Title: Benefits for Bystanders? Effects of the Japan-South Korea and the US-China Trade Dispute for Japan (2018-2020)
Stream: International Economics
Presentation Type: Virtual Presentation
Franziska Schultz, Temple University, Japan Campus, Japan
The Japan-South Korea and the US-China trade dispute since 2018 involve Japan’s three top trading partners. Japan has experienced economic spillovers from both disputes. This paper provides a comparative analysis of direct and indirect economic spillovers for Japan from the two disputes. It argues that the Japan-Korea dispute caused economic losses, while the US-China dispute entailed economic losses and benefits for Japan. This exemplary study allows general conclusions about potential economic risks of trade disputes for participants and bystanders. Direct effects included declining Japanese exports to China, the US and South Korea. The Japan-South Korea dispute caused export delays and declining tourist numbers. US tariffs on China proved detrimental for Japanese sectors with US exposure, others benefited from less Japan-China competition on the US market. Effects remained short-term and limited to specific industries, but as the disputes are expected to continue, they pose economic risks for Japan. As an indirect effect, the spillovers motivated a two-fold strategy of Japanese economic statecraft since 2018, including expressive bargaining behavior without spillovers, and increased multilateral economic cooperation to mitigate them. Japanese export restrictions 2019 exemplify expressive bargaining behavior, political signals implying prolonged procedures for exports rather than export preventions. Increased commitment to multilateralism included Japan signing the 2018 CPTPP and 2020 RCEP trade agreement. The analysis draws on theoretical findings by Kapstein and Baldwin (2020), Kawashima (2019), Sun (2019), and documents by MOF, IMF and others.
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