Session IVExperiences of Latin American
Countries
Fausto Medina-LópezDeputy Representative, IDB Office in Japan
Tokyo, Japan – September 28, 2006
APEC OFFICIAL SYMPOSIUMImpact of Regional Economic Integration
in East Asia on APEC Trade Liberalization
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
LAC in World Trade
DOHA ROUND UNCERTAINTIES
From Trade to Cooperation
Between Latin America and the Caribbean
and Asia-Pacific
Trade Linkages
Contrasts between LAC and AP are shaping their current trade relations:
Factor endowments
Trade policies and policies outcomes
Development strategies
Trade
Patterns
LAC imports from AP have grown faster than exports
Inter-industry bi-regional trade
LAC exports: raw materials / commodities
AP exports: manufactured goods
LAC’s trade particularly dynamic with AP:
Source: UNSD, COMTRADE
Growth of Latin America's Trade in 1990-2003 - By Partner
-5
0
5
10
15
20
25
30
35
World LatinAmerica
Canada +US
EuropeanUnion 25
Japan Korea, Rep. China Asean
Avg
An
nu
aliz
ed G
row
th R
ate
(%) Growth
Exports
GrowthImports
19%
7.5%
LAC’s trade with AP particularly dynamic in the period 1996-2003
Source: COMTRADE
Latin America's Trade with Asia Pacific 1985-2003, by Periods
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
JAP KOR OtherAP
JAP KOR OtherAP
JAP KOR OtherAP
tho
usan
ds U
S$
Exports
Imports
1985-1990 1991-1995 1996-2003
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 %
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
Product Composition : Exports Technology Content of Exports: Latin America to East Asia
0% 20% 40% 60% 80% 100%
1986
1990
1995
2000
2003
Primary Products
Resource-based Mfgs.
Low-tech Mfgs.
Medium-tech Mfgs.
High-tech Mfgs.
Other transactions
… Primary products have a dominant share in LA’s exports to Asia Source: WITS-World Bank
Product Composition : Imports
… Medium and High-Tech Manufactured products have a dominant share in LA’s imports from Asia
Source: WITS-World Bank
Technology Content of Imports: Latin America from East Asia
0% 20% 40% 60% 80% 100%
1986
1990
1995
2000
2003
Primary Products
Resource-based Mfgs.
Low-tech Mfgs.
Medium-tech Mfgs.
High-tech Mfgs.
Other transactions
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
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
Free Trade Agreements and The Spaghetti Bowl (Asian Noodles)
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 NegotiationSingapore-PeruSingapore-Mexico Taiwan- Guatemala--Thailand-PeruJapan-Chile
BahamasHaiti
USA
Canada
Uruguay
Paraguay
ArgentinaBrazil
ChileChile
Bolivia Ecuador
Peru
Venezuela
Colombia
Panama
Nicaragua
CostaRica
El Salvador
GuatemalaHonduras
Dominican Republic
Dominica, Suriname,Jamaica, St. Lucia, Belize,St. Kitts & Nevis, Grenada, Barbados,Guyana, St. Vincent & the Grenadines,Antigua & Barbuda, Trinidad & Tobago
Korea
Philippines
New ZealandNew Zealand
Indonesia
Australia
Brunei Darussalam
Chinese Taipei
Malaysia
Japan
People’s Rep. of China
Hong Kong, China
India
Russia
Singapore
ThailandBangladesh
Papua New Guinea
Laos
Fed. States of Micronesia,Marshall Islands, Kiribati, Palau,W. Samoa,Tonga, Vanuatu, E. Timor,Cook Islands, Nauru, Niue, Tuvalu
Bhutan, Maldives,Nepal, Pakistan
Mexico
Viet Nam
Fiji, Solomon Islands,Vanuatu
MyanmarCambodia
Sri Lanka
ASIA AMERICAS
Current INTRA-regional
+ APEC (1989)
+ INTER-regional (2003-2005)
BahamasHaiti
USA
Canada
Uruguay
Paraguay
ArgentinaBrazil
Chile
Bolivia Ecuador
Peru
Venezuela
Colombia
PanamaNicaragua
CostaRica
El Salvador
GuatemalaHonduras
Dominican Republic
Dominica, Suriname,Jamaica, St. Lucia, Belize,St. Kitts & Nevis, Grenada, Barbados,Guyana, St. Vincent & the Grenadines,Antigua & Barbuda, Trinidad & Tobago
Korea
Philippines
New Zealand
Indonesia
Australia
Brunei Darussalam
Chinese Taipei
Malaysia
People’s Rep. of China
Hong Kong, China
India
Russia
Singapore
ThailandBangladesh
Papua New Guinea
Laos
Fed. States of Micronesia,Marshall Islands, Kiribati, Palau,W. Samoa,Tonga, Vanuatu, E. Timor,Cook Islands, Nauru, Niue, Tuvalu
Bhutan, Maldives,Nepal, Pakistan
Mexico
Viet Nam
Fiji, Solomon Islands,Vanuatu
MyanmarCambodia
Sri Lanka
ASIA AMERICAS
UNDER NEGOTIATION
Japan
From Trade to Cooperation
Between Latin America and the Caribbean
and Asia-Pacific
Cooperation
Trade cooperation has been accompanied by closer political
and private sector cooperation
APEC: incorporating initiatives beyond trade – security
FEALAC
PBEC
PECC
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
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
FTAs and Institutional Reforms: The Cases of Chile and CAFTA-DR
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
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)
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
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
Thank you! Thank you! Muchas Muchas
Gracias!!!Gracias!!!Fausto Medina-LFausto Medina-López - ópez - Deputy Representative, IDB Office in JapanDeputy Representative, IDB Office in Japan