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