footwearwww.6633.us

1839Chile-USFreeTradeAgreement:AModeltoFollowBARBARAKOTSCHWARBarbaraKotschwarisaresearchassociateatthePetersonInstituteforInternationalEconomics.
ShethanksJaimeBaeza,KathyBarclay,AlejandroBuvinic,AndresCulagovski,AliciaFrohmann,PatrickKilbride,CarolinaOrdoez,SandraRamos,OsvaldoRosales,AnaMariaSaldías,DaniloSturizaJordan,TaniaSutín,PabloUgarteCruz-Coke,andJohnWelbyfortheirtime,patience,andinsights,aswellasothertradenegotiators,entrepreneurs,ofcials,andacademicsfromChileandtheUnitedStateswhoseinsightandanecdoteshavehelpedinthedevelopmentofthischapter.
MattAdlerpro-videdexcellentdataassistance.
Anyerrorsarethesoleresponsibilityoftheauthor.
Chileisasmalldevelopingcountrywithapopulationofnearly17mil-lionandaGDPof$170billionin2008.
1Witha2007percapitagrossna-tionalincome(Atlasmethod)of$8,190,ChilefallsintotheWorldBank'supper-middle-incomecategory.
AccordingtotheWorldTradeOrganiza-tion,Chile'sshareofworldexportsisnearly0.
5percent,anditcontributesaround0.
3percentofworldimports(WTO2009).
ButChile'stradeimpactfaroutweighsthesemodestnumbers.
Thecountryhasbuiltasolidreputa-tionasasmall,dynamic,openeconomywithhighmarksforstabilityandcompetitivenessandanimpressivelywide-rangingnetworkofbilateraltraderelationships.
Chilehasembracedfreetradesincethemid-1970sandisoftencitedalongwiththeEastAsianeconomies(Agosin1999,AhumadaandSangui-netti1995,Meller1994).
Between2000and2008Chile'smerchandiseex-portsgrewatanaverageannualrateof18percentandimports15percent;commercialservicesexportsexpandedby12percentperyearandimports11percent.
GDPgrowthduringthisperiodaveraged4.
4percentayear.
ManyfactorsexplainChile'stradeperformance.
Economicfactorscer-tainlyplayanimportantrole,mostprominentlythecountry'sconsistent1.
DatafromtheIMF,WorldEconomicOutlook,April2009,www.
imf.
org(accessedonJuly9,2009).
184CAPITALIZINGONTHEMOROCCO-USFREETRADEAGREEMENTmacroeconomicpoliciesandlong-opentraderegime.
ManuelAgosinandClaudioBravo-Ortega(2009)alsocitethesignicantexchangeratedeval-uationundertakenin1974bythePinochetregime(followingthemilitarycoupin1973),subsidiestotheforestryandothersectors,andtheroleofthestateinsupportingexportandinvestmentinstitutions.
Amonglesstangiblefactors,formerChileannegotiatorOswaldoRosalescitesChile's"institutionalstability,thetransparencyofpublicandprivatedecision-making…,anditssolidnancialsystem"(Rosales2003a,1).
ThischapterreviewsChile'stradeperformanceduringthepastde-cade,focusingontradewiththeUnitedStatesundertheChile-USFTA.
Thediscussioncoversexplanatoryfactorsthathavesurfacedrepeatedlyinanalysesoftradeandinvestmentdata,invariouscasestudies,andinconversationswithkeyplayersinthepublicandprivatesectorinChileandintheUnitedStates.
AnalysisofthesefactorsyieldslessonsfromtheChileanexperiencethatmayhelpMoroccoandotherUStradepartnersastheydevelopstrategiesfortakingadvantageofpotentialopportunitiesfromtheirUSfreetradeagreements.
OverviewofChileanTradePolicyChileisahighlyopeneconomythat,beginningin1974,wasoneoftheearliestcountriesinLatinAmericatoliberalizeitstraderegime.
Tradehasrepresentedover50percentofGDPsince1984,70percentinthe2000s,andin2007exceeded80percent(gure9.
1;althoughhighcommoditypricesexaggeratethe2007gure).
Asgure9.
2illustrates,since1999Chilehasconsistentlyrunatradesurplus,onethatgrewconsiderablyinthemid-2000sascommoditypricesrosedramatically.
Thissurplus,coupledwithChile's2000structuralbalancelaw,whichrequiresascalsurplusofatleast1percent(laterloweredto0.
5percent),providesabenignsettingforopennesstotrade.
Chile'seconomicpolicyhasremainedconstanteventhroughamajorpoliticaltransformation.
InMarch1990,PatricioAylwinbecametherstChileanpresidentelectedafterthe1973coupthatputmilitarydictatorGeneralAugustoPinochetinpower.
Pinochetandhis"Chicagoboys"hadfamouslyopenedtheChileaneconomy,replacingstatistmeasureswithfreemarketpolicies,dramaticallyreducingandlevelingtariffsandothertradebarriers,andopeningtheinvestmentregime.
ThenewdemocraticAylwingovernmentpragmaticallymaintainedChile'sfreemarket,andsubsequentadministrationshavefollowedsuit.
TradeAgreementsSince1990Chilehaspursuedastrategyofforgingbilateralandplurilat-eralfreetradeagreementswithnumerouspartnersintheAmericas,inCHILE-USFREETRADEAGREEMENT1859080706050403020100Figure9.
1TradeopennessinChile,1970–2007percentofGDP1970197319761979198219851988199119941997200020032006Source:WorldBank,WorldDevelopmentIndicators,2009.
Figure9.
2Chile'sgrowingtradebalance,1996–2008billionsofdollarsExportsImports7565554535251551996199719981999200020012002200320042005200620072008Source:CentralBankofChile,BasedeDatosEstadisticos,SectorExterno,BalanzaComercial,http://si2.
bcentral.
cl(accessedonApril3,2009).
186CAPITALIZINGONTHEMOROCCO-USFREETRADEAGREEMENTAsiaandthePacic,andinEurope.
TheseagreementswerepartofChile'sobjectivetogainpreferentialaccesstoitsmaintradingpartners,toserveasahubbetweenLatinAmericaandthePacic,andtodiversifythegeo-graphicreachofitsexportsandthusprovideinsuranceagainstnancialandeconomicdownturnsinanymajortradingpartner.
Asshownintable9.
1,ChilehasnegotiatedfreetradeagreementswithmostofLatinAmerica,Canada,andtheUnitedStates;withtheEuropeanUnionandtheEuropeanFreeTradeAssociation(EFTA2);andinAsiawithAustralia,China,India,Japan,Korea,NewZealand,andSingapore.
TheseFTAscovernearly80percentofChile'stotalexports.
AddinginthetradeofcountrieswithwhichChilehaspartial-scopeorframeworkagreements(whichcoversomebutnotalltrade),thisgurereaches90percent.
Withthisrangeofexistingandprospectiveagreements,Chilehasbeencitedasanexampleofacountrythatpractices"competitiveliberalization"(Berg-sten1996).
Chile'stradestrategyaimsforandlargelyachievesneutrality.
Thecountryhaspreferentialagreementswithallofitsmaintradingpartners,butnoneisgivenrealpreferenceovertheothers.
Chileantradenegotia-tors,policymakers,entrepreneurs,andotherexpertsinterviewedforthischapteragreethattheChile-USFTAisonlyonepartofChile'sgreatertradestrategy;asoneofcialattheChamberofCommerceputit,theUSFTAis"theicingonthecake.
"Tobesure,theUnitedStatesisanimportantmar-ket.
TraditionallythemaindestinationforChile'sexports,theUnitedStateshas,overthepastdecade,purchasedbetween13percentand18percentofChile'sexports.
ButChile'smultileveltradeliberalizationstrategyhashelpedgeographicallydiversifythecountry'smarketsandloweritsde-pendenceonanysingleexportdestination.
Moreandmore,Chileancom-paniesorientthemselvestotakeadvantageofmarketopportunitieswithChile'smultipleFTApartners.
TheynolongerfocuspredominantlyontheUSmarket,andin2007,forthersttimesincetheFTAcameintoeffect,theUnitedStateswasnotthetopdestinationofChileanexports(table9.
2).
TariffPoliciesGovernmentincentivesgenerallycastabroadnet,unlikethemoretarget-edtradepromotionandinvestmentincentivesofmanyEastAsianecono-mies.
Whenaskedaboutexportandinvestmentincentives,tradeofcialsgenerallypointoutthatthebulkofincentivesarenotaimedat"pickingwinners"—thisislefttothemarkettodecide.
Between1974and1980,Chilereduceditstariffsfromanaverageof105percentto10percent.
Chile'sliberalizationeffortsexperiencedatemporarysetbackin1982,inthewakeoftheLatinAmericandebtcrisis,2.
TheEFTAmembercountriesareIceland,Liechtenstein,Norway,andSwitzerland.
CHILE-USFREETRADEAGREEMENT187Table9.
1Chile'sFTApartners,April2009PartnerDateofentryintoforceChileanexports,2007(millionsofUSdollars)Exportstotradingpartnerasapercentoftotalexports(percent)FreetradeagreementsPeruMarch20091,0341.
6AustraliaMarch20092790.
4HondurasAugust2008410.
1PanamaMarch20081780.
3JapanSeptember20077,09110.
8Brunei-NewZealand-Singapore(P4)November20061390.
2ChinaOctober20069,98015.
2EFTADecember20042330.
4KoreaApril20043,8495.
9UnitedStatesJanuary20048,42012.
8EuropeanUnionFebruary200315,64723.
8ElSalvadorJune2002940.
1CostaRicaFebruary20021710.
3MexicoAugust19992,3683.
6CanadaJuly19971,2011.
8SubtotalFTApartners50,72577PartialscopeorframeworkagreementsMercosurOctober19964,4016.
7ColombiaDecember19936170.
9BoliviaJuly19933000.
5EcuadorJanuary19954610.
7VenezuelaJuly19938661.
3IndiaAugust20072,2113.
4CubaDecember1999640.
1Subtotaltradeagreementpartners8,92114CurrentnegotiationsColombia(negotiatingFTA)6170.
9Nicaragua280.
0Guatemala2490.
4(tablecontinuesnextpage)188CAPITALIZINGONTHEMOROCCO-USFREETRADEAGREEMENTwhentariffswereraisedto35percenttoaidthestrugglingmanufacturingsector.
Butby1988tariffswereloweredagainto15percent,andin1991furtherreducedtoauniform11percent.
SubsequentreductionsbroughtthetariffonJanuary1,2003,downtothecurrent6percentatrate,whichappliesequallytoallsectors(theonlyexceptionsarewheat,wheatour,andsugar).
ThevarioustariffeliminationsunderChile'sFTAsbringtheactualaverageappliedtariffdowntoabout1.
5percent.
Chile-USFTA:ARoadLongTraveledGivenitstradeproleandsuccessfuleconomicreforms,Chileisasurpris-inglatecomertotheUSFTAweb,althoughitwastherstLatinAmeri-cancountrytosignaframeworkagreementwiththeUnitedStatesunderthe1990USEnterprisefortheAmericasInitiative.
Ina1994assessmentofeconomicintegrationintheWesternhemisphere,Chilereceivedhighmarksformacroeconomicstabilityandmarketconditionsanda"readi-ness"scoresurpassedonlybyMexico(HufbauerandSchott1994).
AndattherstSummitoftheAmericasinDecember1994,Canada,Mexico,andtheUnitedStatesannouncedthattheyhadagreedtoadmitChiletoNAF-TA.
Inamuch-quotedstatement,PrimeMinisterJeanChrétienofCanadaannouncedthat"WehavebeentheThreeAmigos.
…NowwewillbetheFourAmigos.
"33.
DavidESanger,"ChileisAdmittedasNorthAmericanFreeTradePartner,"NewYorkTimes,December12,1994.
Table9.
1Chile'sFTApartners,April2009(continued)PartnerDateofentryintoforceChileanexports,2007(millionsofUSdollars)Exportstotradingpartnerasapercentoftotalexports(percent)Currentnegotiations(continued)Malaysia730.
1Thailand2660.
4Turkey4400.
7Vietnam1080.
2Subtotalnegotiations1,7813Totalexports,alldestinations65,739EFTA=EuropeanFreeTradeAssociationSources:DIRECON,Tratadosdelibrecomercio,www.
direcon.
cl(accessedonAugust8,2009);Inter-nationalMonetaryFund,DirectionofTradeStatistics,April2009,www.
imfstatistics.
org/dot.
CHILE-USFREETRADEAGREEMENT189ButtheFourAmigosclubwasnottobe,astheClintonadministrationencountereddomesticchallengestoitstradepolitics,mostsignicantlyacongressionalrefusaltograntthepresident"fasttrack"negotiatingauthor-CountryPercentoftotal2003UnitedStates18Japan11China9Korea5Italy5Mexico5Brazil4Netherlands4France4UnitedKingdom32004UnitedStates15Japan12China10Korea6Netherlands5Brazil5Italy4Mexico4France4OtherAsia,nes32005UnitedStates16Japan12China11Netherlands6Korea6Table9.
2Chile'stop10exportmarkets,2003–07CountryPercentoftotal2005(continued)Brazil4Italy4Mexico4France4OtherAsia,nes32006UnitedStates16Japan11China9Netherlands7Korea6Italy5Brazil5France4Mexico4Germany32007China15UnitedStates13Japan11Netherlands6Korea6Italy5Brazil5France4Mexico4India3nes=notelsewherespecifiedSource:Author'scalculationsusingdatafromtheUNComtradeDatabase,2009,http://comtrade.
un.
org.
190CAPITALIZINGONTHEMOROCCO-USFREETRADEAGREEMENTity.
4TheChile-USFTAwasputonthebackburnerforadecade.
Inthemeantime,ChilesignedFTAswiththeotherNAFTApartners—withCana-dain1996andwithMexicoin1998—andwiththeEuropeanUnionin2002andKoreain2004.
In2001,whentheUnitedStatessignaledthepossibilityofinitiatingtradenegotiations,Chileannegotiators"werealreadyinWash-ingtonwithatextproposalfor17ofthe19chapters"(Rosales2003a).
TheChile-USFTAwassignedonJune6,2003,andenteredintoforceonJanuary1,2004.
Inadditiontolaborandtheenvironment,itcoverstradeingoodsandservices,investment,governmentprocurement,intellectualpropertyrightsprotection,andthethen-newareaofelectroniccommerce.
Iteliminatestariffsonindustrialgoodsovera10-yearperiodandonagri-culturalgoodsovera12-yearperiod.
Tariffeliminationonotherproductsistakingplaceover12yearsaccordingtovariousstagingcategories(seebox9.
1).
Alltariffsaretobeeliminatedby2015.
Inadditiontogoods,theChile-USFTAliberalizesservicesandinvest-ment,incorporatingWTO-plusprovisionsbasedontheNAFTAmodel.
SomeUStradepartnershavefounditchallengingtoimplementsuchcommitments,whichoftenrequiredomesticregulatorychanges.
5ForChilethiswaslessofachallengeasobligationsinthisareaweresimilartoprovisionsinitsFTAswithCanadaandMexico.
However,theinclusionofaninvestmentchapterwassignicantasChileandtheUnitedStateswerenotsignatoriestoabilateralinvestmenttreaty(BIT).
Theyalsodonotyethaveadoubletaxationtreaty,afactormentionedbybothUSandChileanactorsasapotentialimpedimenttoenhancedinvestment.
6TheFTAalsoincludesachaptergrantingtemporaryentry(sixmonthstothreeyears)forbusinesspersonsinfourcategories:businessvisitors,tradersandinvestors,intracompanytransferees,andprofessionals,thelatterqualifyingforanewcategoryofnonimmigrantprofessional,H1-B1,createdespeciallyfortheChile-USandSingapore-USFTAs.
7Todatetherehasnotbeenagreatdemandfortemporarybusinessvisas,perhapsduetoalackofinformationabouttheseopportunitiesortotheperceptionthatthevisasaredifculttoacquire.
4.
Fasttracktradenegotiatingauthority,whichwasinforcefrom1975to1993,enabledthepresidenttosubmittradeagreementstoCongresswiththeassuranceofanup-or-downvotewithnoamendmentsandwithinalimitedtimeperiod.
"Fasttrack"becametradepromotionauthorityin2001intheBipartisanTradePromotionAuthorityAct.
5.
Forexample,CostaRicapostponedraticationoftheCentralAmerica–DominicanRepublicFreeTradeAgreement(CAFTA-DR)forseveralyearsbecauseofstridentdomesticoppositiontoliberalizinginsuranceandtelecommunications.
6.
Discussionstowardsuchaninstrumentwereinitiatedin1999buthavenotbeencompleted;see"UnitedStates,ChileInitiateIncomeTaxTreatyNegotiations,PressReleasePR-3017,March15,1999,USDepartmentoftheTreasury,Washington,www.
ustreas.
gov.
7.
USDepartmentofState,H1-B1TemporaryEntryofNonimmigrantProfessionals,http://travel.
state.
gov(accessedJune3,2009).
CHILE-USFREETRADEAGREEMENT191Box9.
1LiberalizationofUStariffsonChileangoodsundertheUS-ChileFTACategoryATariffseliminatedimmediatelyonJanuary1,2004.
CategoryBTariffseliminatedinfourequalannualstages;duty-freeeffectiveJanuary1,2007.
CategoryCTariffseliminatedineightequalannualstages;duty-freeeffectiveJanuary1,2011.
CategoryDTariffseliminatedintenequalannualstages;duty-freeeffectiveJanuary1,2013.
CategoryETariffseliminatedintwelveequalannualstages;duty-freeeffectiveJanuary1,2015.
CategoryFGoodsalreadyreceivingtariff-freetreatmentcontinuetodoso.
CategoryGTariffsremainatbaserateuntilyearfour;beginningJanuary1,2008,tariffsreducedby8.
3percentofthebaserateannuallythrough2011;startingonJanuary1,2012,tariffsreducedby16.
7percentofthebaserateannuallythroughJanuary1,2015,atwhichpointtheyareduty-free.
Tariffsremainatbaserateinthefirsttwoyears;beginningJanuary1,2006,tariffsremovedineightequalannualstages;duty-freebyJanuary1,2013.
CategoryHCategoryJBaseratesremainuntilyearseven;beginningJanuary1,2011,dutiesremovedinfiveequalannualstages;duty-freeeffectiveJanuary1,2015.
CategoryKTariffsremovedintwoequalannualstagesbeginningonJanuary1,2004.
CategoryLTariffsremovedintenstages:fromyearsonetosix,tariffsreducedby5percentperyear;beginninginyearseven,by10percentperyear;duty-freebyJanuary1,2013.
CategoryMAppliesvariablytoitemsinChapter98;tariffseliminatedbyJanuary1,2013.
CategoryNTariffseliminatedentirely;duty-freebeginningonthedateofentryintoforce;forgoodsincertaintarifflinesduty-freemeansfreewithoutbond.
(boxcontinuesnextpage)192CAPITALIZINGONTHEMOROCCO-USFREETRADEAGREEMENTAnOverviewofChile-USTradeUndertheFTATheChile-UStraderelationshipisrobust,albeitrelativelymodestfromtheUSstandpoint.
TheUSmarkethaslongbeenthemaindestinationforChileanmerchandiseexports,accountingfor13to15percent(althoughin2007ChinaedgedouttheUnitedStatesasthelargestpurchaserofChileanexports;table9.
2).
Chileisthe39thmainsourceofUSimports,providing0.
4percentofUSimports,andthe25thlargestmarketforUSexports,buy-ing1percentofUSforeignmerchandisesales.
TheChileangovernmentiscertainlyawareofthedisparitybetweenthetwocountries—theUSmarketis148timesthesizeofChile's,andBox9.
1LiberalizationofUStariffsonChileangoodsundertheUS-ChileFTA(continued)MostgoodsfallintocategoriesAorF.
Uponentryintoforceoftheagreement,95percentofChileanexportstotheUnitedStatesenjoyedduty-freeentry,and90percentofUSgoodsenteringChilehadzerotariffs.
Only1.
1percentofChileangoodsfallintocategorieswithatariffliberalizationscheduleof10to12years,and4.
2percentofUSexportstoChilehaveliberalizationschedulesof8to12years.
By2007,97percentofChile'sexportstotheUnitedStatesenteredduty-free.
Quotasforspecificproductsapplyasfollows:forcopperinthefirstyear,withduty-freeaccessstartinginyeartwo;forbeef,thefirstfouryears;forhotelorrestaurantchinaware,thefirstnineyears;forbutter,cheese,condensedmilkandmilkpowder,otherdairyproducts,andavocados,12years(withthequotassubstantiallyhigherOctober1–December31thanJanuary1–September30);forpoultry,sugar,tobacco,andtires,12years.
Avarietyofgoodshavelongerliberalizationschedules:certainpoultryanddairyproducts;chocolateandcajeta(acaramel-likesyrupmadeofsweetenedmilk);freshfruitssuchasdates,watermelons,cantaloupesandothermelons,pears,apricots,andnectarines;frozenfruit;jamsandfruitpaste;infantfoodmadefromfruit;citrusjuice;tomatoesandtomatosauce;peanuts,driedfruit,andfruitandnutmixtures;groundnutandsoyoils;vegetablessuchasaspara-gus,artichokes,broccoli,carrots,celery,corn,cucumbers,leeks,mushrooms,spinach,andothers;driedonionsandgarlic;tuna;waterprooffootwear;glassandceramicwares;rum;andtobacco.
Source:USTariffSchedule,Annex3.
3oftheUS-ChileFreeTradeAgreement,www.
ustr.
gov(accessedonJuly15,2009).
CHILE-USFREETRADEAGREEMENT193Chile'stotalannualexportsareabout72percentofwhattheUnitedStatesimportsinaweek(DIRECON2004).
Forasmallcountry,however,ChilemaintainsastrongpresenceintheUSmarket.
AmericanshavebecomeaccustomedtoconsumingChileangrapesduringthewintermonths,andareusingmoreChileankiwis,blueberries,andotherfruitsintheirdes-sertsandassnacks.
ChileanwineispopularinAmericanwinecellars,largelyasamoderatelypriced,good-qualitywine,anditisstartingtomakeinroadsinpremiumwinemarketsaswell.
Asseeningure9.
2,tradebetweentheUnitedStatesandChilehasexpandedsinceimplementationoftheFTA:USpurchasesofChileanmer-chandisehavegrownatanaverageof17percentperyearandUSsalestoChile35percentayear.
Someofthisgrowthisnecessarilyattributabletotheincreaseincommoditypricesduringtheseyears.
Chile'ssalestotheUnitedStatesarehighlyconcentratedintheminingsector,dominatedbycopper(table9.
3).
In2007nearly10percentofChile'sminingexportsandmorethan15percentofitsindustrialexportsweredestinedfortheUSmarket.
Asseenintable9.
3,"copperandarticlesthereof"haveonaver-ageaccountedforjustunderathirdofexports(rangingfromalowof13percentin2002to45percentin2007,whenthepriceofcopperwasexcep-tionallyhigh).
Lookingatnon-traditionalgoods,fruitsandnutsconstituteone-quarterofChile'snon-copperexports.
Fishandwoodarealsoimpor-tant,makingup18percentand12percentof2008exports,respectively(althoughwoodhasexperiencedasharpdeclinerecently,fromabout20percentto12percentofnoncoppersales).
Chileexportsover2,000productstotheUnitedStates,ofwhichthetop35representednearly80percentofitstotalexportstotheUnitedStatesin2008(table9.
4).
Thisisasignicantincreasefrom2003,whenthese35goodsaccountedforonly44percentofthetotal.
Oftheseitems,41percentwereinthecategoryofbasemetalsandpreciousorsemipreciousstones;24percentwereanimalandvegetableproducts;andtherestwerewoodandwoodarticles,mineralproducts,andchemicals.
Notsurprisingly,giv-enChile'sprominenceasacopperproducerandthehighpriceofcopperduringthecoveredtimeperiod,copperistherst-rankedChileanexportitem,followedbyAtlanticsalmonllets.
TheUSshareofChile'sexportshasdecreasedsincetheFTAwentintoforce,largelyasaresultofChile'sstrongexportgrowthanddiversi-cationofitsexportmarketthroughFTAswithotherpartners.
Still,theUnitedStatesremainsanimportantmarket,buying48percentofChile'sagriculturalexportsand43percentofitsfruitexports.
Withrespecttoindustrialgoods,theUnitedStatesabsorbedonly16percentofChile'smanufacturedexportsbut38percentofitsfurnitureexports.
Otherindus-trialgoodsforwhichtheUSmarketrepresentsasignicantpercentageofChile'stotalexportsincludefoodandbeverages(20percent),crockeryandearthenware(25percent),andmetal,machinery,equipment,electricalmaterial,andmeasuringinstruments(15percent).
194CAPITALIZINGONTHEMOROCCO-USFREETRADEAGREEMENTTable9.
3Chile'sexportstotheUnitedStates:Commoditycomposition,2000–2008(rankedby2008figures)Commodity200020012002200320042005200620072008Copperandarticlesthereof(percentofsubtotal)201513182128453934Noncopperexports(percentofnoncopperexports)Ediblefruitsandnuts252426262524242426Fishandcrustaceans191817201716181818Woodandarticlesofwood161719192420211512Naturalorculturedpearls4423468910Inorganicchemicals;organicorinorganiccompoundsofpreciousmetals,ofrareearthmetals,ofradioactiveelements,orofisotopes434334445Beverages,spirits,andvinegar555444344Ores,slag,andash013138374Preparationsofvegetables,fruit,andnuts322322323Cereals333321222Ironandsteel101001122Subtotal(millionsofUSdollars)2,9362,9183,1463,5534,5415,9618,8748,3837,784Total(millionsofUSdollars)3,2583,2793,5573,9795,0076,7459,5518,9698,182Source:Author'scalculationsusingdatafromUSITCInteractiveTariffandTradeDataweb,2009,http://dataweb.
usitc.
gov.
CHILE-USFREETRADEAGREEMENT195Table9.
4Top35USimportsfromChile,2003–08(thousandsofdollarsandpercentchange,rankedby2008figureswithineachcategory)RankHS10-digitcodeDescription200320042005200620072008Percentchange,2003–08Percentof2008totalAnimalandvegetableproducts,includingfatsandoils701,804798,632914,2271,074,7291,915,4491,984,5431832420304190064Atlanticsalmonfillets,etc.
,farmed,fresh/chilled0000614,822609,962n.
a.
730806106000Grapes,fresh,ifenteredduringtheperiodJuly1toFebruary14,inclusive,ofthefollowingyear228,122287,549324,829329,162283,949316,77539460806102000Grapes,fresh,ifenteredduringtheperiodfromFebruary15toMarch31,inclusive,inanyyear146,630138,393186,254250,093252,021215,66947370304296006Atlanticsalmonidaefillets,frozen,nesoi0000184,496151,929n.
a.
280806104000Grapes,fresh,ifenteredduringtheperiodfromApril1toJune30,inclusive,inanyyear67,07385,263103,131138,973105,316146,692119290810400028Blueberries,cultivated,fresh21,36238,36547,01368,22492,138139,5995532191005100090Corn(maize)seed,otherthanyellowcorn54,56834,53930,03652,08782,59691,175671200808100060Apples,fresh,valued>$0.
22perkilogram57,41886,75140,40875,56199,12483,108451210809200000Cherries,fresh0024,06338,54940,98975,173n.
a.
1240804400010Hassavocados/avocadosdeterminedbythesecretaryoftheUSDAtobeHass-like,fresh/dried89,92880,39193,06051,86389,42666,793-261330811202020Raspberries,uncookedorcookedbyboilingorsteaminginwater,frozen,whetherornotsweetened12,98018,55629,16730,37726,04347,8832691350809402000Plums(includingpruneplums)andsloes,fresh,ifenteredduringtheperiodfromJanuary1toMay31,inclusive,inanyyear23,72328,82536,26639,84044,52939,785680(tablecontinuesnextpage)196CAPITALIZINGONTHEMOROCCO-USFREETRADEAGREEMENTTable9.
4Top35USimportsfromChile,2003–08(thousandsofdollarsandpercentchange,rankedby2008figureswithineachcategory)(continued)RankHS10-digitcodeDescription200320042005200620072008Percentchange,2003–08Percentof2008totalPreparedfoodstuffs159,245187,374189,013204,502198,086224,626413112204215030Redwineoffreshgrapesofanalcoholicstrengthbyvolumenotover14%volume,incontainersholding2litersorless,valuedover$1.
05/liternesoi104,665109,458117,281114,747131,331133,191272302204215046Whitewine,excepticewine,<14%alcohol,<2liters,over$1.
05/liter15,47033,56537,03536,45443,00149,0682171342009790020Applejuice,unfermented,concentrated,notfrozen39,11044,35134,69753,30123,75442,36781Mineralproducts41,776141,716405,606159,196362,351237,0884683142613900000Molybdenumoresandconcentratesnotroasted073,742271,575110,183300,862117,365n.
a.
1232501000000Salt(includingtableanddenatured)andpuresodiumchloride,whetherornotinaqueoussolutionorcontainingaddedanti-cakingorfreeflowingagents,seawater38,50931,24849,72327,93629,44767,140741292613100000Molybdenumoresandconcentratesroasted3,26736,72684,30821,07732,04252,58315101Chemical,plastic,andrubberproducts60,64366,41398,495124,863145,533185,1162052122801200000Iodine46,09351,78382,30486,645106,838123,9771692262834210000Potassiumnitrates14,55014,63016,19138,21838,69561,1393201CHILE-USFREETRADEAGREEMENT197Woodandarticlesofwood,pulp34,66446,55138,859224,182542,999486,17313036104409104010Pinestandardwoodmolding,end-jointed000175,461169,182136,639n.
a.
2174407100153Pine,nesoi,lumber,nottreated/rough,exceptfinger-jointed0000136,12193,017n.
a.
1184412394062Plywoodwithbothouterpliesofsoftwood,allwood,fullysanded,nesoi000077,97792,672n.
a.
1224407100101Woodsawnlengthwiseover6mm,coniferous,finger-jointed000057,46067,309n.
a.
1314418208060Doorsandtheirframesandthresholds,ofwood,nesoi34,66446,55138,85948,72156,47748,489401324411149010Mediumdensityfiberboard,standardwoodmolding,exceeding9mm000045,78248,047n.
a.
1Basemetalsandpreciousorsemipreciousstones,metalsandarticlesthereof756,6761,130,0442,027,7464,499,4073,837,9663,354,9693434117403110000Refinedcoppercathodesandsectionsofcathodes543,774796,2681,473,8943,217,4872,521,0432,321,4103272847108121020Golddore,unwrought,nonmonetary045,675138,275273,885250,599277,734n.
a.
357402000000Unrefinedcopper,copperanodesforelectrolyticrefining75,488128,127149,933538,097418,843247,8732283137202700000Ferromolybdenum1533,86222,31645,00992,576118,649774481157106911020Silverdore01,9838,68931,25385,488106,271n.
a.
1(tablecontinuesnextpage)198CAPITALIZINGONTHEMOROCCO-USFREETRADEAGREEMENTTable9.
4Top35USimportsfromChile,2003–08(thousandsofdollarsandpercentchange,rankedby2008figureswithineachcategory)(continued)RankHS10-digitcodeDescription200320042005200620072008Percentchange,2003–08Percentof2008totalBasemetalsandpreciousorsemipreciousstones,metalsandarticlesthereof(continued)756,6761,130,0442,027,7464,499,4073,837,9663,354,96934341167108121013Goldbullionnotlessthan99.
95%goldbyweight,unwrought,nonmonetary,goldcontent72,32975,04186,76898,93886,752101,477401257404003020Spentanodesofrefinedcopper280029,530254,09565,212232,8001277403190000Unwroughtrefinedcoppernesoi50,92367,342127,231243,68593,40260,648191288112925000Unwroughtrheniumincludingpowders13,98111,74620,64021,52335,16855,6952981Subtotaltop351,754,8082,370,7303,673,9466,286,8797,002,3846,472,515269Total3,979,3855,006,9396,745,1099,551,2848,969,5008,182,252106Top35asapercentoftotal444754667879nesoi=notelsewherespecifiedorindicatedn.
a.
=notavailableHS=HarmonizedScheduleSource:USITCInteractiveTariffandTradeDataweb,2009,http://dataweb.
usitc.
gov.
CHILE-USFREETRADEAGREEMENT199Chile'sexportsadded71"new"productsafterimplementationoftheFTA.
Amongthesearefreshordriedclementines—ofwhichexportsgrew84timesbetween2004and2006—tulipandlilybulbs,preparedprunes,andcowhides.
Inaddition,ChileisexportingfarmoreofsomeitemsthanbeforetheFTA.
Onesuccessstoryiscondensedmilk,whichsawitstariffreducedfrom3.
9centsperkilogramtozerodutyuponentryintoforceoftheagreement(asexplainedinbox9.
1,condensedmilkremainssubjecttoaquotathatwillbephasedoutby2015).
ExportsofcondensedmilktotheUnitedStatesgrewfromjust$26,000in2003toover$3millionin2008,anaverageincreaseof286percentperyear.
ThissignicantgrowthshowsChileanmilkproducershavetakengoodadvantageofincreasedaccesstotheUSmarket.
Othersuccessstoriesincludeblueberrysales,whichgrewbyafactorof40,from$260,000in2003toover$10millionin2008;radialtires,whichgrewfromnothingtoover$6.
7millioninsalesin2008;andvariousmachineryparts—themachineryandmechanicalappliancessec-torasawholeexpandedbyover150percentperyearbetween2003and2008.
Box9.
2describesotherChileanexportsuccessesintheUSmarket.
AnothersectorinwhichsalestotheUnitedStateshaveexpandedsincetheimplementationoftheagreementistextilesandapparel.
OneofChile'sgoalsinnegotiatingtheFTAwastoliberalizetradeinthislabor-intensive,relativelyhighvalue-added,andoftenhighlyprotectedarea.
SincetheimplementationoftheFTA,ChileantextilesalestotheUnitedStateshaveincreasedbyover180percent,particularlyforwovenfabrics;theUnitedStatesabsorbsmorethan10percentofChile'stextileexports.
Chile-USservicestradedeclinedduringtheyearsleadinguptotheagreementandreboundedafter(gure9.
3).
Between1997and2007Chile'sservicesexportstotheworldgrewrapidly,withtheresultthattheUSshareofChile'stotalservicestradefellfrom22percentofexportsand30percentofimportsin2000to10and18percent,respectively,in2007.
HastheFTASpurredChile-USInvestmentForChileandothersmallanddevelopingcountries,akeymotivationforsigningfreetradeagreementsistoexpandinvestment.
FTAparticipation,particularlywithlarger,developedcountries,signalsopennesstotradeandinvestment(andalsoprovidesalegalframeworkforthesettlementofdisputes).
Accordingtotheeconomicsliterature,sounddomesticpoli-ciesaregenerallyanecessaryconditionforinvestmentattraction,butin-vestmentprovisionsintradeagreementsandbilateralinvestmenttreaties(BITs)arepotentiallyhelpfulsupplementaryinstruments.
TheUnitedStatesisChile'smaininvestmentpartner:25percentofforeigndirectinvestment(FDI)owstoChileduring1974–2007originat-edintheUnitedStates(almostallcameafter1990).
Themainsectorsofin-vestmentaremining(33percent);electricity,gas,andwater(14.
5percent);communications(11percent);andnancialservices(9percent).
Chilehas200CAPITALIZINGONTHEMOROCCO-USFREETRADEAGREEMENTbeenparticularlyinterestedinattractinginvestmentintheinformationtechnologyarea,inordertoeventuallyexportservicestraditionallypro-ducedintheUnitedStates,rangingfromcallcenterservicestosoftwaredevelopment.
Andindeed,whileanumberofUSrmsrelocatedinChiletoperformextractiveactivitiesandtomanufacturegoods(aerospace,rub-Box9.
2ChileanexportsuccessesintheUSmarketChileisdiversifyingitssalestotheUnitedStates,enlargingitsexportbasketfromcopperandgrapestonewitems.
Partofthisstrategyinvolvesfindingnichemarkets.
SlakingtheUSthirstforwine:ChileanwinehasbecomeincreasinglypopularintheUnitedStatesundertheFTA.
In2007Chile'sbottledwineexportstotheUnitedStatesgrewby8percentinvolumewhileincreasing15percentinval-ue,accordingtotheDecember2007Gomberg-Fredriksonreport.
1TheChileangovernmentreportsthatthroughOctober2008,thevolumehasshownsteadygrowthof3.
3percent,andthevaluehasoutpacedthevolume,increasingby3.
9percentdespitetheeconomicdownturn,whichhasleftmanywine-produc-ingcountriessufferinglosses.
Chileisoneoftheonlycountrieswhosewineexportsgrewin2008.
InJanuary2008WinesofChilebroughtUSwineprofes-sionalstoChileforaSommelierSymposiumtoeducatethemaboutChileanwines,andayearlateropeneditsfirstUSofficeinNewYork,inrecognitionofthegrowthofChileanwinesalesintheUnitedStates.
Chilegoeseco-friendlyinrecognitionofmarketdemand:Dayka&Hackett,aDelaware-basedproduceimporter,announcedthatitwillbetheexclusiveproviderofRainforestAlliance–certifiedChileangrapes.
2TheallianceincludesfiveChileantablegrapegrowersthathaveearnedearth-friendlycertification.
Asconsumerawarenessincreases,Chileprojectsgrowthinotherorganicfoodexports.
Specializedgourmetgoods:TheMarch2009issueofAMCHAMChile'sBusi-nessChilemagazinetellsthestoryofasmallChileancompany,Chileangourmet,thathasmanagedtobecomeoneofChile'sfastest-growingluxuryfoodcom-paniesbysellinghoneyandmerken.
Merkenisdescribedasa"copper-coloredspicemadefromdried,smokedredchilipeppersandtoastedcorianderseeds"thatwasnewtotheUSmarketbutisnowavailableinWholeFoodssupermar-kets.
Chileangourmet'ssalestotheUShavetripledsince2007to$450,000in2008andareexpectedtoexceed$1millionin2009(Long2009).
1.
Reuters,"WinesofChileIncreasesUSPresencewithNewOfficeinNewYork,"January14,2009.
2.
Dayka&HackettLLC.
2009.
"RainforestAllianceCertifiedChileanGrapesIntroducedbyDayka&Hackett,"pressrelease,January5,2009,www.
freshplaza.
com(accessedonApril15,2009).
CHILE-USFREETRADEAGREEMENT201ber,paper,printingandpackaging,electroniccomponents,andtextiles),thebulkofmorerecentinvestmenthasbeeninservicessuchascallcen-teractivities,back-ofcesupport,andsoftwaredesignanddevelopment.
SeveralcompanieshavealsoinvestedinChilewiththepurposeofsettingupregionalLatinAmericanheadquartersinSantiago.
USgreeneldinvestmentinChilesincetheFTAhaslargelybeeninthesoftwareandinformationtechnologysector.
SinceJanuary2003,anestimated1,600jobswerecreatedinChilethroughUSinvestmentinthissector.
ThisisasignicantchangefromthetraditionalproleofChile'sUSinvestment,whichhasfocusedonextractiveindustries.
8Table9.
5com-paresUSinvestmentinChilebysectorfortheoverallperiodfrom1974to2007andfortheyearsafterthesigningoftheFTA(2003to2007).
Between1974and2007,miningandquarryingdominated,capturingone-thirdofinvestmentinows;electricity,gas,andwaterfollowedasadistantsecond,withashareof15percentofinows.
Incontrast,between2003and2007,USinvestmentpredominatedin"otherservices"(23percent),communica-tions(18percent),nancialservices(12percent),andforestry(12percent).
Interestingly,thischangeisnotrepresentativeofoverallpatternsinChileaninvestment.
ThedistributionofChileaninvestmentfromtheworld,alsoshownintable9.
5,remainsmuchthesameinbothperiods,withminingandquarryingrepresenting33percentofallFDIinbothperiods.
8.
DataonUSgreeneldinvestmentinChileisavailablefromfDiMarkets.
comDatabase,www.
fdimarkets.
com(accessedonJune5,2009).
2,0001,6001,2008004000Figure9.
3Chile-UStradeinservices,1997–2007millionsofUSdollarsUSexportstoChileUSimportsfromChile19971998199920002001200220032004200520062007Source:BureauofEconomicAnalysis,SurveyofCurrentBusiness,October2008,table2.
FTAentersintoforce202CAPITALIZINGONTHEMOROCCO-USFREETRADEAGREEMENTTable9.
5USinvestmentflowsintoChilebysector,1974–2007(thousandsofdollarsandpercent)SectorFlowsfromtheUnitedStatesFlowsfromworld1974–20072003–071974–20072003–07ThousandsofdollarsPercentoftotalThousandsofdollarsPercentoftotalThousandsofdollarsPercentoftotalThousandsofdollarsPercentoftotalAgricultureandlivestock8815030,103014,4630Forestry21411321253,072125,3571Fishingandaquaculture160027,446013,2360Miningandquarrying5,456331211,988,21131954,12731Food,beverages,andtobacco8855192259,3564124,6074Woodandpaperproducts3482858130,670262,7472Chemical,rubber,andplastics1,0206343297,0695142,5675Otherindustries2031212128,078261,5992Electricity,gas,andwater2,370157471,244,62919599,04419Construction41091125,307260,4522Wholesaleandretailtrade4683979172,806383,0153Transportationandstorage21917178,708137,8501Communications1,6941019918709,91911341,28711Financialservices1,493912812683,60711328,76111Insurance8325-37-3236,8674113,8174Engineeringandbusinessservices303252583,662140,1151Sewage,sanitation,andsimilar600045,157121,7901Otherservices680425023176,541384,4503Total10,6011,0846,471,2083,109,283Source:ChileForeignInvestmentCommittee,www.
cinver.
cl/english/estadisticas/estadisticas_pose.
asp(provisionalfiguresasofDecember31,2007).
CHILE-USFREETRADEAGREEMENT203ChileanrmshavealsotakenadvantageoftheiraccesstotheUSmarkettoinvestintheUnitedStates.
AccordingtoComitédeInversio-nesExtranjeras(CINVER),investmentintheUnitedStatesrepresented14percentoftotal2008Chileanoutwardinvestment,makingtheUnitedStatesthethirdmainrecipientofChileaninvestmentabroad,afterAus-traliaandtheUnitedKingdom.
Onaggregate,fortheperiod1974-2008,theUnitedStatesisthemaindestinationofChileaninvestment,absorbingaboutaquarterofChile'soutwardinvestmentows,followedbyCanadaandSpain.
Chile'sinvestmentintheUnitedStatesismainlyinservices(84percent),industry(12percent),andmining(4percent).
Table9.
6listsChileancompaniesthathavesetupgreeneldinvestmentsintheUnitedStatessince2003;threeoftheminvestedinthenancialservicessector,oneinthebeveragesector,andtheotherinlargemachinery.
OpenSecretsofChile'sTradeSuccessChilehasbeensuccessfulinincreasingtradeandinvestmentwiththeUnitedStatesbothbeforeandsincethefreetradeagreement.
WhiletheadditionalmarketaccessprovidedbytheFTAiscertainlyafactor,Chile'ssuccessisalsoattributabletoitslong-standingpoliticalandeconomiccon-ditionsandthestrengthofitsinstitutions.
ThissectionprovidesareviewofthesefactorsandofareasinwhichadditionalmeasurescouldhelpChilefurtherincreasetradeandinvestmentwiththeUnitedStates.
Table9.
6ChileangreenfieldinvestmentintheUnitedStatessince2003DateCompanynameInvestment(millionsofdollars)JobsBusinessactivityBeveragesJanuary2009WinesofChile22.
7183HeadquartersFinancialservicesFebruary2008CorpGroup1463BusinessservicesJuly2004BancoEstado955BusinessservicesJanuary2004AltasCumbres1463BusinessservicesIndustrialmachinery,equipment&toolsFebruary2006Conymet4.
423Sales,marketing,andsupportSource:fDiMarkets.
comDatabase,www.
fdimarkets.
com.
204CAPITALIZINGONTHEMOROCCO-USFREETRADEAGREEMENTMacroeconomicandPoliticalStabilityChilebenetsfromsoundmacroeconomicpolicies,strongeconomicin-stitutions,andrelativestability.
Astableandopeneconomicenvironmentoverthepastdecadehasencouragedsteady,ifunspectacular,long-termgrowth.
9Table9.
7setsoutkeymacroeconomicindicatorsforthe10-yearperiodfrom1999to2008.
Chile'sCentralBankhasbeenindependentsince1989andfollowsapolicyofinationtargeting,withthetargetsannouncedannually(Valdés2007).
Inationhasremainedrelativelylow,withaperiodaverageof3.
5percent.
ChilealsoboastsoneofLatinAmerica'smoststablenancialsectors(IMF2007b)andahighnationalsavingrate.
StandardandPoor'shasratedChileA+/Stable/A-1basedonitssoundeconomicpolicies,theabilityofitsgovernmenttoprovidepublicgoodssuchasinfrastructureandbasicpublicservices,andlowpoliticalrisk(StandardandPoor's2009).
Chile'scurrentaccounthasgenerallybeenpositive,particularlydur-ingtheyearsofhighcopperprices.
Since2003,Chilehasconsistentlyrunascalsurplus,withaperiodaverageof2.
2percent.
In2000thegovern-mentadoptedastructuralsurplusrule,inparttoprotectagainstcopperpricevolatility,mandatingascalsurplusof1percent(reducedin2007to0.
5percent).
Thishasallowedthegovernmenttoimplementcountercycli-calpoliciesandtomaintainrelativestabilityeveninthefaceofexternalvolatility.
Chile'sopentraderegimecontributestoatrade-friendlyenvi-ronment,anditscontinuoustradeliberalizationhasapositiveimpactonexportsandimports(Monfort2008).
Chilealsobenetsfrompoliticalstability.
SincetheendofthePino-chetdictatorship,Chilehasestablishedrulesgoverningthetransferofleg-islativeandexecutivepowersthatarefollowedbyallparties.
Asshownintable2.
7,whichliststheIndexofEconomicFreedomfortheUnitedStatesanditsFTApartners,Chileranks11thoutof183countriesandreceivesconsistentlyhighscores.
TheindexranksChilelesspositivelyinbusinessfreedom,butthecountrystilldoeswellrelativetotheworld;forexample,whereastheworldaverageforopeningabusinessis38days,itis27inChile.
Table9.
8providesanalternativerankingofbusinessperception,fromtheWorldBank'sDoingBusinessReport2008,inwhichChileachievesanoverallrankof40,placingit8thamongtheUnitedStatesanditstrad-ingpartners.
9.
Basedonempiricalevidence,Schmidt-Hebbel(2008)attributesChile'sgrowthinthepast15yearstotradeandnancialopening(1.
1percent),macroeconmicstabilization(0.
9percent),improvementsininstitutions(0.
9percent),lowerratioofgovernmentspendingtoGDP(0.
8percent),andhumancapitalaccumulation(0.
5percent).
CHILE-USFREETRADEAGREEMENT205Table9.
7SelectedmacroeconomicindicatorsforChile,1999–2008Indicator1999200020012002200320042005200620072008AverageAnnualpercentchangeGDPgrowth–0.
44.
53.
52.
24.
06.
05.
64.
64.
73.
23.
8Inflation3.
33.
83.
62.
52.
81.
13.
13.
44.
47.
43.
5PercentofGDPCurrentaccount0.
1–1.
2–1.
6–0.
6–0.
82.
11.
46.
87.
2–0.
81.
3Centralgovernmentbalance–2.
1–0.
6–0.
5–1.
2–0.
22.
14.
67.
78.
87.
82.
6Nationalsaving21.
020.
620.
620.
820.
122.
223.
425.
225.
521.
922.
1Externaldebt48.
049.
056.
060.
058.
045.
038.
032.
532.
730.
345.
0Sources:InternationalMonetaryFund,WorldEconomicOutlook,April2009,andInternationalFinancialStatistics,2009,www.
imfstatistics.
org.
206CAPITALIZINGONTHEMOROCCO-USFREETRADEAGREEMENTTable9.
8DoingBusinessrankingsfortheUnitedStatesanditstradingpartners,2008CountryEaseofdoingbusinessrankStartingabusinessDealingwithconstructionpermitsEmployingworkersRegisteringpropertyGettingcreditProtectinginvestorsPayingtaxesTradingacrossbordersEnforcingcontractsClosingabusinessSingapore11021165251142UnitedStates3626112554615615Canada822918322852844584Australia935783355348452014Bahrain18491426188453152111325Korea23126231526712704312812Israel3024120921605577910239Chile40556274396838415365112Colombia537954807859241419614930Mexico5611533141885938149877923Oman5776133241912388811910563Peru62116115149411218859311996ElSalvador72103121874243113124575378Panama8132731727528104172811672DominicanRepublic9784779710668126723283144Nicaragua10785134661368488162996667Guatemala112147164106272812612012310690CostaRica1171231237745591641529413298Nigeria118911512717684531201449091Morocco12862901681171311641196411264Honduras133146711569028150137107176115Source:WorldBank,DoingBusinessReport2008,www.
doingbusiness.
org/EconomyRankings.
CHILE-USFREETRADEAGREEMENT207InfrastructureandEducationIfChileistoattractfurtherinvestmentandenhanceitsservicesexports,itwillneedtoincreaseitsabilitytocapitalizeontwoimportantelements:stronghumancapitalandlow-costreliabletelecommunicationsinfra-structure.
Therstoftheseiscapturedintable9.
9,whichdisplaystheeducationrankingsoftheUnitedNationsHumanDevelopmentIndex.
Chileranks40thamongallcountriesand7thamongtheUnitedStatesanditstradingpartners.
Chile,whichspends16percentofitsgovernmentbudget(3percentofGDP)oneducation,hasarelativelywell-educatedlaborforce,withaliteracyrateof96percentfortheoverallpopulationand99percentforyouth(ages15to24).
Inaddition,nearly50percentofChileanrmsoffersometypeoftrainingprogram.
InordertofullytakeadvantageofUShigh-technologyinvestment,Table9.
9RankingsfortheUnitedNationsHumanDevelopmentIndex'seducationindexRankCountryIndex3Australia0.
9934Canada0.
99112UnitedStates0.
97123Israel0.
94625Singapore0.
90826Korea0.
98040Chile0.
91441Bahrain0.
86448CostaRica0.
87652Mexico0.
86358Oman0.
76662Panama0.
87875Colombia0.
86986Jordan0.
86887Peru0.
872103ElSalvador0.
772110Nicaragua0.
747115Honduras0.
771118Guatemala0.
685126Morocco0.
544Source:UnitedNations,HumanDevelopmentReport2007/2008,http://hdr.
undp.
org.
208CAPITALIZINGONTHEMOROCCO-USFREETRADEAGREEMENTChilewillneedtobeabletoprovideareliablepoolofEnglish-speaking,well-educatedworkers.
Inresponsetothisneed,Chilehastriedtoin-creasebilingualismamongtheworkforce.
OneprogramisPresidentMi-chelleBachelet'sEnglishscholarshipsprogram,withthetwinobjectivesofensuringEnglishuencyamong6,000Chileansby2010(theyearofthecountry'sbicentennial)andcreatinganationalregistryofpeoplewithprociencyinEnglish.
Theregistry,establishedin2003,ismanagedbytheCorporacióndeFomentodelaProduccióndeChile(CORFO),thenationalinvestmentpromotionagencyestablishedin1939,andhasseenmixedre-sults.
ItprovidesadatabaseofChileanworkersavailabletocompanieswhentheyneedEnglish-speakingemployees,butthereissomequestionaboutthelevelsofprociencyandtheavailabilityofworkerswiththeskillsneeded.
Accordingtoanofcialfamiliarwiththedatabase,ofthe37millioncandidatesregisteredinthedatabase,13millionhavebeencontacted,andonly76,000joboffershavebeenextended.
Thesenumbersindicatethatalargeportionoftheregisteredcandidatesdonothavetheskillsmostindemandbythecompaniesthatusethedatabase.
Tosupple-mentexistingskills,CORFOisalsoofferingincentivestocompaniestobooston-the-jobtrainingbysubsidizingtrainingprograms.
Intermsoftelecommunicationsinfrastructure,ChileranksrelativelywellamongUSFTApartnercountries(table9.
10),with100percentmo-bilecoverageforthepopulationandworld-standardpricesforxedlineandmobiletelephony.
ButitisthesixthmostexpensiveoftheUSFTApartnersintermsofInternetaccess,whichisarealliabilityinattractinghigh-technologyinvestmentandexplainsthecountry'srelativelylowrateofInternetusage(25.
6percentofthepopulation).
Overall,however,Chileisemergingasanattractivelocationforser-vicesexport.
A.
T.
Kearney's2007GlobalServicesLocationIndex,whichrankscountriesintermsoftheirprovisionofthemostcommonremotefunctions,includingITservicesandsupport,contactcenters,andback-of-cesupport,ranksChile7thoverallandrstrelativetotheUnitedStatesanditstradingpartners(table9.
11).
Theindexisbasedonnancialat-tractiveness,whichtakesintoaccountthecostsofcompensation,infra-structure,andtaxandregulatoryregimes;peopleandskillsavailability,whichtakesintoaccountthesizeoftheITsectorandtheavailabilityandeducationoftheworkforce;andbusinessenvironment,whichincludesbusinessandpoliticalriskindicators,qualityofinfrastructure,intellectualpropertysecurity,andaculturalindicatorbasedonpersonalinteractionsamongbusinesspeople.
Transparency,Information,andParticipationChileembracedtransparencyandinformationdisseminationwhenittran-sitionedfromdictatorshiptodemocracyin1990.
ThewebsiteoftheTradeMinistry(DirecciónGeneraldeRelacionesEconómicasInternacionalesCHILE-USFREETRADEAGREEMENT209Table9.
10Telecommunicationsindicators,2006CountryPopulationcoveredbymobiletelephony(percent)Pricebasketformobiletelephony(dollarspermonth)Pricebasketforresidentialfixedline(dollarspermonth)Internetusers(per100people)Pricebasketforinternet(dollarspermonth)Australia98183064.
923Bahrain1007728.
430Canada977n.
a.
70.
39Chile100111025.
626Colombia8210n.
a.
15.
48CostaRica862n.
a.
27.
628DominicanRepublic9092314.
919ElSalvador958210.
423Israel999n.
a.
26.
922Jordan9971014.
411Korea9914874.
333Mexico100141621.
020Morocco9816n.
a.
20.
027Oman9251212.
515Panama75171017.
338Singapore1006758.
720World6910101922n.
a.
=notavailableSource:WorldBank,WorldDevelopmentIndicators,2009.
210CAPITALIZINGONTHEMOROCCO-USFREETRADEAGREEMENT[DIRECON])poststhefulltextandannexesofalltradeagreements,pressreleases,factsheetsexplainingtheagreements,annualevaluationsoftradewitheachFTApartner,andadatabasewheretraderscanlookupthetar-iffsontheirexports.
AJune2003lawincreasedtransparencyinthepublicsectorandreducedthenumberofpoliticalappointeesinpublicposts.
Thegovernment's2006AgendaofProbity,Transparency,QualityofPolitics,andModernizationoftheStateincreasedaccesstopublicinformationandsoughttoreduceadministrativeirregularities.
Asaresult,informationontopicssuchasgovernmentprocurementcontractsforallgoodsandser-vicesbecamepublic.
Infact,Chileansocietyisnowsoaddictedtopublictransparencythat,onApril20,2009,alawtookeffectrequiringgovern-mentagenciestopublishontheirwebsitestheirstructureandfunctions,allcontractssignedwithotherinstitutions,resultsofaudits,andeventhesalariesoftheiremployees.
10TheIMFhasapplaudedChile'sstatisticscol-lectionanddisseminationsystem,givingthecountry'sstatisticalagencieshighmarksforobjectivityinthecollection,processing,anddisseminationofstatistics(IMF2007a,5).
Withregardtoitsfreetradeagreementnegotiationsandimplemen-tation,Chilehastakenstepstoincreasetransparencythroughtwomainchannels:bybuildingaconsensusamongthemajorinternalactorsandbydisseminatinginformationtoexternalstakeholders.
InthecontextoftheUSFTAnegotiations,internaltransparencywasimportantincoor-dinatingnegotiatingpositionsamong85ofcialsin10ministriesand10.
LeysobreTransparenciadelaFunciónPúblicayAccesoalaInformacióndelosrganosdelaAdministracióndelEstado,approvedAugust11,2008,www.
economia.
cl.
Table9.
11A.
T.
KearneyGlobalServicesLocationIndex,2007RankCountryFinancialattractivenessPeopleandskillsavailabilityBusinessenvironmentTotalscore7Chile2.
701.
201.
905.
7610Mexico2.
601.
501.
805.
7311Singapore1.
701.
502.
505.
6814Jordan3.
101.
001.
505.
6021UnitedStates0.
502.
702.
305.
5134CostaRica3.
000.
901.
405.
2235Canada0.
772.
092.
305.
1636Morocco2.
920.
901.
335.
1438Israel2.
001.
301.
805.
1041Panama2.
900.
801.
405.
0245Australia0.
901.
702.
304.
89Source:A.
T.
Kearney,OffshoringforLong-TermAdvantage:The2007A.
T.
KearneyGlobalServicesLocationIndex,www.
atkearney.
com.
CHILE-USFREETRADEAGREEMENT2118specializedagencies(Rosales2003b);ChileformedanInterministerialCommitteeforForeignEconomicAffairs,headedbytheministeroffor-eignaffairs,withthedirectorgeneralofinternationaleconomicrelationsasheadofthetechnicalcommittee.
FortheUSFTA,thiswassupplement-edbyanadvisorycouncilthatincludedmembersofparliament,academ-ics,andforeignministersandambassadorswithdirectexperienceintheUnitedStates.
Thecouncilpreparedspecialstudies,engagedindialoguewithrepresentativesofkeysectorsinChile,andtraveledtoWashingtontomeetwithmembersofCongress,thinktanks,nongovernmentalorga-nizations,andtradeandlabororganizations.
Thecloserelationshipinthetradepolicyareabetweentradeofcialsandthebusinesscommunityre-mainsimportant.
Publicofcialsdrawontheexpertiseofprivate-sectorrepresentativesandbusinessassociationswhenneeded,andviceversa,building"policynetworks"thatareimportantinChileantradepolicy(Bull2008).
Chilehasactivelyinformeditspopulationoftheprovisionsandben-etsoftheFTAthankstoa2000law,promulgatedbythenpresidentRi-cardoLagos,mandatingtheChileannegotiatorstocreatemechanismstoinformcivilsocietyandtoincorporatecitizens'viewsintheimplementa-tionofpolicythroughongoingdialogue.
Inadditiontoregularlyinform-ingtheChileanCongress,negotiatorscarriedoutcountlessseminarsandworkshopsontheagreement,travelingthroughoutthe13regionsofthecountrytoinformbusinesses,laborgroups,universitygroups,andothercomponentsofcivilsociety.
Theymaintainedaregularcallforcommentonthenegotiationsinlocalmediaoutlets.
AndsincethesigningoftheFTA,DIRECONnegotiators,alongwithchambersofcommerceandin-dustryassociations,havecontinuedtoconductseminars,presentations,andmeetingsbothinthecapital,Santiago,andinoutlyingregions.
Chil-eanentrepreneurshaveeasyaccesstonegotiatorsandtradepolicyof-cialsinchargeofimplementingtheagreementsandthusenjoysupportfortheirtradeactivities.
Thisemphasisontransparencyalsomakesitquiteeasyforforeignexporters,importers,andinvestorstondinformationaboutdoingbusi-nessinChile.
AnyonewishingtoexporttoChilecanuseafreedatabaseontheDIRECONwebsitetolearnabouttariffsandtherulesoforiginandtodownloadtheorigincerticate.
BuildingRelationshipsAlesstangibleindicator,butonethatisoftenmentionedasessentialinmakingChileanattractiveinvestmentdestinationandtradingpartner,istrustandreliability.
Chileranks23rdonTransparencyInternational's2008CorruptionPerceptionsIndex,tiedwithFranceandUruguayand212CAPITALIZINGONTHEMOROCCO-USFREETRADEAGREEMENTjustthreeslotsbelowtheUnitedStates.
11Thecountry'sEconomicFree-domIndexrankingissimilarlyfavorable.
Chilehasworkedhardtobuildandmaintainstrongrelationshipswithitstradingpartners.
Asignicantexampleoftheimportance,andpositiveeffects,ofsuchrelationshipsisthefactthatChilehaslargelylim-iteditstradedisputes,thankstoregularhigh-levelmeetings,consistentcontactsattheworkinglevel,andastrongpresenceintradingpartners'markets.
WhileaformaldisputesettlementmechanismexistsundertheChile-USFTA,nodisputeshavebeenbroughtundertheagreement.
Thisisattributabletolong-standingrelationshipsthatpromoteaccessandcommunicationbetweenofcials,whoworktogethertopreemptand,whennecessary,resolveissuesbeforetheybecomedisputes.
DIRECONofcialswhooverseetheChile-UStraderelationshipestimatethattheyoftenspendaboutone-quarteroftheirtimeaddressingconcernsbeforetheybecomeproblems.
AkeyinstitutioninthiseffortistheChile-USFTAFreeTradeCom-mission,whichmeetsannually,anditsassociatedworkinggroupsandcommittees,whichaddresssubjectssuchasagriculture,governmentpro-curement,tradeingoods,sanitaryandphytosanitary(SPS)issues,techni-calbarrierstotrade(TBT),labor,andenvironmentalissues.
Theyearlymeetingsoftradeofcialsensurethatthereisauidandcontinuousdia-logueaboutissuesofimportancetobothsides.
OneconcreteresultofCommissionmeetingsistheaccelerationofcer-taintariffreductions,effectiveJanuary1,2009:UStariffsonspinach,sweetcorn,preservedartichokes,andfrozenvegetables;andChileantariffsonrice,peas,safetyheadgear,andcertainchemicals.
Thegoodsinquestionaccountforapproximately$35millioninannualbilateraltrade.
Thetwocountrieshavealsoagreedinprincipletoharmonizetheagreement'srulesoforiginwiththoseofNAFTA.
Severalstickytradeissueshavealsobeenresolvedthroughconsul-tationsanddiscussionsintheCommissionoritsworkinggroups.
TheChileanpoultryinspectionsystemwasapprovedbytheUSDepartmentofAgricultureFoodSafetyandInspectionService(USDA-FSIS)andbothmarketsareopentoeachothers'poultry.
Inaddition,theworkinggrouponSPSissuesresolvedChileanconcernsabouttheUSDepartmentofHomelandSecurity'snewregulationsaffectingnitratesandUSconcernsaboutmarketaccessforUSbeef.
ChileandtheUnitedStateshavealsoagreedtoseveralmodicationsinthegovernmentprocurementchapter,reectingUSadministrativechanges.
WhiletheagreementsubstantiallyenhancesaccesstothehugeUSgovernmentprocurementmarket,ChileanrmsfoundtheUSgovern-mentprocurementsystemtobecomplexandhavenottakenadvantageofthisaccess.
Asaresult,thecountriesagreedtodevelopaprogramof11.
Theindexisavailableatwww.
transparency.
org(accessedonApril20,2009).
CHILE-USFREETRADEAGREEMENT213technicalassistancetohelpChile'sprivateandpublicsectorunderstandtheUSgovernmentprocurementsystem.
TradePromotionAsmentionedabove,onereasonforChile'sexportsuccessisthenetworkofgovernmentandprivate-sectorconnectionsfosteredanddevelopedbyindividualsandcompanies,industryassociations,chambersofcommerce,andgovernmentinstitutions.
Amongthelatter,amajorplayerisChile'sexportpromotionagency,ProChile,whichispartofDIRECON.
Accord-ingtoitsmissionstatement,ProChile'saimsareto(1)supportsmallandmediumenterprisesinsellinginternationally,(2)helprmstakeadvan-tageoftheopportunitiesgeneratedbyChile'snetworkoftradeagree-ments,(3)generatesynergiesbetweenthepublicandprivatesectors,and(4)promoteChileinforeignmarkets.
ProChilefocusesmuchofitsworkonassistingsmallandmediumenterprises(SMEs),whichproducenearlyhalfofChile'sexportstotheUnitedStates.
Agrowingliteratureisexaminingtheroleofexportpromotionagen-ciesinhelpingcountriesimprovetheirexportperformance,eitherbyen-hancingthegrowthofoverallexportsorhelpingboostdiversicationofexportedproducts.
Andthereisevidencethatexportpromotionagenciesdoplayanimportantroleininformingtheirclientsaboutnewmarketop-portunitiesandinresearchingandclarifyingproceduresforgettingtheirclients'goods(and,increasingly,services)tonewmarkets.
12RobertoAlva-rezandGustavoCrespi(2000)examined365Chileanrmsduring1992–96andfoundthatassistancefromProChilehelpedtoincreaseboththenum-berofmarketstowhichChileancompaniesexportedandthediversica-tionofChile'sexports,thusachievingtwoofthegovernment'sobjectivesfortheagency.
Similarly,arecentstudyonPerufoundthatexportpromo-tionactivities(bythePeruvianexportpromotionagencyPROMPEX)con-tributedtoPeruvianexportexpansionprimarilybyhelpingsmallerrmsreachnewmarkets(VolpeMartinicusandCarballo2008).
ProChile,whichwascreated30yearsago,operatesbothdomesti-callyandinternationally.
ItisheadquarteredinSantiago,thecapital,andhasthirteenregionalofces.
Thestaffintheseofcesfocusonidentifyingdomesticgoodswithapotentialforexportandworkwithcompaniestodetermineexportstrategies.
Theagencyworkscloselywithregionalgov-ernments,theprivatesector,universities,andotherinstitutionstopro-12.
Researchonexportpromotionactivitiesinindustrialmarketsyieldslesspositiveresults(itshouldbenotedthatresultsmayalsobeduetodifferingmethodologiesandtodifferencesindatatypeandquality):BernardandJensen(2004)ndthatexportpromotionactivitiesintheUnitedStatesdonothaveasignicanteffectonexporting,andGrg,Henry,andStrobl(2008)ndthatgrantsencouraginginvestmentandexportinIrelandmayincreasetheexportsofalreadyexportingrmsbutdonotstimulatenonexportingrmstostartexporting.
214CAPITALIZINGONTHEMOROCCO-USFREETRADEAGREEMENTmotetheinternationalreachofgoodsfromeachregionandthusregionaldevelopment.
ProChilealsohasofcesinover40countries,covering90percentofChileanexportdestinations.
Staffintheseofcesareknowledgeableabouttheinsandoutsofdoingbusinessinthepartnercountries;theyunder-standthelocalmarketsandhaveconnectionswithofcialsofthepart-nercountries'governmentandprivatesector,andtheycandrawontheseconnectionsbothforcollaboration(seebox9.
3)andfortheresolutionofquestionsandconcerns.
Furthermore,Chileantradeofcialsaregenerallywell-respectedandperceivedasbeingtruetotheirword,pavingthewayforagoodimageofChileancompanies.
Whilesuchattributesareintangibleanddifculttomeasure,bothpublic-andprivate-sectoractorsrepeatedlymentionedtheimportanceoftrustintherelationshipsofChileannegotia-torsandProChileofcialswiththeircounterpartsinothercountries.
InvestmentPromotionChilemaintainsapolicyofneutralityinforeigninvestmentbuthastriedtoattractinvestmentinthehigh-technologysectorthroughitspoliciesandthroughtargetedinitiatives.
Forthemostpart,thegovernmenthasreliednotonlyonthemarkettodetermineforeigninvestmentbutalsoonChile'slowtelecommunicationscostsandrelativelystronghumancapi-talbaseassellingpoints.
Lowtelecommunicationscostsaretheresultoftelecomreformin1982and1985andhighlevelsofconnectivity,aswellasaneducatedandtrainedworkforce,allofwhichmakeChileanattractivelocationforregionalcallcentersandshared-servicescenters.
Thegovernmentbeganaconcertedeffortinthemid-1990stoattractFDIfromhigh-techrmsandin2000launcheditsProgramadeAtraccióndeInversionesdeAltaTecnología(High-TechnologyInvestmentProgram),supportedbyCORFO.
Thegoalsofthisprogramaretoattracttechnology-Box9.
3ProChileintheUnitedStatesOneexampleofProChile'spromotionofChileangoodsintheUnitedStateswasitsinitiativewiththeUSorganicsupermarketWholeFoodstohaveatwo-weekcelebrationofChileanfoodsentitled"WholeFoodsCelebratestheFlavorsofChile.
"ProductsshowcasedincludeAndesChileanPanquehuecheeses,TamayaChileancarica(acombinationofmangoandpeach),Merkénspice(ablendofchilipreparedafterthenativeMapucheindigenoustradition),Ulmohoney(fromtheindigenousulmotree),Geomarseafood,Mickelsenpreserves(handmadepreserves,producedinthetraditionalstyleofGermancommunitiesfromthesouthofChile),Olaveoliveoil,andnaturalChileanbeef(grassfedandfreerange).
CHILE-USFREETRADEAGREEMENT215intensiveinvestments(particularlyintheinformationtechnologyandbiotechnologysectors),togenerate10,000newjobs,andtoexportupto$150millionworthofITserviceswithinfouryearsoftheinitiationoftheagreement.
Aspartofthisprogram,CORFOsupportedtheestablishmentof12internationalservicescenters,offeringcallcenters,supportservices,andsoftwaredevelopment,formajorinternationalcompanies.
CORFOsupportsforeigncompaniesbyofferinganetworkofcon-tactsinrelevantindustries,assistingwithbusinessservices,andprovidingfundingforspecicactivities.
Itseffortsincludehelpwithfeasibilitystud-ies,assistanceinbusinessplandevelopment,trainingofnewemployees,acquisitionoftechnologicalinfrastructureandequipment,andassistancewithleasing(paymentofupto40percentofthetotalleaseamountdur-ingtherstfewyearsofalong-termlease,upto$500,000).
CORFOalsooffersinnovationincentives,includingfundingallocationsfrom$55,000to$6million;technologytransferprograms,includingtechnologymissions,exchangesandinternships,technologytransfercenters,andgrantsfrom$30,000to$600,000;andfunding(from$12,000to$600,000)forinnovativeprojects,seedcapital,andincubators.
Todate,CORFOhasassisted50com-paniesinestablishingoperationsinChile(CORFO2009;alsoseebox9.
4).
CORFOhasidentiedthefollowingpriorityareasforassistance:theminingsector,agribusiness,wineandtourismintheso-calledproductiveclusters,ITandmedicalandbiomedicaltechnologyintheglobalservic-essector,andrenewableenergyandenvironmentaltechnology(Castillo2009).
Thisisadeparturefromthecountry'straditionalneutrality(al-thoughsubsidieshadpreviouslybeengrantedtocertainsectors,particu-larlyforestry)andwillbewelcomedbysomewhorecommendthatChileabandonitsneutralityandactivelypromotesectorsthatwillstimulatethegreatestinnovation.
InthewordsofarecentWorldBankreport,"itmaybetimeforChiletoconsidersmartrebalancingofitsfamedsector-neutralityifitistobesuccessfulinimplementingafar-rangingmicroreformpack-age"(Kharasetal.
2009,vi).
ConclusionChile'sexperiencesofferseverallessonsfortakingadvantageoftheop-portunitiesofferedbypreferentialaccesstotheUSmarketthroughafreetradeagreement.
BecausemuchofChile'ssuccessinexportingtotheUnit-edStates,andtoothermarkets,stemsfromabroadstrategyofopennessandconsistency,theselessonscannotbeimplementedeasilyorquickly.
Nonetheless,theyarerelevant.
Lesson1:Astablemacroeconomicenvironmentandstablepoliti-calandeconomicconditionsareimportant.
ThemaincomponentofChile'sexportsuccessisitsoverallpolitical-economicstrategyof216CAPITALIZINGONTHEMOROCCO-USFREETRADEAGREEMENTopenness.
Thecountry'slong-standingcommitmenttoopenness,sus-tainedduringthetransitionfromdictatorshiptodemocracyin1989andthroughouteachnewadministration,hascreatedapredictableenvironmentforrmstodobusiness.
Lesson2:Anoveralltradestrategythatbenetsexportersismoreproductivethanafocusonparticularmarkets.
WithChile'swidenet-workofFTAs,companiesareabletodiversifytheirmarketsandarethereforenotoverlydependentonanysingletradingpartner.
Focusingontradingwithallcomponentsoftheglobalized,integratedinterna-tionaltradingsystemhasallowedChiletoestablishtheconditionsthatBox9.
4Successstories:USfirmsinvestinginChiletotakeadvantageofserviceopportunitiesDeltaAirlines:In2000,withaninvestmentof$3million,DeltaAirlinesopenedaregionalcontactcenterinSantiagofortheLatinAmerica/Caribbeanregion.
Theoperationemploys98people(allbilingualinEnglishandSpanish),withamonthlycallvolumeof70,000,andhandlesDelta'sphonereservationsforallofLatinAmerica(accordingtoProChile,Delta'sLatinAmericansalesreach$33millionannually).
ChilebestedPanama,Peru,andCostaRicainbiddingforthecallcenter,thankstoitspoliticalandeconomicstability,high-technologycapacity,lowcommunicationscosts,andsoundtelecommunicationsinfra-structure.
In2003DeltamergeditscallcenteroperationsbasedinMexicowiththeSantiagooffice.
GeneralElectric(GE):In2002,GElocateditscallcenterinSantiago,citingstability,availabilityofskilledtechnicalworkerswithgoodEnglishlanguageskills,lowcosts,andtheoffsetprogramcreditofCORFOasfactors.
InthisCenterofExcellence,workersproducedigitaltechnicaldocumentationandmaintenancemanualsforaircraftengineswritteninEnglishbyChileanengineers.
GEhasalsoestablishedapartnershipwithChile'sFedericoSantaMariaTechnicalUniversitytofundaerospaceeducationprograms.
Unilever:Aftervetting12locationsthroughPriceWaterhouseCoopers,in2002UnileverlocatedasharedservicescenterinChilewithaninvestmentof$11million,whichgenerated160jobs.
AfterthisfirstsuccessfulexperiencedoingbusinessinChile,thefirmmovedtheLatinAmericandivisionofitsBestfoodsdivisionfromNewJerseytoSantiago.
Citigroup:CitigrouptransferreditsemergingmarketspensionfundadvisoryservicefromLondontoChile,andthenin2002,withacooperationagreementwithCORFO,establishedaSoftwareDevelopmentCenterinSantiago.
IBM:IBMhasinvested$17millioninChilewiththeestablishmentofanOnDemandSolutionCenterinSantiago.
Thiscenterhandlesoutsourcing,serverprocessing,networkmonitoringandadministration,servicecalls,printing,andrecoveryservicesforlocalandregionalcompanies.
CHILE-USFREETRADEAGREEMENT217enableexporterstodowellintheUSmarket,withoutrelyingsolelyontheUSFTA.
ThisisunderscoredbytherelativeexportsuccessseenevenbeforetheFTA'sentryintoforce.
Lesson3:Institutionsmatter.
Chile'scompetitivenessandhighinter-nationalrankingsarebasedonrobustandreliableinstitutions.
Chilehasuseditsinstitutionalframeworktoboostbusinessandhascreatedtradeandinvestmentinstitutionsthatrespondtodomesticneedsandtotheneedsoftradepartners.
Lesson4:Relationshipsmatter.
Overtime,Chilehasbuiltupbusinesscondencethroughatraditionoftransparencyandtrust.
Thisreputa-tionisboostedbywidenetworksinthepartnercountriesofactiveprofessionalswithcontactsinthepublicandprivatesectorwhocannotonlyhelpcompaniesndmarketinformationbutalsoheadoffpo-tentialdisputesandfacilitateopportunities.
Inaddition,relationshipswithdomesticactorsareessential.
Chileantradenegotiatorsinvestedsignicantresourcesinreachingouttoallelementsofeachtradepart-nertoensurethatthewidestpossiblerangeofexportsandpotentialexporters,importers,andinvestorswouldbewell-informedabouttheChile-USFTA.
TheircounterpartsatProChile,inofcesabroad,inSantiago,andinthecountry's13regionsareavailabletothepublictoanswerquestionsortohelpingatheringnecessaryinformation.
Lesson5:Focusonhumancapital.
Targetedtrainingofahighlyeducatedworkforce,particularlyinhightechnologyandinEnglishlanguageskills,hasfacilitatedChile'sabilitytoattractrmsinthehigh-techsector,withaviewtoboostingChile'sservicesexports.
Of-cialsworkingtodeveloppoliciesthatwillbolsterthisassetunderstandthelimitationsofcurrentpoliciesandseemtobemakinganefforttoremedytheidentiedgaps.
Lesson6:Gowiththeow.
Asconditionschange,policiesshouldevolve.
Chileisstartingtomoveawayfromitsadherencetoaneutraltradeandinvestmentstrategyandisincreasinglyimplementingtar-getedinvestmentpromotionprograms,inresponsetotheneedforac-cesstotechnologyandfordevelopmentoftheservicessectortoexportandcreatemorejobsforChileans.
Flexibilitybasedonsoundinforma-tionwillhelpthepublicandprivatesectorsmakethebestuseofop-portunitiesprovidedbyinstrumentssuchasafreetradeagreement.
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