Japan External Trade Organization

JETRO Global Trade and Investment Report 2017
- Global Economy Reaching Turning Point Overview

July 31, 2017
Japan External Trade Organization (JETRO)
Overseas Research Department

Chapter 1
The world economy, international trade andforeign direct investment

Chapter 1 Section 1: World Economy and the Issues It Faces

World economy maintains its pace of moderate growth■ World economy grows at about 3% for five consecutive years
According to IMF estimates, the world's real GDP growth rate in 2016 was 3.2%, keeping up its pace of moderate growth of about 3% for the fifth
consecutive year. The 3.2% growth rate was the lowest growth rate since 2010. In 2017, growth is expected to pick up speed to 3.5%, underpinned
by factors such as recovery of global manufacturing and trade, strong economic performance in the Euro zone, outlook for steady growth in the
Chinese economy, and recovery of commodity exporting countries accompanying the rise in commodity prices.
■ Trends in commodity prices holds one of the keys to the world economy
The contribution rate of commodity-exporting developing economies (57 emerging/developing economies) to the growth rate of the world
economy is closely interlocked with commodity prices. When commodity prices rose in the 2000s, contribution rate was on par with that of China(29.5% at its peak in 2008), but fell in tandem with the decline in non-fuel commodity prices after 2011 and the decline in fuel prices after mid2014, hitting a low of just 0.1% in 2015. With the rise in commodity prices after the beginning of 2016, contribution rate is expected to reach 9.7%
in 2018, exceeding that of the United States and the Euro zone. The gradual increase of commodity prices is expected to contribute positively to theworld economy.

Trends in real GDP growth rate/contribution ratio by economies
2015
World
Advanced economies
USEuro area
Germany
FranceUK
Japan
Emerging and developing economies
Emerging and developing Asia
China
India
ASEAN 5Latin America and the Caribbean
BrazilMexicoEmerging and developing Europe
Russia/CIS
RussiaMiddle East and North Africa
Sub-Saharan Africa

20162017 (forecast)

Percent Contribu- Percent Contribu- Percent Contribuchange tion rate change tion rate change tion rate

3.4
2.1
2.6
2.0
1.5
1.1
2.2
1.1
4.3
6.8
6.9
8.0
4.9
0.1
-3.8
2.6
4.7
-2.2
-2.8
2.7
3.4

100.0
27.4
12.2
7.3
1.5
0.8
1.6
1.5
73.2
60.1
34.1
15.9
7.6
0.2
-3.4
1.5
4.9
-3.1
-2.9
6.1
3.1

3.2
1.7
1.6
1.8
1.8
1.2
1.8
1.0
4.3
6.4
6.7
7.1
4.9
-1.0
-3.6
2.3
3.0
0.4
-0.2
5.0
1.3

100.0
22.4
7.9
6.7
1.9
0.9
1.3
1.4
77.4
61.0
35.9
15.5
8.1
-2.5
-3.1
1.4
3.3
0.6
-0.3
11.8
1.3

3.5
2.0
2.1
1.9
1.8
1.5
1.7
1.3
4.6
6.5
6.7
7.2
5.1
1.0
0.3
1.9
3.5
1.7
1.4
2.6
2.7

100.0
24.3
9.4
6.5
1.7
1.0
1.1
1.6
77.3
59.4
34.4
15.0
7.9
2.3
0.2
1.1
3.6
2.2
1.3
5.7
2.4

(%)
2018 (forecast)
Percentchange

3.6
1.9
2.1
1.7
1.6
1.7
1.5
0.6
4.8
6.5
6.4
7.7
5.2
1.9
1.3
2.0
3.2
2.1
1.4
3.3
3.5

Notes: The definitions of advanced/emerging and developing economies follow the World Economic Outlook (WEO).
ASEAN 5 refers to Indonesia, Malaysia, Philippines, Thailand, and Vietnam. The Middle East and North Africa
includes Afghanistan and Pakistan. 2) The contribution rate is calculated using the weighted PPP (purchasing power
parity) of the previous year, which was released in April 2017.
Source: "WEO, April/July 2017" (IMF)

Contribution rate by commodity-exporting developing economies andkey countries to the world’s economic growth rate
Total for non-fuel commodity exporters

Total for fuel commodity exporters

Total for commodity-exporting developing economies

US

China
40 (%)

Commodity prices (2005 =100, right axis)

200

35

100

30

0

25
20

-100

15

-200

10

-300

5

-400

0
△5

2000 01

02

03

04

05

06

07

08

09

10

11

12

13

14

15

16 17p 18p

4.8%2.5%3.0%4.3%5.4%4.9%5.5%5.6%3.0%△0.1%5.4%4.2%3.5%3.4%3.5%3.4%3.2%3.5%3.6%-500(Year)

Notes: (1) Commodity-exporting developing economies cover 57 economies with the exclusion of the Marshall Islands and Tuvalu, for whichdata is not available, from the original 59 emerging and developing economies based on "WEO, April 2017" (IMF), p12 (with the addition ofBrazil and Peru in Annex Table D on p179). Brazil and Peru are categorized as non-fuel commodity exporters. (2) Contribution rate is
calculated based on GDP weight of PPP (purchasing power parity) from the previous year, published in April 2017. (3) The figures below eachyear represent real GDP growth rate for the world. (4) As growth rate for the world economy was negative in 2009, contributio n rate could not
be calculated. (5) Figures for 2017 - 2018 are forecasts by IMF.
Source: "WEO, April/July 2017" (IMF)

Copyright (C) 2017 JETRO. All rights reserved.

3

Chapter 1 Section 2: World Trade and Japan’s Trade

World trade declines for the second year running in 2016
■ World trade declines by 3.1% to $15.6201 trillion in 2016 (JETRO estimate)
World trade in 2016 (merchandise trade, nominal export basis) fell by 3.1% year-on-year to $15.62 trillion (JETRO estimate). Although thepercentage of decline was smaller than the 12.9% decline of the previous year, this was the second consecutive year of decline in world trade, and thefirst time since 1981 - 83 when negative growth was recorded for consecutive years. Trade volume (export basis), which is an indicator of real trade,remained at about the same level with a 0.2% fall, marking the lowest growth since 2010. Commodity price depreciation (in particular, dip in fuelprices), is believed to have brought about a difference in the growth rate of value and quantity.

World trade related indicators(All figures are percentages, unless indicated at the end of column)
World trade (export, 100 mil USD)
Nominal growth rate
Real growth rate
Price growth rate
World trade (import, 100 mil USD)
Nominal growth rate
Real growth rate
Price growth rate
Industrial production index
growth rate (developed countries)
Crude price growth rate
Natural gas price growth rate
Metal price index growth rate
Iron ore price growth rate
Food price index growth rate
Growth of nominal effective dollar exchange rate

2012

2013

2014

2015

2016

176,680 182,542 185,006 161,124 156,201
0.0
3.3
1.3
-12.9
-3.1
2.3
3.7
3.0
1.3
-0.2
-2.2
-0.3
-1.6
-14.0
-2.9
183,118 186,879 189,460 164,902 160,030
0.4
2.1
1.4
-13.0
-3.0
1.3
3.3
2.8
0.2
-0.9
-0.8
-1.2
-1.4
-13.1
-2.1
0.4

0.2

2.1

0.2

0.1

1.0
13.1
-16.8
-23.4
-2.6
3.8

-0.9
-6.6
-4.3
5.3
0.7
2.2

-7.5
-6.5
-10.1
-28.1
-4.1
2.5

-47.2
-30.2
-23.0
-42.4
-17.2
15.3

-15.7
-40.4
-5.4
4.3
2.1
0.2

Notes: 1) Both trade values and nominal growth rates are estimated by JETRO. See Appendix Annnotation II
regarding the method of estimation. 2) The price growth rate was calculated based on the price index of the
IFS. 3) The real growth rate was caluculated by dividing the nominal amount by price index. 4) All commodity
prices are indicated in the growth rate of the annual average. Crude oil prices are the average of Dubai, Brent
and WTI. Natural gas prices are Russian market prices. Iron ore prices are the import prices at China's CFR
Tianjin port.
Source: Trade statistics of respective economies and "IFS, May 2017" (IMF)

Copyright (C) 2017 JETRO. All rights reserved.

Trends in world trade (export basis)(Billion USD)

20,00018,00016,00014,00012,00010,000
8,000
6,000
4,000
2,000
0

Export value（left axis）
Nominal growth rate（right axis）
Real growth rate (right axis)

(%)

25
20
15
10
5
0
-5
-10
-15
-20
-25
-30
(Year)

Source: JETRO's estimates based on the trade statistics of respective economies, and"IFS, May 2017" (IMF)

4

Chapter 1 Section 2: World Trade and Japan’s Trade

Trends by country in world trade:
Impact of economic downturn in the US, China, and commodity exporters■ US and China imports and exports fall for second consecutive year
The United States (second largest exporter and largest importer in the world) andChina (largest exporter and second largest importer in the world) recorded a decline
in both imports and exports for the second consecutive year, pushing down world
trade. The decline in US exports (3.5% decline) was primarily the result of a decline
in general machinery and chemicals, as well as a decline in petroleum and petroleum
products against the backdrop of depreciation in crude oil prices. Close to 60% of
the decline in imports (2.7% decline) is also the result of a decline in petroleum andpetroleum products brought about by the depreciation in crude oil prices. China also
recorded a fall in imports and exports across most products. In particular, electricalequipment, general machinery, base metals and its products, and textile and its
products had an impact on the overall decline in exports (6.4% decline), while
petroleum and its products and electrical equipment had an impact on the decline inimports (4.8% decline).
■ Commodity exporters account for close to half of the decline in world trade
Against a backdrop of sluggish commodity prices, exports from commodity
exporters (41 emerging/developing economies and 7 advanced economies) declined
by 9.7% while imports fell by 8.7%. Close to half of the decline in the amount ofworld exports for 2016 can be accounted for by the decline in trade of thecommodity exporters.
■ Relatively strong performance by the EU, and high growth rates for
Vietnam and the Philippines
The EU performed relative well in comparison with other regions, staying at about
the same level with a 0.2% drop in exports and 0.1% growth in imports. Germany
recorded growth in both imports and exports, while Italy and Spain recorded growthin exports. The growth in exports bound for EU and China, led by the transport
equipment and electrical equipment sectors, contributed to the growth in exports(0.8% growth) for Germany. Vietnam recorded high growth rates of 9.0% increasein exports and 5.6% increase in imports. Its export growth was driven by telephones,
mobile phones, and their parts, as well as computers, electrical products, and theirparts. Imports to the Philippines increased by 21.2% against a backdrop of strong
performance in personal consumption, the promotion of infrastructural investmentby the government, and rapid growth in construction and capital investment in theprivate sector.
Copyright (C) 2017 JETRO. All rights reserved.

World trade value by country and region (2016)
Value
NAFTA
US
CanadaMexicoEU
Germany
Netherlands
France
Italy
UK
Japan
Australia
East Asia
China
South Korea
TaiwanASEAN 6Singapore
Thailand
Malaysia
VietnamIndonesia
Philippines
India
BrazilRussiaTurkeySouth Africa
World
Advanced economies
Emerging/developing economies
Commodity exporters
Fuel exporters
Nonfuel exporters
Commodity exporters Dev.
Commodity exporters Adv.

22,151
14,5103,902
3,739
53,351
13,380
5,695
5,009
4,616
4,092
6,446
1,916
39,986
21,353
4,954
2,572
11,107
3,299
2,137
1,897
1,766
1,445
563
2,646
1,852
2,857
1,425
767
156,201
96,997

ExportGrowth ContriShareratebution
14.2
-3.4
-0.5
9.3
-3.5
-0.3
2.5
-4.9
-0.1
2.4
-1.8
0.0
34.2
-0.2
-0.1
8.6
0.8
0.1
3.6
-0.1
0.0
3.2
-1.0
0.0
3.0
1.0
0.0
2.6 -11.0
-0.3
4.1
3.1
0.1
1.2
2.1
0.0
25.6
-4.8
-1.2
13.7
-6.4
-0.9
3.2
-5.9
-0.2
1.6
-2.6
0.0
7.1
-1.5
-0.1
2.1
-4.8
-0.1
1.4
1.3
0.0
1.2
-4.8
-0.1
1.1
9.0
0.1
0.9
-3.9
0.0
0.4
-4.0
0.0
1.7
-1.3
0.0
1.2
-3.1
0.0
1.8 -16.8
-0.4
0.9
-0.9
0.0
0.5
-6.1
0.0
100.0
-3.1
-3.1
62.1
-1.3
-0.8

Value
29,77821,8784,029
3,871
52,594
10,552
5,043
5,727
4,045
6,365
6,070
1,893
32,00015,247
4,062
2,304
10,388
2,830
1,958
1,687
1,748
1,357
808
3,617
1,376
1,823
1,985
751
160,030
101,640(100 million USD, %)ImportGrowth ContriShareratebution
18.6
-2.8
-0.5
13.7
-2.7
-0.4
2.5
-4.0
-0.1
2.4
-2.1
0.0
32.9
0.1
0.0
6.6
0.3
0.0
3.2
-1.7
-0.1
3.6
-0.1
0.0
2.5
-1.6
0.0
4.0
1.6
0.1
3.8
-6.4
-0.3
1.2
-5.5
-0.1
20.0
-3.5
-0.7
9.5
-4.8
-0.5
2.5
-6.9
-0.2
1.4
1.1
0.0
6.5
-1.0
-0.1
1.8
-4.6
-0.1
1.2
-3.0
0.0
1.1
-4.2
0.0
1.1
5.6
0.1
0.8
-4.9
0.0
0.5
21.2
0.1
2.3
-8.2
-0.2
0.9 -19.8
-0.2
1.1
-0.3
0.0
1.2
-4.0
-0.1
0.5 -12.4
-0.1
100.0
-3.0
-3.0
63.5
-1.7
-1.0

59,204

37.9

-5.8

-2.3

58,390

36.5

-5.1

-1.9

21,437
10,282
11,155
14,048
7,389

13.7
6.6
7.1
9.0
4.7

-9.7
-16.3
-2.6
-12.4
-4.1

-1.4
-1.2
-0.2
-1.2
-0.2

21,008
9,915
11,093
13,377
7,632

13.1
6.2
6.9
8.4
4.8

-8.7
-10.3
-7.2
-11.3
-3.8

-1.2
-0.7
-0.5
-1.0
-0.2

Notes: 1) "Commodity exporters Dev. (Adv.)" indicate commodity-exporting emerging/developing economies(advanced economies). 2) Figures of "World," "EU," "Advanced economies," "Emerging/developing economies" and "Commodity exporters" were estimated by JETRO. 3) Figures of "EU" include those of
intraregional trade. 4) Member countries of ASEAN 6 are Singapore, Thailand, Malaysia, Vietnam, Indonesia
and the Philippines. 5) East Asia includes China, South Korea, Taiwan, ans ASEAN 6. 6) See footnote in themain text regarding the definition of "Commodity exporters," which include 41 emerging/developing
economies and seven advanced economies. Figures of small countries which were unavailable or unable to be
estimated were excluded. 7) Advanced economies include 39 economies based on the definition of DOTS
(IMF).
Source: Trade statistics of respective economies

5Chapter 1 Section 2: World Trade and Japan’s Trade

Trends in world trade by type of product:
80% of the decline is due to commodity-related products■ Decline in commodity-related products accounts for 80% of the decline in world trade
The value of trade (exports) for commodity-related products (total for mineral fuels, etc., mineral ore, base metals and its products, food,oils and fats, and other animal and vegetable products), which makes up 1/4 of world trade, reflecting the decline in commodity prices,fell by 8.9% to $3.96 trillion. This decline accounts for 78.2% of the decline in world exports.
■ Growth in the trade of transport equipment on the back of expansion in Japan and intra-EU trade
While trade in general machinery (2.1% decline), electrical equipment (0.6% decline), precision equipment (1.8% decline), andchemicals (1.9% decline) has fallen, trade in transport equipment has increased (1.1% growth). Factors that contributed to the growth fortransport equipment include the increase in intra-EU trade activity on the back of strong performance by the automotive market, and a
growth in Japanese exports bound for US, EU, and China.
World trade by product (export basis, 2016)
Value

Total exports
156,201
Machinery and equipment
66,114General machinery
18,851Mining and construction machines
695
Machine tools
307
Turbines
1,071
Engines
1,492
Industrial robots
45
Computer and peripheral equipment
4,331
Semiconductor manufacturing equipment
568
Electrical equipment
23,115
Communication equipment
5,312
Integrated circuits
5,337
Transport equipment
18,303
Automobiles
8,366
Passenger vehicles
6,942
Automobile parts
4,033
Precision equipment
5,845
Chemicals
21,566
Pharmaceuticals and medical supplies
5,064
Food (a)11,825
Oils, fats, and other animal and vegetable products (b)1,819
Miscellaneous manufactured goods
5,791
Notes: JETRO estimates.
Source: Trade statistics of respective economies

Copyright (C) 2017 JETRO. All rights reserved.

Share

100.0
42.3
12.1
0.4
0.2
0.7
1.0
0.0
2.8
0.4
14.8
3.4
3.4
11.7
5.4
4.4
2.6
3.7
13.8
3.2
7.6
1.2
3.7

Growth
rate

-3.1
-0.7
-2.1
-12.2
-9.3
5.7
-1.4
7.7
-5.8
18.0
-0.6
-3.4
5.3
1.1
3.3
3.5
3.3
-1.8
-1.9
1.7
1.2
2.7
-0.2

Contribution-3.1 Other materials and their products-0.3 Mineral ore (c)-0.3Iron ore-0.1 Mineral fuels etc.（d）
0.0
Coal
0.0
LNG etc.
0.0
Petroleum and its products
0.0 Textile and its products-0.2 Gold
0.1 Base metal and its products (e)-0.1Iron and Steel-0.1 IT related products (total)
0.2 Parts
0.1 Final goods
0.2 Commodity-related products (total)
0.1 Fuel (=(d) )0.1 Non-fuel (metal, food and beverages)-0.1
Metal (= (c) + (e) )-0.3
Food and beverages (= (a) + (b) )0.1 Materials
0.1 Intermediate goods
0.0 Processed goods
0.0 Parts
Final goods
Capital goods
Consumption goods

Value

46,343
1,547
716
14,350766
1,627
10,8897,441
3,147
10,086
5,541
24,269
11,793
12,476
39,627
14,35025,277
11,633
13,644
13,36473,82445,57728,24664,642
26,47838,163(100 million USD, %)Growth ContriShareratebution

29.7
1.0
0.5
9.2
0.5
1.0
7.0
4.8
2.0
6.5
3.5
15.5
7.5
8.0
25.4
9.2
16.2
7.4
8.7
8.6
47.3
29.2
18.1
41.4
17.0
24.4

-8.3
-0.9
2.4
-18.7
-1.4
-26.0
-18.7
-2.9
7.1
-6.8
-7.7
-1.4
0.4
-2.9
-8.9
-18.7
-2.2
-6.0
1.4
-11.7
-3.2
-5.2
0.1
-0.9
-3.1
0.6

-2.6
0.0
0.0
-2.0
0.0
-0.4
-1.6
-0.1
0.1
-0.5
-0.3
-0.2
0.0
-0.2
-2.4
-2.0
-0.3
-0.5
0.1
-1.1
-1.5
-1.5
0.0
-0.4
-0.5
0.1

6

Chapter 1 Section 2: World Trade and Japan’s Trade

High growth in semiconductor-related and industrial robot trade

Copyright (C) 2017 JETRO. All rights reserved.

Semiconductor manufacturing
equipment

Integrated circuits

Top 10 exporters of semiconductor-related products and industrial robots (2016)

Industrial robots■ Growth for seven consecutive years for integrated circuits, andthree consecutive years for semiconductor manufacturing equipment
Amidst the overall decline in trade for general machinery, electricalequipment, and chemicals, growth was recorded for turbines (5.7%
growth, export basis), industrial robots (7.7% growth), semiconductor
manufacturing equipment (18.0% growth), integrated circuits (5.3%
growth), and pharmaceuticals and medical supplies (1.7% growth).
Against the backdrop of video viewing on smartphones and theadvancement of IoT, and acceleration in the development of artificial
intelligence (AI) and self-driving technologies, global semiconductor
demand is expanding, and trade in integrated circuits grew for the 7thconsecutive year, while trade in semiconductor manufacturing equipment
grew for the 3rd consecutive year.
■ Japan ranks first in the world for semiconductor manufacturing
equipment and industrial robot exports
Economies that contributed to the growth in the export of integrated
circuits include Vietnam, Taiwan, and the EU (particularly Ireland).
The growth in export of semiconductor manufacturing equipment could
be attributed in part to increase in Japan, Singapore, US, and theNetherlands. Imports by the top three economies for imports ofsemiconductor manufacturing equipment (China, Taiwan, Korea)
expanded by an average of 13 - 17% every year after 2009.
A large part of the increase in industrial robot exports can be accounted
for by export growth in Japan and the EU. China came in at first place forindustrial robot imports, with more than 20% of the import share, due tothe introduction of industrial robots brought about by labor shortage,rising labor costs, and government promotion measures aimed atenhancing the sophistication of the manufacturing industry. However,remarkable import growth was also recorded for other emerging anddeveloping economies.
Japan ranks first in the world for industrial robot and semiconductor
manufacturing equipment exports, and its share of the world export
market exceeds 30%.

Rank Economies

Value

Share

1 Taiwan
2 China
3 South Korea
4 US
5 Malaysia
6 Japan
7 Singapore
8 Philippines
9 Vietnam
10 Germany(memo) EU
1 Japan
2 US
3 Netherlands
4 Singapore
5 South Korea
6 China
7 Germany
8 Taiwan
9 Malaysia
10 Austria(memo) EU
1 Japan
2 Germany
3 Italy
4 France
5 US
6 South Korea
7 Austria
8 China
9 Sweden
10 Denmark(memo) EU

724
638
523
350
266
241
167
139
135
122
403
179
128
75
48
42
19
17
8.3
6.9
4.9
109
16
6.4
2.9
2.5
2.0
1.8
1.6
1.6
1.4
1.1
20

13.6
11.9
9.8
6.5
5.0
4.5
3.1
2.6
2.5
2.3
7.6
31.5
22.5
13.1
8.4
7.4
3.3
3.1
1.5
1.2
0.9
19.2
35.9
14.2
6.5
5.5
4.3
4.0
3.5
3.4
3.2
2.5
44.3

Growth
rate
13.7
-9.1
0.2
4.4
-2.3
1.9
-1.8
-2.9
231.0
1.4
17.2
36.1
8.9
12.3
30.3
-8.0
24.0
6.7
32.6
25.9
-16.4
9.2
13.2
1.7
-10.1
21.2
8.5
-23.8
9.2
7.9
-9.5
109.9
7.8

(100 million USD, %)Contri2009-16
CAGR
bution
1.7
11.1
-1.3
15.2
0.0
11.5
0.3
2.1
-0.1
3.2
0.1
-1.8
-0.1
0.3
-0.1
14.9
1.9
86.2
0.0
5.5
1.2
3.5
9.8
11.6
2.2
13.3
1.7
18.6
2.3
37.8
-0.8
23.0
0.8
22.6
0.2
-0.4
0.4
29.7
0.3
42.1
-0.2
6.3
1.9
11.9
4.5
18.6
0.3
7.5
-0.8
14.6
1.0
10.7
0.4
1.0
-1.3
20.1
0.3
16.1
0.3
30.6
-0.4
4.9
1.4
26.4
3.5
9.5

Notes: 1) Exports of Singapore and Hong Kong exclude re-exports. 2) "Share" indicates thethe share in world exports (JETRO estimates). 3) Vietnam's export values are estimatedbased on trade statistics of importers. 4) CAGR indicates compound annual growth rate.
Source: Trade statistics of respective economies

7Chapter 1 Section 2: World Trade and Japan’s Trade

Continued signs of “slow trade” phenomenon■ Prolonged “slow trade” phenomenon
World trade, which had previously been outpacing world demand in growth, has been showing remarkable signs of slowdown recently. “Slow trade,”
where growth in trade volume falls below the growth rate of world GDP, is an ongoing phenomenon. Growth rate in world trade slowed down
drastically after 2012, and its ratio against GDP growth rate has fallen below 1. The “slow trade” phenomenon is particularly serious in emerging anddeveloping economies, with the ratio of growth rate for trade in the most recent years of 2005 - 2016 to GDP growth rate at just 0.4, significantly
lower than the ratio for advanced economies (1.6).
■ Many studies point to decline in demand as a primary cause of “slow trade”
Many studies by the central banks of various countries, as well as international organizations such as IMF and WTO, analyzing the factors behind“slow trade,” have presented the view that a decline in global demand is the primary cause. For example, IMF pointed out that 3/4 of the recent
decline in trade can be accounted for by a decline in global demand, especially the low level of investments with strong ability to stimulate imports. It
also explained that the slowdown in the pace of expansion of the global value-chain, trade policies, and other reasons also have a certain degree of
persuasiveness as the factors contributing to the portion that cannot be accounted for by a decline in demand.

Factors behind the decline in world trade (IMF)

Ratio of world trade growth to world GDP growth
5.5(Real trade growth/real GDP growth)

0.0Emerging/developing economies

4.5

-1.0

World

4.0

-2.0

3.5

3.2

3.1

3.0

2.5
1.9

1.9

2.2

2.1

1.9

1.7
1.2

1.8

1.7

1.6

1.6

0.8
0.4

0.5

1.5

1.6
0.9

1.0 0.8

0.2

0.4

0.3

0.0
-0.5

-5.0
0.7

-0.1
85

87

89

91

93

95

97

99

01

03

05

07

09

11

13

15 16

Note: 1) Real trade growth is based on import volume. 2) All years, except for 2016, in which either the trade growth rate or GDP (Year)
growth rate were negative are excluded. Years in shadow are those in which real trade growth/real GDP growth fell below 1.
Source: "WEO, April 2017"(IMF) and "IFS(06/26/2017)" (IMF)

Copyright (C) 2017 JETRO. All rights reserved.

-6.0
-7.0

(%)

0.0

Trade
policies

-0.5

-4.8
Slowdown in
expansion of
global valuechain

-4.0

2.1

-0.3
-0.4

-3.0

2.8

2.6

2.5

2.3

2.2

1.5
1.0

Decline inglobaldemandAdvanced economies

5.0

2.0

(%)

-1.7
Other

-1.0

-1.0

-1.5

Other

-2.0

Note: Figures show the contribution of each factor against the difference in realimport change between 2003 - 2007 and 2012 - 2015.
Source: "WEO, October 2016" (IMF)8

Chapter 1 Section 2: World Trade and Japan’s Trade

Products expected to experience growth in trade over the medium to long-term

Copyright (C) 2017 JETRO. All rights reserved.

Products which sustained strong imports
Average growth rate (%)

JETRO Classification

Products

4-digit HS code

■ Despite “slow trade,” there are still products with increased trade
Based on a comparison of the growth in trade volume from 2003 - 2007
and 2012 - 2015, drawn up by the IMF, 85% of the products registered asmaller trade volume during the latter period.
Looking at the products that registered an increase in imports from 2012 2016 (b)—when the ”slow trade” phenomenon continued amidst the
lackluster trade performance worldwide—based on JETRO's productcategories, we see a lineup of consumer durables such as passenger
vehicles, communication equipment, processed food, apparel, andpharmaceutical products. Even though the growth rate for the imports ofall these products slowed down from 2003 – 2007 (a), they continued toregister positive growth. Consumer durables, represented by passenger
vehicles, are products with room for future growth in penetration rate
alongside with growth in income. While there were also someintermediate goods such as integrated circuits, and capital goods such as
turbines, that continued to register import growth, in general, consumer
goods stood out for its strong performance.
Even on the basis of the four-digit HS classification, the growth rate forimports during period (b) exceeded that of period (a) for food products
such as shellfish, beef, and cocoa beans, in addition to clothing accessories
such as footwear and men’s clothing; even here, the stable performance ofconsumer durables was prominent. By nature, necessities such as appareland clothing accessories are not characterized by demand that declines
significantly, so trade is expected to continue growing in tandem withpopulation growth in emerging and developing economies going forward.
■ “Slow trade” to ease with recovery in investments
Capital investment is on a recovery trend in the key countries/regions of
the world as of the first quarter of 2017. If the primary cause of “slowtrade” is a decline in demand due to sluggish investment, this means thatthe slow trade phenomenon could ease gradually if investment continues
to recover throughout the year.

Goods classification

Passenger vehicles
Integrated circuits
Telecommunications
equipment
Processed foodPharmaceutical products
Clothes
Auto parts
Gold
Turbines
Fish and shellfish
Ceramics
Beef
Motorcycles
Industrial robots

Consumer
Parts
Capital/Consumer

Footwear
Shellfish
Beef
Sulphonamides

Consumer
Consumer
Consumer
Processed
Materials/
Processed
Materials
Capital/Parts
Consumer
Processed
Processed
Processed
Processed

Precious and semi-precious
stones

Cocoa beans
Navigational equipment
Men's clothing
Plastic rug
Wooden boards
Cacao butter
Flat glass(Memorandum) Trade by goods
Materials
Intermediate goods
Finished goods
Capital goods
Consumer goods

Consumer/Processed
Consumer/Processed

Consumer
Parts
Processed
Parts/Capital
Consumer
Consumer
Consumer
Consumer
Capital702,131639,507(a) 20032007
11.9
13.4

(b) 20122016
2.0
4.4

578,667

20.9

4.6

540,234
533,562
405,502399,682
336,201
140,914
107,823
46,45440,363
19,875
3,995

12.8
16.2
9.4
12.7
19.1
11.6
9.5
12.9
12.8
14.1
10.7

0.5
2.5
1.5
0.9
0.8
2.9
2.9
1.3
2.6
1.4
2.2

24,772
19,581
11,054
10,373

8.3
3.0
3.2
14.3

14.3
4.2
10.4
16.7

10,362

14.5

21.4

9,121
6,283
5,102
4,974
4,785
4,311
3,329

3.2
1.9
6.1
10.7
2.7
15.0
13.5

7.8
2.0
9.7
11.7
3.8
21.0
38.3

1,513,986
7,845,399
6,797,561
2,852,965
3,944,596

23.7
17.4
14.3
16.7
12.7

-15.2
-2.8
0.2
-0.9
1.1

Imports in 2016
(M illion USD)

Note: 1) Products under "4-digit HS code" were calculated from the statistics of the top 20 countries/regions
which accounted for over 70% of the world's imports in 2016. 2) Lines within the category of "JETROClassification" indicate products of which the growth rate was positive during (b). The other lines within the
category of "4-digit HS code" indicate products of which the growth rate during (b) surpassed (a). 3)
Definitions of goods are based on BEC (the United Nations).
Source: Trade statistics of respective countries and regions

9

Chapter 1 Section 2: World Trade and Japan’s Trade

Steady trade in services in comparison with goods■ Moderate “slow trade” phenomenon in service trade
World trade in services in 2016 increased by 0.4% year-on-year to $4.88 trillion. Its share in overall trade of goods (products) and services reached ahistorical high of 23.5%. Since 2012, the amount of trade in services has been growing at a rate that outpaces that of trade in goods, and we could saythat services are more resilient toward economic downturn than goods are. Ratio against GDP growth rate (nominal basis) fell below 1 for goods after
2012; on the other hand, trade in services recorded a growth of 1.5 - 2.6 times of GDP growth rate from 2012 to 2014.
■ Growth in services exports is the source of growth for emerging and developing economies
Looking at services trade by categories, growth rate was higher in areas such as charges for the use of intellectual property (5.0%),
telecommunications, computer and information (6.9%), and other business services such as law and accounting (5.5%), than in traditional service
sectors such as transportation (average growth rate of 0.5% from 2010 to 2016) and tourism (4.0%). Trade in services by region sowed significant
growth in exports from emerging and developing economies. In contrast with an export growth rate of 3.5% for advanced economies after 2010,
growth rate was 4.7% for emerging and developing economies. The expansion in service trade can be an important element in stimulating growth inemerging and developing economies. According to the IMF, it has been proven that growth in service exports has a negative correlation with income
disparity, and the pace of employment growth is faster for countries with a higher growth rate for services exports.
25.0

(%)

Growth of trade in goods and services(% point)

15.0(Million USD, %)

Value

20.0
10.0

15.0
10.0
5.0
0.0
-5.0
-10.0
Growth rate of services minus growth rate of goods(right axis)
Trade in goods

-15.0
-20.0
-25.0

World trade in services by categories (2016)

Trade in services
85

90

95

2000

05

Note: Service trade values after 2005 are based on BPM6. Values before 2004 are based on BPM5.
Source: "IFS, May 2017"(IMF) and WTO

Copyright (C) 2017 JETRO. All rights reserved.

10

Total trade in services
Goods-related services

Manufacturing services on physical inputs owned by others
Maintenance and repair services
5.0
Transport
TravelOther commercial services
0.0
Construction
Insurance and pension services
Financial services
Charges for the use of intellectual property-5.0
Telecommunications, computer and information
Other business services
Research and development services-10.0
Professional and management consulting services
Technical, trade-related and other business services
Government goods and services
Advanced economies-15.0
Emerging/developing economies

15 16(Year)

Share

2010-2016
Average
growth rate

4,879,290
166,010

100.0
3.4

3.7
3.2

85,1401.7-1.2

80,870852,550
1,205,480
2,583,640
87,730121,590
420,270314,060
493,050
1,093,270
140,530
357,970
573,220
71,6103,544,611
1,263,079

1.7
17.5
24.7
53.0
1.8
2.5
8.6
6.4
10.1
22.4
2.9
7.3
11.7
1.5
73.7
26.3

9.9
0.5
4.0
5.0
0.7
3.2
3.7
5.0
6.9
5.5
7.1
3.7
-0.8
0.0
3.5
4.7

Note: 1) Due to constraints on data, the averge growth rate of that of "professional and management consulting services"
was calculated from the data in 2012 and that of "technical, trade-related and other business services" from 2014 to 2016.
2)The total of the advanced and emerging/developing economies not tally with the "Total trade in services" as the figures
follow WTO's own estimates. Source: WTO

10

Chapter 1 Section 2: World Trade and Japan’s Trade

World trade in 2017 is expected to shift toward positive growth■ Increase in value of trade across almost all products in the first quarter of 2017
Taking the total value of trade in products for 34 major countries/regions for which
product-specific data is available for the first quarter of 2017, exports in the first quarterof 2017 increased by 9.3% year-on-year, and imports grew by 11.4%. While more than
60% of the growth could be attributed to the increase for commodity-related products on
the back of a rise in commodity prices, the amount of trade shifted toward positive
growth for most product items.
■ Trend of shrinking decline rate after hitting bottom in Q3 2015
The rate of decline for the amount of world trade has been shrinking after hitting bottom
in the third quarter of 2015, and shifted toward positive growth every month from
November 2016 to March 2017. The main factor contributing to this trend is recovery in
the EU, as well as for commodity exporters against the backdrop of rising commodity
prices. China and US also registered positive growth for both imports and exports in thefirst quarter of 2017.
■ World trade for the whole of 2017 is expected to shift toward positive growthBased on forecasts by WTO (April 2017), world trade volume for 2017 is expected toincrease by 2.4% (range of forecast is 1.8% - 3.6%). The value of trade is also expected
to shift toward positive growth due to the rise in commodity prices and acceleration in
the growth of the global economy.

Contribution of exports by economies, on a quarterly basis
14

9
4

-6
-11

I

II

III
2014

IV

I

II

III
2015

IV

I

Total (exports)
General machinery
Turbines
Industrial robots
Computer and peripheral equipment
Semiconductor manufacturing equipment

Electrical equipment
Communication equipment
Integrated circuits*
Transport equipment
Precision equipment
Chemicals
Pharmaceuticals and medical supplies

Commodity-related products*
Fuel (=Mineral fuels etc.)*
LNG etc.*
Petroleum and its products*
Metal
Iron ore*
Iron and steel
Food and beverages
Materials*
Intermediate goods
Capital goods
Consumption goods

-1

-16

World
trade
coverageratio

Non-fuel (metal, food and beverages)

OthersCommodity exporters
ASEAN 6
China
Japan
US
EU26
World exports (growth rate)(Year-on-year % change)

Trade for 34 major countries/regions by product, on a quarterly
basis (year-on-year growth rate)

II

III
2016

IV

I
2017

Notes: See footnote in the main text regarding the definition of "Commodity exporters." EU26 indicates all EU
member economies excluding two commodity exporters (Greece and Cyprus).
Source: "DOTS (June 26, 2017)" (IMF)

83.6
91.9
93.0
89.5
93.2
99.2
90.0
89.4
95.4
90.2
94.4
89.0
93.0
77.9
81.6
83.4
82.3
79.4
81.2
94.7
86.3
77.8
87.6
86.4
92.0
83.6

(%)

2016

2017

I

II

III

IV

I

-7.3
-6.6
4.6
-2.0
-11.2
0.5
-4.4
-6.8
-0.5
-1.8
-5.9
-4.0
0.1
-20.4
-34.5
-36.5
-36.0
-8.8
-16.5
-33.5
-18.7
-0.7
-28.3
-8.5
-7.7
-0.9

-2.6
-1.9
4.5
14.9
-6.9
14.7
-2.2
-5.9
3.6
3.7
-1.8
-1.3
5.0
-13.9
-26.7
-30.0
-27.0
-3.3
-8.1
-3.0
-7.9
1.5
-20.0
-3.3
-2.6
2.4

-1.9
-1.8
10.1
5.4
-5.4
17.9
-0.8
-2.3
6.2
-1.0
-1.2
-0.9
1.3
-8.0
-16.2
-25.2
-15.2
0.1
-3.3
0.0
-4.9
3.4
-10.2
-1.9
-3.3
-0.9

1.2
0.3
5.1
14.6
-2.2
37.5
0.6
-2.1
6.2
0.4
0.5
0.3
0.2
4.9
6.6
-5.8
7.3
3.9
4.4
14.7
1.3
3.4
8.2
1.4
-0.7
-0.7

9.3
6.4
9.3
34.3
5.5
36.9
8.2
6.4
13.3
2.9
5.7
7.6
7.4
28.7
55.5
23.4
63.2
11.7
17.9
78.6
16.3
6.2
48.0
10.4
4.8
3.0

Notes: 1) The key 34 economies are Argentina, Australia, Austria, Belgium, Brazil, Canada, China,
Denmark, Finland, France, Germany, Greece, Hong Kong, India, Ireland, Italy, Japan, Luxembourg,
Malaysia, Mexico, 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 2016 is based on the larger of the two (imports or exports).
Source: Trade statistics of respective economies

Copyright (C) 2017 JETRO. All rights reserved.

11

Chapter 1 Section 2: World Trade and Japan’s Trade

Japan’s trade balance marks first surplus in six years■ Exports show signs of picking up
For Japan's trade (customs clearance basis) in 2016, exports increased by 3.1% year-on-year to $644.6 billion, while imports fell by
6.4% to $607.0 billion. The trade surplus was $37.6 billion, marking Japan's first trade surplus in six years since 2010. A surplus of $9.6
billion was also recorded in the first half of 2017, indicating a gradual return of the trade balance to the black. On the basis of tradevolume, exports grew marginally from a decline in the previous year (1.0% decline) to 0.3% growth, while imports fell for the second
consecutive year with a 0.3% decline. The upward trend for exports has continued in 2017, and shows signs of picking up. On the yenbasis, exports in 2016 fell by 7.4% to $70.0 trillion, while imports fell by 15.8% to $66.0 trillion, registering a trade surplus of $4.0
trillion.
Japan’s trade trends (2012 – June 2017)
2012

2013

2014

2015

2016

Yen-based

Dollar-based

Jan
Jan-Jun801,335
719,205
694,270625,068
644,579 335,209
46,629
-2.4
-10.3
-3.5
-10.0
3.1
9.6
3.9
888,584
838,889
817,103648,343
607,020 325,617
55,937
4.2
-5.6
-2.6
-20.7
-6.4
12.5
11.3
-87,250-119,684-122,832-23,275
37,5599,592-9,308(Year-on-year difference)-54,973-32,435-3,14899,557
60,834-7,069-3,942
637,476
697,742
730,930
756,139
700,358 377,881
54,220Total exports
-2.7
9.5
4.8
3.4
-7.4
9.5
1.3
(Growth rate)
706,886
812,425
859,091
784,055
660,420 367,460
65,139Total imports
3.8
14.9
5.7
-8.7
-15.8
12.2
8.4
(Growth rate)-69,411-114,684-128,161-27,916
39,938
10,422-10,919
Trade balance-43,763-45,273-13,477
100,245
67,854-7,316-4,349(Year-on-year difference)
Export volume index
91.6
90.2
90.7
89.8
90.0
92.3
78.2
(Growth rate)
-4.8
-1.5
0.6
-1.0
0.3
5.1
-0.2
Import volume index
105.0
105.3
106.0
103.0
102.6
104.2
109.9
(Growth rate)
2.4
0.3
0.6
-2.8
-0.3
3.5
6.3
Crude oil import price
114.8
110.5
105.1
55.0
41.6
54.1
53.4
(Dollar/barrel, growth rate)
5.6
-3.7
-4.9
-47.7
-24.3
45.9
44.5
Exchange rate (yen/dollar)
79.8
97.6
105.8
121.0
108.8
112.3
114.7
(Yen appreciation, %)
0.0
-18.3
-7.8
-12.5
11.2
-0.5
3.1
Note: 1) Yen-based values are converted to dollar-based values by JETRO. 2) The volume index is on a 2010 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)
Total exports(Growth rate)
Total imports(Growth rate)
Trade balance

Copyright (C) 2017 JETRO. All rights reserved.

Feb
55,97415.1
48,813
4.9
7,161
5,082
63,475
11.3
55,364
1.3
8,111
5,757
92.9
8.2
93.0
-4.2
55.3
81.9
113.1
1.7

2017
Mar
63,546
11.4
58,182
15.3
5,364-1,21972,29612.0
66,19315.9
6,103-1,346
104.4
6.6
112.5
4.2
56.1
74.0
113.0
0.1

(Million USD, 100 million JPY, %)Apr
57,104
7.7
52,73415.5
4,371-3,001
63,294
7.5
58,50315.2
4,792-3,321
93.9
4.1
100.5
4.9
53.9
45.8
110.1
-0.2

May
52,35011.9
54,31815.1-1,968-1,59058,512
14.9
60,57617.9-2,064-1,591
86.7
7.5
103.6
5.4
53.9
32.4
112.2
-2.7

Jun
59,605
7.2
55,63313.0
3,972-2,39966,084
9.7
61,68615.5
4,398-2,466
97.6
4.0
105.7
4.2
52.2
15.3
110.9
-4.9

12

Chapter 1 Section 2: World Trade and Japan’s Trade

US is the largest export partner for the fourth consecutive year
■ Although China has been the largest import partner for the 15th consecutive year, there is a continuing decline
Looking at exports by country in 2016, the US became Japan's largest export partner for the fourth consecutive year with exports worth $130 billion(3.3% increase year-on-year). The US economy remained steady, with robust private consumption and growth in areas such as automobiles andconstruction machinery. China, which had experienced sluggish export growth last year, registered a 4.2% growth to $113.9 billion. In addition tocontinued growth in the semiconductor manufacturing equipment, the growth for automobiles and automotive parts also continued to this export
growth. In the EU, growth in countries such as the Germany (automobiles) and UK (railroad vehicles) contributed to an increase of 11.2% to $73.4
billion. As for imports, China registered a decline of 2.6% to $156.4 billion; despite gradual decline since last year, it has remained as Japan's largest
import partner every year for the 15th consecutive year. In the electrical equipment, which is a primary import product, there was a fall in the importof photovoltaic cells used for solar power generation, as well as for textiles and textile products, for which production is progressively beingtransferred to other emerging Asian economies. Furthermore, as a result of the fall in energy prices, imports from Middle East also declined
significantly.

Contribution335,209

9.6

9.6

0.7

64,312

3.1

0.6

11.2

1.2

37,5734.9

0.6

113,874

4.2

0.7

61,56717.8

3.0

95,052

95,5350.5

0.1

50,060

10.7

1.6

Total imports

648,343

607,020

-6.4

-6.4

325,617

12.5

12.5

US

66,63867,3711.1

0.1

35,708

10.9

1.2

EU

71,26574,9445.2

0.6

37,244

4.2

0.5

China

160,674

156,444

-2.6

-0.7

78,020

4.2

1.1

ASEAN

97,95392,301-5.8-0.9

49,814

11.6

1.8

Total exports

625,068

644,579

3.1

3.1

US

125,852

130,0193.3

EU

66,00473,394

China

109,266

ASEAN

Note: Yen-based values are converted to dollar-based values by JETRO.
Source: "Trade Statistics" (MOF)

Characteristics for 2016

US

Jan-Jun2017

YoYchange2016

Largest export partner for fourth consecutive year. Consumption remained steady, and automobile exports
Export performed well. The strong performance of housing construction also contributed to growth for mining andconstruction equipment.
Food products, which make up approximately 20% of imports, was impacted by the market recession, resulting in
Importdecline in the amount of imports for the second consecutive year.
Grew for the first time in five years. In the general machinery, in response to increased production by

Export semiconductor manufacturers, there was an increase for semiconductor manufacturing equipment. In the transport
China

YoY Contrichange bution

2015

Characteristics of Japan’s trade in 2016

equipment, automobile and automotive parts registered an increase, particularly in the area of luxury cars.

Despite a decline from the previous year, China has remained the largest import partner for the 15th consecutive
year. In the electrical equipment, there was a decline in imports of photovoltaic cells due to sluggish demand and afall in prices. Textiles and textile products such as apparel also continued to decline. On the other hand, mobile
phone imports increased from the previous year.
In Thailand, parts for IT-related products rebounded, while machine tools, iron and steel, etc. declined. The
machine tools also registered sluggish performance in Indonesia. On the other hand, Vietnam saw growth in ITExport
related products and parts, automotive parts, and textiles, while the Philippines registered growth in the mining andconstruction machinery.
Due to the impact from the fall in energy prices, the amount of imports from Malaysia and Indonesia continued to
decline significantly. In Vietnam, partly due to the impact of transfer of production from China, the textiles andImporttextile products sector, such as apparel, registered growth. There was also significant increase in the import ofmobile phones.
Exports increased year-on-year, with contributions from Germany thanks to the passenger vehicle in response to
the strong performance of the domestic automotive market, from UK in the railroad vehicle toward the inter-city
Exporthigh-speed rail order plan resulting in orders placed with Japanese manufacturers, and from Italy in the large-scalepassenger ferry.

ImportASEAN(Million USD, %)EU

Japan’s exports and imports by major country/region

There was a rise in the imports of passenger vehicles and pharmaceutical products from Germany and France.

Import From Italy, there was a rapid growth in pharmaceutical products, engines for automobiles, and heat-not-burncigarettes. Passenger vehicle imports from UK grew, surpassing the US to rank next after Germany.

Copyright (C) 2017 JETRO. All rights reserved.

Source: "Trade Statistics" (Ministry of Finance), press releases from the respective companies, various reports, etc.

13

Chapter 1 Section 2: World Trade and Japan’s Trade

Recovery in transport equipment contributes to export growth■ Decline in mineral fuel imports due to depreciation in crude oil prices
Looking at exports by product, transport equipment contributed to export growth with an increase of 6.3% to $161 billion. Strong performance wasrecorded for exports bound for US and China in the automobile, and for exports bound for East Asia including China in the automotive parts. For
general machinery, firm semiconductor demand due to the advancement of IoT and other factors has brought about an expansion in thesemiconductor manufacturing equipment. For imports, the continued depreciation in crude oil prices until the early part of the year has contributed toa drop for mineral fuels by 26.6% to $110.6 billion. However, in response to OPEC agreements to reduce production output, crude oil prices moved
into an upward trend in the second half of the year, and mineral fuel imports from January to May 2017 increased year-on-year.
■ Intermediate goods and capital goods demonstrate their strength under “slow trade” conditions
While world trade experienced a robust export of consumer goods in the midst of a slow trade overall, Japan—in addition to a rise in passenger
vehicles—showed strong growth in many products within the categories of intermediate goods and capital goods, including semiconductor
manufacturing equipment and parts for airplanes and helicopters.

Japan’s exports & imports by main product(Million USD, %)YoYchangeContributionJan-May
2017

YoYchangeContribution644,579

3.1

3.1

275,603

10.1

10.1

117,650

124,0105.4

1.0

55,32913.5

2.6

Semiconductor manufacturing equipment

13,133

17,871

36.1

0.8

9,138

43.8

1.1

Mining and construction machines

7,883

8,578

8.8

0.1

4,081

10.6

0.2

95,60898,2522.8

0.4

40,7389.2

1.4

32,26733,1792.8

0.1

13,831

11.0

0.5

Transport equipment

151,497

161,0136.3

1.5

65,6432.7

0.7

Iron and steel products

37,77633,955

-10.1

-0.6

15,366

13.5

0.7

Total exports
General machinery

Electrical equipment
Electronic parts such as semiconductors

Total imports

2015

2016

625,068

648,343

607,020

-6.4

-6.4

269,964

12.4

12.4

Mineral fuels

150,633

110,625

-26.6

-6.2

60,51939.4

7.1

Crude oil

67,36550,811

-24.6

-2.6

27,161

45.1

3.5

Chemicals

74,06275,4731.9

0.2

32,0505.2

0.7

23,147

24,537

6.0

0.2

9,222

-5.3

-0.2

Pharmaceauticals & medical supplies
General machinery

59,53959,443-0.2

0.0

26,367

6.4

0.6

Electrical equipment

90,26689,943-0.4

0.0

37,757

8.9

1.3

Food

58,461

59,3111.5

0.1

24,8005.6

0.5

Note: Yen-based values are converted to dollar-based values by JETRO.
Source: "Trade Statistics" (MOF)

Copyright (C) 2017 JETRO. All rights reserved.

Products of which export has increased even under trend of "slow trade"
Product

Category

Export value
Export volume
2012 - 2016 2012 - 2016
MillionAverage
Average
USD growth rate growth rate
55,522
3.2
3.3

Passenger motor vehicles, cylinder capacity >1500 cc, ≦3000 cc
Consumer goods
Machines for manufacturing equipment of semiconductor devices,
Capital goods*
8,114
2.0
-3.9
IC
Gold, nonmonetary, unwrought
Processed goods*
6,378
10.1
18.4
Parts for airplanes and helicopters
Parts*
4,747
5.0
8.8
Parts & accessories for manufacturing equipment of semiconductor
Parts*
4,409
7.4
22.6
devices
Passenger motor vehicles, with diesel engine, cylinder capacity
Consumer goods
4,272
4.9
8.5
>1500 cc,
Machines for manufacturing of flat panel displays
Capital goods*
3,459
18.3
4.2
Tankers
Capital goods*
3,383
2.5
1.1
Vehicular engines (over 1000 cc)
Parts*
3,170
4.3
2.6
Parts for turbojets and turbo propellers
Parts*
3,045
6.4
6.4
Parts for phone sets & other apparatuses for voice transmission orParts*
2,819
10.9
-12.4
reception
Lithium ion batteries
Parts*
2,615
3.4
7.5
Gold or platinum jewelry and parts
Consumer goods
2,314
19.1
19.8
Pharmaceutical products, not containing antibiotics or hormones
Consumer goods
2,217
11.8
6.2
Mounted piezoelectric crystals
Parts*
2,060
9.7
17.9
Microtomes (including parts and accessories)
Capital goods*
1,923
0.6
3.8
Outboard motors for marine engines
Consumer goods
1,679
1.2
-2.3
Industrial robots
Capital goods*
1,627
3.0
12.3
Beauty & skin care preparation
Consumer goods
1,590
11.4
18.1
Patient monitoring systems, medical imaging appatantuses, etc.
Capital goods*
1,402
8.9
-5.3
Note: Calculated based on the HS6-digit level. The top 20 export products in 2016 among products of which export amounted
to over a $100 million in 2016 and the average export growth rate from 2012 to 2016 was positive.
* Intermediate goods (including parts and processed products) and capital goods Source: "Trade Statistics" (MOF)

14

Chapter 1 Section 2: World Trade and Japan’s Trade

Significant reduction in mineral fuel deficit■ Recent rebound in energy prices has also had an impact
Looking trade balance by product, the downward trend in the amount of surplus for transport equipment, general machinery, and electrical equipment
has come to a halt, and is on the move upwards. On the other hand, the amount of deficit for mineral fuels has continued shrinking after hitting bottom
in 2012, and shrank significantly in 2015 and 2016. In 2017, surpluses that were on par with the level in the previous year were recorded for main
surplus-generating products such as transport equipment. However, the deficit for mineral fuels is still growing, partly due to the impact of therebound of energy prices.
■ Travel service balance in the black for second consecutive year
Japan's current account surplus in 2016 was $187.8 billion, registering an increase in the amount of surplus for the second consecutive year. The main
factors behind this increase in surplus lie in the shift toward surplus for the trade balance and the reduction in account balance deficit for services.
With a $12.2 billion surplus in the travel service balance, following from last year when a surplus was registered for the first time in 53 years. The
number of tourists visiting Japan, mainly from Asian countries such as China, has continued to rise. Looking at the market share of travel services
receipts for 2016 by country, China had the largest share at about 30%, while other Asian countries combined, including Taiwan and Korea, made up
the majority at about 80%. In addition, the amount of surplus from charges for the use of intellectual property rights, etc. was $19.5 billion,
maintaining the level from 2015 ($19.4 billion) when a historical high was recorded.
(Million USD)

400
300
200

91.7

-100

28.5

75.6

-32.3

-87.2

-119.7-122.8

-23.3

37.6

10.3

Japan’s service trade
5.6

84
61

92
61
173

157
-164

56
42

94

107

95

45

37

29

73
12

67
5

157

161

58
5

140

133

125

156

112

-142

Other services

-248

8

65
132

-101
-289

-265

Other businessservices

20

3

24
53
-40

29
55
-56

-139
-258

Others (Note 2))

30

-186

-200

10

3

Charges for the use of
intellectual property
right royalties
Financial

0

-10
-20

-247

Insurance/ Pension-30

Construction

-40

-300

-50

-400
-500

50

($ billion)

40

100
0

Japan’s Trade balance by main product19.8

Travel

-60

07

08

09

10

11

12

13

14

15

16

16.1-5 17.1-5

Mineral fuels
Transport equipment
Electrical equipment
General machinery
Food
Chemicals
Products by raw material (excluding mineral fuels)
Other
Trade balance
Notes: The numbers in the dotted boxes above this chart represent the trade balance. Source: "Trade Statistics" (Ministry of Finance)

Copyright (C) 2017 JETRO. All rights reserved.

-70

Transportation
05

06

07

08

09

10

11

12

13

14

15

16

16.
1-5

17.
1-5(P)

Services balance

Notes: 1) Yen-based values are converted to dollar-based values by JETRO. 2) "Other" includes manufacturing services on physicalinputs owned by others, maintenance and repairs, communications, computers and information, personal, cultural and recreational,
and government services.
Sources: "Balance of Payments" (Bank of Japan, Ministry of Finance), "Foreign Exchange Rates" (Bank of Japan)

15Chapter 1 Section 2: World Trade and Japan’s Trade

Japan’s agricultural, forestry, and fishery exports■ New record high for the amount of agricultural, forestry, and fisheryexports
Japan's agricultural, forestry, and fishery exports to the world in 2016 hit a
new record high for the fourth consecutive year at 750.2 billion yen, 0.7%
higher than the previous year. The top 10 export destinations were, in orderfrom the largest amount of exports, Hong Kong, US, Taiwan, China, Korea,
Thailand, Vietnam, Singapore, Australia, and the Philippines; these made up
73.8% of total exports. Looking at the breakdown by product, the amount ofagricultural products exported was 459.3 billion yen (61.2% of the total), theamount of forestry products exported was 26.8 billion yen (3.6% of the total),
and the amount of fishery products exported was 264.0 billion yen (35.2% of
the total). The product item with the highest amount of exports was scallops.
The amount of beef exports also hit a record high, ranking in 10th place.

Export value of Japan’s agricultural, forestry, fishery and foodproducts by main country/region (2016)
Others328(4.4%)

EU
423(5.6%)(¥100 m)Hong Kong
1,853(24.7%)

Europe
486

U.S.
1,045
(13.9%)(6.5%)

North America
1,149(15.3%)

Total Export
7,502
Asia
5,539
(73.8%)

Singapore234(3.1%)
Vietnam323(4.3%)

Thailand329(4.4%)

Korea
511(6.8%)

Taiwan931(12.4%)

China
899(12.0%)

Source: "Overview of Foreign Trade of Agricultural, Forestry and Fishery Products" (MAFF)

Copyright (C) 2017 JETRO. All rights reserved.

Export value of Japan’s agricultural, forestry, fishery andfood products
8,000

(%)

(¥100 m)7,000
Fishery products

6,000
5,000

Forestry products

4,000
Agricultural products

3,000
2,000

Comparison to previous year
(right axis)

1,000
－

2012

2013

2014

2015

2016

Source: "Overview of Foreign Trade of Agricultural, Forestry and Fishery Products" (MAFF)

Top 20 export categories of agricultural, forestry, fishery and foodproducts (value basis)(Unit: Milion yen, %)

2015
2016
Amount Amount
Percentage
1 Scallops (fresh, chilled, frozen, salted, dried)
59,07954,834-7.2
2 Alcoholic beverages
39,02942,996
10.2
3 Pearls (natural, cultured)
31,90530,381-4.8
4 Sauces and mixed seasonings
26,42327,372
3.6
5 Tobacco
23,58821,873-7.3
6 Soft drinks
19,73819,431-1.6
7 Confectionery (excluding rice products)
17,702
18,162
2.6
8 Mackerel (fresh, chilled, frozen)
17,896
17,9860.5
9 Seeds for sowing
15,13914,623-3.4
10 Beef (including edible offal)
11,005
13,552
23.1
11 Amderjacks nei (fresh, chilled, frozen)
13,84013,473-2.6
12 Apples
13,393
13,299-0.7
13 Green tea
10,106
11,551
14.3
14 Bonito/Tuna (fresh, chilled, frozen)
13,7769,794-28.9
15 Hides of pigs
8,997
9,737
8.2
16 Fish paste products (fish sausages, etc.)
8,168
9,272
13.5
17 Dried sea cucumber (preparation)
10,3068,676-15.8
18 Logs
9,416
8,466
-10.1
19 Garden tree, etc.
7,609
8,033
5.6
20 Compound feeds, formula feed
8,252
6,944
-15.8
Source: "Overview of Foreign Trade of Agricultural, Forestry, and Fishery Products"
16(Ministry of Agriculture, Forestry and Fisheries)
ProductChapter 1 Section 3: World FDI and Japan’s FDIWorld inward FDI levels off in 2016
■ Expansion toward advanced economies through large-scale M&As, and deceleration toward emerging and developing economies
According to the United Nations Conference on Trade and Development (UNCTAD), world inward FDI in 2016 (balance of payments basis, net,flow) declined by 1.6% year-on-year to $1.7 trillion, leveling off from 2015 when a significant growth was recorded. FDI toward advanced economies
increased by 4.9% to $1.0 trillion as a result of the impact of large-scale M&As targeted at British and American corporations. In particular, thanks tomultiple large-scale M&A, UK jumped forward in the ranking of FDI recipient countries from 14th place in 2015 to second in 2016 after the US. On
the other hand, slowdown in economic growth and sluggish primary commodity process in emerging and developing economies have contributed to a
decline in investments mainly in Asia and Central and South America, resulting in a 9.6% decline to $714.1 billion.
2,200（US$ billion）

FDI for major countries/regions (2016)

Trends in global inward FDI
FDI in developed economies

2,000

FDI in emerging/developing economies

Value

Cross-border M&As

1,800

Greenfield investment

1,600
1,400

1,200
1,000
800

600
400
200
0

2003

04

05

06

07

08

09

10

11

12

13

14

15

16

Note: 1) The definition of developed economies follows UNCTAD, and is the total for 39 countries/regions. 2) The figure for
emerging and developing economies are obtained by subtracting the figures for developed economies from the world total(excluding the financial centers in the Caribbean region). Source: UNCTAD and Thomson Reuters

Top 10 countries/regions for FDI (2016)(Unit: US$Million)
Inward FDI
Outward FDI
1 United States
391,104 United States
299,003
2 United Kingdom
253,826 China
183,100
3 China
133,700 Netherlands
173,658
4 Hong Kong
108,126 Japan
145,242
5 Netherlands
91,956 Canada
66,4036 Singapore
61,597 Hong Kong
62,4607 Brazil
58,680 France
57,3288 Australia
48,190 Ireland
44,5489 India
44,486 Spain
41,78910 Russian
37,668 Germany
34,558
Note: Coutries/regions exclude the financial centers in the Caribbean region.
Source: UNCTAD and Thomson Reuters

Copyright (C) 2017 JETRO. All rights reserved.

United States
EU
United Kingdom
Netherlands
Belgium
Italy
FranceAustralia
Japan
East Asia
China
Hong Kong
Korea
TaiwanASEAN
Singapore
Viet Nam
Malaysia
Philippines
India
Latin America
BrazilMexicoCIS
RussianMiddle East
TurkeyAfricaAngolaDeveloped economies

Emerging and developing economies

World

391,104
566,234
253,826
91,956
33,103
28,95528,352
48,19011,388362,079
133,700
108,126
10,827
8,333
101,093
61,597
12,6009,926
7,912
44,486142,072
58,68026,73961,77937,66827,797
11,98759,37314,364
1,032,373
714,050
1,746,423

Inward FDI
Percent
Share
Contribution
Change
12.3
22.4
2.4
17.0
32.4
4.6
669.1
14.5
12.4
33.8
5.3
1.3
55.8
1.9
0.7
49.8
1.7
0.5
-39.7
1.6
-1.1
147.4
2.8
1.6
0.7
-18.3
20.7
-4.6
-1.4
7.7
-0.1
-38.0
6.2
-3.7
163.8
0.6
0.4
245.3
0.5
0.3
-20.1
5.8
-1.4
-12.7
3.5
-0.5
6.8
0.7
0.0
-10.7
0.6
-0.1
60.3
0.5
0.2
1.0
2.5
0.0
-14.1
8.1
-1.3
-8.7
3.4
-0.3
-19.4
1.5
-0.4
98.4
3.5
1.7
217.7
2.2
1.5
-2.0
1.6
0.0
-30.5
0.7
-0.3
-3.5
3.4
-0.1
-11.2
0.8
-0.1
4.9
59.1
2.7
-9.6
40.9
-4.3
-1.6
100.0
-1.6

Value
299,003
470,351-12,614173,658
18,26922,79457,3286,012
145,242
326,083
183,100
62,46027,274
17,84335,40523,888
1,388
5,601
3,698
5,120
751
-12,434-787
24,72727,27230,844
2,869
18,173
10,693
1,043,884
408,578
1,452,463(Unit: US$Million, %)Outward FDI
Percent
Share
Contribution
Change
-1.4
20.6
-0.3
-12.2
32.4
-4.1
25.8
12.0
2.2
-39.8
1.3
-0.8
12.4
1.6
0.2
29.2
3.9
0.8
0.4
12.9
10.0
1.0
11.1
22.5
2.0
43.5
12.6
3.5
-13.0
4.3
-0.6
14.8
1.9
0.2
21.3
1.2
0.2
-36.4
2.4
-1.3
-23.9
1.6
-0.5
26.2
0.1
0.0
-43.4
0.4
-0.3
-33.2
0.3
-0.1
-32.4
0.4
-0.2
-97.6
0.1
-1.9
-21.2
1.7
-0.4
0.7
1.9
0.0
-18.8
2.1
-0.4
-40.3
0.2
-0.1
0.7
1.3
0.0
34.7
0.7
0.2
-11.0
71.9
-8.1
-3.1
28.1
-0.8
-8.9
100.0
-8.9

Note: 1) The definition of developed economies follows UNCTAD, and are the total for 39 countries/regions with inward FDI, the total for 38 countries/regions with outward FDI.
2) The figure for emerging and developing economies are obtained by subtracting the figures for developed economies from the world total(excluding the financial centers in the Caribbean region).
3) The amount of East Asia is summed with figures of China, South Korea, Taiwan, Hong Kong, and ASEAN.
4) The amount of Latin America exclude the financial centers in the Caribbean region.
5) Due to the difference in FDI data compilation, the figure for Japan (Directional principle) in the table do not correspond to "Japan`s FDI" (Asset and Liabilities principle).
6) "-" denotes figures that could not be calculated.
Source: UNCTAD

17

Chapter 1 Section 3: World FDI and Japan’s FDI

Increasing restructuring activity in sectors such as finance/insurance, chemicals■ cross-border M&A in the world reaches second highest level in history
Total cross-border M&A in the world, executed in 2016, increased by 16.4% year-onyear to $1.3040 trillion, marking growth for the third consecutive year. This is thesecond highest level in history, coming after the $1.6954 trillion recorded in 2007.
Looking at global cross-border M&A by industry, we see that active cross-border M&A
is taking place in the areas of finance and insurance, and other services, in the service
industry, and in the chemicals sector in the manufacturing industry. In all of these
sectors, acquisition value is on a rise again after the global financial crisis. After thecrisis, large-scale cross-border M&A have been implemented in these sectors. We cansee that global corporations, particularly in Europe and US, have been actively carryingout business restructuring through M&A.

Changes in global cross-border M&A by industry(Million dollars)
600,000

Finance/Insurance
500,000

Date ofcompletion

Chemicals

Finance/Insurance

Acquiror Name

Acquiror Ultimate
Parent Nation

Target Name

Mar-09Aug-16Jun-16
Apr-11
Nov-15Jan-16

Roche Holding AG
Teva Pharmaceutical Industries
Shire PLC
Sanofi-Aventis SA
Merck KGaA
ACE Ltd

Switzerland
IsraelIreland-Rep
FranceGermany
Switzerland

Genentech Inc
Allergan PLC-Generic Drug Bus
Baxalta Inc
Genzyme Corp
Sigma-Aldrich Corp
Chubb Corp

Jun-16Visa Inc

United States

Visa Europe Ltd

May-09Aug-15

BNP Paribas SA
CPPIB Credit Investments Inc

FranceCanadaFortis Bank SA/NVGE Antares Capital

Chemicals

400,000

300,000

200,000

100,000

0

Major M&A deals in the chemicals, finance/insurance, and other services sectors(after the global financial crisis)

Other services

97

98

99 2000 01

02

03

04

05

06

07

09

10

11

12

13

14

15

16
(Year)

Note: Based on the industry of acquired company. The industry classification is based on the classification by Thomson Reuters.
Source: Thomson Reuters

Target Nation
United States
United States
United States
United States
United States
United States
UnitedKingdom
Belgium
United States

Industry Sector
Drugs
Drugs
Drugs
Drugs

Value
(Million USD)

Ownership(%) aftertransaction

Insurance

46,69538,75035,21923,525
16,44928,534

100.0
100.0
100.0
100.0
100.0
100.0

Other Financial

21,355100.0

Commercial Banks, Bank Holding Companies

12,76512,00074.9
100.0

10,431

94.0

18,108100.0

11,434

76.6

11,082100.0

10,854

100.0

8,132

100.0

Chemicals and Allied Products

Credit Institutions
Real Estate; Mortgage Bankers
Mar-15
Deutsche Annington Immobilien
Germany
Gagfah SA
Luxembourg
and Brokers
Radio and TelevisionJun-16
Investor Group
Netherlands
Cablevision Systems Corp
United States
Broadcasting Stations
Radio and TelevisionOct-13
Vodafone Vierte
United Kingdom Kabel Deutschland Holding AG
Germany
Broadcasting Stations
Other services
Feb-16
Al Noor Hospitals Group PLC
Utd Arab Em
Mediclinic International Ltd
South Africa
Health Services
Radio and Television
Nov-14
Liberty Global PLC
United Kingdom Ziggo NV
Netherlands
Broadcasting Stations
Jun-16
Progressive Waste Solutions
CanadaWaste Connections Inc
United States
Sanitary Services
Notes: 1) The deals are ranked for the transaction value each time. 2) The industry classification is based on the classification by Thomson Reuters
Source: Thomson Reuters, JETRO business daily news, Press report from various news sources.

Copyright (C) 2017 JETRO. All rights reserved.

08

18

Chapter 1 Section 3: World FDI and Japan’s FDI

Acquisition of foreign corporations by Chinese corporations on the rise worldwide■ Record high in both value and number of acquisitions
Looking at global cross-border M&A by the nationality of the acquiring party, we
note a significant increase in the value of overseas corporations acquired by Asian
corporations. East Asia's market share (total for China, Korea, Taiwan, Hong Kong
and ASEAN) as a percentage of the total acquisition value worldwide, grew from
2.3% in 2000 to 13.6% in 2016. The growth in East Asia's market share is driven
mainly by Chinese corporations. The acquisition value of overseas corporations by
China reached a historic high of $120.4 billion in 2016. On the other hand, until 2007,
the acquisition of overseas corporations by ASEAN corporations progressed at a scale
exceeding that of China. However, it has remained at a level of about $30 billion peryear since then. When the M&A deals transacted by Chinese and ASEAN
corporations in the past five years are ranked in order of acquisition value, acquisition
deals by Chinese corporations occupy the top positions.

Top-ranking acquisition deals of overseas corporations by Chinese and
ASEAN corporations (2012 – 2016)

Trends in cross border M&As by Chinese and ASEAN firms
China (Value)
China (no. of projects, right axis)(Million USD)
140,000

ASEAN (Value)
ASEAN (no. of projects, right axis)(No. of projects)
600

120,000

500

100,000

400

80,000300
60,000200

40,000100

20,00000Note: 1) Acquiror Ultimate Parent Nation. 2) The dates show when M&As have been
completed.
Source: Thomson Reuters
Value(Million
USD)(Year)

Ownership(% ) after
transaction

Feb-13

CNOOC Canada Holding Ltd

Acquiror
Ultimate
ParentNationChina

Nexen Inc

CanadaOil and Gas; Petroleum Refining

17,918

Jul-16

Halti SA

China

Supercell Oy

Finland

Prepackaged Software

8,600

84.3

Nov-15

Marco Polo Industrial Hldg SpA

China

Pirelli & C SpA

Italy

Rubber and Miscellaneous Plastic Products

7,065

100.0

Sep-13

Shuanghui Intl Hldg Ltd

China

Smithfield Foods Inc

United States

Food and Kindred Products

6,947

100.0

Feb-13

TCC Assets Ltd

ThailandFraser & Neave Ltd

Singapore

Food and Kindred Products

6,896

91.2

Mar-16

Anbang Insurance Group Co Ltd

China

Strategic Hotels & Resorts Inc

United States

Investment & Commodity Firms,Dealers,Exchanges

6,500

100.0

Dec-16

Tianjin Tianhai Invest Co Ltd

China

Ingram Micro Inc

United States

Wholesale Trade-Durable Goods

6,258

100.0

Dec-12Petronas Carigali Canada Ltd

Malaysia

Progress Energy Resources Corp

CanadaOil and Gas; Petroleum Refining

5,866

100.0

Apr-14

Mayon Investments Pte Ltd

Singapore

AS Watson Holdings Ltd

Hong Kong

Miscellaneous Retail Trade

5,672

25.0

Jun-16

Qingdao Haier Co Ltd

China

General Electric Co-Appl Bus

United States

Electronic and Electrical Equipment

5,600

100.0

Oct-13

CNPC

China

Kashagan Oilfield

Kazakhstan

Oil and Gas; Petroleum Refining

5,000

8.3

Jul-14

OCBC Pearl Ltd

Singapore

Wing Hang Bank Ltd

Hong Kong

Commercial Banks, Bank Holding Companies

4,847

97.8

Mar-12

SIPC

China

Petrogal Brasil Ltda

BrazilOil and Gas; Petroleum Refining

4,800

30.0

Nov-15Global Logistic Properties Ltd

Singapore

Industrial Income Tr Inc-US

United States

Transportation and Shipping (except air)

4,550

100.0

Jul-13

Petro China Co Ltd

China

ENI East Africa SpA

Mozambique

Oil and Gas; Petroleum Refining

4,210

28.6

Jul-16China Three Gorges Brasil

China

ANNEL-Hydropower Concession(2)BrazilElectric, Gas, and Water Distribution

3,732

100.0

Nov-16

Ninestar Holdings Co Ltd

China

Lexmark International Inc

United States

Computer and Office Equipment

3,605

100.0

May-12China Three Gorges Europe

China

EDP SA

Portugal

Electric, Gas, and Water Distribution

3,516

21.3

Mar-16

Dalian Wanda Group Co Ltd

China

Legend Pictures LLC

United States

Motion Picture Production and Distribution

3,500

-

Aug-14Frasers Centrepoint Ltd
ThailandAustraland Property Group
Australia
Real Estate; Mortgage Bankers and Brokers
3,389
Notes: 1)The nationality of an acquring company corresponds to that of the ultimate parent company. 2) The deals are ranked for the transaction value each time.
3) The industry classification is based on the classification by Thomson Reuters. 4) Excluding deals between China and Hong Kong. 5) Excluding acquisition deals by investor groups.
Source: Thomson Reuters, JETRO business daily news, Press report from various news sources.

100.0

Date ofcompletion

Acquiror Name

Copyright (C) 2017 JETRO. All rights reserved.

Target Name

Target Nation

Industry Sector

100.0

19

Chapter 1 Section 3: World FDI and Japan’s FDI

Promotion of the “Belt and Road Initiative” by China■ Four years after the initial proposal of the “Belt and Road Initiative”
The "Belt and Road Initiative" ("Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road") is a medium- tolong-term external economic and diplomatic strategy that captures the respective land and maritime regions connecting the western regions of China toCentral Asia, West Asia, and Europe, as respective economic zones. About four years have passed since President Xi Jinping first proposed the concept in
September 2013. Cooperation with the countries along the belt have been ongoing, centered around five key areas of cooperation that have been establishedin the plan.
■ Impact assessment to be implemented going forward
Many projects related to this initiative have already been underway before the announcement of the initiative, and many new projects have just commenced.
According to the information issued by the Ministry of Commerce, China's outward FDI toward the countries along the route of the "Belt and Road
Initiative" was $14.5 billion in 2016 (gross investment, 2% decline year-on-year). This amounts to just 8.5% of China's total outward FDI, and no significant
impact on macro statistics has been noted to date.
Cooperation in five key areas of the "Belt and Road Initiative"("five areas of connectivity")
Key areas
1 Policy cooperation
Cooperation on

2 infrastructural
construction

Overview

Examples of infrastructural projects under the "Belt and Road Initiative"
Category Country

Establish mechanisms for exchange with the governments ofeach country, and enhance mutual consistency inpolitical/economic policies

Pakistan

FranceDevelop roads, railways, ports, energy transportation facilities,
and IT communications facilities jointly with each country

Actively promote the conclusion of free trade agreements(FTA) with regions or countries along the belt, with the aim of
improving trade/investment convenience, and abolish the
Cooperation in
3
trade and investment relevant barriers. Also promote overseas expansion by
Chinese corporations, and the establishment of industrial parks
overseas.
Develop cooperative projects with countries along the route in
the areas of currency swap agreements and bond issuance.
4 Financial cooperation Through the establishment of international financial
institutions such as AIIB, provide financial support for criticalprojects of the Belt and Road Initiative.
Strengthen exchange and cooperation between the government
Public-private
and the private sector in areas related to promoting citizen
5
cooperation
welfare, such as cultural projects and medical care.
Source: Prepared based on materials from the National Development and Reform Commission,
Ministry of Foreign Affairs, and Ministry of Commerce of the People's Republic of China

Copyright (C) 2017 JETRO. All rights reserved.

Indonesia
Rail

RussiaLaos

Thailand
Malaysia
Resources

Port development

Myanmar

Sri Lanka

GreeceNetherlands

Source: Various reports

Overview

April 2015: Agreement to promote the China-Pakistan Economic Corridor
November 2015: Conclusion of memorandum of understanding on the management of special economic
zones in Port Gwadar in the southwestern part of Pakistan for 43 years
May 2016: Start of construction on Peshawar-Karachi Highway
November 2016: With expansion works for Port Gwadar, start of trial operation of container shipping
service to Middle East and East Africa
April 2016: Opening of railway between Wuhan and Lyon (France)
In September 2015, the Indonesian government adopted the high-speed rail proposal from China(between Jakarta and Bandung). The ground-breaking ceremony was held in January 2016 with plans tocomplete the project in 2018, but delays in land expropriation and the acquisition of construction permits
have led to delays in the construction work.
The Russian government decided to place orders with Chinese corporations for the exploration anddesign of a Moscow-Kazan high-speed rail in April 2015, vehicle production in November 2015, andoperational management and signaling systems in April 2016.
The Laos government split the Laos section (Boten - Vientiane) of the China-Laos railway into six intervals,
and put them up for tender offers until September 2016. Six Chinese companies made successful bids.
Construction work started in 2016, and the railway is expected to commence operation in 2020.
The Department of Land Transport of Thailand announced on 21 September 2016 that the governmentsof China and Thailand have entered into consultation on the first phase of the high-speed rail project(Bangkok - Nakhon Ratchasima).
In November 2016, China Communications Construction Company Ltd. and Malayan Railways Limited
signed an agreement on the railway project along the east coast of Malaysia (Port Klang - Tumpat).
In January 2015, petroleum and gas pipelines connecting Myanmar's Kyaukpyu Port and Kunming in
Yunnan Province were opened.
September 2014: Start of development of Colombo Port City in Sri Lanka with an injection of $1.4 billion
March 2015: Construction works suspended due to change in political regime
March 2016: Development resumed
August 2016: Renamed "Colombo International Financial City"
April 2016: Acquisition of Piraeus Port in Greece
May 2016: 35% capital investment in the container berth company in the Port of Rotterdam

20Chapter 1 Section 3: World FDI and Japan’s FDI

New record high for Japan’s outward FDI■ 24.3% year-on-year growth to $169.6 billion in 2016
Japan's outward FDI in 2016 increased by 24.3% year-on-year to $169.6 billion (balance of payments basis, net, flow). This was a new record high,exceeding the last peak value recorded in 2013 ($155.6 billion), since 1996 when comparison could be made based on the same standards. Equity capital,
including M&A of foreign corporations by Japanese corporations, and Greenfield investments overseas, grew by 37.3% year-on-year to $108.3 billion.
■ Rapid growth in FDI toward UK
By countries/regions, the amount of investment in the EU was $70.3 billion in 2016, approximately double that of the previous year. The surge in investmentin the EU was mainly brought about by a growth in investment in UK. In September 2016, SoftBank Group acquired ARM Holdings plc, a semiconductor
design company in the UK, for $30.8 billion. This acquisition deal was the largest outward M&A acquisition by a Japanese company. Investment in the US
grew by 5.8% to $52.2 billion. Investment toward the US made up 30.8% of overall outward FDI in 2016, making it the largest investment destination (bycountry) for the seventh consecutive year. In the finance/insurance sector, there were successive large-scale acquisitions of US insurance companies byJapanese insurance companies.

Trends in Japan’s outward FDI by type
190.0
170.0
150.0

Japan's outward FDI by country/region(Million USD, %)(Billion USD)

Debt instruments
Reinvestment of earnings

Equity capital
Total

130.0
110.0
90.0
70.0
50.0
30.0
10.0
-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.
Source: “Balance of Payment Statistics” (Ministry of Finance, Bank of Japan).

Copyright (C) 2017 JETRO. All rights reserved.

2014
Asia
China
ASEAN
Singapore
ThailandIndonesia
Malaysia
Philippines
VietnamIndia
North America
US
Latin America
MexicoOceania
Australia
Europe
EU
UK
World

2015

2016

43,407 34,477
10,889 10,077
22,820 20,624
8,145
6,779
5,568
3,926
4,835
3,306
1,291
2,893
901
1,520
1,652
1,439
2,408
-1,17651,350 50,630
49,437 49,319
6,266
5,953
1,203
1,188
6,029
6,917
4,604
5,943
28,447 36,109
27,025 35,638
6,273 14,017
138,018 136,423

10,886
8,634-6,098-18,955
4,064
2,924
1,409
2,312
1,854
3,690
53,08652,19425,565
2,545
5,953
4,309
73,54870,30847,800169,582

Percentchange
6.4
-68.4
5.1
-14.3
2.4
3.5
1.7
-11.6
0.8
-51.3
1.4
52.1
1.1
28.9
2.2
31.3
4.9
30.8
5.8
15.1
329.5
1.5
114.1
3.5
-13.9
2.5
-27.5
43.4
103.7
41.5
97.3
28.2
241.0
100.0
24.3

Share

Jan-May,
2017 (P)12,775
3,633
6,710
1,950
2,348
1,095
-252
561
856
835
17,766
17,742
8,764
-3
286
-58
35,97035,524
12,40576,882

Percentchange
16.6
-7.3
4.7
8.4
8.7
2.3
2.5
56.5
3.1
53.5
1.4
-7.1
0.7
-56.6
1.1
16.2
1.1
-46.9
23.1
-23.9
23.1
-23.1
11.4
414.7
0.4
-83.0
46.8
122.7
46.2
138.9
16.1
78.2
100.0
36.9

Share

Note: 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. 3) The cumulative total for 2017 is a preliminary
figure.
Source: “Balance of Payment Statistics” (Ministry of Finance, Bank of Japan).

21

Chapter 1 Section 3: World FDI and Japan’s FDI

Growing importance of US as an investment destination■ Rise in percentage of corporations choosing the US as a destination for overseas business expansion
The importance of the US as an investment destination for Japanese corporations is growing. Of Japan's total outward FDI, the percentage of outward
FDI toward the US grew from 13.5% in 2011 to 30.8% in 2016. In the "Survey on the International Operations of Japanese Firms" conducted by
JETRO, the ratio of corporations choosing the US as a destination for their overseas business expansion rose by 12.4 points from 2011 (21.1%) to2016 (33.5%). Looking at only figures for the manufacturing industry, the ratio of corporations choosing the US increases further to 16.5 points.
■ Increasingly active investment in the US in the AI and IoT sectors
Among investments by Japanese corporations in the US in recent years, there has been growing activity in the areas of investing in US venturecorporations in the artificial intelligence (AI) and Internet of Things (IoT) sectors, or moves to establish research and development centers in the US.
By cooperating with venture business and universities in the US, Japanese corporations are attempting to bring in human resources and technologythat are indispensable in the development of new products.

The target country or region for overseas expansion
by Japanese manufacturers
（％）
80.0
70.4
70.0
60.0

70.6
64.1

74.5

61.1

56.5

73.7

58.7

73.9

57.4

50.0

40.0
30.0
20.0
10.0
0.0

32.3
25.4
18.2

3.8
2011
China

19.4

7.0

2012
ASEAN6

SoftBank
Group

UK

56.7

Sony

US

36.1
30.5
18.4
9.1

2013
US

26.7

23.8

21.9
11.6

2014
Western Europe

Hitachi,US
Ltd.
ToyotaMotor
US
Corporation

10.2

2015

2016

Mexico （year）

Overview
Acquisition of ARM Holdings plc, a semiconductor design company, at approximately$31 billion (about 3.3 trillion yen). Gained ARM Holdings' semiconductor technology,
used widely in smartphones and home appliances, opening up the IoT market.
Capital participation in US venture business, Cogitai, Inc., which specializes in artificial
intelligence, and joint development in new artificial intelligence technologies that form thebasis for next-generation AI applications and product groups.
Strengthened the development and construction of IoT platform toward the expansionof the digital solutions business. It will invest 100 billion yen over three years, with afocus on the establishment of new bases in the US.

Date ofannouncement
2016/7/18
2016/5/18

2016/4/14

Toyota Research Institute, which is engaged in the research and development of artificial
intelligence technology, will establish its third base in Ann Arbor, Michigan. It will
collaborate with the University of Michigan on research on self-driving technology.

2016/4/8

Concluded partnership agreement with Bristol Is Open (BIO), a company promoting thesmart city project of Bristol in the UK. It will carry out demonstrations of technology that
contributes to the realization of a smart city, such as IoT.

2016/2/12

In January 2016, it established the Toyota Research Institute (TRI) in Silicon Valley asa R&D center for artificial intelligence technology, and will invest about $1 billion
over a five-year period.

2015/11/6

Dentsu Inc. US

Invested in Sensai Corporation, a US venture company that provides a Big Data
analytical platform that harnesses artificial intelligence technology.

2015/10/22

SoftBank
Group

US

KDDI

US

Invested a total of $59 million, along with existing shareholders, in Cybereason, a US
venture company that provides a platform that harnesses artificial intelligence tocounter cyberattacks.
Invested in Jibo, the US venture company that developed the intelligent robot "Jibo" fordomestic use, through an investment fund. Formed a capital alliance based on the assessmentthat Jibo is a startup with potential in the robotics market.

NEC

14.4

Note: 1) The numbers in FY2011 and FY2012 indicate the number of firms answering that they “intend to
begin and expand overseas operations” after excluding the number of firms which gave no answer on functions
planned to be expanded. The numbers in FY2013 and thereafter indicate the number of firms “intending to
expand overseas operations” after excluding the number of firms which gave no answer on functions planned to
be expanded. 2) ASEAN 6 refers to the total for the six countries of Singapore, Thailand, M alaysia, Indonesia,
the Philippines and Vietnam (excluding duplication).
Source: “Survey on the International Operations of Japanese Firms” (JETRO).

Copyright (C) 2017 JETRO. All rights reserved.

Company Target
namecountry

70.9

41.9

40.7

Examples of investment in the areas of AI and IoT by Japanese corporations

UK

ToyotaMotor
US
Corporation

Source: Press releases of the respective companies, report materials.

2015/10/14
2015/8/6

22Chapter 1 Section 3: World FDI and Japan’s FDI

Contribution to creation employment in the US by Japanese corporations■ Japanese manufacturer comes out top in ranking of employee numbers by country
According to statistics by the US Department of Commerce, the total number of employees employed by the Japanese manufacturer in the US was
382,600 in 2014, overtaking Germany and UK to be the country employing the largest number of employees in the US. Although the number of
employees in the manufacturing industry for the whole of the US in the same year had increased by only 5.7% (656,000 people) as compared to 2010,
the number of employees employed by Japanese manufacturer increased by 32.2% (93,200 people) during the same period, presenting a growth ratethat far exceeds the overall average.
■ Increase in number of employees even in the Great Lakes Region
In the US presidential elections held in November 2016, one of the factors leading to Donald Trump's win was his success in gaining the support ofelectorates in the Great Lakes Region, where there is a concentration of automotive companies. Looking at the total number of employees hired by theJapanese corporations in this region, we see that the figure has increased to from 146,200 in 2010 to 186,900 in 2014. The percentage increase during
the same period was 27.8% (40,700 people), making Japan the country with the largest growth rate.

Changes in the number of employees in the manufacturing industry（thousandpeople）

Total number of employees (right axis)
Germany
Canada450（thousandpeople）

Japan
UK
France16,000

400

357.4
316.3

350

325.9
291.3

300
250

288.7

287.0

289.4

312.3

382.6

14,000330.9
12,000(thousandpeople)Japan
日本

10,000

291.9

8,000
6,000

150

4,000

100

UK
英国

Germany
ドイツFrance
フランス

200
180
160

161.8

140

200

149.1

146.2

2009

2010

152.3

Switzerland
スイス

177.2

186.9

2013

2014

161.3

159.8

120
100
80

60
40

2,000

50
0

Changes in the number of employees in the Great Lakes Region

2004

2005

2006

2007

2008

2009

2010

2011

Note：Majority owned companies by ultimate beneficial owner (UBO)
Source：US Department of Commerce, Bureau of Economic Analysis

Copyright (C) 2017 JETRO. All rights reserved.

2012

2013

2014

0

20

0

2007

2008

2011

2012

Note: Majority owned companies by ultimate beneficial owner (UBO). Great Lakes Region includes Illinois,
Indiana, Wisconsin, Ohio and Michigan
Source: US Department of Commerce, Bureau of Economic Analysis

23

Chapter 1 Section 3: World FDI and Japan’s FDI

Continued shift toward ASEAN despite a lull
■ Japanese corporations continue to place importance on ASEAN
In 2016, Japan recorded an excess of withdrawals for FDI toward ASEAN. As a result, FDI toward China in the same year exceeded FDI
toward ASEAN. However, based on the assumption that exclude withdrawal of equity capital by SoftBank Group from its Singapore
subsidiary (announced in August 2016), Japan's FDI toward ASEAN in 2016 fell by 16.0% year-on-year to $17.3 billion. Although a lull
was observed in 2016, Japanese corporations continue to place great importance on ASEAN as a direct investment destination in Asia.
■ Continued moves to shift bases and functions in China to ASEAN
When Japanese corporations reorganize their domestic and overseas bases, the largest number of companies select ASEAN as theirrelocation destination. Looking at the combinations of main transfer origins and transfer destinations for corporations reorganize theirbusiness bases, we can see a growing trend of moving bases and functions in China into ASEAN, indicating the continued shift toward
ASEAN among Japanese corporations.
Japan’s outward FDI: Comparison of China and ASEAN(million dollars)

30,000

40.0

ASEAN

25,00020,000Shift from Japan to China

Shift from Japan to ASEAN
Shift from China to ASEAN

China

17,332

Shift from China to Japan

30.0

24.2

25.0

10,000

20.0

5,000

△ 5,000

37.4

35.0

15,0000Main transfer patterns of domestic and overseas bases andfunctions by Japanese firms
(%)

19.8

15.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 16.1-5 17.1-5
（P）

0.0

Copyright (C) 2017 JETRO. All rights reserved.

16.2

15.3

12.0
13.7
8.2
3.4

4.5

4.1

△ 10,000
Note: 1) Data excludes investment in the finance and insurance sectors of Thailand in relation to the floods inthe country (Q4, 2011: $3.924 billion, Q1, 2012: -$3.674 billion). 2) In August 2016, SoftBank Group
withdrew equity capital from its Singapore subsidiary. The dotted line shows assumption that exclude thiswithdrawal. 3) Figures are based on BPM6 after 2014.
Source: "Balance of Payments" (MOF, BOJ)

15.3

10.0
5.0

22.7

22.0

19.0

Shift within ASEAN

0.4

FY2006(n=243)

6.2

12.9
8.5

5.8

4.7

4.6

FY2013(n=780)FY2014(n=798)

7.0
6.8

1.3
FY2010(n=232)FY2016(n=458)Notes: 1) The figures above include cases of reported restructuring of bases conducted in thepast two to three years or planned for in the coming two to three years. 2) Multiple answers.
Source: "Survey on the International Operations of Japanese Firms" (JETRO) various issues

24Chapter 1 Section 3: World FDI and Japan’s FDI

Trends in overseas sales of Japanese companies■ Japanese companies maintain their high overseas sales ratio
According to calculations by JETRO, based on the summary of financial reports and securities reports of Japanese corporations (176 companies) for
the fiscal year from December 2016 to March 2017, the overseas sales ratio of Japanese corporations (*not including exports from Japan) was 56.5%.
The figure has exceeded 50% for the fourth consecutive year since 2013, as companies continue to keep up the high ratio. Looking at figures byregion, the Americas ranked highest at 26.3%, making up about 1/4 of total sales revenue. Overseas sales ratio for the Americas, centered on the US,
has continued rising in recent years. In contrast, the percentage for Asia Pacific, at 17.3%, slid marginally before that for the previous year. Looking at
the figures by industry, we see that transport equipment has maintained a high overseas sales ratio of 61.7%.

Share of Japanese companies’ sales by region
Fiscal year (No. ofDomestic Overseas Americas
companies)

2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016

(547)
(581)
(592)
(624)
(669)
(724)
(751)
(781)
(817)
(844)
(320)
(236)
(221)
(211)
(212)
(186)
(176)

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
41.7
43.5

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
58.3
56.5

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
25.9
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
8.9
7.8

(%)

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
18.4
17.3

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
5.0
5.1

Note: 1) Companies surveyed: The accounting period is from December to March, andinformation is broken down by location. 2) Figures for FY2016 reflected companies withfinancial statements or securities reports available by June 12, 2017. 3) Percentage = salesof each region/total sales. 4) Surveyed companies include listed subsidiaries, which weredouble-counted. 5) Companies which combine multiple regional sales such as “Americas
and Europe” and “Europe and Africa”, were excluded.
Source: Aggregated sales amount of all companies based on thier financial statements

Copyright (C) 2017 JETRO. All rights reserved.

Share of Japanese firms’ sales by industry and region (FY2016)
Industry(No of companies)

Manufacturing

Domestic Overseas〔143〕

Transport equipment〔43〕

Machinery & electric appliances〔56〕

Electrical equipment〔21〕

Materials/material processed
goods

〔30〕

Non-manufacturing〔33〕

Americas

EuropeAsiaPacific

(%)
Other

42.3

57.7

27.1

8.0

17.5

5.1

(+ 1.2)(-1.2)(-0.9)(+ 0.2)(-0.3)(-0.1)

38.3

61.7

31.3

8.2

16.5

5.7

(+ 1.4)(-1.4)(-1.1)(+ 0.2)(-0.2)(-0.2)

58.0

42.0

11.6

8.3

19.3

2.8

(+ 0.3)(-0.3)(-0.4)(+ 0.4)(-0.3)(+ 0.1)

55.1

44.9

11.3

7.1

23.8

2.7

(-0.4)(+ 0.4)(-0.2)(+ 0.6)(-0.1)(+ 0.2)

56.4

43.6

6.8

3.3

29.7

3.8

(-0.7)(+ 0.7)(+ 0.4)(+ 0.8)(-0.7)(+ 0.2)

67.1

32.9

8.9

3.2

13.8

6.9

(+ 4.3)(-4.3)(-1.4)(-0.3)(-1.8)(-0.8)

Notes: 1) The manufacturing industry comprises the following areas: Transport machinery, 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,consumer services, away from home meals/home-meal replacement, advertising/infocomms services, legal services,intermediate distribution, finance, transport services, and resources and energy. Electrical equipment is categorized
into the following middle categories based on the same database: Infocomm equipment manufacturing, consumer
electronics manufacturing, electronic parts/device manufacturing. 2) In the parentheses, the change on share ofJapanese firms’ sales of FY2015, calculated by the same company as in FY 2016.
Source: Aggregated sales amount of all companies based on thier financial statements

25

Chapter 1 Section 3: World FDI and Japan’s FDI

Inward FDI from Asia to Japan continues to grow■ Significant growth in Japan’s inward FDI in 2016
In 2016, the value of Japan’s inward FDI (on a balance of payment basis, net, flow) was $34.9 billion, which showed an approximately
six-fold increase from $5.6 billion reported in 2015, and marked a record high since comparable records began in 1996. By region, we
see that investment from Asia increased by 43.8% year-on-year as the region retained its strong presence as a primary investor. FDI from
Europe shifted from negative in 2015 (net outflow) to positive, while FDI from the US also increased from the previous year.
Movements were observed mainly in the electrical and electronics sector for FDI from Asia, the services sector from the US, and thepharmaceutical products and automotive parts sectors from Europe. M&A targeted at Japan in 2016 was $27.8 billion, about 3.2 times
that of last year, as a result of the conclusion of large-scale deals (acquisition of management rights of Kansai International Airport, etc.
by a consortium centered around French company VINCI S.A. at a total of $17.9 billion).

2015

2016

2017
YoY
YoY
Jan-May(P)changechange

6,384
767
2,089
1,207
667
1,649
1,365
7,141
7,131
717
585
4,349
3,672
19,769

5,562
641
973
723
939
2,273
1,842
5,186
5,199
-2,027-640-2,721-2,533
5,585

8,001
-126
1,361
2,497
563
3,714
3,046
5,745
5,761
1,714
846
18,477
17,41434,897

43.8
39.8
245.1
-40.0
63.4
65.4
10.8
10.8
524.8

4,235
-40
-278
392
267
3,902
4,273
3,139
3,227
1,390
-408
-100
-399
8,247

226.3
78.1
50.8
270.1
383.9
-3.8
-1.6
402.2
-35.8

Notes: 1) The yen-based value is converted to dollars by quarter, using the average quarterlyBank of Japan interbank rate. 2). For after 2014, figures reflect the annual revision. The
cumulative total for 2017 is a preliminary figure.
Source: “Balance of Payment Statistics” (Ministry of Finance, Bank of Japan).

Copyright (C) 2017 JETRO. All rights reserved.

Main trends

Asia

2014

Main trends for Japan’s inward FDI in 2016
● Acquisition of Sharp by Hon Hai / Foxconn Technology Group from Taiwan, a global leader inproviding contract manufacturing services for electronic equipment (Electrical/Electronics)● Acquisition of Toshiba Lifestyle Products & Services Corporation, which is engaged in thehome appliance business under the umbrella of Toshiba, by leading Chinese home appliancemanufacturer Midea Group (Electrical/Electronics)● Development of logistics facilities by Global Logistics Properties (GLP), a leading logistics
facility operator in Singapore (Logistics services)

US

Asia
China
Hong Kong
TaiwanSouth Korea
ASEAN
Singapore
North America
US
Latin America
Oceania
EuropeEUWorld(Million USD, %)● Conversion of joint venture (high frequency components) between US electronic parts
manufacturer Skyworks Solution, and Panasonic, to a wholly owned subsidiary(Electrical/Electronics)● Acquisition of all the shares of First Kitchen by US-owned burger chain, Wendy's Japan (Foodservices)● Successive plans for the opening of US-owned luxury hotel chains (Hyatt, Hilton, Marriott, etc.)(Hotels)

EuropeJapan’s inward FDI by country/region● Acquisition of Astellas Pharma's global dermatology business overseas by Denmark's LEO
Pharma (Pharmaceuticals)● Acquisition of respiratory business of Takeda Pharmaceutical Company by UK company
AstraZeneca plc (Pharmaceuticals)● Establishment of joint venture between global airbag leader from Sweden, Autoliv Inc., andleading Japanese brake manufacturer, Nissin Kogyo Co., Ltd. (Automotive parts)

Source: Thomson Reuters, various reports, etc.

26

Chapter 1 Section 3: World FDI and Japan’s FDI

Ratio of Japan’s inward FDI stock against GDP exceeds 5%■ Asia’s share in Japan’s inward FDI stock expands to 18.0%
Japan's inward FDI stock as of the end of 2016 was 27.8 trillion yen, marking 3.1 trillion yen growth from the end of the previous year
and a new record high since the end of 1996 when comparisons could be made. As a result of the increase in Japan's inward FDIstock,ratio against GDP rose from 4.7% in 2015 to 5.2% in 2016, exceeding the 5% mark for the first time. By region, Europe had thelargest
share with 48.7%, while North America made up 25.9%. Due to large-scale acquisitions by Taiwanese corporations and other factors,
Asia's share in Japan's inward FDI stock grew to 18.0%, strengthening its presence as a major investor not only on the basis of annual
inflow, but also on the basis of stock.
Inward FDI stock in Japan
30.0

Share of inward FDI stock in Japan by region（Trillion yen）

（％）

5.2

Debt instruments
25.0

Reinvestment of earnings

4.6

Equity capital
20.0

3.7

3.8 3.9 3.9

3.0

15.0
1.9 2.0 2.0

10.0

5.0

3.7

Inward FDI stock／GDP（right axis）

4.0

4.7

0.8 0.7

0.6

1.0

1.2

2.4

2.5

6.0

100.0

5.0

80.0

4.0

60.0

3.0

40.0

2.0

1.3

0.0

1.0

0.0
Note: Based on BPM6 over the entire period.
Source: "International Investment Position" (MOF, BOJ), data from the Cabinet Office

Copyright (C) 2017 JETRO. All rights reserved.

(%)

37.7

42.9

46.6

46.8

48.7

47.1

34.4

29.8

28.3

25.9

6.6

10.8

15.5

17.4

18.0

End of
End of
End of
End of
End of
2000
2005
2010
2014
2015
Asia
North America
EuropeLatin America

End of
2016
Other

51.6

20.0

32.3

0.0

7.8

Note: Because the BOP-related statistics have been revised, there is no strict continuity inthe data before the end of 2013 and after the end of 2014.
Source: "International Investment Position" (MOF, BOJ), data from the Cabinet Office27

Chapter 1 Section 3: World FDI and Japan’s FDI

Continued establishment of R&D centers with a view to developing new fields■ Positive appraisal of the R&D environment
For foreign corporations, the growing appeal of Japan as a location for business development lies in the technological aspectof Japan's
superb technology and knowhow. According to JETRO's survey, there has been a significant rise in the percentage of foreign
corporations that highly rate Japan's high-quality of R&D, the existence of good partners, companies or universities with outstanding
technologies or products, and the well-structured/effective legislation such as a sophisticated IP (intellectual property) system. Japan's
superiority in these technological aspects have left a favorable impression, leading to successive establishment and strengthening of
R&D centers in new fields for which future growth is anticipated, such as the areas of regenerative medicine and IoT that have been
attracting much attention in recent years.
R&D centers of foreign-affiliated firms with their eyes on new fields

The attractiveness of doing business in Japan
0

20

40

60

The Japanese market
Well-developed infrastructure (traffic,
logistics, ICT, energy, etc.)

73.5

69.6

56.8

Everyday living condition

64.4

45.1

Existence of world famous global
companies

58.6

45.8

Well-structured/effective legislationsuch as a sophisticated IP system

36.8

Possibility of finding highly talented
human resources

37.4

79.6

69.8

52.1

Existence of good partners, companies
or universities with outstanding
technology or products

100

86.4

73.6

High quality of R&D

(%)

80

55.4
50.3

FY2016 survey

FY2015 survey

Notes: 1) Only the top 10 items with the highest rating in "The attractiveness of doing business in Japan" ("The Survey on
Japan’s Investment Climate 2016 Results" ). 2) Each item is rated on four options, and the percentage shows the proportionof companies that selected the top two options ("It's attractive" and "It's largely attractive").
Source: JETRO Invest Japan Report 2016 (JETRO)

Company name

Overview

US bio venture company that carries out clinical development of genetherapy. In 2016, it established a joint venture company together with aAgilis Biotherapeutics,
Japanese corporation to conduct R&D on the treatment of rare diseases. In
Inc. (US)February 2017, it established a new R&D center in Life Science Innovation
Center in Kawasaki City, Kanagawa Prefecture.
Leading medical device manufacturer based in the Netherlands. In 2016, it
established an R&D center in Showa University and conducted
Philips Electronics Japan, experimental studies on its program that enables doctors in a control center
Ltd. (Netherland)
to monitor patients who are in ICU beds in hospitals at remote locations.It islinked with several ICUs and control centers of hospitals, and monitors
patients' conditions and data, etc..
Leading Chinese software development company. In 2016, it established an
Dalian Hi-Think
R&D company in Kyoto. It aims to build an integrated system using new
Computer Technology,
technologies such as artificial intelligence (AI) and IoT. In February 2017, it
Corp. (China)
established an R&D center in Kyoto Research Park.
A company engaged in the development of IoT equipment in Taiwan. In
2017, it set up a Japanese subsidiary in Tokyo to conduct R&D on home
NextDrive Inc. (Taiwan)
energy management systems using IoT technology. It is also working with
Kyoto University to jointly develop compact gateways for IoT.
Global leader in 3D software. In 2016, it established its first Japanese R&D
Dassault Systèmescenters in Tokyo and Nagoya. It conducts R&D on software that provides(France)comprehensive support for product design, etc. in manufacturing industries.

[Source] Press releases of the respective companies, various reports, etc.

Copyright (C) 2017 JETRO. All rights reserved.

28

Chapter 2
Trends in development of world trade rules

Chapter 2 Section 1: Present status and outlook of FTAs for the world and Japan

Number of FTAs in force around the world reaches 290■ 11 new FTAs entering into force after 2016
The number of free trade agreements (FTAs) in force around the world as of 30 June 2017 is 290 (based on JETRO surveys, including customs unions
and preferential trade agreements). A total of 11 new FTAs entered into force, with 10 in 2016 and 1 between January and June 2017. Since 2003 for
14 consecutive years, the number of FTAs entering into force each year has been a double-digit. However, those entering into force after 2016 havenot been large-scale FTAs between major economic countries/regions but instead, FTAs between countries with relatively small amount of trade, such
as Japan-Mongolia FTA and Korea-Colombia FTA.
■ No significant changes to the FTA coverage ratio for major countries/regions
Looking at the FTA coverage ratio for major countries/regions, based on trade statistics for 2016 (ratio of trade with countries that the subject country
has established FTAs with, as a proportion of total trade of the subject country), on the basis of the amount of two-way trade, there were no significant
changes from the previous year, with Japan registering 22.5%, the US at 39.1% and China at 29.3%. The Japan-EU EPA, for which the parties havereached a framework agreement in July 2017, and the Regional Comprehensive Economic Partnership (RCEP) for the East Asia region that iscurrently under negotiations, are important in raising Japan’s FTA coverage ratio. The figures for US, Canada, and Mexico affirm the vital importanceof NAFTA, and much attention will be given to the direction of renegotiations going forward.

Number of FTAs which are in force by region and year (as FTA coverage ratio of major countries/regions (2016)
FTA coverage ratio
FTA partner countries/regionsof end of June 2017)(Unit: Number)
Asia
Pacific
1955-59
60-64
65-69
70-74
75-79
80-84
85-89
90-94
95-99
2000-04
2005-0920102010
2011
2012
2013
2014
2015
2016
2017
Total

2
2
4
9
20
19
5
3
3
2
5
1
56

Americas

Europe

1

1
1

1

1

1
3
1
7
7
8
15
1
1
6
2
1
1
2
1
44

Mile
East/
Africa

5
3
5
5
7
5

Russia/
CIS

1
1

2
1
1
1
9
8
4

5
14
2
2
2

1

1

1

1

28

Source: WTO, data from each government and organization

Crossregional

25

25

2
1
6
18
38
44
1
9
7
7
10
3
7
112

Total

2
3
0
4
3
3
6
17
39
49
77
87
12
13
15
12
13
11
10
1
290

Two-way
trade
Japan
22.5
US
39.1
Canada70.5
Mexico
79.7
Chile
93.1
Brazil15.9
Total trade
74.7
EU28
Extra-regional
30.2
China
29.3
South Korea
67.8
ASE AN
58.8
Singapore
78.1
Malaysia
63.0
Vietnam
56.3
Thailand
60.4
Indonesia
64.5
India
18.7
Australia
68.2
New Zealand
52.9

ExportImport

1st

20.8
46.5
79.1
93.4
92.2
17.2
75.5
32.6
22.4
70.7
55.6
73.7
62.3
44.8
56.1
60.0
20.1
70.1
53.7

24.3
34.2
62.9
66.5
94.2
14.2
73.9
27.7
38.8
64.3
62.2
80.5
63.7
67.8
65.0
69.3
17.6
66.2
52.2

ASEAN
NAFTA
NAFTA
NAFTA
China
MercosurEU
Switzerland
ASEAN
China
ASEAN
ASEAN
ASEAN
China
ASEAN
ASEAN
ASEAN
China
China

15.0
29.3
67.1
66.0
25.9
9.8
63.9
7.6
12.1
23.4
22.8
24.1
27.1
19.6
22.9
24.3
10.5
27.5
19.9

（Unit：％）

2nd

3rd

Australia
South Korea
South Korea
EU
US
CAN
Switzerland
TurkeySouth Korea
ASEAN
China
China
China
ASEAN
China
China
South Korea
ASEAN
Australia

3.6 Mexico
3.1 DR-CAFTA
1.5 EFTA
8.1 Japan
15.8 EU
3.1 Chile
2.8 Turkey
4.2 EEA
7.0 Taiwan
13.2 US16.3 Japan
13.6 US
16.2 Japan12.7 South Korea
16.1 Japan
17.0 Japan
2.5 Japan
13.0 Japan14.9 ASEAN

1.3
1.4
0.9
2.8
14.8
2.2
1.5
3.2
4.9
12.2
8.9
9.5
8.1
11.8
12.5
10.4
2.2
10.8
11.6

Note: 1) The subject countries include countries and regions which have established an FTA as of the end of June 2017. The figures are based upon trade value in 2016.
2) Abbreviations: The Central American-Dominican Republic Free Trade Agreement (DR-CAFTA), the European Free Trade Association (EFTA), and the European Economic
Area (EEA).
3) China's figures exclude those of Hong Kong(8.1%) and Macau (0.1%).
4) ASEAN's figures were based on the total trade value with each member country although some have not yet issued FTAs.
5) Figures for Canada and Singapore were calculated by export statistics which exclude re-exported trade.
Source: Materials and trade statistics from each country's government, "DOT, June 8th, 2017" (IMF)

30

Copyright (C) 2017 JETRO. All rights reserved.

Chapter 2 Section 1: Present status and outlook of FTAs for the world and Japan

Japan’s FTA utilization and related issues■ FTA utilization rate for imports rises to 18.5%
Japan’s FTA utilization rate for imports (value basis) was 18.5%, 2.2 points increase from the previous year. Among countries with large trade values,
the utilization rate for imports from Vietnam was at the high level of 35.7%. In terms of the amount of imports utilizing FTAs, although the amountfrom Thailand exceeded that from Vietnam, the difference has been shrinking in the past few years.
■ Despite tax-saving effect, there are issues in utilizing FTAs, such as with HS code classification, etc.
According to surveys conducted by JETRO, the percentage of Japanese corporations using FTA for export was 45.1% of all companies that export to
FTA partner countries. Looking at examples of FTA utilization by Japanese corporations, we see companies enjoying reduction in tariffs in trade withoverseas subsidiaries as well as retailers at the export destination emphasizing their FTA utilization record in their efforts to expand their sales
channels. On the other hand, there are also cases where companies give up the idea of utilizing FTA due to the complex procedures, difficulty ofclassifying HS codes right, and the effort and costs. There are issues that need to be overcome in order to further promote the utilization.

Status of Japan’s FTA utilization (based on import value)
FTA counter-party

ASEAN

Other Asia
Pacific
countries

EuropeLatin
America
Total

ThailandIndonesia
Singapore
Vietnam
Malaysia
Philippines
MyanmarCambodia
Laos
Brunei
AJCEP
India
Australiza
Mongolia
Switzerland
MexicoPeru
Chile

Value of Utlized FTAs
(100 million yen)

2014
6,247
3,414
474
4,847
2,998
2,418
33
105
9
1
5,207
1,565
476
1,052
134
1,851
25,624

2015
6,889
3,730
463
6,054
2,961
2,574
45
132
12
0
6,437
1,623
2,848
540
1,227
130
1,734
30,961

2016
6,328
3,548
361
6,302
2,573
2,634
44
100
17
1
6,558
1,423
3,012
6
488
1,169
143
1,570
29,720

Examples of FTA utilization by Japanese corporations

Utilization rate (%)
2014
27.2
12.6
5.7
29.7
9.7
22.5
3.7
12.9
7.7
0.0
5.5
21.2
6.2
23.2
7.2
21.5
16.8

2015
27.9
15.6
4.8
33.0
11.4
24.0
4.3
11.2
10.6
0.0
6.8
27.6
6.8
6.0
21.3
8.7
23.9
16.3

2016
28.9
17.8
4.5
35.7
13.7
26.8
4.3
7.6
13.7
0.0
8.1
27.9
9.1
49.2
5.9
18.7
9.8
26.6
18.5

Notes: 1) The total amount of imports for the utilization of AJCEP (ASEAN-Japan FTA) does not include theamount for Indonesia, for which the FTA has not entered into force. 2) According to "World Tariff Profiles"(WTO), 55.9% (tariff line, 2015) , or 83.2% (import value basis, 2014), of the amount of improts for Japan is taxfree.
Source: "Trade Statistics" (MOF)

Copyright (C) 2017 JETRO. All rights reserved.

Corporation

Company A

Location

Ishikawa
Prefecture

Industry

Company B Tokyo

Production
and sale ofplastic
products

Company C Osaka

Production
and sale ofhandicraftrelated
goods

Source: Field interviews

Status of FTA utilization

The company uses FTAs for allexports to overseas subsidiaries
Production and also for sales to otherand sale of companies when such requests
industrial
are received. As unit cost is high,machinery even a tariff reduction of several
percent produces significant taxsaving effect.

Challenges of FTA utilization
There are strict requirements for approving
the deferred payment of fees for theissuance of Certificate of Origin, andpayment has to be made at the counter of
the Chamber of Commerce for eachissuance. Creative effort had to be put into
consolidating the required documents while
trying to reduce the burden on the suppliers.

The company started using
voluntarily after attending FTA
seminars, etc. To date, it has
Even for the same product, the interpretation
experience in utilizing FTAs forof the HS code may be different depending
exports to Mexico, Thailand, and on countries. Despite urging the customer in
Malaysia. It will utilize them if
the partner country to confirm the HS code
they receive requests from thethrough advance ruling, there were times
export destination. Sales company when the customer company did not have ain Thailand uses its track record in good understanding of the system.
FTA utilization as a point ofappeal when expanding sales
The interpretation of HS code may differ
depending on officers in charge of customs
clearance, causing much difficulty. In
Triggered by a request from adrawing up the Certificate of Origin, it took
customer, started utilizing FTA by time for the company to establish a system tousing a self-certification systemcollect product information from its local
for exporting to Australia.
suppliers in an efficient manner. In using theself-certification system, it was difficult todetermine how detailed the information had
to be.

31

Chapter 2 Section 1: Present status and outlook of FTAs for the world and Japan

Framework agreement for the Japan-EU Economic Partnership Agreement (Japan-EU EPA)
■ Aim to reach final agreement by the end of 2017
Negotiations for the Japan-EU EPA, which commenced in April 2013, reached a framework agreement at the political level on 6 July 2017. Goingforward, Japan and the EU will move forward on negotiations in the remaining areas such as investment and regulatory cooperation, with the aim ofreaching a final agreement by the end of 2017, and entering into force of the EPA as early as 2019. If this EPA comes into force, Japan's FTA
coverage ratio will increase to 34.4%, while that of the EU will increase to 33.8%.
■ Claims on tariff reductions for industrial products in the case of Japan and food products in the case of the EU
Since the start of negotiations, Japan had consistently placed importance on reducing tariffs for industrial products such as automobiles and electricalequipment. The EU makes up 11.1% of Japan's automobile exports, and 13.5% of its automotive parts exports. Customs tariffs for passenger vehicles
will be abolished over seven years after the EPA enters in force, and tariffs for automotive parts will be eliminated over seven years (immediately
upon entry into force for some). On the other hand, the EU has requested for tariff reductions for agricultural, forestry, and fishery products, as well as
the relaxation of regulations on pharmaceuticals and processed food products. Imports of chemical products from EU makes up 38.7% of Japan’s allimports of chemical products. Similarly, imports of food and beverages makes up 13.3% of Japan’s imports of the category, with pork and wine
making up 36.4% and 72.9%, respectively.

Trade Ratio of Japan with EU by product category (2016)
Product CategoryWorld（milliondollar）

EU

FTAs in force

In Force＋
ASEAN Australia EU

161,013

12.4

16.1

Automobiles

103,600

11.1

14.6

5.1

Automobile parts

35,408

13.5

23.6

16.5

General machinery

124,010

13.5

20.2

14.9

Transportational machinery

8.3

4.2

Product CategoryWorld（milliondollar）

EU（Unit: %）In Force＋
ASEAN Australia EU

FTAs in force

28.5

Machinery and equipment

205,534

14.5

17.8

14.7

0.1

32.3

6.0

25.7

General machinery

59,443

14.0

14.5

12.6

0.1

28.5

1.0

37.2

Electrical equipment

89,943

4.5

19.9

18.7

0.0

24.3

1.2

33.7

Transportation machinery

28,779

39.9

12.2

9.4

0.2

52.1

Precision equipment

27,370

21.6

24.4

12.0

0.4

46.0

75,473

31.7

20.5

13.8

0.5

52.2

Printing machinery

9,809

25.8

19.0

15.2

1.4

44.8

Export Electrical equipment

98,252

10.2

21.1

17.8

0.4

31.2

Precision equipment

36,813

15.3

14.4

11.0

0.7

29.7

Chemical products

57,529

38.7

17.2

8.9

0.5

55.8

Chemicals

81,185

10.3

18.4

13.6

1.0

28.7

Food and beverages

59,311

13.3

27.4

14.5

6.1

40.8

47,968

11.3

15.6

11.8

0.7

26.8

4,174

36.4

12.0

0.0

0.1

48.4

1,504

72.9

16.0

0.0

2.7

88.9

607,728

12.3

24.3

15.2

5.0

36.7

Chemical products

5,710

4.8

17.7

15.3

1.9

22.5

Total

645,052

11.4

20.8

14.8

2.2

32.2

Two-way trade

1,252,781

11.9

22.5

15.0

3.6

34.4

Food and beverages

Import Chemicals

Pork
Wine
Total

Note: Harmonized System Codes (HS Code) of the product category are as follows: Transportational machinery (HS86-89), Automobiles (HS8702-8705), Automobile parts (8707-8708, 840731-840734), General machinery(HS84), Printing machinery (HS8443), Electrical equipment (HS85), Precision equipment (HS90-91), Chemicals (HS28-40), Chemical products (excluding plastics and rubber) (HS28-38), Foods and beverages (HS01-11, 1624), Pork (HS0203), Wine (HS2204).
Source: "Trade Statistics" (MOF)

Copyright (C) 2017 JETRO. All rights reserved.

32

Chapter 2 Section 1: Present status and outlook of FTAs for the world and Japan

Growing moves toward regional economic integration among developing economies■ ASEANASEAN, which celebrates its 50th anniversary this year, has been
attempting to liberalize not only trade in goods but also
investment in the region to promote trade in services within theframework of the ASEAN Economic Community established in2015. In external relations, ASEAN is also leading RCEP
negotiations.

■ The Pacific Alliance
The Pacific Alliance, established in 2011, will abolish intraregional tariffs by 2030. It is also promoting integration in areas
other than trade, such as the establishment of an integrated stock
market of the four countries and freedom of movement for
citizens. With the aim of developing closer ties with the rest of
the world, especially Asia, it has announced the start of FTA
negotiations with four countries, of which three are Asian
countries. It is also gradually building cooperative relations with
Mercosur.
■ Africa Economic Community (AEC)
In 1991, member countries of the African Union reached anagreement to establish the Africa Economic Community (AEC)
by 2028 through six stages, including the establishment of a free
trade area, the African Customs Union, and the introduction of acommon currency. As the third stage in the establishment of the
AEC, the Tripartite Free Trade Area (TFTA) was signed in June2015 among member countries of the East African Community(EAC), the Southern African Development Community (SADC),
and the Common Market for Eastern and Southern Africa(COMESA). In June of the same year, negotiations alsocommenced on the Continental Free Trade Area (CFTA), which
includes all member countries. Going forward, the Africancountries will continue to strengthen integration toward theestablishment of the AEC.
Besides abovementioned integrations, there are also moves
toward economic integration in various regions, particularly
among developing economies. An example is the Eurasian
Economic Union (EEU) in the Russia CIS region.
Copyright (C) 2017 JETRO. All rights reserved.

Key moves toward regional economic integration in developing economies
Name

RegionAssociationof Southeast
Asian
Asia
Nations(ASEAN)The Pacific
Americas
Alliance

Member states Established

ThailandIndonesia
Philippines
Singapore
Malaysia
Brunei
Cambodia
Laos
MyanmarVietnam

Chile
Colombia
MexicoPeru

AfricaMembers of the
Economic Middle
African Union
Community East/Africa(54 countries)(AEC)

Overview/Key points

・ASEAN established the ASEAN Economic Community along with theASEAN Political-Security Community and the ASEAN Socio-Cultural
Community in December 2015. The aim is to deepen the economic
integration that it has been promoting since the 1990s.
・Tariff elimination/reduction rates are very high, and it is gradually
introducing more flexible systems for the Certificate of Origin system.
・In the service sector, it is putting effort into liberalization for each sector,
August 1967
based on the ASEAN Framework Agreement on Services (AFAS). To
date, it has completed negotiations on liberalization of 70% of entry of
foreign capital for the air transportation, eASEAN, healthcare, tourism, andlogistics sectors, and 50% for other sectors.
・In external relations, it is approaching external negotiations, including
RCEP, based on the philosophy of ASEAN Centrality (independently
driving external relations forward).

・Apart from the member states, 50 countries are registered as observers.
In addition to economic integration within the region, it also aims to deepen
economic relations with Asia and other regions. In June 2017, it announced
new guidelines for associate members, with the aim of expanding andstrengthening the alliance.
・Customs tariffs have already been eliminated for 92% of the products,
with plans to eliminate the remaining by 2030.
April 2011
・Launched the Latin America Integrated Market (MILA) to promote
investment. In the aspect of the movement of people, Mexico and Peru
have instituted visa exemptions for residents who fulfill certain criteria.
・While drawing closer to Mercosur, the two organizations drew up aroadmap in April 2017 with the aim of strengthening their relations. It alsoannounce the start of FTA negotiations with Canada, Australia, New
Zealand, and Singapore.

・The Treaty Establishing the African Economic Community, which entered into
force in 1994, puts forth six stages toward the establishment of the AEC by 2028,
including free trade areas and the African Customs Union.
・In July 2015, the Tripartite Free Trade Area (TFTA) was signed. In addition to the2028
elimination and reduction of customs tariffs by member states, it also aims to reach(scheduled) an agreement on non-tariff areas such as competition policies.
・In June 2015, negotiations commenced on the Continental Free Trade Area
(CFTA). Going forward, there are plans to continue moving toward theestablishment of the AEC.

Note: The date of establishment refers to the establishment of the organization, and is different from the date that the free trade agreement enteredinto force.
Source: Materials from the respective governments and regional organizations.

33

Chapter 2 Section 2: World trade policies reaching turning point (1) Outline

Background to the growth in support for “inward-looking” policies in the West■ A background of growing income and employment disparity
Some countries in the West have shown a tendency of growing support for inward-looking policies that go against the trend of globalization. These
include UK’s decision to leave the European Union, and the US Trump administration’s exit from the TPP, NAFTA renegotiations, andstrengthening of immigration policies. It is said that this trend is backed by growing income and employment disparity (polarization), which hasheightened discontent among low-income groups in advanced economies. Hence, support was shown for the easy-to-understand claim that
globalization is the primary cause behind unemployment and low income among these groups of people.
■ After the 1990s, intensified competition in advanced economies against developing economies in the aspects of goods and people
Globalization (international movement of goods, money, and people) advanced rapidly from the 1990s to the 2000s. Particularly in advanced
economies, competition with developing economies intensified in the aspects of goods and people. The percentage of imports in advanced
economies originating from developing economies rose from 20.0% in 1990 (of which China made up 2.7%) to 39.7% in 2015 (of which China
made up 15.4%), and trade deficit against developing economies also grew from $106.6 billion to $692.7 billion during the same period. The
percentage of international immigrant stock of advanced economies that originated from developing economies also increased from 49.9% in 1990
to 60.7% in 2015.

Income inequality in US: Share of each income group
60

50

(%)

Bottom 50%
Top 10%

Middle 40%
Top 1%

Share: Other
Share: Advanced economies
Share: Developing economies other than China
Share: China
Trade balance with developing economies (right axis)

(%)

40
30
20

10
0
(Year)
Note: 1) The "middle 40%" ranges from the 50th to 90th percentile ranks. 2)
Income data is based on the fiscal income (the sum of all income items
reported on income tax returns, before any deduction).
Source: World Wealth and Income Database (WID.world)

Copyright (C) 2017 JETRO. All rights reserved.

Percentage of imports in advanced economies originating fromdeveloping economies, and trade balance against developing economies

100
90
80
70
60
50
40
30
20
10
0

($1 billion)

0
-100

67.9

71.6

79.1

-200

59.9

60.3

-300
-400
-500

30.4
1980

20.9

17.3
1.0

1990

2.7

13.4

7.0
2000

2010

-600

24.3

25.8

-700
15.4

2015

-800
-900

Notes: 1) Definition for advanced economies and developing economies follows DOTS. "Other" is obtained by deducting
the total for advanced and developing economies from total for the world. 2) Trade balance is calculated using formula[Export values (FOB) - Import values (CIF)].
Source: "DOTS, February 2017" (IMF)

34

Chapter 2 Section 2: World trade policies reaching turning point (1) Outline

Technological progress as the main cause behind income and employment disparity■ Growth of imports from developing economies in recent
years has had a negative impact on some workers inadvanced economies
In recent years, several empirical studies have pointed out that thegrowth of imports from developing economies such as China
after the 1990s has had a negative impact on the wages andemployment of some workers in the West. On the other hand,outward foreign direct investment, off-shoring, and immigration
were observed to have had mostly no negative impact on labormarket in advanced economies.
■ Technological progress as the main cause behind income
and employment disparity
The general view is that the main cause behind the expansion inincome and employment disparity in advanced economies is notglobalization, but technological progress. The cost of using
computers has fallen rapidly since the 1980s, making it evenmore advantageous for companies to replace workers withtechnology.
■ Globalization is beneficial but also poses some challenges
Globalization brings mutual benefits to the home country andforeign countries on the whole (transfer of knowledge andtechnology, improvement in productivity through more efficient
allocation of production factors, allows consumers to purchasediverse goods at cheaper prices, creation of employment throughforeign capital, overseas remittance by migrants, etc.). However,
it is necessary to note that there are some workers who sufferfrom the negative impact of globalization, particularly throughtrade. Rather than dealing with the problems by imposing
restrictions on trade, there is a need to respond throughmacroeconomic policies and policies that promote
education/training, subsidies, and labor mobility and reemployment.
Copyright (C) 2017 JETRO. All rights reserved.

Impact of globalization on labor markets in advanced economies
Form ofDirection of
globalization
impactNegative(Partially
positive)Goods(imports)

Backing sources

Detailed impact(mainly survey papers ofprevious research)

1980s: Small impact on wages.
1990s and after: Increase in imports from developing
economies such as China. Regions, industries, occupations,etc. exposed to this import competition suffered negative
impact on employment and wages (research on Europe andAmericas). Greater negative impact for workers with lower
skills and lower wages.
However, increase in imports from China had a positive
impact on manufacturing employment in Japan. Imports ofcheap intermediate goods can contribute to reducing
production cost and increasing profits for companies.

Author, Dorn, andHanson (2016),
Taniguchi (2016),
Fabinger, Shibuya, andTaniguch (2017)

Money

Positive, or Most of the results showed positive impact on employment, Kiyota (2015), Tanaka(2015), Navaretti andno impact or no negative impact.
Venables (2004)

PeopleMostly no
impact(Outward FDI,
offshoring)(Acceptance ofimmigrants)

Very small impact, approaching zero, on wages andemployment.

Kerr and Kerr (2011)

Source: "Backing sources" in the table, and materials produced by Hitoshi Sato and Tomohiro Machikita (researchers at
IDE-JETRO)

Cost of using computers: Compound annual growth rate
0
-10

-20
-30

-40

-11.0

-29.6

-26.8

-23.5
-32.3
-41.4

-50

-60

(%)

-53.8

Note: The compound annual growth rate was calculated by comparing the medians of thereal cost per million computations (2006 USD prices) of the corresponding decade.
35
Source: Revised data of table 6 of Nordhaus (2007) created by William D. NordhausChapter 2 Section 2: World trade policies reaching turning point

Concerns over expanding trade-restrictive measures■ Trade-restrictive measures in principal countries remain at a high level
Trade-restrictive measures that were introduced after the financial crisis that began in the US in 2008 have continued to accumulate. Since the start ofmonitoring by WTO and other authorities in October 2008, while 1,263 trade-restrictive measures that were introduced in G20 countries up till October 2016
are in effect, only 406 measures have been abolished.
■ Trade remedies such as anti-dumping make up a large percentage of the measures
Of these, trade remedies make up a large proportion. When trade-restrictive measures are classified into the four categories of import restrictive measures(import licensing system, raising customs tariffs, etc.), export restrictive measures (export taxes, restrictions on export volume, etc.), trade remedies (antidumping, safeguards and countervailing measures), and other measures (request for local contents, etc.), the percentage of trade remedies has reached thehigh level of 71.8% during the period from May to October 2016. As measures that are systematically implemented under WTO rules, and which are
effective in restricting trade, trade remedies are expected to be frequently used going forward.

Trade-restrictive measures of G20 countries(Measures)

Trade-restrictive measures (average per month)
Trade-restrictive measures in effectMeasures effectively eliminated

1,400

1,200

20.3
19.0

19.3
18.0

1,000

17.7

18.7

25.0
20.7

1,263

20.0

18.6

17.0

15.6

17.2

17.0

10.8
10.0

408
5.0

200

0

Until
Oct.
2010

Until
May
2011

Until
Oct.
2011

Until
May
2012

Until
Oct.
2012

Until
May
2013

Until
Nov.
2013

Until
May
2014

Until
Oct.
2014

Until
May
2015

Until
Oct.
2015

Until
May
2016

Until
Oct.
2016

Until
May
2017

0.0

Notes: 1) Trade-restrictive measures introduced since Oct. 2008 include measures affecting imports and exports, trade remedies,and other measures.
2) Data aggregaiton of measures was conducted from the end of 2010 until Oct. 2016. The length of period covered differs
according to the dates of publication of each monitoring report.
3) In the recent report published in May 2017, trade remedies were excluded from the categories of trade -restrictive
measures. However, in order to compare with the previous results, the number of such remedies is added to the total figure.
Source: WTO Secretariat

Copyright (C) 2017 JETRO. All rights reserved.

(%)
80.0

Other
Export restrictions
Trade restrictions
Trade remedies
Percentage of trade remedies (right axis)

140
120

15.0

400

from Until
Oct. May
2008 2010(No. of cases)
160

71.8
61.1

70.0
60.0

15.4

14.2

800

600

Breakdown of trade-restrictive measures, and percentage of trade remedies

100

50.0

80

40.0

60

30.0

40

20.0

20

10.0

0

～2011
April

～2011
October

～2012
May

～2012
October

～2013
May

～2013
November

～2014
May

～2014
October～2015年
May～2015
October

～2016
May

～2016
October

～2017
May

0.0

Note: 1) Trade remedies is the total for anti-dumping measures, safeguard measures and countervailing measures. 2) The
target period changes depending on the period for the consolidatin of the report, and is not constant.3) In the report for June
2017, trade remedies were excluded from trade-restrictive measures, but these were calculated here for comparison purposes.
Source: Materials from WTO secretariat

36

Chapter 2 Section 2: World trade policies reaching turning point

Trend of utilizing trade remedies■ Anti-dumping measures utilized at a high frequency

Anti-dumping measures are constantly and frequently used, mainly in the iron and steel as well as chemicals sectors. This measure was invoked for 181 cases in
2015, a high level since 2003. The application of anti-dumping measure on imports from China reflected caution against the trend of oversupply, and reached arecord high of 61 cases in 2015.
■ Growing use of safeguard measures, centered on emerging economies
The number of safeguard investigations for the five-year period from 2011 to 2015 was an average of 18.8 cases per year, far exceeding the average of 13.6 cases
from 1995 - 2010. Utilization is growing mainly in emerging economies. Among the safeguard measures in force as at the end of October 2016, all the countries
with multiple measures enforced were emerging and developing economies. The iron and steel sector stands out for the enforcement of safeguard measures, against
a backdrop of oversupply of iron and steel products worldwide.

Situation by country invoking anti-dumping measures or where the measure was
invoked (1995 - June 2016)
Argentina

Australia

BrazilCanada

China

EU

India

Japan

MexicoRepublic of South
AfricaTurkeyUS

World

Importer(user of measures)

Exporter(country
affected)
Argentina
Australia
BrazilCanada
China
EU
India
Indonesia
Japan
Korea
MexicoRussiaRepublic ofSouth Africa
TaiwanThailandTurkey
US
World

1
39
1
75
0
10
5
5
12
3
2

0
0
1
24
0
0
9
8
20
0
1

5
0
2
64
5
9
3
2
12
7
4

0
0
5
28
0
5
4
3
11
3
3

0
0
1
2
21
7
3
32
27
1
9

1
2
5
0
88
21
14
8
13
3
20

0
2
8
3
149
46
23
26
45
4
19

0
1
0
0
2
0
0
0
1
0
0

1
0
10
2
35
1
2
1
2
2
6

0
3
5
0
21
0
12
5
1
16
0
2

0
0
1
1
68
0
11
9
0
7
0
5

6
2
10
7
107
0
15
13
23
21
17
7

22
14
91
22
840
82
119
121
140
229
46
112

6
12
5
2
7
239

2
9
13
0
6
135

6
11
9
1
23
233

3
6
3
5
11
133

0
14
5
0
35
184

4
12
19
3
9
310

9
47
32
6
30
599

1
1
0
0
0
8

0
3
0
0
23
115

6
4
2
6
137

0
10
11
4
174

9
22
10
6
368

47
187
139
40
175
3,316

Notes: 1) Importers are countries/regions with more than 100 cases (cumulative), and Japan. Exporters are countries/regions with morethan 100 cases (cumulative), and other countries/regions listed as Importers.
2) The shaded cells are bilateral/regional relations with the top five cases.
Source: Materials from the WTO secretariat

Copyright (C) 2017 JETRO. All rights reserved.

Major safeguard measures in effect
Reporting
Country

Product

Effective date

Note

Seamless pipes and tubes
Aug-2014
Saturated fatty alcohols
Aug-2014
India
Sodium citrate
Sep-2014
Hot-rolled flat steel productsMar-2016
Hot-rolled flat steel products
Nov-2016
Cotton yarn
Jun-2011 extended
Articles of iron or steel wireNov-2012
Seamless pipes
Aug-2013
Indonesia
Flat-rolled products of iron or non-alloy
Jul-2014
steel
I and H sections of other alloy steel
Jan-2015
Coated paper and paperboard
Sep-2015
Wire rods and reinforcing bars
Apr-2014 extended
Cold rolled sheets and plated or coatedMoroccoMay-2015
sheetsPaper in rolls and paper in reams
Jun-2016
Steel angle bars
Aug-2009 extended
Philippines
Testliner
Jul-2011 extended
Newsprint
May-2015
Glass blockAug-2011 extended
ThailandHot rolled steel flat products
Sep-2013
Non alloy hot rolled steel products
Dec-2014
Seamless steel pipes
Oct-2008 extended
Tableware and kitchenware of porcelain
May-2014
UkraineFlexible porus plates, blocks and sheets ofJun-2016
polyurethane foams
Polyethylene terephthalate
Jun-2011
TurkeyWallpaper and similar wallcoverings
Jun-2015
Vegetable oil
Sep-2013
VietnamSemi-finished an certain finished productsAug-2016
of alloy and non-alloy steel
Note: WTO members which take two or more safeguard measures as of October 2016 (as of
May 2017 for G20 countries). Based on notifications to the WTO Secretariat.
Source: WTO Secretariat

37

Chapter 2 Section 2: World trade policies reaching turning point

UK begins its negotiations to leave the EU■ Commonalities and differences in the negotiation policies of UK and EU
Based on the formal notification to leave the EU triggered in March 2017, the UK has commenced the process of the so-called Brexit negotiations.
The UK and EU are in accord on the principles of protecting the rights of EU citizens in the UK and British citizens in the EU, as well as maintaining
stability and transparency of business. In parallel with Brexit negotiations, UK has proposed the conclusion of a "bold and ambitious free trade
agreement" between UK and EU, but EU has presented a phased approach that prioritizes Brexit negotiations and rejected the proposal by UK.
■ Strong dependence of UK on EU, with many viewing the negotiations to be disadvantageous to UK
Two-way trade with EU makes up 49.0% (2016) of UK's trade value, while EU's share of UK's inward FDI balance has reached 45.4% (2015).

Principles set out by the British government toward its exitfrom the EU

Stock of immigrants from the Eastern Europe to the UK,
Germany and Italy (as of 2015)(Unit: number of immigrants, %)UK

12 Principles

Germany

Growthrate
Number ofcompared
Immigrants with year
2000

Italy

Number of
Immigrants

Growthratecomparedwith year
2000

Number of
Immigrants

Growthratecomparedwith year
2000

1097.81,930,136

187.8

118,641

174.9
155.1

1 Providing certainty and clarity

7 Protecting workers rights

2 Taking control of our own laws

8 Ensuring free trade with European markets

3 Strengthening the Union

9

Poland703,050

Protecting our strong historic ties with
4 Ireland and maintaining the Common Travel
Area

Securing new trade agreements with othercountries

Hungary

56,166341.5

172,755

94.3

12,889Ensuring the UK remains the best place for10
science and innovation

Romania

89,4021111.6590,189

82.8

1,021,613

760.4

Baltic States

192,268

1768.7

92,272

138.7

10,228536.1

5 Controlling immigration

11

Cooperating in the fight against crime andterrorism
Delivering a smooth, orderly exit from the12
EU

Turkey (extra-EU)

100,95693.0

1,655,996

0.4

20,491

113.0

6

Securing rights for EU nationals in the UK
and UK nationals in the EU

Source: The UK government

Note: Baltic States include Estonia, Latvia and Lithuania.
Source: United Nations

Intra-EU ratio of FDI stock of major EU countries(Units: million euros, %)Inward FDI stock (year 2015)

Stance of EU institutions toward Brexit negotiations
Document
European Council (Article 50) guidelines on
Brexit negotiations (Adopted 29 April 2017)

Intra-EU

Main points
・Securing the rights of EU citizens working and studying in the UK・Avoiding the legal vacuum for stability of corporate activities
・Commitment to fulfilling UK's debts as a member state of the EU
・Responding flexibly to border issues with Ireland･The transition period after Brexit should be capped at a maximum of three
European Parliament resolution of 5 April 2017 on
years
negotiations with the United Kingdom following･Security cooperation and trade conditions are not interchangeable for one
its notification that it intends to withdraw from theanother
European Union (Adopted 5 April 2017)･Rejection of preferential access to the shared market
Source: Materials from the European Council and European Parliament

Copyright (C) 2017 JETRO. All rights reserved.

EU28
UK
Germany
FranceSpain
Italy
Netherlands
Luxemburg
Source: EurostatWorld

7,333,194 13,078,106
587,471 1,294,795
526,950
722,826
422,774
606,370
394,315502,663274,577
309,620
1,793,658 3,618,685
1,383,523 3,005,207

IntraEU
ratio

Outward FDI stock (year 2015)
Intra-EUWorld

56.1 8,213,864 15,105,490
45.4 611,955 1,433,450
72.9 738,188 1,264,059
69.7 637,230 1,101,103
78.4 177,345
450,361
88.7 281,043
429,22849.6 2,208,976 4,299,559
46.0 1,914,562 3,517,234

IntraEU
ratio

54.4
42.7
58.4
57.9
39.4
65.5
51.4
54.4 38

Chapter 2 Section 2: World trade policies reaching turning point

EU heading toward “multi-speed integration”■ 60 years since the signing of the Treaty of Rome: Expanding and diversifying membership

In March 2017, the EU welcomes its 60th anniversary since the signing of the Treaty of Rome, which marked the establishment of the European Economic Community(EEC). It announced the Rome Declaration, and affirmed the integration philosophy of prosperity based on the premise of peace in Europe, which remains unwavering eventoday. However, with 28 member countries in various stages of development, the EU has been faced with many difficult issues in recent years including the European debt
crisis, large-scale influx of refugees, and Brexit negotiations with the UK. It is being forced to reconsider the direction that EU integration should move in.
■ The pros and cons of “multi-speed integration”
Prior to marking the 60th anniversary of the Treaty of Rome, the European Commission released the "White paper on the future of Europe: Reflections and scenarios for the
EU27 by 2025." It raises the questions of whether to continue on the extension of supranational integration, or to respect the rights of member countries and restrict areas ofsupranational integration, or to lean toward "multi-speed integration" that tolerates differences in the speed and depth of integration corresponding to the ability and wishesof member countries, for each area such as the Economic and Monetary Union and diplomatic cooperation. In summary, of the EU member states, the major advanced
economies in Western Europe will promote multi-speed integration. On the other hand, Eastern European countries that joined after 2000 will retain their rights as member
states, while taking the position that multi-speed integration should be limited to areas recognized under the traditional framework, such as cooperation in the field of justiceand home affairs.

Major events in European Integrationand numbers of member countries（Number of member countries）

European Commission’s five scenarios for the EU by 2025
March 2019: the UK will
leave the EU

2009: the Treaty of Lisbon in effect30

28

Main supporting countries:

27

25
25

2007:
Bulgaria,
Romania2013:
Croatia

Area/Point ofcontention

2002: the currence euro adopted

20

1967: European Community established
1968: Completion of the Customs Union

1993: the Maastricht Treaty in effect
The birth of the European Union

1987: the Single European Act in effect (thesingle market was established in the end of
1992)

15

12

1957: the Treaty of Rome signed
1958: the Treaty of Rome in effect
European Economic Community established

6
5

10
9

10

1973 (accession):
Denmark, Ireland,
the UK

1981:
Greece1986:
Portugal,
Spain

Founding members in 1957:
Belgium, France, West Germany,
Italy, Luxemburg, Netherlands01957 and onwards

Source: Website of the European Union

Copyright (C) 2017 JETRO. All rights reserved.

15

2004:
Czech Republic,
Cyprus,Estonia,
Hungary,
Latvia,Lithuania,
Malta,
Poland,Slovakia,
Slovenia

Single market and trade

1995:
Austria,
Finland,SwedenCandidiate countries:
Albania,
Montenegro,
Servia,The former Yugoslav
Republic of Macedonia,
Turkey(year)Emphasis on the rights ofmember states

Main scenarios of EU(Visegrad Group (four countries ofCentral and Eastern Europe))
Scenario 2(Western European countries ofGermany, France, Italy, Spain)
Scenario 3

Limited to single
marketScenario 4

Selection andconcentration

Certain restrictions on
Strengthen market
the freedom ofintegration for new
movement of people andindustrial sectors
services

Expansion of
supranationalism(No strong support)
Scenario 1

Scenario 5

Multi-speed
integration

Continue withexisting scenario

Acceleration in
integration of all
member states

Strengthen freedom of
movement of goods andcapitalPromote the conclusionof new types of free
trade agreements

Economic and Monetary
Keep to a minimum
Union (EMU)

Implement Eurostabilization policies

Promotion of tax system Progressive
harmonization and social implementation of
security cooperation inpolicies to stabilize thesome member statesEuro

Schengen Agreement,
immigration policies,
security and justice

Review of regional
border controls

Strengthen managementof border control andrefugee protection

Deepen police/justicecooperation in somemember states

Progressive
development ofcooperation/ common
parts utilization

Diplomacy/ Security
policies

Entrust some foreign
policies to member
statesStrengthen overallcommon diplomacy/
security policies

Deepen defense
cooperation in somemember states

Securing consistency as
EUFinance/ Budget

Narrow down, reduce

Concentrate resources
on priority items

Budget required
additionally borne byimplementing country

EU's authority anddecision-making

Expected difficulties in
Diminish EU's authority the selection of priority
matters

Growing complexity ofscope of EU's authority
and decision-making
processes

Harmonization ofregulations and standards,
and further strengtheningof the implementation
measures
Expansion of economic
and fiscal policies
including harmonization ofsocial security and tax
systems
Strengthen management ofborder control and refugeeprotection

Strengthen overall common
diplomacy/ security
policies
Maintain/ Strengthen
financial support
Review of some systems frameworks forstabilization of the Euro
zone

Maintain existing
complex decisionmaking processes

Strengthen EU's authority,
and reduce the sovereignty
domains of member states

Notes: 1) The numbering of the scenarios follows the order assigned in materials from the European Commission. These have been rearranged according to thedirection of the scenarios.
2) The points raised in the overview are representative examples, and not exhaustive.
3) The Visegrad Group comprises the following four countries: Poland, Czech Republic, Hungary, and Slovakia.
Source: Materials from the European Commission

39

Chapter 2 Section 2: World trade policies reaching turning point

Call from US for thorough enforcement of “fair trade” through various means

Relation between US economic conditions and trade remedy measures
60(%)(No. of measures)-15.0

Trade remedy measures

50

-10.0

Industrial production index（YoY, Right axis, inverse）
40

-5.0
30
0.0
20
5.0

10
0

85

87

89

91

93

95

97

99

01

03

05

07

09

11

13

15 16

10.0
16/17/(Year)
1Q 1Q

Note: Number of trade remedy measures (antidumping and coutervailing duty orders)are based on countries subject to measures, not the
products, as of late May 2017. Source: International Trade Commission and Federal Board of Governors of the Federal Reserve System

Copyright (C) 2017 JETRO. All rights reserved.

50(Billion USD）

US trade deficit by major country

0
-50

-350

Canada

98

96

92

94

90

86

88

84

82

-400
Source: "DOTS, May 2017"(IMF)

14

Mexico

16

-300

12

Germany

10

-250

06

Japan

08

-200

04

China

02

-150

2000

-100

80

■ Thorough enforcement of “fair trade” on the basis of US trade policy
The philosophy of "fair trade" is at the basis of US trade policy. Based on therecognition that it is important for the markets of each country to be open, and torealize conditions of fair competition, the US has consistently called on partnercountries for the enforcement of fair trade through various means, such as
unilateral measures, trade remedies, and raising disputes to WTO.
■ Opposition through various means, targeted at countries with trade
deficit
In particular, the US has pointed out problems in various aspects—mainly in
relation to trade imbalance—toward China, which makes up half of the trade
deficit. The US is expected to continue demanding for the correction of the
deficit through means such as strict trade remedy measures, with a focus oncountries with a trade deficit such as China. Under the Trump administration, thepercentage of US imports that are eligible for special trade restrictions such as
trade remedy measures is expected to double to 7.4%, from 3.8% before the
Obama administration.

(Year)

Main US laws related to trade
Measures put in place
Conditions for invocationby the US
Tariff Act of 1930: Law that became the basis for the US tariff system today.
Anti-dumping,
Raising of tariffs
Damages to the domestic industries of the US by dumping andcountervailingexport of subsidized items.
tariffs
Article 337
Prohibition of imports,
In cases where US industries incur damages as a result of
injunction against unfair
unfair practices in import. Mainly applied to the infringement
practicesof intellectual property rights.
Trade Expansion Act of 1962: Law that aims to expand the US export market and promote free trade.
Article 232
Raising of tariffs, restrictions on Cases where the Secretary of Commerce acknowledges thatimport volume
imports may harm US security
Trade Act of 1974: Reflecting the trade deficit, focuses on "fair trade." Codification of trade promotion authority.
Article 122
Raising of tariffs, restrictions on Massive and serious trade imbalance in the US.
import volume
Law

Article 201(safeguard)

Raising of tariffs, restrictions on When USITC acknowledges that rapid growth in the import ofimport volume
target items seriously damages or are at risk of damaging
domestic industries.
Article 301
Prohibition of imports,
Foreign trade practices deemed by the USTR as being ininjunction against unfair
violation of trade agreements, or as unfair, unreasonable, or
practices
discriminatory, and which limit trade with the US.
Omnibus Foreign Trade and Competitiveness Act of 1988: Comprehensive provision of measures to restore thecompetitiveness of US industries
Article 1302
Retaliatory measures such as
Unfair trade practices such as violation of trade agreements(Super 301)
raising of tariffs
and trade barriers. Strengthened version of Article 301 of the1974 Trade Act (revoked in 2002).
Article 1303
Prohibition of imports,
Unfair practice in import. Mainly applied to the infringement(Special 301)
injunction against unfair
of intellectual property rights.
practices
Source: US Department of Commerce, US House Committee on Ways and Means, "Report on Compliance by Major Trading
Partners with Trade Agreements" (METI), etc.

40

Chapter 2 Section 2: World trade policies reaching turning point

Involvement of various parties concerned in US trade policies■ Although it is possible to raise tariffs and regulate imports based on laws, it is difficult for the President to make significant changes to trade policy
independently
In the US, under the Constitution, the Congress has the authority to impose tariffs and regulate trade with other countries. For the President to implement any policies
beyond the scope of his or her authorization, or enforce trade agreements within the US, there are cases where it is necessary to enact new legislation or revise existinglegislation in the US legal system; the consent of the Congress is required each time. Trade policies are formulated not only by the President and the Congress, but also
through the interaction of interest groups, such as the relevant government ministries and agencies, industries, and labor unions. The impact of unfair trade is primarily
investigated by the International Trade Commission (ITC), which reports on the results of investigations to the President and the Congress. Bills are drawn up within theCongress in response to requests from the industry, and the President approves or rejects them. The United States Trade Representative (USTR), which takes the center stage
in trade negotiations with other countries, consolidates views from within the US and presents its case. This is the flow of trade policy formulation in the US.
The Trump administration, established in January 2017, has reviewed past FTAs including withdrawing from the TPP and NAFTA renegotiations, and made successive
announcements on conducting a factor analysis on trade deficit, creating the impression that it is keeping its commitment and pledges to voters. Through its trade policies,
the Trump administration has expressed its dissatisfaction with the existing global trade system that is centered around the WTO, and has adopted an approach of strictly
enforcing measures such as trade remedies and Article 301 of the Trade Act of 1974. However, there are limits to the President's authority, and the President is not able toindependently make significant changes to trade policy, such as the signing of new trade agreements.

Trade related Executive Orders and Presidential Memoranda
by President Trump (2017)

Office of Trade andManufacturing
Policy(OTMP)*-Recommendation oflegislation-Veto rights

AdvicePresident

Foreign government

Delegate trade negotiation
authority (1988 Omnibus Trade
Act)

Legislature

Congress

Trade negotiations
authority

Investigative report

AdviceRequestInvestigative report

Negoti-ations

United States Trade Representative (USTR)
Resolve unfair trade issues with foreign countries
Adjustment of views between Congress andindustry

Investigative report

Department of Commerce
Policy management

Administration

United States International Trade Commission(USITC)
Investigations and research

Required

Represent industry

Industrial sectors
Note: Established for the first time under the Trump administration. The newly established National Trade Council was abolished with the setting up of the
OTMP .
Source: "Overview and Compilation of US Trade Statutes," edited by US House Committee of Ways and Means (JETRO, 2005), etc.

Copyright (C) 2017 JETRO. All rights reserved.

Date of
Title
Outlinesignature
Mar 31 Omnibus Report on Significant Trade Deficits Assessment of major causes of trade deficits, unequal burdens imposedby trading partners and impacts on the economy of the United of States.
Mar 31 Establishing Enhanced Collection andDevelopment of a plan to enforce antidumping and countervailing duties
Enforcement of Antidumping andas well as combat violations of the US trade and customs laws.
Countervailing Duties and Violations of Tradeand Customs Laws
Apr 18 Buy American and Hire American
Assessing the extent of enforcement of the Buy American Law andimpact of trade agreements, and to review the immigration system
including the H1-B visa program.
Apr 29 Addressing Trade Agreement Violations and Identifying violations or abuses of WTO and any US trade agreement
Abusesand investment agreement.
Apr 29 Establishment of Office of Trade andEstablishment of office with the mission to advise the President on
Manufacturing Policy
policies to decrease the trade deficit and strengthen the United States
manufacturing bases.
Jan 23 Withdrawal of the United States from thePermanent withdrawal of the US from TPP, and pursuit of bilateral trade
TPP
negotiations.
Jan 24 Construction of American Pipelines
Development of a plan to use materials and equipment produced in the
US for all new pipelines within US borders.
Apr 20 Steel Imports and Threats to National
Investigating the effects on national security of steel imports based on
Security
the Trade Expansion Act of 1962.
Apr 27 Aluminum Imports and Threats to National
Investigating the effects on national security of aluminum imports based
Securityon the Trade Expansion Act of 1962.

Executive Orders

The White House

Presidential Memoranda

Parties/Institutions involved in US trade policy

Note: Although there is no clear distinction between the two instruments above, as a matter or historical practice, it seems that presidents are more
apt to utilize executive orders on matters that may benefit from public awareness. Memoranda, on the other hand, are often used to carry out
routine executive decisions, or to direct agencies to perform duties consistent with the law or implement laws that are presidential priorities.
Source: White House

41

Chapter 2 Section 2: World trade policies reaching turning point

Changes to objectives and format of US FTA with the times

Copyright (C) 2017 JETRO. All rights reserved.

President/
Traderepresentative

FT A

40th
Reagan[Republican]
81-89
Ⅰ: Brock
Ⅱ: Yeutter

41st George
H.W.Bush[Republican]
89-93
Hills

42nd
Clinton[Democratic]
93-01
I: Kantor
II: Barshefsky

Trade promotion
authority
FTAA (1)
91/06 Neg

Americas92/12 Signed

Chile

43rd
George W.Bush[Republican]
1st term
2nd term
01-05
05-09
・Portman
Zoellick・Schwab

44th
Obama[Democratic]
09-17
・Kirk
・Froman

94/04

02/08

07/07

15/06

RevokedEnacted

RevokedEnacted98/04 Neg

NAFTA

45th
Trump
[Republican]
17Lighthizer

04/02
Suspended
17/08

94/01 EIF

Renegotiation00/12 NegCAFTA-DR

03/06 Signed
04/01 EIF
04/08 Agreed

5 countries ofCentral America

03/01 Neg

06/03-09/01

04/01 Agreed

EIF

04/01 Neg

Dominican Republic

P anama

04/04 Neg

07/06 Signed

12/10 EIF

P eru

04/05 Neg

06/04 Signed

09/02 EIF

Colombia

04/05 Neg

06/11 Signed

12/05 EIF

Middle East Free Trade Area Initiative (MEFTA) (2)84/01 Neg

Middle East and Africa

Israel

85/04 Signed
85/09 EIF
01/09

Jordan00/06 Neg

Approval
01/12 EIF
03/01 Neg

Morocco04/06 Signed
04/01 Neg

Bahrain

04/09 Signed

06/01 EIF
06/08 EIF
05/03 Neg

Oman

06/01 Signed
09/01 EIFEnterprise for ASEAN Initiative (EAI) (3)Asia PacificSingapore

00/11 Neg

03/05 Signed
04/01 EIF
06/05 Neg

Korea

07/06 Signed

12/03 EIF

03/03 Neg
Australia

04/05 Signed
05/01 EIFTP P

Europe■ Bilateral or multilateral?
The FTA has been regarded as an important foreign policy tool for the US.
The first characteristic of FTAs of the US is that the orientation towardeither a bilateral or multilateral FTA has been dependent on the times, or theselection criteria for the partner country has always been different. In thecase of the US, it is clear that concluding an FTA is either for economic
reasons such as expanding its exports, or as a foreign policy, including
security factors. Under the Trump administration, the country has made aclear transition from the multilateral approach that had lasted until theprevious administration, to a bilateral ideology.
■ Presence of a vital Trade Promotion Authority (TPA)
The second essential viewpoint is the presence of the President's Trade
Promotion Authority (TPA), where administrative authority is granted by
the Congress. The TPA is a provision that enables the adoption of a trade
agreement concluded between the government and a foreign country, onlywith a vote of yes or no, without any revisions made to the individual
contents by the Congress. The partner country can also trust in and negotiatewith the US government under this provision. While the President has
acquired TPA for almost all FTAs, it is becoming increasingly difficult toobtain TPA amidst growing doubts toward free trade.
■ Popularization of US-style rules through FTAs
The third characteristic lies in the aspect of the contents—the US positions
FTA as a means for establishing international rules. For example, in
addition to formulating provisions that are more protective toward
intellectual property than the TRIPS agreement under WTO, the FTAs also
include provisions on labor and the environment that are outside WTO's
regulatory scope. The US has deployed a strategy of using the FTA to gaina foothold toward disseminating and expanding, among many countries,
discussions that it could not bring into the WTO. Going forward, it isexpected to maintain this policy, but it is unclear if it will be possible tospread the TPP-style rules, which are currently regarded as rules of thehighest standards, even bilaterally between two countries.

(Year/Month)
Status of FTAs concluded by the US *Neg=Launch of negotiations, EIF=Entry
into force

TIIP

10/03 Neg

17/01

16/02 Signed

Withdrawal

13/07 Neg

Notes: 1) Timing of agreement undetermined (34 countries from the Americas participating in negotiations). 2) Concept presented
in May 2003. 3) Concept presented in October 2002. Trade and investment framework agreement concluded in August 2006. 4)
Shaded cells refer to FTAs that have entered into force. FTAs with suspended negotiations are not shown.
Source: United States Trade Representative (USTR) materials, etc.

42

Chapter 2 Section 3: Trends in international standardization from the perspective of trade rules

International standardization as a part of foreign economic strategy■ Growing influence of international standards under the WTO system

In tandem with advancements in technology today, strategic initiatives toward acquiring international standards and promoting the international expansion of
the country's goods and services in a way that benefits the country, are being actively implemented in policies at the national and regional level, as well as at
the corporate level. One of the objectives of WTO agreements is to promote the international harmonization of various regulations and standards, which
differ for each country, and to lower non-tariff trade barriers. As a result, after the second half of the 1990s, there has been greater incentive for corporations
and governments that carry out public procurement to adopt and obtain international standards issued by international standardization institutions.
■ Characteristic initiatives taken by principal countries/regions toward international standardization
Against the background of the growing influence of international standards, the principal countries/regions have adopted the approach of strategicallyincorporating international standardization into their respective policies, particularly since the start of the 2000s. As a result of the strengthened initiatives
toward the formulation of international standards by each country, the number of international standards has also increased. For example, the number ofinternational standards offered by the International Organization for Standardization has increased by more than 10,000 in the past 20 years.

Important elements regarding international standardizaion
strategies in major countries and regions
Country/Regions

Elements

Copyright (C) 2017 JETRO. All rights reserved.

WTO agreements
Agreement on Technical Barriers to Trade (TBT): All WTO members
Agreement on the Application of Sanitary and Phytosanitary Measures (SPS):
All WTO members
Government Procurement Agreement (GPA): Only applicable to signatories

Regulations
Laws and regulations
published bygovernments(Note that some standards areincorporated into regulations)Public procurement by
non-GPA countries

Standards
International Standards such as ISO(International Organization forStandardization) standards
Regional Standards such as EN Standards
published by CEN (European Committe forStandardization)
National Standards such as JIS Standards published
by JISC (Japanese Industrial Standards Committee)

Private Standards: published by private
consorsiums and industry organizations such as
the GLOBALG.A.P

Conformity assessment bodies- European standardization bodies such as the European Committee forStandardization (CEN) collaborate with international standardization bodies such as
the International Organization for Standardization (ISO).
EU- Harmonization of regulations and standards within Europe through EU Directives.
- Spread of European standards to other regions.
- A tradition of attaching importance to market mechanism-Criteria developed in various fields by approx. 450 private institutes
US- Wide utilization of international standards under the WTO regime- Strategic promotion of unique standardization in high-tech fields- Standardization enhanced after joining the WTO in 2001
- Initiative taken in promoting standardization as a national strategy
China- Prominence of China growing in international standardization organizations such as
the ISO- Harmonization and mutual approval of rules and specifications among member
countries based on the ASEAN Economic Community (AEC)- Slow streamlining of standards and specifications in responding to real economic
ASEAN
conditions- An aim at mild harmonization in consideration of differences between countries- Nearing achievement of its strategic goal for increasing its presence in international
standardization organizations by 2015
Japan
- Strategic formulation of standards in new fields
Source: Interview surveys, seminar reports

WTO agreements and various rules for international standardization

De facto standards〔注〕①WTO諸協定は、国際標準化に関連する協定のみを挙げた。
Note: 1) Only those WTO agreements related to standards are listed.
②強制規格は、輸入や販売などを行う上で、当該規格への適合が、法令上の義務となっているもの。
2) Regulations are written rules, the adoptation to which are obligatory.
③任意規格は原則、適合が義務化されていない規格を指すが、法令に取り込まれている場合もある。
3) Standards are written rules which are not compulsory in principle.
However, some standards are effectively incorporated into national regulations.
〔資料〕各種資料から作成
Sources: Interview surveys and others

43Chapter 2 Section 3: Trends in international standardization from the perspective of trade rules

International standardization today, from the perspective of trade rules■ Challenges that international standards are faced with

WTO agreements set forth the objective of promoting international harmonization of various standards, and reducing non-tariff trade barriers. After the 1990s,
progress has been made in the compliance of the standards of each country with international standards, and the international convergence of some technicalregulations has also progressed to a certain degree. On the other hand, issues with the international standards themselves have been brought into sharp relief,
including (1) With the expansion of the subjects of international standards from "goods" to "services" and "systems," it is becoming increasingly difficult todifferentiate between the standardization organizations; (2) The number of private standards (for example, GLOBAL G.A.P., accreditation by the British Retail
Consortium (BRC) etc.) is on the rise and becoming more influential.
■ Duplication of standards between international standardization organizations, as seen from Smart Cities
For example, the standardization of Smart Cities spans a wide range of fields, including urban planning, infrastructure such as power and transportation, andenvironment, and it is becoming a major battlefield for the establishment of duplicate international standards. The respective international standardization
organizations such as ISO, IEC, ITU-T, and ISO/IEC JTC1, as well as international standardization organizations from principal countries such as BSI from theUK, are promoting standardization in parallel. In standardization organizations, whether or not a standard developed is adopted by a corporation or publicorganization is a decision that lies with the party concerned, or in other words, the market. Hence, eliminating the absence of a standard that is necessary, instead ofa duplicate standard, is deemed as their key issue. On the other hand, WTO views the duplication of international standards as a problem that poses an obstacle toachieving the objectives of the TBT agreement.

Objectives of WTO/TBT agreements, and status of achievement

Standardization of Smart Cities, progressing in a multilayered format
Standardization organization

Targets/Objectives

TC268 Sustainable cities andcommunities

Targets overall functions of a city, such as quality of life (QOL), disasterresilient urban development, etc.

TC268/SC1 Smart community
infrastructure

Develop an evaluation framework for urban infrastructure that can serve as afoundation to support urban facilities and services.

IEC
International ElectrotechnicalCommission

SEG1 Smart Cities
TC57 Power systems management
and associated information exchange,etc.

Efficient power supply to urban facilities such as buildings, traffic networks,
medical facilities, factories, etc., development of Smart Grid interface
standards, etc.

ISO/IEC JTC1
ISO/IEC Joint Technical Committee

WG11 Smart Cities

Development of information and communication technology (ICT) standards
that can serve as a foundation for smart cities. In cooperation with ISO
TC268, develop ICT-related indicators for smart cities.

SG20 Smart and sustainable cities

Develop ICT standards related to the utilization of IoT (Internet of Things)
technology in smart cities.

ISO
International Organization forStandardization

ITU-TInternational Telecommunication Union
Telecommunication Standardization
Sector
CEN/CENELEC/ETSIEuropean Committee forStandardization/ European Committee
for Electrotechnical Standardization/
European Telecommunications
Standards Institute
BSI
British Standards Institution

Copyright (C) 2017 JETRO. All rights reserved.

Main competentcommittee

Consolidate and disseminate matters of interest and needs of the respective
SF-SSCC Sector Forum on Smart andcountries in Europe.
Sustainable Cities and Communities
Collaboration with the respective international standardization organizations.

Smart City Standards Strategy Group

Provides for decision-making frameworks to establish smart cities andprevent misunderstanding due to confusion with terminology.

AENOR
Promote effective and intensive use of ICT by the citizens, corporations, andSpanish Association for Standardization CTN178
administration, and improve economic productivity and competitiveness.
and Certification
Note: Although the terminology used by each organization are not standardized, "smart city" was adopted as the term generally used in Japan.
Source: ISO, IEC materials, and materials from the respective organizations

44

Chapter 2 Section 3: Trends in international standardization from the perspective of trade rules

WTO contributes to international standardization to a certain degree■ Obligation to report, based on the TBT agreement, as its function
An important function set forth under the TBT agreement is the obligation of member countries to make public the formulation, enactment, revisions, etc. oftechnical regulations, by reporting to the WTO. Since the establishment of WTO, the number of TBT reports has exceeded 28,000, and surpassed 2,000
cases every year in recent years. This marks WTO's contribution toward improving transparency of regulations and standards.
■ Preventing disputes beforehand through reviews in the TBT Committee
Of the TBT reports, measures that were pointed out as in WTO "Specific Trade Concerns (STC)" by member countries were discussed within the TBTCommittee, and where necessary, the country introducing the measure would be requested to put in place remedies. The number of STC cases reviewed by
the TBT Committee exceeds 100 cases per year, for new and ongoing cases combined. Despite the fact that provisions related to TBT have been included in
FTAs in recent years (of the 23 FTAs that entered into force from 2015 to the first half of 2017, 21 included a chapter on TBT), the scope that facilitates thehandling of TBT problems bilaterally is very limited. There is no change to the fact that WTO still plays a primary role.

WTO TBT notifications and STCs

(STCs)(No. of notifications)

120

2,327

Previous STCs

2,500

New STCs

100

2,000

TBT notifications (right axis)
80
55 68

47
60

61

46

1,500

63
1,000

20
6
4

17 20

14 13

10
9

4
13 15
11 13
6
5

20

15 14 12

24 27

32

43
29

35

42

47

500
37

60

US

47

South Korea

Taiwan

32
26
23
21
19
18
15
13
12
11
10
8
8

France

8

Total

521

India
BrazilRussiaNote: "Previous STCs" refers to STCs which have been discussed in two or more meetings of the TBTCommitte in the WTO.
Source: WTO TBT-IMS databaseJapan
CanadaThailand31

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Copyright (C) 2017 JETRO. All rights reserved.

China

Colombia
46

14

98

Mexico21

24

EUIndonesia

28

40Country/ number ofRegion
STCs

Ecuador

44

37

0

55

Top countries and regions pointed out by TBT Committee
regarding STCs (1995-2016)

Argentina
0(Year)

Examples (year)
Regulation on Chemicals (REACH) (2003)
Regulation on Classification, Labelling and Packaging (CLP) (2007)
Administrative Measure on Cosmetics Labelling (2015)
Compulsory Certification (CCC) System (2006)
Bioterrorism Act (2003)
Transportation of Lithium Batteries (2010)
Food Industry Promotion Act (2009)
Alcoholic Beverages Standards (2013)
Draft Resolution on tobacco pruducts (2011)
Regulation on the label of processed foods (2013)
Resolution establishing a general conformity assessment framework (2013)
Draft Technical Regulation on Safety of Alcohol Drinks (2012)
Energy Labelling Measures (Law for Sustainable Use of Energy) (2011)
Commercial Truck Diesel Emissions Regulation (2011)
Labelling Guidelines on Wagyu Beef (2008)
Amendment to Tobacco Act (2009)
Draft Notification for Labels of Alcoholic Beverages (2014)
MERCOSUR Regulation on Alcoholic Beverages (2004)
GMO Labelling (2015)
Draft decree on a common set of symbols informing the consumer about
recyclable products (2014)

Note: Examples shown are the cases which relatively large number of WTO members raised as STCs.
Source: WTO TBT-IMS database45

Chapter 2 Section 4: Present status in developing multilateral trade rules

A WTO system that presents both aspects of potential and risk
■ Multilateral trade negotiations show steady output and progress
After reaching an agreement on the Agreement on Trade Facilitation at the 9th WTO Ministerial Conference held in December 2013 (Bali), WTO has beensteadily achieving result in individual agenda items. Amidst criticisms in the international society of the emergence of groups of people left behind by theflow of globalization, the significance and effects of inclusive multilateral trade rules have been reaffirmed through the WTO. Even developing economies,
which have traditionally adopted a passive attitude in dealing with new trade issues in WTO from the standpoint that they should not depart from the main
agenda of the Doha Round, have presented a different attitude, such as pointing out the need to formulate multilateral rules on e-commerce.
■ A difficult path forward for multilateral trade systems
On the other hand, WTO is faced with an even more difficult situation than ever before. With 164 member states, its decision-making process in principle isbased on consensus. It has to win the consent of a wide range of countries in tackling new issues such as e-commerce, which is not an easy task.
Furthermore, the Trump administration has displayed the stance that it does not necessarily place great importance on the WTO system; this is a risk factor
that could destabilize the multilateral trade system going forward.

Recent achievements or progress in WTO and plurilateral
trade negtiations
IssuesAchieved results

Agriculture
Market accessGovernment procurement
Trade facilitation

Position of principal countries/regions toward multilateralnegotiations/negotiations between many countries

Recent achievements or progress
Prohibition of export subsidies (2015)
Duty-free, quota-free for cotton exports from LDCs (2015)
Expansion of tariff-free products under the Information
Technology Agreement (ITA) (2015)
Revised agreement in effect (2014) which facilitated newaccessions
Trade Facilitation Agreement in effect (2017)

Agenda in progress

Amendment of the TRIPS Agreement on access to medicinesIntellectual property
in effect (2017)
Negotiation of "Trade in Services Agreement (TiSA)" inServices
progress among 23 WTO members (since 2013)
Negotiation on fishery subsidies in progress (activated since
Trade rules
2016)
Negotiation of "Environmental Goods Agreement" in progress
Environment
among 18 WTO members (since 2014)
Discussions on e-commerce (since 2016)
Discussions on investment facilitation (since 2017)
New issues
Discussions on how SMEs can benefit from global trade (since2017)
Note: TiSA negotiations are conducted outside the WTO system.
Source: WTO Secretariat and other sources on international trade

Copyright (C) 2017 JETRO. All rights reserved.

Doha RoundNew fields

Plurilateral negotiations

US

Need for a new
approachNot persist in
discussions in WTO

Traditionally, active involvement

EU

Need for a new
approach

Propose proactively

Active involvement

Japan

Need for a new
approach

Propose e-commerce
rules

Active involvement

China

In principle, maintainthe previous
framework

Propose proactively
but assert balance
between issues

Participation in environmental goods
agreement negotiations

India
South Africa

Maintain the previous
framework

OpposeNon-participation

Argentina
BrazilIn principle, maintainthe previous
framework

Propose proactively

Non-participation

RussiaIn principle, maintainthe previous
framework

Propose rules tofacilitate investment

Non-participation

LDC

Maintain the previous
framework

Opposition inprinciple

Non-participation

Source: Various specialized trade journals

46

Chapter 2 Section 4: Present status in developing multilateral trade rules

WTO’s Trade Facilitation Agreement is a positive influence on trade administration■ Trade Facilitation Agreement enters into force in February 2017
WTO's Trade Facilitation Agreement entered into force in February 2017. If the simplification of trade procedures and improvement of transparency
based on the Agreement are realized, it would contribute to reducing the cost and time needed in trade, thereby providing a push for the parties
concerned, including SMEs, to participate in trade. As to the schedule for the implementation of each clause of the agreement, developing economies
have been making reports to the WTO based on classifications A to C.
If the agreement were completely fulfilled, WTO estimates that it could reduce trade-related costs by 14.3% worldwide. Particularly for developing
economies, as there are cases where the time and cost required for customs clearance poses a problem, if advancements are achieved in thedigitization of documents for example, it would then help to simplify procedures. Although the full implementation of the agreement is expected totake some time, it is highly significant in its potential to raise the level of trade facilitation across the world.

Time and cost to export

Provisions
Contents
Section 1: Specific commitments members should implement
Publication and availability of Recommending members to promptly publish information related to customs
Article 1
information
procedure in an easily accessible manner such as through the Internet.
Article 3 Advance rulings
Introduction of advance rulings, publication of its procedures, etc.
Article 4 Procedures for appeal or
Allowing traders to request appeal or review on decisions made by customs.
Article 7 Release and clearance ofFacilitating quick release and clearance of goods.
Formalities connected with
Facilitating symplification of formalities connected with importation,
Article 10 importation, exportation andexportation and transit.
transit
Recommending members to guarantee freedom of transit including by applying
Article 11 Freedom of transit
transit charges, procedures and controls.
Section 2: Special and differential treatment (SDT) provisions
Category A: Provisions that the Member will implement by the time the Agreement enters into force (or in
the case of a least-developed country Member within one year after entry into force) .
Category B: Provisions that the Member will implement after a transitional period following the entry into
Article 14
force of the Agreement.
Category C: Provisions that the Member will implement on a date after a transitional period following theentry into force of the Agreement and requiring the acquisition of assistance and support for capacity
building.
Article 17 Early warning mechanism
Extension of implementation dates for Provisions in Categories B and C.
Shifting between Categories B Members may shift provisions between Categories B and C through the
Article 19
and C
submission of a notification to the Committee.
Grace period for theGrace period for the application of the understanding on Rules and Procedures
Article 20
settlement of disputes
governing the settlement of disputes.
Section 3: Institutional arrangements and final provisions
Source: WTO "Trade Facilitation Agreement"

Time toTime toCost toexport:export:export:Country/
Border Documenta
BorderRegioncompliancery
compliance(hours)compliance
(USD)
OECD
12 (hours) 3
150
US
2
2
175
UK
24
4
280
Germany
36
1
345
Japan
23
2
265
East Asia & Pacific
57
73
402
China
26
21
522
Thailand51
11223
Indonesia
53
61
254
Malaysia
48
10321
South Asia
59
78
376
India
106
38
413
Latin America & Caribbean
64
56
527
Mexico20
8400Brazil49
18
959
Middle East & North Africa
64
77
460

Categories

Outlook of WTO Trade Facilitation Agreement

Copyright (C) 2017 JETRO. All rights reserved.

Note: Regional classification follows the World Bank.
Source: "Doing Business 2017"(World Bank)

47

Chapter 3
E-commerce and foreign human resources
as a new overseas business modelChapter 3 Section 1: The future of the e-commerce market

What is electronic commerce (e-commerce)?
■ Definition of e-commerceWith growing use of the Internet accompanying the popularization of personal computers and mobile phones, electronic commerce (ecommerce) has gained prominence as a new business model. Although there is no internationally prescribed definitions for e-commerce, thedefinition by OECD, which is frequently quoted in documents drawn up by the various countries, defines e-commerce as “the sale or purchaseof goods or services, conducted over computer networks [...] between enterprises, households, individuals, governments, and other public or
private organizations.” (Ministry of Economy, Trade and Industry). As long as they are “orders received or placed on any Internet application”(Ministry of Economy, Trade and Industry), such as electronic data interchange (EDI) or the receiving/placing of orders through a corporatewebsite or mobile app, it does not matter which devices are used to conduct the transaction (personal computer, mobile phone, tablet device,gaming device, etc.).
■ Of the various formats of e-commerce, B2C is growing by leaps and bounds and attracting much attention
E-commerce can be broadly categorized into six different formats. B2B covers business-to-business transactions that are carried out throughelectronic data interchange (EDI), corporate webpages, and e-commerce platforms. B2C refers to purchases made by consumers on ecommerce platforms or corporate webpages. Apart from these, there are also C2B and C2C formats in which consumers become suppliers, andG2B and G2C are e-commerce formats in which the government becomes the supplier. Of these, the amount of transactions for B2B and B2C
is significantly larger than for the other formats, and the growth rate for B2C surpasses that of B2B. The growth of B2C has a significant
impact on overall e-commerce, including sales models and methods of approaching consumers, and is attracting much attention.

Main formats of e-commerce

FormatBusiness-to-BusinessBusiness-to-Consumers
Consumer-to-Consumer
Consumer-to-BusinessGovernment-to-Business Government-to-Consumer
(B2B)
(B2C)
(C2C)
(C2B)
(G2B)
(G2C)
Trading of goods andTrading that involves sales Trading of goods andTrading that involves
Trading that involves
Trading that involves
services that is carried out of goods and services from services that is carried out provision of services from provision of services from provision of services frombetween businesses
businesses to consumers between consumers
individuals to businesses
government to businesses government to consumers

・Receiving orders forindustrial machinery
through the company's
Example website
・Receiving and placing
orders using EDI with
suppliers and customers

・Sale of health・Sale of used clothing on ・Making a request for the ・ Corporate registration, ・Submission of final
supplements posed on the a personal blog
company's Japanese
payment of taxes, etc.
returns, passport/visa
company's website
・Sale of bicycle that an documents to be translated online
applications, etc. online
・Sales of toys put up for individual no longer uses on to English, through a・Digitization ofsale by the company on an an auction site
website for freelancers
customers clearance
e-commerce platform
procedures

Source: "Economic growth in the APEC through e-commerce" (APEC Business Advisory Council, November 2015)

Copyright (C) 2017 JETRO. All rights reserved.

49

Chapter 3 Section 1: The future of the e-commerce market

B2C markets in major countries/regions■ Developing markets where rapid growth is anticipated
UNCTAD estimates e-commerce transactions in the B2C sector worldwide was approximately $2.9 trillion in 2015. China is considered to have alreadyovertaken the US to become the world's largest market. The average annual growth rate for India is estimated to grow at a pace surpassing China, reachingalmost 40% from 2016 to 2020. In the related indicators to the e-commerce business environment that influence the expansion of the e-commerce market,
advanced economies surpass developing economies. However, there are also developing economies that are putting nationwide effort into improving the ecommerce environment. If they are successful in developing these environments in the future, the amount of transactions for these countries are expected to
draw closer to that of the advanced economies.

Sales value of B2C e-commerce in major countries, e-commerce index, and market share
Sales Value of B2C e-commerce
2010

2016

2020
(estimate)（million dollar、％）

E-commerce related indexes

UNCTAD
Growth Rate
CAGR（2016 E-Commerce（2015→→2020）
Index
2016）(2016)% ofIndividuals
using theInternet
（2015）% ofIndividuals
having acredit card
(2014)

Market Share of major companies（2016）

Logistics
Index
Performance（2016）

1st

2nd

3rd

China

12,216

366,078

650,210

33.5

15.4

49.1

50.3

15.8

3.66 Alibaba Group Holding

43.5 JD.com

20.2 Sunning Commerce Group

3.1

US

133,557

312,064

533,514

12.8

14.3

82.6

74.5

60.1

3.99 Amazon

33.0 Wal-Mart Stores

7.8 eBay

7.4

UK

32,10773,456

106,720

13.9

9.8

83.7

92.0

61.7

4.07 Amazon

26.5 eBay

10.1 Tesco

6.6
8.9

Japan

35,00372,577

104,400

8.5

9.5

86.1

91.1

66.1

3.97 Amazon

20.2 Rakuten

Softbank
20.1（Yahoo!Shopping）

Germany

18,39144,09470,068

12.0

12.3

78.0

87.6

45.8

4.23 Amazon

40.8 eBay

15.0 Otto

11.2

9.9 E Leclerc

7.530.2 Amazon

12.1

Casino Guichard10.7
Perrachon(Cdiscount)
Jasper Infortech
39.5(Snapdeal)

France16,91335,76951,205

10.5

9.4

76.2

84.7

44.1

3.90 Amazon

India

1,226

21,64881,633

90.6

39.4

34.0

26.0

4.2

3.42 Flipkart

Russia2,879

11,49420,096

21.1

15.0

57.6

70.1

21.0

2.57 Maksus (Svyaznoy)

4.6 Wildberries

4.3 Ulmart

3.6

18.7 MercadoLibre

Casino Guichard17.6
Perrachon(Pontofrio)

15.5

9.5 Rocket Internet (Linio)

5.8 Amazon

5.5

3.1 Garbarino

2.9

Alibba Group Holding
9.2（Lazada）

4.4

14.9 Amazon

7.7

Brazil4,114

10,36916,481

8.0

12.3

56.2

59.1

32.0

Rojas Americanas
3.09 （Americanas.com）

Mexico610

4,563

11,505

33.7

26.0

49.1

57.4

17.8

3.11 MercadoLibre

Argentina

413

4,505

15,321

55.5

35.8

51.9

69.4

26.6

2.96 MercadoLibre
Rocket Internet
2.98(Zalora）
Charoen Pokphand Group
3.26(Wemall.com)

Cencosud
38.6（Jumbo）
XL Axiata
21.6（Elevenia）
Rocket Internet
16.3(Zalora）

Indonesia

293

2,652

5,417

35.0

19.5

33.0

22.0

1.6

Thailand

552

1,505

2,488

11.2

13.4

47.2

39.3

5.7

South Africa

211

543

1,174

23.2

21.3

50.3

51.9

13.5

3.78 (Take a Lot)

12.5 Apple

5.5 Pick 'n' Pay Stores

5.1

Nigeria

10

195

689

14.1

37.2

30.4

47.4

2.8

2.63 Jumia

50.9 Konga.com

23.6 DealDey

5.3

Tiger Global Management

Note: 1. The sales value is an estimate by Euromonitor International. The values are the sales of consumer goods to the general public via the Internet (excluding sales of motor vehicles, motorcycles and vehicle parts) through any electronic device. Sales of delivery
services, such as those of foods and household goods, and pickup at stores where the payment is made in the store are excluded. 2. The UNCTAD B2C E-commerce Index is set by UNCTAD between 0 and 100 based upon the share of individuals using the Internet (ITU),
secure Internet servers per 1 million people (World Bank), the share of individuals with credit card (World Bank), and Postal Reliability Score (Universal Postal Union). 3. Logistics Performance Index is set between 1 to 5 by World Ban based upon six criteria, including
customs performance, infrastructure quality, timeliness of shipments, etc. 4. The names in parentheses are major e-commerce platforms or online shopping sites of the respective companies.
Source: "Passport" (Euromonitor International, UNCTAD, International Telecommunications Union (ITU), World Bank.

Copyright (C) 2017 JETRO. All rights reserved.

50

Chapter 3 Section 1: The future of the e-commerce market

Trends for leading companies around the world■ Spotlight on restructuring of the Middle East e-commercemarketIn the Middle East, the acquisition of Souq.com by Amazon wasannounced. Competition is becoming increasingly intense in this region
with the rise of new businesses such as the e-commerce platform"Noon.com," whose establishment was announced in October 2016. The
entry of Amazon into the market has come under the spotlight aswatchers observe what changes it will bring to the e-commerce market
in the Middle East.
Apart from these, major corporations also have a significant market
share in the respective markets in India, Central and South America, andAfrica. They are keeping up with their efforts to expand their businesses,
such as by developing independent payment methods and distribution
networks.
Copyright (C) 2017 JETRO. All rights reserved.

Trends for leading e-commerce companies
RegionCompany
nameYear
Sales (2016,
Nationality establishe
M illionddollars)

US

1994

Asia

Americas

Amazon.
com

Middle East/Africa■ Amazon continues with global business expansion
US company Amazon has expanded its business to 11 countries
worldwide. It is the world's largest e-commerce, with users even fromoutside the operating countries. In addition to expanding the company's
internal distribution network, it is also working on expanding its ecommerce business by introducing, on a pilot basis, delivery using
drones. Offline, it is also introducing and acquiring new businesses andhas a great impact on the retail sector. It is continuing with efforts to
expand the business, including the acquisition of the largest e-commerce
platform in the Middle East, Souq.com, expanding its business in India,
and formulating plans to enter the Southeast Asian market.
■ Alibaba Group, which contributes to the growth of China’s ecommerce market
China's largest e-commerce company, Alibaba group, commands 43.5%
of China's e-commerce market. It has contributed to the growth of ecommerce in China, including the introduction of an independent
payment system "Alipay" and developing a distribution network.
Outside of China, it has invested in various companies, mainly inSoutheast Asia, and is expected to continue expanding its business going
forward.

MercadoLibre

Argentina

1999

AlibabaGroup
Holding

China

1999

Flipkart

India

2007

Souq.com UAE

Jumia

Nigeria

Recent major trends

・World's largest e-commerce company that has a presence in 11 countries.
The platforms are also used by many customers from outside of theoperating countries.
・In addition to initiatives such as the pilot introduction of new distribution
methods and independent payment systems, it has also developed various
123,768 businesses in its offline retail business, including Amazon Fresh andAmazon Go.
・Currently, it is making moves to expand its business interests not only inadvanced economies that it has already broken into, but also in India,
M iddle East, and Southeast Asia.
・Largest e-commerce company in the Central and South American region
that sells to 18 countries mainly in the same region, including Argentina,
Brazil, and Chile.
・The company introduced M ercadoPago, a payment system that accepts
844 credit card payments, cash payments at affiliate stores, and charging using
cash to meet various payment needs.
・In addition to B2C, it also engages in C2C business and helps to develop
an environment where individuals are able to facilitate sales.
・Largest e-commerce corporation in China that makes up 43.5% of thecountry's e-commerce market.
・Has developed China's e-commerce environment through means such as
introduction of an independent payment system "Alipay" and the building
19,450 of distribution networks.
・In particular, it has successively invested in e-commerce in Southeast
Asia as well as in payment businesses, and strengthened its presence in thesame region.
・Largest company that makes up 39.5% of India's e-commerce market.
・There are talks of acquiring Snapdeal, which has struggled with increasing
n.a. sales in re-commerceent years. If realized, it would make Flipkart a
massive corporation that accounts for more than 60% of the e-commercemarket.

2005

・Largest e-commerce company in the M iddle East region and also sells to
North Africa.
・Taking the opportunity of the growth of Internet use in the same region,n.a. it became the first unlisted venture corporation in the M iddle East to attainan appraised valuation exceeding $1 billion.
・Announced in M arch 2017 that it would be acquired by Amazon.

2012

・Leading e-commerce corporation that was the first unlisted venturecorporation in Africa to attain an appraised valuation exceeding $1 billion.
M any European and American companies have also invested in it.
・In addition to developing an independent distribution network, it has
93 continued to grow while responding to the infrastructural conditions in
Africa, such as developing systems that accept cash on delivery.
・Apart from e-commerce, it also conducts business in a wide range offields using the Internet, such as food delivery, real estate, and recruitment
websites.

Note: 1) Flipkart, Souq.com, and Jumia are unlisted corporations.
2) Sales for Jumia are based on the annual report of its parent company, Rocket Internet (84 million Euros).
Based on "IFS 14 July 2017 edition" (IMF), with exchange rate of $1 = 0.9 Euros.
Source: Reports from JET RO's overseas offices, websites of the respective corporations, press reports, etc.

51

Chapter 3 Section 1: The future of the e-commerce market

Regulations related to e-commerce■ Increase in related regulations along with the popularization of the Internet
As the e-commerce market expands worldwide, it has been pointed out that in some countries, (1) There are complex regulations, or regulations
lacking in transparency, which may become a barrier to business; (2) The systems to support e-commerce are inadequate. With regard to (1), under
existing laws in Vietnam for example, providers, etc. are obligated to set up servers in the country. There are similar regulations in Indonesia andRussia. In India, foreign investment regulations imposed on retailers may form a bottleneck during the expansion of e-commerce. Furthermore,inadequacies in prompt customs clearance systems and electronic payment procedures correspond to the problem raised in (2).
■ Corporations perceive data localization as a problem
A regulation that corporations view as being particularly problematic is "data localization," which requires corporations tostore data, or the servers
containing the stored data, within the home country. The number of data-related regulations that encompass data localization has continued toincrease alongside with the rise in the number of Internet users, particularly since the later half of the 2000s. Such demands or regulations imposed by
the government could damage e-commerce's advantage, which lies in the ability to expand sales channels while remaining based in the home country.

Number of data related regulations in the world
90(Number of regulations)

83
80

80

E-commerce regulations in major countries
Regulations
Data
localization

Country/
Basis law
RegionVietnam Decree 72 of 2013

73

70

65
Internet users reached
2 billion

60

49

42
3940

40
30
20
10
2 2 2 30

Restrictions India
on foreign
investment

57

50

Russia

4 5 5

7

9 9

1111

33
31
27
24
22
2021
17
15
1213

China

85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 1516
Source: Estimate by the European Centre for International Political
EconomyCopyright (C) 2017 JETRO. All rights reserved.

(Year)

Federal Law No.
242-FZ
FDI policy

OutlineImpact on businesses

Demanding companies in the information service
For companies providing cloud computing services, the demandindustry such as content providers to set up more than to set up the relevant facilities and data storage within the country
one server within the country.
is a factor that can inhibit the optimum placement of facilities. For
users of such services as well, when expanding business overseas
Regulating companies which collect personalin cooperation with international service providers, the mandatory
use of domestic servers in the countries that they have businessinformation to set up servers which store the data ofinterests in may impose unnecessary costs on them.
consumers within the country.
Foreign-affiliated retailers which deal in a single brand Although the system allows single brands to receive 100% foreign
are allowed to operate under 100% foreign investment capital investments, automatic approval is restricted up to 49% ofwhen 30% of their procurement comes from within the the foreign capital investment; for investments above this level,country. While prohibiting those which deal in multiple approval from the government is required. In actual fact, entry into
brands from conducting e-commerce, it is permitted for the market is difficult, and local companies have a significant share.
companies producing products within the country tosell products through Internet.

Foreign Investment Requiring companies to obtain an operating license forIndustrial Guidance value-added telegraph services in order to provide
Catalogue
Internet service to third parties through their own
platforms.
Personal
EU
General Data
Making companies to appropriately process personal
information
Protection
data within the European Economic Area, andprotection
Regulationprohibiting them from transferring the data outside the(enforced in May
area in principle.
2018)
Opaque or China
Cybersecurity Law Mandating companies to undergo a screening processcomplex(enforced in June
when collecting customer data from within the country
regulations
2017)
that is either stored domestically or transferredoverseas.
Source: Servey reports of JETRO and materials from respective governments

In addition to the fact that the telecommunications industry itself isa restricted industry, companies have to meet a high level ofdemands when they apply for business licenses.
It is unclear at which point an act is deemed as the "processing"and "transfer" of personal data; if deemed to be such an act, it
would be subjected to expensive penalties.

The definitions of terminology are ambiguous and largely
dependent on the discretion of the government. As China manages
its own data independently, this could lead to a rise in costs.

52

Chapter 3 Section 1: The future of the e-commerce market

Points of contention in multilateral negotiations on e-commerce■ WTO continues practice of non-imposition of customs tariffs
There are several organizations attempting to formulate e-commerce rules, and therepresentative organization is WTO. Discussions on e-commerce began with the"Ministerial Declaration on Global Electronic Commerce" issued in 1998. The main
points of contention were the problem of classification of “digital content" that are
subjected to regulation, and making the non-imposition of customs tariffs on electronictransmissions a permanent measure. However, with the exception of maintaining thepractice of non-imposition of customs tariffs, the absence of established rules on ecommerce was a situation that lasted.
In July 2016, in light of the growing momentum toward the establishment of rules
accompanying the recent growth of the e-commerce market, discussions toward theformulation of international rules began at the special session on e-commerce. With theaim of achieving results at the 11th Ministerial Conference to be held at the end of 2017,
more than 20 members to date have submitted their draft proposals for negotiations.
Even for organizations other than WTO, active discussions are ongoing with the aim of
improving the business environment. For example, APEC has picked up on the issue ofdigital trade as a future trade and investment issue, and is working to secure the freecross-border movement of data.

Solutions
by FTAs

Discussions
in WTO

Overview Issues

Issues on e-commerce discussed in WTO
1) Treatment of digital content 2) Custom duties on electronic 3) Cooperation with developing
transmissions
countries
How to classify value generated bytransactions of digital content.

Not imposing tariffs on digitaltransfer in terms of technologicalaspects and securement of theenvironment for free trade through ecommerce.

Developing countries are concerned
about reduction of tax income inaccordance with the development of
e-commerce.

GATT is applied for trade in goods, While the policy of the "M oratorium In order to gain an understandings of
GATS for services and TRIPS foron Customs Duties" has beendeveloping countries, it is necessary
intellectual property rights. However, maintained since the ministerial
to study both positive and negative
there is no unified rule because
declaration in 1998, it is a temporary aspects of the promotion of ediscussions on this topic have divided measure. When the moratorium period commerce which might adversely
by each Council.
is finished, imposing tariff will beaffect national revenues.
possible.
Defining digital content in express
Permanently ensuring that customs
Setting forth provisions regarding
terms.
duties will not be imposed on digital cooperation, including for sharing
transfers.
related information.

Source: Reports and papers of WTO and E15

Copyright (C) 2017 JETRO. All rights reserved.

Initiatives toward the establishment of international rules
for e-commerce

Initiative"A Vision for the 21st Century" makes reference to the potential of ecommerce (APEC)
1998
May
Ministers' declaration on global e-commerce. Here, the moratorium on
customs duties was decided on.
Sep"Work Plan for E-commerce" adopted
Oct
Conditions for e-commerce taxation framework, OECD Action Planfor Electronic Commerce (OECD)
Nov
APEC Blueprint for Action on Electronic Commerce (APEC)
1999
Feb
Review Report to the WTO General Council
Jun
Establishment of e-commerce management group by senior officials(APEC)
Dec
Guidelines for Consumer Protection in the Context of Electronic
Commerce (OECD)
2004
Jul
Extension of moratorium on customs duties at the General Council (1)2005
Dec
Extension of moratorium on customs duties at the Ministerial
Conference (2)2007
Sep
Publication of the model chapter on e-commerce in FTA (APEC)2009
Dec
Extension of moratorium on customs duties at the Ministerial
Conference (3)2011
Dec
Extension of moratorium on customs duties at the Ministerial
Conference (4)2013
JunStart of negotiations on new Trade in Services Agreement (TISA).
Plans to draw up provisions for e-commerce in the Annex.
Dec
Extension of moratorium on customs duties at the Ministerial
Conference (5)2015MayAgreement on G7 Principles and Actions on Cyber (G7)
Nov
Work Plan for Advancing Facilitating Digital Trade for Inclusive
Growth (APEC)
Dec
Extension of moratorium on customs duties at the Ministerial
Conference (6) (-Dec 2017)
2016
Jul
Launch of discussions at the special session on e-commerce
Sep
Affirmation of the importance of "free flow of information" (G20)
Nov
Agreement on "Next Steps for Advancing Work on Digital Trade in2017" (APEC)
2017
AprFirst meeting of the Digital Ministers (G20)May
Confirmation of progress on roadmap for promoting digital economy at
the meeting of trade ministers (APEC)
Notes: 1) Initiatives concerning personal information have not been included. 2) Shaded
cells show items related to WTO.
Source: Materials from WTO, OECD, APEC.

1997

PeriodNov

53

Chapter 3 Section 1: The future of the e-commerce market

E-commerce provisions in FTAs
■ Expansion in US-style e-commerce rules
Alongside with efforts by international organizations, the number of e-commerce provisions in FTAs has also been on the rise after the 2000s. The objectiveof the e-commerce chapter in FTAs is to reduce unnecessary barriers, improving consumer credibility, and sharing information on regulations and policies.
FTAs also have the aspect of coming up with a certain conclusion on the point of contention that were problematic in WTO, such as making the practice of
non-imposition of customs tariffs permanent. Many of the FTAs that contain an e-commerce chapter, numbering about 60, are agreements with the US orwithin its FTA partners’ countries, and it is clear that US-style e-commerce chapters have become increasingly widespread. On the other hand, FTAs of the
EU reflect the position that digital contents should be regulated by service rules, and there are few agreements with an independent e-commerce chapter.
■ New rules that TPP incorporates
Even among the FTAs that have an e-commerce chapter, the TPP is currently rated as having the most comprehensive provisions. In addition to theconventional major provisions, the TPP includes new rules on cross-border information transfer through electronic means, prohibition on requests to set up
computer-related facilities in the country, and prohibition on requests to disclose the source code of software. Amidst the growing importance of e-commerce,
the global spread of such high-level regulations carries great significance.
987(Number)

FTAs which include e-commerce provisions

Other
FTAs signed by FTA partners of the US

Provisions

8

6

6
5

Definitions of "Digitalproducts" ("Electroniccommerce" in case of
CETA)

7

FTAs signed by the US

5

Provisions on e-commerce by FTA

6

5

5

5

4

4
3
2

2
1

0

2

1

1
0

2003 04
05
06
07
08
09
10
11
12
13
14
Note: Includes FTAs with e-commerce provisions in the same chapter as otherfields, and provisions under Annexes.
Source: Based on the respective FTA articles

Copyright (C) 2017 JETRO. All rights reserved.

15

16

APEC model chapter forelectric commerce(Released in Sep 2007)(Suggests to set out thedefinitions applicable to thechapter on electroniccommerce.)

Not imposing custom duties✔
on electronic transmissions
Non-discriminatory✔
treatment on digital productsM
andating
companies toDomestic electronic
maintain domestic rules in linetransactions framework
Online consumer protection
Personal information
protection
Electronic authenticationand electronic signatures
Paperless trading
Cross-border transfer of
information, including
personal information
No requirement on locationof computing facilities
No requirement on transferof, or access to source code
Cooperation

Pacific Alliance(Entry into force in
May 2016)

TPP(Signed in Feb 2016)

Product that is digitally encoded. Product that is digitally encoded,
Digitised representation of
produced for commercial sale orfinancial instrument not included. distribution, and that can betransmitted electronically.
Digitised representation offinancial instrument not included.

✔

CETA

(Signed in Oct 2016)
Commerce conducted throughtelecommunications, alone or in
conjunction with otherinformation and communication
technologies.

✔

✔

×

✔

×

with international standards.

Stipulating avoidance ofregulations without specificobligation.

M andating companies tomaintain domestic rules in linewith international standards.

No speficic obligation imposed.

✔

✔

✔

✔

✔

✔

✔

✔

✔

✔

✔

✔

✔

✔
×
(Future negotiations
considered)

✔

×

✔

×

×

×

✔

×

×

×

✔

×

✔

✔

×

(Year of✔
✔
entry into Note: Check marks also indicate provisions which only prescribe an obligation to make an effort.
Source: Ministry of Economy, Trade and Industry, and respective FTAs
force)

54

Chapter 3 Section 1: The future of the e-commerce market

e-commerce utilization by Japanese corporations■ Japanese corporations planning to start sales in the ASEAN market
According to surveys conducted by JETRO, 24.4% of the Japanese corporations surveyed have had experience using e-commerce, and approximately half of
this percentage (47.2%) carry out sales overseas through e-commerce. Many of the sales destinations of these corporations are currently countries inNortheast Asia and those in the West, but many corporations indicated that ASEAN countries are potential sales destinations for the future.
■ Expanding sales channels through the use of e-commerce
Looking at the examples of e-commerce utilization by Japanese corporations, we see that it has become possible to approach different customers than wasconventionally possible. Company A, which produces "Go-" stones (chess pieces) from hard clam shells (Miyazaki Prefecture), uses e-commerce to sell its
products to countries/regions where it does not have any sales agents. It is putting effort into improving brand awareness, such as by creating a webpage tointroduce the company and its technique, and increasing the number of its fans worldwide. Company C, a housing equipment manufacturer (Osaka), hasreceived business inquiries from leading US chains through an e-commerce platform in the US and experienced a sales promotion effect that had not beenpossible in the past. Going forward, it will continue to expand its use of e-commerce.

Sales destinations of Japanese corporations through ecommerce（Unit：%）
Parameter(1) Current sales
destination（n＝345）

Rank(2) Corporations
aiming to expand ecommerce sales（n＝247）(3) Corporations
considering to start ecommece sales（n＝673）

1

China

49.6 China

44.1 China

45.8

2

US

36.2 US27.9 Taiwan

31.5

3

Taiwan26.4 Thailand

26.3 US

30.0

4Hong Kong

22.6 Hong Kong

23.5 Hong Kong

28.1

5

Korea

19.4 Taiwan

22.7 Thailand

26.9

6

Singapore

18.8 Vietnam22.3 Singapore

26.3

7

Thailand15.1 Malaysia

22.3 Vietnam

24.2

8

UK

14.2 Singapore

21.1 Malaysia

18.9

9

Canada11.0 Indonesia

20.6 Indonesia

18.3

10

Germany

10.7 Korea

15.8 Korea

18.0

Note: 1) Parameters are: (1) Corporations using e-commerce to carry out sales overseas;(2) Corporations using e-commerce to carry out sales overseas and planning to expand
their e-commerce business in future; (3) Corporations that are not using e-commerce now,
but considering the use of e-commerce in future." M ultiple answers.
2) Shaded cells show data for ASEAN countries.
Source: "FY2016 Survey on International Operations of Japanese Firms" (JETRO)

Copyright (C) 2017 JETRO. All rights reserved.

Examples of e-commerce utilization by Japanese
corporations
Corporation

Overview

Company A (Miyazaki Prefecture) / Production and sale of "Go" stones (chess pieces)

Issues・'The company makes sales through its own online shopping site to customers in the countries and regions where it has no
B2C・Brand awarenesspartner distributor. The comapny has also created a designated web page to introduce the culture of the "Go" game as well as
Cross-border・Distribution
the company's sophisticated techniques to make "Go"-stones to increase the brand awareness.
Sales countries/regions:(deliveries in other・P ayments are accepted through credit card and P ayP al. Ordered items are sent to customers after payment is received andEurope and US,
countries)
confirmed.
Northeast Asia, Southeast ・Japan P ost's EMS system is used for deliveries. Delivery time is short, and tracking and swift response is possible even when ・M ultilingualAsia, etc.
compatibility
problems occur.

Company B (Niigata Prefecture) / Production and sale of metal products

B2B
・For sales through the company's own website, orders are received after payment via a deposit or ・Inventory control
Cross-border
PayPal is recieved and confirmed.
・M ultilingual・Sales are also carried out through B2B platforms specialized for materials. Sales conducted through compatibility
Sales countries/regions:
theseplatforms
exceedsales
onthe
company's
own
site.
Northeast Asia, Southeast
Asia, Europe
Company C (O saka) / Production and sale of housing equipment
・In China, e-commerce sales are conducted through trading companies. In T aiwan and the US, it puts
B2C, B2B
products up for sale under the company's name on local e-commerce platforms.
Cross-border・As payments are settled in advance, no problem has ever occurred so far. As products that are in stock
Sales countries/regions:are put up for sale, there is no major problem with inventory control.
Northeast Asia, North・In the US, It was approached by a major local chain store through the e-commerce platform. T his
America, Europe
made the company realize the potential of e-commerce as an alternative way to expand into a newmarket.
Company D (Tokyo) / Food processing
・In both China and the US, it sells its products by opening stores on major local e-commerce platforms.
B2C
・Sales in the US commenced four to five years ago. T hrough the utilization of a leading distribution
Local
network, it reached the top 20 in its product category about two years ago, and sales have been on theSales countries/regions:rise since then.
China, US
Company E (Hokkaido) / Trading firm

B2C
Cross-border
Sales countries/regions:
Russia CIS・The company sells healthy food products and processed foods made in Japan that are popular in the country throughthe company's own web page in Russian. In addition to all of Russia, it also receives orders from the neighboring
Russian-speaking countries.
・Credit card payments make up 90% of all payments. EMS is used for deliveries. While there are delays in the sales
destination country from time to time, the packages can be tracked, and non-deliveries have not occurred to date.

・Infrastructure (local
distribution, Internet
environment, etc.)

・Distribution(Inventory control,
customs clearance)
・Labor shortage
・Brand awareness・Internet security
・Distribution(deliveries in othercountries)

Note: "Cross-border" refers to companies engaged in sales through cross-border e-commerce from Japan. "Local" refers to companies engaged in sales using e-commerce at an overseas base.
Source: Field interviews

55

Chapter 3 Section 1: The future of the e-commerce market

Challenges in e-commerce utilization for overseas sales■ Issues with product delivery and payment systems
According to surveys by JETRO, there were many corporations that face problems with product delivery and reliability of payment systems when
conducting overseas sales using e-commerce. In interviews with e-commerce utilizing corporations conducted by JETRO, there were corporations that
had concerns about payment systems, as well as corporations facing problems with brand awareness, customs clearance, and delivery in the sales
destination country.
■ Responses to the challenges influence the growth of the businessWith regard to payment, payment via credit card or cash on delivery are the mainstream methods in many countries/regions . However, in developing
economies where such infrastructure has not yet been developed, the development of a substitute payment system can influence the growth of thebusiness. With regard to delivery, in addition to the availability of high-quality logistics companies, factors such as the efficiency of the customs
authorities pose problems in delivering products from the e-commerce business operator to the consumer. Around the world, there are companies suchas Safaricom (Kenya) and Alibaba Group (China), that have developed payment methods using mobile phones to tackle such issues in e-commerce
utilization. In the aspect of distribution, Jumia (Nigeria) has built an independent distribution network that uses motorcycles to provide delivery
services, while Amazon (US) has launched a pilot delivery service using drones. As for country policies, there are initiatives aimed at expanding theutilization of e-commerce. For example, Vietnam has moved to revise existing domestic laws imposing requirements on server locations, while the US
and the Philippines have raised the amount of de minimis to increase goods that are exempt from customs tariffs.
Challenges faced by Japanese corporations in using e-commerce foroverseas sales（M ultiple answers, %）P arameter

Rank
1
2

Overall ((1)＋(2)＋(3))（n＝1,404）
Risks related to productdelivery (damage,accuracy)
Reliability of payment
systems(1) Have used before, and willfurther expand usage in the
future/maintain current usage
levels（n ＝697 ）36.2 High delivery cost
Risks related to product34.8 delivery (damage,accuracy)
Necessity of using foreign
33.5
languages(2) Have used before, but will
reduce usage in the future（n＝34）

37.4 High delivery costComplexity of customs
36.3
clearance procedures
Difficulty in increasing
the firm's brand awareness
Risks related to product28.0 delivery (damage,accuracy)
Reliability of payment
27.5
systems(3) Have not used before, butwill consider using in the
future（n＝673）

Reliability of payment
systems
Risks related to product35.3 delivery (damage,accuracy)
Necessity of using foreign
35.3
languages
35.3

42.1
36.3

3

High delivery cost

4

Necessity of using foreign
languages

Reliability of payment
30.5
systems

5

Lack of information on
systems and regulations

Shortage of required
29.1
personnel

6

Shortage of required
personnel

28.8

7Complexity of customs
clearance proceduresComplexity of customs
28.1
clearance procedures

Necessity of using foreign
26.0
languages

26.5 High delivery cost

29.4

8

Difficulty in increasing
the firm's brand awarenessDifficulty in increasing
22.7
the firm's brand awarenessLack of information on
23.8
systems and regulations

Unclear tariff payment
23.5
standards

21.4

9

Unclear tariff payment
standards

21.1

10

Undeveloped relevant legal
systems and lack oftransparency

Lack of information on
systems and regulations

Unclear tariff payment
standards
Undeveloped relevant legal

16.5 systems and lack of

28.7

26.4

20.4

Shortage of required
personnel

16.5 Limited payment methods

transparency

Note: Shaded cells show items with response rate of 30% or above.

Unclear tariff payment
standards

Source: "FY2016 Survey on International Operations of Japanese Firms" (JET RO)

32.2

Shortage of required
29.4
personnel

30.5Complexity of customs
clearance procedures

29.9

Difficulty in increasing
the firm's brand awareness

21.0

Concerns for information
17.6
leakage

17.4

20.6

IssuesSales(Approachingconsumers)

Internal factors: Brand awareness, procuring ofnecessary funds, securing human resources, etc.
External factors: Infrastructural development for Internet,
various regulations for mandatory server placement, etc.,
shutdown of Internet due to political instability, etc.

32.5

Lack of information on
32.4
systems and regulations

29.4

Main issues in e-commerce flow

Costs/risks of cash on delivery, risk of incurring
Payment
damages from fraudulent credit card payments, existence(Receiving payments) of alternative payment methods

Logistics
Source: Various reports

Inventory control system that can deal with large
volumes of small-lot deliveries, availability of highquality distribution companies, delivery costs, and theefficiency of customs clearance at the export destination,
etc.

56

Copyright (C) 2017 JETRO. All rights reserved.

Chapter 3 Section 1: The future of the e-commerce market

Examples of countermeasures toward e-commerce utilization issues
Major e-commerce issues, and examples of countermeasures
Sales

IssuesExternal factors（Data
regulations）

Country/Corporation

Examples of countermeasures

VietnamWith the signing of the TPP, Vietnam is moving toward the revision of existing domestic lawsthat impose mandatory server placement requirements.

M-Pesa, which commenced its service in 2007 in Kenya, is a payment method that utilizes short

Cash on delivery

Safaricom
messaging services (SMS) sent through mobile phones. Under the system, payments are added（SMS payment） to the mobile phone bills. This SMS payment service generates the largest amount oftransactions in the world for payments through mobile phones, etc.

Payment
Credit cards

The availability ofhigh-quality
distribution
companies"Last mile"(Diverse customer
needs in parcel
Logistics
delivery )De minimis rule

Alipay, which commenced its service in 2004 in China, introduces a payment system thatenables payment through the reading of QR codes. In addition to credit cards, it can also link to
Alibaba Groupbank accounts and enables users to add money to their account by cash, bringing changes to（mobile payment） payment systems in the country. The Alibaba Group carries out acquisitions and investments
in various payment/financial corporations mainly in Southeast Asia and is strengthening its
presence in the payment business sector in the region.

Jumia, Alibaba
Group

As a leading e-commerce platform in Africa, Jumia has built its own distribution network using
motorcycle delivery services. The Alibaba Group consolidates existing distribution
corporations in China and has put effort into improving the efficiency of distribution.

AmazonAmazon has expanded its scope through same day and next day deliveries and is moving
forward on the expansion of its in-house warehouses in various countries. It is exploring fasterand more efficient means of delivery, such as through the pilot introduction of delivery using
drones.

US, Indonesia,
Philippines, etc.

・In March 2016, the US raised de minimis (upper limit of the value of imports that are notsubjected to customs tariffs) from $200 to $800.
・Similarly, the Philippines raised its de minimis from about $0.20 in October 2016 to about $200,
while Indonesia raised its from $50 to $100 in January 2017.

Customs
China has enacted a designated zone system for cross-border e-comerce to improve customs
China
clearance efficiency.
clearance
Source： Reports from JETRO's overseas offices, various press reports

Copyright (C) 2017 JETRO. All rights reserved.

57

Chapter 3 Section 2: Receiving foreign talents in Japan, and employing them in corporations

Securing human resources is the most serious management issue faced by Japanese corporations■ Increase in number of corporations raising human resources as a issue
When Japanese companies develop overseas business such as by exporting and entering foreign markets, the most serious issue faced by Japanese
corporations is that of securing human resources. According to JETRO's surveys, the percentage of companies raising human resources as a issue
increased by 14.1 points from FY2013 (41.2%) to FY2016. Japanese corporations rapidly gained heightened awareness of this issue during the same
period. The percentage of corporations indicating "securing human resources: as a issue was the largest among all the items listed.
■ Advancing decline of working-age population
There has been a marked decline of working age population in Japan, who play a key role in corporate activity. Comparing the working-age
population as a percentage of the total population with other major advanced countries, the ratio of Japan's working-age population is declining at a
rapid rate. As of 1990, Japan's working-age population had been at the high level of 69.7%; by 2015, it had dropped to 60.8%, already below thelevels for the US (66.3%), Germany (65.9%), UK (64.5%), and France (62.4%). Japan's working-age population will continue to decline going
forward, and is forecast to hit 51.3% in 2050 with a further widening gap with other major advanced countries.

Issues regarding overseas business(%)

FY2016FY2013 Change from(n=2,995) (n=3,471)
FY2013
Personnel responsible for overseas business

55.3

41.2

14.1

Local business partners (alliance partners)

52.1

47.8

4.3

Information on overseas systems (tariff rates, regulations,permissions, etc.)

48.9

40.1

8.8

Information on local markets (consumers' preferences,needs, etc.)

48.6

39.4

9.2

Expansion of local sales networks

45.2

32.5

12.7

Cost competitiveness

38.0

27.0

11.0

Goods for local markets

31.5

21.4

10.1

Awareness of products and brands

30.9

-

-

Raising of necessary funds

18.5

16.2

2.3

Other

2.4

1.1

1.3

Nothing in particular

4.0

3.5

0.5

Note: 1) Percentage to the total number of respondent firms. 2) Multiple answers. 3) The FY2013
survey did not include the choice of "awareness of products and brands."
Source: "Survey on the International Operations of Japanese Firms" (JETRO), various issues

Copyright (C) 2017 JETRO. All rights reserved.

75.0

(%)

Ratio of working age population(aged 15-64)
to the total population
Japan

70.0

forecast

65.0

UKFranceGermany
US

60.0

55.0

50.0
Notes: Median estimates.
Source: "World Population Prospects: The 2015 Revision" (United Nations)(year)

58

Chapter 3 Section 2: Receiving foreign talents in Japan, and employing them in corporations

Number of foreign nationals working in Japan exceeds the 1 million mark■ Number of engineers and marketing professionals double
Against the backdrop of human resources as a issue, Japanese corporations are expressing a growing interest in employing foreign talents. The number offoreign nationals working in Japan grew by 19.4% year-on-year in 2016 to reach 1,083,769, surpassing the 1 million mark for the first time. Of these, the“Specialized technological field” (about 200,000 people) is the main category for highly skilled personnel supporting the overseas business expansion effortsof Japanese corporations. Within this category, the largest number holds residence status as “engineer” or “specialist in humanities/ international services,” at148,538 in 2016, double the number from 2010 (77,459). By nationality, the greatest contribution comes from China, and within industry, the largest numbers
are in the non-manufacturing sectors.
■ Number of international students reaches record high for fourth consecutive year
When Japanese corporations recruit foreign employees, they show the greatest interest in international students who are enrolled in educational institutions inJapan. The number of international students reached a new record high for the fourth consecutive year in 2016, at 239,287 students (14.8% increase year-onyear). This rising trend for the number of international students is similarly present even when limiting the numbers only to students at tertiary institutions andexcluding those at Japanese language educational institutions, reaching a record high of 171,122 (12.5% increase year-on-year) in 2016. While China remains
the country with the largest number of international students in Japan, the number has remained steady at about 80,000. On the other hand, there has been asignificant rise in the number of international students from Vietnam and Nepal. The number of Vietnamese students exceeded the number of Korean students
for the first time in 2015, putting them in second place after China.

Changes in the number of international students by educational institution

Trends in foreign workers in Japan by statuses of residence（1,000 persons）
1,200
1,000
800

(People)300,000

Specialized technological field
Technical Intern Training
Activities without certification
Residence based on status
Designated Activities
Total number of foreign workers in Japan

Japanese language institutes

University preparatory course
250,000

Specialized training colleges
Graduate school

200,000

University (Undergraduate)/Juniorcollege/College of technology

600

Higher education institutions

150,000

The number of international students

400

100,000

200
050,000

2008

2009

2010

2011

2012

2013

2014

2015

2016

(Year)

Note: 1) Data from the end of every October. 2) Based on the revised Immigration Control and Refugee Recognition Law on July
1, 2010, "Technical Intern Training" is added to the list of statuses of residence separate from "Designated Activities."
Source: Status of reporting on the employment of foreign workers by employers (Ministry of Health, Labour and Welfare)

Copyright (C) 2017 JETRO. All rights reserved.

0

1998

99

2000

01

02

03

04

05

06

07

08

09

10

11

12

13

14

15
16
（year）

Notes: 1) the total number of international students including Japanese language institutes is also drawn since 2011. 2) As of each May 1
3) Higher education institutions include graduate schools, universities (undergraduate schools), junior colleges, technical colleges,
specialized training course, and university preparatory courses.
Source: Result of an Annual survey of International Students in Japan 2016 (JASSO)

59

Chapter 3 Section 2: Receiving foreign talents in Japan, and employing them in corporations

Expectations of expansion of sales channels and improvements in external
negotiation capabilities through the employment of foreign talents■ Benefits in technological innovation is limited at the current point in time
In JETRO's survey, Japanese corporations that have employed, or are considering employing, foreign employees, were asked about the benefits ofutilizing foreign talents. The answers "Expanded sales channels" and "Improved international negotiating ability" received a high percentage of
responses at 40.9% and 39.7% respectively. Looking at the benefits by the positions of foreign employees, the largest percentage answered “Expanded
sales channels" in cases where foreign talents were employed to a director or management position. On the other hand, response rates for"Contribution to development of new products" and "Improved problem solving ability" which are related to technological innovation, were at a low
level. While issues remain in sharing an organizational vision, and in communication among employees, employing foreign employees is of greatsignificance in incorporating diversity into the management of the company. Along with the growing use of foreign talents by Japanese corporations,such areas are expected to become highly appraised.

Benefits of hiring/employing foreign employees by position(%)
Benefits of hiring/employing foreign employees
Lowering
psycholoFinancial
ContriStrategic
gical barriers
Increased
Improved
effects
bution to prepara
Improved
among
Expanded
Improved motivationinterNo. of (sales,develop- -tion forproblemJapaneseNo
sales
languageamong
national
Otherfirms businessment of localization
solving
employees inanswerchannels
ability
Japanesenegotiating
performa
newof manage
abilitycommuni
employees
abilitynce, etc.)
products-ment-cation withforeignnationals

1,887

13.5

40.9

11.7

28.6

31.6

13.9

9.2

39.7

27.9

6.1

4.6

Directors

120

20.0

43.3

15.8

29.2

30.0

12.5

14.2

39.2

30.8 10.8

7.5

Management at
division/department manager
level

270

22.6

50.7

20.4

38.5

33.0

15.6

14.1

49.6

31.9

6.7

3.3

Engineers

357

12.9

30.5

18.5

36.1

28.6

16.0

9.5

35.6

30.5 10.6

2.2

Positions of foreign employees

Total

Generaladministrative
755 13.1
37.7
10.3
28.3
35.4
13.4
9.3
44.5
29.0 4.1
staff
General plant
378 16.4
24.6
7.9
29.1
25.1
15.1
7.7
28.0
27.5 14.8
staff
Not currently
hiring foreign
employees but
637 11.9
56.7
13.0
30.5
33.1
15.2
8.8
42.2
27.5 2.4
considering it in
the future
Note: 1) Percentage to the total number of firms answering “currently hiring foreign employees” or “expecting to consider recruitment of them”. 2) Multiple
answers.
Source: "FY2014 Survey on the International Operations of Japanese Firms" (JETRO)

Copyright (C) 2017 JETRO. All rights reserved.

2.5
4.8
6.1

Issues in hiring/employing foreign employees
Total
Large-scale(n=3,005) firms (n=638)
20.1
21.8

(%)
SMEs
(n=2,367)
19.7

Difficult to share the organizational vision
Frequent troubles in communication with
19.0
17.1
19.5
Japanese employees
Don’t know how to treat foreigners or
18.2
13.9
19.4
manage personnel affairs
The turnover rate is high because many
foreigners wish to return home or change their
16.9
21.2
15.7
jobs in the future
Their Japanese ability has not reached the
16.4
13.5
17.2
required level
Difficult to deal with application for permission
for living in Japan, such as acquisition of a
15.4
9.7
16.9
working visa
Financial effects (on sales, performance, etc.)
15.3
14.6
15.5
are unknown
Don’t know how to recruit foreigners
9.3
3.1
10.9
No (or few) applications for recruitment
5.3
8.9
4.4
Other
9.5
9.6
9.5
Note: 1) Percentage to the total number of respondent firms. 2) Multiple answers.
Source: "FY2015 Survey on the International Operations of Japanese Firms" (JETRO)

60