Japan-Peru EPA To Take Effect On March 1

by Mary Swire, Tax-News.com, Hong Kong

Friday, January 27, 2012

After an exchange of notes, the Economic Partnership Agreement (EPA) between Japan and Peru, which promotes the liberalization and facilitation of trade in goods and services between the two countries, will enter into force on March 1, 2012.

It is hoped that the entry into force of the EPA will greatly invigorate both economies and further strengthen the relationship between the two countries, including cooperation in the fields of competition and intellectual property. According to the Peruvian government, the treaty aims, among other things, to boost Peruvian exports by 25%.

Signed on May 31, 2011, negotiations on the EPA were begun in May 2009 and, after six rounds and two years of talks, were concluded in November 2010. Trade ties between the two countries are already strong, with Japan presently Peru's fifth most significant trading partner. Exports from Japan amounted to USD1.4bn in 2010, with Peru exporting USD1.8bn to the Japanese market.

Motor vehicles account for more than half of Japan’s overall exports to Peru, while copper represents more than half of Peru’s overall exports to Japan. The agreement should eliminate, over a period of 10 years, the import tariffs on more than 99% of the value of goods traded between both countries.

With the cancellation of the duty on its exports of motor vehicles and electronic goods to Peru, Japan is looking to become more competitive in those products where it comes up against its main trading rival, South Korea. The latter’s free trade agreement (FTA) with Peru came into effect in August 2011.

On the other hand, Peru is looking to provide markets, not only for its mineral resources, such as copper, lead and zinc, but also for its agricultural and fishery products, despite the fact that some, more controversial, imports into Japan, such as rice, will be excluded from the agreement.

The pact will add to the two countries' existing regional free trade agreements. Japan already has two FTAs with South American nations, Mexico and Chile, and Peru has existing agreements with China and South Korea. Peru is also one of the countries that are negotiating a final agreement on the United States-led Trans-Pacific Partnership, which Japan is also looking to join.