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APEC OFFICIAL SYMPOSIUM Impact of Regional Economic Integration in East Asia on APEC Trade Liberalization. Session IV Experiences of Latin American Countries. Fausto Medina-López Deputy Representative, IDB Office in Japan Tokyo, Japan – September 28, 2006. Outline. LAC in World Trade

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Session IV Experiences of Latin American Countries

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Session iv experiences of latin american countries

APEC OFFICIAL SYMPOSIUM

Impact of Regional Economic Integration in East Asia on APEC Trade Liberalization

Session IVExperiences of Latin American Countries

Fausto Medina-López

Deputy Representative, IDB Office in Japan

Tokyo, Japan – September 28, 2006


Session iv experiences of latin american countries

Outline

  • LAC in World Trade

  • The Doha Round Faces an Uncertain Future

  • LAC Bilateral Agreements and the Need for a Renewal of the Region’s Integration Process

  • Trends in Asia-Pacific (AP) – Latin America-Caribbean Relations (LAC)

  • FTAs and Institutional Reforms for Implementing Trade Policy: The Case of Chile and CAFTA


Session iv experiences of latin american countries

LAC in World Trade


Session iv experiences of latin american countries

DOHA ROUND UNCERTAINTIES


Session iv experiences of latin american countries

From Trade to Cooperation

Between Latin America and the Caribbean

and Asia-Pacific


Session iv experiences of latin american countries

  • LAC imports from AP have grown faster than exports

  • Inter-industry bi-regional trade

  • LAC exports: raw materials / commodities

  • AP exports: manufactured goods

Trade Linkages

  • Contrasts between LAC and AP are shaping their current trade relations:

    • Factor endowments

    • Trade policies and policies outcomes

    • Development strategies

Trade Patterns


Session iv experiences of latin american countries

19%

7.5%

Source: UNSD, COMTRADE

LAC’s trade particularly dynamic with AP:


Session iv experiences of latin american countries

LAC’s trade with AP particularly dynamic in the period 1996-2003

Source: COMTRADE


Session iv experiences of latin american countries

LAC Trade with AP (1990-2003)

  • LAC global exports: 9 % p.a.

  • LAC exports to AP: 6 % p.a.

    But: China (21%) & S.Korea (9%)

  • LAC global imports: 10 % p.a.

  • LAC imports from AP: 15 % p.a.

    Note: AP imports share of total LAC imports Up:

    1990 = 8 %

    2003 = 15 %


Session iv experiences of latin american countries

LAC Trade with AP (1990-2003)

Product Composition

  • Share of Manufactures in LAC Total Exports: UP

    1990 = 32%

    2003 = 55%

  • Share of Manufactures in LAC Exports to AP: DOWN

  • Food, Fuels, Metals and Minerals represent now 2/3 of LAC exports to AP

    Pattern due to South America exports

    Mexico and CA have increased Manufacturing Exports to AP


Session iv experiences of latin american countries

Product Composition : Exports

Source: WITS-World Bank

… Primary products have a dominant share in LA’s exports to Asia


Session iv experiences of latin american countries

Product Composition : Imports

Source: WITS-World Bank

… Medium and High-Tech Manufactured products have a dominant share in LA’s imports from Asia


Session iv experiences of latin american countries

AP Trade with LAC (1990-2003)

  • LAC only represents only 2 % of AP

    But it has experienced relatively dynamic growth

    China UP 27 % p.a.

    ASEAN Up 12 % p.a.

    S. Korea Up 11 % p.a.

    Japan Up 4 % p.a.

  • Manufactures dominate AP global exports and represent more than 90 % of AP exports to LAC

  • Some “head-to-head” competition in manufactured goods

    in global markets


Session iv experiences of latin american countries

To promote these positive trends possible avenues are……

  • Promoting intra-industry trade

  • Encouraging bi-regional production networks

  • Expanding opportunities for trade in services

Fast growing AP region is still a relatively unexploited export market for LAC


Session iv experiences of latin american countries

Free Trade Agreements and The Spaghetti Bowl (Asian Noodles)


Session iv experiences of latin american countries

Bi-Regional Integration : RTA / FTAs

  • AP Rising interest in FTAs in the late 1990s

    Concluded 20 – In Negotiation 25 – Planned 13

  • Transpacific Trade Agreements also on the Rise

    • APEC

    • With U.S. (Singapore, Korea)

    • With LAC:

      • Chile-South Korea (2003)

      • Mexico-Japan (2004)

      • Panama-Taiwan(2004)

      • Singapore-NZ-Brunei-Chile

      • Singapore-Panama

      • China-Chile

    • Other LAC-AP Bi-regional Accords in Negotiation

      • Singapore-Peru

      • Singapore-Mexico

      • Taiwan- Guatemala

        --Thailand-Peru

      • Japan-Chile


Session iv experiences of latin american countries

+ INTER-regional (2003-2005)

+ APEC (1989)

Current INTRA-regional

Dominican

Republic

Nicaragua

Myanmar

Cambodia

El Salvador

Guatemala

Honduras

Russia

Panama

Indonesia

Costa

Rica

Bhutan, Maldives,

Nepal, Pakistan

Philippines

Viet Nam

Laos

USA

Malaysia

Paraguay

Bangladesh

Thailand

Brunei Darussalam

Brazil

Argentina

India

Singapore

Uruguay

Sri Lanka

New Zealand

Chile

Mexico

Japan

People’s Rep. of China

Peru

Hong Kong, China

Colombia

Korea

Canada

Bolivia

Ecuador

Chinese Taipei

Australia

Venezuela

Fiji, Solomon Islands,

Vanuatu

Papua New Guinea

Bahamas

Haiti

Fed. States of Micronesia,

Marshall Islands, Kiribati, Palau,

W. Samoa,Tonga, Vanuatu, E. Timor,

Cook Islands, Nauru, Niue, Tuvalu

Dominica, Suriname,

Jamaica, St. Lucia, Belize,

St. Kitts & Nevis, Grenada, Barbados,

Guyana, St. Vincent & the Grenadines,

Antigua & Barbuda, Trinidad & Tobago

ASIA

AMERICAS


Session iv experiences of latin american countries

UNDER NEGOTIATION

Dominican

Republic

Myanmar

Cambodia

Nicaragua

Russia

El Salvador

Guatemala

Honduras

Panama

Indonesia

Costa

Rica

Bhutan, Maldives,

Nepal, Pakistan

Brunei Darussalam

Viet Nam

Laos

USA

Philippines

Malaysia

Paraguay

Bangladesh

Thailand

Brazil

Argentina

India

Singapore

Uruguay

Sri Lanka

New Zealand

Chile

Mexico

Japan

People’s Rep. of China

Peru

Colombia

Hong Kong, China

Korea

Canada

Bolivia

Ecuador

Chinese Taipei

Australia

Venezuela

Fiji, Solomon Islands,

Vanuatu

Papua New Guinea

Bahamas

Haiti

Fed. States of Micronesia,

Marshall Islands, Kiribati, Palau,

W. Samoa,Tonga, Vanuatu, E. Timor,

Cook Islands, Nauru, Niue, Tuvalu

Dominica, Suriname,

Jamaica, St. Lucia, Belize,

St. Kitts & Nevis, Grenada, Barbados,

Guyana, St. Vincent & the Grenadines,

Antigua & Barbuda, Trinidad & Tobago

ASIA

AMERICAS


Session iv experiences of latin american countries

From Trade to Cooperation

Between Latin America and the Caribbean

and Asia-Pacific


Session iv experiences of latin american countries

Cooperation

  • Trade cooperation has been accompanied by closer political and private sector cooperation

  • APEC: incorporating initiatives beyond trade – security

  • FEALAC

  • PBEC

  • PECC


Session iv experiences of latin american countries

Some Political Economy Considerations for Cooperation

  • Cooperation Needs a Focal Point to Begin:

    - Coordination problems

    - Commitment problems

    - Sovereignty Issues

  • Trade is a good focal point

    - Economic ties endogenously create demand for cooperation (externalities)

    - Attracts attention of well-organized interest groups

  • Institutional Development is crucial to sustain a TRADE and COOPERATION Nexus


Session iv experiences of latin american countries

Some final remarks….

  • To promote cooperation:

    • Trade can serve as effective first step

    • Incremental approach is advisable

    • The deeper and more comprehensive the cooperation the more the formal institutional demands

    • Programmed budgets and financing is needed: role of regional financial institutions


Session iv experiences of latin american countries

FTAs and Institutional Reforms: The Cases of Chile and CAFTA-DR


Session iv experiences of latin american countries

Implementing Trade Policy in LAC: The Cases of Chile and CAFTA-DR

  • The multilateral approach to trade liberalization (WTO) is the best trade policy, but in the context of Doha’s problems, FTAs is a second best option

  • But negotiating a FTA is not an easy task, nor is the process of its implementation

  • Chile has an extensive network of FTAs with countries within and outside LAC and has developed a vast experience

  • Central America and the Dominican Republic are relatively newcomers to the game and faced serious problems in the preparation for negotiations of CAFTA-DR; during negotiations; in the process of internal ratification of those agreements and will face more issues during their implementation


Session iv experiences of latin american countries

FTAs Have Become More Complex In Recent Times

  • Following economic reforms initiated in the 1980s, LAC embarked in the 1990s on an intensive integration process:

  • From old ALADI model (trade liberalization of goods, simple rules of origin, import substitution approach, partial tariff reduction, disperse tariff structures, European-type integration, supra national bureaucracies and weak dispute-settlement mechanism)

  • To more recently NAFTA-type model (liberalization of goods, services, investments, intellectual property, government procurement; negative lists and automatic schedules; complex ROO; export-led strategies; lower tariff protection; no bureacratic institutional arrangements; members driven)


Session iv experiences of latin american countries

Implementation Issues

  • Prior to the beginning of negotiations certain conditions are established and amendments to laws required (intellectual property rights) or elimination of certain trade barriers

  • During negotiations, several legal reforms may be introduced in order to prepare overall legal framework to the new set of obligations (environment, labor, etc.)

  • Before the agreement becomes effective some changes in legislation may be introduced to ensure consistency of domestic law with new provisions

  • Internal consultations have to be made before embarking, during the negotiations and when the agreement is approved: Some vocal groups might oppose the ratification

  • Protection of vulnerable sectors (traditional agriculture) and producers


Session iv experiences of latin american countries

Lessons Learned

  • Do not rush: Prepare well before getting involved in the process; be clear about what you want and expect to agree

  • Get trade capacity-building: Develop the appropriate institutions

  • Introduce the required institutional reforms and new legislation

  • Be clear about dispute settlement mechanisms


Session iv experiences of latin american countries

Thank you!

Muchas Gracias!!!

Fausto Medina-López - Deputy Representative, IDB Office in Japan


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