Free Trade Agreement between the EAEU/Russia and Japan: soes it Make Sense?

Abstract

Despite rising protectionist trends, the number of free trade agreements (FTAs) continues to grow worldwide. The countries of the Eurasian economic Union (EAEU) also do not remain aloof from these processes. Feasibility studies of signing such agreements with various partner countries are underway in the Eurasian Economic Commission. This article discusses the likely effects of the FTA with Japan. A review of the structure and trends of mutual trade is done. The analysis reveals the statistical and logical relationship between the dynamics of trade in goods between Russia and Japan and oil prices, as well as the impact of such factors as the devaluation of the Russian ruble, the increase in duties on the import of used cars, WTO accession and sanctions. The article assesses the possible quantitative effects of liberalization of trade in goods between the EAEU countries (primarily Russia) and Japan. We use the partial equilibrium model SMART (from the WITS toolkit) and calculations for the budget loss of zeroing of import duties. The structural asymmetry of mutual trade and the likely effects of its liberalization on business and budgets of the participating countries is shown. The probable impact of the FTA on the automotive sector in the Russian Federation are considered separately.