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Impact of Regional Economic Integration on APEC Trade

This symposium discusses the experiences of Latin American countries in the face of regional economic integration in East Asia and the need for a renewal of the integration process. It explores trade patterns, trends, and potential avenues for promoting positive trade relations in the Asia-Pacific region.

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Impact of Regional Economic Integration on APEC Trade

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  1. 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

  2. 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

  3. LAC in World Trade

  4. DOHA ROUND UNCERTAINTIES

  5. From Trade to Cooperation Between Latin America and the Caribbean and Asia-Pacific

  6. 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

  7. 19% 7.5% Source: UNSD, COMTRADE LAC’s trade particularly dynamic with AP:

  8. LAC’s trade with AP particularly dynamic in the period 1996-2003 Source: COMTRADE

  9. 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 %

  10. 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

  11. Product Composition : Exports Source: WITS-World Bank … Primary products have a dominant share in LA’s exports to Asia

  12. Product Composition : Imports Source: WITS-World Bank … Medium and High-Tech Manufactured products have a dominant share in LA’s imports from Asia

  13. 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

  14. 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

  15. Free Trade Agreements and The Spaghetti Bowl (Asian Noodles)

  16. 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

  17. + 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

  18. 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

  19. From Trade to Cooperation Between Latin America and the Caribbean and Asia-Pacific

  20. Cooperation • Trade cooperation has been accompanied by closer political and private sector cooperation • APEC: incorporating initiatives beyond trade – security • FEALAC • PBEC • PECC

  21. 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

  22. 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

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

  24. 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

  25. 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)

  26. 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

  27. 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

  28. Thank you! Muchas Gracias!!! Fausto Medina-López - Deputy Representative, IDB Office in Japan

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