Mar 30, 2015 - 11:00am

U.S.-Chile Commerce Booms Thanks to Trade Pact


Senior Vice President for International Policy

More than a decade after its entry into force on January 1, 2004, the U.S.-Chile Free Trade Agreement (FTA) stands as one of the most successful bilateral trade agreements in history. As Washington considers legislation to renew Trade Promotion Authority (TPA) as an essential tool to clinch new trade agreements, this FTA offers compelling evidence of their impressive benefits.

The agreement’s high standards and comprehensive coverage helped usher in a period of breathtaking growth in two-way trade. Robert Zoellick, who served as U.S. Trade Representative during the negotiation of the FTA, spoke at a forum marking the agreement’s anniversary in Santiago organized by AmCham Chile, the Inter-American Development Bank and the Chilean government. In his remarks, he noted:

“Our FTA’s high standards for a modern, international economy — and its comprehensive coverage, ranging far beyond most FTAs — encouraged Chile to set its sights high. Over the past decade, the trade in goods and services between Chile and the United States rose over 300 percent.”

Take a closer look at those numbers — and the sectors that have seen the biggest gains:

  • U.S. Exports: U.S. exports to Chile have risen more than five-fold (464%) in the past decade — the largest percentage increase for exports to any of the top 40 U.S. export markets. In 2003-2013 (i.e., since the FTA entered into force), U.S. exports to Chile rose 258% for machinery (reaching $2.2 billion in 2013), 598% for transportation equipment ($1.9 billion), 370% for chemicals ($1.8 billion) and 193% for ICT products ($1.7 billion). Reflecting the U.S. energy boom, U.S. exports to Chile of refined petroleum products rose nearly 8,000%.
  • Chilean Exports: The United States is the second largest national market for Chilean exports, trailing China. However, while China principally purchases raw materials such as copper and fishery products from Chile, the United States is a significantly more important market for Chile’s non-traditional, value-added exports, which are associated with innovative industries and high-paying jobs.

Since the FTA entered into force, the United States has resumed its position as the largest foreign investor in Chile, accounting for roughly one-quarter of all foreign direct investment in the country over the past four decades, according to the Chilean Foreign Investment Committee. The stock of U.S. foreign direct investment in Chile topped $41 billion as of the end of 2013, according to the U.S. Department of Commerce.

Chile is a remarkable country — and not just due to its natural beauty, entrepreneurial people, and commitment to democracy and free enterprise. In international indices, Chile regularly tops Latin American rankings and at times finishes above the United States (e.g., on The Wall Street Journal Index of Economic Freedom). Chile is ranked:

  • 7th of 186 economies in the Heritage Foundation/Wall Street Journal Index of Economic Freedom
  • 8th of 138 economies in the WEF Global Enabling Trade Report
  • 21st of 175 economies in TI’s Corruption Perceptions Index
  • 33rd of 144 economies in the WEF Global Competitiveness Report

The FTA didn’t fuel Chile’s rise in these rankings, but it certainly didn’t hurt. In sometimes subtle ways — for instance, by encouraging greater transparency in public procurement using the Internet — the FTA has helped Chile burnish its credentials as a modern, democratic, free-market economy.

Chile and the United States are bound together by more than a trade pact. As Zoellick points out:

“Behind all the numbers we cite when we review trade agreements are stories of individuals — and deeper human ties that bind our societies.

“When the frightening plight of 33 Chilean miners seized the attention of the world in 2010, Americans were proud that two companies from Pennsylvania sprang forward with resourceful drill bit and rig technology — and a little help from NASA — so that the rescue shaft could be widened and the miners freed.

“Selina Jackson, then with the United Parcel Service, moved a company, planes, and skilled people to get this rescue equipment to Chile right away. The Chilean government recognized her personal service with an honored decoration.

“What may be less well-known is that Ms. Jackson — and UPS — were among our core supporters with the U.S. Congress to pass our FTA with Chile. And I was fortunate to draw her to the World Bank, where today she works on trade and U.N. issues in Geneva.”

In short, what goes around comes around. Similarly, we wish many happy returns to the impressive U.S.-Chile FTA.

 

About the Author

About the Author

Senior Vice President for International Policy

Murphy directs the U.S. Chamber’s advocacy relating to international trade and investment policy.