Heterogeneous Impacts of Free Trade
Agreements: The Case of Japan*

Kenta Yamanouchi
Keio University
Mita 2-15-45
Minato-ku, Tokyo 108-8345, Japan
ymdkntr40723331@yahoo.co.jp

Abstrait
This paper investigates the trade creation effects of Japan’s free trade agreements (FTAs) using ag-
gregate trade data for the years 1996–2015. We estimate various specifications of a gravity model.
Our main finding is that the effects of Japan’s FTAs are not clearly observed when the gravity model is
specified with three types of fixed effects (c'est à dire., exporter-year fixed effects, importer-year fixed effects,
and country-pair fixed effects). En fait, the effects of FTAs vary substantially among trade partners and
around half of the FTAs increase Japan’s trade values. Our results also suggest that FTAs with small trade
partners tend to have large effects on Japan as well as other countries. Recently enforced FTAs, cependant,
increase Japan’s import values more rapidly.

1. Introduction

Free trade agreements (FTAs) are currently the dominant form of commercial policy. Le
pattern of trade policies in the last two decades has been characterized mainly by the pro-
liferation of FTAs. According to the Regional Trade Agreements Information System in
the World Trade Organization (WTO), the cumulative number of physical regional trade
agreements increased from 24 dans 1992 à 286 dans 2017.1

Japan started to seek trade liberalization through FTAs around 2000 and established the
first FTA with Singapore in 2001. Since then, 15 FTAs with 17 countries have been estab-
lished by August 2018.2 En outre, Japan recently signed two important multilateral trade

*

I am grateful to Sungbae An, Mateus Silva Chang, Vu Quoc Huy, Banri Ito, Hayato Kato, Fukunari
Kimura, Kozo Kiyota, and participants at the 7th Spring Meeting of the Japan Society of Interna-
tional Economics at Matsuyama University and the Asian Economic Panel at Keio University for
useful comments and suggestions.

1 See http://rtais.wto.org/UI/PublicMaintainRTAHome.aspx (last accessed 30 Août 2018).

2 See Table 1 for the list of partner countries. More detailed information is available in Ando and

Urata (2015). While most of Japan’s trade deals are economic partnership agreements, covering a
wide range of issues, we use the term FTA throughout the paper for brevity.

Asian Economic Papers 18:2

© 2019 by the Asian Economic Panel and the Massachusetts Institute of

Technologie

est ce que je:10.1162/ASEP_a_00686

je

D
o
w
n
o
un
d
e
d

F
r
o
m
h

t
t

p

:
/
/

d
je
r
e
c
t
.

m

je
t
.

/

e
d
toi
un
s
e
p
un
r
t
je
c
e
–
p
d

/

je

F
/

/

/

/

/

1
8
2
1
1
6
8
7
0
9
0
un
s
e
p
_
un
_
0
0
6
8
6
p
d

.

F

b
oui
g
toi
e
s
t

t

o
n
0
8
S
e
p
e
m
b
e
r
2
0
2
3

Heterogeneous Impacts of Free Trade Agreements: The Case of Japan

agreements, the Comprehensive and Progressive Agreement for Trans-Pacific Partner-
ship and the economic partnership agreement with the EU. Although East Asian countries
including Japan began forming FTA networks only recently, they are catching up with
Western countries and are expected to play a vital role against protectionism.

This paper investigates the trade creation effects of Japan’s FTAs. We focus on Japan for
three reasons. D'abord, despite increasing interest among policymakers, the ex post evalua-
tion of FTAs is extremely limited. No papers apply recently developed methods of analysis
to Japan’s FTAs. The gravity model, which is commonly used in ex post studies, is devel-
oping rapidly in the academic literature and is now estimated differently from the way it
was ten years ago. En outre, some recent studies show that different FTAs have very
different effects, and trade creation effects are not clearly observed in some cases. Even un-
der FTAs, Japan has not eliminated trade barriers for agricultural goods, which are heavily
protected by most favored nation (MFN) tariff rates. En outre, MFN tariff rates on man-
ufacturing goods are already low and there is little scope to reduce them further through
FTAs. It is therefore unclear whether Japan’s FTAs have increased its own trade values.
Trade creation is crucial for demonstrating the positive welfare effects of FTAs; if trade cre-
ation does not occur, a reconsideration of Japan’s trade and commercial policies would be
called for.

The second reason is that Japan provides a suitable case study for exploring the hetero-
geneous effects of FTAs in the context of the surge in regionalism and the proliferation of
bilateral trade agreements since the 1990s. European countries trade mainly among them-
selves and they established trade agreements with each other soon after World War II. Le
United States also established trade agreements with its major trading partners, Canada
and Mexico, autour 1990 by signing the Canada–U.S. Free Trade Agreement and the North
American Free Trade Agreement (NAFTA). In contrast, Japan, the world’s fourth largest
exporter and third largest economy, began negotiations of bilateral trade agreements with
the countries of ASEAN after 2000.

Enfin, Japan’s FTA partners vary substantially in terms of economic development, rang-
ing from Cambodia, Laos, and Myanmar to Australia, Singapore, and Switzerland. Le
differences in the trade creation effects across different FTAs can be attributed to the char-
acteristics of the partner countries.

The objective of this paper is to evaluate Japan’s FTAs. To this end, we first estimate
the effects of Japan’s and other countries’ FTAs using a state-of-the-art gravity model.3
We include three types of fixed effects and estimate using Poisson pseudo maximum

3 In the first stage, we estimate the crude effects of FTAs. Various kinds of related factors such as

interactions among other FTAs and the formation of production networks are included.

2

Asian Economic Papers

je

D
o
w
n
o
un
d
e
d

F
r
o
m
h

t
t

p

:
/
/

d
je
r
e
c
t
.

m

je
t
.

/

e
d
toi
un
s
e
p
un
r
t
je
c
e
–
p
d

/

je

F
/

/

/

/

/

1
8
2
1
1
6
8
7
0
9
0
un
s
e
p
_
un
_
0
0
6
8
6
p
d

.

F

b
oui
g
toi
e
s
t

t

o
n
0
8
S
e
p
e
m
b
e
r
2
0
2
3

Heterogeneous Impacts of Free Trade Agreements: The Case of Japan

likelihood (PPML).4 We estimate the gravity model using various specifications to com-
pare the coefficients for the FTA dummies. En outre, the effects of each of the FTAs are
separately identified to take heterogeneity into account. Then the estimated crude effects
of individual FTAs are regressed on some variables to explore which FTAs have larger ef-
fects. This paper therefore contributes to the literature by examining the determinants of
successful FTAs.

The structure of the paper is as follows. We briefly review the literature on the impacts
of FTAs in the next section. In Section 3, we describe the source of the data and provide a
descriptive analysis. Section 4 discusses the econometric methodology for estimating the
gravity model. Results of the estimation are presented in Section 5, followed by conclusions
in Section 6.

2. Related literature

FTAs are major instruments for promoting international trade in the 21st century. The ex
post effects of FTAs are usually estimated using a gravity model; Baier and Bergstrand
(2007) recommend the use of panel data to remove all time-invariant bilateral factors not
controlled for in the traditional specification. A similar specification is applied in Magee
(2008), although the effects of FTAs weaken when the gravity model is estimated with fixed
effects. Cipollina and Salvatici (2010) conduct a meta-analysis and robustly reject the hy-
pothesis that FTAs have no effects. Large effects are also confirmed in Eicher, Henn, et
Papageorgiou (2012).

Although the effects of FTAs have been established in many papers, Kohl (2014) notes that
the trade creation effects are heterogeneous and only about one-quarter of agreements are
actually trade-promoting.5 Heterogeneity is also studied in Baier, Yotov, and Zylkin (2019)
and Baier, Bergstrand, and Clance (2018). Zylkin (2016) examines the heterogeneous ef-
fects of FTAs, using the case of NAFTA. The differences between these papers and ours are
three-fold. D'abord, we focus on the heterogeneity of directional effects rather than agreement-
specific effects or pair-specific effects. This is because Japan’s FTAs are bilateral except
for the agreements with ASEAN (ASEAN–Japan Comprehensive Economic Partnership,
AJCEP), initially applied in December 2008 between Japan and four countries in ASEAN.
Deuxième, we compare the coefficients estimated in various specifications to consider what
is important for the evaluation. This analysis provides a good benchmark for future stud-
ies because our state-of-the-art specification is computationally burdensome. Enfin, notre

4 The roles of these fixed effects are discussed in Section 4.

5 Among the 166 agreements studied in Kohl (2014), only 44 agreements have a trade-promoting

effect.

3

Asian Economic Papers

je

D
o
w
n
o
un
d
e
d

F
r
o
m
h

t
t

p

:
/
/

d
je
r
e
c
t
.

m

je
t
.

/

e
d
toi
un
s
e
p
un
r
t
je
c
e
–
p
d

/

je

F
/

/

/

/

/

1
8
2
1
1
6
8
7
0
9
0
un
s
e
p
_
un
_
0
0
6
8
6
p
d

.

F

b
oui
g
toi
e
s
t

t

o
n
0
8
S
e
p
e
m
b
e
r
2
0
2
3

Heterogeneous Impacts of Free Trade Agreements: The Case of Japan

sample period, 1996–2015, includes recent agreements. Because Kohl (2014) finds that FTAs
signed after 1990 have smaller effects, extending the sample period is not a trivial point.

Some papers examine FTAs in Japan or East Asia.6 Ando and Urata (2011) investigate the
impact of the Japan–Mexico economic partnership agreement and find large trade-creation
effects for some products. Ando and Urata (2015) conduct a similar analysis for three of
Japan’s FTAs with Malaysia, Thaïlande, and Indonesia. Yamanouchi (2017) examines the
effects of Japan’s FTAs by using the Trade Statistics of Japan published by the Ministry
of Finance and Japan Customs. Although the effects of individual FTAs are estimated in
these papers, only Japan’s trade data are used. The trade values of Japan’s FTA partners
with third countries are not considered. Vietnam, Par exemple, is undertaking rapid liber-
alization, including WTO accession in 2007. It is therefore useful to separately identify the
effects of Japan’s FTAs with Vietnam from the effects of Vietnam’s unilateral trade liberal-
ization. Okabe (2015) explores FTAs formed by ASEAN countries and their trade partners,
so AJCEP is studied in that paper. She concludes that the impact of AJCEP is unclear. Fur-
thermore, while the effects of each of Japan’s FTAs are estimated, a country-pair dummy is
not included in the specification.

In this paper, we use world trade data to estimate the effects of Japan’s FTAs. We estimate
various specifications of a gravity model and place emphasis on the importance of estimat-
ing the effects of FTAs using the correct specification. En outre, we discuss the character-
istics of the partners with which FTAs are working well.

3. Données

The trade data used in this paper are obtained from UN Comtrade. The sample period
extends from 1996 à 2015. We first construct a large data set of 156 countries to inter-
polate missing trade values. Then the sample to estimate the gravity model is limited
à 69 des pays.

We include a country in the data set if its import data are available for more than 11 années
during the period 1996–2015. All of Japan’s FTA partners are then added regardless of data
availability. Many countries have some missing import data. We interpolate the missing
import values using the export data reported by exporters. Because import values are re-
ported as cost, insurance, and freight, and export values are reported as free on board, le

6 Some papers study the effects of FTAs in East Asia other than for Japan. Yean and Yi (2014), pour
example, explore the ASEAN–China FTA. Chia (2013, 2015) discusses the prospect of economic
integration in the region.

4

Asian Economic Papers

je

D
o
w
n
o
un
d
e
d

F
r
o
m
h

t
t

p

:
/
/

d
je
r
e
c
t
.

m

je
t
.

/

e
d
toi
un
s
e
p
un
r
t
je
c
e
–
p
d

/

je

F
/

/

/

/

/

1
8
2
1
1
6
8
7
0
9
0
un
s
e
p
_
un
_
0
0
6
8
6
p
d

.

F

b
oui
g
toi
e
s
t

t

o
n
0
8
S
e
p
e
m
b
e
r
2
0
2
3

Heterogeneous Impacts of Free Trade Agreements: The Case of Japan

gap must be estimated.7 We regress import values on a quartic of export values, a quartic
of bilateral distance (population weighted), a quartic of log of importer GDP, a quartic of
log of importer population, other gravity variables (a contingency dummy, a common colo-
nizer dummy, and a common language dummy), variables related to trade policies (a FTA
dummy, a customs union dummy, a partial scope agreement dummy, a common currency
dummy, an importer EU dummy, and an importer WTO dummy), and an exporter-year
fixed effect. We obtained these variables, other than some trade policy variables, from the
CEPII Web site, constructed by Head, Mayer, and Ries (2010) and Head and Mayer (2014).8
The information on the FTA, customs union, and partial scope agreement dummies is
obtained from the Mario Larch Regional Trade Agreements Database from Egger and
Larch (2008).9

The actual and predicted values have a high correlation coefficient of 0.92, suggesting that
the estimation is valid and the missing import values are well approximated by the corre-
sponding export values.

The sample we use in the main analysis is smaller because of computational difficulty.
We then select the countries by ranking trade values averaged over 20 années. The sample
includes Japan’s FTA partners and the countries with a ranking of export or import values
higher than 60. Our sample includes 69 countries.10

Tableau 1 shows the evolution of Japan’s exports to all countries and FTA partners. The trade
flows under FTAs are shaded. Japan’s exports to all countries were around US$ 410 milliard
dans 1996. The total export value has increased rapidly over the period 2003–08. Although
Japan’s total exports collapsed during the 2008–09 global financial crisis, they soon recov-
ered before decreasing slightly. From Table 1, it is difficult to identify the effects of Japan’s
FTAs because most of them were enforced during the expansion period, although the ex-
port values increased after the enforcement. En outre, although export values to devel-
oping countries such as Myanmar and Vietnam grew most rapidly, we must account for
the impacts of the deepening integration of the world economy.

7 In our data set, the correlation of trade values reported by importers and by exporters is 0.88, mais
the mean of the logged trade gap (the difference between log of import values and log of export
valeurs) est 0.26 and the median is 0.14.

8 The data set is available at Centre d’Etudes Prospectives et d’Informations Internationales (CEPII):
www.cepii.fr/CEPII/en/bdd_modele/presentation.asp?id=8 (last accessed 2 Septembre 2018).

9 The data set is available at www.ewf.uni-bayreuth.de/en/research/RTA-data/index.html (last

accessed 2 Septembre 2018).

10 Mongolia is included in the sample as an FTA partner of Japan; cependant, the FTA was not en-

forced in the sample period.

5

Asian Economic Papers

je

D
o
w
n
o
un
d
e
d

F
r
o
m
h

t
t

p

:
/
/

d
je
r
e
c
t
.

m

je
t
.

/

e
d
toi
un
s
e
p
un
r
t
je
c
e
–
p
d

/

je

F
/

/

/

/

/

1
8
2
1
1
6
8
7
0
9
0
un
s
e
p
_
un
_
0
0
6
8
6
p
d

.

F

b
oui
g
toi
e
s
t

t

o
n
0
8
S
e
p
e
m
b
e
r
2
0
2
3

Heterogeneous Impacts of Free Trade Agreements: The Case of Japan

5
1
0
2

4
1
0
2

3
1
0
2

2
1
0
2

1
1
0
2

0
1
0
2

9
0
0
2

8
0
0
2

7
0
0
2

6
0
0
2

5
0
0
2

4
0
0
2

3
0
0
2

2
0
0
2

1
0
0
2

0
0
0
2

9
9
9
1

8
9
9
1

7
9
9
1

7
7

2
5
4

1
7

1
2
2

2
5
1

5
5
1

1
7
1

8
4
1

4
8

7
5
4

7
8

8
4
2

4
7
1

9
9
1

4
0
1

5
8
1

7
4
4
1

4
7
1
1

4
4
5
1

4
6
0
1

9
8

6
6
1

0
2
5

0
4
4

4
4
2

8
8
1

4
6
1

3
7

8
8
1

4
2
3

5
5
4

1
5
2

6
9
1

2
8
1

5
8

5
4
4

3
9

0
6
2

0
0
2

6
2
2

0
5
1

6
2
2

5
0
6
1

3
7

7
5
9

0
9
1

4
1
2

9
7
4

6
2
3

8
2
2

9
8
1

9
9

0
6
4

4
0
1

3
7
2

2
4
2

7
6
2

2
9
1

7
4
1

5
3
8

0
6
9

1
9

8
3
2

4
9
2

5
6
5

1
4
3

0
5
2

6
0
2

0
1
1

9
2
4

1
1
1

8
0
3

6
0
2

8
2
2

1
0
2

9
8

7
7
3

1
6
8

2
9

1
2
2

5
0
3

3
1
5

8
9
2

6
3
2

6
0
2

2
0
1

1
9
3

7
0
1

7
5
3

5
8
1

9
9
1

6
7
1

7
6

6
0
2

6
4
7

6
9

7
6
1

2
9
1

8
7
3

1
1
3

3
2
2

8
8
1

8
7

7
9
2

0
8

7
6
1

2
2
1

5
1
1

2
9
1

7
9
2

9
4
5

8
1
6

6
7

6
5
1

6
4
1

5
0
3

0
1
2

1
7
1

9
4
1

8
0
1

4
2
4

1
0
1

8
3
3

3
6
1

7
7
1

2
4
2

3
6
2

4
1
5

2
8
6

3
9

3
8
1

0
4
1

6
5
3

0
9
2

9
2
2

8
9
1

0
9

5
2
4

8
9

8
0
2

6
4
1

6
7

7
2
1

9
4
1

9
5
3

2
1
5

5
9

8
3
1

3
7
1

6
6
2

8
7
1

2
0
2

0
8
1

3
8

8
9
3

0
9

4
5
1

6
2
1

4
6

0
9

4
5
1

1
2
2

9
8
3

1
0
1

7
1
1

9
5
1

6
1
2

8
2
1

4
7
1

3
6
1

0
8

0
4
3

6
8

3
3
1

7
2
1

1
8

8
7

4
2
1

6
8
1

7
3
3

1
1
1

1
1
1

3
2
1

8
6
1

1
0
1

5
7
1

1
5
1

0
8

5
7
2

8
8

4
0
1

9
0
1

1
7

8
5

0
0
1

1
9
1

4
9
2

6
0
1

6
1
1

2
0
1

5
3
1

1
8

3
6
1

2
4
1

4
6

7
9
1

4
7

4
7

9
8

9
4

9
8

4
5

3
1
2

6
4
2

9
0
1

0
0
1

6
9

3
8

6
0
1

1
4
1

9
1
1

1
6

3
4
2

4
7

6
5

2
7

1
5

2
6

7
4
1

1
7
1

7
0
2

4
0
1

3
8

8
7

7
9

3
9

5
1
1

6
0
1

7
6

0
1
2

3
7

7
5

7
6

5
5

1
5

5
4

7
6
3

0
8
1

2
9

5
9

5
7

1
8

7
9

6
0
1

3
0
1

7
9

8
6
1

9
8

3
7

4
7

3
6

8
6

0
7

3
7
2

0
9
1

1
9

2
7

0
1
1

1
0
1

0
1
1

9
1
1

7
1
1

7
7

2
3
1

0
7

6
6

9
5

4
3

1
6

2
7

3
9

6
8

2
5
1

8
0
1

9
0
1

6
1
1

8
0
1

0
1
1

1
0
1

1
7

8
1
1

9
5

4
0
1

9
4

0
5

2
7

4
5

4
8

4
8

0
2
1

6
8

0
0
1

2
1
1

1
2
1

6
0
1

4
9

7
9

6
1
1

0
9

1
1
1

8
7

7
9

0
8

0
9

9
6
1

3
1
1

4
0
1

0
0
1

4
0
1

7
9

9
0
1

6
0
1

2
0
1

)
s
r
un
je
je
o
d
S
U
n
o
je
je
je
je

m

(

0
5
9

7
3
8

,

3

2
4
8

,

3
2

5
2
2

,

9
1

4
0
5

,

8

5
4
4

,

0
2

9
4

9
3
1

6
0
1

8
0
2

,

1

8
7
5

,

7

2
1
1

,

2

1
8

0
4
4

6
8
1

,

2

9
5
8

,

7

r
e
n
t
r
un
p
UN
T
F

e
r
o
p
un
g
n
je
S

un
je
s
oui
un
je
un
M.

o
c
je
X
e
M.

d
n
un
je
je
un
h
T

un
je
s
e
n
o
d
n
je

e
je
je
h
C

je
e
n
toi
r
B

s
o
un
L

s
e
n
je
p
p

je
je
je
h
P.

d
n
un
je
r
e
z
t
je

w
S

un
je
d
o
b
m
un
C

r
un
m
n
un
oui
M.

m
un
n
t
e
je
V

un
je
je
un
r
t
s
toi
UN

un
je
d
n
je

toi
r
e
P.

4
7
1

,

0
1
4

)
s
e
je
r
t
n
toi
o
c

6
5
1
(
d
je
r
o
W

0
0
1
=
6
9
9
1
n
je

e
toi
je
un
v

t
r
o
p
X
E

6
9
9
1

t
r
o
p
X
E

s
r
e
n
t
r
un
p
UN
T
F
o
t

s
e
toi
je
un
v
t
r
o
p
X
e
s
'
n
un
p
un
J.

F
o
n
o
je
t
toi
je
o
v
E

.
1
e
je
b
un
T

je

D
o
w
n
o
un
d
e
d

F
r
o
m
h

t
t

p

:
/
/

d
je
r
e
c
t
.

m

je
t
.

/

e
d
toi
un
s
e
p
un
r
t
je
c
e
–
p
d

/

je

F
/

/

/

/

/

1
8
2
1
1
6
8
7
0
9
0
un
s
e
p
_
un
_
0
0
6
8
6
p
d

.

F

b
oui
g
toi
e
s
t

t

o
n
0
8
S
e
p
e
m
b
e
r
2
0
2
3

.
s
e
toi
je
un
v

t
r
o
p
X
e

g
n
je
d
n
o
p
s
e
r
r
o
c
m
o
r
F

d
e
t
un
je
o
p
r
e
t
n
je

e
r
un

s
e
toi
je
un
v

g
n
je
s
s
je

m
d
n
un

,
s
r
e
t
r
o
p
m

je

oui
b

d
e
t
r
o
p
e
r

oui
je
je
un
c
je
s
un
b

e
r
un

s
e
toi
je
un
v

e
d
un
r
T

.
e
d
un
r
t

m
o
C
N
U

:
e
c
r
toi
o
S

6

Asian Economic Papers

Heterogeneous Impacts of Free Trade Agreements: The Case of Japan

The evolution of Japan’s import values is like that of its export values. As shown in Table 2,
total imports almost doubled over the period 2003–08. After the collapse in 2009, import
values recovered quickly but then decreased. As for each of the FTA partners, import val-
ues have grown more rapidly than export values. Par exemple, imports from Cambodia
have increased by 147 times in the last two decades.

Dans l'ensemble, we cannot conclude from this simple analysis that FTAs have had significant ef-
fects on Japan’s international trade, although trade with some countries increased rapidly
after an FTA was enforced. Plutôt, we turn to explore the contribution of FTAs using a
correctly specified gravity model with three types of fixed effects.

4. Estimation method

In this paper, we use the standard gravity framework established by Anderson and van
Wincoop (2003), in which the bilateral trade value from country i to country j, pi jxi j, takes
the form

pi jxi j

= YiE j
Oui

(cid:3)

1-p

,

(cid:2)

ti j
(cid:2)
iPj

(1)

where Yi, E j, Oui, ti j, PJ, (cid:2)
je, and σ denote the total sales of country i, the total expenditure in
country j, the sum of the sales all over the world, bilateral iceberg trade costs from country
i to country j, an inward multilateral resistance term, an outward multilateral resistance
term, and the elasticity of substitution, respectivement.

We estimate the following equation, based on Baier and Bergstrand (2007) and Yotov et al.
(2016), corresponding to equation (1):

Tradei jt

= exp(αW FTAW
i jt

+ αJXFTAJX
i jt

+ αJMFTAJM
i jt

+ β

1CUi jt

+ β

2PSAi jt

+ β

3CommonCurrencyi jt

+ δB
i j

+ δX
it

+ δM

jt ) + ε

i jt

,

(2)

where Tradei jt is the aggregate trade value from country i to country j at year t. FTAW
a dummy variable and equal to 1 if the trading countries are included together in an FTA
and both are not Japan. FTAJX
ing countries are included together in an FTA and the exporter or importer is Japan. Le
FTA dummies are separated by partners in the estimating equation when we focus on the
heterogeneity of FTAs across partners. We interpret positive coefficients for these FTA
dummies as evidence of trade creation.11 CUi jt is equal to 1 if both countries are included

i jt are FTA dummies and equal to 1 if the trad-

i jt and FTAJM

i jt is

11 The estimated coefficients for the FTA dummies are considered to be average effects over time. Al-
though we do not explicitly consider the phase-in effects in the first stage, it is partially addressed
in the second stage.

7

Asian Economic Papers

je

D
o
w
n
o
un
d
e
d

F
r
o
m
h

t
t

p

:
/
/

d
je
r
e
c
t
.

m

je
t
.

/

e
d
toi
un
s
e
p
un
r
t
je
c
e
–
p
d

/

je

F
/

/

/

/

/

1
8
2
1
1
6
8
7
0
9
0
un
s
e
p
_
un
_
0
0
6
8
6
p
d

.

F

b
oui
g
toi
e
s
t

t

o
n
0
8
S
e
p
e
m
b
e
r
2
0
2
3

Heterogeneous Impacts of Free Trade Agreements: The Case of Japan

5
1
0
2

4
1
0
2

3
1
0
2

2
1
0
2

1
1
0
2

0
1
0
2

9
0
0
2

8
0
0
2

7
0
0
2

6
0
0
2

5
0
0
2

4
0
0
2

3
0
0
2

2
0
0
2

1
0
0
2

0
0
0
2

9
9
9
1

8
9
9
1

7
9
9
1

7
0
1

1
5
2

2
8
1

7
1
2

0
0
2

0
3
1

8
6
1

6
1
4

0
4
8

0
5
7

6
9
1

7
0
2

7
0
1

6
2
2

8
4
2

4
9
2

2
1
2

8
6
1

8
8
2

1
9
4

7
3
8

4
6
7

5
2
2

2
0
2

1
0
1

3
2
2

3
5
2

0
9
2

5
1
2

0
9
1

0
4
3

8
5
4

8
3
7

5
0
7

4
0
2

4
0
2

9
1
1

3
3
2

9
7
2

7
3
3

1
3
2

2
1
2

0
3
4

7
2
5

3
5
6

7
4
7

6
0
2

0
3
2

8
1
1

0
1
2

9
5
2

5
5
3

0
4
2

4
2
2

9
0
4

5
1
4

3
7
5

2
7
5

7
9
1

0
2
2

1
1
1

4
8
1

3
9
1

0
8
2

5
0
2

6
8
1

5
9
2

1
6
1

5
7
3

5
0
4

5
7
1

0
9
1

3
8

8
4
1

2
4
1

2
9
1

6
5
1

3
4
1

9
3
2

5
1
1

1
3
3

4
4
3

1
4
1

6
7
1

7
0
1

1
0
2

7
9
1

6
8
2

3
0
2

4
1
2

6
2
3

7
7

6
0
3

0
5
4

6
8
1

0
8
1

6
9

7
6
1

8
4
1

5
9
2

9
7
1

4
7
1

9
7
1

1
5

7
8
2

3
0
3

3
9
1

6
4
1

2
0
1

9
4
1

1
3
1

2
6
2

5
6
1

8
5
1

7
6
1

2
5

9
3
2

2
6
2

6
7
1

3
4
1

1
9

4
3
1

4
2
1

5
8
1

2
5
1

7
3
1

4
6
1

4
3

8
9
1

5
2
2

0
7
1

1
4
1

5
8

4
1
1

0
2
1

1
5
1

8
3
1

3
2
1

5
3
1

4
3

4
7
1

1
9
1

2
8
1

5
3
1

4
7

4
9

5
9

7
0
1

6
1
1

8
0
1

1
3
1

1
3

5
3
1

3
5
1

5
5
1

8
0
1

8
6

5
9

5
9

7
7

3
9

2
0
1

8
2

9
0
1

6
0
1

5
2
1

4
4
1

2
9

3
7

6
0
1

9
0
1

8
8

1
0
1

7
9

1
2
1

9
2

9
9

9
2
1

1
4
1

2
9

1
7
1

0
9
2

4
4
2

2
8
1

5
4
2

1
1
4

8
3
3

9
3
2

8
4
2

9
1
6

8
5
3

5
4
2

6
4
2

6
5
6

6
9
3

1
6
2

0
4
2

8
4
5

8
9
3

1
5
2

0
0
2

0
1
5

6
1
3

3
0
2

1
3
1

9
8
3

4
4
2

2
6
1

4
8
1

5
9
4

4
3
3

3
2
2

6
4
1

3
2
5

9
1
2

2
8
1

2
4
1

9
0
3

6
9
1

9
6
1

2
1
1

4
6
1

2
7
1

1
5
1

1
9

9
5
1

6
3
1

3
3
1

6
7

1
0
1

5
0
1

2
1
1

3
7

0
0
1

8
9

8
9

8
7

9
9

1
0
1

2
0
1

5
5
7
4
1

1
6
7
1
1

2
8
8
8

8
5
1
6

1
9
6
4

5
6
1
3

2
7
1
2

3
4
8
1

7
1
1
2

1
3
8
1

6
0
6
1

9
1
5
1

2
6
3
1

1
4
1
1

5
0
0
1

7
8

6
2
1

3
2
1

2
0
1

3
0
1

7
0
1

8
1
1

1
5

6
1
1

0
3
1

9
5
1

2
9

5
9
7

2
9

2
8

4
0
1

0
1
1

4
7

7
8

2
9

1
9

6
8

2
8

5
7

8
5

8
9

7
9

7
1
1

4
9

6
2
5

9
7

8
6

0
9

0
9

4
6

5
6

3
7

6
8

0
8

1
7

4
7

5
8

7
8

6
8

8
9

4
8

6
7

7
6

1
9

1
8

5
4
2

0
8

5
8

6
9

3
9

6
9

7
0
1

0
0
1

0
9

6
9

8
0
1

0
1
1

6
9

3
9

0
0
2

7
2
1

2
0
1

8
9

)
s
r
un
je
je
o
d
S
U
n
o
je
je
je
je

m

(

3
2
3

,

7

0
9
8

,

1

3
6
7

,

2

0
5
7

,

1
1

2
1
2

,

0
1

4
9
1

,

5
1

2
9
3

,

1

3
2

3
0
1

8
1
0

,

2

2
2
5

,

4

3
6
5

,

3

7

7
2
4

3
4
8

,

2

9
2
2

,

4
1

r
e
n
t
r
un
p
UN
T
F

e
r
o
p
un
g
n
je
S

un
je
s
oui
un
je
un
M.

o
c
je
X
e
M.

d
n
un
je
je
un
h
T

un
je
s
e
n
o
d
n
je

e
je
je
h
C

je
e
n
toi
r
B

s
o
un
L

s
e
n
je
p
p

je
je
je
h
P.

d
n
un
je
r
e
z
t
je

w
S

un
je
d
o
b
m
un
C

r
un
m
n
un
oui
M.

m
un
n
t
e
je
V

un
je
je
un
r
t
s
toi
UN

un
je
d
n
je

toi
r
e
P.

8
2
3

,

7
2
3

)
s
e
je
r
t
n
toi
o
c

6
5
1
(
d
je
r
o
W

0
0
1
=
6
9
9
1
n
je

e
toi
je
un
v

t
r
o
p
m

je

6
9
9
1

t
r
o
p
m

je

s
r
e
n
t
r
un
p
UN
T
F
o
t

s
e
toi
je
un
v
t
r
o
p
m

je

s
'
n
un
p
un
J.

F
o
n
o
je
t
toi
je
o
v
E

.
2
e
je
b
un
T

je

D
o
w
n
o
un
d
e
d

F
r
o
m
h

t
t

p

:
/
/

d
je
r
e
c
t
.

m

je
t
.

/

e
d
toi
un
s
e
p
un
r
t
je
c
e
–
p
d

/

je

F
/

/

/

/

/

1
8
2
1
1
6
8
7
0
9
0
un
s
e
p
_
un
_
0
0
6
8
6
p
d

.

F

b
oui
g
toi
e
s
t

t

o
n
0
8
S
e
p
e
m
b
e
r
2
0
2
3

.
s
e
toi
je
un
v

t
r
o
p
X
e

g
n
je
d
n
o
p
s
e
r
r
o
c
m
o
r
F

d
e
t
un
je
o
p
r
e
t
n
je

e
r
un

s
e
toi
je
un
v

g
n
je
s
s
je

m
d
n
un

,
s
r
e
t
r
o
p
m

je

oui
b

d
e
t
r
o
p
e
r

oui
je
je
un
c
je
s
un
b

e
r
un

s
e
toi
je
un
v

e
d
un
r
T

.
e
d
un
r
t

m
o
C
N
U

:
e
c
r
toi
o
S

8

Asian Economic Papers

Heterogeneous Impacts of Free Trade Agreements: The Case of Japan

in the same customs union. De la même manière, PSAi jt is a partial scope agreement dummy and
CommonCurrencyi jt is a common currency dummy. δB
i j is a country-pair fixed effect and
reflects all time-invariant factors that affect the bilateral trade values, such as distance, lan-
guage, and the historical relationship between two countries. δX
it is an exporter-year fixed
effect and reflects the production capacity of the exporter, outward multilateral resistance,
and unilateral trade policies such as WTO accession. Enfin, δM
jt is an importer-year fixed
effect and reflects the total expenditure of the importer, inward multilateral resistance, et
unilateral trade policies such as the reduction of MFN tariff rates. En outre, the combina-
tion of these two country-year fixed effects controls for the log of the levels of the bilateral
exchange rates. In all estimations, standard errors are clustered by country pair.

Équation (2) is estimated initially by ordinary least squares (OLS). Recently, cependant, le
bias of the OLS estimator has been pointed out. Santos Silva and Tenreyro (2006) show that
when a log-linearized model such as the gravity model is estimated by OLS, heteroskedas-
ticity affects both consistency and efficiency. They recommend specifying the conditional
variance as proportional to the conditional mean and estimating the log-linearized model
by PPML. Our baseline specification is therefore the estimation with three types of fixed
effects by PPML.12 We can deal with the zero trade flows problem by PPML. En outre,
the use of PPML is supported by the need to satisfy the adding up constraint (Arvis and
Shepherd 2013; Fally 2015).

To explore the role of the country-pair fixed effects, we also estimate the gravity equation
as follows:

Tradei jt

= exp(αW FTAW
i jt

+ αJXFTAJX
i jt

+ αJMFTAJM
i jt

+ β

1CUi jt

+ β

2PSAi jt

+ β

3CommonCurrencyi jt

+ c

1 ln disti j

+ c

+ c

4CommonColonizeri j

+ δX
it

+ δM

jt ) + ε

i jt

2Contiguityi j
.

+ c

3CommonLanguagei j

(3)

In this specification, log of distance, a contingency dummy, a common language dummy,
and a common colonizer dummy are added instead of the country-pair fixed effect. Com-
pared with equation (2), this specification ignores the effects of unobservable factors re-
lated to the level of bilateral trade flows. The endogeneity bias of trade policies becomes
severe if those factors are closely related to the determinants of trade policies.

We also estimate a panel version of the naïve gravity equation (Head and Mayer 2014). Dans
this specification, country-year fixed effects are dropped as follows:

12 PPML with high-dimensional fixed effects is computationally demanding. In this paper, we use
the Stata command ppml_panel_sg written by Larch et al. (2017). See their paper for the detailed
procedure.

9

Asian Economic Papers

je

D
o
w
n
o
un
d
e
d

F
r
o
m
h

t
t

p

:
/
/

d
je
r
e
c
t
.

m

je
t
.

/

e
d
toi
un
s
e
p
un
r
t
je
c
e
–
p
d

/

je

F
/

/

/

/

/

1
8
2
1
1
6
8
7
0
9
0
un
s
e
p
_
un
_
0
0
6
8
6
p
d

.

F

b
oui
g
toi
e
s
t

t

o
n
0
8
S
e
p
e
m
b
e
r
2
0
2
3

Heterogeneous Impacts of Free Trade Agreements: The Case of Japan

Tradei jt

= exp(αW FTAW
i jt

+ αJXFTAJX
i jt

+ αJMFTAJM
i jt

+ β

1CUi jt

+ β

2PSAi jt

+ β

+ λ

3CommonCurrencyi jt
+ λ

3 ln Populationit

+ λ

1 ln GDPit

+ λ

2 ln GDP jt

4 ln Population jt

+ λ

5 ln Remotenessit

+ λ

6 ln Remoteness jt

+ λ

7WTOit

+ λ

8WTO jt

+ δB
i j

+ δT

t ) + ε

i jt

,

(4)

(cid:4) (cid:5)

=

(cid:6)−1

GDPjt
disti j

j(cid:2)=i

where Remotenessit
is the inverse of the market potential function and
measures the degree of isolation from the rest of the world. Remoteness jt is defined in the
same way and it is the inverse of supply potential. Other additional explanatory variables
are log of GDP, log of population, a WTO dummy, and a year fixed effect. In this specifi-
cation, multilateral resistance terms are not included. Although the remoteness indices
are used instead, Anderson and van Wincoop (2003) and Head and Mayer (2014) criticize
their use because the indices do not have a solid theoretical foundation. En outre, le
coefficients for the FTA dummies are biased if FTAs enter into force simultaneously with
unilateral trade liberalization other than WTO accession.

5. Estimation results

Dans cette section, we provide the estimation results of equations (2)–(4). We first estimate the
average treatment effects of all FTAs. Japan’s FTAs are then separated from the other FTAs.
We further decompose the effects of Japan’s FTAs by partner countries. Individual FTAs all
over the world are also investigated to explore the determinants of successful FTAs.

5.1 Trade creation effects of all FTAs
Before estimating the effects of Japan’s FTAs, we first estimate the effects of all FTAs.
We start with the results of the traditional gravity specification (equation [4]) by OLS.
As reported in column (1) of Table 3, the coefficients for the FTA dummy and the cus-
toms union dummy are both positive and statistically significant. The coefficients for the
other gravity variables are also consistent with the standard gravity model estimates in
previous studies.

We also estimate equation (3) and report the results in column (2). Although the coefficient
for the FTA dummy is significantly positive, it has halved in value. This implies that FTAs
are more likely to be signed between country pairs with high ex ante trade values, condi-
tional on gravity variables. This is the opposite result to that of Baier and Bergstrand (2007),
but it is qualitatively consistent with Magee (2008). The coefficient for the customs union
dummy increases. Dans l'ensemble, the coefficients for the other country-year variables are positive
and statistically significant as expected.

10

Asian Economic Papers

je

D
o
w
n
o
un
d
e
d

F
r
o
m
h

t
t

p

:
/
/

d
je
r
e
c
t
.

m

je
t
.

/

e
d
toi
un
s
e
p
un
r
t
je
c
e
–
p
d

/

je

F
/

/

/

/

/

1
8
2
1
1
6
8
7
0
9
0
un
s
e
p
_
un
_
0
0
6
8
6
p
d

.

F

b
oui
g
toi
e
s
t

t

o
n
0
8
S
e
p
e
m
b
e
r
2
0
2
3

Heterogeneous Impacts of Free Trade Agreements: The Case of Japan

Tableau 3. Estimation results for overall FTAs

(1)
OLS

0.367***
(5.856)
0.238**
(2.363)
0.0181
(0.231)
−0.584***
(−6.059)
−1.108***

(−27.46)

0.612***
(4.019)
0.635***
(5.358)
0.509***
(6.936)

Variables

FTA

CU

PSA

Common currency

ln(Distance)

Contiguity

Common colonizer

Common language

Exporter ln(PIB)

Importer ln(PIB)

Exporter ln(Population)

Importer ln(Population)

Exporter ln(Remoteness)

Importer ln(Remoteness)

Exporter WTO

Importer WTO

91,267
Observations
Oui
Exporter-year fixed effects
Importer-year fixed effects
Oui
Exporter-importer fixed effects No

(2)
OLS

0.202***
(6.216)
0.561***
(9.950)
0.0768
(0.989)
−0.139***
(−4.521)

0.0710***
(7.134)
0.218***

(16.61)

1.448***

(12.86)

0.555***
(7.393)
0.233**
(2.035)
−0.0708
(−0.601)
0.594***

(12.65)

0.465***

(10.33)
91,262
Non
Non
Oui

(3)
OLS

(4)
PPML

(5)
PPML

0.118***
(3.266)
0.292***
(4.390)
0.0663
(0.837)
−0.00833
(−0.209)

0.374***
(5.655)
0.656***
(6.536)
−0.154
(−1.431)
−0.122
(−1.590)
−0.669***

(−17.48)

0.353**
(2.257)
0.407***
(6.170)
0.122*
(1.938)

91,262
Oui
Oui
Oui

93,840
Oui
Oui
Non

0.104**
(2.051)
0.448***
(6.739)
0.0993
(1.631)
0.0302
(0.907)

0.268***
(3.145)
0.740***

(23.22)

0.698***
(5.788)
0.0680
(0.611)
0.746***
(5.415)
−0.119
(−0.898)
0.366***
(5.632)
0.226***
(4.945)

93,760
Non
Non
Oui

(6)
PPML
−0.00703
(−0.127)
0.0606
(0.786)
−0.000895
(−0.0207)
−0.0386
(−1.251)

(7)
PPML
w/o zero
−0.00786
(−0.142)
0.0535
(0.688)
−0.00176
(−0.0407)
−0.0396
(−1.284)

je

D
o
w
n
o
un
d
e
d

F
r
o
m
h

t
t

p

:
/
/

d
je
r
e
c
t
.

m

je
t
.

/

e
d
toi
un
s
e
p
un
r
t
je
c
e
–
p
d

/

je

F
/

93,760
Oui
Oui
Oui

91,262
Oui
Oui
Oui

Source: Author’s calculations.
Note: Robust t-statistics in parentheses. CU = customs union dummy; FTA = free trade agreement dummy; PSA = partial scope agreement
dummy. ***Statistically significant at the 1 percent level; **statistically significant at the 5 percent level; *statistically significant at the 10

percent level.

Column (3) of Table 3 shows the estimation results with all three types of fixed effects.
Encore, although the coefficient for the FTA dummy is positive and statistically significant,
it has decreased compared with columns (1) et (2). This result implies that the role of
trade policies is overestimated when the gravity model is specified with all three types of
fixed effects.

The results of the estimations by PPML are almost the same as those by OLS. As reported
in columns (4)–(6), the coefficients for the FTA dummies and the customs union dummies
are positive and statistically significant. One notable difference between the results of OLS
and PPML is that when three types of fixed effects are included, the coefficients for the FTA

11

Asian Economic Papers

/

/

/

/

1
8
2
1
1
6
8
7
0
9
0
un
s
e
p
_
un
_
0
0
6
8
6
p
d

.

F

b
oui
g
toi
e
s
t

t

o
n
0
8
S
e
p
e
m
b
e
r
2
0
2
3

Heterogeneous Impacts of Free Trade Agreements: The Case of Japan

Tableau 4. Estimation results for Japan’s FTAs and others

Variables

Japan’s FTA (export)

Japan’s FTA (import)

Other FTA

Observations
Exporter-year fixed effects
Importer-year fixed effects
Exporter-importer fixed effects

(1)
OLS

0.672***
(3.636)
0.760
(1.615)
0.397***
(6.164)
91,267
Oui
Oui
Non

(2)
OLS
−0.191*
(−1.758)
−0.0525
(−0.513)
0.154***
(4.789)

91,262
Non
Non
Oui

(3)
OLS

0.178
(1.583)
0.106
(0.808)
0.0517
(1.437)
91,262
Oui
Oui
Oui

(4)
PPML

0.504***
(3.245)
0.423*
(1.821)
0.296***
(4.267)
93,840
Oui
Oui
Non

(5)
PPML
−0.00362
(−0.0249)
0.173**
(2.516)
0.0738
(1.430)

93,760
Non
Non
Oui

(6)
PPML

0.0672
(0.781)
0.0864
(1.312)
−0.0439
(−0.684)
93,760
Oui
Oui
Oui

(7)
PPML
w/o zero

0.0667
(0.775)
0.0855
(1.296)
−0.0460
(−0.716)
91,262
Oui
Oui
Oui

Source: Author’s calculations.
Note: Robust t-statistics in parentheses. OLS = ordinary least squares; PPML = Poisson pseudo maximum likelihood. ***Statistically significant
à la 1 percent level; **statistically significant at the 5 percent level; *statistically significant at the 10 percent level.

dummies and the customs union dummies decrease to almost zero, which means that these
trade policies have no trade creation effects on average.

A potential reason for the lack of significant effects is our choice of the sample period. Baier
and Bergstrand (2007) and Magee (2008), Par exemple, use the sample periods: 1960–2000
and 1980–98, respectivement. The coefficient for the FTA dummy in the present paper reflects
the impacts of only recently signed FTAs because the trade creation effects of FTAs en-
forced before 1996 are absorbed into the country-pair fixed effect. Kohl (2014) points out
that FTAs enforced after the 1990s performed poorly.

5.2 Trade creation effects of Japan’s FTAs
We next turn to the trade creation effects of Japan’s FTAs. Tableau 4 shows the results of es-
timation, in which the effects of Japan’s FTAs are separated from those of others. Other
covariates are included in the estimation, but not reported in the table to save space. Comme
reported in column (1) of Table 4, the coefficients for Japan’s FTA dummies are positive
and statistically significant for exports and positive and slightly insignificant for imports
when the country-year fixed effects are included but the country-pair fixed effects are not.
Although the results change when the country-pair fixed effects are included in the regres-
sion, the point estimates are still large in the estimation with three types of fixed effects. Dans
addition, this result holds when the gravity model is estimated by PPML. As reported in
column (6), the point estimates of the coefficients for Japan’s FTA dummies are 0.067 pour
exports and 0.086 for imports, but they are not statistically significant.

Dans l'ensemble, Japan’s FTAs do not appear to have positive effects on trade values when the
model is correctly specified. Although the coefficients are statistically insignificant, le
point estimates are not small. These results weakly suggest that the effects of Japan’s FTAs
are heterogeneous.

12

Asian Economic Papers

je

D
o
w
n
o
un
d
e
d

F
r
o
m
h

t
t

p

:
/
/

d
je
r
e
c
t
.

m

je
t
.

/

e
d
toi
un
s
e
p
un
r
t
je
c
e
–
p
d

/

je

F
/

/

/

/

/

1
8
2
1
1
6
8
7
0
9
0
un
s
e
p
_
un
_
0
0
6
8
6
p
d

.

F

b
oui
g
toi
e
s
t

t

o
n
0
8
S
e
p
e
m
b
e
r
2
0
2
3

Heterogeneous Impacts of Free Trade Agreements: The Case of Japan

5.3 Trade creation effects of Japan’s individual FTAs
The results of the previous subsection suggest that some of Japan’s FTAs are working well,
but others are not. To examine this point further, we decompose the effects of Japan’s FTAs
by partner countries.

Tableau 5 presents the coefficients for Japan’s FTA dummies. We regard column (4), lequel
includes three types of fixed effects and estimates by PPML, as the most reliable result.13
We also add the results from other studies, Ando and Urata (2015) and Yamanouchi (2017),
in columns (5) et (6). Based on column (4), the export values from Japan to Australia,
Chili, India, Indonésie, Mexico, Myanmar, Thaïlande, and Vietnam are positively affected
by the FTAs with these countries. The FTA with Myanmar (AJCEP) has the largest effect
and it increased Japan’s exports to Myanmar by exp(0.517) − 1 = 67.7 pour cent. Ce résultat
is surprising because Myanmar’s tariff rates were not lowered in the sample period under
AJCEP. Donc, this implies that removing nontariff barriers is crucial for trade creation.
In contrast, FTAs with Brunei, Cambodia, Laos, Peru, the Philippines, and Switzerland
have no significant effects on Japan’s exports. The coefficients for FTAs with Malaysia and
Singapore are negative and statistically significant.

Import values, cependant, increased significantly because of FTAs with Australia, Brunei,
Cambodia, Laos, Malaisie, Myanmar, and the Philippines. The coefficients are statistically
insignificant for the other FTAs. The largest effect on imports is also observed for the FTA
with Myanmar.

We also check the symmetry of the trade creation effects using a joint test of the hypothesis
that all pairs of coefficients are equal for exports and imports. The chi-square statistic is
103.1 and the hypothesis is clearly rejected.

je

D
o
w
n
o
un
d
e
d

F
r
o
m
h

t
t

p

:
/
/

d
je
r
e
c
t
.

m

je
t
.

/

e
d
toi
un
s
e
p
un
r
t
je
c
e
–
p
d

/

je

F
/

/

/

/

/

1
8
2
1
1
6
8
7
0
9
0
un
s
e
p
_
un
_
0
0
6
8
6
p
d

.

Tables 6 et 7 present the matrices of the root mean square differences between the coef-
ficients for the FTA dummies across specifications. Tableau 6 shows the root mean square
differences of the coefficients for Japan’s exports to its FTA partners. The coefficients in our
baseline specification (column [6]) differ little from those estimated without country-year
dummies. The choice of estimator does not matter much. Cependant, the specifications with-
out the country-pair dummies (columns [1] et [4]) show very different coefficients. Tableau
7 shows the same matrix for Japan’s imports. The results are like the case of exports, et
misspecification is problematic if the country-pair fixed effects are excluded from the es-
timation. If the country-pair fixed effects are not included, the trade creation effects of the
FTAs are overestimated because of endogeneity.

F

b
oui
g
toi
e
s
t

t

o
n
0
8
S
e
p
e
m
b
e
r
2
0
2
3

13 As robustness checks, we also estimate the model (1) without zero trade values, (2) without inter-

polated values, (3) limiting the sample to impose one-year intervals, et (4) including pair-specific
linear trends. The results do not change substantially.

13

Asian Economic Papers

Heterogeneous Impacts of Free Trade Agreements: The Case of Japan

t
r
o
p
m

je

)
7
1
0
2
(

L
M.
P.
P.

t
r
o
p
X
E

je
h
c
toi
o
n
un
m
un
Oui

)
6
(

*
*
*
0
7
3
.
0

9
2
4
0
.
0
−

*
*
*
3
1
4
.
0

*
*
*
4
1
1
.
0

*
*
9
0
1
.
0

*
*
*
5
9
5
.
0

*
*
1
0
2
.
0
−

2
2
1
0
.
0

*
*
*
8
0
1
.
1

*
*
*
0
6
5
.
0

5
1
5
0
.
0
−

*
*
*
0
2
2
.
0
−

*
*
1
4
1
.
0

*
*
*
8
9
4
.
0

*
*
*
9
6
3
.
0
−

*
*
*
1
8
1
.
0
−

*
*
*
7
0
4
.
0
−

*
*
*
5
8
4
.
0
−

d
n
un

o
d
n
UN

)
5
(

)
5
1
0
2
(

un
t
un
r
U

S
L
Ô

t
r
o
p
m

je

t
r
o
p
X
E

t
r
o
p
m

je

3
3
5
0
.
0

)
8
7
5

.
0
(

*
*
*
3
9
5
.
0

)
6
5
5
.
4
(

*
*
*
3
0
3

.
0
−

)
6
5
8
.
2
−

(

6
0
1
.
0
−

)
0
1
7
.
0
−

(

*
*
0
9
1
.
0

*
*
*
7
2
6
.
0

*
*
*
0
1
6
.
0

)
5
2
0
.
3
(

)
8
0
0
.
2
(

)
2
5
2
.
3
(

5
5
1
.
0

)
3
0
6
.
1
(

6
4
2
0
.
0
−

)
3
2
3
.
0
−

9
2
1
0
.
0
−

)
3
1
2
.
0
−

(

(

*
*
*
4
6
2
.
0

)
4
4
8

.
2
(

*
*
*
8
2
6
.
0

)
0
0
8
.
4
(

2
6
2
0
.
0
−

)
1
0
3
.
0
−

(

8
4
1
.
0
−

)
1
0
2
.
1
−

(

*
*
*
4
9
5
.
0

*
*
*
4
0
3
.
0

)
0
5
6
.
2
(

)
9
9
5
.
3
(

0
1
8
0
0
.
0

*
*
*
9
7
6
.
0

)
8
2
1
.
0
(

*
*
8
2
1
.
0

*
*
*
1
9
3
.
0

4
4
8
0
.
0

8
4
2
0
.
0
−

4
6
6
0
.
0

*
*
*
5
7
1
.
0

*
*
*
2
8
1
.
0

8
0
9
,
1

s
e
Oui

o
N

s
e
Oui

8
0
9
,
1

s
e
Oui

o
N

s
e
Oui

)
2
1
6

.
0
(

1
6
7
0

.
0
−

)
4
2
8
.
0
−

(

5
4
8
0
.
0

)
9
9
7

.
0
(

0
6
3

s
e
Oui

o
N

s
e
Oui

*
*
*
0
0
4
.
0
−

)
2
2
8
.
3
−

(

8
1
1

)
7
5
8

.
0
−

.
0
−

(

)
4
6
4
.
1
−

3
6
8
0
.
0
−

)
5
4
4
.
0
−

6
1
2
.
0
−

(

(

*
*
*
4
1
9
.
0

)
4
0
7
.
4
(

6
6
3
0
.
0

)
1
8
2
.
0
(

9
3
2
.
0

)
9
9
5
.
1
(

0
6
3

s
e
Oui

o
N

s
e
Oui

)
4
3
7
.
2
(

8
0
1
0
.
0
−

)
2
0
9
0
.
0
−

(

*
9
9
1
.
0

)
1
4
8
.
1
(

8
3
1
.
0
−

)
4
8
8
.
0
−

(

1
3
1
0
0
.
0
−

)
9
3
1
0
.
0
−

(

6
6
3
0
.
0

)
4
4
4
.
0
(

3
5
1
.
0
−

)
7
7
1
.
1
−

(

*
*
3
5
1
.
0

)
5
3
1
.
2
(

8
0
1
.
0

)
9
1
1
.
1
(

0
7
5
0
.
0

)
0
7
4
.
0
(

*
*
*
7
9
3
.
0

*
*
0
7
1
.
0

)
8
2
7
.
2
(

)
1
1
5
.
2
(

*
*
5
6
2
.
0

L
M.
P.
P.

t
r
o
p
X
E

)
4
(

)
1
6
5
.
2
(

)
7
9
0
.
1
−

*
*
8
7
1
.
0
−

)
0
9
4
.
2
−

1
5
1
.
0
−

(

(

*
*
*
8
2
4
.
0

*
*
*
7
1
5
.
0

)
7
6
5
.
4
(

)
6
7
7
.
3
(

1
5
2
0
.
0

*
*
*
9
3
1
.
0

*
*
*
7
5
5
.
0

)
2
4
4
.
3
(

*
*
*
5
4
2
.
1

)
2
1
.
6
1
(

)
2
4
.
1
3
(

*
*
*
9
6
3
.
0

*
*
*
0
3
3
.
0

)
1
8
4
.
9
(

t
r
o
p
m

je

9
2
3
0
0
0
.
0
−

)
9
9
6
0
0
.
0
−

(

)
8
6
1
.
9
(

*
*
*
1
6
1
.
1

)
6
6
.
2
2
(

*
*
*
1
3
2
.
0

*
*
*
4
1
2
.
0

*
*
*
0
3
5
.
0

*
*
*
1
4
3
.
0

)
8
6
4
.
5
(

)
0
8
6
.
3
(

)
6
8
3
.
6
(

1
0
4
0
.
0

)
6
9
8
.
0
(

5
8
6
0
.
0

)
0
0
6
.
1
(

*
*
*
4
3
1
.
0

*
*
*
2
6
4
.
0

)
9
0
8
.
2
(

*
*
*
9
6
4
.
0

)
5
8
.
0
1
(

)
4
2
.
1
1
(

*
*
*
2
0
3
.
0

L
M.
P.
P.

t
r
o
p
X
E

)
3
(

)
3
6
4
.
6
(

*
*
*
0
8
1
.
0
−

)
4
7
2
.
3
−

(

*
*
*
2
5
4
.
0
−

)
8
7
9
.
8
−

(

*
*
*
4
3
5
.
0

)
4
8
.
2
1
(

8
8
5
0
.
0

)
4
7
0
.
1
(

*
*
*
5
8
1
.
0

)
5
2
2
.
0
(

4
4
1
.
0
−

)
3
8
5
.
1
−

(

*
*
*
7
0
3
.
0
−

)
2
7
2
.
4
−

(

)
5
3
0
.
9
(

*
*
*
8
5
1
.
0
−

*
*
*
2
0
2
.
0
−

)
3
9
9
.
4
−

(

)
6
5
5
.
4
−

(

)
0
3
4
.
4
(

*
*
*
6
1
7
.
0
−

*
*
*
6
8
4
.
0
−

)
1
4
3
.
9
−

(

)
1
7
.
5
1
−

(

*
*
*
9
6
4
.
1

*
*
*
3
7
4
.
2

)
8
5
6
.
3
(

t
r
o
p
m

je

)
7
8
1
.
6
(

3
7
6
0
.
0
−

)
2
9
1
.
0
−

(

*
*
*
1
1
7
.
0

)
2
2
3
.
5
(

*
*
0
3
7
.
0
−

)
4
9
9
.
1
−

(

)
0
7
2
.
3
(

*
*
*
9
9
7
.
0
−

)
2
7
5
.
3
−

(

1
1
2
.
0

*
*
2
3
6
.
0

)
7
4
5
.
0
(

)
2
8
1
.
2
(

*
3
3
4
.
0

)
8
5
9
.
1
(

*
8
4
3
.
0
−

)
5
0
7
.
1
−

(

0
9
9
0
.
0

)
9
1
9
.
0
(

*
*
*
1
1
2
.
0

)
3
9
3
.
3
(

*
9
0
2
.
0

)
6
5
8
.
1
(

0
6
7
,
3
9

s
e
Oui

s
e
Oui

s
e
Oui

*
*
*
7
3
1
.
0

*
*
*
5
9
2
.
0

*
*
*
1
5
5
.
0

)
0
8
9
.
7
(

)
5
1
6
.
2
(

)
4
5
.
0
1
(

*
*
*
1
5
2
.
0

*
*
*
8
0
2
.
0

*
*
*
1
2
3
.
0

)
4
2
1
.
4
(

)
3
9
3
.
6
(

)
2
0
8
.
5
(

*
*
*
6
0
5
.
0

*
1
7
4
.
0

)
5
4
9
.
1
(

*
*
8
9
5
.
0

)
2
6
7
.
2
(

)
6
3
4
.
2
(

0
6
7
,
3
9

o
N

o
N

s
e
Oui

)
3
9
3
.
4
(

*
*
*
9
3
6
.
0
−

)
0
8
6
.
2
−

(

)
4
9
0

.

1
(

*
*
*
1
3
6

.

)
7
4
3

.

0
−

3
−

(

*
*
*
3
9
9
.
0

*
*
*
5
8
5

.

0

3
4
3
0

.

*
*
*
0
5
3
.
1

7
4
1

.

0

2
3
1

.

0

*
*
2
1
3

.

0

)
5
1
4

.

2
(

8
8
1

.

0

*
*
*
0
5
3

.

0

*
*
*
3
0
8

.

0

)
2
5
3

.

3
(

)
1
5
9

.

0
(

*
*
1
9
4

.

)
6
2
2

.

0
−

2
−

(

)
7
9
5

.

3
(

5
4
2

.

)
5
9
5

.

0
−

1
−

(

L
M.
P.
P.

t
r
o
p
X
E

)
2
(

t
r
o
p
m

je

t
r
o
p
X
E

S
L
Ô

)
1
(

)
5
8
3

.

4
(

4
3
6

.

)
2
9
1

.

0
−

1
−

(

*
*
*
6
9
7

.

0

*
*
*
1
6
3

.

0

)
7
8
3

.

6
(

*
*
5
1
5

.

0

)
2
1
0

.

3
(

)
4
3
3

.

2
(

2
2
5
0

.

0

)
6
5
3