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Japan's FTA policy and movement of Japanese Companies towards the FTA era in East Asia December 8,2009 Japan External Trade Organization (JETRO) Asia and.

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Presentation on theme: "Japan's FTA policy and movement of Japanese Companies towards the FTA era in East Asia December 8,2009 Japan External Trade Organization (JETRO) Asia and."— Presentation transcript:

1 Japan's FTA policy and movement of Japanese Companies towards the FTA era in East Asia December 8,2009 Japan External Trade Organization (JETRO) Asia and Oceania Division, Overseas Research Department Seiya Sukegawa 1

2 Table of Contents Cultivation of a good economic relationship with East Asia emerging markets AFTAs impact on Japanese affiliated manufacturers in Asia Exploitation of FTA by Japanese affiliates and the problems they face 2

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7 Table of Contents Cultivation of a good economic relationship with East Asia emerging markets AFTAs impact on Japanese affiliated manufacturers in Asia Exploitation of FTA by Japanese affiliates and the problems they face 7

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15 FRAMEWORK AGREEMENT FOR ESTABLISHING FTA BETWEEN INDIA AND THAILAND Oct Concentrates production of transmission in India, and exports to Thailand through EH Toyota Transportation Machinery Closed the air-conditioner factory in Singapore and shifted production to Thailand Started exporting air conditioner from Thailand to India through Thailand-India EH Sanyo Electric Machinery Stopped local production of TV in India and started importing from Thailand through EH Sony Stopped production in India and shifted to Thailand Applying for EH Japanese air-conditioner manufacture Early Harvest started in Sep.2004 Source) Prepared by JETRO based on newspapers and interviews Source) Prepared by JETRO based on newspapers and interviews Manufactures 21-inches TV in India, and import 29- inches TV from Thailand Sharp General Machinery Started exporting rice polishers from Thailand to India as the tariff on rice polishers (HS843780) was lifted Satake Higashi-hiroshima Dissolved the manufacturing affiliate in Malaysia and shifted the production of CRT to Thailand Promotes concentration of production in Thailand with an intension of exporting to India Funai Procures parts of pickup tracks from India and manufactures in Thailand Tata 15 Response of Japanese affiliates to Thailand-India Early Harvest

16 Drastic reorganization of TV production base by Sony Background Background Termination of production In India India-Thailand Early Harvest Concluded: Oct Tariff reduction: from Sep India ThailandMalaysia CRT:2.2 mil Vietnam CRT:0.1 mil CRT:0.38 mil CRT:0.1 mil CRT:0.3 mil. LCD:1.1 mil. CRT:0.55 mil. LCD:0.4 mil. Will stop production in Mar.2010 CRT:0.9 mil. Stopped production in 2008 CRT:1.9 mil. LCD:0.01 mil. CRT:0.9 mil. CRT:n.a. Termination of production in Vietnam Flexible application of rules of origin of AFTA Started Aug Liberalizaion of foreign investment in import/wholesale business Started May Termination of production In Thailand ASEAN-India FTA Concluded Aug Tariff reduction: from Jan ExportGlobal Production base Source Production volume data is based by Fuji Chimera Research Institute 16 Export Stopped production in Jul.2004 import from Thailand Import from Thailand (Unit: number of production) CRT TV LCD TV

17 Table of Contents Cultivation of a good economic relationship with East Asia emerging markets AFTAs impact on Japanese affiliated manufacturers in Asia Exploitation of FTA by Japanese affiliates and the problems they face 17

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19 Problem with Form D Problems in utilizing FTA pointed out by Japanese firms Companies must specify FOB price on COO It is required to indicate FOB price on AFTA COO. When the trade is done through the third country, it enables importers to compare price on invoice and original FOB price and reveals the profit margin of the third country. Problem with Japanese EPA In some cases FTA preferential tariff is higher than MFN rate Negotiation of FTA was based on the tariff table as of the start of the negotiation. During the long negotiation process, some countries gradually reduced MFN tariff, and consequently FTA preferential tariff rate for some items turned out to be higher than MFN rate. In some EPAs, it is agreed to apply whichever rate that is lower. HS codes used in the agreement and at the customs are different Agreement is based on HS code 2002, while the customs use HS Some countries refuse to apply preferential rate because of the inconsistency of HS code. Companies bear risk and cost of managing two different codes. Mexico and Malaysia have started organizing the codes, and it is expected that others follow. Each country uses different document to certify regional value content Problem with Japan-ASEAN Comprehensive EPA 19

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22 22 Thank you very much for your attention.


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