An Economic Assessment of the EU–Japan Economic Partnership Agreement with Realistic Preference Utilization Rates

Abstract Recent years have seen an increased focus on the implementation of Preferential Trade Agreements (PTAs). While the number of PTAs has risen remarkably since early 2000, data on the utilization of preferential tariffs under these agreements point out that some businesses have not gained access to all the benefits that PTAs can provide. When utilization rates are low, the impact of the agreement will likely differ from what was anticipated by ex-ante economic research. This paper conducts a dynamic Computable General Equilibrium (CGE) analysis of the expected impact of the EU–Japan Economic Partnership Agreement and compares a scenario that includes realistic preference utilization data with a standard scenario where all tariff liberalization is assumed to be fully utilized by businesses. The results show considerable differences between the two scenarios and illustrate the need to make the inclusion of credible utilization data standard practice in the modelling of international trade.