By Marcus Leach
New export opportunities worth €900million a year by 2020 could emerge for British companies trading with Japan and Korea according to a report conducted on behalf of the European Commission.
‘The Executive Training Programme’s: EU Trade with Japan & Korea’ report maintains that if export growth from UK to Japan and Korea follows growth patterns in UK’s non-EU exports over the last ten years, British companies could enjoy significant new export opportunities by 2020.
According to the report, UK trades significantly less with Japan and Korea, on a per capita basis, than with Australia, another developed economy that is located about the same distance from the EU. Per capita, Japan consumes approximately €37 worth of British imports per year, while the equivalent figure for Korea is €48. However, Australians consume a significantly higher amount of British goods at €164 worth per capita. This points to the importance of factors apart from distance, such as culture, language and business environment in maximising trade and export opportunities.
‘The Executive Training Programme’s: EU Trade with Japan & Korea’ report was conducted by economist Ronan Lyons of Oxford University, on behalf of the European Commission to launch the new cycle of its Executive Training Programme (ETP). The ETP provides European companies’ executives with the knowledge and skills necessary to overcome business, language and cultural barriers in order to trade successfully in the Japanese and Korean markets.
“The variation between EU exports to Australia versus those to Japan and Korea points to significant export opportunities for European businesses in these Asian markets," commenting on the research, Tung-Lai Margue, Director, Head of the Service for Foreign Policy Instruments of the European Commission, said.
"Over the past 30 years the Executive Training Programme has become a key instrument in supporting EU companies’ expansion in Japan and Korea, helping them to understand business practices in those markets and overcome language and cultural barriers to successful trade relations.
“This report clearly highlights that, as two of the largest economies in the world, these markets offer a wealth of opportunity to European businesses. The ETP is uniquely positioned to enable European businesses to unlock the potential of these complex and idiosyncratic markets.”
According to the IMF’s World Economic Outlook, Japan’s economy is expected to grow by approximately 18% between 2010 and 2020 while Japanese imports of both goods and services is anticipated to grow by 50% between now and 2016.
The share of British exports outside the EU that went to Japan fell from 4.8% in 2000 to 3.3% in 2010. With no change in trend, this could fall further to 2.3% by 2020. In 2010, Japan was Great Britain’s fifth largest market for exports outside the EU, down from second largest in 2000. While British exports outside the EU have grown on average 1.2% per year over the past ten years, exports to Japan have declined at an average annual rate of 2.5% in the same period.
The research report highlights opportunities for particular sectors within Japan. Economist Ronan Lyons, author of the report, commented, “Machinery such as electronics, comprises 41% of all Great Britain’s exports outside the EU. In the case of exports from UK to Japan, however, the figure is just 32%. An increase in machinery exports to Japan in line with other countries could represent a €390million opportunity for British firms.”
“Foreign direct investment presents a range of further opportunities for British firms," Lyons continued.
"For example, construction activity in Japan over coming years will be driven by the reconstruction following the earthquake earlier this year - the most expensive natural disaster in history. The reconstruction package announced by the Japanese Government is estimated at €36billion. Also, Japan faces particular challenges in relation to healthcare, with 40% of its population predicted to be over the age of 65 by 2050. The medical devices market in Japan, worth €20billion in 2009, is currently dominated by American rather the EU firms.”
In relation to Korea, the report shows that the proportion of UK exports to that market has decreased over the past 10 years, from 2.0% in 2000 to 1.7 % in 2010. If this trend continues exports from UK to Korea could reach 1.4% by 2020. However, with the coming into force of a free-trade agreement between the EU and Korea in July of this year, trade may continue to expand rapidly over coming years. According to the IMF’s World Economic Outlook, Korea’s economy is expected to grow by about 53% between 2010 and 2020 while imports of both goods and services is anticipated to grow by 75% between 2011 and 2016.
The research shows that fuels comprise 10% of all UK’s exports outside the EU but account for just 4% of its trade with Korea. An increase in fuel exports to Korea in line with its exports globally would present a €146million opportunity for British fuel firms.
As a result of the Korean Government’s ‘Low Carbon, Green Growth’ strategy and a €11.5billion economic stimulus package, the environment and green tech sector in Korea is booming, with the Ministry for the Environment in Korea predicting that it will double in size to €45billion by 2013. Also, it is estimated that Korea’s healthcare sector, which was worth €38billion in 2007, will grow rapidly in coming years, by an average growth rate of 12-15% per annum.
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