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Ten years 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 a key tool to clinch new trade agreements, this impressive record is more relevant than ever.
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, recently 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 nearly six-fold (487%) in the past decade—the largest percentage increase for exports to any of the top 40 U.S. export markets. In 2003-2012 (i.e., since the FTA entered into force), U.S. exports to Chile rose 404% for machinery (reaching $3.1 billion in 2012), 738% for transportation equipment ($2.3 billion), 225% for ICT products ($1.9 billion), and 356% for chemicals ($1.8 billion). Reflecting the U.S. energy boom, U.S. exports to Chile of refined petroleum products rose more than 8,000%.
- Chilean Exports: The United States is the second largest national market for Chilean exports, trailing China. However, while China principally purchases raw materials such as copper and fishery products from Chile, the United States is a significantly more important market for Chile’s non-traditional, value-added exports, which are associated with innovative industries and high-paying jobs.
U.S. Trade with Chile (US$ millions)
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 was $40 billion as of the end of 2012, 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).
It’s not all roses, though. As Zoellick points out:
The experts are aware that the United States still has some frustrations with Chile’s implementation of the FTA’s intellectual property rights provisions. Unfortunately, as USTR now seeks new trade negotiating authority, the Congress reminds free traders of these shortfalls—so I hope Chile can help USTR demonstrate that our counterparts will fulfill their commitments.
Still, 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 on its 10th birthday.