Hiro Lee is currently Professor of Economics at the Osaka School of International Public Policy, Osaka University. He has worked extensively in quantitative analysis of international trade and development, and is currently working on “Quantitative Assessments of Japan’s agricultural policy reforms and its participation in the Trans-Pacific Partnership” using a dynamic applied general equilibrium model. His studies have been published in a variety of books and journals, including Cambridge University Press, Palgrave Macmillan, World Scientific, the Journal of Development Economics, and The World Economy.
The primary strategic challenge for trade policy makers is managing a continuously shifting pattern of trading opportunities. During the last four decades, commodity trade between the United States and Japan has evolved in response to shifting comparative advantage. As the U.S. ceded international market share in manufactures, bilateral commodity trade during this period has shifted decisively in favor of Japan. This led to unprecedented trade imbalances in the 1980s and sharply rising protectionist sentiment in the U.S. Corresponding to Japan's cumulative trade surpluses, however, is a huge outflow of capital services, with the U.S. being its principal beneficiary. In this study, a calibrated general equilibrium model is used to evaluate more liberalized bilateral trade in both commodities and factor services. We argue that more cooperative trade strategies exist which can serve domestic policy agendas and raise living standards in both countries.