Commentary / Japan

Now is the time for stronger G20 trade and investment

by Osamu Onodera

Contributing Writer

The Group of 20 Trade and Digital Economy Ministers Meeting is approaching. Over 50 trade ministers and digital economy ministers will get together for the first time in G20 history in Tsukuba, Ibaraki Prefecture, on June 8 -9, to discuss how G20 economies can promote trade and investment, and maximize benefits from the development of the digital economy and technologies to ensure sustainable growth of the global economy.

Expectations are high that the G20 will continue to play a positive role in fostering economic opportunity and addressing challenges in the global landscape. Trade and investment have been important drivers of the unprecedented global economic growth and poverty reduction enjoyed in recent times. This rapid growth contributed to an early achievement of the United Nations goal of halving extreme poverty between 1990 and 2015. Digitalization is expected to continue to create benefits for our economies and societies as a whole, and help achieve the inclusive, innovative and human-centred future society that Japan promotes as “Society 5.0.”

However, the global economic and social system faces considerable challenges. Rapid globalization has led some to believe they are not benefitting sufficiently and are discontent. There are also signs of adaptation fatigue, as domestic and international systems and the wider population struggle to keep pace with the fast-changing times. The World Trade Organization has found it difficult to keep rules up to date, in areas such as e-commerce, investment, services and trade-distortive subsidies among others. These challenges become more acute in the context of increasing trade tensions between major trading countries. As global markets become more integrated, level playing field issues, including market-distortive subsidies and other practices, are gaining renewed attention. For example, the Global Forum on Steel Excess Capacity has been working to find a global solution to excess capacity in the steel sector.

In the digital economy, development and utilization of emerging technologies such as artificial intelligence and the internet of things (IoT) can benefit society greatly by propelling digitalization into the next stage where cyber and physical world are fully integrated, but these developments may also invite new challenges and concerns in terms of privacy and security.

Japan believes that more international cooperation, not less, is part of the solution to ensuring global prosperity is shared by all. Japan, as the G20 host, will be using the ministerial meeting to send positive messages on promotion of a free, fair and mutually beneficial trade and investment environment for achieving the Sustainable Development Goals, and contributing to create an innovative and inclusive society through digitalization. To this end, Japan will be encouraging ministerial engagement on several themes.

For the digital economy, data is becoming an increasingly important driver of economic activity and innovation, and promoting the free flow of data will be one of the topics to be discussed. At the World Economic Forum in Davos, Switzerland in January, Prime Minister Shinzo Abe set forth the concept of “Data free flow with trust.” We hope to share such concept with member countries at the ministerial meeting. Digital economy ministers will also discuss how digital technology can better be used for the benefits for society through the discussion on AI, cybersecurity and others.

For trade, we will discuss a number of issues including stepping up our dialogue on current trade developments, of which I will briefly outline three.

(1) WTO reform and related issues

Last year, G20 leaders recognized that the WTO is in need of reform to improve its functioning. The WTO has served the global economy well as the bedrock of the rules-based multilateral trading system, providing stable and predictable conditions for trade and investment. However, the WTO system is experiencing increased stress, as rules designed for the 20th century become outdated and inadequacies of the system become apparent. Decision-making rests with WTO members in Geneva but the G20 should seek to maintain political momentum for reform by sharing common views on how best to safeguard the system in the main areas and maintain its relevance into the future.

(2) Trade and investment’s contribution to sustainable and inclusive growth

Technology and globalization can improve access to new products and services, enhance productivity and increase the overall size of the “pie.” But there is an increasing view that the benefits are not being shared widely enough. Japan hopes that the G20 can send a message on sharing more widely the benefits of trade and investment by enhancing the participation of micro, small and medium-size enterprises, developing countries and women in global value chains. The idea of win-win-win, or “Sanpo-yoshi,” a traditional Japanese concept that states that ensuring all three parties — the seller, the buyer and the local community — benefit is key to success and sustainability, provides useful food for thought in this regard.

It may also be increasingly important to maintain a sound business environment that promotes market-driven investment decision and that allows businesses large and small to thrive on a level playing field. There is a lot that G20 members can do to promote sustainable and inclusive growth, by learning from each other, and by listening to the voice of business and other stakeholders.

(3) Interface between trade and the digital economy

Given the growing significance of cross-border data flows in all economic sectors and ever increasing cross-border electronic commerce flows, and the borderless nature of the digital economy, the importance of deepening discussions at the interface of trade and the digital economy is increasing. Trade ministers and digital economy ministers will discuss a number of issues at the interface between trade and the digital economy, with a view to increasing cooperation to harness the potential of the digital economy.

The issue of e-commerce has been discussed in the WTO for quite some time. E-commerce allows producers and consumers to access a truly global marketplace, and the need for trade rules has been increasingly recognized. In January, 76 WTO members confirmed their intention to commence WTO negotiations on trade-related aspects of e-commerce. The ministerial meeting presents an ideal opportunity to give political impetus to these important discussions.

The G20 is uniquely placed to take collective action to ensure future prosperity as the premier forum for international economic cooperation. It is Japan’s hope that the G20 together can find a good way forward.

Osamu Onodera is deputy director-general for trade policy (in charge of the G20) at the Ministry of Economy, Trade and Industry’s Trade Policy Bureau.