TPP and Pacific Alliance - 日本商工会議所 · Improving image of synthesis being developed 1 Integration focused on Asia-Pacific region 2 3 In addition to strengthening intra-regional

TPP and Pacific Alliance: Business Opportunities Born from Chile-Japan Economic Relations

December 2, 2014 Tadayuki Nagashima

Executive Vice President Japan External Trade Organization

1

Copyright JETRO All rights reserved

Copyright (C) 2013 JETRO. All rights reserved.

1. Economic relationship between Chile and Japan Trade, investment and global value chains (GVCs)

2. GVCs and region-wide FTAs

3. What is the aim of the Pacific Alliance?

4. TPP and WTO

2 Today’s four points

Copyright-JETRO All rights reserved

Economic relationship between Chile and Japan Trade, investment and global value chains (GVCs)

3

Copper ore 59%

Fish 15%

Pulpwood 6%

Wine 2%

Fruits and vegetables

2%

Copper and copper alloys

2%

Others 14%

Motor vehicles

54%

Tires 13%

Machinery 10%

Petroleum products

4%

Others 19%

Chile-Japan trade (total amount, major items)

[Total amount of import and export] [Export to Chile: Breakdown of major items (2013)]

[Import from Chile: Breakdown of major items]

Source: Created by JETRO based on Trade Statistics of Japan Copyright-JETRO All rights reserved

0

500

1,000

(Billion yen)

Chile → Japan

Japan → Chile

4

Mining 89%

Wholesale, retail 3%

Others 8%

2.0

16.0 10.0

17.4 22.0

50.8

59.2

72.6

108.7

0

50

100

2005 2006 2007 2008 2009 2010 2011 2012 2013

(Billion yen)

Direct investment by Japan into Chile (total amount, major fields)

Source: Created by JETRO based on Trade Statistics of Japan

[Trend in direct investment by Japan into Chile] [Breakdown of major fields (2013)]

[Source countries of Japan’s copper ore (2013)]


0% 50% 100%

Chile Peru Australia

Canada

Indonesia

PNG

others

5

Japanese companies develop copper mines in Chile

Import copper ore from Chile

Refine in Japan

Process into auto-parts (wire harness)

Incorporate in automobiles

Export automobiles

GVC: Chile’s copper ore supporting Japan’s auto-production

Japanese companies expand development in Chile (FDI)

Half of Japan’s copper ore import comes from Chile

Chile: Largest copper reserve in world

Seven refineries in Japan (production capacity: 1.7 mil. tons)

60% of copper is used for electric cables → 10% of copper cables is used for automobiles

Japan’s auto-production: 9.63 mil. cars (2013)

Japan: 3rd largest auto-producer in world

Japan’s auto-export: 4.675 mil. cars (2013) * Auto-export to Chile: 131,179 cars (2013)


6

Import of salmon by Japan from Chile expanding

In addition to direct import (Chile → Japan), there is a trend of entry into the Japanese market after processing in third countries

[Frozen salmon: Trend in import amount from Chile]

Source: Created by JETRO based on Trade Statistics of Japan


7

0

10

20

30

40

50

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

(Billion yen)

Chile Tailandia Japon

Source: Created by JETRO based on website of Nippon Suisan Kaisha


8

Procurement and farming Processing Product

Fishing of sockeye salmon in Ozernaya River in West Kamchatka, Russia

Processing plant of Chile SA

Autumn salmon in Hokkaido

Nissui Thailand (Processed to fillet, boneless and flakes)

Hachikan (Bottling)

Raw skirt meat exported to Singapore

Lightly roasted trout exported to Japan

Bottled salmon for domestic distribution in Japan

http://www.nissui.co.jp/english/index.html

Chile Tailandia Japon

Rice bowl restaurant chain Established in May 1991 38 shops around Japan

Menu “minced salmon

rice bowl”

Using salmon trout which is bred on well-managed farms

Exported from Chile to Thailand with primary processing in Thailand

Flavored and processed at plants in Japan and served in restaurants

Source: Created by JETRO based on website of Don


9

http://www.the-don.co.jp/


GVC and region-wide FTAs

10

EPA (FTA)

EPA (FTA)

Eliminating tariff (3.5%) in 10 years

5% tariff

EPA (FTA) tariff rate does not apply

EPA (FTA) rule of origin

FTA signed (October 4, 2013)

7.2% tariff

Limited to ingredients produced in ASEAN member states

Limitation of bilateral FTA for GVC

《Frozen food》

《Frozen food》《Preparation》

Note: In general, products are processed in bond, on which no tariff is charged


11

Thailand

Chile

Japan

TPP RCEP

FTAAP

Region-wide FTAs necessary to facilitate GVCs

Recognizing APEC has a critical role to play in shaping and nurturing regional economic integration, we agree that APEC should make more important and meaningful contributions as an incubator to translate the Free Trade Area of the Asia-Pacific (FTAAP) from a vision to reality. We reaffirm our commitment to the eventual FTAAP as a major instrument to further APEC's regional economic integration agenda.


12 22nd APEC Economic Leaders’ Declaration Beijing, China November 11, 2014

TPP

RCEP

TTIP

EU-Japan

13

Alianza del

Pacífico


Four mega-FTAs in world and Alianza del Pacífico

Item Alianza del Pacífico Mercosur

Integration degree

Free trade agreement ◎ Customs union

History February 10, 2014 (signed) Established as free trade area (additional protocol)

◎ January 1, 1995 (in effect) Established as customs union

Member countries/

size △

Four countries GDP $2.1 trillion Population 210 million

○

Six countries (four countries at the time of establishment)

GDP $3.2 trillion Population 290 million

Speed/ scope

◎

Comprehensive agreement was reached immediately, including market access (elimination of tariff), governmental procurement, liberalization of cross-border services, investment and e-commerce

Scope is steadily expanding from market access (elimination of tariff). Slow speed regarding liberalization of cross-border services: Agreement concluded in 1997 → enforced in 2005 → fields of liberalization are decided over 10-year negotiations

Trade agreement with Japan

◎

With four member countries, individual economic partnership agreements (EPAs) are in effect or under negotiation

No EPA negotiation. Study group established at Brazil-Japan private level

Comparison between Alianza del Pacífico and Mercosur 14


FTA coverage rate of major countries/regions (2013)

Top three countries regarding FTA coverage rate are in Latin America (Chile, Peru and Mexico) → Foundation for FTA utilization is established

15


91.8

91.4

80.8

74.4

70.5

69.2

67.1

59.7

51.9

39.8

36.0

25.1

18.2

17.3

16.7

15.5

0 10 20 30 40 50 60 70 80 90 100

チリ

ペルー

メキシコ

EU28

シンガポール

カナダ

コロンビア

ASEAN

ニュージーランド

米国

韓国

オーストラリア

日本

中国

インド

ブラジル

Chile

Peru

Mexico

Singapore

Canada

Colombia

New Zealand

US

Korea

Australia

Japan

China

India

Brazil

EU28

ASEAN

(%)


What is the aim of the Pacific Alliance?

16

Alianza del Pacífico: Comparison with Mercosur, ASEAN and India

GDP ($1 billion) Population (1 million) GDP per capita (dollars)

17

[2013 IMF estimate]

Exceeding India and equal to ASEAN 1/6 of India, 1/3 of ASEAN Seven times that of India, three times that of ASEAN

Source: Created by JETRO based on IMF World Economic Outlook Database April 2014 Copyright JETRO All rights reserved

Brazil 2,243 Brazil 198

2,125

3,219

2,406

1,871

0 1,000 2,000 3,000 4,000

Alianza delPacífico

Mercosur

ASEAN

India

214

291

626

1,243

0 500 1,000 1,500


Mercosur

ASEAN

India

9,925

11,062

3,845

1,505

0 5,000 10,000 15,000


Mercosur

ASEAN

India

Changes in BOP 18

Decreasing BOP → growing middle class → expanding consumer market

↑ B

OP

↑

Ext

rem

e

po

vert

y

(%)

Source: Created by JETRO based on materials of Comissão Econômica para a América Latina e o Caribe Copyright JETRO All rights reserved

5.6 3.1

24.4

6.0

19.9

10.4 12.6 14.2 13.2

5.4

18.6

11.3

20.2

11.0

54.7

25.8

54.2

32.9

39.4

37.1

37.5

18.6

43.8

28.2

0

10

20

30

40

50

60

2000 2011 2001 2012 2002 2012 2002 2012 2001 2012 1999 2012

Chile Peru Colombia Mexico Brazil Latin America

Stock exchange Number of listed

companies Market capitalization

(million dollars)

Transaction (million dollars)

MILA

Santiago (Chile) 306 265,150 41,227

Bogota (Colombia) 78 202,693 20,409

Lima (Peru) 271 80,978 3,173

Mexico 143 526,016 163,692

Total 798 1,074,836 228,501

São Paulo (Brazil) 363 1,020,455 739,678

(Reference) New York 2,371 17,949,884 12,730,493

(Reference) Tokyo 3,419 4,543,169 5,888,102

Integration of MILA: Mercado Integrado Latinoamericano (MILA)

[Outline of Mercado Integrado Latinoamericano (2013)]

Source: World Federation of Exchanges

19


Region-wide FTAs: Intra-regional trade ratio (2012)

Alianza del Pacífico: Only 4% Other purposes would be needed in addition to

forming intra-regional supply chains

(%) 【2012】

20

Source: Created by JETRO based on IMF Direction of Trade Copyright JETRO All rights reserved

4.0

15.9

40.2

24.5

20.2

43.2

42.0

57.4

55.0

63.3

0 10 20 30 40 50 60 70

Alianza del Pacífico

Mercosur

NAFTA

ASEAN

China-Korea-Japan

RCEP

TPP

EU-Japan

US-EU

EU

62.5

60

65

60

35

60

55

55

40

40

0 10 20 30 40 50 60 70

【メキシコ締結FTA】

NAFTA

メキシコ・EU

メキシコ日本

メキシコ・メルコスール …

太平洋同盟

【主要FTA】

メルコスール

米国・韓国

EU・韓国

ASEAN

日本・ASEAN

[FTAs of Mexico]

Mexico-EU

Mexico-Japan

Mexico-Mercosur


[Major FTAs]

US-Korea

Mercosur

EU-Korea

Japan-ASEAN

ASEAN ASEAN ASEAN

Japan-ASEAN

NAFTA

Mexico-EU

Mexico-Mercosur


21 Comparison of rule of origin (passenger cars)

Moderate rule of origin Forming supply chains within region + α

(%)

Source: Created by JETRO based on relevant agreement statements Copyright JETRO All rights reserved

Ⅰ The Pacific Pumas 1. The Pacific Pumas 2. Pumanomics 3. Improved Governance 4. Puma Integration

Ⅱ Global Opportunities

5. The Pacific Alliance 6. Latin America Divided? 7. A Trans-Atlantic Triangle 8. Harnessing the Dragon

Ⅲ Prepared to Pounce?

The Puma: A powerful, fast, agile, lean and stealthy animal. Efficient and resourceful, this New World cat can thrive in mountainous highlands and humid rainforests. It is a fitting mascot for the emergence of Mexico, Colombia, Peru and Chile.

[Issued in March 2014] The Pacific Pumas

Perspective of US think tank (example) 22


Institutional harmonization with developed countries: WTO

Improving image of synthesis being developed

Integration focused on Asia-Pacific region 1

2

3

23 In addition to strengthening intra-regional supply chains…

Bolstering appeal of investment destinations

Establishment of basis for economic development through incorporation of foreign capital

4

An escape from the “middle-income trap”? Copyright JETRO All rights reserved Source: Created by JETRO based on IMF Direction of Trade


TPP and WTO

24

Conclusion of FTA in Alianza del Pacífico

Close relationship between Alianza del Pacífico and TPP

25


FTA partner → Alianza del Pacífico North America (NAFTA) East Asia

Mexico Chile Peru Colombia US Canada Japan Korea China

Mexico 1999 2012 1994 1994 2005 × ×

Chile 1999 2009 2009 2004 1997 2007 2004 2009

Peru 2012 2009 2006 2009 2009 2012 2011 2010

Colombia 1994 2009 2006 2012 2011 Under

negotiation Signed (2013) ×

FTA partner →

ASEAN Oceania

P4

Thailand Indonesia Malaysia Vietnam Singapore Brunei New Zealand Australia

Mexico × × × × × × × ×

Chile Signed (2013) Negotiation

started (2014) 2012 2014 2006 2009

Peru 2011 × × × 2009 × × ×

Colombia × × × × × × × ×

FTA partner →

Europe South America

EU Mercosur

Mexico 2000 Auto Pact

(2006) Uruguay (2004)

Chile 2003 1996

Peru 2013 2005

Colombia 2013 2005

TPP TPP

TPP

26

TPP negotiation field Alianza del Pacífico (Reference) US-Korea FTA

1 Market access of goods ○ ○

2 Rules of origin ○ ○

3 Trade facilitation ○ ○

4 Sanitary and phyto-sanitary (SPS) measures ○ ○

5 Technical barriers to trade (TBT) ○ ○

6 Trade remedies (safeguards) (Specified in bilateral FTA) ○

7 Governmental procurement ○ ○

8 Intellectual property (Specified in bilateral FTA) ○

9 Competition policy (Specified in bilateral FTA) ○

10 Cross-border services ○ ○

11 Business mobility (temporary immigration) (Specified in bilateral FTA) ×

12 Financial services ○ ○

13 Telecommunications ○ ○

14 E-commerce ○ ○

15 Investment ○ ○

16 Environment (Specified in bilateral FTA) ○

17 Labor (Specified in bilateral FTA) ○

18 Legal and institutional issues ○ ○

19 Dispute settlement ○ ○

20 Capacity building cooperation (Negotiated in working group) ×

21 Horizontal issues (Negotiated in working group) ×

(Area not included in TPP negotiations) Fleet service

Agriculture

Textile and apparel products Pharmaceuticals and medical

equipment

Integration with Alianza del Pacífico in mind: Comparison with TPP

Source: Created by JETRO based on relevant agreement statement Copyright JETRO All rights reserved

WTO plurilateral agreement

27 Institutional harmonization with developed countries (US, EU and Japan): WTO


Agreement Japan US EU Alianza del Pacífico Mercosur China ASEAN India

Governmental procurement

In effect (1996), expansion agreed upon and in effect (April 2014, Japan)

○ ○ ○ × (Equivalent provisions specified in EPA with Japan)

× × △ (Singapore) ×

ITA (information technology agreement)

In effect (1997), expansion under negotiation

○ ○ ○ △ (Colombia, Peru) × ○

△ (Indonesia, Malaysia, Philippines, Singapore, Thailand, Vietnam)

○

New service trade

Under negotiation (from June 2013)

○ ○ ○ ○ △

(Paraguay)

× (Intention of joining announced in September 2013)

× ×

Eco-friendly goods

Start of negotiations announced (January 2014)

○ ○ ○ Promoted by APEC member states (Mexico, Chile, Peru)

× ○ △ (Singapore) ×

Documents

TPP and Pacific Alliance - 日本商工会議所 · Improving image of synthesis being developed 1 Integration focused on Asia-Pacific region 2 3 In addition to strengthening intra-regional