Japan External Trade Organization
(1) Trends in Trade
(2) Changes in Trade Environment
(3) Developments in Trade
with Japan
(4) Economic
Indicators
According to the Asian Development Bank (ADB), average real GDP growth in Asia declined from 8.2 percent in 1995 to 7.4 percent in 1996, due to a sharp slowdown in export growth and the fiscal austerity policies adopted as a result of concerns over economic overheating caused by the rapidity of growth since 1990. With the global average growth rate being 4 percent and the next highest growth rate after Asia's being Africa's 5 percent, it can still be said that Asia is leading the world's economic growth. In the meantime, average inflation in Asia declined from 10.2 percent in 1994 to 9.1 percent in 1995 and further down to 6.1 percent in 1996, as a result of tight budgetary controls and firm monetary policies by governments trying to ensure stable growth.
Exports of 13 main countries and regions in Asia declined to 4.8 percent, on a dollar basis, in 1996 from 22.1 percent in 1995 and from 18.6 percent in 1994. In the same way, imports declined to 6.5 percent in 1996 from 23.4 percent in 1995 and from 17.2 percent in 1994. The drop in the growth rate of exports from China, the Republic of Korea, and Thailand were particularly sharp. Notable slowdowns were also evident in Taiwan, Hong Kong, Singapore, and Malaysia - all leading exporters. The main causes for the slowdown in exports were [1] the deteriorating markets for semiconductors, main export products of Asia, in particular DRAMs, due to the worldwide glut in these items, [2] the effects of the strong dollar and weaker yen, and [3] the slow growth in intra-regional trade. In China, there were repercussions from changes in the trade system, specifically the reduction in the rate of refund of the value added tax (VAT) on exports.
Most countries in Asia have been making rapid progress in recent years in economic liberalization, deregulation, and other changes in its internal institutions relating to the trade system. For example, the ASEAN countries have been working to set up the ASEAN Free Trade Area (AFTA), China has been making effort to join the WTO, and the Republic of Korea gained entry into the OECD (December 1996).
At the same time, the backlash from the industries affected has created pressures against liberalization. Asian countries are faced with the difficult task of balancing liberalization with protection of their domestic industries. Indonesia, for example, launched a national car project (February 1996) and raised the tariff on ethylene and propylene from 5 percent to 25 percent (June). Vietnam banned imports of 12 items including paper, cement, and automobiles with less than 12 seats in order to protect domestic firms already burdened with excessive inventories (May 1996). These countries find strengthening their domestic manufacturers to be an issue of overriding priority. Similar moves are being seen in Australia as well. In addition, considerable use has been made of bilateral negotiations to supplement the multilateral trade system of the WTO and the Asia-Pacific Economic Cooperation (APEC) forum.
The Asia-Pacific region is expanding and deepening interdependencies in regional economic unions - first and foremost are APEC, now entering the stage of implementation of trade liberalization, and ASEAN, now a nine-member organization with the addition of Laos and Myanmar. In addition, there have been the formation of Bangladesh, India, Sri Lanka and Thailand Economic Cooperation (BISTEC), and the birth of the Summit Conference of the Developing Countries (D8) participated in by the heads of eight Islamic countries (Turkey, Iran, Egypt, Nigeria, Pakistan, Bangladesh, Indonesia, and Malaysia) (both launched in June 1997). Broader regional networks are being built through the creation of such new economic cooperation frameworks. Australia and New Zealand, on their part, have been moving toward economic union through an agreement on closer economic ties (CER) and have been trying to link up with AFTA and Mercosur.
Exports of the East Asian countries (Asian NIEs, ASEAN4, and China) to Japan slowed in 1996, except in the case of the Philippines, and rose by only 6.2 percent (DOT, dollar basis). Imports by the Asian NIEs and ASEAN from Japan dropped (down 8.3% and 4.7%, respectively), with overall imports thereby falling 6.3 percent.
The main reason for the slowing of exports to Japan was the reduction in dollar based export prices by the countries and regions of East Asia in an effort to maintain price competitiveness in the wake of the fall in the value of the yen in 1996. The reason for the drop in imports from Japan was the slower imports of capital goods and intermediate goods due to the slowdown of the East Asian economy and its exports and, at the same time, the progress made in import substitution through local production. As a result, China turned its US$500 million deficit in trade with Japan in 1995 to a US$1.7 billion surplus in 1996. The deficit of East Asia as a whole in trade with Japan shrank 25 percent to US$55.9 billion.