, leading issues, and methodology Hiro Lee and David Roland-Holst Part II. US-Japan and Asian Trade Patterns: 2. Cooperative approaches to shifting comparative advantage: the case of bilateral trade between the United States and Japan Hiro Lee and David Roland-Holst Comment Peter A. Petri 3. Is there an Asian export model? Marcus Noland Comment Albert Fishlow Part III. Regional Trading: Arrangements in the Pacific Basin: 4. Should East Asia go regional? Arvind Panagariya Comment Barry Eichengreen 5. Political feasibility and empirical assessments of a Pacific free trade area Hiro Lee and David Roland-Holst Comment Alain de Janvry 6. Regionalism in the Pacific basin: strategic interest of ASEAN in APEC Tan Kong Yam Comment Pearl Imada Iboshi Part IV. Foreign Direct Investment: Determinants and Consequences: 7. The determinants of foreign direct investment: a survey with application to the United States Peter A. Petri and Michael G. Plummer Comment Jeffrey H. Bergstrand 8. Are trade and direct investment substitutes or complements? An analysis of the Japanese manufacturing industry Masahiro Kawai and Shujiro Urata Comments Julia Lowell 9. Koreas outward foreign direct investment and the division of labor in the Asia-Pacific Jai-Won Ryou Comment Chung H. Lee 10. Chinas absorption of foreign direct investment Shang-Jin Wei Comment K. C. Fung 11. The impact of foreign investment in Indonesia: historical trends and simulation analysis Iwan Azis Comment William E. James Part V. Trade Resources and the Environment: 12. Economic development and the environment in China Wang Huijiong and Li Shantong Comment Mark Poffenberger 13. Outward orientation and the environment in the Pacific Basin: coordinated trade and environmental policy reform in Mexico John Beghin, David Roland-Holst, and Dominique van der Mensbrugghe Comment David Zilberman and Linda Fernandez.