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Asia Pacífico | Observatorio Parlamentario
Challenges of Chile-Japan FTA (Part 2)
14 septiembre 2007
The commercial opportunities for Chile with the Japanese total 128 million, of which one-fifth is above 65 years of age. The aging population of Japan is undoubtedly a key figure to consider. It has the highest life expectancy in the world; 82 years, on average. Also, Japan is one of the largest consumer markets in the world with a GDP of $4.03 trillion (purchasing power parity). It is also a major importer at an estimated $452 billion (2005). It has a robust economy with reserves of $ 835.5 billion (2005). Chile has shared a complementary trade relationship with Japan for more than a century.
The commercial opportunities for Chile with the Japanese total 128 million, of which one-fifth is above 65 years of age. The aging population of Japan is undoubtedly a key figure to consider. It has the highest life expectancy in the world; 82 years, on average. Also, Japan is one of the largest consumer markets in the world with a GDP of $4.03 trillion (purchasing power parity). It is also a major importer at an estimated $452 billion (2005). It has a robust economy with reserves of $ 835.5 billion (2005). Chile has shared a complementary trade relationship with Japan for more than a century.
As regards trade in goods, Japan is the second largest trade partner in exports and sixth largest in imports since 2004 in Chile. Imports from Chile to Japan have steadily exceeded exports, resulting in a trade surplus of $3 billion. Chile is a stable supplier of mineral, agricultural, forestry and fishery resources. Imports from Japan to Chile are industrial products, especially autos and machinery for mining.
Chile and Japan share an important company in terms of technical and economic cooperation. Major projects include the International Cooperation Agency of Chile (AGCI) and the Japan International Cooperation Agency (JICA), training programs for skilled human resources through reciprocal scholarship programs.
But the market and economy have a very peculiar feature: Chilean entrepreneurs seeking to trade via the FTA face a serious challenge. Japanese consumers are the most demanding in the world with regard to product quality (performance, durability, taste, presentation) and low prices. A small flaw or stain renders a product damaged. Compliance with safety standards and quality requirements can be very expensive initially, but will be a constant factor Chileans should consider when doing business in the Japanese market. Japan’s exacting QA standards will checkmate any lack of exactitude on the part of Chilean suppliers.
Being a high-income, very consumer-oriented population with an aging demographic, the last 25 years have seen a constant increase in high quality imports at low cost. Imports arrive from many different countries, as Japanese diversify their needs and lives increasingly individualistic lifestyles. The trend seems to point to finding tasteful products that are unique and fresh. The search is what makes the new products have shorter life cycles. This is especially true in the food market.
It is not a stretch to say that most Japanese have an "affluent middle class conscience" given their high levels of education and income. While it is true that each market has its idiosyncratic features, a very pronounced facet of the Japanese market is the fact that it cannot be understood without living in Japan and "understanding" the Japanese. There is a need to explore and understand the Japanese market. Products that have been successful in Chile may not necessarily be so in Japan. A commercial venture may be disastrous if one does not learn about Japanese lifestyles, culture and traditions.
There are some customs and codes of social etiquette to be considered in the field of business. What Confucius said five centuries before Christ remains in force today in the moral standards and protocols of Japanese life. The central tenet of the system is the principle of benevolence; this runs true from daily interaction all the way into politics. It is recommended to never address a person by their first name. Rather, one should use the last name out of respect and add the word "san". The bows of greeting are complex and the angle of the bow depends on the rank, age and circumstances. Of course, a foreigner need not understand all the subtleties of these greeting rituals.
In business situations the meishi is essential: the ceremonial exchange of business cards. They cards are given individually with both hands, showing the name to the recipient. Business cards are a sort of extension of the individual, so we must treat them with respect. When receiving a card, one must take the time to read the name of the person, even in a large group setting. The Japanese avoid sustained eye contact, as it is considered a discourtesy.
In Japan, tipping is not used. However, people exchange gifts under some ritual circumstances and as expressions of gratitude. The opening of gifts in front of the giver should be avoided unless asked to.
Informality is something to be avoided. It is better to follow any instructions that flow out of a given interaction.
As regards trade in goods, Japan is the second largest trade partner in exports and sixth largest in imports since 2004 in Chile. Imports from Chile to Japan have steadily exceeded exports, resulting in a trade surplus of $3 billion. Chile is a stable supplier of mineral, agricultural, forestry and fishery resources. Imports from Japan to Chile are industrial products, especially autos and machinery for mining.
Chile and Japan share an important company in terms of technical and economic cooperation. Major projects include the International Cooperation Agency of Chile (AGCI) and the Japan International Cooperation Agency (JICA), training programs for skilled human resources through reciprocal scholarship programs.
But the market and economy have a very peculiar feature: Chilean entrepreneurs seeking to trade via the FTA face a serious challenge. Japanese consumers are the most demanding in the world with regard to product quality (performance, durability, taste, presentation) and low prices. A small flaw or stain renders a product damaged. Compliance with safety standards and quality requirements can be very expensive initially, but will be a constant factor Chileans should consider when doing business in the Japanese market. Japan’s exacting QA standards will checkmate any lack of exactitude on the part of Chilean suppliers.
Being a high-income, very consumer-oriented population with an aging demographic, the last 25 years have seen a constant increase in high quality imports at low cost. Imports arrive from many different countries, as Japanese diversify their needs and lives increasingly individualistic lifestyles. The trend seems to point to finding tasteful products that are unique and fresh. The search is what makes the new products have shorter life cycles. This is especially true in the food market.
It is not a stretch to say that most Japanese have an "affluent middle class conscience" given their high levels of education and income. While it is true that each market has its idiosyncratic features, a very pronounced facet of the Japanese market is the fact that it cannot be understood without living in Japan and "understanding" the Japanese. There is a need to explore and understand the Japanese market. Products that have been successful in Chile may not necessarily be so in Japan. A commercial venture may be disastrous if one does not learn about Japanese lifestyles, culture and traditions.
There are some customs and codes of social etiquette to be considered in the field of business. What Confucius said five centuries before Christ remains in force today in the moral standards and protocols of Japanese life. The central tenet of the system is the principle of benevolence; this runs true from daily interaction all the way into politics. It is recommended to never address a person by their first name. Rather, one should use the last name out of respect and add the word "san". The bows of greeting are complex and the angle of the bow depends on the rank, age and circumstances. Of course, a foreigner need not understand all the subtleties of these greeting rituals.
In business situations the meishi is essential: the ceremonial exchange of business cards. They cards are given individually with both hands, showing the name to the recipient. Business cards are a sort of extension of the individual, so we must treat them with respect. When receiving a card, one must take the time to read the name of the person, even in a large group setting. The Japanese avoid sustained eye contact, as it is considered a discourtesy.
In Japan, tipping is not used. However, people exchange gifts under some ritual circumstances and as expressions of gratitude. The opening of gifts in front of the giver should be avoided unless asked to.
Informality is something to be avoided. It is better to follow any instructions that flow out of a given interaction.
