RIEB Discussion Paper No.121

Prospects for Closer Economic Relations between Latin America and Asia
Akio Hosono and Shoji Nishijima
Professors at RIEB/Kobe University
May 2001

Abstract
Regional integration such as NAFTA, MERCOSUR and FTAA have been flourishing in Latin
American countries in the 1990s. In addition to these multi-countries FTAs, many bilateral
FTAs have also emerged both among Latin American countries and between them andextra-regional countries. The purpose of this paper is to ana lyze the leading factors that arebehind the proliferation of intra-regional and inter-regional FTAs of Latin American countries.
We also discuss the prospects for bilateral FTAs between Latin America and Asia, particularly
focusing on Japan-Mexico and Japan-Chile FTA. Finally, a new approach to cooperation
between East Asia and Latin America, the East Asia Latin America Forum (EALAF), will be
examined.
Journal of Economic Literature Classification Numbers: F15, O53, O54.

Correspondence: Please contact to: hosono@rieb.kobe-u.ac.jp, or nisijima@rieb.kobe- u.ac.jp

Introduction
In the 1990s formal regional integration have been flourishing in Western
Hemisphere in a variety of ways. Latin American countries have strengthened their relations
by revitalizing existing sub-regional schemes or launching new important initiatives. In
addition to regional integration schemes or multi-countries FTAs (Free Trade Agreements)
such as NAFTA, MERCOSUR and FTAA, various bilateral FTAs have also emerged both
among Latin American countries and between them and extra-regional countries in the second
half of 1990s. Through these regional schemes Latin American countries have increased theirintra-regional trade much greater than expected. On the other hand, Asian countries havecontinued expanding their trade through “market led integration” without formal agreements
or other modalities of arrangements, except some regional scheme such as APEC and AFTA
(Hosono [2000], Nishijima and Smith [1996]). However, very recently, some of the East
Asian countries are showing strong interests about bilateral FTAs not only within Asia but
also between Asia and Latin America.
The purpose of this chapter is to analyze driving forces that are behind theproliferation of intra-regional and inter-regional FTAs of Latin American countries and theprospects for bilateral FTAs between Latin America and Asia. Section 1 describes the basic
background of regional integration in Latin America and Section 2 discusses the recent
developments of bilateral FTAs in Latin America. Section 3 argues the historical process ofregional integration in Latin America in the 1990s. Following a simple overview of thecurrent economic relations between Latin America and Asia in Section 4, Section 5 analyzes
the prospects for Japan-Mexico and Japan-Chile FTA. Finally, a new approach to cooperation
between East Asia and Latin America, the East Asia Latin America Forum (EALAF), will be
examined in Section 6.
1.

Regionalism in Latin America: its background

The resurgence and development of regionalism in Latin America in the 1990s canbe explained by the following reasons.
(1) Economic liberalization:
Regional integration in Latin America is not a new phenomenon. Latin America hadcreated numerous regional pacts and frameworks in the 1960s. But it should be noted that theregional integration in the 1960s were created in the context of import substituting
industrialization aiming at enlarging protected markets. On the other hand, regionalism in the1

1990s must be understood as one of the indispensable factors to complement and support theeconomic liberalization process. As is well known, Latin American countries started drastic
policy reforms based on “neo-liberalism” in the middle of 1980s abandoning interventionist
strategy that had brought serious economic crises in the 1980s. Remarkable outcomes ofpolicy reforms are seen in the trade and capital liberalization, and privatization. Figure 1
shows that very high tariff rates of Latin American countries were reduced very quickly
within a decade to around 10% to 14% that are almost same to the current level of Asian
countries where it needed about 30 years. Capital market liberalization also had significant
impacts on capital inflows to Latin America. As Figure 2 shows net capital inflows increased
dramatically from US$30.7 billion in 1991 to US$136.9 billion in 1998. Among all, FDI had
the most prominent increase and it exceeded the FDI into Asia in 1999 (See also Figure 3).
Privatization process in Latin America also overwhelmed the Asian privatization. During
1990 to 1998, Latin American countries realized privatization of US$154.2 billion while theamount in Asia was only US$38.6 billion (See Figure 4). Therefore it is undeniable that,together with drastic policy reforms, regional integration is playing important roles toaccelerate the liberalization process and attract FDI from both member and non- member
countries.
(2) Democratization
The 1980s was the decade of political democratization for most of Latin Americancountries. Along with the deepening and widening of democratization process in the region,
political circumstances for regional cooperation have been emerging. Democratization ofBrazil and Argentina contributed to hold a presidential meeting in 1985 at Iguaçu (just after a
few years of democratization of both countries) where the Presidents discussed the regional
cooperation for the first time. Ano ther example is the settlement of the dispute of 100 years
between Argentina and Chile over the territory of Beagle strait. These changes in politicalsituation in the region contributed to create the conditions that allowed intra-regional
cooperation and economic integration.
(3) Increasing regionalism of the US
The US foreign trade policy had been fundamentally based on a combination ofmultilateralism (GATT) and bilateralism (bilateral negotiation) at least until the end of the
1980s. But the US strengt hened an inclination towards regionalism in the 1990s. The
president Bush manifested the EAI (Enterprise for the Americas Initiatives) in 1990 that
intends to form a free trade area of the Americas from Anchorage to Tierra del Fuego. In 1994
the US effectuated NAFTA with Canada and Mexico, and showed a strong interest for the first2

time in the liberalization process of the APEC at the Seattle Meeting. In December of 1994,
the US took a leadership at the Miami Summit for attaining a consensus to form FTAA (Free
Trade Area of the Americas), which contains all countries in the North and South America
except Cuba. Against these changes in the US attitude towards regionalism, Latin Americancountries responded in various ways: on the one hand, many countries expressed strong
concerns about joining the FTAA and some countries such as Chile started a negotiation tojoin NAFTA, but on the other hand Southern Cone countries such as Brazil and Argentina
formed a sub-regional integration, MERCOSUR, to counterbalance aga inst the regionalism of
the US and to foster their negotiating power.
(4) Increase in “De Facto” intra-regional trade
The intra-regional trade in Latin America started to increase before the new trends ofregionalism of the 1990s. While Latin American countries exported only 11.9% of theirexports to their own region in 1985, the share of the intra-regional trade increased in a rapid
way to 15.2% in 1990 and 25.6% in 1994. Although the share of intra-regional trade in Latin
America is much less than that of Asian countries, it should be underlined that the increase in“de facto” intra-regional trade provided a fundamental condition to facilitate new initiatives
for regional integration in the 1990s.
Table 1 Intra -regional trade share of Latin America (%)
Year
1985
1990
1991
1992
1993
1994
%
11.9
15.2
19.1
21.9
25.1
25.6
Note: Mexico is not included in Latin America.
Source: DOT/IMF various years

2.

1995
26.1

1996
27.4

1997
28.4

1998
31.4

Growing Initiatives towards Bilateral FTA in Latin America

Besides plurilateral or multi-countries economic integration such as NAFTA and
MERCOSUR, many bilateral agreements have emerged in Latin America since the early
1990s. Particularly two Latin American countries, Chile and Mexico, have independently
pursued bilateral FTAs with countries throughout Latin America (See Table 2). For instance
Chile formed FTA with Canada and Mexico, and ECA (Economic Complementarity
Agreement) with MERCOSUR and 5 countries (Bolivia, Venezuela, Colombia, Ecuador andPeru), and CFA (Cooperation Framework Agreement) with EU. Moreover, Chile initiatednegotiations with the US, Korea, Central American countries and Cuba to form bilateralframework. Mexico is another example that has advanced bilateral regional integration. In

3

addition to NAFTA and G3 (Mexico, Colombia and Venezuela), Mexico formed FTA with EU
and 7 countries (Bolivia, Costa Rica, Nicaragua, Chile, and three Central American countries)
by the end of 2000, and signed FTA with EFTA that plans to be in effective from July 1, 2001
(though it needs ratification). Moreover Mexico formed ECA with Uruguay, Peru, Argentina
and Brazil, and agreed with these countries to amplify and deepen ECA into comprehensive
FTA. At the moment, Mexico is negotiating with Ecuador, Peru, Panama, and Trinidad
Tobago to form FTA. MERCOSUR also has various bilateral schemes. It signed CFA with EU
in 1995 that plans to establish FTA by 2005. In 1996, Bolivia and Chile joined MERCOSUR
as associate members in the framework of an ECA. MERCOSUR formed CFA with CACM
and ANCOM. Very recently it started negotiation with South Africa for forming FTA.
As the fundamental reasons for aggressive attitudes towards bilateral FTA, somefactors can be listed. (1) Many Latin American countries are using bilateral FTAs as effective
measures to pursue more thorough policy reforms, (2) WTO meeting in 1999 failed toestablish a new round for trade liberalization, which led to less confidence about the future
multilateral liberalization, and (3) APEC has been at a standstill after the Asian financial crisis,and seems to lose a momentum for liberalization process.
In addition to these basic reasons, there are various reasons from a theoretical pointof view why these countries are so aggressive for forming bilateral agreement s.
・ Comparing with multi-countries FTA, the possible number of “sensitive ” areas and sectors
are likely to be small and thus it is easier to attain an agreement.
・ A country can select a partner country that would accrue greater benefits with smallerdifficulties at the negotiation.
・ A country can avoid unfavorable liberalization that sometimes results from GATT/WTO
liberalization process.
・ If a country forms plural bilateral FTAs, it would have a stronger position at thenegotiation to join a multi-countries regional block such as FTAA.
・ When plural bilateral FTAs create a network in the region, it would make it easier to form
multi-countries FTA in the region.
・ In the case of not full- fledged trade agreement such as ECA (Economic Complementarity
Agreement) and CFA (Cooperation Framework Agreement), member countries can startcooperation in the areas that are easy to have consents. And ECA and CFA will play animportant role as a stepping-stone for forming comprehensive FTA.
・ If a multi-countries FTA forms a bilateral FTA with outside country, the outside country
can give a pressure on the multi-countries FTA not to be protectionist, and such bilateral
FTA would provide the possibility to increase the membership of the multi-countries FTA(one of the conditions for “open regionalism”).

4In sum, bilateral regional framework will take less time to enter into a treaty and have lessconflictive negotiation process than multi-countries framework.
On the other hand, it should be noted that bilateral FTA is likely to have a series ofpossible disadvantages, which are inclined to result in less open and more protectionist trade
policy.
・ If the bilateral FTA adopts restrictive rules of origin, it will be discriminative tonon- member countries as any other type of FTA could be.
・ Bilateral agreements may leave more opportunities for member countries to exclude thesensitive sectors from their agreements, and may prolong the negotiation about these
sectors.
・ Different rules of origin of individual FTA are likely to produce comp lex and confusing
forms of discriminations, and the complexity of the rules itself would be an impediment
for trade that pass through different FTA countries. Moreover complicated rules would
also be an obstacle when bilateral FTAs are to be unified into a plurilateral FTA such as
FTAA.
・ If FTAs are discriminative against the US, it would make the process towards FTAA moredifficult.
・ When a bilateral FTA is a “hub and spoke” type, it would have various problems 1 .
Because trade among spoke countries are not liberalized, the hub country can enjoy thegreater benefits from FTA than spoke countries, which means that the hub is likely to
oppose FTA among the spoke countries.
・ If each bilateral FTA has different rules and spoke countries have different treatments interms of tariff reduction and other facilitation, it would lead to a confrontation among hub
and spokes.
・ In contrast to a member country of some multi-countries FTA, existing spoke country
generally cannot participate in the negotiation table for a new bilateral FTA with the hubcountry. In such a case, the spoke county is likely to oppose a new spoke country to form
bilateral FTA with the hub.
・ In case that the hub country has a strong negotiating power, the liberalization process
might be biased in favo r of the hub country.
From a theoretical point of view there are possible risks, which may lead to an inconsistency
with multilateral liberalization or open regionalism. However it is obvious that bilateral FTAs
are proliferating in Latin American as a pragmatic way for trade liberalization.

1

See Chapter XX by Findlay.

5

3. Three phases of FTA process in Latin America
The purpose of this section is to analyze driving forces that are behind theproliferation of intra-regional and inter-regional FTAs of Latin American countries in the
1990s. In spite that FTAs are getting more attention of scholars of international economics
and are now considered to be one of the most effective instruments of trade policy in most of
the countries of the world 2 , there have been only few empirical studies on the above
mentioned issues related to FTAs, especially regarding cases of those in which Latin
American countries are participating. Therefore, let us discuss driving forces behind theirinitiatives towards FTAs from the first years of the 1990s, focusing on the three different
phases of the development of Latin American regionalism.
(1) First Phase: Recognition of FTAs as an effective trade policy instrument
It is well known that the first steps towards liberalization and reforms in the case of
Mexico were taken after the debt crisis. The first important step to accelerate the process was
to join GATT in 1986. It is well known also that the foremost important reason why President
Salinas de Gortari of Mexico decided to look for a FTA with the United States was to finalize
the efforts of Mexico to liberalize her economy that started from the mid 1980s. When Gorge
Bush and Carlos Salinas announced in June 1990 that the United States and Mexico would
have talks on perspective of a bilateral agreement of free trade, it was understood that it meanta clear message of the Mexican government to make the liberalization process irreversible(See Leycegui [2000], p.30 and Molot [1996], p.310]). According to Leycegui the FTAs
between Mexico and some other Latin America countries in the early 90s were also to
confirm this same message.
On the other hand, Chile’s initiative to extend FTA to a number of countries in theregion also started from the beginning of the 1990s, although her motivation was clearly
different from that of Mexico. There were at least two basic reasons why Chile adopted thestrategy to negotiate FTA with other Latin American countries at that period. First of all,
Chilean government after the democratic transition wanted to get out of the prolonged“diplomatic” isolation from international community as the consequence of the General
Pinochet’s dictatorship. Secondly, from the economic point of view, after almost fifteen yearsof unilateral liberalization, it was more clearly felt that unilateral opening did not necessarily
improve the Chile’s access to other countries’ markets.

2

See, for example, MITI, White Paper on International Trade, 1999. Tokyo.

6

In this context, Chile intended to have “preferential, assured and predictableopening” through bilateral liberalization. It was also expected that bilateral agreements would
establish better conditions for market access by means of elimination of non-tariff barriers andrules that limit adoptions of discretionary and arbitrary measures (See Saez [1999], p.166).
Although factors behind the new trade policy were different between Mexico andChile, they coincided in considering that FTA was one of the important policy instruments as
early as the beginning of the 1990s. Therefore, it was not just an accident that the pioneeringbilateral trade liberalization was agreed between these two countries. The first Chile-Mexico
trade agreement went into force in January 1992, almost two years before NAFTA wasestablished. The agreement was officially called ECA 17 (Economic Complementarity
Agreement) of ALADI (Latin American Integration Association, LAIA). One year before
Mexico-Chile ECA was ratified, Argentine-Chile ECA went into force, which was called ECA
16 of ALADI. These two ECAs as well as many other trade agreements among Latin
American countries were negotiated in the frame work of ALADI. Therefore the existence of
ALADI, as a kind of “umbrella” agreement notified to GATT, facilitated considerably thenegotiation and realization of these regional trade agreements. Since, under this typeagreement, trade in goods is liberalized either partially or fully according to the provisions set
forth in ALADI’s 1980 Treaty of Montevideo, ECA under ALADI framework can be regarded
as a sort of FTA in many cases. However it should be mentioned that, just because of theagreements in the ALADI framework, their scope was very limited compared with such acomprehensive FTA as NAFTA that has detailed rules of origins and well formalized
provisions on dispute settlement, service, intellectual property, investment, and government
procurement.
Hence these first ECAs of Latin American countries ratified at the beginning of the
1990s are often called a simple scheme of FTA. As a matter of fact, ECAs basically covertrade of goods although they contemplate possibilities of future negotiation of other areas.
They included general trade rules and dispositions regarding dispute settlements that, however,are not considered very effective.
(2) Second phase: “Deepening and widening” of FTAs.
The so-called comprehensive FTAs are substantially different from simple FTAs,
particularly, in terms of trade of services, investments, dispute settlements and antidumping. 3
3Some authors consider the comprehensive FTAs a la NAFTA as “third generation” or “lastgeneration” FTAs. In Chile, an ECA with liberalization under negative list is called first generation
FTA, an ECA with liberalization under positive list is called second generation FTA, and a7

As it was mentioned above, the announcement of Presidents Bush and Salinas on theinitiative on bilateral trade agreement was made June 1990, soon after Canada-United States
Free Trade Agreement went into force (1989). It was thought that Mexico-United States
FTA could jeopardize to some extent the Canada’s advantage gained by the Canada-US FTA.
Hence Canada decided to participate in the nego tiation to eventually attain the North
American Free Trade Agreement. The trilateral talks started in 1991.
The three countries’ stances towards NAFTA and interests behind it are very different.
We have to recognize that the long history of Canada-US and Mexico-US economic relations
as well as several formal and informal arrangements existed prior to the negotiation of
NAFTA between these pairs of countries were important elements that explain thecomprehensive nature of the NAFTA. For instance, the agreement on trade of automobiles
between Canada and United States and the regime for “Maquiladoras” in the Mexico-US
border zone can be important elements for the comprehensive nature of NAFTA, although we
do not have enough space to discuss in details this important aspect (See Molot [1996],
pp.317-35).
As far as Mexico is concerned, the specific reasons, among others, which motivatedthe country to negotiate comprehensive FTAs, especially NAFTA, are considered to befollowing:(a) As Mexico was to liberalize trade and investment anyway, it was considered to bebeneficial for the country to get concessions through the trade agreement from the UnitedStates, the largest trade partner for Mexico.
(b) As the percentage of petroleum in the total export of Mexico had been decreasing
rapidly, it was convenient for Mexico to get better access to as many markets as possible
through bilateral, regional and multilateral negotiations.
(c) It was considered also very important to assure the continuity of economic policyof opening that started from mid 1980s. It was thought that NAFTA would make it much moredifficult for the future governments of Mexico to change this liberalization policy through socalled “locking- in” effect (See Leycegui [2000], pp.31-2).
As for Chile, liberalization through bilateral FTAs was getting to be considered oneof the most effective instruments of trade policy for a small country like Chile. According to
Sebastian Saez, former Director in charge of trade negotiation of Chilean Foreign Ministry(DIRECON), multilateral system of trade has certain rules of negotiation that affects thecomprehensive FTA like NAFTA is called third generation FTA or last generation FTA (TLC de ultima
generacion). However, agreement between Chile and MERCOSUR is considered different fromabove-mentioned FTAs, because it covers articles related to matters as physical integration, border
trade, etc. although does not cover several normative issues included in the last generation FTAs as
second Chile -Mexico FTA and Canada-Chile FTA. See Saez [1999], p.164.

8

capacity of negotiation of small countries. As a small country is not the relevant producer of acertain product in the world, the space for negotiation for her is limited due to the rule of theprincipal supplier of GATT (See Saez [1999], pp.166-7).
The first comprehensive FTA for Chile was Canada-Chile FTA, which went into
force in 1997. According to Saez, from the period of negotiation of this FTA, Chile’s basic
stance regarding FTAs have changed, reflecting interest of Chile to include aspects related toinvestments and services in the FTAs. At the same time, Chile looked for more solid judicial
security through a reliable system of dispute settlement (See Saez [1999], pp.173-4).
After the NAFTA was established, Mexico extended FTAs to several countries of
Latin America. In 1995, the trilateral FTA with Colombia and Venezuela was negotiated toform the G3 (el Gupo de los Tres). FTAs with Costa Rica and Bolivia went into force in l995
and FTA with Nicaragua in 1998 and later the negotiation on FTAs with three other countries
of Central America together, El Salvador, Guatemala and Honduras; individually with Panama,
Ecuador, Peru, Belize, Trinidad and Tobago, Dominican Republic and Israel followed.
In this process, the renegotiation of Chile-Mexico ECA was particularly important.
The interests of these two countries coincided again in the sense that for both of them it wasconvenient to up-grade the former simple ECA and transform it into a comprehensive NAFTA
type FTA. The comprehensive Chile-Mexico FTA started in July 1999.
In the case of Chile, after the first two trade agreements (ECA with Argentina and
Mexico, respectively, as mentioned above), the country started free trade agreements in
ALADI framework (ECA) with Venezuela and Bolivia in 1993, Colombia in 1994, Ecuador in
1995, MERCOSUR in 1996, and Peru in 1998. Chile also initiated bilateral negotiation with
Canada from 1996 and with Central American Common Market from 1999.
In this way, Mexico and Chile have been converting into “hubs” of FTAs in Latin
America from mid 1990s. At the same time they have made efforts to deepen the contents of
FTAs from simple schemes to a comprehensive one during this period.
(3) Third phase: Inter-regional FTAs
Towards the end of 1990s, both Mexico and Chile started to look for establishing
FTAs with extra-regional countries. As they are the most recent initiatives, they are not yet
necessarily analyzed in depth. Howeve r, it could not be denied that they reflect the new trade
policy of these countries and their intentions to diversify economic ties with major
extra-regional countries like European Union and Asia. In this context, it is expected that
Mexico and Chile are going to be “hubs” that involves not only FTAs in Latin American, butalso inter-regional FTAs connecting existing or newly establishing integration schemes among

9

Western Hemisphere, Europe, and Asia.
One of the basic reasons for this tendency towards FTA with other countries orregions than Latin America lies in the natural outcomes from above mentioned deepening andwidening process of FTA, particularly the proliferation of bilateral FTAs. However, Mexico
and Chile have different reasons for expanding their FTAs with extra-regional countries.
After the entry into force of NAFTA, the Mexican export had increased dramaticallyfrom $51.9 billion to $136.9 billion during 1993 to 1999. But the extent of dependency on the
US market also had boosted considerably. In 1999, about 88% of Mexican export went to theUS, while that to EU was only 3.3%. Even though the trade expansion with the US must be
welcome for Mexico, too much dependence on the US market would make the Mexican
economy very vulnerable to fluctuatio ns of the US economy. Moreover extremely close
relationship with the US may weaken Mexican political influence to its southern neighbors.
Therefore it will be desirable for Mexico to diversify and strengthen economic relations withextra-regions through expanding bilateral FTAs. In fact, Mexico initiated bilateralnegotiations with the countries of extra-regions from the mid 1990s. Mexico concluded thenegotiation with EU in December 1999 and the EU-Mexico FTA itself came in effective from
July 2000.
Chile is one of the most liberalized countries in the world. In fact, Chile has pursued
unilateral trade liberalization with uniform tariff rates that have been reduced 1% each year (itis scheduled to reduce to 6% by 2003). Uniform tariff means that any sector is neither
preferential nor protected and there is no sensitive sector at the negotiation for FTA. With
such openness of the economy, regional agreement is an effective measure for Chile toaccelerate trade liberalization of partner countries. Therefore Chile has sought to improve
market access for its export by negotiating a series of regional schemes such as FTA, ECA
and AIP (Agreement for Investment Protection) with hemispheric and non- hemispherictrading partners. Chile-EU framework agreement for cooperation looking towards a FTA wasaccorded in 1999. In this context, it was also very important for Chile to start Chile-US FTA
negotiation from the end of 2000.
At the same time, Latin America countries seem to have been increasing theirinterests to extend bilateral FTAs to Asian countries. Mexico and Chile, in particular, areshowing strong interests in forming bilateral framework with Japan, Korea, and Singapore. A
couple of studies on the possibilities of Japan-Mexico FTA and Japan-Chile FTA have been
made in these countries. Moreover preliminary consultation or negotiation between each ofthese two Latin American countries and some Asian countries such as Korea and Singapore
are also being made.
It should be noted here that these momentum in Latin America towards bilateral FTA

10would have significant influences on the recent movements in Asia for forming bilateral FTA.
If Asian countries pay enough attention on Latin America, initiatives for bilateral FTA in Asia
Pacific would be accelerated.

4. Present Economic Relations between Asia and Latin America
It will be useful to overview the present economic relations between Latin Americaand Asia before turning into the questions of perspectives regarding Japanese FTAs with Latin
American countries.
(1) Trade
One of the prominent changes in trade in the 1990s is seen in drastic increase of
intra-regional trade in every region. As Table 3 shows, NAFTA increased its share of
intra-regional trade from 41.4% in 1990 to 51.0% in 1998, and Latin America (except
Mexico) from 13.7% to 31.4% in the same period. East Asia also increased the intra-regional
trade from 35.7% in 1990 to 43.4% in 1997, but it decreased slightly due to currency crisis in
1998. As mentioned above, one of the basic reasons for the increase in intra-regional trade in
Latin America can be attributed to the developments of institutional regional integration suchas MERCOSUR and various bilateral FTAs, while in East Asia the increase of intra-regional
trade has mainly been attributable to “de facto” expansion of trade led by market.
The share of Latin America in total East Asian exports has been stable at the levelaround 2% or 3%, which shows a rather moderate importance of Latin America for East Asia.
Since “East Asia” in this figure includes Japan, it is likely that the East Asian countries otherthan Japan must have much less export to Latin America. By contrast, the share of East Asia
in total Latin American exports has been keeping about 10% indicating that the importance ofEast Asia for Latin America is much greater. There is an apparent asymmetry in theimportance as an export market for respective region.
From the theory of international trade, both regions have a similar structure of“comparative advantage ”, which means that their trade is competing. The geographic distancealso has been discouraging trade between the regions. But industrial developments in bothregions, particularly in the manufacturing sector, have a possibility to expand “intra- industrial
trade” between the regions, though it will take a long time. At the same time, even though thestructure of comparative advantage may not change in the short run, economic liberalization
can change in product varieties and qualities (differentiation), which can provide a large
chance to expand trade between Asia and Latin America. In this sense, some regional11

agreements is expected to be an effective measure to expand the inter-regional trade between
Asia and Latin America.
(2) Foreign Direct Investment
Asian countries have received FDI at an increasing rate by 1997, but slightly
stagnated in 1998 and 1999 because of the currency crisis in 1997 (See Figure 3). By contrast,
FDI to Latin America has kept an increasing pace by 1999, despite the currency crisis in
Brazil in 1999 (See Figure 2). In 1999, FDI flowed into Latin America about US$90 and in
Asia about US$62. The reasons for recent different patterns of FDI in these regions are (1)privatizations in Latin America explains about 30% of FDI inflows, (2) Japanese recession
reduced its FDI into Asia, and (3) the effects of currency crisis was much grater in Asia than
Latin America. But, one conspicuous reason to explain an increasing FDI into Latin America
lies in the aggressive investments and M&A of the US and European multinationals that are
regarding Latin America as an important future market with expanding network by various
regional integration. Particularly Spanish multinationals such as Telefónica de España,
Endesa-Eapaña, Banco Santander, Banco Bilbao Vizcaya have invested in Latin Americancountries very aggressively. The total FDI into Latin America from Spain has increased from
US$4,024 mil in 1996 to US$12,636 in 1998.
According to the MOF data about Japanese FDI, Japan had increased continuously
its FDI into Asia by 1997, but dropped in 1998 and 1999 due to the Asian crisis and domestic
financial instability. By contrast, the share of Latin America in total Japanese FDI has been
increasing (See Figure 5). But, by taking a closer look at the figures, it becomes clear that amajor part of the FDI in Latin America went into Caiman Island, Bermuda, and Panama inorder to make good use of tax heaven and flag convenience. This means the Japanese FDI into
Latin America in the area of manufacturing and service sectors is very small (about 2.2% of
the total Japanese FDI in 1998 and 5.5% in 1999). On the other hand, the US has kept FDI in
Latin America at the stable level, for instance 14.1% of total US FDI in 1999. Reflecting thesefacts, the Japanese presence in Latin America has been declining rapidly. The basics reason
for this is seen in the fact that a major part of FDI into Latin America occurred in such area asprivatization, telecommunication, electricity, energy, IT, etc. These are areas that Japan does
not have international competitiveness. Besides, the recent FDI takes the form of M&A that
the Japanese firms do not have enough experiences and advantages. This fact tells us thatJapan is losing its international competitiveness in Latin American market, and should
progress structural reforms more quickly and to more extent.
Taking consideration of these facts regarding Japanese trade and FDI to Latin
America, it would be helpful to examine the prospects for FTAs with Latin American12

countries as effective measures to strengthen economic ties between Japan and Latin America.

5.

Perspectives for Japan-Mexico and Japan-Chile FTA

In this section, we will focus on new initiatives that are being taken to strengthen
economic relations between East Asia and Latin America: among others, initiatives towards
bilateral FTAs such as Japan-Mexico FTA and Japan-Chile FTA.
In the section 3, efforts were made to identify motivations of some Latin Americancountries to strengthen their external relations through FTAs. Further more it was explainedthat in recent years they became to be highly interested in establishing FTAs withextra-regional countries such as EU and Japan.
Therefore, in this section we need to examine, first, factors which motivate East
Asian countries, especially Japan, to get interested in strengthening ties with Latin Americancountries through FTAs in order to assess, later, the perspectives of Japan-Mexico FTA andJapan-Chile FTA, having also in mind the analysis of previous sections (especially sections
2,3 and 4).
(1) Basic Factors behind initiatives towards bilateral FTAs between some East Asian and
Latin American countries.
We could distinguish at least two basic factors for Japan to get much more motivated
now to consider the possibilities of establishing FTAs with some of Latin American countries
almost at the same time with the establishment of FTAs with some East Asian countries: oneis recognition of the importance of FTAs in general terms and the other is the concern about
the eventual discrimination against Japan vis-à-vis United States and EU in some of Latin
American countries.
As for the first point, we can recognize that in several East Asian countries, including
Japan, Korea and Singapore, a positive view of bilateral or regional FTAs (as well as of
sub-regional cooperation) is now much more broadly held than a few years ago. Indeed, Japanand Korea, the last two significant contracting parties of the GATT/WTO that have neverparticipated in a formal FTA or regional integration process on the grounds that these process
are against multilateralism, have recently changed their attitude to FTAs.
Note, for example, that the 1999 edition of the White Paper on External Trade issued

13

by Japan’s Ministry of International Trade and Industry (MITI) 4 declared, for the first time.
For instance, MITI showed its clear stance in White Paper [1999], pp.37-8.
“Japan, convinced of the importance of consistency with the principles of GATT, andconsidering the possible negative effects of regional integration on regional and extra-regionalcountries, has thus far adopted a very different position from that of most other countries of
the world, which have promoted regional integration (FTAs and customs unions) in addition
to the multilateral trading system.”“Nevertheless, there is a growing need to address this issue in a more flexible andconstructive manner, since the following positive effects of regional integration are evident
and they could help to strengthen the multilateral trading system. First, there has been a net
growth of trade and investment in the specific cases of NAFTA and MERCOSUR. Second, inthe context of globalization, some rules of the international economy have been fixed bymeans of the harmonization of many national circumstances. It should therefore be easier toestablish rules (such as TRIMs, TRIPs, dispute settlement, government procurement etc.)
among countries with similar socio-economic conditions. Third, in negotiating the multilateralsystem of international trade, a greater role is now played by groups of countries engaged inregional integration or cooperation.”
The White Paper concluded: “Japan should assume a more active posture towards
regional integration and cooperation initiatives, and should propose a model that will help
strengthen the multilateral system.”Less than a year after, the Trade and Investment Committee of Keidanren (TheFederation of Economic Organizations of Japan) published the report Free Trade Agreement
should be strongly promoted: Towards a new approach of trade policy and handed it over tothe government in July, 2000. This report made a comprehensive analysis regarding theurgent need for Japan to promote FTAs and proposed the scope and contents of the expected
FTAs including trade of services, rules of origin, anti-dumping measures, safeguard,
liberalization and protection of foreign direct investment, standards and certification,
intellectual property rights, government procurement, competition policy, electroniccommerce, and dispute settlement.
We should add that in this new context, Japan and Singapore started negotiations fora “New Age FTA” from the beginning of 2001. This will cover several issues related toelectronic commerce and information technology, in addition to the comprehensive trade andinvestment areas (a comprehensive FTA). 5
4

Ministry of International Trade and Industry, MITI, was reorganized in the process of administrativereform and since January 2001 it is called Ministry of Economy, Trade and Industry, METI.
5
In this connection, we should mention also that during his visit to Japan in October 1998, the14

As for the second point mentioned above, Japan, Korea and other East Asian
countries are now increasingly more convinced of the need to strengthen its links andcooperation with Latin America, since North American and European countries are alreadymoving in that direction. Indeed, for example, East Asian countries substantially lag behind
the United States, Canada and European countries in their foreign direct investment in Latin
America, in which market East Asian firms are in a disadvantageous position in term ofcompetition in the area of trade and investment against the US and EU firms.
There are of course various explanations for this. Attention must nevertheless be paid
to the fact that in comparison with the United States (which has taken the lead in the FTAA
discussions) and the EU (which concluded a FTA with Mexico in 2000 and is negotiating a
FTA with MERCOSUR as well as with Chile under the terms of an existing frameworkagreements), thus far there have been no similar initiatives between Latin America and East
Asian countries, including Japan. 6
In addition to this, it should be mentioned that Latin America has been always
important for Japan, Korea and other East Asian countries because of its abundant resourcesof minerals and foodstuffs.
Finally, as a specific reason for Japan, it should be stressed that comprehensive FTA
with any countries would have a possibility to accelerate structural adjustments of Japanese
economy that has suffered from the serious recession for a decade because of the sluggish
reforms.
(2) The initiative for Japan-Mexico FTA and specific factors behind it
Responding to the proposal of the President of Mexico, Ernesto Zedillo formulated
during his visit to Japan in November 1998 that efforts to consider concrete measures tostrengthen economic relations between Mexico and Japan should be initiated, Japan ExternalPresident of the Republic of Korea, Kim Dae Jun, proposed a new bilateral relationship between
Korea and Japan that is suited to the new era. The two governments have agreed to set up a study
committee in each country, entrusted with considering measures to strengthen their economic links.
During his visit to Korea in March 1999, Keizo Obuchi, then Prime Minister of Japan, presented the“Agenda 21 of the Japan-Korea Economy: Towards Stronger Japanese-Korean Economic Relations in
the Twenty-first Century”
6

It was in this context that Singapore’s Prime Minister, Goh Chok Tong, proposed the creation of theEast Asia -Latin America Forum (EALAF) during a visit to Chile in October 1998. EALAF seeks tobring together the leaders of the Asian and Latin American countries with the aim of fostering dialogue
on trade and investment. EALAF’s first meeting of senior officials was held in September 1999, andanother followed in August 2000. The first ministerial meeting is scheduled for the first quarter of2001 in Chile.

15

Trade Organization, JETRO established a Commission to study on measures to strengthen
economic relations between Japan and Mexico in February 1999 and presented its report in
April 2000. The Secretary of Trade and Industrial Development (SECOFI) of Mexican
government also presented its report at the same time.
The above-mentioned Commission of JETRO summarized as follows the conclusionof its study: 7“A FTA would be an effective means of strengthening economic ties
between Japan and Mexico.”“The Promotion of a Japan-Mexico FTA would not only contribute to theestablishment of trade and investment rules in multilateral negotiations at the WTO, forinstance, but also play a major role in diversifying Japan’s trade policy options and inpreventing the formation of regional economic blocs in North America, Europe and Asia”“In promoting a Japan-Mexico FTA, an initiative should be taken also to seek a morecomprehensive, higher-level agreement that will cover not only trade and investment
liberalization but also intellectual property rights, standards certification, government
procurement, and dispute settlement mechanisms. At the same time, even while giving
adequate consideration to possible effects on domestic industries, every effort should be madeto create a basic framework to realize a FTA at the earliest date possible.”This report emphasizes, among others, the following important points: (a)Japan-Mexico FTA should be comprehensive, (b) its effects on domestic industries, especially
agriculture, should be taken into consideration8 , and (c) interregional FTA like the eventual
Japan-Mexico FTA would avoid the formation of major blocks in the world economy.
Japan-Mexico Economic Committee of Keidanren is much more specific regarding
the urgent need of negotiating the FTA with Mexico. The President of the Committee, Mr.
Nobuhiko Kawamoto emphasizes the importance of Japan-Mexico FTA on the base of therecent survey of Japan-Mexico Chamber of Commerce (established in Mexico).
According to this survey, about 80% of Japanese firms which are operating in
Mexico think that there is a demerit of not forming FTA with Mexico, for the reasons: (1)Mexican tariff rate increased about 3% for the imports from non-FTA countries from January
1999, (2) Special treatments by Maquiradora and PITEX9 would be abolished by the end of
7

JETRO,2000, p.45
The report mentions in details the possible effects on agriculture and livestock, especially on the
production of pork in Japan.
9
On May 3, 1990, the president of Mexico enacted the "Decree Establishing Temporary Import
Programs to Produce Export Articles" ("PITEX"). The purpose of PITEX is to promote exports of
non-petroleum products, vertical integration, and sales of export quality products in the Mexican
domestic market. A company seeking to work under PITEX must obtain authorization from the
816

2000, (3) Japanese firms are in an unfavorable condition in the competition of government
procurements and privatized infra-projects comparing with FTA member countries due to thetariffs levied on imports from Japan. In particular, Japanese electronic and transportation
firms in Mexico have a strong demand for creating FTA with Mexico.
Moreover 72 per cent of the above- mentioned firms replied that the recently
established EU-Mexico FTA would have negative impacts on them.
In short, Keidanren is overwhelmingly concerned of the discrimination against Japancaused by NAFTA and EU-Mexico FTA. 10
Very recently (January 23, 2001), Japan and Mexico agreed to materialize an
Investment Protection Agreement within three months as a preparation for FTA, and also
agreed to form a study committee for strengthening economic relationship.
(3) The initiative for Japan-Chile FTA and specific factors behind
In November 1999, Mr. Gabriel Valdes, Minister of Foreign Relations of Chile,
manifested to Mr. Noboru Hatakeyama, President of the Japan External Trade Organization,
JETRO, his hope to carry out a study on the possibilities of signing a Japan-Chile Free Trade
Agreement. Then, in February 2000, the Undersecretary of the same Ministry in charge of
economic relations proposed officially to JETRO to start the study.
In order to respond to this proposal, the JETRO established a Study Committee on
Japan-Chile Free Trade Agreement in May 2000. This Committee finally published its reportin May 2001, concluding as follows 11 :“Having duly considered the advantages and disadvantages of a free trade agreement
between Japan and Chile, and having adequately considered the potential impact on Japan’s
specific domestic industries12 , the multifaceted role of agriculture, and the need to secure astable supply of natural resources, we conclude that the maximum effort should be made toconclude a free trade agreement between Japan and Chile as soon as possible.”“For all of these reasons, the free trade agreement to be concluded between Japanand Chile should be comprehensive, addressing not only market access but also investments,
services, government procurement, standards and certification, and competition policies. In
this way, it will not only promote bilateral trade but also promote mutual investment flows

Ministry of Commerce and Industrial Development (SECOFI)"
10
Opinions expressed by Mr. Kawamoto are those published by the magazine of Keidanren. See
Keidaren, (a monthly journal of the organization of the same name), October 2000 (in Japanese).
11
12

JETRO, 2001, p.16
Impacts on agiculture and fishery, particularly salmon, are widely referred in the report.

17and encourage businesses from the two nations to cooperate in developing markets in third
countries. In addition, as a result of the agreement’s motivational effect, Japan and Chile willenter into a closer and more multilevel economic relationship. Not only that, by concluding aforward-looking free-trade agreement demonstrating that both nations regard free trade as amatter of national policy, Japan and Chile will be contributing to the liberalization of tradeand investment throughout the world.”
Although the general background for taking initiatives towards Japan-Chile FTA issame as Japan-Mexico FTA, there are some specific aspects which are different between them.
First of all, the discrimination against Japan vis-à-vis the United States and EU is potential
one in the case of Chile, because Chile-US FTA and Chile-EU FTA are now being negotiated,while NAFTA and EU-Mexico FTA are already in force.
Second, trade between Japan and Chile and Japanese investments in Chile are muchless than the case of Japan-Mexico relations. However, in the case of Chile, the following
aspects are emphasized as reasons for studying the possibilities of Japan-Chile FTA: (a) Chilemodel of economic development, (b) Chile’s free trade policy, (c) advanced status in IT
among Latin American countries and (d) Chile’s positio n as a “gateway” between Asia andthe rest of Latin America, especially, MERCOSUR. On the base of these aspects, the reportemphasizes that Chile is important to Japan as a partner of FTA.
(4) Possibilities and significance of Japan-Mexico FTA and Japan-Chile FTA: Preliminary
Remarks
As the initiatives towards Japan-Mexico FTA and Japan-Chile FTA are still at an
early phase, we are not in conditions to make an in-depth analysis to assess the possibilities ofthese agreements. However, we could mention at least the following factors as crucial forthem:(a) Concern about the discrimination against Japan vis-à-vis the United States,
Canada and EU in Latin American countries, especially in the Mexican and Chilean markets,
as well as the increasingly stronger negative impacts of this situation on Japanese trade andinvestment in these countries;(b) Possibilities for avoiding or alleviating potential impacts of these FTAs on
domestic industries such as agriculture, livestock and fishery through several domestic policy
measures and/or instruments as well as through specific approaches and modalities in thecontext of FTA themselves, such as those adopted in the EU-Mexico FTA, which areconsidered to be consistent with GATT/WTO(c) WTO negotiation on agricultural sector and the stance of Japanese government

18

for further liberalization in this sector having mind her strong concern about the multi- facetedrole of agriculture including issues of environment and food security.
(d) Process of negotiation of Japan-Singapore FTA and other related initiatives inAsia.
(e) Advancement of other interregional FTAs initiatives between East Asian and
Latin American countries such as Chile-Korea FTA and Singapore-Mexico FTA.
(f) Advancement of negotiations to establish FTAA in the Western Hemisphere andnegotiations for EU-MERCOSUR FTA. In this regard, it is considered crucial whether the
Bush Administration would be able to obtain the authorization of the fast track for tradenegotiation by the Congress.
As was mentioned before, it is too early to evaluate this on-going process ofinterregional FTA initiatives. Nevertheless, we believe that this paper could have contributed
to identify basic motivations behind them and some crucial factors that would determine thepossibilities of attaining these FTAs actually in near future.
It is conspicuous that bilateral FTA with Mexico and Chile will be very helpful as a
steppingstone for expanding the relationship between Japan and Latin America. Taking
account of a fact that the Japanese presence in Latin America in terms of FDI has declined in
the 1990s, bilateral FTA with Latin American countries will have a special importance forJapan to promote Japanese FDI not only in the member countries but also in other Latin
American countries that are integrated through various regional schemes. In addition, it
should be underlined that discussions about FTA with Mexico and Chile themselves will havea great influence on the initiatives for bilateral FTAs in Asia and on the APEC liberalization
process (Mexico and Chile are the APEC members). Of course, it also should be noted thatsuch FTAs must be endowed with some mechanism that guarantee a contribution tomultilateral liberalization, or at least should not be contradictory to it. Such FTAs should not
be protective against the third countries and should have a clear condition regarding
participation.
6. New Initiatives to Cooperation between East Asia and Latin America
In addition to the initiatives for bilateral FTAs, Asian and Latin American countries
have embarked on a new framework to enhance the connections between the two regions. Asa first step for this new approach, Singapore Prime Minister Goh Chok Tong, in October 1998,
proposed the formation of a summit to bring together the leaders of Asian, including Japan,
and Latin American countries. It is called the East Asia-Latin America Forum (EALAF, in
Spanish, FALAE). The first Meeting of EALAF was held on September 1 to 3, 1999 in

19

Singapore.
The inaugural Ministerial Meeting of the Forum was held in Santiago, Chile on 29
and 30 March 2001. In this meeting, it was agreed that the official name of the forum willbe “Forum for East Asia – Latin America Cooperation.” (FEALAC)
The participant countries at the Singapore Meeting were China, Sout h Korea, Japan,
ASEAN 10 countries of ASEAN (Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia,
Myanmar, Philippines, Singapore, Thailand, Vietnam), Australia, New Zealand and 12
countries from Latin America (Argentina, Brazil, Chile, Paraguay, Urugua y, Peru, Bolivia,
Ecuador, Colombia, Venezuela, Panama, Mexico) (See Table 4). At the inaugural FEALAC
meeting, El Salvador, Costa Rica and Cuba were accepted as member countries. Thus, oneof the salient futures of this Forum lies in a fact that almost all the Latin American countries
are joining it, while only three countries from Latin America are participating to APEC. Asia
is linked to North America through APEC, and also has a dialogue channel with Europe
through ASEM (Asia-Europe Meeting). In this sense, it is expected that the FEALAC could
be a forum that boosts Asia-Latin American ties and forges the missing link between two
regions.
According to the Communique of the above- mentioned Santiago Meeting, it marked
the beginning of an unprecedented dialogue and cooperation between their regions to meet
political, cultural, social, economic and international issues of common concern. In thisconnection, they will strengthen the ties between their two dynamic regions that will need to
manage the challenges and opportunities in an interdependent and globalised world.
During the Meeting, the Ministers approved the Framework Document of the Forumthat establishes the principles, aims, objectives and modalities to guide its future work. They
also decided to establish three Working Groups, with the aim of strengthening dialogue andcooperation in political/cultural, economic/social, and education/science and technology
fields.
The FEALAC Framework establishes that the purpose of the Forum is to promotebetter understanding, political and economic dialogue and cooperation in all areas so as toachieve more effective and fruitful relations and closer cooperation between the two regions.
It also mentions that the Forum should take a multidisciplinary approach and could involve
both the public and private sectors.
It should be pointed out that FEALAC will have to address several issues in the
future: (1) the relation with the United States that does not participate in it, and (2) the relation
with APEC that has similar objectives and overlaps the membership. At the moment, we havenot any information related to the United States’ official stance regarding the FEALAC.
Regarding APEC, according to a Chilean high official, “APEC has nothing to do with this20

forum. It’s an economic and commercial forum. We will take up social, cultural and politicalissues. Political issues are very important to us.”If this FEALAC concept gets off the ground, the two regions, which have a
combined population of 2.3 billion people, will have a framework for economic dialogue forthe first time that would play an important role for the future relationship between the regions.
According to the Co-Chairs’ Statement of the above- mentioned Santiago Ministerial
Meeting, the Ministers directed that the Working Groups would have the following broad
terms of reference:a) Elaborate detailed frameworks for cooperation between the two regions in order tomake recommendations on a few practical, Forum-wide projects;b) In doing so, the Working Groups sho uld, where appropriate, endeavor tocoordinate and harmonize existing national projects and explore potential
synergies between national projects and proposed Forum-wide projects in order to
identify national projects which could be harmonized with, or incorporated into,
possible Forum-wide projects;c) The Working Groups should also examine suggestions made by member states inorder to prioritize them and avoid duplication with the existing work of otherregional and international forums, groups and institutions.
Final Remarks
Thus far East Asian countries, including Japan, have been pursuing multilateralism
under GATT/WTO regime and have realized “market oriented” regional integration. However
it is becoming conspicuous that the formal regional integration does not necessarily contradict
with multilateralism, rather it could be an effective measure for trade and investment
liberalization. Moreover, because of drastic progress of regionalism in the world, East Asian
countries have been forced to be in disadvantageous positions regarding competition in themarkets of formal integration. It is an inevitable result that the East Asian countries recently
initiated negotiations with various countries about FTAs.
In this context, bilateral FTAs with Latin American countries have exceedingly
important meanings for Asian countries. Latin American countries, particularly Mexico andChile, have rich experiences in forming bilateral FTAs and strong concerns about FTA with
East Asia. As Mexico-EU FTA indicates, they have already entered into the third phase ofregional integration, and are looking for new FTAs with extra-regions. Taking account of themerits of bilateral FTA discussed in the previous section, the strong driving force of Mexico
and Chile towards FTA seem to produce circumstances in which the initiatives in Asian21

countries for FTA would be accelerated.
Using bilateral FTAs as a lever, it is expected that Asia and Latin American countries
would be able to promote trade and investment liberalization, and then could amend themissing link between the regions. For Japan, FTA means not only strengthening theconnections with Latin America but also effective stimulus for structural adjustments in thedomestic economy. In this sense, Japan, in particular, must take a leadership and proceed
actively the negotiations for FTAs with Latin American countries. Finally it is needless to saythat Japan should pursue and construct FTA that is consistent with multilateral free tradesystem.

References
Findley, Christopher, “Old Issues in New Regionalism,” Chapter XX in this volume.
Hosono, Akio, “Asia-Pacific Economic Cooperation and the Free Trade Area of the Americas,
Possibilities of Cross-Pacific Cooperation,” Inter-American Law Review, Vol.28, No.3, The
University of Miami, 1997.
Hosono, Akio and Neantro Saavedra Rivano (eds.), Development Strategies in East Asia andLatin America, Macmillan, London and New York, 1998.
Hosono, Akio, “Investment opportunities in Latin America and Asia and the Pacific,” inInterregional Cooperation in Trade and Investment: Asia and Latin America, UN-ESCAP,
2000.
Hosono, Akio, “Economic Integration in Asia and Pacific: Experiences and New Initiatives”,
Integration and Trade, No. 12, Vol. 4, IDB/INTAL, Buenos Aires, December 2000.
IDB, Integration and Trade in the Americas, Aug 1998, October 1999, and December 2000.
IDB, “Ten Years of Trade Liberalization and Regional Integration: What Happened to Tradein Latin America and the Caribbean?”, IDB, Integration and Trade in the Americas,
December 2000.
Iglesias, Enrique, Transpacific Partnership: Latin America's Role, 12th International General
Meeting of the Pacific Economic Cooperation Council (PECC), Santiago, Chile, Sep. 1997.
JETRO, Report on Closer Economic Relations between Japan and Mexico, April 2000.
JETRO, Study Report on the Japan-Chile Free Trade Agreement, May 2001.

22

Leycegui, Beatriz, “Socios Naturales? : Una Visión General”, in Leycegui, Beatriz y Rafael
Fernández de Castro (eds.), ?Socios Naturales?: Cinco Años de Tratado de Libre Comerciode América de Norte. ITAM, Mexico City, 2000.
MITI, White Paper, 1999 edition, May 1999.
Molot, Maureen A., “? NAFTA: Resultado de Decisiones Políticas o Inducido por la
Inversión?” Lipsey, Richard C. and Patricio Meller (eds.), NAFTA and MERCOSUR: Un
Dialogo Canadiense - Latinoamericano, CIEPLAN, Santiago, 1996.
Saez, Sebastian, Estratégia y Negociación en el Sistema Multilateral de Comercio, Dolmen
Ediciones, Santiago, 1999.
Nishijima, Shoji, “APEC, FTA A and the Pacific Rim: A Latin American Perspective,”
IDE/Kobe University, APEC Study Center Discussion Paper Series No.12, February 1997.
Nishijima, Shoji and Peter Smith eds., Cooperation or Rivalry? Regional Integration in theAmericas and the Pacific Rim, Westview Press, 1996

23

Table 2 Effective Regional Arrangements of Chile, Mexico and MERCOSUR
Participant Country or Region Type
Effectuation
Chile
Bolivia
ECA
July 1, 1993
Venezuela
ECA
July 1, 1993
Colombia
ECA
January 1, 1994
Ecuador
ECA
January 1, 1995
MERCOSUR
ECA
October 1, 1996
CanadaFTA
July 5, 1997
Peru
ECA
July 1, 1998
European Union
CFA
April 24, 1999
MexicoFTA
August 1, 1999
USA
FTA
Under Negotiation
Korea
FTA
Under Negotiation
Central America
FTA
Under Negotiation
Cuba
FTA
Under Negotiation
MexicoUS, Canada (NAFTA)FTA
January 1, 1994
Colombia, Venezuela (G3)FTA
January 1, 1995
Bolivia
FTA
Januray 1, 1995
Costa Rica
FTA
Januray 1, 1995
Nicaragua
FTA
July 1, 1998
EU
FTA
July 1, 2000
Chile
FTA
August 1, 1999
IsraelFTA
July 1, 2000
Guatemala,Honduras,
El FTA
January 1, 2001
Salvador (Northern Triangle)
EFTA
FTA
July 1, 2001
Uruguay
ECA
Effective
Peru
ECA
Effective
Argentina
ECA
Effective
Brazil
ECA
Effective
EcuadorFTA
Under negotiation
Peru
FTA
Under negotiation
PanamaFTA
Under negotiation
Trinidad y Tobago
FTA
Under negotiation
Japan
IPA
Under negotiation
MERCOSUR EU
CFA(FTA 2005) Dec. 1995 (sighed)
Bolivia
ECA
January 1, 1996
Chile
ECA
October 1, 1996
CACM
CFA
April 18, 1998(signed)
ANDES
CFA
April 18, 1998(signed)
South Africa
FTA
Under negotiation
Notes: FTA: Free Trade Agreement, ECA: Economic Complementarity Agreement,
CFA: Cooperation Framework Agreement, IPA: Investment Protection Agreement.
Source: Mexico: Secretaria de Economia, Chile: DIRECON, Mercosur: Mercosur Committee
in Uruguay.

24

Table 3. Intra and Inter-Regional Trade Share by Each Region (%)
1970 1975 1980 1985 1990 1995 1996
Exporting Importing
regionregionNAFTA
NAFTA
0.360 0.346 0.336 0.439 0.414 0.462 0.476
Latin
0.081 0.089 0.086 0.056 0.048 0.067 0.067
America
East Asia
0.176 0.152 0.168 0.147 0.187 0.202 0.200
EU
0.233 0.195 0.216 0.170 0.196 0.162 0.154
Oceania.
0.022 0.017 0.018 0.021 0.019 0.016 0.016

1997

1998

0.491 0.510
0.071
0.181
0.154
0.015

0.073
0.152
0.164
0.015

0.284
0.292
0.099
0.193
0.003

0.314
0.283
0.083
0.194
0.002

Latin
America

Latin
America
NAFTA
East Asia
EU
Oceania.

East Asia

East Asia
NAFTA
Latin
AmericaEU
Oceania.

0.287 0.286 0.327 0.318 0.357 0.390 0.435 0.434 0.384
0.325 0.235 0.235 0.334 0.280 0.240 0.233 0.238 0.263

NAFTA
Latin
America
East Asia
EU
Oceania.

0.097 0.069 0.067 0.112 0.082 0.077 0.079 0.086 0.096

EU

0.112
0.322
0.054
0.332
0.001

0.119
0.338
0.048
0.268
0.001

0.169
0.287
0.063
0.214
0.002

0.119
0.332
0.065
0.257
0.005

0.152
0.350
0.088
0.241
0.004

0.261
0.270
0.115
0.231
0.004

0.274
0.289
0.109
0.211
0.003

0.037 0.060 0.047 0.028 0.018 0.026 0.025 0.028 0.027
0.135 0.134 0.144 0.114 0.162 0.137 0.121 0.135 0.140
0.034 0.034 0.028 0.070 0.022 0.016 0.018 0.020 0.027

0.022
0.007
0.558
0.008

0.023
0.110
0.561
0.008

NAFTA
0.169 0.134 0.144 0.128 0.135 0.089 0.088 0.097
Latin
America
0.007 0.019 0.012 0.010 0.009 0.013 0.017 0.014
East Asia
0.326 0.391 0.385 0.408 0.443 0.509 0.456 0.482
EU
0.247 0.173 0.141 0.131 0.121 0.117 0.115 0.102
Oceania.
0.061 0.061 0.064 0.070 0.076 0.099 0.097 0.095
Notes: NAFTA (US, Canada, Mexico), Latin America(excludes Mexico),
East Asia (Japan, China, Hong Kong, Indonesia, Korea, Malaysia, Philippines,
Singapore. Thailand; exclude Taiwan), Oceania (Australia, New Zealand)
Source: DOT/IMF.

0.118

Oceania

0.031
0.033
0.487
0.016

0.035
0.029
0.484
0.012

0.033
0.031
0.509
0.028

0.018
0.041
0.503
0.010

0.012
0.051
0.550
0.008

0.023
0.072
0.624
0.008

0.023
0.073
0.614
0.008

0.016
0.431
0.132
0.083

25

Table 4 East Asia-Latin America Forum (EALAS/FALAE): Participating Countries
Population
GNP
GNP/capita(Millions)(US$ Billions)(US$)
East Asia
Australia
19.0
380.0
20,540Brunei0.3
7.1
25,090
Cambodia
11.0
0.3
300
China
1,227.0
1,055.4
860
Indonesia
200.0
221.9
1,110
Japan
126.0
4,772.3
37,850
Korea
46.0
485.2
10,550
Laos
5.0
1.9
400
Malaysia
21.0
98.2
4,680
Myanmar47.0----New Zealand
4.0
60.5
16,480Philippines
73.0
89.3
1,220
Singapore
3.0
101.8
32,940Thailand
61.0
169.6
2,800
Vietnam
77.0
4.5
320
Latin America
Argentina
36.0
305.7
8,570
Bolivia
8.0
7.4
950
Brazil
164.0
773.4
4,720
Chile
15.0
73.3
5,020
Colombia
38.0
86.8
2,280
Ecuador
12.0
19.0
1,590
Mexico
95.0
348.6
3,680
Panama
3.0
8.4
3,080
Paraguay
5.0
10.2
2,010
Peru
25.0
60.8
2,460
Urguay
3.0
19.4
6,020
Venezuela
23.0
78.7
3,450
Source: Asian Times Online, September 07, 1999 and World Development Report 1997-1998.

26

Figure 1 Tariff Reductions in Latin America
Argentina (1987)
Bolivia (1985)

35.0

9.7

Brazil (1987)

51.0

14.6
35.0

Chile (1984)

11.0

Colombia (1984)

11.7

Mexico (1985)

13.3

Peru (1990)

13.2

Uruguay (1987)

12.2

Venezuela(1989)

12.0

WB,

42.0

13.5

61.0
23.0
66.0
32.0

0
10
20
World Development Indicators.

30

Prior to Policy Reform
37.0

1998

40

50

60

70

Figure 2 Net Resource Flows to Latin America
140.000
120.000
100.000

PEF

LTD

80.00060.000Grants40.000FDI
20.000
0.000
1991

1992

1993

1994

1995

1 9 9 6

1997

1998

1999

1998

1999

World Bank, Global Development Finance

Figure 3 Net Resource Flows to Asia
140,000
120,000

PEF

100,000

LTD

80,000Grants60,00040,000FDI

20,000
0
1991

1992

1993

1994

1995

1996

1997

World Bank, Global Development Finance27

Figure 4 Privatization in Latin America and Asia
40,00035,000Latin America

Asia

30,00025,00020,00015,00010,000
5,000
0

1990

1991

1992

1993

1994

1995

1996

1997

1998

Source: World Bank, Global Development Finance, 2000, p.185.

Figure 5 Japanese FDI by Region (Billion yen)
10,000Oceania

9,000

Africa8,000

Middle East

7,000
6,000

Europe

5,000

Asia

4,000
3,000

Latin
America (1)

2,000

Latin
America (2)

1,000
0

1989

1990

1991

1992

1993

1994

1995

1996 1997

MOF: LA(1)=Caiman, Panama, Bermuda, LA(2)=LA-LA(1)

1998

1999

North
America28