Japan sees decline in value-added trade surplus with Korea

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In this Wednesday, July 10, 2019, file photo, South Korean President Moon Jae-in, third from right, speaks during a meeting with business leaders at the presidential Blue House in Seoul, South Korea. Moon criticized comments by Japanese officials who questioned the credibility of Seoul's sanctions against North Korea while justifying Tokyo's move to strengthen controls on high-tech exports to South Korea. Moon said his government was committed to resolving the matter diplomatically and urged Japan to refrain from pushing the situation to a "dead-end street." (Bae Jae-man/Yonhap via AP, File)

SEOUL (The Korea Herald) — Japan’s trade surplus in value-added goods and services (TiVA) with South Korea took a downturn during the 2005-2015 period, reflecting the diversifying structure of logistics and trade, statistics showed Sunday.

In light of the interconnection of the global value chain, the country’s recent curbs on hi-tech exports to Korea are likely to affect not only the two countries but also the regional and global economy in general, Seoul’s government officials noted.

According to the Organization of Economic Cooperation and Development, Japan logged $135.2 billion in aggregated TiVA from 2005 to 2015. Its total trade surplus during the same period stood at $303.2 billion.

TiVA, in international trade is equivalent to operating profits of corporate business transactions, figuring out the value added by each country in the production and distribution process.

The OECD indicator was developed to address the dilemma that conventional measures of international trade can no longer precisely reflect the flow of goods and services in the complex global production chains.

For instance, when a Korean customer purchases a Japanese television for 1 million won ($848), the OECD would exclude the display panel price when assessing Japan’s TiVA in the given deal.

With an increasing number of countries participating in the global value chain, Japan’s TiVA surplus with Korea has been declining over recent years, data showed.

Tokyo’s TiVA with Seoul dipped from $14 billion in 2005 to $3.9 billion in 2015, down 72 percent during the ten years. Its total trade surplus decreased 58 percent during the same period, from $27.3 billion to $15.7 billion.

Seoul’s Ministry of Economy and Finance noted that given the multilateral, globalized trade structure of today, the impact of Japan’s disputed export curbs will spread beyond the East Asian region.

“The recent growth of the global economy was partly due to the closely interrelated global value chains,” said a ministry official.

“Japan’s latest actions including the export curbs would result in the severance of such value chains and consequently deliver negative impacts on the global economy.”