the business environment and opportunities provided by the ... mr noguchi jetro ppt.pdf · rcep,...

The 31st Japan-Chile Business Cooperation Committee

1st plenary session: Prospects of the TPP 11

The business environment and opportunities provided by the TPP 11 as seen from Japan

Japan External Trade Organization (JETRO)

Naoyoshi NoguchiExecutive Vice President

1Copyright (C) 2018 JETRO. All rights reserved

2

Today’s contents

１. Japan’s activities for FTAs and significance of TPP 11

２. Supply chains in Chile and Asia, and roles of Japanese companies

３．Expectation for TPP 11 by Japanese companies

Copyright (C) 2018 JETRO. All rights reserved

Copyright (C) 2017 JETRO. All rights reserved.

Japan’s activities for FTAs■ In effect (14 countries and 1 region): ： SINGAPORE、MEXICO、

MALAYSIA、CHILE、THAILAND、INDONESIA、BRUNEI、ASEAN、

PHILIPPINES、SWITZERLAND、VIETNAM、INDIA、PERU、AUSTRALIA、

MONGOLIA

■ Concluded (1 region): TPP11 (CPTPP)

■ Agreement reached (1 region): EU

■ Under negotiation (4 countries and 3 regions): GCC（Gulf Cooperation

Council）、CANADA、COLOMBIA、JAPAN/CHINA/SOUTH KOREA、

RCEP、TURKEY、SOUTH KOREA (halting)

Source: Documents made by METI

EUAgreement reached

(Dec. ’17)

SWITZERLANDIn effect (Sep. ‘09)

SOUTH KOREAHalted

MEXICOIn effect (Apr. ’05)

Revised（Apr. ’12)

PERUIn effect (Mar. ’12)

CHILEIn effect (Sep. ’07)

COLOMBIAUnder negotiation

TURKEYUnder negotiation

THAILANDIn effect (Nov. ’07)

INDONESIAIn effect (Jul. ’08)

PHILIPPINESIn effect(Dec. ’08)

MALAYSIAIn effect (Jul. ‘06)

SINGAPOREIn effect (Nov. ‘02)

Revised (Sep. ’07)

VIETNAMIn effect (Oct. ’09)

BRUNEIIn effect (Jul. ’08)

GCC COUNTRIESUnder negotiation

GCC（Gulf Cooperation

Council）：SAUDI ARABIA、KUWAIT、UAE、BAHRAIN、QATAR、OMAN

NZ

CANADA

USWithdrawal in Jan. ‘17

AS

EA

N (A

JCE

P)

In effect (Dec. ‘

08)

*Chapters on service and investm

ent

yet to go into effect

JAPAN/CHINA/SOUTH KOREAUnder negotiation

RCEP（ASEAN10＋JAPAN/CHINA/SOUTH

KOREA/INDIA/AUSTRALIA/NZ）Under negotiation

INDIAIn effect (Aug. ’11)

AUSTRALIAIn effect (Jan. ’15)

TPPConcluded between 12 countries (Feb. ’16)

Agreement in principle (Nov. ’17)

Concluded between 11 countries (Mar. ‘18)

MONGOLIAIn effect (June ‘16)

- The nominal GDP of TPP 11 is $10.2 trillion (a 13.5% share of the

global market). Combined population within TPP 11 member

countries exceeds 500 million people (accounting for 6.7% of the

world).

- Regarding the mega-FTAs in which Japan participates; TPP11,

RCEP, the Japan-China-Korea and the Japan-EU EPAs; the

nominal GDP is $43.3 trillion (a 57.5% share of the global market)

and the combined population is 4.27 billion people (57.4% of the

world).



FTAs in effect between Japan and other member countries of TPP 11

- The TPP 11 will be Japan’s first FTA with Canada and New Zealand.

- Chile already has an FTA with each member of the TPP 11.

4

CANADA MEXICO PERU CHILE AUSTRALIA NZ SINGAPORE MALAYSIA VIETNAM BRUNEI JAPAN

CANADA ○ ○ ○

MEXICO ○ ○ ○ ○

PERU ○ ○ ○ ○ ○

CHILE ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

AUSTRALIA 0 0 0 ○ ○ ○ ○ ○ ○ ○

NZ 0 0 0 ○ ○ ○ ○ ○ ○

SINGAPORE 0 0 ○ ○ ○ ○ ○ ○ ○ ○

MALAYSIA 0 0 0 ○ ○ ○ ○ ○ ○ ○

VIETNAM 0 0 0 ○ ○ ○ ○ ○ ○ ○

BRUNEI 0 0 0 ○ ○ ○ ○ ○ ○ ○

JAPAN 0 ○ ○ ○ ○ 0 ○ ○ ○ ○

Note: 1. While the Global System of Trade Preferences among Developing Countries (GSTP) has entered into force between Mexico, Singapore, Malaysia and Vietnam, and between Peru, Malaysia and Vietnam,

these countries are considered as not having prior FTAs between them because of the small number of product categories covered. 2. There are cases of other FTAs being under negotiation between countries

entering into an FTA for the first time with the TPP 11.

Source: Data from each government

○ FTAs which entered into force FTAs will enter into force by the effectuation of TPP

Concluded

Concluded



Today’s contents





Japan’s trade structure and TPP 11… ASEAN’s high proportion

Source: Trade Statistics of Japan Ministry of Finance

- Regarding trade between Japan and other TPP member countries, ASEAN (Singapore, Brunei, Malaysia and Vietnam) accounts

for a high proportion of both exports and imports.

Exports to the four countries mentioned above account for 7% of Japan’s total exports to the world, and occupy over half of the

exports to all other member countries of TPP 11 (with TPP 11 accounting for 12.8% of total exports).

Likewise, imports account for 7% of Japan’s total imports from the world (with TPP 11 accounting for 16% of total imports).

6

( Unit：％ )

CANADA NZAUSTRA

LIA

ASEAN

TPP4MEXICO CHILE PERU

Transportation equipment 2.9 0.8 4.2 3.4 2.1 0.5 0.2 14.2 3.7General machinery 0.7 0.2 1.2 6.0 1.8 0.1 0.1 10.2 1.0Electrical equipment 0.6 0.0 0.4 9.2 1.7 0.0 0.0 11.9 0.6Chemical products 0.5 0.1 1.0 6.0 0.8 0.2 0.1 8.8 0.6Steel products 0.6 0.1 0.8 9.9 4.5 0.2 0.2 16.3 0.8Total 1.3 0.3 2.2 7.0 1.7 0.2 0.1 12.8 1.6Mineral fuels 0.8 0.0 17.0 7.6 1.2 0.0 0.1 26.8 0.8Machinery and equipment 0.4 0.0 0.1 7.0 1.1 0.0 0.0 8.6 0.4Chemical products 1.0 0.3 0.5 6.6 0.3 0.2 0.0 8.9 1.3Foods 4.0 2.1 6.1 4.0 1.7 2.6 0.3 20.8 6.1Textile products 0.1 0.0 0.1 11.2 0.1 0.0 0.1 11.7 0.1Total 1.5 0.4 5.0 7.0 0.9 0.9 0.2 16.0 1.9

1.4 0.4 3.6 7.0 1.3 0.6 0.2 14.4 1.8Two‐way trade

Product

TPP11

TPP11

Total

TPP11

Newly

total

Export

Import


Membership of Japanese chambers of commerce and industryFDI from Japan

CountryJun.

‘15

Jun.

‘16

Jun.

‘17

THAILAND 1,624 1,716 1,749

VIETNAM 1,463 1,562 1,683

SINGAPORE 832 854 854

PHILIPPINES 745 776 805

INDONESIA 743 786 773

MALAYSIA 607 610 574

MYANMAR 239 310 351

CAMBODIA 192 218 245

LAOS 77 79 93

BRUNEI 3 3 3

Total 6,525 6,914 7,130

Source: Japanese Chambers of Commerce and

Industry in ASEAN

Increase of investment from Japan to ASEAN

As of June 2017, there are a total of 3,114 Japanese companies in the four ASEAN countries of TPP

11. (The membership of "Camara Chileno Japonesa" is 76.)

7

Unit:1b USD

Left: FDI to China from Japan

Right: FDI to ASEAN from Japan

Note: New criteria has been applied to the Balance of Payments Statistics since 2014. Please be

aware that this results in a lack of continuity with data from 2013 and before. The data for Brunei,

Cambodia, Laos and Myanmar in 2015 was as of the third quarter.

Source: Bank of Japan and other organizations.

INDONESIA

MALAYSIA

SINGAPORE

PHILIPPINES

THAILANDMEKONG

CHINA

CHINA

BRUNEI

INDONESIA

MALAYSIA

SINGAPORE

PHILIPPINES

THAILAND

CAMBODIA

LAOS

MYANMAR

VIETNAM


Potential to expand trade between Chile and ASEAN members

Statistics of bilateral trade with TPP 11 member countries (2016)（Unit: 1m USD, ％）

Partner

Country

Presence

of bilateral

FTA

Export Import Trade balanceExport items from Chile Items imported by Chile

USD Share USD Share USD

US 〇 8,160 13.2 9,433 16.6 △ 1,273 Copper, Fish filletsRefined petroleum products, Motor

vehicles

CANADA 〇 958 1.5 604 1.1 354Copper, Gold Wheat, coal

MEXICO 〇 1,216 2.0 1,890 3.3 △ 674Chickens, Fish fillets Television receivers, Motor cars

PERU 〇 1,480 2.4 947 1.7 533Miscellaneous Edible

Preparations, Frozen fishCopper, Molybdenum ores

JAPAN 〇 5,035 8.1 1,578 2.8 3,457 Copper, Frozen fishMotor cars, Refined petroleum

products

SINGAPORE 〇 79 0.1 64 0.1 15 Iodine, Frozen fishPharmaceutical products, Tugs And

Pusher Craft Vessels

MALAYSIA 〇 106 0.2 184 0.3 △ 78Copper, SlagApparel articles and accessories,

Furniture and parts thereof

VIETNAM 〇 201 0.3 603 1.1 △ 402Copper, Sawn wood

Electrical Apparatus For Line

Telephony Or Line Telegraphy,

Footwear

BRUNEI 〇 0 0.0 0 0.0 0 - -

AUSTRALIA 〇 328 0.5 355 0.6 △ 27Copper, Frozen fruit & nuts coal, Paper

NZ 〇 77 0.1 90 0.2 △ 13Wood pulp, Fruit & nuts Cheese, Butter

11 countries total － 17,640 28.4 15,748 27.6 1,892 －－

10 countries total 9,480 15.3 6,315 11 3,165

World － 62,042 100.0 56,964 100.0 5,078 －－

Note: Data on the amount and balance of bilateral trade is based on the statistics of Chile.

The component ratio for each country is the percentage of Chile’s total trade with the world represented

by that country.

Source: Statistics from Chilean customs

While Chile and the four ASEAN countries of TPP 11 have already concluded

FTAs, the trade share is small.


In the rules of origin of the TPP 11, a full accumulation system is adopted with the potential to increase added

value and production processes throughout the entire TPP 11 region. This system enables Japanese

companies to realize optimal strategies for production allocation and site location for various production

networks.

If no accumulation rule is applied, because the value contributed by Country A within the TPP is only 20%, it is unable to fulfill the 45%

required by the rules of origin. But with the accumulation system, the 25% value added by Japan can be added to the 20% of Country A,

enabling it to meet the 45% value added requirement to be considered a local product.

Example: In the case that the rules of origin require 45% or more added value. (Figures and pictures are samples.)

Optimal strategies along with full accumulation system through TPP 11

TPP11域内国A TPP11域内国B

A country

outside of TPP

9

General parts

Core component

with 25% added

value

Japan

Country A within

TPP 11

Assembly of

refrigerator with

20% added value

Preferential

tariff of TPP 11

Export

Country B within

TPP 11

Finished product


（http://voxeu.org/article/latin-americas-missing-global-value-chains）

CHILE

Vertical integration（Supply chains between parent companies and subsidiaries）

Source: IDB（Juan Blyde, Lead

Trade Economist of the Inter-

Americas Development Bank）

High density

JAPAN

VIETNAM

SINGAPOREMALAYSIA

Low density

Full accumulation through TPP 11 and future supply chains

- There is room for Japanese companies active in ASEAN to expand supply chains to Latin America (Chile and

Peru).

- Japanese companies can play an active role in establishing supply chains with the Asia-Pacific region which Chile

hopes to build.

10



Today’s contents




Chilean import tariffs of products from Japan

HS

codeProduct

Basic

tariff

(%)

Current rate

Japan-Chile

EPA (%)

TPP11 Tariff rate (%)

Import from

Japan(2016): 1,000 USD)

1st yr. 2nd yr. 3rd yr. 4th yr. 5th yr. 6th yr.

2501.00.40 Pure sodium chloride 6.0 6.0 0.0 02523.30 Aluminous cement 6.0 1.5 0.0 0

3822.00

Diagnostic or laboratory reagents on a

backing, prepared diagnostic or

laboratory reagents whether or not on a

backing

6.0 6.0 0.0 3,015

40.12Retreaded or used pneumatic tyres of

rubber,etc6.0 1.5 0.0 0

4412.99.00Plywood and laminated wood

-coniferous6.0 6.0 0.0 0

4419.11.00 Tableware and kitchenware, of wood 6.0 1.5 0.0 0.3

5002.00 Raw silk 6.0 6.0 0.0 07608.10.00

7608.20.00Aluminium tubes and pipes 6.0 6.0 0.0 5.7

7610.10.00Aluminium structures（windows and their

frames, etc）and parts of structures6.0 6.0 0.0 0

Reference: Tariff elimination schedule of "B15" category of the Japan-Chile EPA .1.5 1.1 0.8 0.4 0.0 0.0 -Note: It is assumed that the CPTPP will enter into force in April 2019. The import value from Japan is as of 2016. The

products (X) of which the current tariff on import from Japan set in the Japan-Chile EPA is 6% are excluded from

liberalization, and that of 1.5% is categorized in "B15."

Source: The Japan-Chile EPA and articles of the TPP

Improving access of Japanese products to the Chilean market

12

Examples of products which were excluded from liberalization or to be gradually eliminated over 15 years

Among products which were decided in an EPA between Chile and Japan to be excluded from liberalization or gradually liberalized

over 15 years, tariffs will be eliminated just after the entry into force of the TPP 11 for a number. This is a chance for Japanese

manufacturers to look at Chile anew.


Example: Comparison of the rules of origin by product

- Even for the same products, the rules of origin differ depending on the agreement.

- Companies are allowed to select the most beneficial rule.

- As seen below, the TPP 11 will allow some products, such as parts of copy machines

and medical equipment, to more easily fulfill the conditions of rules of origin.

13

HS code ProductCriteria of the rules of origin of the

Japan-Chile EPACriteria of the rules of origin of the TPP 11

8443.99Parts of copy

machines

The product can meet criteria by adding

value using materials other than those in

HS code 8443 and changing the product

to the code 8443.99

The product can meet the criteria by using materials

other than those of HS code 8443.99 and changing

the code to 8443.99.

Otherwise, the product can fulfill the condition if the

local procurement rate reaches 30% (with an

accumulation scheme) or 40% (with a deduction

scheme).

Note: As materials of products of the six digit HS code are more similar to original products than that of the four digit, less processing

(added value) is required.

Example


Merit (1): Expediting customs clearance


(1) Release of Goods (Article 5.10)Each Party shall adopt or maintain procedures that provide for the release of goods within a period no longer than that required to

ensure compliance with its customs laws and, to the extent possible, within 48 hours of the arrival of the goods.

Based on the data of “Doing Business” (2018), average time for custom clearance in Chile is 54

hours for import and 60 hours for export.

JETRO “Business Conditions of Japanese Companies in Chile”, released in January 2018.

14

13.5

8.1

2.7

2.7

2.7

0.0

0.0

0.0

0.0

13.5

70.3

0.0 20.0 40.0 60.0 80.0 100.0

Significant time required for customs clearance

Complex procedures for customs clearance

Inadequate communication and enforcement of noticesand rules

High import tariffs

Strict or unclear quarantine system

Unclear variation assessment / classification criteria fortariffs

Unclear inspection system

High non-tariff barriers

Export restriction and export tax

Other issues

No particular issues

Chile(n=37)

(%)

Issues in the field of trade systems in CHILE (n=37)


Exporters,importers and

producers

Government agency of trade partner country

(customs)

Confirming the tariff classification as well as original products in advance.

Providing necessary information.

Notifying as promptly as possible. Issuing it as expeditiously as possible andin no case later than 150 days after receiving a request.

When we requested the Chilean customs to notify us of the HS codes of Japanese products we were considering

exporting to the country at that time, the customs officials were not aware of the system, and hence we were unable

to obtain the information.

Survey on actual conditions of the Japan-Chile EPA, released in March 2018

(2) Advance Rulings (Article 5.3) Each Party shall issue an advance ruling as expeditiously as possible and

in no case later than 150 days after it receives a request to notify the tariff classification, the

application of custom valuation criteria and whether a good is originating in accordance with the

Rules of Origin.

Merit (2): Expediting customs clearance

Reference

15

Q: Regarding expanding business in Chile, what issues are you facing in tax and public administration matters,

and approvals and permits?

- The TPP obliges member countries to ratify or accede to either of the following agreements: the

Madrid Protocol, which defines the international registration of marks stipulating collective

application of international trademarks, or the Singapore Treaty, which harmonizes and simplifies

the international system of trademark application procedures. (Article 18.7)

- While Chile has acceded to neither of them as of now, the country will be able to apply for

international trademark registration in the future if it accedes to either.

Hopes for improving conditions surrounding intellectual property

16

- In the Japan-Chile EPA, a third-party certification system is adopted to issue the certificate of origin of products.

Designated organizations: the Japan Chamber of Commerce and Industry, and the Chile’s Industrial

Development Company (SOFOFA)

- In the TPP, a self-certification system is adopted. In the case of exporting a number of the same products, it

enables exporters to save time and costs (issuance fees by designated organizations).

-> In this regard, exporters have to take all measures to ensure compliance with the system such as document

management. The reason is that there is the possibility of increased inquiries from the customs of an import

country to check whether the submitted report has faults or not.

Self certification or certification by a third party

Other merits


Disclaimer: The Japan External Trade Organization (JETRO) and the author are neither directly nor indirectly

responsible for punitive damages and forfeiture of benefits caused by actions taken based on the contents of this

report.

Thank you very much! ¡Muchas gracias!

17

Copyright© 2018 JETRO. All rights reserved.禁無断掲載

JETRO’s report, “Business Conditions of Japanese Companies in Chile” are available in both Japanese and Spanish.

Japanese version: Scan the QR code on the right side and visit the website.

Spanish version: Scan the QR code on the right side and visit the website.