JETRO Global Trade and Investment Report 2018: Global Economy Connected via Digitalization



Japan External Trade Organiztion

Global trade

■ In 2017, world trade (trade in goods, nominal export value) increased by 10.5% to $17.3 trillion (JETRO estimate) compared with the previous year and saw positive growth for the first time in three years. In particular, growth in commodity-related products, reflecting an increase in prices, and growth in semiconductor-related products resulted in remarkable increases. The trade volume (export basis) also increased by 4.5%. Both the value and volume of world trade showed its highest growth since 2011.

■ In the first quarter of 2018, the trade value of goods (from 34 major economies) increased by double digits, at 13.3% for exports and 14.6% for imports over the same period the previous year. A chain of restrictive measures on trade, however, has raised concerns of a downside risk.

■ In 2017, Japan’s export amounted to $697.2 billion, up 8.2%, while imports also increased by 10.5% to $671.0 billion from the previous year. This remarkable growth trend resulted in increasing the trade surplus ($26.3 billion) for the second consecutive year. Exports of general machinery such as semiconductor manufacturing equipment were especially strong, with the recovery of global investment.

Foreign direct investment (FDI)

■ Japan’s outward FDI in 2017 decreased by 3.0% from the previous year to $168.6 billion (on a balance of payment basis, net, flow). This shows a slight decrease from its peak in 2016, but it still remains the second highest level on record. There are signs of re-expansion of previously stagnant business by Japanese firms in China.

■ Looking at the share of world outward FDI stock by country/region, it is observed that the presence of emerging and developing economies, especially China, as investment sources is increasing year by year. There is rising concern regarding corporate acquisitions in Europe and North America by Chinese enterprises, while the Chinese government is also strengthening control over outward investment. Asian companies, such as those of China, are expanding their presence in investment in Japan, such as capital participation or the sharing business. 3 Copyright (C) 2018 JETRO. All rights reserved.

World trade policies

■ While the pace of FTAs going into force around the world has declined, two major FTAs that will have a significant economic impact, the EU-Japan EPA and TPP 11, are coming into effect. As Japan pays tariffs of about $2.6 billion per year in exports to the EU (JETRO estimate), there are expectations for the reduction of tariff costs.

■ The total number of anti-dumping investigations initiated by all World Trade Organization (WTO) members remains at a high level. In addition to the extensive application of the conventional trade remedies such as anti-dumping measures, the trade policy implemented by the US includes unilateral measures based on domestic law. The existence of the multilateral trade system which shares a common foundation with the rules of WTO has been shaken.

Topics: Global economy connected via digitalization

■ Within global digital trade, cross-border e-commerce and data flows grew more remarkably than goods and services. “Digital-related trade in goods” (export basis, JETRO estimate) accounted for 17.0% ($2.95 trillion, 2017) of the world’s total trade, and in recent years, old digital-related goods are giving way to the new. While the overall presence of Japan in the export of digital-related goods worldwide is declining, Japan has maintained the world’s largest share of exports of semiconductor manufacturing equipment and industrial robots since 2007.

■ Global cross-border greenfield investment and cross-border M&A transactions by digital-related companies are increasing. While the US occupies the largest share (based on the number of projects/deals) in both cases, the share of emerging and developing countries which are proactively developing business outside of their borders, such as China, is expanding.

■ The United States, which is home to the world’s major digital companies, has promoted the liberalization of digital trade through FTAs. Meanwhile, the EU is proactively promoting the formation of digital-related rules even in non-trade fields such as competition policy and tax reform. And China is imposing stringent domestic restrictions on foreign capital investment. These facts demonstrate how digital trade policy differs in each country. Under these circumstances, exploratory work toward starting discussions on e-commerce by like-minded countries has been launched in the WTO and is drawing attention as an indication of the significance of multilateral rule formation for trade.

JETRO 2018


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Copyright © 2019 Japan External Trade Organization. All rights reserved.