The Role of Multinational Firms in International Trade: The Case of Japan

This paper examines the role of multinational firms in international trade using firm-level panel data for Japanese firms between 1994 and 2000. Our results indicate that multinational firms dominate Japanese trade. In 2000, only 12.4 percent of Japanese firms were multinationals but they accounted for 93.6 and 81.2 percent of Japanese exports and imports, respectively. We found that multinational firms emerged from being exporters/importers. These results imply that firms do not make the choice of either exporting or undertaking FDI, contrary to the findings of previous studies. Rather, exporters make a decision on whether or not to undertake FDI.Multinational Firms, Foreign Direct Investment, International Trade, Intra-firm Trade

International Trade and Inequality

The impact of globalization on equality has become a serious concern for many countries. More evidence that challenges the theoretical prediction of positive impact of international trade on income distribution has increasingly become available recently. This paper addresses this subject, surveying the empirical findings on the impact of international trade on inequalities from various perspectives. The survey reveals that an increase in trade openness by developing countries appears to have contributed to narrowing the development gap vis-à-vis developed countries, while its impacts on income gap between developing countries are not clear. The impacts of increased trade or trade liberalization on within-country inequalities are mixed. In some cases, trade liberalization improved wage-inequality, but in some other cases, the opposite pattern was observed. Similar mixed patterns are found for regional inequalities. These mixed findings are consistent with the fact that theoretical predictions are also mixed. One reason for the mixed findings is the impact of other factors affecting inequalities, including labor market conditions, inflow of capital, and policy reforms. Government needs to implement appropriate policies to deal with the inequalities. Two of the most important are policies to promote human resource development and policies on income redistribution. The former improves quality of labor, with the support from a well-functioning and flexible labor market. The latter covers policies on social safety net or on tax system. The safety net pays some portion of adjustment costs borne by workers who are adversely e tax system (e.g., progressive and inheritance tax) helps distribute income more equally between the rich and the poor

Small and medium-size enterprise support policies in Japan

The authors examine how Japan's public and private sectors support small and medium-size enterprises (SMEs). They focus on technical, financial, and marketing assistance. Their findings are based on a survey of 107 firms; 40 that produce silverware, 33 engaged in synthetic textile weaving, and 34 that manufacture auto parts. Each sector represents a distinctive form of industrial organization, but they also share several characteristics: each industry is concentrated in a particular region, each involves close subcontracting relationships, and each has overcome difficulties and achieved a certain measure of industrial success. Technical support for these SMEs came largely through private channels, including parent firms, equipment suppliers, and other firms in the same line of business. Public institutions played only a subordinate role. Marketing support also came largely from parent firms, trading companies, and other private sources. Producers of intermediate goods in particular - such as auto parts and synthetic textiles - relied heavily on subcontractors. Most loans for Japan's SMEs were provided under competitive market conditions but three sources of directed credit - loans from specialized parastatals, loans channeled through local governments, and loan guarantees - accounted for about 20 percent of all SME borrowing and 35 to 60 percent of investment borrowing. Default rates averaged less than one-half of one percent of outstanding loans, and real interest rates were positive. The majority of firms surveryed used and valued directed credits. The smallest firms in particular valued them. Public institutions complemented the private marketplace in all three areas. Public technical and marketing support helped create and maintain private networks. In finance, Japan successfully embedded directed credit in a well-functioning, predominantly private, competitive, and prudential financial system. Through partnerships, public support continues to play both a direct and an indirect role in supporting the development of SMEs in Japan.Small Scale Enterprise,Water and Industry,Microfinance,Small and Medium Size Enterprises,Labor Policies,Environmental Economics&Policies,Water and Industry,Microfinance,Private Participation in Infrastructure,Small Scale Enterprise

Changing Commercial Policy in Japan During 1985-2010

In this paper we examine the changing nature of Japan's commercial policy over the last 25 years while reviewing Japan's changing structure of trade, FDI and economy that underlay policy changes. We argue that until the late 1990s Japan adopted a two-track approach of relying on multilateral liberalization under the GATT/WTO and open regionalism under Asia-Pacific Economic Cooperation (APEC) on the one hand and on the bilateral trade relationship with the US on the other. Although the Japan-US bilateralism sometimes resulted in "managed trade" and encountered negative perceptions of the US approach in Japan, overall, it had a positive impact on the Japanese economy in opening domestic markets through various reforms and deregulation measures. Japan's more recent commercial policy focuses on bilateral and plurilateral economic partnership agreements particularly with-but not limited to-East Asian economies. We argue that agricultural sector liberalization is key to the further integration of Japan with the Asian and global economies.japan commercial policy; economy; trade; gatt; wto; fta

The Impacts of an East Asia FTA on Foreign Trade in East Asia

This paper attempts to examine the impact of an East Asia FTA on trade patterns in East Asia by using a multi-sector computable general equilibrium model. The model used in this analysis is the standard GTAP model and GTAP database developed by Hertel (1997) and his colleagues of Purdue University. Our findings are summarized as follows: First, the impacts of an East Asia FTA on GDP and welfare of member countries are generally positive, while the impacts on non-members are negative. Second and surprisingly, the FTA does not seem to affect much on the patterns of comparative advantage or intra-industry trade. Third, production of the sectors with a comparative advantage increases. Fourth, unexpectedly exports of protected sectors increase, reflecting a shift in incentives from domestic sales to export sales. Finally, an East Asia FTA will promote regionalization in East Asia but it will not necessarily promote regionalization in AFTA.

The determinants of offshore production by Multinational Corporations (MNCs) : a comparison of Japanese and US MNCs

This study employs confidential affiliate-level panel data to improve measures of foreign affiliate activities of Japanese firms in manufacturing sectors. Combining existing data on U.S. MNCs with the Japanese data, we illustrate the pattern and determinant of their foreign affiliate sales by destination market across countries and industries for the period 1989-2005. Among our results, Japanese and U.S. MNCs are similar in the substantial growth of their foreign affiliate sales and the importance of sales to local markets. However, Japanese MNCs are distinctive from U.S. MNCs in that Japanese affiliate sales in Asia were prominently higher in host markets with lower educational attainment.Japan, United States, International business enterprises, Industrial management, Multinational firm, FDI, U.S., Skill endowment