Faculty Profile

LEE Hiro

Research Topics

International Trade, Development Economics, East Asian Economies

Research Introduction and Message

Regional Integration and Industrial Adjustments in the Asia-Pacific Region

   In recent years, a growing number of bilateral and plurilateral free-trade agreements (FTAs) involving Asia-Pacific countries have been signed or ratified, or are under negotiation. Empirical evidence suggests that the benefits of FTAs exceed their costs when the economic size of the FTA is relatively large. While the aggregate welfare effect of regional integration is important, the sectoral impact is of an even greater concern to policy makers. On the one hand, FTAs benefit industries with comparative advantage (e.g. automobiles and electronics products in Japan) through an expansion of exports and production. Consumers also benefit from a reduction in the price of imported products. On the other hand, FTAs generally lead to a contraction of output and employment in highly protected sectors (e.g. a number of agricultural and food sectors in Japan).

   Public opinion is sharply divided regarding whether Japan should participate in the Trans-Pacific Partnership (TPP) agreement, but a key element is whether the Japanese government can carry through agricultural reform. Japan has protected the agricultural sector with high tariffs for over 50 years, but the sector has continued to lose competitiveness during this period. What the government needs to do is not a continuation of protection, but to implement policies to increase the international competitiveness of the agricultural sector in the long run, through the abolition of the rice acreage-reduction program, the elimination of farming entry barriers, provision of incentives (e.g. subsidies) for large-scale farming operations and greater production efficiency, and so forth.

   Currently, I am conducting research that examines the relationship between the sequencing of FTAs in the Asia-Pacific region and the magnitude of welfare effects and industrial adjustments of the member countries. In particular, I am examining whether Asian countries should pursue Asia-wide FTAs or participate in the TPP, which may become an important policy question in future. I am interested in discussing about trade policies that would benefit both developed and developing countries.

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