U.S.-Chile Free Trade Agreement Reports

United States Trade with Chile Soars in First Year Under Free Trade Agreement

U.S.-Chile Trade Analysis: January-December 2004

In January 2005, the United States-Chile Free Trade Agreement (FTA) completed its first year in force, and already bilateral trade figures have shown impressive growth. Total U.S. exports to Chile in 2004 increased by nearly a billion dollars, growing from $2.72 billion in 2003 to $3.63 billion in 2004, or by 33.5 percent. This compares favorably to an increase of 13 percent in U.S. exports to the world and an increase of 18 percent in exports to Central and South America and the Caribbean in 2004. Chile ended 2004 ranked as the 30th largest export market for the United States, rising from 35th place in 2003. Chile has also benefited tremendously from the FTA; U.S. imports from Chile grew from $3.71 billion in 2003 to $4.73 billion in 2004, an increase of nearly 28 percent. After only one year in effect, the FTA has already benefited workers and consumers in both countries.

U.S. Exporters Gaining Market Share

For the first time since 1995, U.S. exporters increased their share of the Chilean import market in 2004. While U.S. exports to Chile occupied 25 percent of the Chilean import market in 1995, that share consistently dropped in the years following, reaching just 14.5 percent in 2003. In 2004, U.S. exports accounted for 15.1 percent of Chile's imports. With the FTA in effect, U.S. exporters are winning back market share that was lost in recent years to the European Union, Mexico, and Canada, all of which negotiated free trade agreements with Chile before the United States.

U.S. industrial goods exports rose by nearly 37 percent in 2004, increasing from $2.46 billion to $3.37 billion. Construction equipment exports rose from $234.6 million to $396.8 million, increasing by 69 percent. Medical equipment exports grew from $68.5 million to $91.7 million (34 percent increase), paper exports rose from $48.1 million to $82.1 million (71 percent increase), and agricultural equipment exports grew from $13.3 million to $23.5 million (77 percent increase).

Top U.S. Exports to Chile:

A majority of the top categories of goods at the HS four-digit level exported from the United States to Chile showed impressive increases. Not coincidentally, the top goods highlighted below also became duty free immediately under the FTA, with the exception of petroleum oils, for which the tariff rate dropped from 6 percent to 1.2 percent upon the FTA's entry into force.

U.S.-Chile FTA Success Stories

Sun Pacific Shippers Sales

With the FTA, Sun Pacific Shippers Sales of Los Angeles, California, and leading Chilean fruit exporter Subsole, Exportadora de Frutas, found it attractive to export California-grown citrus to meet market demand during Chile's off-season, as the FTA immediately reduced Chilean duties on products such as clementines from six percent to zero. After discussions with Sun Pacific, Subsole agreed to import California-grown clementines as a test case for the Chilean market. The idea was a success; with the assistance of the U.S. Foreign Commercial Service in Santiago, $42,000 of Sun Pacific's "California Cuties" reached Chilean supermarkets in March, and the companies have since met to discuss future opportunities. The fact that California and Chile have opposite growing seasons, combined with new market access afforded by the FTA, holds promise for continued U.S. fresh fruit exports to the Chilean market.

IMPEX

Richard Grana, president of IMPEX, was among the first Kentucky exporters to benefit from the new trade agreement with Chile. In fact, by August 2004, Mr. Grana had already sold more products to Chile than he had sold in all of 2003 to the country. IMPEX, located in rural Paducah, Kentucky, is an export management company that markets conveyor systems and environmental technologies for U.S. manufacturers. The Chilean mining sector uses the products marketed by IMPEX to complete maintenance and improvement projects. With some technical guidance on the FTA provided by the Louisville U.S. Export Assistance Center, Mr. Grana found that his products became duty-free immediately under the agreement, which enabled him to increase sales in what was already a good market for his firm. The recent rise in the price of copper has made Chile's mining sector all the more active, and Mr. Grana feels confident that with the FTA in place his sales will continue to increase as well.

Project Development International (PDI)

Roberto Sanchez, Program Manager for Project Development International (PDI), believes his company's success in Chile is attributable to the FTA. Started in 1984 in Clearwater, Florida, PDI is a small company of eighteen professional employees that is dedicated to innovative and effective management services for the construction industry. The company has found success helping clients complete their projects on time and within budget. With the assistance of the U.S. Commercial Service staff in Santiago, PDI recently signed a representation agreement with Integra Proyectos, a Chilean consultancy firm based in Santiago. Mr. Sanchez believes the FTA facilitated the partnership with Integra and will make it easier for PDI to export its services. Working with PDI, Integra is currently bidding on various construction projects in Chile, including a military hospital.

For questions about this report, please contact Sara McDowell, Chile Desk Officer, at (202) 482-4302 or by email at Sara_McDowell@ita.doc.gov