U.S.-Chile Free Trade Agreement Reports

United States Remains Chile's Top Trade Partner

U.S.-Chile Trade Analysis: First Semester 2005

Since implementation of the United States-Chile Free Trade Agreement (FTA) on January 1, 2004, the United States has regained its position as the principal single-country source of Chile's imports and has retained its position as the top destination of Chile's exports. When comparing U.S. goods exports in the first semester of 2003, before the FTA took effect, to U.S. goods exports in the first semester of 2005, it becomes clear that the FTA has played a key role in boosting trade. U.S. exports to Chile in the first six months of 2005 totaled $2.56 billion, double the $1.28 billion exported to Chile in the first semester of 2003. These figures surpass the 25 percent increase in U.S. exports to the world and a 40 percent increase in U.S. exports to Central and South America and the Caribbean in the first semester of 2005 compared to 2003. Chile has also benefited from the FTA; U.S. imports from Chile grew from $2.04 billion in the first semester of 2003 to $3.24 billion in the first semester of 2005, an increase of 59 percent. This follows notable trade figures posted in 2004, when bilateral trade increased over 30 percent in the first year of the Agreement.

U.S. Exporters Gaining Market Share

According to Chilean Customs data, in June the United States continued to hold its position as the top source of Chile's imports, a position it reclaimed from Argentina in March of this year. Imports from the U.S. in June totaled $402.9 million, accounting for 17 percent of Chile's total imports, while imports from Argentina totaled $356.4 million and accounted for 15 percent. This adds to the positive trend witnessed in 2004, which marked the first time U.S. exporters increased their share of the Chilean import market since 1995. 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 U.S.

U.S. construction equipment exports rose 153 percent in the first semester of 2005 compared to the first semester of 2003, increasing from $113.9 million to $288.7 million. Medical equipment exports grew from $32.4 million to $56.2 million (73 percent increase), agricultural equipment exports grew from $4.4 million to $12.1 million (175 percent increase), and paper exports grew from $20.3 million to $40.6 million (100 percent increase) when comparing the first semester of 2003 to the same time period in 2005.

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 in 2005 is 0.6 percent under the Agreement.

Petroleum oils and oils obtained from bituminous minerals, other than crude: Exports reached $625.5 million in the first semester of 2005, a 4,214 percent increase or an increase of $611 million over the first semester of 2003.

Motor vehicles for the transport of goods: Exports reached $128.3 million in the first semester of 2005, a 707 percent increase or an increase of $112.4 million over the first semester of 2003.

Automatic data processing machines: Exports reached $123.6 million in the first semester of 2005, a 40 percent increase or an increase of $35.4 million over the first semester of 2003.

Motor vehicles for the transport of persons: Exports reached $63.4 million in the first semester of 2005, a 75 percent increase, or an increase of $27.2 million over the first semester of 2003.

Self-propelled bulldozers, angledozers, graders, levelers: Exports reached $61 million in the first semester of 2005, a 97 percent increase or an increase of $30.1 million over the first semester of 2003.

Tractors: Exports reached $27.3 million in the first semester of 2005, a 550 percent increase or an increase of $23.1 million over the first semester of 2003.

Fertilizers: Exports reached $31.4 million in the first semester of 2005, a 114 percent increase or an increase of $16.7 million over the first semester of 2003.

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 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.

Usibelli Coal Mine
Family-owned Usibelli Coal Mine in Healy, Alaska is helping to keep the lights on in Chile. Recent increases in the price and demand for natural gas have impacted its supply to Chile, forcing a number of Chilean power producers to use alternative fuels to generate power. Many power producers have decided to bridge the gap with coal and diesel fuel generation. Usibelli was approached by the international resource trading company Glencore, Ltd. as a potential coal supplier, and it subsequently started shipping coal to various Chilean power plants for the first time in 2004. Usibelli has already shipped approximately 200,000 metric tons of Alaskan coal to Chile. U.S.-mined coal is duty free under the FTA, which has made sourcing from the United States an attractive new option for Chilean power companies.

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 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

Note:

All data in this report, except what is specified as Chilean Customs data, was obtained from the World Trade Atlas Database, which pulls information from the U.S. Department of Commerce, Bureau of Census.

Construction equipment, medical equipment, agricultural equipment and paper product groupings are based on definitions determined during the Uruguay Round.