1JETRO Global Trade and Investment Report 2019
The fluctuating international economic order and global
business in the future
Key points
July 30, 2019Japan External Trade Organization(JETRO)
Overseas Research Department

2

Contents
Chapter 1: World trade and Japan’s Trade
Section 1: Current state of the world economy
Section 2: World trade
Section 3: Japan’s trade
Section 4: Impact of trade protectionism

3
4
6
10
13

Chapter 2: Global FDI and Japan’s FDI
Section 1: Global FDI
Section 2: Japan’s outward FDI
Section 3: Japan’s inward FDI
Section 4: Emerging companies as new business partners

24
25
30
35
38

Chapter 3: Trends in global trade rule formation
Section 1: Current situation of FTAs in the world and Japan
Section 2: Recent trends in FTA rule formation
Section 3: Trends of trade protectionism
Section 4: Current status and issues of multilateral trade system

47
48
53
54
61
Copyright (C) 2019 JETRO. All rights reserved.

3

Chapter 1: World trade and Japan’s tradeChapter 1 Section 1 Current state of the world economy

4

World economy decelerated from the latter half of 2018


According to estimates of IMF, the world’s real GDP growth rate in 2018 was 3.6%, slowing from 3.8% in 2017. Trade tensions andtariff hikes, a decline in business confidence, a tightening of financial conditions, and higher policy uncertainty across many
economies are indicated as downward factors.

Among major countries, net exports of the US fell into the negative during the third quarter of 2018 and pushed down the growthrate for two consecutive quarters. Although China’s growth rate during the second quarter of 2018 was lower than that of the same
period of the previous year, the deceleration stopped during the first quarter of 2019 for the first time in four quarters. Compared to
net exports (external demand), the movement of domestic demand (final consumption and capital formation) is becoming weaker.

Trends in real GDP growth rate/contribution by economies
2017

2018

Contribution

Percentchange

3.8

3.8

2.4

1.0

US

2.2

Euro area

2019 (Forecast)Contribution

Percentchange

3.6

3.6

2.2

0.9

0.3

2.9

2.4

0.3

UK

1.8

Japan

1.9

Emerging and developing economies
Emerging and developing Asia

2020 (Forecast)(%)

Contribution

PercentchangeContribution

3.2

3.2

3.5

3.5

1.9

0.8

1.7

0.7

0.4

2.6

0.4

1.9

0.3

1.9

0.2

1.3

0.1

1.6

0.2

0.0

1.4

0.0

1.3

0.0

1.4

0.0

0.1

0.8

0.0

0.9

0.0

0.4

0.0

4.8

2.8

4.5

2.6

4.1

2.4

4.7

2.8

6.6

2.1

6.4

2.1

6.2

2.1

6.2

2.1

China

6.8

1.2

6.6

1.2

6.2

1.2

6.0

1.2

India

7.2

0.5

6.8

0.5

7.0

0.5

7.2

0.6

ASEAN5World
Advanced economies

PercentchangeTrends in US real GDP growth rate/contribution
by expenditure (% change from previous quarter, Annualized)

(%)

5.3

0.3

5.2

0.3

5.0

0.3

5.1

0.3

Latin America and the Caribbean

1.2

0.1

1.0

0.1

0.6

0.0

2.3

0.2

Emerging and developing Europe

6.1

0.2

3.6

0.1

1.0

0.0

2.3

0.1

Russia/CIS

2.2

0.1

2.7

0.1

1.9

0.1

2.4

0.1

Russia

1.6

0.1

2.3

0.1

1.2

0.0

1.9

0.1

Middle East and North Africa

2.1

0.2

1.6

0.1

1.0

0.1

3.0

0.2

Sub-Saharan Africa

2.9

0.1

3.1

0.1

3.4

0.1

3.6

6

4
2

0
-2

-4

I

II

III

IV

I

II

2016

III

IV

I

II

2017
Net exports

III

IV

2018

OthersI

2019

Real GDP growth rate

Source: "GDP, First Quarter 2019 (Second Estimate)" (US Department of Commerce)

Trends in China's real GDP growth rate/contribution
by expenditure (Quarter, % change from the previous year)

0.1 (%)South Africa
1.4
0.0
0.8
0.0
0.7
0.0
1.1
0.0
Note: 1) The definitions of advanced/emerging and developing economies follow World Economic Outlook (WEO). ASEAN5 refers to Indonesia,
Malaysia, Philippines, Thailand, and Vietnam. The Middle East and North Africa includes Afghanistan and Pakistan.
2) Contributions are calculated using with PPP (purchasing power parity) of the previous year, which was released in April 2019.
Source: "WEO, April /July 2019" (IMF)

8

(%)
7.0

6

6.8

4

6.6

2

6.4

0

6.2

-2

I

II

III
2016
Net exports

IV

I

II

III
2017

Others

IV

I

II

III

IV

2018

I

6.0

2019

Real GDP growth rate (right axis)

Source: National Breau of Statistics and Thomson Reuters

Copyright (C) 2019 JETRO. All rights reserved.

Chapter 1 Section 1 Current state of the world economy

5

Trade issues push down economic growthThe growth rate of Thailand, who has increased presence through value-added export to both the US and China, continued its
slowdown tendency during the first quarter of 2019, as its net exports fell into the negative from the third quarter of 2018.



The global economic outlook is dominated by risks of downturn. Among those risks, impact of trade tensions has been estimated byinternational organizations. According to such estimates, the harm caused by trade friction to corporate sentiment and investment
would be more serious than the negative impact of additional tariff measures.
Foreign value addedin domestic final demand of the US and China(Share by country/region: 2005→2015)

Outline of IMF‘s analysis of the impact of global trade tensions on theeconomy (GDP)Scenario

Share in China (%)30(1)
Measures already implemented

25

20

Japan
2015

15
US

10

2005

5
0

(2)
Additional tariffs on all mutual imports
between US and China

EU

ASEAN

0

(3)
Additional tariffs on cars and parts

China

5

10

15

Share in US (%)

20

25

(4)
Impact on sentiment of firms

30(5)Impact on financial market

Source: OECD

Trends in Thailand's real GDP growth rate/contribution
by expenditure (Quarter, % change from the previous year)
(%)
12
9
6
3
0
-3
-6
-9

I

II

III

IV

2016
Net exports

Source: Thomson Reuters

I

II

III

IV

I

II

III

IV

2017

2018

OthersReal GDP growth rate

I
2019

2019
2020
2023
2019
2020
2023
2019
2020
2023
2019
2020
2023
2019
2020
2023

Impact on economy（GDP）（%）
World
US
China
-0.11
-0.15
-0.56
-0.12
-0.16
-0.46
-0.08
-0.16
-0.23
-0.20
-0.20
-1.16
-0.23
-0.27
-0.95
-0.14
-0.31
-0.37
-0.25
-0.61
-1.00
-0.35
-0.69
-0.88
-0.25
-0.55
-0.41
-0.50
-0.74
-1.27
-0.51
-0.76
-1.04
-0.29
-0.55
-0.47
-0.78
-0.91
-1.63
-0.82
-0.95
-1.41
-0.32
-0.56
-0.51

Japan
0.03
-0.00
-0.03
0.08
0.01
-0.05
-0.04
-0.15
-0.24
-0.23
-0.34
-0.27
-0.47
-0.66
-0.34

Each scenario is as follows:
1) The US imposes additional tariffs of 10% on aluminum imports, 25% on steel imports, 25% on$50 billion of imports from China and 10% on an additional $200 billion of imports from China(rising to 25% in 2019). US trading partners impose retaliatory tariffs of an equivalent amount,except in the case of the 10% tariff on $200 billion in Chinese imports. In this case, China
responds with additional tariffs of 7% on $60 billion of US imports (rising to 17% in 2019).
2) In addition to the above, from 2019 the US imposes additional tariffs of 25% on a further $267
billion of imports from China, and China responds with additional tariffs of 25% on all imports
from the US.
3) In addition to the above, from 2019 the US imposes additional tariffs of 25% on all imported
cars and car parts, with trading partners imposing retaliatory tariffs of an equivalent amount.
4) In addition to the above, the sentiment of companies worsens, and investment declines.
5) In addition to the above, the financial market is negatively affected.
Source: "WEO, October 2018" (IMF)
Note:

Copyright (C) 2019 JETRO. All rights reserved.

Chapter 1 Section 2 World trade

6

World trade in 2018 was at a record high, however its growth slowed downWorld trade in 2018 (trade in goods, nominal export value) increased by 9.7% to a record high of $19.0 trillion (JETRO estimate).
However, its growth slowed down compared to 2017. The main factor was its slowdown during the latter half of 2018 owing to thedeceleration of the global economy.

World trade related indicators(All figures are percentages, unless indicated at the end of column)
2014
2015
2016
2017
2018
World trade (export) (100 mil USD) 186,149 161,864 156,699 173,450 190,243
0.4
-13.0
-3.2
10.7
9.7
Nominal growth rate
Real growth rate
2.4
2.1
1.6
4.5
2.8
Price growth rate
-1.9
-14.8
-4.7
5.9
6.7
World trade (import) (100 mil USD) 189,775 165,008 160,226 177,857 196,149
0.4
-13.1
-2.9
11.0
10.3
Nominal growth rate
Real growth rate
3.0
2.6
1.7
4.7
3.2
Price growth rate
-2.5
-15.3
-4.5
6.0
6.9
Industrial production index growth
2.3
0.6
0.4
3.0
2.3
rate（OECD)
Fuel price index growth rate
-5.9
-44.1
-16.5
23.9
27.3
-7.5
-47.2
-15.7
23.4
29.4
Crude oil price growth rate
0.7
-34.8
-28.6
16.1
26.4
Natural gas price growth rate
Metal price index growth rate
-12.2
-27.3
-5.3
22.1
6.2
Iron ore price growth rate
-28.1
-42.4
4.3
21.5
-1.4
Food and beverage price index growth rate
-0.1
-16.1
-0.3
3.2
-1.1
Growth of nominal effective
2.5
15.3
0.2
-1.0
-2.5
dollar exchange rate

Note: 1) Both trade values and nominal growth rates are estimated by JETRO. See Appendix Annnotation II
regarding the method of estimation. 2) The real growth rate is from the WTO. 3) The price growth rate wascaluculated by dividing the nominal value by volume index. 4) All commodity prices are indicated in thegrowth rate of the annual average. Crude oil prices are the average of Dubai, Brent and WTI. Natural gas
prices are from the Europe/Japan/US index. Iron ore prices are the import prices at China's CFR Tianjin port
Source: Trade statistics of respective economies, OECD data （July 2019） , "IFS (June, 2019 ） " (IM F),"WEO, April 2019” (IM F) , and WTO data

Trends in world trade (export basis)
Export value
Nominal growth rate (right axis)
Real growth rate (right axis)（Billion USD）
20,000（％）

25.0

18,00020.0

16,00015.0
10.0

14,0005.0

12,0000.0

10,000

-5.0

8,000

-10.0

6,000

-15.0

4,000

-20.0

2,000

-25.0

0

-30.0
（year）

Source: JETRO's estimates based on the trade sitatistics of respective countries, and WTO data

Change in world trade by quarter(export basis, year-on-year growth rate)(Billion dallars)
6,000

(%)

5,000

15.0

4,000

10.0

3,000

5.0

2,000

0.0

1,000

-5.0

0

Q1

20.0

Q2

Q3

Q4

Q1

Q2

Q3

2016
2017
Export value
Real growth rate (right axis)

Q4

Q1

Q2

Q3

Q4

-10.0

2018
Nominal growth rate (right axis)

Note: Both nominal growth rate and real growth rate are on export basis.
Source: "DOTS (Released on June 29, 2019)" (IM F) and WTO data

Copyright (C) 2019 JETRO. All rights reserved.

Chapter 1 Section 2 World trade

7

Trends by country: imports of China greatly increase owing to tariff reduction

Exports expanded in many countries and regions, but thegrowth rate slowed compared to the previous year.

The exports of major countries/regions by quarter showedremarkable slowing down during the latter half of 2018.



China’s trade value (total value of exports and imports)
increased to a record high of $4.6 trillion. What contributed tothe increase was an import expansion of consumption goods
such as clothes and processed commodities owing to tariff
reduction.



26.2% of the world export increase can be explained by thecontribution of commodity exporters. Crude oil price hikes
until the third quarter pushed up the trade amount ofcommodity exporters.

Export growth rate of major countries/regions by quarter(year-on-year growth rate)
(%)

25.0

20.0
15.0
10.0
5.0
0.0

-5.0
-10.0
-15.0
-20.0

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2015
Japan

2016

2017

China

ASEAN4

2018
US

2019
EU15

Note: Due to the limitation of data, Indonesia, Philippines, Singapore, and Thailand are pickedup as 4 countries of ASEAN, and 15 member countries as of April 2004 are picked up as EU.
Source: Trade statistics of respective country/region

World trade by country and region (2018)（100 million USD, ％）ExportImportGrowth Contri- Volume
Growth Contri- Volume
Value
Share
Value
Share
rate bution growth rate
rate bution growth rate
NAFTA
25,656 13.5
8.0
1.1
4.3
34,667 17.7
8.5
1.5
5.0
US
16,640
8.7
7.6
0.7
4.1
25,427 13.0
8.6
1.1
5.2
Canada
4,507
2.4
7.1
0.2
2.3
4,597
2.3
6.2
0.2
3.8
Mexico
4,509
2.4
10.1
0.2
7.2
4,643
2.4
10.4
0.2
5.3
EU
64,543 33.9
9.5
3.2
1.5
64,613 32.9
10.4
3.4
1.4
Germany
15,607
8.2
7.7
0.6
0.9
12,857
6.6
10.5
0.7
2.2
Netherlands
7,238
3.8
11.0
0.4
1.7
6,457
3.3
12.3
0.4
3.3
France
5,819
3.1
8.7
0.3
1.5
6,725
3.4
8.7
0.3
0.5
Italy
5,466
2.9
7.7
0.2
-0.5
5,008
2.6
10.5
0.3
0.7
UK
4,974
2.6
11.2
0.3
1.5
6,552
3.3
5.0
0.2
-3.6
Japan
7,378
3.9
5.8
0.2
2.7
7,481
3.8
11.5
0.4
2.0
Australia
2,570
1.4
11.2
0.1
5.0
2,271
1.2
2.6
0.0
-0.8
East Asia
48,047 25.3
9.2
2.3
n.a.
43,028 21.9
15.1
3.2
n.a.
China
24,914 13.1
10.1
1.3
4.1
21,090 10.8
17.8
1.8
6.4
South Korea
6,049
3.2
5.4
0.2
2.6
5,352
2.7
11.9
0.3
2.4
Taiwan
3,079
1.6
5.4
0.1
3.4
2,858
1.5
10.3
0.2
3.1
ASEAN6
14,006
7.4
10.0
0.7
n.a.
13,728
7.0
13.5
0.9
n.a.
Singapore
4,118
2.2
10.3
0.2
3.4
3,705
1.9
13.0
0.2
4.2
Thailand
2,499
1.3
5.9
0.1
3.0
2,510
1.3
11.8
0.1
6.7
Malaysia
2,475
1.3
13.6
0.2
4.8
2,176
1.1
11.7
0.1
2.7
Vietnam
2,437
1.3
13.3
0.2
12.1
2,369
1.2
11.2
0.1
10.8
Indonesia
1,802
0.9
7.5
0.1
0.9
1,879
1.0
19.7
0.2
11.9
Philippines
675
0.4
6.7
0.0
-3.9
1,089
0.6
17.3
0.1
6.3
India
3,244
1.7
8.3
0.1
4.3
5,144
2.6
14.3
0.4
3.1
Brazil
2,399
1.3
10.2
0.1
4.6
1,812
0.9
20.2
0.2
11.5
Russia
4,493
2.4
25.6
0.5
4.4
2,382
1.2
4.7
0.1
1.9
Trukey
1,679
0.9
6.9
0.1
4.6
2,230
1.1
-4.8
-0.1
-9.5
South Africa
938
0.5
5.1
0.0
4.1
930
0.5
11.8
0.1
6.6
World
190,243 100.0
9.7
9.7
2.8 196,149 100.0
10.3
10.3
3.2
Advanced countries
114,615 60.2
8.0
4.9
n.a. 121,455 61.9
9.3
5.8
n.a.
Emerging/developing economies
75,628 39.8
12.3
4.8
n.a.
74,694 38.1
11.9
4.5
n.a.
Commodity exporters
30,088 15.8
17.1
2.5
n.a.
23,822 12.1
5.2
0.7
n.a.
Fuel exporters
16,332
8.6
25.2
1.9
n.a.
10,404
5.3
1.0
0.1
n.a.
Nonfuel exporters
13,756
7.2
8.8
0.6
n.a.
13,418
6.8
8.7
0.6
n.a.
Commodity exporters Dev.
20,927 11.0
20.6
2.1
n.a.
14,822
7.6
4.7
0.4
n.a.
Commodity exporters Adv.
9,161
4.8
9.9
0.5
n.a.
9,000
4.6
6.1
0.3
n.a.
Note: Figures of "World," "EU," "Advanced economies," "Emerging/developing economies" and "Commodity exporters" were
estimated by JETRO. 2) Figures of "EU" include those of intraregional trade. 3) Member countries of ASEAN 6 are Singapore,
Thailand, Malaysia, Vietnam, Indonesia and the Philippines. 4) East Asia includes China, South Korea, Taiwan and ASEAN 6. 5)
See footnote in the main text regarding the definition of "Commodity exporters" (40 emerging/developing economies and 7 advanced
economies). Figures of small countries which were unavailable or unable to be estimated were excluded. 6) Advanced economies
include 37 economies based on the definition of DOTS (IMF). Figures for "emerging/developing economies" are calculated bysubtracting "advanced economies" from the "world."7) Highlighted cells indicate countries/regions with a decreased growth ratecompared to 2017.
Source: Trade statistics of respective economies and WTO data

Copyright (C) 2019 JETRO. All rights reserved.

Chapter 1 Section 2 World trade8

Trends by product: a lull in the growth of semiconductor-related products
Although positive growth was recorded for many products, thegrowth rate slowed down compared to 2017. Among greatly
contributing products, commodity-related products, electricalequipment, and general machinery showed a slowdown inexports.

World trade by product (export basis, 2018)
Value

30.0

Total exports
Machinery and equipment
General machinery
Turbines
Computer and peripheral equipment
Semiconductor manufacturing equipment
Industrial robots
Electrical equipment
Communication equipment
Electronic tubes and semiconductors
Integrated circuits
Lithium-ion storage batteries
Transport equipment
Automobiles
Hybrid vehicles
Plug-in hybrid vehicle
Electric vehicles
Automobile parts (excluding engines)
Precision equipment
Chemicals
Pharmaceuticals and medical supplies
Food (a)20.0

Oils, fats, and other animal and vegetable products(b)The export growth of semiconductor-related products slowed
down owing to the declining demand for smart phones in
addition to a reaction to trade expansion in 2017. According toWorld Semiconductor Trade Statistics (WSTS), the market
size of semiconductors in 2018 increased by 13.7%, but thegrowth slowed down compared to the previous year (21.6%).
It is estimated to decline by 12.1% in 2019, but to recover in
2020.



Export growth rate of semiconductor-related products by quarter

(%)
（％）
70.0
60.0
50.0
40.0

Semiconductors andelectronic components
Semiconductor
manufacturing equipment

10.0
0.0
-10.0
-20.0

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2015

2016

2017

2018

2019

Note: 1) Change in growth rate of export amount (Compared to the same period of the previous year).
2) Semiconductors and electronic components are the total of electron tubes/semiconductors, etc. and integrated circuits.
3) Due to the limitation of data, created based on 33 countries/regions (refer to P. 9 for details)
Source: Trade statistics of respective country/region

Mineral ore(c)Mineral fuels etc. (d)Base metal and its products (e)Commodity-related products (total)
Fuel (mineral fuels etc.)（d）Non-fuel (metal, food and beverages)
Metal（c + e）
Food and beverages（a + b）

190,243
77,12922,744
1,369
6,084
837
60
27,560
6,120
1,140
7,146
298
20,190
9,313
296
131
115
4,213
6,634
26,307
6,052
13,312
1,996
2,162
24,604
13,02555,09924,60430,495
15,18715,308（100 million USD, ％）Growth ContriShareratebution
100.0
9.7
9.7
40.5
7.6
3.1
12.0
9.9
1.2
0.7
14.3
0.1
3.2
11.0
0.3
0.4
9.4
0.0
0.0
-0.5
0.0
14.5
8.6
1.3
3.2
4.9
0.2
0.6
2.6
0.0
3.8
14.5
0.5
0.2
32.8
0.0
10.6
4.6
0.5
4.9
3.9
0.2
0.2
21.5
0.0
0.1
33.4
0.0
0.1
34.2
0.0
2.2
6.6
0.2
3.5
5.4
0.2
13.8
11.3
1.5
3.2
12.8
0.4
7.0
3.8
0.3
1.0
-1.4
0.0
1.1
9.3
0.1
12.9
28.5
3.1
6.8
11.0
0.7
29.0
15.5
4.3
12.9
28.5
3.1
16.0
6.8
1.1
8.0
10.7
0.8
8.0
3.1
0.3

Note: 1) JETRO estimates. See Appendix Annnotation II regarding the method of estimation. 2) See
Appendix Annnotation I regarding the product classification. 3) Highlighted cells indicate items with adecreased growth rate compared to 2017.
Source: Trade statistics of respective economies

Copyright (C) 2019 JETRO. All rights reserved.

Chapter 1 Section 2 World trade

9

World trade in 2019 expected to slow downIn the first quarter of 2019, the trade value of goods (from 33 major economies where data is available) showed a decrease of 2.6%
compared to the same period of the previous year. Growth was negative among major items such as general machinery (2.3%
decrease), electrical equipment (3.4% decrease), transport equipment (4.3% decrease), and chemicals (0.9% decrease). The decline
was especially noticeable in machine tools, semiconductor manufacturing equipment, and cellular phones.



According to the forecast of WTO (April 2019), world trade quantity (average of exports and imports) will slow down to 2.6%
growth in 2019 from 3.0% in 2018. The future deceleration of exports is also expected by the world new export order index whichshowed 48.8 in June 2019, falling below 50, the division point between increase and decrease, for 6 consecutive months.

Trade for 33 major economies by product, on a quarterly basis(year-on-year growth rate)

Total (exports)
Machinery and equipment
General machinery
Mining and construction machines
Machine tools
TurbinesEngines
Computer and peripheral equipment
Semiconductor manufacturing equipment

Industrial robots
Electrical equipment
Communication equipment
Cellular phones
Integrated circuits
Transport equipment
Precision equipment
ChemicalsCommodity-related products (total)*
Fuel*
Non-fuel (metal, food and beverages)
Metal
Food and beverages

World trade
coverage ratio（2018）

79.0
85.1
87.6
93.6
95.4
91.1
82.2
85.7
97.7
97.6
83.4
82.2
85.0
89.1
83.4
88.9
87.2
76.6
78.6
76.5
77.2
75.8

2018
I
13.2
13.1
16.5
21.3
35.3
15.8
16.1
17.0
19.1
8.3
12.7
8.3
17.8
17.6
10.7
10.4
16.1
17.5
21.3
12.0
14.9
9.2

II
11.5
9.7
12.7
22.6
17.3
11.4
9.2
15.3
9.6
-2.3
10.8
5.4
13.0
16.6
5.9
7.5
14.2
20.4
32.6
10.6
14.0
7.3

III
7.2
4.0
7.0
11.0
8.5
18.6
5.0
7.5
13.4
-4.9
7.7
5.0
9.6
12.6
-3.8
2.6
10.0
20.1
41.0
3.7
7.3
0.3

IV
3.0
1.4
3.1
4.6
-1.5
13.3
2.4
3.1
-4.6
-2.1
1.1
-0.3
-3.3
4.8
0.2
0.3
6.0
10.4
21.7
0.3
2.3
-1.5

（％）
2019
I
-2.6
-3.2
-2.3
-1.0
-12.8
10.0
-3.8
-3.6
-14.6
-10.3
-3.4
-4.6
-11.4
-3.2
-4.3
-1.8
-0.9
-4.6
-5.6
-3.7
-4.6
-2.9

Notes: 1) The key 33 economies are Argentina, Australia, Austria, Belgium, Brazil, Canada, China, Denmark,Finland, France, Germany, Greece, Hong Kong, India, Indonesia, Ireland, Italy, Japan, Luxembourg,
Netherlands, Philippines, Portugal, Russia, Singapore, South Africa, South Korea, Spain, Sweden,
Switzerland, Taiwan, Thailand, UK, and US. 2) Products marked with an asterisk (*) are based on imports,
other products are based on exports. World trade coverage ratio for 2018 is based on the larger of the two(imports or exports).
Source: Trade statistics of respective economies

Contribution of exports by economies, on a quarterly basis（Year-on-year ％change）

20.0

OthersCommodity exporters
ASEAN6
China
Japan
US
EU26
World exports (growth rate)

15.0
10.0
5.0
0.0

-5.0
-10.0
-15.0
-20.0

I

II III IV I

II III IV I

II III IV I

II III IV I

II III IV I

2014

2015

2016

2017

2018

2019

Note: 1) World exports cover 210 economies. 2) See footnote in the main text regarding thedefinition of "commodity exporters."EU26 includes all EU member economies excluding two
commodity exporters (Greece and Cyprus).
Source: "DOTS (June 29, 2019)" （IMF）

Copyright (C) 2019 JETRO. All rights reserved.

Chapter 1 Section 3 Japan’s trade10

China becomes Japan’s largest export partner for the first time in 6 years,
but the growth of exports to China slows down in the latter half of the yearConcerning Japan’s trade (customs clearance basis) in 2018, the exports
increased by 5.8% compared to the previous year to $737.8 billion, and theimports increased by 11.5% to $748.1 billion. The trade balance recorded a
deficit of $10.3 billion.
By country/region, China became the largest export partner for the first timein 6 years, but the growth of exports to China slowed down in the latter halfof the year owing to the decrease of digital-related goods which led export
expansion. Exports, such as copying machines and semiconductor
manufacturing equipment, to ASEAN also fell down in the latter half of theyear, and exports turned to the negative in the first quarter of 2019
compared to the same period of the previous year. Concerning imports from
China, the largest partner, the computer category such as notebook PCs andair conditioners increased. Regarding imports from the US, LNG derived
from shale gas and others increased.

15.0
10.0
5.0
0.0
-5.0
-10.0
-15.0

World

US (19.0％)

China （19.5％）

ASEAN （15.5％）

EU （11.3％）-20.0

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
(P)
2015

2016

2017

Note: Figures in parentheses indicate share in total export in 2018.
Source: "Trade Statistics" (MOF)

Japan’s trade trends(Million USD, %)2019
Jan-Jun(P)
Jan
Feb
Mar
Apr
May
June(P)
Total exports
697,221
737,846
347,077
51,14958,20364,772
59,88852,65660,408(Growth rate)
8.2
5.8
-5.9
-5.6
-1.7
-6.5
-6.6
-9.1
-5.9
Total imports
670,971748,109354,926
63,94555,21160,08259,433
61,28954,965(Growth rate)
10.5
11.5
-2.3
2.0
-6.8
-3.0
1.8
-3.2
-4.6
Trade balance
26,250-10,263-7,849 -12,797
2,992
4,690
455
-8,633
5,443(Year-on-year difference) -11,309.2 -36,512.7 -13,671.7 -4,283.3
3,043.2 -2,675.6 -5,323.9 -3,271.4 -1,160.5
Export volume index
105.9
107.7
101.8
87.6
102.2
114.4
106.9
93.0
106.7
(Growth rate)
5.4
1.7
-5.6
-9.0
-0.6
-5.6
-4.3
-8.9
-5.5
Import volume index
102.9
105.8
102.4
110.3
95.0
104.6
103.5
106.2
94.9
(Growth rate)
4.2
2.8
-1.0
0.5
-6.5
0.4
4.1
-1.2
-3.2
Crude oil import price
54.2
72.8
67.6
62.7
62.3
65.7
68.8
73.0
73.1
(Dollar/barrel, growth rate)
30.2
34.3
-1.9
-3.0
-8.8
-1.7
3.9
3.0
-4.4
Exchange rate (yen/dollar)
112.2
110.4
110.4
109.0
110.4
111.2
111.7
109.8
108.1
(Yen appreciation, %)
-3.0
1.6
-1.9
1.7
-2.3
-4.7
-3.8
-0.1
1.8
Note: 1) Yen-based values are converted to dollar-based values by JETRO. 2) The volume index is on a 2015 basis.
3) Exchange rates are the interbank rate average for each period. 4) Growth rates are a year-on-year comparison.
Source: "Trade Statistics" (Ministry of Finance), "Foreign Exchange Rate" (Bank of Japan)
2017

20.0

Japan’s exports by major country/region(year-on-year change)
(%)

2018

25.0

(%)

2018

2019

(Year/Quarter)

Japan’s imports by major country/region(year-on-year change)

20.0
15.0
10.0
5.0
0.0
-5.0
-10.0

World

US (10.9％)-15.0

China （23.2％）

ASEAN （15.0％）-20.0

EU （11.8％）-25.0

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
(P)

2015

2016

2017

Note: Figures in parentheses indicate share in total import in 2018.
Source: "Trade Statistics" (MOF)

2018

2019
(Year/Quarter)

Copyright (C) 2019 JETRO. All rights reserved.

Chapter 1 Section 3 Japan’s trade11

Exports such as digital-related goods stalled after the middle of 2018


Looking at Japan’s exports by product, transportation equipment increased by 5.2% to $172.7 billion compared to the previous year
and digital-related goods increased by 4.5% to $147.0 billion. After the middle of 2018, exports of machinery and equipment such as
digital-related goods stalled owing to saturation of the demand for semiconductor investment as well as the slowdown of exports to
China against the background of its decelerated economy.

Concerning Japan’s imports, mineral fuel increased greatly to $174.5 billion (23.7% growth) in continuation of previous year (27.6%
growth), reflecting the rise of energy prices, and accounted for almost half of the import increase in 2018. In the first quarter of
2019, imports turned to decrease partly because the energy price lowered compared to the same period of the previous year.

Japan’s export growth by contribution of major product(Compared to the same period of the previous year)
12.5

(%)

Japan’s import growth by contribution of major product(Compared to the same period of the previous year)
15.0

10.0

(%)

10.0

7.5
5.0

5.0
2.5

0.0

0.0

-5.0

-2.5

Other （22.8％）-5.0

Chemicals （13.3％）-7.5

Other machinery and equipment （20.7％）-15.0

Mineral fuels （23.3％）

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2016

2017

2018

Digital-related goods total （16.8％）-20.0

Growth rate (y-o-y)

2015

Other machinery and equipment （14.8％）-15.0

Digital-related goods total (19.9％）-12.5

Chemicals （11.8％）-10.0

Transport equipment （23.4％）-10.0

Other （33.2％）

2019(Year/Quarter)
Note: 1) Figures in parentheses indicate share on total export amount in 2018.
2) Digital-related goods are composed of semiconductor manufacturing equipment, integrated circuits, etc.
Source: "Trade Statistics" (Ministry of Finance)-25.0

Growth rate (y-o-y)
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2015

2016

2017

Note: Figures in parentheses indicate share in total import amount in 2018.
Source: "Trade Statistics" (Ministry of Finance)

2018

2019

(Year/Quarter)

Copyright (C) 2019 JETRO. All rights reserved.

Chapter 1 Section 3 Japan’s trade

12

Japan’s agricultural, forestry, and fishery exports exceeded 900 billion yenIn 2018, Japan’s exports of agricultural, forestry, and fishery products increased by 12.4% to 906.8 billion yen, exceeding 900 billion
yen for the first time. The biggest export category was alcoholic beverages, which increased by 13.4% to 61.8 billion yen showing agreat increase from the previous year. Many other categories of high-ranking export value, such as mackerel and beef, showed
increase rates of over 20% compared to the previous year.

Large-scale Economic Partnership Agreements (EPA), which came into effect after 2018, will have a large influence on Japan’s
exports of agricultural, forestry and fishery products. For example, Japan-EU EPA (effective since February 2019) immediately
eliminated tariffs on some Japanese products such as beef. This is expected to improve the price competitiveness of Japanese foodproducts in the European market.
Export value of Japan’s agricultural, forestry, fisheryand food products

10,000(%)(¥100 m)

9,068

8,000
6,000
4,000
2,000
0

2014
2015
Agricultural products
Fishery products

2016

2017
2018
Forestry products(Year)

Comparison to previous year
(right axis)
Note：IncludingIncluding alcoholic beverages and pearls
Source: : "Overview of Foreign Trade of Agricultural, Forestry and Fishery
Products" (MAFF)

List of immediate elimination of tariffs on Japanese agricultural, forestry andfishery exports to EU
Items

Tariff rate until the elimination of tariffs

Fishery products

0 - 26% (Sea-cucumber preparations, etc.)

Seasonings (soy sauce, etc.)

7.7% (Soy sauce)

Alcoholic beverages

EUR 0 - 32 /100 liter

Green tea

0 - 3.2%

Beef

12.8% + EUR 141.4 - 304.1 /100 kg

Flowers

6.5% or 8.3% (Garden tree, Japanese bonsai plamt, potted plant)
8.5% or 10% (Cut flowers)

Forest products (wood & wood product)

0 - 10%

Fruit and vegetables

12.8% (Citrus fruit such as Citrus junos (yuzu), etc.)
EUR 9.5 /100 kg

Pork*

EUR 46.7 - 86.9 /100 kg

Chicken*

6.4%, EUR 18.7 - 102.4 /100 kg

Hen Eggs (including powdered eggs, etc.)*

EUR 16.7 - 142.3 /100 kg

Milk/milk products*

EUR 118.8 /100 kg (skimmed milk powder)
EUR 189.6 /100 kg (Butter)

Note: 1) Excluded items include scallop (eliminated in stages and shall be duty-free in Year 8), ice cream (staged
reduction by 70% in 6 years), cocoa powder (staged reduction by 25% in 8 years) 2) *: items currently undernegotiation for lifting the export ban, or reaching agreement of removal of the export ban and discussion forexport conditions are ongoing as of June 2019.
Source: "Japan-EU EPA Summary of Results of Negotiation on AFF Products (2) (Export to EU)" (MAFF)
Copyright (C) 2019 JETRO. All rights reserved.

Chapter 1 Section 4 Impact of trade protectionism

13

Trade restrictive measures introduced one after another since 2018


Share by product subject to US additional tariff measuresagainst China

2018 saw a succession of large-scale trade restrictive measures enforced.
Particularly since July, the retaliation of additional tariff measures
between the US and China has been ongoing, continuing in 2019. The
scale of trade value subject to major trade restrictive measures since 2018
corresponds to around 4% of the world trade value in 2017.

80.0

20.5

70.0

10.0

Target3/23/2018

US

All trading
partners*

Additional 25% tariffs on 252 steel products

29,033

1.2

3/23/2018

US

All trading
partners*

Additional 10% tariffs on 9 aluminum products

17,4030.7

4/2/2018

China

US

Additional tariffs of up to 25% on 128 products including fruits, pork, steel andaluminum

2,969

2.0

6/22/2018

EU

US

Additional tariffs of up to 25% on 182 products including steel, aluminum,
engines, ships and card games

3,206

1.1

90.0

7/6/2018

US

China

[First round] Additional 25% tariffs on 818 products including cars, pumps andelectronic parts

32,262

6.4

80.0

US

[First round] Additional 25% tariffs on 545 products including agricultural
products such as soy beans, livestock such as beef and pork, cars and seafood

33,834

China[Second round] Additional 25% tariffs on 279 products including plastics,
semiconductors, railway cargo and tractors

13,6852.7

50.0

14,1089.4

40.0

8/23/2018

US

22.6

China

US

9/24/2018

US

China

[Third round] Additional 10% tariffs on 5,745 products including furniture,
clothes and miscellaneous goods. On May 10, 2019, the rate was raised to 25%.

189,91037.6

US[Third round] Additional tariffs of up to 10% on 5,207 products including LNG,
electronic products and food. On June 1, 2019, the rate was raised up to 25%
among the 4,545 products.

53,39335.7

9/24/2018

China[Fourth round] Additional tariffs of up to 25% on 3,805 products including
255,20850.5
cellular phones, notebook computer and toys.
Note: 1) The figures for trade scale were created from the 2017 trade statistics of countries/regions imposing the measures. Target products were counted based on
those which were listed at the time restrictive measures were implemented. '2) * Some countries and regions were excluded.
Source: "Biznews" by JETRO, "World Economic Trends II (The 2018 Autumn/Winter Report)" by the Cabinet Office, and trade statistics from each country.

Undecided

US

China

19.9

21.2

3rd round

4th round(Undecided)

14.8

0.0

1st round

2nd roundPrecisionequipment(HS90-91)
Transport
equipment(HS86-89)
Electricalequipment(HS85)
Generalmachinery(HS84)

Note: See below
Source: "Trade statistics" (US Department of Commerce), "Biznews"(JETRO), etc .

Share by product subject to China's additional tariffmeasures against the US
100.0

70.0

Miscellaneous
goods 3)

(%)

28.1

58.9

30.0
20.0

19.9
38.2
6.0

10.0
0.0

6.0
1st round

Food andbeverages(HS01-24)

63.7

60.0

2nd round

Other materials
and theirproducts 3)

20.4

Chemicals(HS28-40)

15.3

Precisionequipment(HS90-91)

12.5

Transport
equipment(HS86-89)

17.5

Electricalequipment(HS85)

3rd round

Generalmachinery(HS84)

M achinery and equipment

8/23/2018[Second round] Additional 25% tariffs on 333 products including cars, chemical
products and energy products

31.9

49.0

20.0

Food andbeverages(HS01-24)

Machinery and equipment

25.6

Other materials
and theirproducts 3)

Chemicals(HS28-40)

6.2

54.9

40.0

Tariff-effective
date

China

20.6

8.7

50.0

(Unit: Million USD, %)Percentage ofTrade scale
total imports(2017)
from the target
country

19.4

29.8

60.0

Countries/regions
imposing themeasures7/6/2018

15.7

15.8

7.4

30.0

Outline

6.7

13.8

90.0

Products subject to the additional tariff measures were listed originally toa limited extent in both countries; however, subsequently the range ofapplication has been expanded.

Major trade restrictive measures since 2018

Miscellaneous
goods 3)

(%)

100.0

Note: 1) Based on value basis (2017). 2) Machinery and equipment shown within dotted line frames.
3) Only goods having more than 5% share are indicated. 4) Classification of products is as follows:
Other materials and their products：HS25-27, 41-63, 68-83, Miscellaneous goods：HS64-67, 92-97.
Source: "Trade Statistics" (China Customs), "Biznews" (JETRO), etc.

Copyright (C) 2019 JETRO. All rights reserved.

Chapter 1 Section 4 Impact of trade protectionism

Import value between the US and China declines after mutual imposition of
additional tariff measures



20.0

14

The growth of US imports from China in 2018 slowed down after the US imposed the third round of additional tariffs against China,
and since January 2019, it has continued to decline significantly compared to the same month of the previous year. At the same time,
China’s imports from the US have slowed in growth after China imposed its first round of additional tariffs, and they have begun
declining year-on-year since October 2018.

Trends in import of the US from China

Trends in import of China from the US(Year-on-year change)(Year-on-year change)

(%)

30.0

(%)

Year-on-year change
15.0

20.0

Year-on-year change

10.0

10.0

5.0

0.0

0.0

-10.0

-5.0
-10.0

-15.0
-20.0

First
SecondThirdFirst roundon July 6-20.0

Second roundon August 23

-30.0

-40.0

Third roundon September 24

Others

Source: "Trade statistics" by the DOC, "Biznews" by JETROFirst
SecondSecond roundon August 23
Third roundon September 24

Third
OthersJan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May
2018

First rounf
on July 6

2019

-50.0

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May
2018

2019

Source: "Trade statistics" by China Customs, "Biznews" by JETRO
Copyright (C) 2019 JETRO. All rights reserved.

Chapter 1 Section 4 Impact of trade protectionism

15

US imports of target products of additional tariff measures against China
declining greatly in 2019Concerning target products of the US additional tariff measures, the import value from China of some products of machinery andequipment declined since around October 2018 year-on-year. Other target products also declined in 2019, showing a sharp fall.

Changes of import of target products after additional tariff measures against China by the US
Product

Import value of taeget product from China
Share of China on(2017)
total import value
1st round 2nd round 3rd roundTotalof each pruduct(7/6)(8/23)(9/24)(Unit: Million dollars, %)Year-on-year change(Colorless：+, Blue：-, light colorgstrong color as decreasing rate expands)

2018

2019

YOY change

2019

1
4
7
10
1
4 5
32,262
13,685 189,910 235,857
15.9 12 20 14 6 10 11 13 11 13
12-26.0
15,796
2,025
37,66955,49021.1 24 24 21 17 16 15 11 9 16
-40.0
2,361
85
23,081
25,52840.1 40 37 25 30 26 18 18 13 27
-66.4
2,440
0
1,785
4,226
21.2 11 14 5
6 5
0 4 9 10 11
-24.5
456
0
1,558
2,014
23.0 17
15 12 12 16 26 34 22 23 14 20
-20.8
908
0
2,259
3,167
23.5 16 34 31 5 18 30 25 15 20 22 24 29
-15.9
9,615
7,507
48,38965,51128.9 13 21 5 4 8 6 12 11 11
-26.8
572
0
24,264
24,83645.5 11 14
8 1 1 12 17
-32.9
1,254
3,574
13
4,841
11.0 21 27 42 28 24 21 59 17
-50.4
3,689
722
7,297
11,70732.7 8 21
8 5 5 8
2
8
-20.1
821
0
1,972
2,793
43.1
6
21
2 1
-19.6
1,123
1,233
1,130
3,485
26.5 16 35 9 7 2 1 25 6 19 9 3 19
-18.9
3,439
3,439
59.4 33 37 8 4 14 16 21 27 24 18 9 38
-21.6
802
291
2,962
4,055
21.8 16 24 4 2 12 10 12 8 13 13 6 16
-17.7
2,403
480
11,758
14,641
4.6 7 7 20 20 23 14 21 30 25 18 7 27
-10.4
1,669
0
1,669
0.9
56 85 ## 19 71 ## 87## 40 3
-7.1
9,424
9,424
14.3 12 19 20 15 13 8 12 13 16 29 18 32 2
-9.3
4,445
596
1,065
6,106
12.7 8 17 9 13 16 17
-29.2
2,986
2,004
1,221
6,211
17.5 24 49 43 19 26 23 18 15
-30.2
1,158
0
1,158
8.6 2 1 10 9 24 23 12
-23.8
4
2,163
16,491
18,65814.9 19 27 17 16 19 16 24 22 24 16 14 37-20.8
Chemical industrial products (excl. pharmaceuticals)
4
11
7,674
7,689
12.1 7 15 12 20 25 10 26 24 37 12 17 45-23.9
Plastics/rubber
0
2,152
8,817
10,96917.8 28 36 21 14 16 20 23 20 16 18 11 32-18.5
Food and beverages
5,347
5,347
6.8 1 5 21
4 10 17 11
12 42
-36.1
Other materials and their products
913
38,732
39,64610.8 6 14 18
3 11 12 12 13 9 8 28
-18.9
Textile3,448
3,448
24.9 3 21 14
10 17 19 25 13 13 11 41
-23.1
Steel
883
7,765
8,648
28.3 19 19 18
7 17 10 18 28 29 19 27-13.5
Miscellaneous goods
30,45930,45957.6 2 24 9
2 10 10 5 8 10 8 31
-13.5
Furniture/bedding/lamps
29,167
29,16757.4 2 25 9
2 10 10 5 8 9 8 31
-13.5
Note: 1) Large classification is defined by 2 digit of HS level. Middle classification is defined by JETRO. 2) *: Partly includes HS codes excluded in the large classification (other electric/electronicparts: HS900110, measuring and testing equipment: HS8543). 3) Blue cells classify decreasing rate into 3 grades from light color to strong color (0% to -10%, -over 10% to -20%, -over 20% ）.
Jan. - May

Total import of target products
General machinery
Computer and peripheral equipment, etc.
Pumps
Refrigerators/freezers
Cocks, etc.
Electrical equipment
Communication equipment
Semiconductors and electronic components
Other electric/electronic parts*
Video equipment
Motors/generators/their parts
Cleaners/electric home appliances
Cables, etc.
Transport equipment
Automobiles
Automobile parts (excluding engines)
Precision equipment
Measuring and testing equipment*
Medical electronic equipment
Chemicals

Source: "Trade Statistics" (US Department of Commerce), "Biznews" (JETRO), etc.

Copyright (C) 2019 JETRO. All rights reserved.

Chapter 1 Section 4 Impact of trade protectionism

After additional tariff measures, China’s import share of many target products
declines in the US16

When comparing China's share of import subject to additional tariff measures by the US, China's share declined in many items suchas computer parts and digital processing units after such measures were introduced. Computer parts such as printed circuit boards
and digital processing units (excluding notebook computer) showed particularly significant decreases in share.
Changes of China's share of the US imports before and after additional tariff measures by the US(Unit: Million USD, %)China's share of US's imports of target products
Imports
BeforeAfter
Taeget Products
from China(Oct. 2017 (Oct. 2018 Change of(2017)
Mar. 2018)
Mar. 2019)
share
Total import of target products (3,434 products, counted based on the 6-digit HS code)
235,857
16.0
14.0
- 2.0
1
851762*
Third
Voice, image data transmission / reception devices (switching, routers, etc.)
22,935
51.2
50.2
- 0.9
2
847330
Third
Parts and accessories for computer, such as printed circuit boards
15,00970.9
32.6- 38.23850440
Third
Static converters (rectifiers, etc.)
4,612
50.2
46.2
- 4.0
4
847150
Third
Digital processing units (excluding notebook computer)
4,412
19.4
9.2
- 10.25940161*
Third
Seats with wooden frames, upholstered
3,773
67.7
63.9
- 3.8
6
940320
Third
Metal furniture (excluding for offices)
3,532
70.3
69.0
- 1.3
7
940540Third
Electric lamps and lighting fittings
3,115
67.9
68.5
+ 0.6
8
420292Third
Bags (plastic, fiber, excluding suitcases and handbags)
3,002
70.4
65.8
- 4.5
9
940360Third
Wooden furniture (excluding for offices, kitchens and bedrooms)
2,736
45.8
42.7
- 3.1
10
854442
Third
Cables for communication and power (with connectors)
2,688
54.1
53.5
- 0.6
11
870870
Third
Road wheels and parts and accessories for motor vehicles
2,358
58.7
56.0
- 2.7
12
848180Third
Cocks (made of steel, copper)
2,235
28.5
30.7
+ 2.2
13
854370
Second Electrical devices with individual functions (such as LED bulbs)
2,213
34.1
27.7
- 6.4
14
847170First
Automatic data processing storage units
2,137
18.6
4.9
- 13.715940510Third
Chandeliers and other electric ceiling or wall lighting fittings
2,136
53.0
54.7
+ 1.7
16
940179*
Third
Seats with metal frames, not upholstered
2,035
87.6
86.2
- 1.4
17
870899
Third
Parts and accessories for motor vehicles
1,903
14.3
14.6
+ 0.3
18
391810
Third
Vinyl floor covering
1,805
84.3
87.3
+ 3.0
19
850811
Third
Vacuum cleaners (less than 1500-watt output)
1,714
77.4
76.1
- 1.4
20
853710Third
Equipment for electrical control and distribution (less than 1,000 volts)
1,681
16.1
18.2
+ 2.0
Note: 1) Target products released based on the 8-digit HTS code were re-counted at the level of the 6-digit HS code (a total of 3,434 products). 2) Codes with *; partially
include non-target products. 3) In case a product is targeted in multiple phase, it was listed with the largest import amount. 4) Colored cells are products of which the sharehas shrunk by 10%points or more after imposition. Source: "Trade statistics" by the DOC, "Biznews" by JETRO
Copyright (C) 2019 JETRO. All rights reserved.

Chapter 1 Section 4 Impact of trade protectionism

17

Shift in US procurement of computer parts and accessories
Regarding the import of computer parts and accessories, such as printed circuit boards, the US imports from China decreased bynearly 60% after the additional tariff measures were introduced. Meanwhile, the US imports from South Korea increased by a factorof 2.3 times, and those from Taiwan 2.7 times. As for digital processing units (excluding notebook computer), the US imports from
China dropped to about half, while the imports from Mexico and Taiwan expanded by 16.4% and 5.8 times, respectively.

Changes of import of target products after additional tariff measures by the US
Parts and accessories for computer,such as printed circuit boards

Total import of target products(%)(Billion USD）
900

800

20.0
Share of China (right axis)

16.0

14.0

15.0

70.9

14,000

10.0

700

5.0
600

500

(Million USD)
16,000

0.0

492

499

803
10,000

200
100

0

26

129

Mexico

139

China
123

109

before

after

6,000
31

4,000

60.0
40.0

20.0

2,192
China
8,957

18,000

(%)

19.4

9.2

16,00014,000Share of China(right axis)

Taiwan183

1,057

12,000
Taiwan

0.0

20.0
15.0

10.0
5.0

0.0

10,000

South
Korea

8,000

3,322

6,000

Mexico10,352

12,048

4,000

2,000
0

（Million USD)
80.0 20,000

1,453

400
South
Korea

Share of China(right axis)

32.6

12,000

8,000

300

(%)

Digital processing units(excluding notebook computer)

3,715

2,000
0

before

after

China
2,677

1,393

beforeafter

Note: 1) The period of "Before": Oct. 2017 - Mar. 2018. The period of "After": Oct. 2018 - Mar. 2019. 2) Only the two countries/regions with the largest increase in share of US's
total import of all target products as well as each individual product are displayed. 3) Share of China is that of total imports of taeget product by the US.
Source: "Trade statistics" by the DOC, "Biznews" by JETRO
Copyright (C) 2019 JETRO. All rights reserved.

Chapter 1 Section 4 Impact of trade protectionism

China’s imports of target products of additional tariff measures against the US
decrease remarkably after the middle of 2018

18

Concerning the target product of China’s additional tariff measures, mostly food/drink, such as soybeans as well as other raw
materials and their products, witnessed a significant decline, after introduction of the first round, in imports from the US comparedto the same month of the previous year.
Change of import of target products after additional tariff measures against the US by China
Product

Import value of taeget product from theUS(2017)
1st round(7/6)

2nd round(8/23)

3rd round(9/24)

Total

Share of US on
total import valueof each pruduct(Unit: Million dollars, %)Year-on-year change
YOY change(Colorless：+, Blue：-, light colorggstrong color as decreasing rate expands)

2018

2019

2019

1
4
7
10
1
4 5 Jan.-May
Total import of target products
33,834
14,10853,393
101,334
9.4 2126 16 11 12 12-34.5
General machinery
9,340
9,340
6.9 31
0 19 1021 17 4 16 1
-9.0
Pumps
1,105
1,105
11.6 1441 18 22 51 3
12 35
23
-10.5
Cocks, etc.
1,194
1,194
15.6 1218 3 19 6 40 35 11 17
8 11
8
-5.7
Electrical equipment
459
6,699
7,158
3.6 327 11 19 8 10 24 13
1
2-7.1
Electron tubes/semiconductors, etc.
834
834
3.0
3 4 247 38 22 14
41
0 17 74
22.4
Other electric/electronic parts*
560
2,002
2,562
3.5 626 24 25 13 25 8
-20.8
Transport equipment
12,941849
969
14,75921.7 27
15
32
17
-26.6
Automobiles
12,047747
12,79425.6 30
18
35
24
-26.3
Automobile parts (excluding engines)
660
4
531
1,195
9.0 67 29
18 12 24 21
1 23
-28.6
Precision equipment
846
8,147
8,993
10.5 47
20 35 35 3 34 49 15
1-9.4
Precision equipment (excl. digital-related goods)
2,025
2,025
3.7 51 10 22 38 38 0 27 43 15
6 7 6
1
-2.0
Measuring and testing equipment*
5,305
5,305
18.4 28
7 29 27
15 37 146
-8.4
Medical electronic equipment
745
1,383
2,128
31.3 70
47 42 55 15 90 74 22 10
8
7
-11.0
Chemicals
2,802
10,874
13,676
8.9 418 15 1 18 32 13 7
-17.9
Chemical industrial products (excl. pharmaceuticals)
1,547
7,620
9,166
9.6 5213 22 2 16 37 14 9
1
-11.6
Plastics/rubber
1,255
3,043
4,298
7.4 172
25 24 10 1
-32.9
Food and beverages
19,912160
1,676
21,748
21.2
28
12
-60.0
Meat
1,187
0
1,187
13.9
54
-54.5
Marine products
1,315
0
1,315
17.4 80 112 21 52 13 51-35.7
Other food/beverages
2,664
160
1,652
4,475
11.6 30 5 8 17 31-55.2
Soybeans
13,96013,960
35.1
35
77
60
83
-66.9
Other materials and their products
980
8,992
15,01024,982
7.7 501 47 63 60 5 13
-49.6
Mineral ores
1,464
1,464
3.4
20 ## 13
86
37
-91.2
Mineral fuels, etc.
3,425
644
4,069
4.8 119 28
6 161 6 21 73-83.0
Wood/its products
254
2,814
3,068
17.2 80
8 20 31 10 7 10
-47.6
Paper/pulp products
2,717
3,025
5,742
20.7 4013-27.0
Textile
980
4
854
1,838
6.7 32
2 41 11 15 1
-37.7
Steel
299
1,237
1,536
5.9 2823 18 29 8 18 14
9-23.1
Other base metals/their products
2,239
1,682
3,920
6.5 5637 45 36 10 17 11-34.0
Miscellaneous goods
677
677
5.5 502 4 33 3 40 35 64 38 28 20 14 41 15 910.0
Note: 1) Large classification is defined by 2 digit of HS level. Middle classification is defined by JETRO. 2) *: Partly includes HS codes excluded in the large classification (other electric/electronic parts:
HS900110, measuring and testing equipment: HS8543). 3) Blue cells classify decreasing rate into 3 grades from light color to strong color (0% to -10%, -over 10% to -20%, -over 20%).
Source: "Trade Statistics" (China customs), "Biznews" (JETRO), etc.

Copyright (C) 2019 JETRO. All rights reserved.

Chapter 1 Section 4 Impact of trade protectionism

The US share of China’s import of some products decreases by more than 30%
after additional tariff measures19

When comparing the US share of China’s import subject to additional tariff measures before (October 2017 – March 2018) and after(October 2018 – March 2019) imposition of the additional tariffs, the share shrank in items such as soybeans and cotton by morethan 30% after the imposition.
Changes of US's share of China's imports before and after additional tariff measures by China

Taeget Products
Total import of target products (4,078 products, counted based on the six digit HS code)

Imports fromthe US(2017)(Unit: Million USD, %)US share of China's imports of target products
Before(Oct. 2017 Mar. 2018)

After(Oct. 2018 Mar. 2019)

Change ofshare

101,334

9.5

5.9

-3.6

1

120190First

Soybeans, other than seeds

13,959

56.2

7.2

-49.0

2

870323*First

Passenger cars with engine over 1,500 cc but not over 3,000 cc

10,318

25.1

17.8

-7.3

3

271112

SecondLiquefied propane gas

1,761

26.4

0.0

-26.4

4

470710

SecondWaste paper (such as unbleached kraft paper)

1,694

51.8

37.0

-14.8

5

870380*First

Electric-powered vehicles

1,403

94.2

93.4

-0.8

6

740400

SecondCopper waste and scrap

1,390

18.6

4.7

-13.9

7

470321

Third

Chemical woodpulp (of softwood)

1,069

22.2

15.9

-6.3

8

520100First

Cotton, not carded or combed

980

49.6

13.7

-35.9

9

100790First

Grain sorghum, other than seeds

956

98.2

0.0

-98.2

10

410150

Third

Whole hides of cows and horses (exceeding 16 kg)

892

55.4

52.5

-2.9

11

020649First

Offal of swine except livers, edible, frozen

874

46.7

9.7

-37.0

12

760200

SecondAluminum waste and scrap

832

30.2

29.0

-1.2

13

440791Third

Oak wood

829

84.7

73.1

-11.6

14

902780

Third

Instuments and apparatus for analysis

820

26.1

23.4

-2.6

15

870324*First

Passenger cars with engine over 3,000 cc

784

10.2

8.2

-2.1

16

847989Third

Machines and mechanical appliances with individual functions

764

8.9

6.0

-2.9

17

260300Third

Copper ores and concentrates

671

2.6

0.0

-2.6

18

870840First

Gear boxes for motor vehicles

660

11.9

8.2

-3.7

19

852349Third

Optical media for recording sound or other phenomena

647

29.4

25.4

-4.0

20
271111
Third
Liquid natural gas
644
7.9
0.9
-7.0
Note: 1) Target products released based on the eight digit HS code were re-counted in the level of the six digit HS code (a total of 4,078 products). 2) Codes with *; partially
include non-target products since January 2019. 3) In the case that a product is targeted in multiple measures, it was listed under the measure with the largest import amount.
4) Colored cells are products of which the share has shrunk by 30%points or more after imposition. Source: "Trade statistics" by China Customs, "Biznews" by JETRO
Copyright (C) 2019 JETRO. All rights reserved.

Chapter 1 Section 4 Impact of trade protectionism

20

China’s procurement of soybeans and cotton shifts to Brazil and other countriesWith regard to China’s soybean imports, the imports from the US, which was its largest trading partner in the category, decreased by
90% from before the imposition. Meanwhile, the imports from Brazil increased 1.9 times, and those from Canada increased 2.5
times. China’s imports of cotton from the US decreased by 45.7%, while its imports from both Brazil and Australia increased
approximately five times.
Changes of import of target products after additional tariff measures by China(Billion USD）
700(%)
Share of US(right axis)

600

5.9

5.0

17,500

56.2

539

0.0
494

490

12,500

5,986

200
5,000

Australia

0

20
US

12
55

Before

22

19

35
After

Share of US(right axis)

40.0
2,500

7.2

0.0

BrazilUS
10,245

Canada1,333

Brazil11,307

1,095
Before

20.0
0.0

2,000

1,500

Australia

After

590

1,000
118
500

2,500

0

40.0

13.7

20.0

10,000

7,500

100

60.0

49.6

Share of US(right axis)

15,000400(%)(Million USD)(%)
60.0 3,000

20,000500

300(Million USD)

10.0 22,500

9.5

Cotton, not carded or combed

Soybeans

Total import of target products

0

148
US

Brazil
723

567

308

BeforeAfter

Note: 1) The period of "Before": Oct. 2017 - Mar. 2018. The period of "After": Oct. 2018 - Mar. 2019. 2) Only the two countries/regions with the largest increase in share of China's total import of all target
products as well as each individual product are displayed. 3) Share of US is that of total imports of taeget products by China. 4) As data on “gold (HS7108)” (included in target products) was not disclosed
through China's trade statistics before March 2018, gold is excluded from total import of target products.
Source: "Trade Statistics" by China Customs, "Biznews" by JETRO
Copyright (C) 2019 JETRO. All rights reserved.

Chapter 1 Section 4 Impact of trade protectionism

Japanese overseas affiliates indicate the negative impact of trade protectionism at
a higher rate than Japanese companies

21

According to a JETRO survey, with regard to the impact of trade protectionism such as additional tariff measures between the US
and China, many answers of “no impact” or “not sure” were found among headquarters of Japanese companies, while many answers
indicating negative impact were found among Japanese overseas affiliates chiefly in the US.
The impact of protectionist moves on the business of Japanese companies (headquarters and local affiliates)[(B) Japanese companies (local affiliates)][(A) Japanese companies (headquarters)](%)"Negative impact" is themost.

"No impact" and "Not sure" are more than
"Negative impact on the whole."(Multiple answers, %)

80

60

40

20

28.0
3.4
8.8

0.0

52.0

9.2

7.9

27.6
2.6
0.7

45.2

7.9

4.9
6.3

24.7

21.7

6.2
2.6
6.4

6.7

10.2
1.8

28.0
5.2 1.9

40.0
33.5

24.1
1.3

33.7
42.0 18.8
25.2
7.9

61.0

31.8
45.5
42.7
21.9
24.4
24.7 28.2
3.5

7.2

9.8

6.1

80
60
40

14.6
13.5
5.2
US
(n=520)

Canada(n=82)

Central and South America(n=319)Hong Kong, Macau,
Taiwan, Republic of Korea(n=576)ASEAN, Southwestern Asia,
Oceania(n=3,207)

Note: Single
answer only for
China

2.1
Europe(n=728)

No impact
Not sure
No answer

15.2

37.3

China
(n=557)Total(n=3,385)

Companies
operating overseas(n=1,528)*Answers (multiple choice) against the question about "the impact of protectionist moves on the business of your comany"(as of the survey period)

Negative impact on the whole
Positive impact on the whole
Positive and negative impact to the same degree

37.3

43.1

38.5

31.5

Export companies(narrowly)(n=1,250)

Import companies(narrowly)(n=152)

Domestic companies(n=354)

0

52.0

75.0

20

0

*Answers (multiple choice) against the question about "the impact of protectionist moves such as US tariffincrease on the business of your comany"

Negative impact

No impact

Positive impact

Not sure

Note: 1) The survey conducted; (A) in Japan (Nov. 19, 2018 - Jan. 4, 2019), (B) in USA/Canada (Nov. 9 - Dec. 7, 2018), Central & South America (Nov. 1 - 30), Hong Kong/Macau/Taiwan/Republic of Korea(Oct. 9 - Nov. 9), ASEAN/Southwestern Asia/Oceania (Oct. 9 - Nov. 9), Europe (Sep. 27 - Oct. 25), China (Oct. 26 - Nov.9). 2) Subject Companies of the survey are (A) Japanese companies (headquarters) who
are highly interested in overseas business, regardless of company size (large companies, small and medium companies) and industry types. Company types of headquarters are classified into "Companies
operating overseas" who have overseas bases (excluding agents), "Export companies (narrowly)" exporting but having no overseas base, "Import companies (narrowly)" importing but not exporting and having
no overseas base, "Domestic companies" having no overseas base and neither exporting nor importing, and "Total" of whole sum of these companies. (B) Japanese companies operating in individual
country/region regardless of company size (large companies, small and medium companies) and types of industry. (However, regarding US, only manufacturing companies and manufacturing-related sales
companies are targeted.) 3) Regarding "impact" of question (A), answers of "as of now" between two answers of "as of now" and "in two or three years in the future," are aggregated. Although multiple answers
are given to (B), only for China (excluding Hong Kong and Macau) single answer is given. 4) Refer to the survey report described in the following "Source" for other details.
Sources: "Survey on the International Operations of Japanese Firms" (JETRO) for (A), "The impact of protectionist moves such as tariff increase on Japanese affiliates operating overseas" (JETRO) for (B)Copyright (C) 2019 JETRO. All rights reserved.

Chapter 1 Section 4 Impact of trade protectionism

22“Wait-and-see” is the measure taken by most Japanese affiliates in China at thetime of the survey periodWith regard to measures of foreign affiliates in China against protectionist moves such as additional tariff, answers of “wait-and-see”
were remarkable among Japanese companies (headquarters and local affiliates) and European companies at the time of the survey
period. On the other hand, the survey indicated a tendency that US companies have been examining concrete measures such aschanging production bases and suppliers as future measures.

Measures of foreign affiliates (Japanese, European, US) in China against protectionist moves (trade friction between the US and China, etc.)

5.6(2) [European affiliates in china] [What measures have been taken so far]

8.0

5.2 6.0

72.5
6.7 6.0 5.2 2.0

68.0
8.3 6.0

10.7

7.8

10.7

15.6

16.5

24.8

4.4
6.8

0.0 13.6

12.5

1.0

35.3
0.0

20

1.0

18.3

19.7
9.0 9.7

20.2
14.3

31.1

33.2
12.3
3.0 2.5

9.7

2.6

2.9

Increasing investments

OthersConsidering exiting the China
marketAs of survey in August - September 2018 (n=432)

Delaying or canceling investment
decisionsNo impact

Considering relocation of some or
all manufacturing out of the US

Considering relocation of some or
all manufacturing out of China

Adjusting supply chain by seeking
to source components and/or
assembly outside the US

Adjusting supply chain by seeking
to source components and/or
assembly outside China

Measures alredy implemented (n=160)

0

30.2
30.9
25.2
22.7

0.0
Reconstruction of business in
China of "Procurement in China
for Chinese market" (note)othersStrengthening of informationgathering system

Lobbying to domestic andoverseas governments/economic
industrial associations, etc.

Measures considering implementing in the future (n=206)

Change (partially) of saledestination country/region

No particular measurestaken/considered

Cost saving efforts throughproductivity
improvement/optimization

Reviewing content of own
products/services

Price increase of own
products/services

Change (partially) of production
country/region of own products(only manufacturing industry)

Change (partially) of
procurement country/region ofother companies' products

0

7.3

6.9

8.8

4.4

Others20

3.8

As of survey in Jan. - Feb. 2019 (n=585)(3) [US affiliates in China] [What impact on business strategy](measures)

40

43.8

Considering and/or
already increasing
investment in China(note)

40(M ultiple
answers, %)Considering and /oralready decreasing
investment in China(note)(Multiple answers, %)2.0 10.9 8.0

4.0

Delayedinvestment/capital
expenditure decisions(note)

As of survey in September 2018 (n=193)(1)-2 [Japanese companies (headquarters) having production base only in China][What measures are "already implemented" or "scheduled to be considered"]

14

Delayedinvestment/expansion
decisions

No changes, monitoring
the situation(n=215)

Moved or are moving
relevant production outof the US

Moved or are moving
relavant production of
China

Change of saledestination

No change

Change of suppliers

23.7

80
60
40
20
0

No impact (note)

Change ofproduction base(including partial)

21.4

Others7.4

Change of suppliers

0

36.7

8.8

Not sure

40
20(M ultiple
answers, %)(1)-1 [Japanese companies (local affiliates) in China]"What concrete measures are to be taken"(Multiple answers, %)As of survey in May 2019 (n=239)

Note: 1) The survey conducted; for (1)-1 during Oct. 26 - Nov. 9, for (1)-2 during Nov. 19 2018 - Jan.4 2019, the (2) survey in Sep. 2018 was conducted through Sep. 3, the survey in Jan. - Feb 2019 was done for 4 weeks in Jan. - Feb., the (3)survey in Aug. - Sep. 2018 was during Aug.29 -Sep.5, and the survey in May 2019 was during May 16 - 20. 2) Subject companies of the survey are (1)-1: Japanese companies (local affiliates) in China (excluding Hong Kong and Macau), (1)-2:
Japanese Companies (headquarters) having production base only in China (excluding Hong Kong and Macau), (2): member companies of EU Chamber of Commerce in China, (3): member companies of US Chamber of Commerce in China andShanghai who have production base in China, 3) Regarding question (2), ”what impact was caused to business strategy?" is the question of only the survey in Jan - Feb. 2019, but it was organized being regarded as same meaning of the questionof the survey in September 2018. Regarding answering choices, "Postponement of decision making of investment or capital investment" is a choice of only the survey in May 2018, "No impact," "Investment reduction in China," "Investment
expansion in China" are choices of only the survey in Jan. - Feb. 2019. "Reconstruction of business in China of [Procurement in China for Chinese market]" of (3) is a choice of only the survey in May 2019. 4) Refer to each survey described in "Source" for other details.
Source: (1)-1 "Impact of protectionist moves such as tariff hikes on Japanese overseas affiliates" (JETRO), (1)-2 "Survey on the International Operations of Japanese Firms" (JETRO), (2) European Chamber survey and analysis on US-China
tariff effects (EU Chamber of Commerce in China, released on September 13, 2018) and "European Business in China Business Confidence Survey 2019" (EU Chamber of Commerce in China, released on May 20, 2019), (3) Joint press releasematerials about the impact of US and Chinese tariff measures on US affiliates in China (US Chamber of Commerce in China and in Shanghai, released in September, 2018 and on May 22, 2019)

Copyright (C) 2019 JETRO. All rights reserved.

Chapter 1 Section 4 Impact of trade protectionism

23

Southeast Asia as a candidate for transferring production bases


Although a number of foreign-affiliated companies in China did not have plans to transfer their production bases when asked insurveys, some companies had begun to review their production system. Should the decision be made to transfer production and bases
to other countries in response to protectionism, foreign-affiliated companies in China listed Southeast Asia as a candidate location.
Candidate regions where German and US companies in
China are considering transferring production sites(1) German-affiliated companies in
China
Countries and regions where companies
have decided to transfer production sites in
response to protectionism within the past
two years(Multiple answers allowed, ％)20

Unsure
5.3%

13.2

5.7

1.9

3.8
Other

AfricaCentral/SouthAmerica

United States

Central andEasternEuropeWesternEurope（n=379）India

020.8 20.8

For Chinese market

34.0 32.1

Southeast
Asia

Have notdecided totransfer
80.9%40Time ofannoucement

Latin
America*

EuropeEast Asia

United States

IndianSubcontinent*

Elsewhere

Southeast
Asia

No plans to relocate
manufacturing
facilities(2) US-affiliated companies in China
Destination countries and regions where companies have alreadytransferred or are considering transferring production sites in response toprotectionism(Multiple answers allowed、％)
80 64.6
60.3
60
24.7
6.3
10.5
8.4
40
3.8
18.5
5.9
4.2
10.4
6.3
6.0
4.2
4.2
3.9
20
0

Results of research from Aug. to Sep., 2018
(n=432)
Results of research in May, 2019 (n=239)

Company

Head officelocation

Field

OutlineJul. 2018

Tesla

US

Electric vehicles

Apr. 2019

Harley-Davidson

US

Motorcycles

May. 2019

BMW Group

Germany

Automobiles

May. 2019

Ford Motor Company

US

Automobiles

Jul. 2018

Volvo Cars
（Zheijiang Geely

Sweden(China)Automobiles

Group Holding）

For US market(1) German-affiliated companies in
China
The ratio of companies which havedecided to transfer production sites from
China in response to protectionism (%)
Have decided
to transfer
13.8%•Trends of global companies which were affected by additionaltariff measures by the US and China (major cases)

Oct. 2018

Nidec Corporation

Japan

MotorsFeb. 2019

TCL Corporation

China

TV

May. 2019

Ricoh Company

Japan

Multifunction
printers

Constructed an EV production plant in thesuburbs of Shanghai
Moved its motorcycle production from the US to
ThailandMoved its SUV production from the US to
China (Shenyang)
Planning to start production of a new model car(Lincoln) in China
Moved its SUV production from China toEuropeMoved its production of cars and homeelectronic parts for the US from China to
MexicoStarted construction of TV production plants in
Vietnam for domestic sales and the US market
Moved main production of main multifunction
printers for the US market to Thailand from
China
Moved most production of running shoes from
China to Vietnam

Brooks Running
US
Shoes
Company
Sharp Corporation
Moved a part of production of notebook PCs（Foxconn Technology Japan
Jun. 2019
PCs(Taiwan)from China to Vietnam
Group）
Note: Some cases may include production other than for the Chinese or US market.
Source: Media coverage and press releases
May. 2019

Note: 1. Duration: (1) From August 27 to October 22, 2018; (2)The periods of research are from August 29 to September 5, 2018, and from May 16 to 20, 2019.
2. Target companies are (1) members of the German Chamber of Commerce and Industry in China with production sites in China, and (2) members of the US Chamber of Commerce and Industry in China and Shanghai with production sites in
China.
3. In graph (2), "Indian Subcontinent" includes India, Bangladesh, Pakistan and Sri Lanka, and "Latin America" includes "Mexico". (Research in May 2019 was done only in "Mexico".)
4. For other details, refer to the documents below.
Source: (1)"German Business in China Business Confidence Survey"（The Delegations of German Industry and Commerce in China), (2)"Impact of US and Chinese Tariffs on American Companies in China"（AmCham China and AmCham
Shanghai）

Copyright (C) 2019 JETRO. All rights reserved.

24

Chapter 2: Global FDI and Japan’s FDI

Chapter 2 Section 1 Global FDI

25

Global direct investment decreases over 10%
According to the United Nations Conference on Trade and Development (UNCTAD), global inward FDI in 2018 decreased by
13.4% from the previous year to $1,297.2 billion (on a balance of payment basis, net, flow). Inward FDI in developed countries fellby 26.7% to $556.9 billion, contributing 13.5 percentage points to the worldwide decline. It is at the lowest level in 14 years since
2004.
FDI for major economies/regions (2018) (on a balance of payment, net, flow)

Trends in global inward FDI (net and flow)(Billion USD)
2,200

Inward FDI

FDI in developed countries

2,000

FDI in emerging and developing countries

AmountGlobal cross-border M&A

1,800

Global cross-border greenfield investment
Developed economies

1,600
1,400
1,200
1,000
800
600
400

2003

04

05

06

07

08

09

10

11

12

13

14

15

16

17

Top 10 countries/regions in the world in terms of
FDI (2018)18(year)(Unit: Million USD)
Inward FDI
Outward FDI
1 United States
251,814 Japan
143,161
2 China
139,043 China
129,830
3 Hong Kong, China
115,662 France
102,4214 Singapore
77,646 Hong Kong, China
85,1625 Netherlands
69,659 Germany
77,076
6 United Kingdom
64,487 Netherlands
58,9837 Brazil
61,223 Canada
50,455
8 Australia
60,438 United Kingdom
49,8809 Spain
43,591 Korea, Republic of
38,917
10 India
42,286 Singapore
37,143
Note: Excluding financial centers in the Carribean region
Source: Data of UNCTAD

Total

0

Note: 1. The figures for developed countries were summed from those of 39 countries/regions based on the categories of UNCTAD.
2. The figures for emerging and developing countries are those of the world (excluding the financial center in the Caribbean region)
minus those of developed countries.
Source: Data from UNCTAD and Thomson Reuters

Emerging and developing economies

200

US
CanadaEU
Netherlands
UK
Spain
Switzerland
Australia
Japan
East Asia
China
Hong Kong
South Korea
TaiwanASEAN
Singapore
Indonesia
Vietnam
India
Central and South America

BrazilMexicoCIS
RussiaMiddle East
TurkeyUAE
AfricaEgypt
South Africa
Developed economies
Emerging/developing economies

World

251,814
39,625
277,640
69,65964,48743,591-87,21260,4389,858
424,829
139,043
115,662
14,4796,998
148,646
77,64621,98015,50042,286
146,720
61,22331,60425,62013,332
29,291
12,944
10,38545,902
6,798
5,334
556,892
740,261
1,297,153

Increase
rate
-9.2
59.6
-18.5
19.7
-36.3
108.4
42.9
-5.5
3.6
3.7
4.5
-19.2
112.6
3.1
2.5
6.8
9.9
6.0
-5.6
-9.4
-1.5
-36.2
-48.6
3.2
12.8
0.3
10.9
-8.2
165.8
-26.7
0.3
-13.4

Composition
19.4
3.1
21.4
5.4
5.0
3.4
4.7
0.8
32.8
10.7
8.9
1.1
0.5
11.5
6.0
1.7
1.2
3.3
11.3
4.7
2.4
2.0
1.0
2.3
1.0
0.8
3.5
0.5
0.4
42.9
57.1
100.0

Contribution
-1.7
1.0
-4.2
0.8
-2.5
1.5
-8.4
1.2
0.0
1.0
0.3
0.3
-0.2
0.2
0.3
0.1
0.1
0.1
0.2
-0.6
-0.4
0.0
-1.0
-0.8
0.1
0.1
0.0
0.3
0.0
0.2
-13.5
0.1
-13.4

Value
-63,550
50,455
390,388
58,98349,88031,62026,9283,635
143,161
341,534
129,830
85,162
38,91718,02469,60137,143
8,139
598
11,037
6,515-13,036
6,858
37,21136,44549,175
3,608
15,079
9,801
324
4,552
558,444455,728
1,014,172(Unit: Million dollars, %)Outward FDI
Increase
ComContrirate
positionbution
-25.5
-36.8
5.0
-2.1
-5.4
38.5
-1.6
110.5
5.8
2.2
-57.6
4.9
-4.7
-20.9
3.1
-0.6
4.3
9.5
0.4
0.0
-10.8
14.1
-1.2
-5.5
33.7
-1.4
-18.0
12.8
-2.0
-1.8
8.4
-0.1
14.2
3.8
0.3
56.0
1.8
0.5
-1.7
6.9
-0.1
-15.0
3.7
-0.5
291.8
0.8
0.4
24.6
0.1
0.0
-0.9
1.1
0.0
-82.1
0.6
-2.1
-2.1
67.7
0.7
0.2
-1.8
3.7
0.0
6.7
3.6
0.2
26.9
4.8
0.7
37.0
0.4
0.1
7.2
1.5
0.1
-26.0
1.0
-0.2
62.6
0.0
0.0
-38.2
0.4
-0.2
-39.6
55.1
-25.7
-8.9
44.9
-3.1
-28.9
100.0
-28.9

Note: 1) T he figures for developed economies are summed from those of 39 economies/regions based on the categories of UNCT AD.
2) T he figures for emerging and developing economies derived by subtracting developed economies from world (excluding Caribbean financial centers).
3) T he figures for East Asia are summed from those of China, South Korea, T aiwan, Hong Kong, and ASEAN.
4) T he figures of Central and South America are those excluding financial centers in the Caribbean.
5) Due to the difference in FDI data compilation, the figures for Japan (Directional principle) in the table do not correspond to "Japan`s FDI" (Asset and Liabilities
6) “-” before the values indicates withdrawal excess.
Source: United Nations Conference on T rade and Development (UNCT AD)

Copyright (C) 2019 JETRO. All rights reserved.

Chapter 2 Section 1 Global FDI

26

Main reason: repatriation of earnings due to the US tax system revision
The large-scale tax system revision in the US is the main factor of the significant decline in global inward FDI in 2018. In the US,
the corporate tax has decreased since 2018; in addition, a one-time tax on overseas retained earnings of US companies (15.5% for
cash, 8% for others) has been imposed. As a result, the earnings that US companies retained overseas, including their affiliates in
Europe, have been returned to the country.

Change in US outward FDI (net and flow)

Change in inward FDI in Euro area, Switzerland, and Ireland (net,flow)(Billion dollars)
500

千(Billion USD)
200

Switzerland

150

400

100

300

50

IrelandEuro area

200

0

100

-50

-100

Reinvestment of earnings

-150
-200

0

Outward FDI

-100

-200

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2014

Source: BOP (IMF)

2015

2016

2017

2018

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2014

2015

2016

2017

2018

Note: Euro area includes Ireland.
Source: BOP (IMF)

Copyright (C) 2019 JETRO. All rights reserved.

Chapter 2 Section 1 Global FDI

27

Increase in cross-border greenfield investment toward ASEANThe number of global cross-border greenfield investments announced in 2018 increased by 7.2% from the previous year (13,855
cases) to 14,847 cases. Among major economies, the number of investments toward ASEAN showed a remarkable increase. In thecase of cross-border greenfield investment in ASEAN by companies from outside of the region, the increase in investment from the
US and China is particularly noticeable. Chinese companies’ investments in ASEAN gained strength in 2018.

Change in global cross-border greenfield investment

Cross-border greenfield investment in ASEAN by companies
outside the region(Cases)(Cases)
2,000
1,800

18,000World (right axis)

1,600

toward US

toward China

toward ASEAN

16,00014,0001,400(Cases)
350

Japan

China

South Korea

Taiwan

US

India

300
250

12,000

1,200

10,000

1,000
800

600

8,000

150

6,000

100

4,000

400

200

50

2,000

200

0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 (Year)

Source: fDi Markets (Financial Times)

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018(Year)

Note: The classification of countries/regions is determined by the location of the parent
company's head office.
Source: fDi Markets (Financial Times)
Copyright (C) 2019 JETRO. All rights reserved.

Chapter 2 Section 1 Global FDI

28

Acquisitions of foreign companies by Chinese companies slow down

Although acquisitions of foreign companies by Chinese companies had rapidly increased since 2015, the completed values of crossborder M&A decreased in 2018. The top cross-border M&A deals by Chinese companies targeting Western companies cover a wide
variety of industrial sectors, such as transportation, software, real estate, and electronics, including the acquisition of the Swisschemical giant Syngenta ($44 billion), as well as distribution infrastructure and advanced technology companies.
Top Western company acquisitions by Chinese companies（2015-2018）
Date

百Change in acquisitions of foreign companies by Chinesecompanies(Cases)(100 million dollars)
3,000

1,200

Announced values
2,500

Completed values

1,000

2,000

No. of announced
cases (right axis)
No. of completed
cases (right axis)

800

1,500

600

1,000

400

500

0

Acquiring companies
China National Chemical Corp

Chemicals and Allied
Products

Dec. 2017

02

03

04

05

06

07

08

09

10

11

12

13

Note: 1) The nationality of the acquiring company is that of the ultimate parent company.
Source: Thomson Reuters

14

15

16

17

0

18 (Year)Acquired companies

Nationality

Industry sector
Chemicals and Allied
Products

Value
Post-deal(Millionstakedollars）(%)

Syngenta AG

Switzerland

43,988

94.7

China Investment Corp

Investment & Commodity
Firms, Dealers, Exchanges

Logicor Ltd

Transportation and Shipping
United Kingdom(other than air)

13,742100.0

Apr. 2017

Bohai Capital Holding Co Ltd

Business Services

C2 Aviation Capital LLC

United States Business Services

10,380100.0Feb. 2018

Zhejiang Geely Hldg Grp Co

Investment & Commodity
Firms, Dealers, Exchanges

Daimler AG

Germany

Transportation Equipment

8,948

9.7

Jul. 2016

Tencent Holdings Ltd

Investment & Commodity
Firms, Dealers, Exchanges

Supercell Oy

Finland

Prepackaged Software

8,600

84.3

Nov. 2015

China National Chemical Corp

Investment & Commodity
Firms, Dealers, Exchanges

Pirelli & C SpA

Italy

Rubber and Miscellaneous
Plastic Products

7,065

100.0

Mar. 2016

Anbang Insurance Group Co Ltd

Insurance

Strategic Hotels & Resorts Inc

United States

Investment & Commodity
Firms, Dealers, Exchanges

6,500

100.0

Mar. 2017

Hainan Province Cihang（HNA
Tourism Group Co Ltd）

Transportation andShipping (other than air)

Hilton Worldwide Holdings Inc

United States Hotels and Casinos

6,497

25.0

Dec. 2016

Tianjin Tianhai Invest Co Ltd

Transportation andShipping (other than air)Ingram Micro Inc

United States

Wholesale Trade-Durable
Goods

6,258

100.0

Jun. 2016

Qingdao Haier Co Ltd

Machinery

General Electric Co-Appl Bus

Electronic and Electrical
United States
Equipment

5,600

100.0

Jan. 2017

Midea Group Co Ltd

Electronic and Electrical
Equipment

KUKA AG

Germany

4,381

94.5

Nov. 2016

Zhuhai Hengxin Fengye Tech

Investment & Commodity
Firms, Dealers, Exchanges

Lexmark International Inc

Computer and Office
United States
Equipment

3,605

100.0

Jan. 2018

Zhejiang Geely Hldg Grp Co

Transportation Equipment

Volvo AB

SwedenTransportation Equipment

3,587

8.2

Mar. 2016

Dalian Wanda Group Co Ltd

Retail Trade-General
Merchandise and Apparel

Legend Pictures LLC

Motion Picture Production
United Statesand Distribution

3,500

-

Sep. 2017

Yan Kuang Group Co Ltd

MiningCoal & Allied Industries Ltd

Australia

Mining

3,100

100.0

Jun. 2017

Suzhou Qingfeng Invest Mgmt Co

Investment & Commodity
Firms, Dealers, Exchanges

Global Switch Holdings Ltd

United Kingdom Prepackaged Software

2,968

49.0

Feb. 2016

Hainan Airlines Co Ltd Labor（HNAGroup Co Ltd）

Air Transportation andShipping

Swissport International AG

Switzerland

Air Transportation andShipping

2,820

100.0

Investor Group

Investment & Commodity
Firms, Dealers, Exchanges

NXP Semiconductors-Standard

Electronic and Electrical
United States
Equipment

2,750

100.0

Jul. 2018

Tsinghua Unigroup Ltd

Electronic and Electrical
Equipment

Linxens SA

FranceElectronic and Electrical
Equipment

2,623

100.0

Jan. 2016

Bohai Leasing Co Ltd

Business Services

Avolon Holdings Ltd

Ireland-Rep Business Services

2,533

100.0

Jun. 2017200

2000 01

Industry sector

Feb. 2017

Machinery

Note: 1) The nationality of the acquiring company is that of the ultimate parent company. 2) Ranking with one transaction value. 3) The definition of industry sectors is based on that of Thomson
Reuters.
Source: Thomson Reuters

Copyright (C) 2019 JETRO. All rights reserved.

Chapter 2 Section 1 Global FDI

29

Tide of tightening investment regulations in Western countries

One of the reasons why the acquisitions of foreign companies by Chinese investors slowed down is the tide of tightening investment
regulations, especially in Western countries. The US established the “Foreign Investment Risk Review Modernization Act(FIRRMA)” to strengthen the functions of the Committee on Foreign Investment in the United States (CFIUS) which screens foreigncompanies' investment in the US. The EU will also introduce a screening system for inward direct investment from outside theregion. Behind these movements lie national security concerns, including China’s gaining access to advanced technology andincreasing influence on public infrastructure.
Tide of tightening regulations on inward FDI in Western countries
Countries/
regions

US

EU

Date
Oct. 2018

The Department of the Treasury announced a pilot program to implement some provisions of the FIRRM A in advance, targeting the investments in US companies that deal with critical technologies
related to 27 specific industries including aircraft manufacturing. The pilot program requires the investors to submit applications prior to investments.

Aug. 2018

The “Foreign Investment Risk Review M odernization Act (FIRRM A),” which strengthens the function of the CFIUS that screens foreign companies' investment in the United States, was established inAugust 2018 as part of the National Defense Authorization Act (NDAA) for FY2019.

Nov. 2017

A bill to strengthen the CFIUS's authority was submitted to the US Congress.

Sep. 2017

Based on a recommendation of the Committee on Foreign Investment in the United States (CFIUS), President Trump signed an executive order to suspend theacquisition of US semiconductor company Lattice Semiconductor by a Chinese investment fund.

Apr. 2019

A regulation concerning the screening of inward direct investment from outside the EU went into effect (starting in October 2020). From the perspective of national
security and public order, the investments (acquisitions) in the industrial fields that are strategically critical for the EU will be examined.

Mar. 2019

The Council of the European Union approved the proposed regulation for screening inward direct investment from outside the region.

Feb. 2019

The European Parliament approved the proposed regulation for screening inward direct investment from outside the region.

Nov. 2018
Sep. 2017

The European Parliament, the Council of the European Union, and the European Commission announced a tentative agreement on the proposed regulation that
establishes the screening framework for investment from outside the region.
European Commission President Jean-Claude Juncker's State of the Union Address proposed a “screening framework” that examines investments in the regional
infrastructure and high-tech fields by investors outside the region.

Apr. 2018

The Bundesrat adopted a resolution that it should expand the subjects of examination for the restrictions on acquisition of domestic companies by foreign investors
stipulated by the Foreign Trade and Payments Ordinance.

Jul. 2017

A revision to the Foreign Trade and Payments Ordinance was approved at a Cabinet meeting to strengthen the regulation on acquisition of domestic companies by foreign investors. From the perspectiveof maintaining public order and security, the industry categories subjected to examination by the Federal M inistry of Economic Affairs and Energy were expanded and documented, and the examination
period was extended.

Feb. 2018

Prime Minister Édouard Philippe announced his policy to expand the strategic fields for restrictions on foreign investment in high-tech fields such as AI, space, anddata storage. Foreign investors are required to obtain prior permission upon acquisition.

May. 2014

The French government announced a cabinet order to expand the industry sectors that require prior permission for investment in France by foreign investors to include energy, water
resources, transportation, electronic communication service, etc. (went into effect the same month).

May. 2018

The government announced the rejection of the acquisition proposal for a major Canadian construction company by a subsidiary of China Communications
Construction Company (CCCC) because of national security concerns.

Mar. 2015

The revised Investment Canada Act extended the screening period for the acquisitions in national security related fields from the previous 130 days up to 200 days.

Germany

FranceOutlineCanadaSource: "Biznews" (JETRO), etc.

Copyright (C) 2019 JETRO. All rights reserved.

Chapter 2 Section 2 Japan’s outward FDI

30

Japan’s outward FDI decreases by 8.5% year-on-yearJapan’s outward FDI in 2018 decreased by 8.5 % compared to the previous year to $159.1 billion (on a balance of payment basis,
net, flow). This is partly because the outward M&A by Japanese companies that had continued to expand has slowed down. By
major country/region, investment toward the US that was the largest investment destination significantly declined to 56.5%, and thatto the EU decreased by 16.3%. On the other hand, investment toward ASEAN highly grew by 33.2%.

Japan’s outward FDI by country/region (net, flow)

Change in Japan’s outward FDI by type (net, flow)
190.0 (Billion dollars)
170.0
150.0
130.0
110.0

2017

Debt instruments

Asia

Reinvestment of earnings
Equity capital
Outward FDI

2018

Composition(Unit: Million dollars, %)2019
Jan-May（ P)

Increase rate

Composition

Increase rate

40,90552,57433.0

28.5

24,923

19.0

China

11,122

10,755

6.8

-3.3

5,929

4.5

45.5
62.5

South Korea

1,840

4,807

3.0

161.3

888

0.7

-14.9

ASEAN

22,33029,75418.7

33.2

15,044

11.5

53.6

Singapore

9,478

15,909

10.0

67.8

3,136

2.4

-37.2

Thailand

4,917

6,582

4.1

33.9

1,898

1.4

-28.7

Indonesia

3,622

3,255

2.0

-10.1

5,918

4.5

421.7

90.0

Malaysia

909

770

0.5

-15.3

2,483

1.9

-

Philippines

1,098

989

0.6

-10.0

553

0.4

110.1

70.0

Vietnam
India

2,014

1,841

1.2

-8.6

907

0.7

2.1

1,500

3,218

2.0

114.5

1,830

1.4

15.2

North America

50,426

24,070

15.1

-52.3

28,152

21.4

19,489.949,601

21,570

13.6

-56.5

26,18719.9-

12,086

24,646

15.5

103.9

287

0.2

-98.1

Mexico

1,328

1,321

0.8

-0.6

392

0.3

-42.6

Brazil

-1,423

2,203

1.4

-

920

0.7

-0.8

Oceania

5,010

1,717

1.1

-65.7

3,547

2.7

17.3

50.0

US
Central and South America

30.0
10.0

Note: 1) The yen-based value is converted to dollars by quarter, using the average quarterly Bank of Japan
interbank rate. 2) Figures are based on BPM6. 3) The cumulative total for 2018 is a preliminary figure.
Source: "Balance of Payments" (Ministry of Finance, BOJ)

18.1-5
19.1-5 (P)Australia

96
97
98
99
2000
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18

-10.0

3,977

2,863

1.8

-28.0

3,180

2.4

24.3

Europe61,66353,865

33.8

-12.6

73,676

56.1

220.5

EU

58,90449,313

31.0

-16.3

12,033

9.2

-42.1

UK

22,32821,437

13.5

-4.0

292

0.2

-97.7

Netherlands

19,683

9,316

5.9

-52.7

2,887

2.2

-15.9

173,856

159,147

100.0

-8.5

131,350

100.0

120.9

World

Note: 1) The yen-based value is converted to dollars by quarter, using the average quarterly Bank of Japan interbank rate.
2) The cumulative total for 2018 is a preliminary figure.
Source: "Balance of Payments" (Ministry of Finance, BOJ)

Copyright (C) 2019 JETRO. All rights reserved.

Chapter 2 Section 2 Japan’s outward FDI

31

Total values of outward M&A by Japanese companies decreasing

Cross-border M&A deals, which have great impact on Japan’s outward FDI, declined by 23.8% ($67.5 billion) in 2018, dropping forthe first time in four years, due to a decreasing number of large-scale deals mainly toward the US. In the first half of 2019, however,it rapidly increased by 3.2 times compared to the same period in the previous year. The reason is that Takeda Pharmaceutical Co.
acquired Irish pharmaceutical Shire for $76.9 billion. The value was the highest ever among overseas M&A deals by Japanesecompanies.

Japan's top outward M&A deals (since 1990)

Change in Japan’s outward M&A values and cases(Billion dollars)(Cases)

120.0

700

North America
EU28

100.0

600

East Asia
Others80.0

500

No. of cases (rigt axis)
400

60.0

300
40.0

200
20.0

0.0

100

2000 01

02

03

04

05

06

07

08

09

10

11

12

13

14

15

16

17

18

18 19
1-6 1-60(Year)

Date(Completion)

Acquiring companies

Acquired companies

Industry sector

Nationality

Value(million dallars)

Post-deal
stake (%)

Jan. 2019 Takeda Pharmaceutical Co Ltd

Shire PLC

Ireland-Rep Drugs

76,886

100.0

Sep. 2016 Softbank Group Corp

ARM Holdings PLC

United Kingdom

Electronic and Electrical Equipment

30,751

100.0

Jul. 2013 SoftBank Corp

Sprint Nextel Corp

United States

Telecommunications

21,64078.0

Apr. 2007 JTI (UK) Management Ltd Gallaher Group PLC

United Kingdom

Tobacco Products

18,800100.0

Apr. 2014 Suntory Holdings Ltd

Beam Inc

United States

Food and Kindred Products

15,688100.0

Sep. 2011 Takeda Pharmaceutical Co Ltd

Nycomed Intl Mgmt GmbH Switzerland Drugs

13,686

100.0

Jan. 2001 NTT DoCoMo

AT&T Wireless Group

United States

Telecommunications

9,805

16.0

May. 2008 Mahogany Acquisition Corp M illennium Pharmaceuticals Inc

United States

Drugs

8,128

100.0

May. 1999 JT

Netherlands Tobacco Products

7,832

100.0

RJ Reynolds International

Jun. 2011 Mitsubishi UFJ Finl Grp Inc Morgan Stanley

United States

Commercial Banks, Bank Holding Companies

7,800

22.4

Mar. 2017 Asahi Group Holdings Ltd Plzensky Prazdroj As

Czech Republic

Food and Kindred Products

7,774

100.0

Jan. 2018 Investor Group

United States

Prepackaged Software

7,670

17.5

Oct. 2015 Tokio Marine & Nichido Fire HCC Insurance Holdings Inc

Uber Technologies Inc

United States

Insurance

7,541

100.0

Jan. 1991 Matsushita Electric Industrial MCA Inc

United States

Motion Picture Production and Distribution

7,086

100.0

Mar. 2019 Renesas Electronics Corp

United States

Electronic and Electrical Equipment

6,494

100.0

Business Services

6,321

100.0

Integrated Device T echnology

Note: 1) The figures of East Asia are summed from those of China, South Korea, Taiwan, Hong Kong and ASEAN. 2) The figures for EU aresummed from those of 28 EU member countries.

Sep. 2000 NTT Communications Corp Verio Inc

United States

Source: Thomson Reuters (as of Jul. 3, 2019)

Mar. 2017 Sompo Japan Nipponkoa Ins Inc Endurance Specialty Holdings

Bermuda Insurance

6,301

100.0

May. 2015 Japan Post Co Ltd

Toll Holdings Ltd

Australia Transportation and Shipping (other than air)

6,021

100.0

Jan. 2019 Softbank Group Corp

WeWork Cos Inc

United States

Aug. 2015 Chia Tai Bright Investment CITIC Ltd

Real Estate; Mortgage Bankers and Brokers

Hong Kong Investment & Commodity Firms, Dealers, Exchanges

6,000

-

5,924

21.5

Note: 1) Ranking with one transaction value. 2) The company names are those at that time.
Source: Thomson Reuters

Copyright (C) 2019 JETRO. All rights reserved.

Chapter 2 Section 2 Japan’s outward FDI

32

Increasing executed amount of FDI toward ASEAN


Looking at the changes in the executed amount of Japan’s FDI toward China, the US, ASEAN, and Mexico in which many Japanesemanufacturers have invested, investment toward ASEAN is expanding. A similar trend can be seen in the increasing number ofoutward greenfield investments by Japanese companies. In the context of rising production costs in China, some Japanese companies
considering diversified investments have been promoting investment in ASEAN after the invocation of additional tariffs.

Change in the executed amount of Japan’s outward FDI(China, ASEAN, US, Mexico）

Change in the number of greenfield investments by Japanesecompanies(Million dollars)(Million dollars)
6,000

20,000China

MexicoASEAN

US (right axis)(Cases)30
US18,0005,000

16,00014,000

4,000

China

Mexico

ASEAN

25

20

12,0003,000

10,000

15

8,000
2,000

6,000
4,000

1,000

10

5

2017

2018

2019

0

(Year)

0

Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar

0

Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May

2,000

2017

2018

2019
(Year)

Note: 3-month backward moving averages
Source: "Balance of Payments" (Ministry of Finance, BOJ)

Note: 3-month backward moving averages
Source: fDi Markets (Financial Times)

Copyright (C) 2019 JETRO. All rights reserved.

Chapter 2 Section 2 Japan’s outward FDI

33

Outward FDI stock exceeding 30% of GDP, unfavorably with other countries
Change in Japan’s outward FDI stockJapan’s outward FDI stock was $1,645.9 billion as of the endof 2018, increasing by 5.9% from the end of the previous year.
The ratio to GDP also rose to 33.1% although the figure stays
at a low level in comparison to other major economies.
In contrast, the rate of returns on Japan’s outward FDI is notmuch different from those of other major countries; thus, if theoutward FDI stock continues to grow, direct investment
income credit are expected to increase steadily.

(%)(Billion dollars)

1,800

Debt instruments

1,600

29.6

Reinvestment of earnings

28.6

Ratio of FDI stock to GDP(right axis)

1,200

30.0

25.0

23.7
18.4
15.4

1,000

20.0

14.2 13.8

800

11.7
600
400

35.0

27.6

Equity capital

1,400

33.1
32.1

5.8

6.7

7.6
6.0

4.9

6.1

7.2 7.1 7.5

8.8

15.0

12.0

10.3
10.0

5.0

200
0

0.0
(Year)
Note: Based on the BPM6.
Sources: "International Investment Position of Japan" (Ministry of Finance, BOP), Cabinet Office statistics

Ratio of outward FDI stock to GDP in major countries(%)

FranceGermany

Japan

South Korea

UK

US

100.0

(%)
10.0

Rate of returns on outward FDI in major countries

9.0

90.0
80.0

76.9

70.0
60.0

8.0

7.7

7.0

68.0

6.7

6.0

6.0

59.6

5.0

50.0

5.2
4.7

4.0

3.4

36.7

3.0

30.0

33.1

2.0

FranceGermany

Japan

20.0

23.9

1.0

South Korea

UK

US

40.0

0.0

10.0
0.0

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018
(Year)

Sources: "BOP" (IM F), "WEO, April 2019" (IM F), : "International Investment Position of Japan" (M inistryof Finance, BOJ), Cabinet Office statistics

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017 2018(Year)

Note: 1) (Rate of returns on outward FDI) = (Current direct investment income credit) / (Stock of outward
direct investment at the beginning and end of year) x 100 (%)2) No data of the United Kingdom for 2017
Sources: BOP (IMF), "Balance of Payment Statistics" (Ministry of Finance, BOP)

Copyright (C) 2019 JETRO. All rights reserved.

Chapter 2 Section 2 Japan’s outward FDI

34

Japanese companies’ overseas sales ratio remaining at high levelsAccording to JETRO’s calculations based on the earnings summaries and financial reports of 182 Japanese companies from thefiscal year December 2018 to March 2019, the overseas sales ratio of Japanese companies (see note) was 59.3%, increasing from
FY2017 (58.4%) to maintain a high level. In terms of the composition of overseas sales by region, the Americas was the highest at
26.3%, up from the previous year, followed by Asia-Pacific at 19.4%. By industry, the overseas sales of industrial machinery,transportation equipment, and electrical equipment exceeded a 60% share.
Note: Sales to overseas customers from a Japanese origin (exports) are not included in overseas sales.

Share of Japanese companies’ sales by region
Fiscal year
(No. of companies)
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018

(547)
(581)
(592)
(624)
(669)
(724)
(751)
(781)
(817)
(844)
(320)
(236)
(221)
(211)
(212)
(219)
(218)
(196)
(182)

Domestic Overseas Americas
71.4
68.5
67.2
66.5
65.4
64.9
62.3
60.8
62.6
63.3
54.0
53.1
51.3
45.6
43.1
42.2
42.3
41.6
40.7

28.6
31.5
32.8
33.5
34.6
35.1
37.7
39.2
37.4
36.7
46.0
46.9
48.7
54.4
56.9
57.8
57.7
58.4
59.3

13.4
14.7
14.9
14.1
13.6
13.8
14.5
14.2
12.7
12.4
18.1
17.7
18.6
21.5
23.5
25.4
25.5
25.0
26.3

(%)

Europe
5.6
6.1
6.6
7.0
7.4
6.9
7.7
9.1
8.6
7.5
8.1
8.9
7.8
9.2
9.2
8.3
8.5
9.0
8.5

AsiaPacific

5.8
6.3
6.8
7.7
8.5
9.5
10.3
10.7
10.8
11.3
15.2
15.0
17.2
18.2
18.7
19.5
18.7
19.3
19.4

(%)
Industry(No of companies)

Other
3.8
4.4
4.5
4.8
5.1
4.9
5.1
5.2
5.3
5.4
4.7
5.3
5.1
5.5
5.5
4.6
5.0
5.1
5.2

Notes: 1) Companies surveyed: The accounting period is from December to March, and segment
information is broken down by location. 2) Figures for FY2018 reflected companies withfinancial statements or securities reports who entered sales figures onto the SPEEDA databaseby the end of May 2019. Note that for some companies, the data was supplemented by theirearning summaries. 3) Percentage = sales of each region/total sales. 4) Surveyed companies
include listed subsidiaries, which were double-counted. 5) Companies which combine multiple
regional sales such as “Americas and Europe” or “Europe and Africa”, were excluded.
Source: SPEEDA and corporate financial statements

Share of Japanese firms’ sales by industry and region (FY2018)

Manufacturing

Domestic Overseas〔154〕

Americas

EuropeAsiaPacific

Other

40.6

59.4

26.7

8.5

19.3

4.8

(+ 0.7)(-0.7)(-0.3)(-0.2)(-0.0)(-0.2)

39.6

60.4

29.5

8.2

17.6

5.1

(+ 0.9)(-0.9)(-0.5)(-0.3)(+ 0.1)(-0.2)

Transport equipment〔41〕

Machinery & electric appliances

〔59〕

38.0

62.0

19.0

10.7

28.2

4.0

(-0.5)(+ 0.5)(+ 0.4)(+ 0.6)(-0.5)(+ 0.1)

Industrial machinery

〔33〕

36.2

63.8

22.1

12.4

25.8

3.6

(-0.8)(+ 0.8)(+ 0.4)(+ 0.7)(+ 0.1)(-0.4)

Electrical equipment

〔23〕

39.9

60.1

16.5

9.3

29.7

4.6

(+ 0.0)(-0.0)(+ 0.2)(+ 0.3)(-1.0)(+ 0.5)Materials/material processed goods
Non-manufacturing

〔38〕

49.5

50.5

11.9

9.9

25.8

2.8

(-0.2)(+ 0.2)(+ 0.2)(+ 0.2)(-0.4)(+ 0.1)

〔28〕

44.6

55.4

7.7

6.3

20.7

20.7

(-0.0)(+ 0.0)(+ 0.9)(+ 0.9)(-2.1)(+ 0.4)
Notes: 1) The manufacturing industry on the SPEEDA database comprises the following major categories: Transportmachinery, machinery and electric appliances, materials/material processed goods, pharmaceuticals and biotechnology,
and food and household goods. Non-manufacturing industry comprises the following broad areas in the same database:Construction and real estate, retail, consumer services, away from home meals/home-meal replacement,
advertising/ICT services, corporate services, intermediate distribution, finance, transport services, and resources andenergy. 2) Industrial machinery is broken down into industrial/production/commercial/heavy machinery manufacturingand Other industrial machinery; Electrical equipment is broken down into information communication/consumer
electronics manufacturing, semiconductor-related/other electronic parts/device manufacturing.
3) Figures in parentheses in the lower part indicate the changes from the sales share from FY2017 (the same
companies as in FY2018 are summed up).
4) The shaded areas show countries/regions whose sales share increased from the previous year.
Source: SPEEDA and corporate financial statements
Copyright (C) 2019 JETRO. All rights reserved.

Chapter 2 Section 3 Japan’s inward FDI

35

2018’s inward investment in Japan increases by 30% from the previous yearJapan’s inward FDI in 2018 (balance of payment basis, net, flow) was $25.9 billion, increasing by 26.7% from the previous year. The
acquisition of Toshiba Memory by a corporate consortium with US-based Bain Capital had a major impact on that.



Although Asia is becoming established as a leading foreign investor in Japan, the amount of investment decreased by 10.8% fromthe previous year, coming to a halt in the recent upward trend.

Japan’s inward FDI by country/region

Trends in Japan’s inward FDI by type45.0

(Million USD, %)($ billion)

2019
Jan-May(P)

5,591

8,426

5,620

636

△ 92

985

797

△ 19.0

796

645.0

983

1,510

△ 328

789

-

576

109.1

703

2,495

848

395

△ 53.4

301

16.0

932

614

1,133

1,949

71.9

335

△ 33.2

20.0

Asia
China
Hong Kong
TaiwanSouth Korea
ASEAN

YoY
change5,015△ 10.8

2,324

3,907

2,975

1,076

△ 63.8528△ 43.315.0

Singapore

1,893

3,236

3,216

△ 296

-

60

100.4

Thailand

335

662

△ 444

1,211

-

315

△ 66.9

4,313

6,880

6,177

5,958

△ 3.5

4,914

-

4,338

6,847

6,229

5,902

△ 5.2

4,849

-

△ 1,957

1,623

2,769

4,399

58.9

2,671

△ 46.0

△ 651

809

242

1,948

706.3

816

△ 62.4△ 5.0

North America
US
Latin America
Oceania
EuropeEU△ 2,264

22,968

5,470

7,223

32.0

9,865

835.8

△ 2,104

22,093

4,047

6,609

63.3

9,094

808.5

△ 10.0

World

5,253

40,942

20,422

25,885

26.7

21,421

108.1

40.0

2015

Debt instruments
Reinvestment of earnings

35.0

Equity capital

30.0

Net

25.0

10.0
5.0

Note: 1) Yen-based values are converted to dollar-based values by JETRO.
2) Figures are based on BPM6. 3) Cumulative total for 2016 is preliminary.
Source: "Balance of Payments" (MOF, BOJ)

18.1-5
19.1-5（P)

96
97
98
99
2000
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18

0.0

2016

2017

2018

YoY
change2,533
23.0

Notes: 1) The yen-based value is converted to dollars by quarter, using the average quarterly Bank of Japan interbank
rate. 2). For after 2014, figures reflect the annual revision. The cumulative total for 2019 is a preliminary figure.
Source: “Balance of Payment Statistics” (Ministry of Finance, Bank of Japan).

Copyright (C) 2019 JETRO. All rights reserved.

Chapter 2 Section 3 Japan’s inward FDI

36

Inward investment balance in Japan exceeds 30 trillion yen for the first timeThe balance of inward investment in Japan was 30.7 trillion yen as of the end of December 2018, surpassing 30 trillion yen for the
first time, with a record high. This has come much closer to the 2020 government target of 35 trillion yen.

The amount of FDI return was $34 billion in 2018, maintaining the high level of recent years. By region, Europe holds the largest
share with over 50%, followed by North America about 30%, and Asia about 20%. The Asia region is enjoying an upward trend.

Change in inward direct investment balance

Balance/GDP (right axis)

2.0

10.0

Note: Based on the BPM6
Sources: "External Assets and Liabilities of Japan" (Ministry of Finance, BOP), Cabinet Office statistics

18

17

16

15

14

13

0.0

12

0.0

0

5.0

11

1.0

10

1.0

15.0

1.3

0.6

28.6%

09

0.8 0.7

1.2

20.0

North
America08

10Europe51.6%

3.4 billion
dolllars(2018)

07

1.9

2.0 2.0

3.0

25.0

06

2.4

2.5

4.0

05

3.0

15

5

3.9 3.904

20

3.7 3.8

Asia
16.7%

03

3.7

4.0

Others
3.2%

30.0

02

4.6 4.7

Regional share

35.0

01

Share capital

5.0

99

Return reinvestment

40.0

2000

5.6
5.3 5.3

Funding with a debt-like nature（Billion dollars）
6.0

98

25

(%)

97

30

(Trillion yen)

96

35

Change in return on Japan’s inward FDI

Source: "Balance of Payment Statistics" (Ministry of Finance, BOP)

Copyright (C) 2019 JETRO. All rights reserved.

Chapter 2 Section 3 Japan’s inward FDI

37

Investment of foreign companies with high affinity for local industrial clusters

According to JETRO’s questionnaire survey, more than 60% of foreign companies are considering expansion to other areas in Japan
than Tokyo for additional investment. These companies cite “closeness to customers” and “existing related industrial clusters” incommon as reasons for the possible. In order to attract more foreign capital, it is necessary to appeal the advantage of local industrial
characteristics.



Looking at greenfield investment in regions, foreign companies with affinity for local industries are expanding into markets, such as
Kanagawa and Aichi Prefectures for automobile parts and Hokkaido and Kyoto for tourism.
Inward greenfield investment cases in local areas

Distinctive local industrial clusters

Industry sector

Kyoto Pref.: International tourist city,
but expanding the applied research ofregenerative medicine, etc. Gaining
much support through industryacademia-government collaboration.
Osaka Pref.: Manufacturing base ofmajor companies that produce steel,machinery, electronic devices, etc.
Many SMEs with special processing
technologies are also located.
Nara Pref.: Taking
advantage of expanded
allocated drug as local
industry, launching the
Kampo Medicine Mecca
Promotion Project.

Aichi Pref.: The world's
largest cluster of nextgeneration automotive
and aerospace industries.
The sales of products has
been the highest for 40
consecutive years.

Mie Pref.: Welcoming
production factories that haveboth functions of R&D andmanufacturing, and that provide
guidance and support fordomestic and overseas factories.

Sources: JETRO's website "Investing in Japan’s local regions," municipal website, etc.

Miyagi Pref.: Based onthe "Miyagi International
Strategic Plan",establishing preferential
and special measures inprivate investment
special zones.

Fukushima Pref.: Working on cutting-edge
technology development under industryacademia collaboration, including AIST's
Fukushima Renewable Energy Institute.
Kanagawa Pref.: Clusters ofindustries includingtransferred Nissan’s Global
Headquarters and MercedesBenz R&D base. Bio ventures
leading the bio industry arealso concentrated.
Shizuoka Pref.: Developing andapplying basic technologies toindustries in order to support
next generation industries
focused on optical technologies.

Chiba Pref.: Closeto the city center,
improving the R&D
environment in
Kazusa Academia
Park, Tokatsu
Techno Plaza, andKashiwanoha area.

Investment
destination

Date

Kanagawa
Sep. 2017
Automobile
Aichi
Jun. 2018
parts
Aichi
Sep. 2017
Hyogo
Nov. 2018
Shizuoka
Feb. 2018
Aircraft parts
Hyogo
Apr. 2018
Aichi
Feb. 2018
Osaka
Aug. 2017
Electronic
Chiba
Jun. 2017
parts
Osaka
Apr. 2018
Kanagawa
Aug. 2017
Biology
Kyoto
Feb. 2018
Kanagawa
Feb. 2018
Kyoto
Aug. 2018
Medicine
Aichi
Jul. 2017
Aichi
May. 2017
Chemistry
Nara
May. 2018
Kanagawa
Sep. 2018
Saitama
May. 2017
Mie
Nov. 2018
Food
MiyagiSep. 2018
Hyogo
Jul. 2017
Hokkaido
Oct. 2017
Hotel/tourism
Hokkaido
Jan. 2018
Kyoto
Apr. 2018
Yamaguchi
Oct. 2016
Renewable
Oita
Aug. 2018energyFukushima
Sep. 2017
Note: Investment values include estimates.
Source: fDi Markets

Companies
Valeo
Forward Engineering
GKN
Airbus Group
Leonardo (Finmeccanica)
Swift Engineering
Pattonair
INNO Instrument
Huawei Technologies
GTT Communications
Agilis Biotherapeutics
Cellink
TC Biopharm
Dishman Pharmaceuticals and Chemicals
Zhejiang Huahai Pharmaceutical Co
OC Oerlikon
ArkemaGCP Applied Technologies
Lotte Group
Pure Salmon
Trident Seafoods
NestleClub Mediterranee
The Pavilions Hotels & Resorts
Ace Hotel
Gunkul Engineeringsaferay
Jamieson Group(Million dollars)
Nationality

Value

FranceGermanyUK
Netherlands
Italy
US
UK
South Korea
China
US
US
Sweden
UK
India
China
Switzerland
FranceUSSouth Korea
Singapore
US
Switzerland
FranceHong Kong
US
ThailandGermany
US

148
36.2
36.2
38.4
38.4
7
7
71.1
44.5
32.1
64.2
53.7
20
7.3
7.3
90.1
90.1
90.1
288
117.25
39.5
39.5
178.9
178.9
178.9
306.6
170.9
170.9

Copyright (C) 2019 JETRO. All rights reserved.

Chapter 2 Section 4 Start-up companies as new business partners

38

Emerging companies show presence in major developed countries

According to the National Venture Capital Association (NVCA), global venture capital (VC) investment reached 254.3 billion
dollars in 2018. Breaking down the amount of VC investment by economy, the highest is the US, followed by China and thenEurope.



When comparing VC investment as a percentage of GDP, that for the US (0.4%), and Israel (0.378%) is more than 10 times higher
than other major developed countries like Japan (0.036%). In recent years, while the ratio for major developed countries overall
has been climbing, it has only seen minute growth in Japan.
VC investments as a percentage of GDP of major
developed countries (2014 - 2017)

VC investments as a percentage of GDP (2017)

（％）
0.0

（％）

0.2

0.3

0.4

0.400

0.4

0.5

0.374
US

0.378

0.35

Seed, start-up/other early stage
Later stage venture
Total(breakdown unknown)

0.3

0.25

0.177

0.2

UK

0.036

0.1

0.400
0.104

Canada0.15
France0.05

Luxembourg

Denmark

Belgium

GermanyJapan

Ireland

Switzerland

Spain

Netherlands

South Africa

FinlandFranceSwedenNew Zealand

UK

South Korea

CanadaIsrael

US

0

0.1

Japan

Germany

0.177
0.036
0.076
0.027
0.055
0.023
0.036
0.023
0.035

0.378

IsraelNote: 1. The percentage for Israel is from 2014, and that for South Africa from 2016. Only that for Japan was
calculated by JETRO from the total GDP and the VC investment amount, on a fiscal year basis (from April to
March of the next year). 2. The growth stage of companies are decided based on OECD categories.
Souce: OECD, Venture Enterprise Center, Japan (VEC)

2014

2015

2016

2017

(year)

Note: Israel is with the data in 2014 only. The 2017 data of Japan was calculated
by JETRO from the total GDP and the VC investment amount. The data ofJapan is on a fiscal year basis (from April to March of the next year). The
figures without a box are from the data of 2014. Those with a box are from thedata of 2017.
Souce: OECD, Venture Enterprise Center, Japan (VEC)
Copyright (C) 2019 JETRO. All rights reserved.

Chapter 2 Section 4 Start-up companies as new business partners

39

Global VC investment in diversified fields, larger deals

In terms of global VC investment, while the information and communication fields still hold a large proportion, the share of the life
science field is increasing, with a wider variety of fields for VC investment.



Average VC investment (average investments) per company in major countries tends to increase, recording especially large growthin the US and Israel. In the US, the average investment amount in the growth stage “expansion” and the leap stage “later” of
emerging companies is expanding, which is making average investments of VC investment deals larger.
Percentage of VC investment in the US and Europe by field<US>(Hundred million dollars)
60(Hundred million dollars)
800

200
0

(Million dollars)
11.1
10

50

600
400

Average VC investment per company
in major countries<Europe>4018.0 %

19.0 %

20.7 %

30

31.0 %

20
68.1%

59.8%

53.6%

10

0
2014

2015

2016

OthersIndustry/energyLife Science
Information communication

33.9 %

26.9 %

2010

7.4

6.7

2016

5
3.2

2.9 3.2

2.5

3.0

1.6

1.4 1.3

GermanySouth Korea

0.9

41.5 %

38.6 %

44.4 %

2014

2015

2016

OthersIndustry/energyLife Science
Information communication

0US

IsraelSwitzerland

UnitedKingdom

Note: 1) The average VC investment per company is calculated by dividing the total VC
investment by the number of companies financing from VC. 2) The figures of the US show
Note:of1)
The average
VC investment
per yearcompanybythe number
transactions,
not companies.
3) The latest
in Israelisiscalculated
2014.
Source:dividing
OECD the total VC investment by the number of companies

financing from VC. 2) The figures of the US show the number oftransactions, not companies. 3) The latest year in Israel is 2014.
Source: OECD

Note: 1) The figures of each year in the US and Europe are based on the reports to be published in the following year,
thus, those cannot be directly compared with each other. 2) Europe means the 28 EU member countries, Switzerland,
Iceland, Liechtenstein, Norway, San Marino, Vatican City, Bosnia and Herzegovina, Moldova, Montenegro, North
Macedonia, Serbia, and Ukraine. 3) The figures of “Information communication” in 2014 and 2015 indicate the sum of“computers, consumer electronics” and “communication." 4) Since the calculation methods differ, the total amount offield in each year does not match with the VC investments (total amount) for each year separately announced by OECD.
Source: OECD
Copyright (C) 2019 JETRO. All rights reserved.

Chapter 2 Section 4 Start-up companies as new business partners

40

Layered ecosystem promoting corporate renewalEcosystems which produce emerging companies such as startups are created by multiple factors such as people aiming to start theirown business, capital, a structural foundation for companies and legal regulations. They continuously produce startups thatspecialize in business progressiveness and pursuit of innovation and work to promote corporate renewal.

As the ecosystem has been taking shape, more accelerators, mentors, and events, including pitch contests that seek funds frominvestors, have come into the system, and thus a more layered support system for entrepreneurship has been established.

Concept of ecosystem- Students- Foreign entrepreneurs- Retired employees- Serial entrepreneurs

Socia lissues(Aging, increase in unemployment
rate, hollowing out of industry,me d ic a l d is p a r it ie s , e t c . )Business
environmentOppor-tunity

Entreprenuer

Startup- Pitch contests- Accelerator programs- Incubation facilities, etc.

Funding- VC- Government
subsidies- Angel investors,
etc.

Recovering initial investment(exit), upscaling- Initiative of government- Existing firms- Univ. and research institutes- IT infrasructure- Laws & regulations

Source: Created by JETRO based on various information
Copyright (C) 2019 JETRO. All rights reserved.

Chapter 2 Section 4 Start-up companies as new business partners

41

Ecosystem formation based on regional social issues in the backgroundComparing the ecosystems spreading around the world by region, regional advantages, social issues, and industrial clusters are coreelements for their formation. Especially in emerging countries, a social problem-solving ecosystem tends to be created based on suchbackground factors as underdeveloped infrastructure, low bank account ownership, and poverty.

Of the existing 316 unicorns in the world (as of June 2019), the US (176 companies) and China (90 companies) account for over80%.
The number of unicorns by region and ecosystem formation based on regional social issues
Europe (44): Due to the hollowing-out of industry
caused by the transfer of manufacturers toneighboring countries, etc., the momentum of
innovation promotion for future industry
development increased, and as a result, anecosystem focused on industry-academiagovernment collaboration and R&D has been
formed. Many start-up events are held in various
regions, creating opportunities for exchange withlarge corporations and investors.

Middle East (5): UAE, Lebanon,and Saudi Arabia are
implementing government- ledpromotion for startups to breakaway from unstable politicalsituations and resource-dependent
economic structures.

Africa (3): Taking the latecomer advantage,
leapfrog startups (catching up the latest technology
very fast without going through usual step-by-stepevolution) have been launched to solve the issuesof low bank account holding rate, educational
disparity, etc. In particular, ecosystems of Fintech,
Edtech, and others have been established. In
addition, as a test market, Africa has strength toprovide demonstration experiment opportunities in
the fields in which Africa has more flexible
regulations than other countries.

Note: Figures in parentheses show the number of unicorns (as of June 2019).
Source: Ecosystem survey by JETRO, CB insights

Japan (2): Its rapidly aging and declinig
population has generated startups
relating to the medical field and IoTtechnologies. Open innovation has beenpromoted in the face of limitations to
self-sufficiency of large companies.

Asia (125): Startups relating to
EC and transportation services
are growing in the ASEAN region
to solve such issues as
underdeveloped infrastructure,
excessive population density, andhigh unemployment. Scale-up
takes time because regulations
and specifications differ fromcountry to country.

North America (177): In
response to the unemployment
rate increase after the financial
crisis, cities have establishedstartup support measures forcreating next industry. In
Boston and Toronto, distinctive
startups with high-leveltechnology based on research atuniversities are present.

South America (5): Inefficient large-scale
agricultural management and medical
disparities has generated Agtech for efficient
agriculture and HealthTech to correct medical
disparities. As their interest in the US market
is strong, although exit strategies have mainly
been practiced by large companies, in recent
years some companies have listed in foreign
markets including NYSE (New York Stock
Exchange).

Copyright (C) 2019 JETRO. All rights reserved.

Chapter 2 Section 4 Start-up companies as new business partners

42

Advantages of ecosystem by major city


Looking at the characteristics of ecosystems in the world’s leading cities from the four perspectives of 1) entrepreneurship, 2)
funding, 3) opportunity, and 4) business environment, the strengths of each ecosystem become clear.



In Japan, with the spread of open innovation by large companies, a fourth venture boom is coming, and corporate venture capital(CVC) and accelerators are increasing, especially in Tokyo. Startups relating to IoT technology in the manufacturing industry andmedical field are growing.

Advantages of major ecosystem
City
SiliconValleyBostonHelsinkiLondonParis

BerlinAdvantages
Business
environ-ment

Entreprenuer

Oppor-tunity

Funding

Business
environ-ment

Entreprenuer

Opportunity

Funding

Business
environ-ment

Entrepreneur

Opportunity

Funding

Business
environ-ment

Entreprenuer

Opportunity

Funding

Business
environ-ment

Entreprenuer

Opportunity

Funding

Business
environ-ment

Entreprenuer

Opportunity

Funding- Referred to as the birthplace of the ecosystem, the ecosystem of Silicon Valley
has formed spontaneously. With serial entrepreneurs playing a mentoring role,
there is a mechanism in place to create startups on an ongoing basis.
- Numerous foreign entrepreneurs help maintain diversity in the region.
- There is an accumulation of life-science companies and research institutes such
as MIT and Harvard University.
- As entrepreneurs and spin-off startups rise, they draw large companies andinvestors.

- Many large corporations and investors from all over the world participate
in the largest venture event in Europe “SLUSH," which gives opportunities
for entrepreneurs to expand their networks after startup.
- As a renowned financial city, it has drawn an accumulation of startups
endeavoring in the fields of fintech, block chain, and crypto currency.
- In terms of activities such as experimental studies, the city offers a flexible andinnovative legal system such as establishment of a regulatory sandbox to create
new industries.
- The government is leading the initiative "La French Tech " to support startups.
Overseas startups also receive generous support.
- Startups in fields related to fashion and life-style have accumulated in the city.
- With cost of living cheaper than in the former West Germany due to industry being hollowedout during the era of the East-West Division, an ecosystem has been growing amongsubcultures such as artists and hackers.
- The city has a well-prepared support framework for students aspiring to be entrepreneurs,
and numerous excellent engineers from Eastern Europe have gathered.

Note: 1) This list includes cities where "JETRO Global Acceleration Hubs," which assist Japanese startups
in expanding business through overseas ecosystems, are located, plus Tokyo. 2) Blue colored quadrants
indicate advantages.
Source: Various materials

City
Tel Aviv

Dubai

Singapore

Shanghai

ShenzenBangalore

Tokyo

Advantages
Business
environ-ment

Entreprenuer

Opportunity

Funding

Business
environ-ment

Entreprenuer

Opportunity

Funding

Business
environ-ment

Entreprenuer

Opportunity

Funding

Business
environ-ment

Entrepreneur

Opportunity

Funding

Business
environ-ment

Entreprenuer

Opportunity

Funding

Business
environ-ment

Entrepreneur

Opportunity

Funding

Business
environ-ment

Entreprenuer

Opportunity

Funding- Numerous startups are being created in the fields of life-science and cybersecurity, with many researchers who have won the Nobel Prize and entrepreneurs
who have just completed military service.
- The Jewish Community has greatly contributed to formation of ecosystems.
- The government, which aims at developing an economy not dependant on natural
resources, is proactive in drawing overseas startups.
- Under the initiative of the city leadership, it is establishing a support
organization for funds and ventures.
- Through the strong leadership of the government, the city has successfully
established an innovation hub in a short period of time.
- As a financial city, it has an accumulation of overseas-affiliated companies, andhas established its position as a hub of financial procurement.

- There is an accumulation of EC startups with advantages relating tolifestyle and contents. In addition, an innovation model area has been
established to carry out demonstration experiments of autonomous driving.
- Many startup-related events are held.
- With the creation of supply chains for electronic parts in the background, anecosystem with strength in manufacturing has been forming.
- Due to proximity to the market and customers, it is distinguished by productdevelopment focusing on quick commercialization.

- Bangalore, where the defense industry once flourished, is home toIndia's top universities and highly skilled IT workers.
- Engineers with high technical skills gather for offshore development by
the US-based IT firms.
- Startups with strength in productization by combining devices with software areshowing growth, particularly in relation to core technologies.
- CVC and accelerator programs have recently been increasing in line with thepromotion of open innovation by major companies aiming at branching out fromin-house innovation models.

Copyright (C) 2019 JETRO. All rights reserved.

Chapter 2 Section 4 Start-up companies as new business partners

43

Measures for ecosystem development
The policies of various governments aimed at developing ecosystems can be grouped into three categories: 1) supply of tax benefits
and subsidies, 2) establishment and deregulation of visas for foreign entrepreneurs, and 3) creation of regulatory sandboxes.

The Japanese government has lowered the corporate tax rate and begun creating a startup visa system with the intention of creating
20 unicorns (unlisted venture enterprises with a value of one billion dollars or more) or equivalent listed venture enterprises by 2023.

Measures of major countries for fostering ecosystem
Policies for developing ecosystems
Country

UAE

Singapore

Government objectives and measures

Priority areas were announced for promoting innovation in "UAE Vision 2021" advocated by
the Federal Government, and a government-controlled fund to assist entrepreneurs wasestablished.
Various entrepreneur support programs conducted by different ministries and agencies havebeen integrated into a single brand under the title "Startup SG," through which necessary
assistance is provided based on the growth stage of individual startups.

1. Tax
incentives,
subsidies

2. Establishment of
3. Regulatory
startup visa andrelaxation of visa sandbox (Note)
regulations

✓

✓

✓

✓

✓

✓

FranceIn 2013, the government established the initiative "La French Tech" which aims at supporting
ecosystems and cultivating them to an international level. The initiative will facilitate theformation of communities, growth of ecosystems, and internationalization.

✓

✓

UK

Within its industrial strategy, the government has set five foundations (ideas, human resources,
infrastructure, business environment, and places) and four grand challenges (AI, clean growth,
future-oriented mobility, and an aging society).

✓

✓

✓

✓

✓

Japan

IsraelChina
India

FinlandGermanyUS

The government has set a target to create 20 or more unlisted venture enterprises with anenterprise value or market cap of one billion dollars (unicorns) or equivalent listed venture
enterprises by 2023.
The government has engaged in investment and created multiple VC firms through "Project
Yozma" started in 1993. "The Magnet Program" supports collaboration between industry andacademia.
The country is pushing a mass entrepreneurship and innovation campaign, with the StateCouncil and local governments implementing over 400 measures combined.
In 2016, the Indian government created the action plan for “Startup India." The government
launched the measures to contribute to the growth of ecosystems, including the simplification ofstarting business procedures and patent applications, as well as support for financing.
Funding for technological development projects in companies and research institutes;
additionally, establishment of the BusinessFinland as public institution to provide software
support in business development.
The Federal Ministry of Economics and Energy (BMWi) and the Credit Institute for
Reconstruction (Kfw) are playing leading roles in investing into startups through thegovernment-affiliated venture investment fund "Hightech Startup Fund," and holding business
The prior administration under President Obama started the Startup America Initiative under astrategy for American Innovation. It has focused on improving access to funds, cultivating
entrepreneurial human resources, deregulation, and accelerating technological transfer.

✓*Some local gov.

Strong✓* Some ministries

Simplification of administrative
procedures and promotion of
government procurement.

✓✓

Government
initiative

Approval of transfer ofmilitary technology to theprivate sector✓✓

4. Other✓
Addressing the promotion ofdigital education andcollaboration between startups
Established a framework forearly stage investment,
expanded entrepreneur

Note: A regulatory sandbox is a framework in which the government reviews regulations using information and data obtained through demonstrations with the goal of introducing new technologies and business models to society.
Source: Various materials

Weak

Copyright (C) 2019 JETRO. All rights reserved.

Chapter 2 Section 4 Start-up companies as new business partners

44

Increasing interest of foreign VCs in Japanese entrepreneurial activities


The Total Japanese Early-Stage Entrepreneurial
Activity, which indicates the dynamic ofentrepreneurial activity, has risen to 5.3, increasingfrom the previous year (4.7), but is still at a low
level globally.

18.0
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0

So far, about 10,000 startups have emerged in Japan,
with the investment from overseas VCs as well as
domestic
ones
flowing.
Foreign-affiliatedcompanies have also launched CVCs in Japan andare boosting growth of Japanese startups.

Total Early-Stage Entrepreneurial Activity in major countries
15.6
13.6

2017

12.8 12.7

11.4
9.3

10.7
9.0

9.9

10.4
8.4 8.2

6.1
3.9

US

Israel

India

UAE

2018

China

UK

France5.3

5.3 5.0

Japan

Germany

4.7

Note: Total Early-Stage Entrepreneurial Activity (TEA) is an index of the total number of people who are actually preparing
for starting business and who are under 3 and a half years after starting business per 100 adults (aged 18-64).
Source: Global Entrepreneurship Monitor 2018/2019

VC investments by attribute and overseas VC ratio

Japanese startups supported by foreign-affiliated CVCs(%)

(100 million yen)

1,800
1,600
1,400

14.0

Financial VC

Independent VC

CVC

Government-related VC

Foreign VC

Others

Date

1,000

8.0

800

6.0

600

0

2009

2010

2011

2012

2013

Source: "Japan Startup Finance 2018" (entrepedia)

2014

2015

2016

2017

2018

Case example

Salesforce, DNX Ventures, etc.

US

May. 2018

Salesforce Ventures, 500
Startups Japan, Draper Nexus
Venture Partners, etc.

USLife Science

Investing in Kakehashi, which is developing the nextgeneration electronic medicinal history system“Musubi” in dispensing pharmacies, in order topromote IT systems in pharmacies.

Electronic
devicesystems

Investing in Nanolux, an AIST technology transfer
venture that develops, designs, and manufactures
image sensors equipped with “infrared color nightvision technology” enabling color photography evenin the dark, and also night vision cameras equippedwith the technology.

Jun. 2018

Samsung Venture Investment
Corporation, etc.

South
Korea

4.0

Aug. 2018

Salesforce Ventures

US

2.0

Nov. 2018

Airbus Ventures, etc.

FranceFeb. 2019

Aflac Incorporated

US

Newly establishing “Aflac Innovation Partners LLC”
Finance/insurthat invests in projects in the domains of InsurTech
anceand Health Tech.

Mar. 2019500 Startups Japan

US

Accelerator

400
200

DomainMay. 2018

10.0

1,200

Country

Investing in UPWARD, which develops operating
Cloud service activity support systems using a cloud system, andpromoting functional enhancement with AI.

12.0

Overseas VC ratio (right axis)

Company

0.0

Sources: Companies' press releases and websites

Announcing the establishment of “Japan Trailblazer
Cloud service Fund” with $100 million. To date, the company has
invested in Uhuru, sansan, freee, and TeamSpirit.
Aircraft

Investing in Telexistence, the University of Tokyo
originated venture that develops telerobotics.

The team in charge of the fund for Japan became
independent to establish a new VC “Coral Capital."

Copyright (C) 2019 JETRO. All rights reserved.

Chapter 2 Section 4 Start-up companies as new business partners

45

Japanese companies with little international collaboration

According to a JETRO survey, although about 60% of Japanese companies have external cooperation experience, less than 30% ofJapanese companies have engaged in collaboration with foreign companies and/or organizations for innovation. The proportion ofinternational joint patent applications to the total number of patent applications based on the Patent Cooperation Treaty (PCT) showsthat Japan’s rate is 2.1%, which is lower than the global average (6.1%). These statistics indicate that Japan is lagging behind inestablishing networks with foreign companies, organizations, and/or researchers.
Efforts for Innovation
0.0

20.0

(Multiple answers、％)

40.0

60.0

80.0

100.0

79.4
88.3
77.4

Utilize resources in own company(tecnologies, human resources, etc.)

59.5
69.1
57.4

Collaborate with others

Number of patent applications in major countries/regions
and proportion of applications with foreign co-inventor(s)250（No. (thousand)）

（％）
35.0

Total Patent Applications（2016）

Patents with Foreign Co-inventor(s)（right）

30.0

200

25.0

12.4
18.9
11.0

Collaborate with domestic startups

Colalborate with domestic firms(excluding startups)

25.1

Collaborate with domestic
universities/research institutes
Collaborate with foreign straups

22.3

50

Japan

South Korea

China

EU

US

Australia

Germany

Source: FY2018 Survey on the International Operations of Japanese Firms (JETRO)

2.1
FranceTotal（n=3,385）
Large-scale firms（n=615）SMEs（n=2,770）

0

10.0
5.0

IsraelForeign Collaboration
Total：27.3％
Large-scale firms：38.7％
SMEs：24.8％

UK

2.3
1.1
2.6

47

Canada

6.3
12.4
5.0

31.2

15.0

100

India

19.0

20.0

OECD

21.2

150

World

Other

37.6

6.8
9.9
6.1

Collaborate with foreign firms(excluding startups)
Collaborate with foreign
universities/research institutes

Domestic Collaboration
Total：49.6％
Large-scale firms：60.5％
SMEs：47.2％
30.7
39.2
28.8

0.0

Note: The number of application indicates the number of international patentapplication applied under the Patent Cooperation Treaty.
Source: OECD.Stat

Copyright (C) 2019 JETRO. All rights reserved.

Chapter 2 Section 4 Start-up companies as new business partners

46

Expansion into new markets and business fields through collaboration
Some Japanese companies have expanded into new markets and business fields through collaboration with emerging foreigncompanies such as startups. Issues in collaboration have been raised, such as costs of collaboration to find appropriate partners,
differences in business practices (reflected in the decision making process, for instance), and risks of information leakage. The key
to overcome these issues lies in how determined the company can be as a whole, executives included, in engaging in thecollaborations.



Collaboration between emerging foreign companies and Japanese companies
Company

IDOM

PartnerUber Technologies: Established in
2009,
(US),
Ride-hailing service

Motivation

Seeking a business model to be a foothold toward
expanding business in Africa as a new sales market

Shipper (Logistics):
Established in 2016,
OPENLOGIThe first step towards expanding its logistic outsoucing
service abroad. The company saw an opportunity in the
Shoppee/logistics service industry in Indonesia, where the eTokopedia: Established in 2009/2015 commerce market is rapidly growing. Local SMEs have(Indonesia),
been reportedly having difficulties in inventory
management.
Local e-commerce SMEs

Business

Advantages and effects

The company leases second-hand Japanese cars for local drivers registered with
Uber in Tanzania. If the amount paid passes a certain threshold, the driver can The company recognized the potential of the new business model in expanding into atake possession of the car. This has created a new sales channel for secondnew market, obtaning knowhow and a new customer base. Through scaling up thehand cars and, at the same time, a means for a more stable income for local
new model, the company is aiming to expand its business in other areas.
drivers.

With the aim of enabling more efficient and reliable inventory management andThe one-year pilot project went without any trouble such as a misdelivery or returned
shipping, the company conducted a pilot project for logistics outsourcing
package, proving the feasibility of the business in Indonesia. In addition, the project
operations in collaboration with the logistics platform service company and the also showed there is no significant difference between domestic and overseas
system of leading Indonesian e-commerce platforms as well as local e-commerce warehouse operations. As the company confirmed the viability of its business model
SMEs.
for the overseas market, it is looking to enter Indonesia.

It was an asset for Fujitsu to collaborate in Japan in a different area from its existing
As one of the collaboration projects, Fujitsu joined an international consortium
businesses, where future demand is expected to increase.
launched by Quantstamp in order to develop definitions of "security" in-(Partners) Since Japanese companies can be expected to maintain long-term
blockchain technology, which is one of the urgent challenges in the field. Fujitsu isbusiness cooperation once a relationship of trust is born, this is an importantlooking for future business collaboration with it as well.
collaboration from the perspective of entering the Japanese market.

Fujitsu

Quantstamp
Established in 2017 (US)Providing security services with theuse of blockchain

Recognizing start-up companies seeking cutting-edge
technologies as they search for new businesses beyond
existing businesses. "Fujitsu Accerelator" has been held
since 2015, in which Quantstamp was accepted.

SBI Remit

BitPesa
Established in 2013
(Kenya)Affordable and speedy overseas
money transfer service throughblockchains

This is the company's first business collaboration in Africa. Money tranfer from
Seeking innovative solutions to improve customer service Africa to Japan requires first exchanging the local money to another major
Collaboration with BitPesa, which already has business operations in eight African
within Africa, where the company had a strategic interests foreign currency before exchanging it to Japanese yen. The collaboration withcountries and covers 85 countries for money transfer, has allowed the company tofor its growth prospects.
BitPesa, however, enables the company to provide a faster and more affordable provide a direct money transfer service between African countries and Japan.
money transfer service between African countries and Japan.

MitsuiOMC Power
Established in 2011
Deciding to invest, with the expectation of capital and(India)scalability to other regions through contribution to rural
Establishing small solar power plants
electrification projects in developing countries.
to provide electricity to non-electrified
areas

Source: Interviews by JETRO, press releases and media reports

By supplying solar energy to the areas where people have used fossil fuels as energy,
Investing nearly 1 billion yen, Mitsui supports OMC power to provide
Mitsui will contribute to regional development with reduced burden on the
distributed power business, which stores solar power to provide cheap electricity
environment. In addition, the stable supply of electricity can be expected to serve as
for businesses, elementary schools, and houses in areas without a power grid.
the basis for providing various value-added services such as refrigeration of
Also, through collaboration with its various businesses, Mitsui aims to provide
vegetables and selling fertilizers.
high value-added services using stable electricity.
-(Partner) Mitsui's investment can lead to the better evaluation that the distributed
In addition to India, it is expecting to expand into Africa, where OMC Powerpower business, monetization of which has been seen as difficult, can become a valid
has already started operations, Asia, etc.
business model.

Copyright (C) 2019 JETRO. All rights reserved.

47

Chapter 3: Trends in global trade rule formation

Chapter 3 Section 1 Current status and outlook of FTAs in the world and Japan

48

Increasing number of cross-regional FTAs in forceThe number of Free Trade Agreement (FTAs) which newly came in force in 2018 was seven. The total number of FTAs in force inthe world as of the end of June 2019 was 314, up from 307 in the same period of the previous year (including customs unions andpreferential trade agreements, based on JETRO survey). The movement to conclude cross-regional FTAs has been becoming more
active since 2000. Of the FTAs that entered into force between 2015 and 2019, cross-regional FTAs account for 53.7%.



As TPP11 came into force, the FTA trade coverage ratio in each member country of TPP11 ranks high, which shows the large-scaleeconomic zone created by the agreement.

Percentage of cross-regional FTAs in new FTAs
(Cases)90
No. of FTAs
80
70

Percentage of cross-regional FTAs
in new FTAs(Right axis)

60
50
40
30
20
10
0

Sources: WT O, materials of governments and institutions

FTA coverage ratio of major countries/regions
FTA coverage ratio(%)
Two-way
ExportImport
100.0
Japan
36.7
34.8
38.7
US
39.1
47.0
33.9
90.0
Canada
83.3
89.2
78.0
78.1
88.9
67.5
80.0 Mexico
Chile
83.8
86.3
81.0
16.3
15.7
17.1
70.0 Brazil
Total trade
76.3
77.3
75.3
EU28
Extra-regional
34.4
36.9
31.9
60.0
Turkey
50.2
59.0
43.6
30.6
23.2
39.2
50.0 China
South Korea
67.8
72.5
62.5
59.6
57.2
62.0
40.0 A S E A N
Singapore
78.6
74.0
81.1
Malaysia
62.4
61.6
63.3
30.0
Vietnam
63.6
51.3
76.4
20.0
60.8
59.2
62.3
Thailand
66.6
64.0
69.0
Indonesia
10.0 India
16.9
16.8
16.9
Australia
72.8
75.9
69.3
0.0
New Zealand
63.0
65.3
60.7

（Unit：%）

FTA partner countries/regions
1st
2nd
3rd
ASEAN
15.2 TPP11
12.0 EU
NAFTA
29.2 South Korea 3.1 Singapore
NAFTA
66.1 EU
10.1 TPP11
NAFTA
63.9 EU
8.1 TPP11
China
27.7 US
16.4 EU
Mercosur10.1 CAN
3.0 ChileEU
63.8 Switzerland 2.5 Turkey
Switzerland 6.7 Turkey
3.9 EEA
EU
42.1 South Korea 1.9 EFTA
ASEAN
12.6 South Korea 6.8 Taiwan
China
23.6 ASEAN
14.0 US
ASEAN
22.7 China
17.3 Japan
ASEAN
23.8 China
13.1 TPP11
ASEAN
27.2 China
16.7 Japan
China
22.7 South Korea 14.0 TPP11
ASEAN
23.3 China
16.0 Japan
ASEAN
23.9 China
19.7 Japan
ASEAN
11.1 South Korea 2.5 Japan
China
29.6 TPP11
20.8 ASEAN
TPP11
26.1 China
21.9 ASEAN

11.5
1.4
7.7
6.1
13.6
2.3
1.4
3.4
1.5
4.9
11.5
8.4
10.3
7.1
13.1
12.0
10.1
2.1
13.8
12.2

Note: 1)The subject countries include countries and regions which have established an FTA as of the end of June 2019. The figures are based upon tradevalues in 2018.
2)Abbreviations: Andean Community (CAN), the European Economic Area (EEA).
3) Hong Kong and Macao are excluded from the figures of China.
4) Hong Kong is excluded from the figures of ASEAN.
5) Figures for Canada and Singapore were calculated by export statistics which exclude re-exported trade.
6) TPP11 includes only ratification countries in the coverage rate..
Source: Documents and trade statistics from each country's government, "DOTS, June 29th, 2019"(IMF)

Copyright (C) 2019 JETRO. All rights reserved.

Chapter 3 Section 1 Current status and outlook of FTAs in the world and Japan

49

Japan’s effective FTA trade coverage ratio increases strongly to 36.7%
With the entry into force of TPP11 and the Japan-EU EPA, the coverage ratio of Japan's enacted FTAs has increased significantly,
from 23.4% in the previous year to 36.7%. If RCEP, which is under negotiation, comes into force, the coverage ratio will increase
to 63.8%.
Japan's trade structures and its FTAs in force and under negotiation
Product Category
Transportation machinery
General Machinery
Electrical equipment
ExportChemicals
Iron and Steel
Total
Mineral Fuels
Machinery and equipment
Chemicals
ImportFood and beverages
Textile/Textile products
Total
Two-way tradeWorld（milliondollar）

Australia ASEAN

172,672
148,003109,352
97,84340,227738,143
174,532
236,851
88,551
66,31537,721
748,487
1,486,631

33.2
34.2
33.4
29.9
43.1
34.8
29.9
35.4
51.3
48.5
33.5
38.7
36.7

4.7
1.2
0.4
1.0
0.5
2.3
18.1
0.1
0.4
6.2
0.1
6.1
4.2

India

Mongolia

0.3
2.1
1.2
2.1
3.7
1.5
0.5
0.3
1.3
1.1
1.2
0.7
1.1

0.2
0.0
0.0
0.0
0.0
0.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0

8.3
14.5
19.4
14.0
30.2
15.5
9.3
16.4
14.6
13.9
26.1
15.0
15.2

Switzerla
Mexico
nd
0.2
0.1
0.1
0.7
0.0
0.5
0.0
1.5
3.5
1.1
0.1
1.0
0.8

RCEP
China

Transportation machinery
General Machinery
Electrical equipment
ExportChemicals
Iron and Steel
Total
Mineral Fuels
Machinery and equipment
Chemicals
ImportFood and beverages
Textile/Textile products
Total
Two-way trade

23.2
49.8
51.3
56.1
67.6
46.3
31.5
58.9
40.9
39.9
86.9
49.7
48.0

8.1
23.8
24.5
26.5
17.9
19.5
0.8
37.7
18.1
13.1
58.0
23.2
21.4

South
Korea
0.9
8.0
5.9
12.5
15.1
7.1
2.9
4.3
6.2
3.5
1.3
4.3
5.7

TurkeyColumbia

GCC

0.5
0.7
0.5
0.2
0.6
0.4
0.0
0.1
0.1
0.3
0.4
0.1
0.3

0.4
0.1
0.0
0.1
0.5
0.2
0.2
0.0
0.0
0.5
0.0
0.1
0.1

7.1
1.2
0.6
1.0
2.3
2.4
48.7
0.0
1.0
0.0
0.0
11.7
7.1

Note: Under negatiation on Trade Agreement on goods (TAG) with the United States.
The total of TPP11 and RCEP includes countries where Japan already has other agreements.
Source: "Trade Statistics" (MOF)

Total
50.0
68.0
64.9
70.2
79.5
64.4
82.5
77.6
76.8
66.0
93.3
78.1
71.3

Peru

Chile

0.2
0.0
0.0
0.1
0.3
0.1
0.3
0.0
0.0
0.4
0.0
0.3
0.2

0.6
0.1
0.0
0.2
0.2
0.3
0.0
0.0
0.3
2.8
0.0
1.0
0.6

2.0
1.8
1.5
0.7
4.4
1.6
0.5
1.3
0.3
1.8
0.1
0.8
1.2

(Ref.)

FTAs under negotiation
Product Category(%)
FTAs in force

US
31.8
20.8
14.1
12.8
7.3
19.0
5.5
14.1
15.6
20.2
1.1
10.9
14.9

TPP11
Canada
12.6
8.2
9.8
6.8
12.4
10.9
20.1
6.9
7.2
17.3
13.1
13.0
12.0

3.0
0.8
0.5
0.5
0.6
1.3
1.0
0.4
1.3
4.1
0.2
1.6
1.4

NZ

0.9
0.2
0.0
0.1
0.1
0.4
0.0
0.0
0.3
2.2
0.0
0.4
0.4

EU
12.7
13.3
10.3
10.6
3.0
11.3
0.3
15.4
29.4
15.1
5.5
11.8
11.5

(Ref.)
Total（incl. US）

81.8
88.8
79.0
83.0
86.8
83.4
88.0
91.7
92.4
86.2
94.4
89.0
86.2

Copyright (C) 2019 JETRO. All rights reserved.

Chapter 3 Section 1 Current situation of FTAs in the world and Japan

50

Japan's FTA entering "harvesting period"


According to JETRO surveys, the utilization rate of FTAs in the exports of Japanese companies to ASEAN countries has increased
in recent years. The utilization rate in exporting to India increased by 8.3 percentage points, the highest figure among FTAs in force.



The FTA usage in the exports to Thailand and Vietnam by industry shows that the utilization rate of “medical products andcosmetics” recorded the largest increase. This is due to the rising awareness of beauty, market penetration by Japanese-affiliateddrugstores in ASEAN countries, and the rapid increase in visitors to Japan from those countries. In addition, the decline in FTA tariff
rates is helping Japan’s exports to ASEAN countries.



The elimination of tariffs based on FTAs can happen immediately or incrementally, and there are many tariffs that are eliminatedafter 10 years or more. About 10 years have passed since the entry into force of many FTAs with Asian countries, meaning they are
finally reaching their “harvesting period”.

Utilization of FTAs in exports of Japanese firms（by major FTA, time series）
Survey Year
Total

Thailand

VietnamIndonesia

Malaysia

Philippines

India

Usage

(%)
FY2016→FY2018

FY2016（n=1,234）

45.1

FY2017（n=1,347）

44.9

FY2018（n=1,472）

48.2

FY2016(n=824)

47.2

FY2017(n=875)

46.7

FY2018(n=957)

49.0

FY2016(n=575)

33.7

FY2017(n=646)

32.8

FY2018(n=727)

40.2

FY2016(n=554)

39.2

FY2017(n=579)

41.3

FY2018(n=597)

44.6

FY2016(n=532)

31.6

FY2017(n=547)

29.3

FY2018(n=580)

33.3

FY2016(n=383)

26.1

FY2017(n=412)

26.2

FY2018(n=466)

30.0

FY2016(n=354)

29.1

FY2017(n=376)

28.2

FY2018(n=382)

37.4

+3.1

+1.8

Import value and tariff rates
of certain cosmetic (HS330499) in Thailand(%)

Import: Japan

Import: South Korea

50

Import: France + US

Tariff: JTEPA

Tariff: AKFTA

Tariff: WTO

40

+6.4

30
+5.4

20
+1.7

+3.9

+8.3

Note: 1) The parameter for the total is the number of firms that are performing exports to one or morecountries/regions for which FTAs have been implemented at the time of the survey. It does not include firms
who did not answer whether they were using an FTA or whose answers were unclear. 2) List includes six
countries with which FTAs have been implemented as of the time of the survey and to which many companies
are exporting.
Source: FY2018 Survey on the International Operations of Japanese Firms (JETRO)

10

0

2007

08

09

10

11

12

13

14

15

16

17

18 (Year)

Note: 1) The top four import countries in 2018 (France, Japan, South Korea, and US) account for 58.1% of thetotal. 2) JTEPA stands for the Agreement between Japan and the Kingdom of Thailand for an Economic
Partnership, and AKTFA "ASEAN Korea Free Trade Agreement." 3) Tariff reduction are based on agreements.
Source: Global Trade Atlas (IHS Markit), JTEPA documents (Ministry of Foreign Affairs), AKFTA documents(ASEAN Secretariat), and Thai Customs
Copyright (C) 2019 JETRO. All rights reserved.

Chapter 3 Section 1 Current status and outlook of FTAs in the world and Japan

51

Increasing introduction of more convenient Certificate of Origin SystemAs there have been no moves toward international integration of preferential rules of origin, each FTA member country/region has
introduced their own rules of origin and certification systems. Satisfying these different rules of origin and complying with thesecertification systems could be hurdles for companies in using FTAs.



Traditionally, countries/regions in Asia and Africa tend to introduce the third-party certification system, in Europe the approved
exporter system, and in Americas the self-certification system. In recent years, however, more convenient systems such as theapproved exporter system and the self-certification system have been introduced, regardless of region.

Obstacles in using FTAs for Japanese companies

Burdens to satisfy ROO

Certification of Origin and verification system of major FTAs

(Multiple answers, %)FY13
FY18 FY13（n=495） （n=710） →FY18
48.3
60.6
12.3

Labor and time cost to obtain CoO for each export

52.9

51.4

△ 1.5

Complication in ROO that differ by product

35.8

45.5

9.7

19.6

26.8

7.2

Time required for determination of country of origin of
product/issue of CoO
Fees to obtain CoO

28.7

25.4

△ 3.3

Lack of information available on the use of FTAs

8.1

17.6

9.5

Lack of internal structures within firms to use FTAs

11.3

15.2

3.9

8.5

8.0

18.2

15.9

Have experienced trouble to use FTAs at importing
countries' customs
No problem in particular
Other

FTAs
ATIGA
Pacific Alliance

EAC

Type of
Proof of Origin

Countries responsible
for origin verification
Documentary Check: Exporting Party
Third-party certification system
Verification Visit: Importing Party
Documentary Check on Importer: Importing Party
Third-party certification system Documentary Check on Exporter: Exporting Party
Verification Visit: Importing Party
Third-party certification system
Approved exporter system
Exporting Party(Added in 2015 amendment)

Japan・Mexico

Third-party certification system Documentary Check: Exporting Party, Importing Party
Approved exporter system
Verification Visit: Exporting Party(Added in 2012 amendment)(importing party could go along)△ 0.5

EU・South Korea

Approved exporter system

Exporting Party

△ 2.3

NAFTA

Self-Certification

Importing Party

TPP11

Self-Certification

Importing Party

3.8
3.1
△ 0.7
Note: 1) n = firms that use FTAs in export. 2) Abbreviations are as follow; ROO =Rules of Origin, CoO = Certificate of Origin
Source: "Survey of the Interntional Operations of Japanese Firms" (JETRO)

Documentary Check on Importer: Importing Party
Documentary Check on Exporter: Exporting Party
Verification Visit: Exporting Party
Note: 1) Abbreviations of FTAs are as follow; ATIGA = ASEAN Trade in Goods Agreement, EAC = East
Africa Community, NAFTA = North America Free Trade Agreement, TPP11 = Comprehensive and Progressive
Agreement for Trans-Pacific Partnership. 2) For "Types of Proof of Origin", "Third-party certification system"
indicates a type where an export party needs to obtain an origin certificate by approved authorities; "Approved
exporter system" indicates a type where exporters approved by authorities can make out their own certificates todeclare their products' origin, and; "Self-Certification" indicates a type where any exporter can declare theirproducts' origin.
Source: Texts from each FTA

Japan・EU

Self-Certification

Copyright (C) 2019 JETRO. All rights reserved.

Chapter 3 Section 1 Current status and outlook of FTAs in the world and Japan

52

Verification operations vary by country

According to interviews with customs and experts in the FTA partners with which Japan has concluded or is negotiating anagreement, the criteria for selecting the subjects to origin verifications include the cases of doubt on certification, handling articles
and companies at high risk, and random sampling.



The implementation records of verification indicate that a certain amount of verification has been conducted, but on-site visits by animporting country’s custom office are not very common. Common mistakes in applications for preferential tariff treatment include
lack of required information, lapse of certificate of origin, and inadequate through bills of lading. As the self-certification of origin
has been introduced in new FTAs of Japan, it will be necessary to more thoroughly work on document preparation and procedures
when applying for preferential tariff treatment.
Criteria for selecting
verification subjects
Criteria for selecting verification subjects

Implementations of verification by customs and common mistakes
Region1) Case of doubt on certification:

Country

Implementation and frequency of verfication

Case of denial and common mistakes in application for preferential tariff treatment

Indonesia-

Inconsistency between the certificate of origin and other commercial documents,
insufficient information on the through bill of lading, and no issuance of the certificate oforigin during the period required in the agreement.

India

There are implementation records of verification, but many applications forpreferentail tariff treatment are not checked in details. On-site visits toexporting countries have not been implemented in Japan, but have been
implemented in Southeast Asian countries.

-

Vietnam

The custom has hardly conducted verification in Japan-ASEAN FTA and
Lack of required information on the certificate of origin
Japan-Vietnam FTA.

・Inconsistency among information on thedescription of certificate of origin,
・Inconsistency between a certificate of origin andthe rest of the documents,

Asia
Pacific

・Strict rules of origin for the import items subject topreferential tariff rate application,etc.
2) Imports and companie s at high risk:

NZ

Random sampling ratio for selecting the subjects to verification is around
1%

China

Verification is conducted irregularly, and the period between whenpreferential tariff treatment is applied and when the verification isconducted is not fixed.

-

MexicoVerification was last conducted in the Japan-Mexico FTA in 2018.
Usually, verification is carried out for the import declarations made three
years before (the import declarations made in 2016 can be subjects toverification in 2019). Imports from Japan account for about 2% of all
verifications.
There are no records of verification for TPP11 utilization yet.

-

Chile

Verifications are frequently conducted for cargoes with high risk.

Lapse of certificate of origin, the format of certifiation is non-compliant with that of theagreement.

USOn-site visits are conducted once a year in each FTA parter of the US.

Insufficient documents to prove the origin.

The number of verifications is small, at most a few percent of all
applications for preferential tariff treatment.

Declaration in the format of different FTAs of Switzerland, declaration with the format
based on the EU agreement, mistakenly believing that could be used to apply preferential
tariff treatment in Switzerland.

・Large number of imports subject to preferential
tariff rate,
・Records of mistakes of a given company, or
records of mistakes when preferential tariff applied
for a given product,

Americas・Large tax saving amount,etc.
3) Random sampling
Source: Reports from JETRO overseas offices

EuropeSwitzerland

Although a given import is not a direct shipment from an export area, through bill of lading or otherrequired documents are not attached.

Source: Reports from JETRO overseas offices

Copyright (C) 2019 JETRO. All rights reserved.

Chapter 3 Section 2 Recent trends in FTA rule creation

53

Recent FTAs covering a wider range of new rulesSome FTAs signed in recent years provide rules for new fields not commonly observed in existing FTAs. For example, rules of“Regulatory Coherence” encourage FTA member countries to follow certain procedures and practices when formulating new
regulations. Another example is the establishment of “gender chapter” related to the gender equality, which is one of the SDGs.



In electronic commerce, that currently attracts global attention, not only the US but also Japan, Europe, China, etc. are creating therules through their own FTAs.

Rules in recent FTAs

FTAs

Contents
Rules are established to improve the transparency of the regulations when FTA member countries impose
CETA(Ch.21）
Regulatorythem in their own countries and regions. Many of the rules of regulatory coherence are not to require but to
TPP11（Ch.25）
Coherence
encourage member countries to follow certain procedures and practices, such as notifications of new
Japan-EU EPA（Ch.18）etc.
regulations to other member countries or impact assessment on related regulations.
CETA（Ch.20）
The rules concern GI, a system to treat a regional name as a brand. TPP11 has only confirmed the current
Geographic
TPP11（Ch.18）
TRIPS agreement and set the minimum standards for the GI applications in each country. On the other
Indications
Japan-EU EPA（Ch.14）
hand, the EU has actively incorporated rules on GI into its FTAs.EU-Japan EPA, for instance, includes(GI)
EU-Vietnam FTA（Ch.12）etc.
provisions for mutual protection of GI listed in the agreement.
Chile-Uruguay FTA（Ch.14）
Although it was previously only mentioned as part of preambles and provisions of trade agreements, someCanada-Chile modernized FTA
recent FTAs such as the Chile-Uruguay FTA enforced in December 2018 establish the topic of gender as
Gender（Ch.Nbis)an independent chapter ahead of the rest of the world. In these gender chapters, member countries
Canada-Israel modernized FTA
recognize the importance of gender euqality and cooperation in related fields. The Canada-Israel revised（Ch.13）etc.
FTA also includes procedures for dispute settlement in this topic by the member countries.
USMCA（Ch.19）
Many related rules have been established in FTAs including the US, EU, Japan and Australia, but theElectronic
CETA（Ch.16）
scope of recent FTAs is expanding. More attention has been given in this topic, as evidenced how even
Commerce
TPP11（Ch.14）
FTAs of China, that has had few rules in the field, starts to incorporate independent chapters on electronic
China-Singapore FTA etc.
commerce, such as the upgraded trade agreement with Singapore.
No notable progress has been made in recent FTAs in the rules on ISDS (Investor-State Dispute
CETA（Ch.8）
Settlement), some of whose issues, such as increasing investor rights and the inability to apply appellate
USMCA（Ch.14）
Investment
procedures, have been raised. USMCA has significantly narrowed the scope where ISDS could be
EU-Vietnam（Investment Protection
triggered. Although the EU is eager to establish a permanent Investment Court System (ISC), it has not yet
Agreement Ch.3）etc.
been realized.
Note: 1) FTAs named in the box are some of major recent FTAs that have relevant rules. 2) Agreements without any chapter number are agreements whose specificchapter numbers and contents have not been published. 3) For the chapter number of TPP11, refer to TPP.
Sources: Texts of FTA agreements, government reports and related materials
Copyright (C) 2019 JETRO. All rights reserved.

Chapter 3 Section 3 Trends in trade protectionism

54

Impact of expanding trade-restrictive measures worldwide
According to the WTO trade monitoring report, G20 economies introduced 71 trade-restrictive measures in 2018, representing an
increase for two consecutive years. In addition, the trade coverage of these measures from October 2018 to May 2019 is estimatedat US$335.9 billion, the second largest volume following the previous aggregation period (US$480.9 billion).
The new investigation of trade remedy measures (anti-dumping, countervailing duty, safeguard) has also maintained a highstanding. While anti-dumping investigations, which are the most commonly used, are decreasing, the investigations ofcountervailing duty reached a record number, with 55 cases. This is due to the 24 investigations conducted by the US for the second
straight year. Safeguard investigations also increased for the first time in four years.



Numbers of trade-restrictive measures by G20 economies
and their trade coverage(Numbers)(Numbers)

100

Total

90
80
70
60

10 5,000

Others91

Export restriction
Average per month (right axis)

78
68
58

(Numbers

60

Anti-dumping

Safeguard (Right axis)

8 4,000
3,359

50Countervailing (Right axis)

300

40

6 3,000

250

5
40

200

4 2,000

20

2 1,000

0

741
470

1

2012 2013 2014 2015 2016 2017 2018
18/5- 18/10Note: Tade remedies are not included. The dates in 18/10 19/5
parentheses indicate the aggregation period.
(Year/Month)
Source: WTO

30

150

3
20

10
0

(Numbers)

350

7

62

30
20

400

4,809

71

50
40

(100 million, US$)

9Import restriction

83

Number of initiations of trade remedy measures

322

100
10

0

50

17th
18th
19th
20th
21st
Report Report Report Report Report(Oct 2016- (May-Oct (Oct 2017- (May-Oct (Oct 2018- 0
May 2019)
May 2017) 2017)
May 2018) 2018)

95

97

99

Source: WTO Secretariat

2001

03

05

07

09

11

13

15

17

18

0

(Year)

Copyright (C) 2019 JETRO. All rights reserved.

Chapter 3 Section 3 Trends in trade protectionism

55

Negative impacts of continued trade protectionismAs trade protectionism gained some momentum in the past, countries/regions introduced various trade restriction measures such as
raising tariffs, encouraging usage of domestic products, and introducing mandatory standards. In response to the unilateral actions
taken by the US since 2018, many countries have responded with relative calm in ways that are consistent with international trade
rules, including the usage of trade remedy measures and WTO dispute settlements.
On the other hand, some running measures by major countries do not follow the WTO rules, which could undermine the modern
international trade order. Specifically, the negative impacts on the economy include: 1) accumulation of trade restriction measures,2) shrink of world trade, 3) increase in consumer burden, 4) weakening of industry, 5) hindrance of supply chain, (6) diminishingpredictability.

Past momentum for trade protectionism
Implementation status of trade restriction measures
Response
Trade restrictions expanded due to the global recession. Those OECD adopted theinculded tariff hikes and import quotas on steel, automobiles,
trade restriction
electric appliances, textiles, etc. by developed countries, and“restraint declaration” inimport restrictions caused by deteriorated balance of payments 1974.
in some developing countries.

400

300

The second oil
crisis (1979)

Under the prolonged economic stagnation, protectionist
The Uruguay Roundpressures increased in developed countries including thestarted in 1986, followed
western countries. In the name of “reciprocity” or “equilibrium by the launch of WTO inof profits," various types of trade restriction measures, such as 1995.
voluntary export restraint, import quotas, anti-dumping, andcomplicated import procedures, were implemented.

Asian currency
crisis(1997)

Liberalization of trade and investment in East Asia brought brought a ASEAN started the
double-structured status of competitive foreign multinational
ASEAN Industrial
companies and vulnerable local companies. On the background of
Cooperation (AICO)
economic stagnation since the Asian currency crisis, some countries
raised tariffs, encouraged usage of domestic products, and imposed scheme in 1996, later to
AFTA.
import restrictions.

The first oil crisis(1973)

IT bubble burst(2000)

World trade sharply slowed down due to the collapse of the IT
bubble in the United States, and invocations of anti-dumping in2001 and safeguards in 2002 recorded the highest levels.

Lehman ShockMeasures to protect domestic industries were implemented bygovernments across the world, regardless of developed ordeveloping countries. Various types of trade restriction
measures were introduced, such as raising tariffs on specificitems, introducing mandatory standards including steel
products, request of local procurement, and governmental
support for specific industries.

(2008)

2018
US-China Trade
Friction

250

2016
Brexit Referendum

2001
9/11

2000
Dot-com Bubble
1997
Asian Financial

200

2003
Iraq War2010
Eurozone Crises
2013
US Government
Shutdown
2008
Global Financial

150－
WTO, G20, OECD, etc.
declared the avoidanceof protectionism, and
WTO, etc. started“Trade Monitoring
Report."Influential countries, such as G20 members, took more measures,
Repeating declaration oftransition from tariff measures to non-tariff measures occurred, andprotectionism avoidancethen such measures were prolonged, which became an issue. Tradeat the G20 summit, etc.
restrictions by developing countries increased, mainly on steel
products, chemicals, etc.
Sources: "JETRO White Paper on International Trade," "JETRO Global Trade and Investment Report," etc. of eachfiscal year (JETRO)

Europe's debt
crisis(2010)

Global Economic Policy Uncertainty Index

350(1997-2015 Average=100)

Occurrence time

100
50
1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019
Note: Index developed by Stanford University based on data collected through(Year)
articles of leading newspapers from 20 countries on a monthy basis. The larger the
figure, the higher the uncertainty.
Source: "Economic Policy Uncertainty Project" (Policy Uncertainty.com)
Copyright (C) 2019 JETRO. All rights reserved.

Chapter 3 Section 3 Trends in trade protectionism

56

US administration uses all tools available in trade policyThe current US administration, immediately after inauguration,
has actively utilized trade remedy measures such as initiation of
investigation by authority and the first safeguard used in 16 years.
In 2018, the total number of anti-dumping and countervailing duty
measures was 59, recording the highest level ever.
Meanwhile, the usage of unilateral measures based on domestic
laws has become active since 2018. Uncertainty in trade policy is
increasing due to the invocation of measures that have not beenused for many years, including Article 232 of the Trade Expansion
Act and the repeated tariff increases on Chinese products.
US categorical Economic Policy Uncertainty Index

600

July 2018
First round of additional tariffs
on imports from China

Trade policy
Monetary policy

March 2018
Determination of addditionaltariffs based on Section 232 andSection 301

Fiscal policy

400

Health care
National security300

May 2019
US-China trade
frictionJanuary 2018
Initiation of safeguard firsttime in 16 years

200

100

0

Date

Outline of measures
President approves safeguard measures on large residential washers and
23-Jancrystalline silicon photovoltaic products
Determination of additional import tariffs on steel and alminum based on the
8-Mar investigation conducted under Section 232 of the Trade Expansion Act of1962
Determination of additional import tariffs on imports from China and22-Mar strengthened investment restriction on Chinese investment in the US, basedon the investigation conducted under Section 301 of the Trade Act of 1974
27-Mar Agreement in principle of an amended US-Korea FTA (KORUS FTA)
Initiation of investigation under Section 232 of the Trade Expansion Act of
23-May 1962 regarding the effects of imported automobiles and parts on national
securityFirst round of additional tariffs on imports from China based on Section 301
6-Jul
of the US Trade Act of 1974
Enactment of the National Defense Authorization Act (NDAA) for FY2019,
including FIRRMA to strengthen CFIUS, ECRA to enhance export control
13-Augregulations, and stipulations to prohibit government procurement of Chinese
telecommunication equipment
23-Aug Second round of additional tariffs on imports from China
24-Sep Third round of additional tariffs on imports from China
30-Nov Signature of the US-Mexico-Canada Agreement (USMCA)
Submission of Section 232 Investigation Report on automobiles and parts
17-Febfrom the DOC to the President
Submission of the 2019 Trade Policy Agenda and 2018 Annual Report to
1-Mar
Congress
15-Apr Trade Agreement on Goods (TAG) negotiation starts with Japan
Raising of tax rate on the third round of additional tariffs on imports from
10-MayChina
Announcement of the list of products subject to the fourth round of additional
13-Maytariffs on imports from China
16-May Addition of Huawei and its 68 affiliates to the Entity List of the DOC
Proclamation postponing for 180 days a final decision on whether to impose
17-MaySection 232 tariffs on automobiles and parts
Areement to remove Section 232 steel and aluminum tariffs on Canada and20-MayMexico
DOC proposes rulemaking to impose countervailing duties on countries that
23-Mayact to undervalue their currency
Announcement of additional tariffs on products imported from Mexico based
30-May on the 1977 International Emergency Economic Powers Act → Indefinitely
suspended on June 7
Sources: White House, JETRO website
Copyright (C) 2019 JETRO. All rights reserved.

2019(1985-2010 Average = 100)

500

Major trade-related decisions taken by the
Trump administration

2018



2015

2016

2017

2018

2019 (Year)

Note: Index developed by Stanford University based on data collected through articles of 10 leading
newspapers in US on a monthy basis. The larger the figure, the higher the uncertainty.
Source: "Economic Policy Uncertainty Project" (Policy Uncertainty.com)

Chapter 3 Section 3 Trends in trade protectionism

57

Current administration’s unilateral measures related to securityUnilateral measures taken by the current administration are characterized by relating economic issues to security. Many of themeasures introduced are related to tariffs, including raising tariff rates on steel and aluminum based on Section 232 of the Trade
Expansion Act of 1962, and imposing additional tariffs on Chinese products based on Section 301 of the Trade Act of 1974.
While previous administrations were cautious about using Section 232, the current administration, which started investigations byauthority for the first time in 16 years, is aggressive in both investigation and invocation. US trade partners have reacted quickly
against the measures and taken countermeasures.
Non-tariff measures include the US market access restrictions based on the National Defense Authorization Act of 2019. The law
involves the Foreign Investment Risk Review Modernization Act (FIRRMA), the Export Control Reform Act (ECRA), andgovernment procurement restrictions.

Cases for the United States to invoke measures
under Section 232 and investigations initiatedunder the Trump administrationYear
initiated

President

Subject ofinvestigation

1973

Nixon (R)Petroleum

1979

Carter (D)1982

Petroleumfrom Iran
Petroleum
Reagan (R)from Libya

Initiator

Presidential Action

Chairman of the
Oil Policy
Committee
Secretary of theTreasury
Presidential
requestTransitioned away fromexisting quota system to alicense fee
Embargo imposed on
petroleum from IranEmbargo imposed on
petroleum from Libya
Imposed tariffs of 25% on
steel imports from all
countries
Imposed tariffs of 25% on
steel imports from all
countries
Waiting for the President's
decision.

2017

Trump (R)

Steel

Secretary ofCommerce

2017

Trump (R)

Aluminum

Secretary ofCommerce

2018

Trump (R)

Automobiles
and parts

Secretary ofCommerce

2018

Trump (R)Uranium ore UR-Energy andand products Energy Fuels

The president announced his
intention not to impose import
restriction.

Titanium
Titanium Metals
In Process
sponge (2)Corp.
Note: 1) The shaded area indicates the cases for which import restrictions based on
Section 232 were imposed, 2) Investigation on titanium sponge is ongoing. TIMET,
which requested the investigation, is the only manufacturer of this product in the
United States and requested an anti-dumping investigation of the product in 2017. The
US International Trade Commission (USITC) did not recognize any damage todomestic industries, and as a result, it did not lead to imposition of anti-dumping duty.
Thus, investigation based on Section 232 was requested.
Source: US Congressional Research Service
2019

Trump (R)

Retaliations against US Section 232 measures
EU:

Russia:【Effective date】 July 6, 2018
【Number of products】79【Tariff rate】25-40%【Top 5 US exports affected by retaliation】
1.Motor vehicles, 2.Dozers/ Heavy equipment,
3.Optical fibers, 4.Taps/ Cocks/ Valves, 5.Forklift【Effective date】 June 22, 2018
【Number of products】182【Tariff rate】25%【Top 5 US exports affected by retaliation】
1.Steel, 2.Whiskies, 3.Beauty products, 4.Yachts. 5. Motorcycles

Turkey:【Effective date 】 June 21, 2018
【Number of products】22【Tariff rate】4-140%【Top 5 US exports affected by retaliation】
1.Coal, 2.Petroleum coke, 3.Nuts, 4.Kraft paper, 5.Polymers

China:

India:【Effective date】 April 2, 2018
【Number of products】128【Tariff rate】15-25%【Top 5 US exports affected by retaliation】
1.Offal, 2.Steel, 3.Nuts, 4.Pork, 5.Stone fruits (cherries/peaches)

Canada:【Effective date 】 July 1, 2018➡ Lifted on May 20, 2019
【Number of products】229【Tariff rate】10-25%【Top 5 US exports affected by retaliation】
1.Steel, 2.Aluminum, 3.Sauces, 4.Toilet paper/Towels, 5.Yachts【Effective date】 June 16, 2019
【Number of products】28【Tariff rate】10-50%【US exports affected by retaliation】
Motorcycles, Steel, Nuts, Fruits

Mexico:【Effective date】 June 5, 2018➡ Lifted on May 20, 2019
【Number of products】71【Tariff rate】7-25%【Top 5 US exports affected by retaliation】
1.Pork, 2.Steel, 3.Food preparations, 4.Cheese/Curd,
5.Apples/Pears

Note: Steel and aluminum products underlined.
Sources: US Congressional Research Service, Website of each government, "Biznews" by JETRO, various press releases and media reports

Copyright (C) 2019 JETRO. All rights reserved.

Chapter 3 Section 3 Trends in trade protectionism

58

US-China trade friction: Trade issues are part of struggle for supremacyThe current US administration, which aims to reduce its trade deficit, has put a high priority on measures against China, with which
the US has the largest trade deficit. However, the conflict between the US and China is a matter of supremacy, including security
and advanced technology competition. The trade friction is part of the conflict.
China has countered with decent countermeasures against US unilateral measures. The conflict has intensified again, especiallysince May 2019.

US-China claims for each issue

China’s response to US measures

Issue
US→China
Trade
The trade deficit with China isimbalance preventing the US from maximizing
employment

Opening
marketIndustrial
subsidiesTechnology
transfer

China→US
Trade deficits are determined basedon the economic and industrial
structures of the two countries andshould not be coordinated by thegovernment.
Criticizing the market entry regulations China has so far voluntarily carried out
in the financial and cloud computer
deregulation
fields
Subsidy system for state-owned
Subsidy abolition is unacceptable due
companies violates the WTO rules,
to the impact on local companies anddemanding total abolition
financial institutions
The Chinese government is forcing
US companies to transfer technology,
requiring joint ventures with Chinesecompanies and restrictions on
investment ratio

Objecting, saying China is not forcing
US companies to transfer technology
as claimed by the United States, but
explicitly prohibiting such enforcementby the Foreign Investment Law.

The Chinese government provides
Emphasizing the enhancement of
unfair support for Chinese companies intellectual property rights protection
to acquire companies with advanced for steady legislation
technology and intellectual property
rights in the United States
China“Made in China 2025” is a strategy to “Made in China 2025” is implemented
manufacture
violate US intellectual property rights under the philosophy of openness,
2025
and promote China's advanced
development, and cooperation. The
technology, which would distort fairplan is fair and transparent, and meetscompetitioninternational economic rules
Sources: "Biznews" by JETRO, media coverage and press releases
Intellectual
propertyrightsDate

US(Degree of dependence upon foreign trade: 20.5%
Imports from China: $539.5 billion) 〔Note 1)〕

Feb. 2018 Invocation of the safeguards for solar panels and large
washing machines based on section 201 of the Trade Act
3.3％
of 1974
Mar. 2018 Additional tariffs imposed on steel and aluminum basedon Section 232 of the Trade Expansion Act of 1962

3.9%

Date

China

(Degree of dependence upon foreign trade: 34.3%
Imports from US: $153.6 billion) 〔Note 1)〕

Feb. 2018 Initiation of the Anti-dumping investigation on US sorghum →provisional decision in April, abolishment in May

Aug. 2018 WTO dispute (DS562)
Apr. 2018 ・WTO dispute (DS544)
・Additional tariffs up to 25% on 128 items such as
fruits, pork, steel products, and aluminum products〔Note 2)〕Mar. 2018 Deciding to impose additional tariffs on imports from China (refer to

Apr.&
WTO dispute (DS543, 565)
Aug.2018

Jul. 2018

Jul. 2018

the following) and strengthen restrictions on investment in the UnitedStates based on Section 301 of the Trade Act of 1974

First round of additional tariff
Subject items
818 items(Approx. $32.0 billion including
automobiles, pumps, electronic parts)

Additional rate

25%

Aug. 2018 Second round of additional tariff
Additional rate
Subject items
279 items
25%(Approx. $14.0 billion including plastic,
semiconductors, railroad cars)
Sep. 2018 Third round of additional tariff
Additional rate
Subject items
12.4%
5,745 items
10%(Approx. $190.0 billion including
18.3%
furniture, clothing, miscellaneous goods)
May. 2019 Third round of additional tariff＜raising rate＞ 25%
Invocation
Fourth round of additional tariff
date not
Additional rate
Subject items
decided yet
3,805 items
25%(Approx. $260.0 billion including mobile
27.8%
phones, laptop computers, toys)

First round of countermeasures
additional rate
Subject items
545 items
25%(Approx. $34.0 billion including
agricultural products, livestock products,
automobiles, marine products)
Aug. 2018 Second round of countermeasures
Additional rate
Subject items
333 items
25%(Approx. $14.0 billion including
automobiles, chemical products, energy
products)

Sep. 2018 Third round of countermeasures
Additional rate
Subject items
5,207 items
5%, 10%(Approx. $53.0 billion including liquid
natural gas, electrical products, food)Jun. 2019 Third round of countermeasures ＜raising rate＞ 25%
Additional rate
Subject items-

Notes: 1) Based on the data in 2018. 2) The average US tariff rate on Chinese products after imposition of measures, estimated by the Peterson Institute forInternational Economics.
Sources: White House, Peterson Institute for International Economics, foreign trade statistics of each country

Copyright (C) 2019 JETRO. All rights reserved.

Chapter 3 Section 3 Trends in trade protectionism

59

US-China trade friction: tariff rate change after US’s measure intensification



35.0

The US has added tariffs on Chinese products three times since July 2018, after deciding to impose sanctions against China basedon Section 301 of the Trade Act of 1974 in March 2018.
Largely due to the expansion of additional tariffs against Chinese products, the US’s average applied tariff rate rose from around
1.4% in the 2000s to 1.9% in 2018. This is about the same rate as 1998 (2%) shortly after establishment of the WTO. According to
the estimation of Peterson Institute for International Economics, the invocation of the third round of additional tariffs against
Chinese products could have raised the US’s average applied tariff rate on Chinese products to 12.4%.
US average effective tariff rate(%)
The Revenue Act of 1913

(Also known as the Underwood Tariff,which stipulates comprehensive andsignificant elimination of tariffs.)

30.0

Average effective tariff rate

The Tariff Act of 1930

(Also known as the Smoot-Hawley Tariff Act, ahigh tariff policy law established for the Great
Depression.)

Average effective tariff rate on Chinese goods

The Reciprocal Trade Agreement Act of
1934

25.0

(Stipulating the promotion of trade agreements with othercountries for expanding exports.)

20.0
15.0

1948 GATT goes into effect

12.4％

1995 WTO established
2001
China's accession to WTO

10.0

2018

2010

2000

1990

1980

1970

1960

1950

1940

1930

1920

1910

1900

0.0

1890

5.0

1.9％

(Year)
Note: Average effective tariff rates on Chinese products are the actual rates imposed from 1989 to 2017. Only the figure for 2018 is estimated by the Peterson
Institute for International Economics, taking into account the effects of additional tariffs imposition.
Sources: Unites States International Trade Commission, World Integrated Trade Solution (World Bank), The Peterson Institute for International Economics
Copyright (C) 2019 JETRO. All rights reserved.

Chapter 3 Section 3 Trends in trade protectionism

60

Multilateral free trade system based on WTO rules is at a critical moment




60

The number of complaints filed with the WTO in 2018 rapidly increased to 38, surpassed only by 1997 (50 cases) and 1996 (39cases). Many countries/regions referred the disputes to the US, especially regarding the measures based on Section 232 of the US
Trade Expansion Act. The point in question is whether the US measures are justified as trade restrictions for security (GATT Article
21). In a case dealing with this Article (DS512), however, it was determined that trade restrictions for security should not be
enforced just by the member countries’ self-judgment.
Any of those US measures and retaliations against them can violate the WTO rules. Imposing measures that do not follow theinternational trade rules could undermine the rule of law established by the WTO for 25 years since its founding. It would benecessary to share a sense of crisis for protectionist trade so that the WTO rules are not ignored, to thereby maintain the multilateralfree trade system.
Number of WTO dispute settlements(Numbers)(Numbers)

20

Average annual number of active
proceedings per month (Left axis)
50

WTO disputes related to the Trump administration’s measures
Request for
Dispute Responde Complain
consultations
numbernt
ant(2018)
542

Requests for consultations (Left axis)

543

US as respondant (Right axis)

15

40

30

10

565
544
547
548
550
551
552
554
556
564

China
UnitedStatesUnitedStatesUnitedStates

545

20

562

5

10

0

95

97

99

2001

Source: WTO Secretariat

03

05

07

09

11

13

15

17 18
(Year)

0546

UnitedStatesMeasures in question

Violations of the WTO agreement
claimed by the alleging country

United States 23-Mar

Intellectual property infringement

TRIPS (national treatment, patent rightexclusivity)

China

4-Apr

China

23-AugAdditional tariffs against Chinese
GATT (most‐favored nation treatment)
products based on Section 301 of
DSU (Strengthening multilateral system)
the Trade Act of 1974

China
India
EU
Canada*Mexico*NorwayRussia5-Apr
18-May
1-Jun
1-Jun
5-Jun
12-Jun29-JunSwitzerland 9-Jul
Turkey15-Aug
Korea

14-MayChina

14-Aug

Korea

14-MayAdditional tariffs imposed onsteel and aluminum based on
Section 232 of the Trade
Expansion Act of 1962

GATT (most‐favored nation treatment,
concession, prohibition of quantitative
restrictions, etc.)
Safeguard agreement (conditions,investigation, determination of serious
injury, application of measures, applicable
period, concession level,
notification/consultation, etc.)

Safeguard measure on imports GATT (non-discriminatory administration ofof crystalline silicon photovoltaic quantitative restrictions, etc.)
Safeguard agreement (conditions, investigation,
products
Safeguard measure on importsof large residential washers

determination of serious injury, application of
measures, applicable period, concession level,
notification/consultation, etc.)

557
Canada*16-Jul558
China
16-JulCountermeasures taken by
UnitedGATT (most‐favored nation treatment,
559
EU
16-Julcountries/regions in response toconcession)
560
Mexico* States
16-JulUS Section 232 measures
561
Turkey16-Jul
566
Russia27-AugNote: Later, the two countries marked with (*) and the US agreed to mutually withdraw the complaints against each other,
after the abolition of measures against Canada and Mexico by the United States.
Sources: WTO Secretariat, "Report on Compliance by Major Trading Partners with Trade Agreements"(Ministry of
Economy, Trade and Industry)
Copyright (C) 2019 JETRO. All rights reserved.

Chapter 3 Section 4 Current status and issues of multilateral trade system

61

Increasing momentum for WTO reform

The outcome document of the 11th WTO Ministerial Conference held in December 2017 was not a ministerial declaration agreed by
all participating members, but the Chair's statement. This emphasized the difficulty of unanimous approval among many members invarious positions including developed and developing countries. There spreads a sense of crisis that current state of WTO is
insufficient.

As a new approach, plurilateral discussions on current issues including electronic commerce (EC) has been advancing. The
ambitions on EC differ depending on the economies. The US aims for a high level of liberalization, the EU defines the protection of
personal information and privacy as “fundamental rights," and China asserts autonomy over cyberspace.
Major developments surrounding the WTO
and number of documents published（No. of documents） November 2001
4th Ministerial
7,000
Conference- Start of new round

5,000

December 2011
8th Ministerial Conference- Agreement to explore "newapproach"

4,000

2,000

1,000

0

December 2015
10th Ministerial
Conference- Agreement on
product
expansionnegotiations for
Information
technology
Agreement (ITA)
2001
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18

3,000

OthersEconomies

Increased
perception ofneed for WTO
reform etc

Customsduties・ Encouraging thedevelopment mechanisms
to promoteinteroperability.

US・ Restricting on crossborder flows of personal
information and
Not imposing
proportionate to the risks
customs duty
presented.
on electronictransmissions. For the protection of personal
data and privacy:
・ Fundamental right.
・ Adopting safeguards toensure the protection of
personal data andprivacy.

EU

Adopting a legal frameworkthat provides for theprotection of the personal
information of the users ofelectronic commerce.

Japan(January-June)(Year)
Note: The number of documents in which the word "WTO" has been published in 39
major overseas newspapers/magazines which could be identified since 2001.
Source: "Factiva (July 2, 2019)" (Dow Jones), website of Ministry of Foreign Affairs,
various materials

Personal information
protection
・ Adopting a legal
framework that provides
for the protection of thepersonal information of
the users of digital trade.

December 2013
9th Ministerial
Conference- Trade Facilitation
Agreement

15
16
17
18
19

6,000

2017
February: Enforcement ofTrade Facilitation Agreement
December: 11th Ministerial
Conference- Joint statment among
voluntary members regarding
areas like electronic commerce

Proposals by major economies related to EC in the WTO (outline)

China

Not imposing
customs dutyon electronictransmissions
until the next
session of theministerial
conference.

Adopting measures that
protect the personal
information of users ofelectronic commerce.

Cross-border transfer of
information by electronic
means

Location of computing
facilities

Source code

・ In principle, not
Not requiring to use or locate ・ In principle, not requiringprohibiting or restricting. computer facilities in party's
the transfer of, or accessterritory.
to source code.
・ Not preventing ofadopting measures toachieve a legitimate public
policy objective.

・ The disclosure shall noconstrues to negatively
affect the source code
status as a trade secret.

Cross-border data flows shall not be restricted by:With some exceptions, inprincipal, not requiring the・ Requiring the use of computing facilities in the member'stransfer of, or access to, theterritory for processing.
source code.
・ Requiring the localization of data in the member's territory
for storage and processing.
・ Prohibiting storage and processing in the territory ofother members.
・ In principle, allowing.
Not requiring to use or locate In principle, not requiring the
installation of computing
transfer of, or access to,・ Not preventing offacilities in the member's
source code.
adopting measures toachieve a legitimate public territory.
policy objective.

・ No preventing of adopting any measures for the purpose of guaranteeing cybersecurity,
safeguarding cyberspace sovereignty, protecting the lawful rights and interests of citizens,
juridical persons and other organizations, and achieving other legitimate public policy
objectives.
・ This agreement shall not be construed to require any member to furnish any information, toprevent any member from taking any action which it considers necessary for the protectionof its essential security interest, or to prevent any member from taking any action inpursuance of its obligations under the United Nations Charter for maintenance ofinternational peace and security.

Note: The issues and contents are just partial; not everything is covered.
Source: WTO documents and media press reports

Copyright (C) 2019 JETRO. All rights reserved.

Chapter 3 Section 4 Current status and issues of multilateral trade system

62

Ongoing debate on strengthening monitoring functionsIn recent years, there has been a widespread international recognition that market-distorting subsidies cause the problem ofexcessively large production capacity. The WTO agreement on subsidies requires the members to notify the subsidies withspecificity, but 78 countries (48% of the members) did not report them for 2017. The performance of notification obligation is achallenge.

In order to ensure the global level playing field, Japan, the EU, and the US are collaborating to cope with market distorting measuresby third countries, such as excess capacity by subsidies. In November 2018, they made a proposal with Argentina, Costa Rica, andothers to encourage the members to comply with the notification rule by increasing the cost to be covered by the members whichhave failed to make any notification.
Major reform proposals for notification functions

Status of subsidy notification (1995-2017)(%)(No. of members)
180

50

150
120
90

60
30
0

1995 98 2001 03
05
07
09
11
13
15
17
(112) (133) (143) (146) (149) (151) (153) (153) (159) (162) (164)
Year (No. of all members)
Notified"Nil" notification
Did not make any notification
Percentage of members “not notifying” in all members (right axis)
Note: As of March 29, 2019.
Source: WTO document (G/SCM/W/546/Rev.10)

Economies(Proposal date)

Main proposals etc.

・ A developing country member encountering difficulties to fulfil notification obligations is encouraged to request
assistance and support for capacity building from the Secretariat.
Japan, US, EU,・ After one but less than two full years from a notification deadline, representatives of the member cannot be nominatedArgentina, Costa Rica,
to preside over WTO bodies, the member will be assessed a supplement of [X] percent on its normal assessed
Taiwan, Australia
contribution to the WTO budget, etc.
40
(November 2018)
・ After two but less than three full years following a notification deadline, the member will be designated as an Inactive
Member, representatives of the member will be called upon in WTO formal meetings after all other members have taken
the floor, and before any observes, etc.
・ Almost the same content as the above proposal. Canada and New Zealand joined as co-sponsors.
Japan, US, EU,・ Such wording as the increased amount in budget burden “may be used for the purpose of providing members with
Argentina, Costa Rica,
technical assistance to fulfil notification obligations” was added.
Taiwan,Australia,
30
・ If the notification is delayed for more than two years, the member shall be designated as a “Member with notification
Canada, New Zealanddelay" not “Inactive Member." As in the proposal above, representatives of the member will be called upon in WTO(March 2019)
formal meetings after all other members have taken the floor, and before any observes.
・ Developed members should lead by example in submitting comprehensive, timely, and accurate notifications.
・ Members should improve the quality of their counter-notifications, other members notify the measures that should be
notified by the countries concerned so as to remind them.
20
・ Members should increase exchange of their experiences on their notifications.
China
・ The WTO secretariat needs to update Technical Cooperation Handbook on Notifications as soon as possible and(May 2019)intensify training in this regards.
・ Developing members should also endeavour to improve their compliance of notification obligations. Technicalassistance and capacity building should be provided to developing members, in particular LDCs, if they are unable tofulfil notification obligations on time.
・ Given the challenging issue of resource constraints, developing countries cannot agree to any transparency
obligations which go beyond existing obligation. Further, punitive approaches to enforce notification andCuba, India, Nigeria,transparency obligations are not acceptable.
South Africa, Tunisia,
・ Flexibilities must be provided to developing countries, SVEs and LDCs in relation to existing notification obligations so
Uganda, Zimbabwethat they are commensurate with their levels of development.
(June 2019)・ Some developed countries are chronically low in their level of compliance with existing notification requirements,
notably under GATS.
Source: WTO documents (JOB/GC/204; JOB/CTG/14, JOB/GC/204/Add.1-2;JOB/CTG/14/Add.1-2, JOB/GC/204/Rev.1;JOB/CTG/14/Rev.1,
WT/GC/773,JOB/GC/218;JOB/CTG/15;JOB/SERV/292;JOB/IP/33;JOB/DEV/58;JOB/AG/158)

Copyright (C) 2019 JETRO. All rights reserved.

Chapter 3 Section 4 Current status and issues of multilateral trade system

63

Dispute settlement function in a crucial phase

The Appellate Body, the appellate division of the WTO’s dispute settlement system, has four vacancies (for seven positions), because the US has opposed
the replacement process for the members who have retired from the positions. Under the current number of the Appellate Body, only one committee can beheld consisting of three members; additionally, two of the three incumbents will complete their terms in December 2019. As various economies have been
making proposals for the issues that the US sees as problems, the WTO has been seeking solutions to the issues.

It would be difficult to recover the dispute settlement function in the short term, as the US, which has refused to appoint Appellate Body members, has notpresented an improvement plan. Although suspension of the Appellate Body does not mean suspension of the dispute settlement function, with the
improvement in terms of fairness and reliability of the judicial function by the Appellate Body, which has been in place since the inception of the WTO
framework, it should be resolved as soonas possible.

US claims to the Appellate Body and major reform proposals by major economies
US claims to the Appellate Body

Proposals and claims by major economies

WTO members agreed in the Understanding on Rules andProcedures Governing the Settlement of Disputes (DSU) that foreach appeal in no case shall the proceedings exceed 90 days.
However, since 2011, it no longer consults with the parties, but
simply informs the Dispute Settlement Body that it will not comply
the DSU deadline.
(2) Continued service Under the WTO agreement, it is the Dispute Settlement Body, notby persons who are
the Appellate Body, that has the authority and responsibility to
no longer Appellate decide whether a person whose terms of appointment has expired
Body members
should continue serving. However, the Appellate Body conducts
the substantial appointments itself, and a person who ceases to bea member of the Appellate Body continues to be a member.

・ The Appellate Body would need to consult with the parties early inappellate proceedings - or before the appeal is filed - if it estimatesthat the report will be circulated outside 90 days.
・ The Appellate Body shall strictly observe the 90 day deadlines forAppellate Review.

(1) Disregard for the
90-day deadline forappeals(3) Issuing advisory
opinions on issues
not necessary toresolve a dispute

The purpose of the dispute settlement is not to "make law", butrather help members resolve trade disputes among them. WTO
members have not given panels or the Appellate Body the power togive "advisory opinions" as some national or international
tribunals have. Yet there are numerous occasions when a panel or
the Appellate Body has made unnecessary findings or rendered"advisory opinions".

・ An outgoing Appellate Body member shall complete thedisposition of pending appeal in which a hearing has already takenplace during that member's term.
・ The outgoing Appellate Body members should continuedischarging their duties until their places have been filled but nolonger than for a period of two years following the expiry of theterm of office.
・ The Appellate Body shall address each of the issues raised on
appeal by the parties to the dispute to the extent this is necessary
for the resolution of the dispute.
・ The scope of the Appellate Review shall be limited to issues of law
covered in a panel report and legal interpretations developed by thepanel.
・ The recommendation and rulings of the Dispute Settlement Body
(DSB) cannot add to or diminish the rights and obligations.
・ The Appellate Body cannot review the meaning itself of themembers' municipal laws.
・ The Appellate Body shall not review panel's fact-finding, such as
meaning of municipal law, as an issue of law.
・ Annual meeting are held between the Appellate Body and WTO
members where members could express their views.
・ An interpretation by the Appellate Body of any WTO provision
does not constitute a precedent for posterior interpretations.

(4) Appellate Body
The Appellate Body has reached conclusions that are not based onreview of facts andpanel factual findings or undisputed facts, and consistently asserts
review of member'sthat it can review the meaning of a member's domestic measure as adomestic law de novo matter of law.
(5) The Appellate
The Appellate Body has asserted its reports effectively serve as
Body claims its
precedent and that panels are to follow prior Appellate Body
reports are entitled to reports absent "cogent reasons". However, Appellate Bodybe treated asreports are not themselves agree text nor are they substitute for theprecedent
text that was actually negotiated and agree.
Source: “2018 Trade Policy Agenda and 2017 Annual Report of the President of the United States on the Trade Agreements Program” (Office of the United States
Representative), “2019 Report on Compliance by Major Trading Partners with Trade Agreements-WTO, EPA/FTA and IIA-” (Ministry of Economy, Tradeand Industry), and WTO documents (WT/GC/W752/Rev.2, WT/GC/W753/Rev.1, and WT/GC/W768/Rev.1)

Function of WTO and evaluations
Function

Multilateral
trade rule
formation andLegislative
trade
liberalization
negotiations
Deterrence ofprotectionism
by investigating
and publishing
Monitoring theimplementation
status ofcurrent trade
rules

Judicial

Judicial
settlement oftrade disputes
and its
implementation
by Dispute
Settlement
Body

2014
2018
2019
Publication year of JETRO Global Trade and Investment Report
Evaluation
Challenges

×→△

○

○

△

○→△

◎→△

△

Difficulties in decision making
among all members. Lack of US
involvement in the WTO. (Sameas 2018)△

Elimination of market-distorting
measures such as subsidies.
Improvement of monitoring
function to ensure that all
members comply with theirnotification requirements.

▲

The suspension of the Appelate
Body is not the suspension of the
dispute settlement function (panel
procedures remain), but two of
the three members of the current
Appellate Body will have theirterms end on December 2019.

Note:

Each symbol is only to illustrate the current situation of the WTO, and not intended
to undervalue the significance and function of the organization.
Source: "Global Trade and Investment" (JETRO, respective years), and various materials

Copyright (C) 2019 JETRO. All rights reserved.

64

JETRO Global Trade and Investment Report 2019: The fluctuating international economic order andglobal business in the future
Key Points
Address any inquiries concerning this report to:International Economy Division, Overseas Research Department
Japan External Trade Organization (JETRO)
1-12-32 Akasaka, Minato-ku, Tokyo 107-6006 Japan
TEL: +81-(0)3-3582-5177
E-mail: ORI@jetro.go.jp
Note: Figures may not sum up to the total because some are less than one unit.
Disclaimer of liability: Responsibility for any decisions made based on or in relation to the information provided in this material shall rest solely
on the reader. Although JETRO strives to provide accurate information, JETRO will not be responsible for any loss or damages incurred byreaders through the use of such information in any manner.

[Reproduction without permission is prohibited.]
Copyright (C) 2019 JETRO. All rights reserved.