September 7, 2018 UNL, Yeutter Institute The Transformational Dynamics of the US-Japan Economic Relationship Clayton Yeutter Institute of International Trade and Finance Ralph Inforzato, Chief Executive Director Japan External Trade Organization (JETRO) Chicago Office 1
INTRODUCTION 1. What is JETRO? (Japan External Trade Organization) 2. The US-Japan Economic Relationship and the Transition of US Trade Policy 2
1 Japan External Trade Organization (JETRO)
7 offices in 5 countries 5 offices in Japan Incl. Tokyo HQ, Osaka HQ and IDE Headquartered in Tokyo with 5 offices in Japan and 7 offices in 5 countries. About 1,800 employees worldwide. New York San Francisco Chicago Los Angeles Atlanta Houston Toronto
The Japan External Trade Organization (JETRO) is a Japanese government-related organization that promotes mutual trade and investment between Japan and the rest of the world. Established in 1958 by the Ministry of International Trade and Industry (now the Ministry of Economy, Trade and Industry METI ) Promoting FDI into Japan Core Focus Helping Japanese SMEs expand their business overseas 5
2 The US Japan Economic Relationship 6
Ambassador Clayton Yeutter: Our Beacon for a US Fair and Free Trade Policy December 10, 190 - March, 2017 7
US-Japan Trade Friction is Long Past (Million USD) 1,000,000 US-Japan trade balance in goods 70.0% 900,000 800,000 700,000 60.0% 50.0% 600,000 500,000 00,000 0.0% 0.0% 00,000 200,000 100,000 8.7% 20.0% 10.0% 0 1985 1986 1987 1988 1989 1990 1991 1992 199 199 1995 1996 1997 1998 1999 2000 2001 2002 200 200 2005 2006 2007 2008 2009 2010 2011 2012 201 201 2015 2016 2017 0.0% US deficit against Japan US total deficit Japan's share in total US deficit (right axis) Source: US Census Bureau 8
Foreign Direct Investment in the U.S. Japanese investment into the U.S. has increased since 1990, resulting in $1 billion of investment stock as of 2015. Japan has become the second-largest investor after the United Kingdom. The investment stock at the end of 2015 was higher by 7% than it was at the end of 2008. Japan has invested $176 billion into the U.S. as the largest investor during this period. $176 billion UP 7% Survey coverage: US companies in which 10% or more of the capital is controlled by foreign companies. Source: U.S. Department of Commerce 9
US Production of Japanese Automakers Greater Than Japan s Exports to US Market Since 1992, Japanese automakers US production has consistently outpaced exports from Japan to the US. In 2017, Japanese automakers built.77 million vehicles in the US..5 Millions of Units 2.5 2 1.5 1 50% decrease 0.5 0 '85 '86 '87 '88 '89 '90 '91 '92 '9 '9 '95 '96 '97 '98 '99 '00 '01 '02 '0 '0 '05 '06 '07 '08 '09 '10 '11 '12 '1 '1 '15 '16 '17 Source: US Census Bureau Exports from Japan to the U.S. JAMA Japanese-Brand Members automakers U.S. Production U.S. production Source: Japan Automobile Manufacturers Association(JAMA) 10
Automotive Sector is Strong, But Industries Have Been Diversified 2008 2009 2010 2011 2012 201 201 2015 2016 2017 Japan has invested in 712 greenfield INDIANA TENNESSEE 6 5 5 7 19 6 15 15 10 17 8 6 10 1 7 10 5 projects in U.S. manufacturing and logistics KENTUCKY 1 2 8 9 9 9 5 11 6 between January 2008 and September 2017. By state, the most popular investment OHIO GEORGIA TEXAS 2 6 6 1 8 9 8 11 7 10 9 1 8 0 destination is Indiana, in which Toyota, ALABAMA 2 6 9 5 01 Honda, and Subaru have built their assembly plants. Many new projects were observed in the states where more than one automaker is located such as SOUTH CAROLINA NORTH CAROLINA Japanese FDI into the U.S. (Manufacturing and Logistics, 2008-the first half of 2017) 2 0 6 5 1 2 8 2 2 2 2 2 Electronic Components 25 Food Tobacco 27 Other 118 Automotive Components 22 Tennessee (Nissan) and Kentucky (Toyota). (Unit: No. of projects) Rubber Industries have become diversified (e.g. chemical, food, service and so on). Industrial Chemicals 6 Metals 6 Source: Financial Times Auto OEM Plastics 57 11
Locations of Japanese Manufacturers In North America Food/Processed food, agricultural or fishery products Textiles (Spinning/Woven fabrics/chemical fibers) Printing/Publishing Paper/Pulp Textile apparel/textile products Lumber/Wood products Furniture/Fixtures Chemical and allied products/petroleum products Plastic products Rubber products Ceramic/Stone and clay products Medicines Fabricated metal products(including plated products) Iron and steel(including cast and wrought products) Non-ferrous metals Electrical machinery/electronic devices(including parts) General-purpose machinery/production machinery(including molds and machine tools) Business oriented machinery (Including office machines, analytical instruments and medical equipment, etc) Information and communication electronics equipment Transportation equipment parts (Motor vehicles/motorcycles) Transportation equipment (Motor vehicles/motorcycles) Transportation equipment parts (Railroad vehicles/ship/aircraft/industrial trucks) Transportation equipment (Railroad vehicles/ship/aircraft/industrial trucks) Miscellaneous manufacturing industries Source: Compiled by JETRO from several companies information 12
Employment in Manufacturing Sector: 2015 Total employment by Japanese manufacturing companies in the US amounts to 00,600 the largest by any foreign country This is an increase of 110,200 (8.%) from 2010, the largest increase by country during that period. Total manufacturing employment in 110,200 UP 8% U.S. grew only 808,000 (7.0%) during that period Note: Companies in which majority is owned by ultimate beneficial owner (UBO), Source: U.S. Department of Commerce, Bureau of Economic Analysis 1
Japanese Companies Contributing to U.S. Exports Japan(LEFT) United Kingdom(LEFT) German(LEFT) France(LEFT) Canada(LEFT) Japanese-Affiliated Companies Represent UP 5.0% Almost 5% of Total U.S. Exports to the World Exports increased by 5.0% from 5,779 million dollars in 2010. Note: Companies in which majority is owned by ultimate beneficial owner (UBO). Source: U.S. Department of Commerce, Bureau of Economic Analysis 1
Comparison to Other Asian Countries Total employment by Japanese companies in the U.S. (2015) was Japan 9.1 times larger than that of Australian companies Australia 19.5 times larger than Chinese companies. China Note: Majority owned companies by ultimate beneficial owner (UBO) Source: U.S. Department of Commerce, Bureau of Economic Analysis 15
Japanese companies plans for overseas business (%) 80.0 70.0 60.0 50.0 0.0 0.0 20.0 10.0 56. 21.1 Percentage of Japanese firms that currently have an overseas base and are planning to expand (by country/region) 67.9 69.0 59.2 7.8 58.6% expressed concerns regarding policy changes by US administration 21.8 26.0 25. 19. 19.2 15.7 15.9 15.7 56.9 56.5 7.5 7.2 1. 18.1 16.1 5.7 52..7.5 70.5 69.2 9. 29.0 20.6 19.7 21.5 20.1 18.5 18.2 0.0 2011 2012 201 201 2015 2016 2017 China ASEAN6 U.S. Europe India Source: FY2017 Survey on the International Operations of Japanese Firms in Japan, JETRO (More than,000 Japanese firms, mainly SMEs, responded in this survey) 16
US Trade Policy in Transition: 2018 Retaliation Canada: 25% tariff on steel imports; 10% tariff on aluminum and other products took effect July 1 totaling $12.6 billion EU: The EU introduced retaliatory measures on US products June 22 worth $.2 billion ranging from steel and aluminum products to agricultural goods Mexico: Tariffs of 15-25% on steel imports from the US and 20-25% on US farm products implemented June 5 Turkey: Tariffs worth $267 million on items such as coal, paper, walnuts, tobacco, rice, whiskey, and cars China: 15-25% tariff on agricultural products, scrap aluminum Russia: Duties of 25-0% on some US equipment used in construction, oil and gas, metal processing, and fiber optics Source: S&P Global Platts, July 2018 17
Thank you for your attention. For more details, please contact JETRO Chicago: Ralph Inforzato, Chief Executive Director Ralph_Inforzato@jetro.go.jp Tsubasa Hashimoto, Director of Public Affairs Tsubasa_Hashimoto@jetro.go.jp 18