News & Updates
JETRO Global Trade and Investment Report 2020 -A global economy with increasing uncertainty and the future of digitalization-
Jul 30, 2020
- World trade in 2019 decreased in both trade value and volume
- World trade in first quarter of 2020 drops sharply due to COVID-19
- Japanese companies seeking new business styles in a world of increasing uncertainty
1. World trade in 2019 decreased in both trade value and volume
- In 2019, world trade (trade in goods, nominal export value) decreased by 2.9% from the previous year to $18.5 trillion (JETRO estimate). This is because of an increase of uncertainty caused by trade disputes, a decline in demand due to slowing global economic growth and a decline in fuel prices. The trade volume (export basis) also decreased by 0.1% year-on-year, a down turn from the previous year in terms of both value and volume. It was the first time in ten years, since 2009, that both sides had negative growth.
- In 2019, the amount of trade value in many countries and regions, mainly in Europe and East Asia, declined from the previous year. The export value of resource-exporting countries also decreased from the previous year due to the impact of falling resource prices. Looking at the world trade in 2019 by product category, the growth rate became negative for many products. The down turn in resource-related products, general machinery, chemicals, transportation equipment, electrical equipment, etc. has slowed down trade.
- US-China trade friction has changed the flows of world trade. Due to the additional tariff measures against China by the US, China’s global share of exports to the US of computer parts has shrunk, while Korea, Taiwan, and ASEAN countries have expanded exports to the US. In response to this shrinkage, China expanded its exports to Korea and the rest of Asia.
2. World trade in first quarter of 2020 drops sharply due to COVID-19
- The growth rate of world exports in the first quarter of 2020 decreased by 5.8% year-on-year. Looking at the breakdown, EU-25 (-1.7 percentage points), China (-1.6 percentage points) and resource-exporting countries (-1.0 percentage points) made a large contribution to the decrease in exports. Examining the growth rate in the first quarter of 2020 by country, China’s exports fell sharply by 13.4% year-on-year.
- Looking at trade (on an export basis) for 32 major economies where data was available up to the first quarter of 2020, a sharp decline in transportation equipment and general machinery was seen, while positive growth in exports of pharmaceuticals and medical supplies remained. An overview of world trade in the same quarter shows a more pronounced depression in imports and exports for China and the EU than others.
- In response to the spread of COVID-19, a series of trade-restrictive measures have been introduced around the world. Particularly since March, restrictions to the export of hygiene supplies have become more common globally. On the other hand, there have been a series of trade-facilitating measures such as reduction of tariffs and simplification of import procedures: a cumulative total to 97 as of May 2020, exceeding the total number of trade restriction measures (82) based on JETRO’s research.
3. Japanese companies seeking new business styles in a world of increasing uncertainty
- According to a survey conducted by JETRO in collaboration with Japanese chambers of commerce and industry in each country/region, about 80% of Japanese companies operating overseas expect that sales in 2020 will decline from the previous year. The main reason for operational decline of Japanese companies in relation to COVID-19 was the decrease in both domestic and overseas demand. This was followed by the supply disruption due to the division of domestic and overseas supply chains.
- In response to COVID-19, about 60% of Japanese companies operating overseas are considering revisions to their business strategies and models. Looking at the breakdown of these business revisions, procurement and production accounted for about 20% and 10% of responses respectively, while changes in sales strategy accounted for roughly 70%.
- COVID-19 provided an opportunity for the rapid digitalization of the living infrastructure of people and corporate activities around the world. In addition to medical services such as online medical care, digitalization has progressed in fields such as education and food service industry. In Japan, various new endeavors have begun in response to COVID-19, such as online classes, development of systems to reduce food loss caused by cancellation of events and self-restraint of restaurants.
- The global economic growth rate in 2020 is expected to be lower than the one under the global financial crisis in 2009. Japan's exports, which turned toward negative growth in 2019, are now in a widening decline. Japan’s outward FDI, which reached a new record high in 2019, also started to decline in 2020. With global uncertainty reaching unprecedented levels, “demand shock” and “market loss” brought about by COVID-19, on the heels of US-China friction, are forcing Japanese companies to shift to new business styles.
International Economy Division, Overseas Research Department, JETRO
PIC: Mr. Yoneyama (Director, International Economy Division), Mr. Furukawa, Mr. Asakura and Ms. Ago