The Impacts of the Mexico, Chile and Peru EPAs with Japan on bilateral trade of agroindustry products:

lessons for RTAs negotiation among APEC economies

Fuente: E-studio

Adriana Roldán Pérez (PhDc)Associate Professor

Source: Asiasociety.org Source: wordpress.com

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Source: Hema Maps

1. Trade between Asia and Latin America, food trade.2. Trade relations between Japan and LA, trends of food consumption in Japan.3. Descriptive analysis.4. General Model Estimation results.

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CONTENT

Source: Data Trademap. Figure by the Author.

Trade between LA and Asia

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•LA export to Asia Pacific were basically commodities (minerals and agriculturalproducts) accounting for the 81% of total exports.•Agricultural products represented 30% of total LA exports to Asia Pacific

1. The Pacific Alliance

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•Latin America imports from Asia Pacific were manufacturing products accounting for the 83% oftotal imports.•During this period, the trade deficit increased from USD 27.8b in 2001 to USD 106.3b in 2014, achange of 282%.•The region’s trade deficit growth was larger than the GDP growth in the same period, that onlyincreased 190% (From USD 2.03t to USD 5.9t).

Source: Data Trademap. Figure by the Author

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Major food suppliers in LA to Asia Pacific(2010-2014 average)

Source: Data Trademap. Figure by the Author

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Main markets in Asia for LA food exports(2011-2014)

Source: Data Trademap. Figure by the Author.

China51%

Japan13%

Korea6%

India6%

Others5%

Indonesia4%

Hong Kong, China

3%

Chinese Taipei3%

Singapore3%

Malaysia3%

Thailand3%

LA quick and sustained recovery after 2008-2009.

LA high and stable economic growth.

LA domestic and market expansion

LA improvement on employment and poverty indicators.

The regions endowment of natural resources (arable land and fresh water).7

LA Returned to Japan’s list Foreign Policy Priorities

Shinzo Abe’s visit to LA in 2014 with more than 250 businessman.

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Japan EPA’s with LALA members of the Pacific Alliance and APEC

Country Negotiation Started Signed Effective

Mexico November 2002 September 2004 April 2005

Chile February 2006 March 2007 September 2008

Peru May 2009 May 2011 March 2012

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Japan trade relations with Mexico, Chile and Peru

Japan is the major food export market in Asia

Export

Import

3rd 9th 6th

5th 3rd 6th

1st 1st 2nd

CONVENIENCE FOOD: Food outside home

LOHAS: “Lifestyle based on Health and Sustainability”.

Changes in habits of food consumption: increase of meat, milk and different fruits. The wheat and its derivate are gaining more space from the traditional rice consumption

Westernization

Turbulent urban life:

No time for cooking

Women into the labor market

Higher GDP per person

Tradition + Green consumption

Organic food

Healthy food

Ecofriendly products

Trends of Food Consumption in Japan

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Mexico exports to Japan by period 2001 - 2005 2006 - 2014 2001 - 2014

Annual Growth Rate

HS01-05 Live animals & products 13% 10% 11%

HS06-14 Vegetable products 13% 4% 8%

HS25-27 Mineral Products 12% 4% 5%

HS28-38 Chemicals -8% 3% 1%

HS84 General machinery -9% 11% 4%

HS85 Electrical machinery -16% 19% 5%

HS86-89 Transport equipment 12% -1% 3%

Others Others 12% 3% 9%

Total 4,7% 6,4% 6,0%

Mexico’s trade with Japan

Source: Data Trademap. Figure by the Author.

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Chile exports to Japan by period 2001 - 2007 2008 - 2014 2001 - 2014

Annual Growth Rate

HS01-05 Live animals & products 8% 5% 6%

HS06-14 Vegetable products 3% 9% 6%

HS16-24 Products of food industry 1% 7% 4%

HS25-27 Mineral Products 34% 5% 14%

HS44-46 Wood & wood products 3% -1% 3%

HS72-83 Base metals & products 23% -14% 3%

Others Others 3% -1% 3%

Total 21,7% 3,2% 10%

Chile’s trade with Japan

Source: Data Trademap. Figure by the Author.

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Peru exports to Japan 2001 - 2012 2013 - 2014 2001 - 2014

Annual Growth Rate

HS01-05 Live animals & products 3% -4% 3%

HS06-14 Vegetable products 14% -14% 11%

HS16-24 Products of food industry 3% 39% 0%

HS25-27 Mineral Products 30% -37% 20%

HS71 Precious stones -40% -25% -38%

HS72-83 Base metals & products 8% 71% 9%

Others Others 5% 20% 2%

Total 18,9% -28,9% 12%

Peru’s trade with Japan

Source: Data Trademap. Figure by the Author

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Main Mexico’s, Chile’s and Peru’s agricultural exports to Japan (2014)

HS030312 Frozen Pacific salmon other than red 27%

HS030482 Frozen fillets, Trout 14%

HS020329 Swine frozen 8%

HS 030481 Frozen fillets, Pacific salmon, Atlantic and Danube 7%

HS 220421 Grape wines 7%

HS 030314 Frozen Trout 7%

HS020329 Swine cuts, frozen 38%

HS080440 Avocados, fresh or dried 14%

HS020230 Bovine cuts boneless, frozen 7%

HS020319 Swine cuts, fresh or chilled 6%

HS030235 Fresh or chilled bluefin tunas "Thunnus thynnus" 5%

HS030345 Frozen bluefin tunas "Thunnus thynnus" 4%

HS230120 Flour of fish ,for animal feeding 52%

HS150420 Fish fats&oils 6%

HS030749 Cuttle fish and squid,shelled or not,frozen,dried,salted 5%

HS071080 Vegetables, frozen (Asparagus) 4%

HS081190 Fruits&edible nuts uncook,steam/boil 4%

HS030499 Frozen fish meat whether or not minced 4%Source: Data Trademap. Figure by the Author

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Major agricultural products with high preferential margin and export growth:

The case of Chile exports to Japan

MFN EPA

'020230 Bovine cuts boneless, frozen 358 3480% 6500% 38,50 38,50

'020621 Bovine tongues, edible offal, frozen 2.742 232% 59% 12,80 12,80

'020629 Bovine edible offal, frozen nes 578 6322% 4633% 17,05 17,05

'030541 Salmon, Pacific, Atlantic and Danube, smoked including fillets 4.792 310% 109% 10,50 10,50

'030614 Crabs frozen, in shell or not, including boiled in shell 59 127% 50% 4,00 4,00

'050400 Guts, bladders and stomachs of animals except fish whole or in pieces 1.769 290% 47% 0,00 0,00

'071290 Vegetables and mixtures dried, but not further prepared nes 1.956 1349% 545% 4,50 0,00

'080232 Walnuts, fresh or dried, shelled or peeled 4.621 46110% 18250% 10,00 0,00

'080440 Avocados, fresh or dried 1.860 589% 353% 3,00 0,00

'080610 Grapes, fresh 25.017 146% 14% 12,40 5,30

'080620 Grapes, dried 1.951 257% 34% 1,20 0,00

'081040 Cranberries, bilberries and other fruits of the genus Vaccinium, fresh 7.947 221% 195% 6,00 0,00

'081110 Strawberries,uncookd o steamd o boild in water,sweetend o not,frozen 11.156 828% 315% 10,80 1,65

'081120 Raspberries,mulberries,etc uncook,steam/boil in water sweetend/nt,froz 3.734 239% 77% 6,00 0,00

'081190 Fruits&edible nuts uncook,steam/boil (water) sweetend/not,frozen,nes 7.077 738% 298% 10,17 2,20

'120600 Sunflower seeds, whether or not broken 734 127% 0% 0,00 0,00

'150420 Fish fats&oils&their fractions exc liver,refind/not,not chemically mod 7.479 144% 1% 0,00 0,00

'160249 Swine meat&meat offal nes/exc livers/ incl mixtures,prepard o preservd 26 1200% 600% 0,00 0,00

'200799 Jams,fruit jellies,fruit/nut purée&paste,ckd prep,sugard,sweetend/not 2.402 510% 503% 21,30 21,30

'200911 Orange juice,unfermentd&not spiritd,whether not sugard sweet,frozen 44 340% 18% 21,30 21,30

'200969 Grape juice, incl. grape must, unfermented, Brix value > 30 at 20°C, w 14.560 575% 93% 19,10 5,20

'220410 Grape wines, sparkling 7.569 75590% 44275% 0,00 0,00

'220421 Grape wines nes,incl fort&grape must,unfermntd by add alc in ctnr<=2l 129.555 472% 498% 0,00 0,00

'220429 Grape wines nes,incl fort&grape must,unfermntd by add alc,in ctnr > 2l 19.991 761% 379% 0,00 0,00

'220430 Grape must nes, unfermented, other than that of heading No 20.09 15.630 403% 218% 0,00 0,00

'220600 Fermented beverages nes (for example, cider, perry, mead, etc) 178 5833% 1433% 0,00 0,00

HS Code

TariffChange (%):

Quantity

2003 - 2014

Change (%):

Value

2003 - 2014

Trademap

Value

(000 USD)

2014Description

Source: Data Trademap and WTO tariff information. Figure by the Author

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GME results for Mexico’s, Chile’s and Peru Exports to Japan at aggregated level

Constant

GDP

GDP per capita

Distance

Japan Dummy

Adj R2

Numer of observations

(0.18)

0.8838

210

0.318

210

(0.32) (0.21)

0.6573

210

16.086***

(0.81)

0.604***

(0.04)

0.457***

(0.04)

-2.114***

(0.07)

-0.339*

0.040

(0.14)

(0.08)

-1.199***

(0.10)

1.276***

(0.04)

1.191***

5.110**

(1.56)

0.689***

(0.08)

-0.267**

10.334***

(0.90)

0.626***

(0.05)

0.276***

Chile Exports to JapanMexico Exports to Japan Peru Exports To Japan

OLS OLSOLS

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GME results for Chile’sExports to Japan at sectoral level

ln(𝐸𝑥𝑝𝑜𝑟𝑡𝑠𝑖,𝑗 ,𝑡) = 𝛽0 + 𝛽1𝑙𝑛(𝐷𝑖𝑠𝑡𝑖,𝑗 ) + 𝛽2ln(𝐺𝐷𝑃𝑗 ,𝑡) + 𝛽3ln(𝐺𝐷𝑃𝑃𝐶𝑗 ,𝑡) + 𝛽4ln(𝐺𝐷𝑃𝑖,𝑡

+𝛽5𝑙𝑛(𝐺𝐷𝑃𝑃𝐶𝑖,𝑡) + 𝛽6𝑙𝑛(𝐴𝑔𝑟𝑖𝐿𝑗 ,𝑡) + 𝛽7𝐹𝑇𝐴𝐷𝑢𝑚𝑚𝑦𝑗 ,𝑡 + 𝜀𝑡 (2)

1 2 3 4

Live animals & products Vegetable products Vegeteble & animals olis Products of food industry

HS01-05 HS06-14 HS15 HS16-24

a) Pooled OLS

GDP: Chile -12,656 7,093 -9,955 0.958

(14.77) (5.70) (14.20) (7.28)

GDP per capita: Chile 16,200 -8,015 18,067 -1,030

(20.16) (7.77) (19.07) (9.93)

GDP: Partner 1.063** 1.045*** 2.157* 0.426*

(0.36) (0.14) (0.83) (0.18)

GDP per capita: partner 1.326*** 0.377** -1,224 0.414*

(0.33) (0.13) (0.72) (0.16)

Distance -2.953*** -2.196*** -3,292 -1.469***

(0.61) (0.24) (1.56) (0.30)

Japan Dummy 2.052** -0.423 0.125 1.097***

(0.62) (0.24) (0.72) (0.31)

Agricultural land -0.074 -0.024 -1,062 0.108

(0.23) (0.09) (0.57) (0.11)

China Dummy 3.880*** 1.263*** 2.762* 2.164***

(0.59) (0.22) (1.26) (0.29)

USA Dummy -1.544* -0.312 -0.223 -0.328

(0.73) (0.29) (1.24) (0.36)

Korea Dummy 2.323*** 0.848*** 0.502 0.935**

(0.57) (0.22) (0.82) (0.28)

Brazil Dummy -0.637 -1.609*** -1,704 -1.336***

(0.66) (0.26) (1.30) (0.33)

Peru Dummy 0.478 -0.056 0.085 0.309

(0.68) (0.27) (1.01) (0.34)

Mexico Dummy 1.304** 0.287 -0.720 0.420

(0.44) (0.17) (0.64) (0.22)

Constant 181,979 -103,474 101,633 -0.730

(197.26) (76.10) (192.67) (97.28)

Adj R2 0.771 0.901 0.563 0.697

Number of observations 191 195 194 195

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GME results for Chile’sExports to Japan at sectoral level

ln(𝐸𝑥𝑝𝑜𝑟𝑡𝑠𝑖,𝑗 ,𝑡) = 𝛽0 + 𝛽1𝑙𝑛(𝐷𝑖𝑠𝑡𝑖,𝑗 ) + 𝛽2ln(𝐺𝐷𝑃𝑗 ,𝑡) + 𝛽3ln(𝐺𝐷𝑃𝑃𝐶𝑗 ,𝑡) + 𝛽4ln(𝐺𝐷𝑃𝑖,𝑡

+𝛽5𝑙𝑛(𝐺𝐷𝑃𝑃𝐶𝑖,𝑡) + 𝛽6𝑙𝑛(𝐴𝑔𝑟𝑖𝐿𝑗 ,𝑡) + 𝛽7𝐹𝑇𝐴𝐷𝑢𝑚𝑚𝑦𝑗 ,𝑡 + 𝜀𝑡 (2)

1 2 3 4

Live animals & products Vegetable products Vegeteble & animals olis Products of food industry

HS01-05 HS06-14 HS15 HS16-24

B) PPML+FE

GDP: Chile 0.030 0.323 -0.310 0.519*

(0.68) (0.29) (1.07) (0.26)

GDP per capita: Chile 0.087 -0.443 0.973 -0.476

(0.83) (0.34) (1.40) (0.28)

GDP: Partner -0.357 -0.060 0.021 -0.283

(0.34) (0.27) (0.62) (0.20)

GDP per capita: partner 0.515 0.318 -0.171 0.214

(0.35) (0.27) (0.65) (0.17)

Agricultural land 0.047 -0.490** -0.399 0.251

(0.34) (0.17) (0.59) (0.21)

Japan Dummy -0.020 -0.025* -0.073* -0.032*

(0.02) (0.01) (0.03) (0.01)

China Dummy -0.067* -0.080* 0.098** 0.043

(0.03) (0.03) (0.03) (0.03)

USA Dummy -0.009 0.003 0.058** -0.011*

(0.01) (0.01) (0.02) (0.00)

Korea Dummy 0.039* -0.001 0.151*** 0.056***

(0.02) (0.01) (0.03) (0.01)

Data Source: author estimation

Note: Year fixed effect included in all equations. Figures in parentheses are t-statistics/robust z-statics. * p<0.05, ** p<0.01, *** p<0.001.

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Preliminary Conclusions • Even though Mexico, Chile and Peru are not the main agricultural exporters to Japan, they

have a huge potential to expand their exports because of the EPAs negotiated with the Asian

country.

• Recent food consumption trends in Japan open the door for value added products exports for

Latin America such as products of the food industry, live animals, vegetables and fruits.

• Mexico, Chile and Peru exports to Japan are highly concentrated in some products. For each

country only 6 products represented around 70% of their total agricultural exports.

• After the enforcement of the Mexico-Japan EPA (2006-2014), the Mexico’s exports and imports

grew. While exports annual growth rate increased, imports annual growth rate decreased.

Agricultural exports growth was less than the period before the EPA’s enactment.

• In the case of Chile, after the enactment of the Chile-Japan EPA (2008-2014) the exports

annual growth slightly increased while the imports decreased. It is important to note that the

exports growth increased less after the EPA came into effect.

• For Peru, after the enforcement of the EPA with Japan both Peru’s exports to and imports from

Japan decreased. It can be explained for the drop of mineral price as it happened in Chile.

• The gravity model results at aggregated level of agricultural products indicate that Mexico’s and

Chile’s exports to Japan are larger than other countries with similar economic conditions.

• The gravity model results at sectoral level in the case of Chile show a positive effect for live

animals and products of food industry in one of the method conducted. In the other method a

negative impact for three sectors and no impact for live animal sector.

THANK YOU

どうも ありがとう ございますdômo arigatô gozaimasu

MUCHAS GRACIAS

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