Japan-Mexico: How to Effectively Chase the Chameleon?

Japan-Mexico: How to Effectively Chase the

Chameleon? 10th Anniversary of the Japan-Mexico

Economic Partnership Agreement

Beatriz Leycegui Mexico City, Mexico

blg@sai.com.mx June 11, 2015

1

Contents

I. World Trade: A Chameleon

II. Chasing the Chameleon: Japan-Mexico Strategies

III. Final Remarks

2

I. World Trade: A Chameleon

3

Section I - World Trade: A Chameleon

Transformation of World Trade

• Just like a:

• It adapts to the specific needs at any given time and location.

• This is ever more true in the past two decades.

4

Section I - World Trade: A Chameleon

XXI Century Trade Revolution

As a consequence of the information and communication technologies revolution (1980s & 1990s)

Remember when you sent your first e-mail?

5

Section I - World Trade: A Chameleon

XXI Century Trade Revolution

6

ICTs revolution led to the fragmentation of

production processes.

Expansion of GVCs –

Made in the world

Section I – World Trade: A Chameleon

XXI Century Trade Revolution

7

Sou

rce:

*O

rgan

izat

ion

for

Eco

no

mic

an

d C

oo

per

atio

n D

evel

op

men

t (2

01

3),

P

rofi

tin

g f

rom

tra

de

in v

alu

e a

dd

ed.

Trade Transformation-

Global Value Chains.

XXth Century - Trade of final goods.

XXIst Century - More than 50% of world’s trade is inputs (2013).*

Section I - World Trade: A Chameleon

Smiling Curve

8

Distribution

Marketing

Manufacture

Branding

Design

Concept, R&D

Sales/ After Service

So

urc

e: S

hih

, S

. (2

00

5).

Refo

rgin

g A

ce

r: C

rea

te, G

row

an

d C

ha

llen

ge

. B

eiji

ng: C

ITIC

Pu

blis

hin

g H

ou

se

.

Section I - World Trade: A Chameleon

9

Increase participation

Greater value added to

exports

Democratization of trade (SME’s)

Expand local suppliers and

sourcing

Global Value Chains

Challenges

II. Chasing the Chameleon: Japan-Mexico Strategies

10

II. Chasing the Chameleon: Japan-Mexico Strategies 1. Negotiation of the Japan-Mexico

Economic Partnership Agreement (EPA) (2005)

2. Deepening of the EPA (2012)

3. Trans-Pacific Partnership Agreement (TPP)

4. Pacific Alliance

11

Section II - Chasing the Chameleon: Japan-Mexico Strategies

1. Negotiation of the Japan-Mexico Economic Partnership Agreement (EPA) (2005) • EPA – Mexico’s first and

only FTA with an Asian country.

• Bilateral trade in 2012: USD $22 billion (increase of 41% since enforcement of EPA).*

• Mistake: assessing trade agreements in terms of the trade balance.

12

Min

istr

y o

f E

co

no

my,

Off

ice

M

exic

o-J

ap

an

(2

01

3)

Mexico’s

$4 billion

$16 billion

Section II - Chasing the Chameleon: Japan-Mexico Strategies

Positive assessment of the Japan-Mexico EPA

13

Japanese investments in Mexico 2005-2013: USD $12.1 billion.*

Government procurement projects in Mexico: USD $4.3 billion.*

Main sectors: automotive and autoparts, electronics, metallurgic, machinery, food processing, high technology manufacturing, energy, logistics and transport services.

More than 90% of Mexico’s imports from Japan are intermediate and

capital goods.

Min

istr

y o

f E

co

no

my,

Off

ice

M

exic

o-J

ap

an

(2

01

3)

Section II - Chasing the Chameleon: Japan-Mexico Strategies

Positive assessment of the Japan-Mexico EPA

14

•**

Wo

rld

Tra

de

Org

aniz

atio

n, I

nte

rnat

ion

al T

rad

e St

atis

tics

(20

14

)

As a result, Mexico’s export position is:

Automotive** 4th place

Manufacture** 8th place

Electronic components** 6th place

• Mexico’s structural reforms- Japanese investments in a privileged position

• In case of conflict between Mexican laws and the EPA, the latter prevails. 15

Section II - Chasing the Chameleon: Japan-Mexico Strategies

Positive assessment of the Japan-Mexico EPA

Constitution

EPA

Constitutional and Federal laws

Section II - Chasing the Chameleon: Japan-Mexico Strategies

2. Deepening of the EPA (2012)

16

Improve market access in

agricultural and industrialized

goods.

Trade facilitation

Customs procedures

Agriculture -Increase quotas and reduce tariffs within them, e.g. bovine meat, orange juice, apples, green tea.

Industry -Accelerate tariff elimination and modification of rules of origin.

Investment:

Attract foreign investment in

energy, infrastructure,

technology, and clean

energy

Global Value Chains:

Further

integration of Mexican

enterprises into Japanese global value

chains in Mexico

Regulatory Cooperation:

Sanitary and

phytosanitary issues and technical

regulations and

standards

Section II -Chasing the Chameleon: Japan-Mexico Strategies

Pending Agenda of the Mexico-Japan EPA

17

Market Access:

Improve

opening of the

agricultural sector

Regulatory Cooperation:

Sanitary and

phytosanitary issues and technical

regulations and

standards

Market Access:

Improve opening of

the agricultural

sector

Section II -Chasing the Chameleon: Japan-Mexico Strategies

3. TPP– Too soon to make a call Can be WTO and RTA-plus

18

Improve market access of goods and

services trade

Further participation of SME’s in

international trade and investment

Regulatory convergence and

cooperation

Competitiveness and supply chains

Trade facilitation provisions

Rules of origin and cumulation of

origin

19

Sou

rce:

Pac

ific

Alli

ance

Web

Sit

e.

Section II – Chasing the Chameleon: Japan-Mexico Strategies

4. Pacific Alliance - Importance

6th global

economy in 2012;

expected to

become 4th in 2025

50% of

LAC trade in goods and services in

2013

2,7% of world’s

GDP

2.9% of world’s

trade

35% of

Latin America GDP in 2013

USD 2,123 billion GDP in 2012

Section II - Chasing the Chameleon: Japan-Mexico Strategies

Pacific Alliance - A Paradigm of Integration

20

Not a static agreement – it is an integration process

Harmonization and deepening of existing FTA’s as a pre-requisite

Goes beyond existing FTA’s, new generation disciplines

Private sector active participation

Given level of ambition has more than 30 international observers, Japan among them.

Section II - Chasing the Chameleon: Japan-Mexico Strategies

Pacific Alliance - Sectors of greater potential for integration

21

Intermediate Goods

Machinery and mechanical appliances

Plastics

Paper and board

Consumption Goods

Textiles

Food

Perfumery and Cosmetics

How deep is their love? Of their trade only 3.6% is intra-regional. * Further integration as the challenge.

Sou

rce:

*SA

I, La

w &

Eco

no

mic

s/ W

orl

d In

tern

atio

nal

Tra

de

Stat

isti

cs 2

01

3

The

Eco

no

mis

t, M

arch

14

, 20

15

.

22

Section II– Chasing the Chameleon: Japan-Mexico Strategies

Pacific Alliance Business Council (CEAP) – An Initiative of the Private Sector Constituted by four Chapters, each established by a State Member and tasked with specific study areas, e.g.:

Chile: • Commerce in Services • Entrepreneurship • Financial integration

Colombia: • Education • SMEs

Mexico: • Technical barriers to trade • Regulatory coherence • Intellectual property

Peru: • Single window • Global value chains • Competitiveness

CEAP

Section III -The Japanese Role in the Latin American Economic Integration

Japanese Support Institutions

23

Japan trade promotion.

Economic cooperation for economic and social development.

Conducts lending, investment and guarantee operations for the private sector complementing economic development.

Japan International Cooperation Agency

Japan Bank for International Cooperation

III. Final Remarks

• Mexico has benefited from Japanese creative thinking based on its ancient values and tradition:

• Minimalism: the Japanese excel at the miniaturization techniques for making smaller and lighter products.

• Adaptation: Japanese manufactures excel at applied technology, adapting or redefining technologies to meet particular needs.

• Simplification: the impulse to remove all excess and to show only the essence.

24

Section III - Final Remarks

Referring to what is essential, Octavio Paz once remarked:

“I learned precision of language from Japanese poetry, in which there is no waste of words”.

25

Your companies and government have taught us not to waste resources or time, to focus on the essence, to be strategic, to produce with quality and innovation according to the rhythms imposed by societies that are each day more demanding and well-informed.

26

Beatriz Leycegui blg@sai.com.mx

Edificio Plaza Reforma Prol. Paseo de la Reforma #600-010-B Santa Fe Peña Blanca, México, D.F. 01210 Tel. (55) 5985 6618 Ext. 685 Fax: (55) 5985 6628

www.sai.com.mx