16th Joint Meeting of Brazil-Japan Economic Cooperation Committee

Carlos MarianiNational Confederation of Industry

Bilateral Trade in perspective: balanced numbers

- Fast and sustainable growth during the last decade- Decline in 2012, specially due to Brazilian exports prices of basic products - Bilateral trade in 2013: growth in exports (+8%), but imports declining (-15%)

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

2.3 2.83.5 3.9 4.3

6.1

4.3

7.1

9.58.0

2.5 2.9 3.4 3.84.6

6.85.4

7.07.9 7.7

-0.2 -0.1 0.1 0.1 -0.3 -0.7 -1.10.2

1.60.2

ExpImpSurplus

Brazil Japan Trade Flow – US$ billions

Trade composition: What changes can we expect in the short term?

11.7%

14.9%

73.4%

ManufactureSemimanufactureBasic products

99.5%

ManufactureSemimanufactureBasic products

Brazilian exports to Japan Brazilian imports from Japan

Japanese companies: important investors in Brazil

Japanese Foreign Direct Investments in Brazil

US$ 4 billions (Acquisition of

Schincariol)

US$ 1,2 billion (joint venture in

Australia)

US$ 1 billion (New factory in

Goiás)

2011 – 2012 investment announcement

US$ 50 millions (expansion of factory in São Paulo)

2011 – 4th largest investor (US$ 7.6 billions)

2012 – 10th largest investor(US$ 1.5 billion)

Trade and investment complementarities between both economies remain

But, what has advanced and what’s missing to advance more?

Some issues on trade and investments have advanced

• Transfer Price legislation in Brazil:

A new law passed in 2012 defining calculation methods for Transfer Price. Japanese companies with investments in Brazil were very active.

• Pork meat from Santa Catarina:

Meat exports started to be shipped this year.

• Digital TV standard:

More countries adopted Brazilian-Japanese digital TV standard.

To strengthen and work on a clear bilateral agenda of

obstacles and opportunities to increase trade and

investment

EPA

Ways to advance more

Advantage: shorten results

Disadvantage: limited results

Advantage: very broad market access coverage

Disadvantage: sensitive issues for both sides

Reasons to discuss an EPA

Broad scope of trade, investment and cooperation

Multiplication of bilateral agreements

Need to diversify exports to Japan and intra firm trade

Question: Does Brazil and Japan see each other as strategic partners for an Agreement?

Japan and the Transpacific Partnership (TPP)

Global and regional value chains

Brazilian strategy for trade agreements: Is it time to change? Is Japan on the list?

Chile Peru México Coreia do Sul

U.E. China EUA Japão Brasil

59.6%

0.7%

60.6%

2.8%

44.0%

9.5%

21.4%

7.4%4.1%

82.2%73.7%

63.5% 61.0%

45.2%

30.5%23.4% 23.4%

10.2%

2003 2012

Market access potential through Preferential Trade Agreements already celebrated – selected countries

- Brazil and Japan: low market-access agreements currently in force- Concerns about Brazil’s economic isolation

MERCOSUL – European Union

Countries are finalizing their lists of goods to exchange with European Union, probably in the end of the year;

Status

MERCOSUR shall continue to be the institutional structure for Brazil to negotiate, but the tariff reductions of MERCOSUR’s new agreements can occur in different speeds in order to advance extra-regional negotiations. There are already precedents.

Flexibility to negotiate

The feasibility of EPA needs a comprehensive evaluation from CNI and

KEIDANREN.

• Tariff issues: sugar, ethanol, metal, wood and furnitures, processed food, fruit and vegetables, fish, processed soybeans

• Non tariff issues: bovine, poultry, fresh fruit.

• Biofuels: Ambitious policies in Japan to stimulate the use of biofuels in its energy matrix.

• Trade facilitation cooperation (single window, for example)

• Subsidies: avoidance of subsidies in aircraft industry.

Issues affecting trade and investment between Brazil and Japan

Demands from Brazil

• Infrastructure: stable and predictable regulation in infrastructure projects;

• Taxation: Other taxation issues inside Brazil;

• Biofuels: stable domestic policy for biofuels in Brazil;

• Visa requirements for business, researchers and students (important issue for both sides).

Demands from Japan

Issues affecting trade and investment between Brazil and Japan

Trade and investment relations are mature. But need to revert the recent fall trend;

There is room for more private and public sector engagement to strengthen and work on a systemized business agenda;

A serious discussion on a free trade agreement between Mercosul and Japan needs to assess its feasibility.

Conclusions: