Japan-Russia Bilateral Merchandise Trade Specialization in the Era of Digital Transformation

Abstract

This paper aims to qualitatively assess the Japan-Russia bilateral trade specialization in the era of digital transformation. The index of revealed comparative advantages is calculated to measure the comparative advantages in Japan-Russia bilateral merchandise trade in 2001-2019. The research outcomes showcase that by 2019, Russia has high trade specialization in precious or semi-precious metals and stones, aluminum, mineral fuels, and wood in trade with Japan, while Japan maintains high comparative advantages in transport vehicles, plastic, and rubber. Despite the intensifying digitalization trend in international trade, the Japan-Russia bilateral trade in this field is significantly lagging behind. The results statistically confirm Japan's export specialization in a few ICT products in trade with Russia, however, their total share remains low. Considering the upward trend of Japan's digital exports, it is, therefore, important to develop Japan-Russia cooperation in this area to realize the existing potential and obtain gains from digital trade. There is a window of opportunities in digital cooperation to realize environmentally-friendly smart cities by the application of IoT. The establishment of a joint digital platform will stimulate the Japan-Russia e-commerce and help develop bilateral trade. The growing interest of Japanese business towards online trading with Russia together with the recently announced initiative of the Japanese government to establish a Digital Agency in 2021 may trigger digitalization of the Japanese economy and thus extrapolate digitalization effects on foreign trade of Japan with its trading partners, including Russia. In addition, the negotiation of a bilateral Digital Trade Agreement between the two countries could positively affect the further expansion of digital trade.