This paper investigates the trade restrictiveness of product-specific rules of origin (PSRs) in the comprehensive sets of free trade agreements (FTAs) for Japan and the United States, focusing on their similarities and dissimilarities. The most distinctive dissimilarities are the major PSR types and their variation among FTAs. Japan's FTAs use the selective type (“change in tariff classification [CTC] or regional value content [RVC]”) most intensively. In contrast, a few U.S. FTAs use RVC and others use CTC most intensively, and the distribution of simplified PSR types appears to be almost the same among FTAs in each group. The detailed PSR types, however, are likely to be more heterogeneous and complicated in U.S. FTAs than in Japan's FTAs. Such dissimilar features are more salient in machinery sectors with dense global value chains (GVCs)/international production networks (IPNs). The quantitative estimates suggest that the selective types utilized by Japan for most machinery products are much less trade-restrictive, while certain complicated types adopted by the United States for many machinery products are substantially trade-restrictive. Our detailed investigation revealed the two countries’ contrasting strategies, namely, Japan appears to aggressively utilize FTAs with less restrictive PSRs to enhance GVCs/IPNs, while the United States tends to make PSRs more restrictive and complicated in detail as a sort of disguised protection tool.

This paper provides empirical evidence that supports the continuing importance of machinery international production networks (IPNs) in East Asia. We first confirm their robustness and resilience, even during the coronavirus disease (COVID-19) pandemic, as well as the significance of East Asian countries as suppliers of machinery final products and parts and components for the world. Then, we demonstrate how deeply East Asian countries are committed to machinery IPNs by applying a gravity equation to pre-pandemic bilateral machinery trade and comparing actual values with fitted values of the estimated equation. The gravity estimation exercise indicates that machinery trade is basically regional—within Factory Asia, Factory North America, and Factory Europe—but Factory Asia also has strong inter-regional linkages. It also verifies that ASEAN has played an important role in Factory Asia, going far beyond the gravity prediction, for the development of machinery IPNs.

This paper investigates the trade creation effects of Japan's free trade agreements (FTAs) using aggregate 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 (i.e., exporter-year fixed effects, importer-year fixed effects, and country-pair fixed effects). In fact, 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, however, increase Japan's import values more rapidly.