Japan
Report by the WTO Secretariat
Since Japan’s previous Trade Policy Review in 2011 there has been little change in its trade and related policies. Nonetheless the simple average MFN applied tariff rate has increased due partly to a rise in the average ad valorem equivalents of non-ad valorem duties. Also Japan has adopted more international standards.
The Rise of the People’s Republic of China and Its Competition Effects on Innovation in Japan
As a reaction to import competition from low-wage economies firms in developed economies would respond by upgrading their innovative activities leading to so-called defensive skill-biased innovation. In this chapter we examine this “defensive innovation” hypothesis which was first discussed in Wood (1994) and subsequently formalized in Thoenig and Verdier (2003). In a broader context the effect of competition on the rate of innovation has been one of the most studied areas in the literature (e.g. Aghion et al. 2005). In the study most relevant to our work Bloom Draca and Van Reenen (2016) found that a large sample of European firms increased a wide range of their innovative activities (patenting research and development [R&D] expenditures computer use and total factor productivity growth) driven by intensified competition from the People’s Republic of China. This innovation was conducted within-firm.
Introduction
The Trade Policy Review Mechanism (TPRM) was first established on a trial basis by the GATT contracting parties in April 1989. The Mechanism became a permanent feature of the World Trade Organization under the Marrakesh Agreement which established the WTO in January 1995.