A Model Trade Partner
US exports to Chile have soared since FTA took effect in 2004
by Bill Armbruster, blog anchor
I caught Barbara Kotschwar, a Latin America specialist with the Washington-based Petersen Institute for International Economics, by surprise when I said I wanted to talk about trade with Chile. “There isn’t anything exciting going on,” she said, adding “the fact that you never hear about it is a good thing.”
No news may be good news, but the absence of Chilean trade stories from the news cycle means the public is largely unaware of the benefits of a successful free-trade agreement … and many US exporters are missing out on a great market.
Under the FTA, which entered into force in 2004, tariffs on more than 90% of the goods traded between the US and Chile were eliminated immediately, with duties on another 154 items phased out this year.
The pay-off for US companies: exports of US goods to Chile have tripled since the FTA took effect, rising from $3.6 billion that year to $10.9 billion last year. Imports from Chile also increased, but at a slower pace, from $3.7 billion in 2004 to $7 billion last year, a gain of 89% that resulted in a tidy $3.9 billion surplus for the US.
The positive trend continues. Imports from Chile through August totaled $6.4 billion, up 28%, but US exports jumped 44% to $10.2 billion, making Chile the 19th largest market for US exports, according to Datamyne statistics. That may seem like small potatoes, but it’s pretty impressive when you consider that Chile has a population of just 17 million and only the 46th largest economy in the world, according to the CIA World Factbook.
Free trade friction-free
One reason you don’t hear much about Chile is the lack of trade frictions. That’s largely due to seasonal differences. Fresh fruit accounts for nearly half of Chile’s exports to the US, most produced during the Chilean summer when it’s cold in the northern hemisphere.
Fresh grapes are Chile’s biggest fruit export, totaling $700 million during the first eight months of this year, almost one quarter of total fruit exports. (A Datamyne report on Chilean grapes is available for purchase.) Blueberries, cranberries, peaches, plums and raspberries are other major fruit exports.
Copper is Chile’s second largest export to the US, at $2.4 billion through August, followed by wine and fish. The Commerce Department’s Country Commercial Guide ranks Chile the world’s fifth largest exporter of wine and second largest exporter of salmon.
Forest products are another major commodity. In fact, the two largest importers of containerized freight over each of the past three years, according to Datamyne figures, are forest products companies. Arauco Wood Products imported 10,088 containers through September, up 14% over last year, while CMPC USA Inc., received 3,400 boxes, up 4.8%.
Juergen Pump, senior vice president of Hamburg Sud North America, which offers services between South America and all three US coasts, notes that most of Chile’s fruit and fish are shipped in conventional reefer vessels. Pump described the US-Chile container trade as robust in both directions, with good growth prospects. It’s also a well-balanced trade. Last year Chile exported 88,435 containers to the US, while importing 76,316 boxes.
China is Chile’s largest export market, and its imports from China, primarily electronics and apparel, are growing rapidly, but were about $3 billion less than its US imports. Refined oil accounts for about 25% of US exports to Chile. Other leading items include construction and mining equipment, but electronics and civilian aircraft are also significant US exports.
While Chile has one of the most advanced economies in the southern hemisphere, it does have its downsides. It ranked a disappointing 62nd in the trade section of the World Bank’s most recent Doing Business Report (the subject of one of my earlier columns).The biggest problem cited by the report is bureaucracy. It takes 11 days to prepare export documents, 12 days for import documents. More positively, the cost of moving a container between Chile’s ports and the interior is relatively low, averaging $795.
Chile’s trade future is in the Pacific, according to Riordan Roett, a Latin American scholar with the Johns Hopkins School of Advanced International Studies. As for US-Chile trade relations, Roett told me he sees nothing controversial on the horizon – more no news / good news.
Still, I wonder why free-trade advocates weren’t touting the Chile accord as a model during the long controversy over the FTAs with Korea, Colombia and Panama.
Bill Armbruster, the anchor for the Datamyne Blog has covered shipping and trade for 30 years as a reporter and editor with The Journal of Commerce and Shipping Digest. “I’ll be blogging on headline news and current issues in oceangoing commerce, trying to shed some light on the backstories and, wherever I can, supply some sound advice for shippers.” Write Bill care of [email protected].
The opinions expressed in this article are those of its author and do not purport to reflect the opinions or views or Descartes Datamyne. In addition, this article is for general information purposes only and it’s not intended to provide legal advice or opinions of any kind and my not be used for professional or commercial purposes. No one should act, or refrain from acting, based solely on this article without first seeking appropriate legal or other professional advice.
Date posted: November 2, 2011