U.S.-Chile Free Trade Agreement Reports

U.S. Exports to Chile Break 2004 Levels

U.S.-Chile Trade Analysis: January-September 2005

The United States-Chile Free Trade Agreement (U.S.-Chile FTA), which took effect January 1, 2004, continues to fuel the growth in bilateral trade between the United States and Chile. In the first nine months of 2005, the United States already exported more to Chile than it did in all of 2004. From January to September 2005, the U.S. sent $3.89 billion in exports to Chile, while in all of 2004 U.S. exports to Chile totaled $3.61 billion and 2003 exports totaled $2.72 billion. U.S. imports from Chile continue to grow as well. U.S. imports from Chile in the January-September 2005 period totaled $4.70 billion, which neared the $4.73 billion imported from Chile in all of 2004 and clearly surpassed the $3.71 billion imported in 2003. The United States continued to hold its position as the top source of Chile’s imports in the January-September period, a position it reclaimed from Argentina in March of this year according to Chilean Customs data. Imports from the United States accounted for 16.8 percent of Chile’s imports in the first nine months of 2005, while imports from Argentina accounted for 16.4 percent. The United States remained the top destination of Chile’s exports as well.

Trade Before and After the FTA

Especially telling are figures comparing trade in 2005 to trade in 2003, before the FTA took effect. U.S. exports to Chile in the first nine months of 2005 totaled $3.89 billion, nearly double the $1.98 billion exported to Chile in the first nine months of 2003. This growth surpasses the 26 percent increase in U.S. exports to the world and the 40 percent increase in U.S. exports to Central and South America and the Caribbean in the first nine months of 2005 compared to the same time period in 2003. U.S. imports from Chile grew from $2.82 billion in the first nine months of 2003 to $4.70 billion in the first nine months of 2005, an increase of 67 percent.

U.S. construction equipment exports rose 147 percent in the first nine months of 2005 compared to the same time period in 2003, increasing from $167.5 million to $414.3 million. Medical equipment exports grew from $50.3 million to $80.6 million (60 percent increase), agricultural equipment exports grew from $7.5 million to $16.8 million (124 percent increase) and paper exports grew from $34.1 million to $63.2 million (85 percent increase) when comparing the first nine months of 2003 to the first nine months of 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 $782.5 million in the first nine months of 2005, a 2,188 percent increase or an increase of $748.3 million over the first nine months of 2003.

Motor vehicles for the transport of goods: Exports reached $183.4 million in the first nine months of 2005, a 430 percent increase or an increase of $148.8 million over the first nine months of 2003.

Automatic data processing machines: Exports reached $193.7 million in the first nine months of 2005, a 46 percent increase or an increase of $60.8 million over the first nine months of 2003.

Motor vehicles for the transport of persons: Exports reached $86.4 million in the first nine months of 2005, a 94 percent increase, or an increase of $41.9 million over the first nine months of 2003.

Self-propelled bulldozers, angledozers, graders, levelers: Exports reached $83.9 million in the first nine months of 2005, a 103 percent increase or an increase of $42.6 million over the first nine months of 2003.

Tractors: Exports reached $36.1 million in the first nine months of 2005, a 408 percent increase or an increase of $29 million over the first nine months of 2003.

Fertilizers: Exports reached $66.1 million in the first nine months of 2005, a 93 percent increase or an increase of $31.8 million over the first nine months of 2003.

U.S.-Chile FTA Success Stories

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.

Caterpillar Inc.

For Caterpillar, the benefits of free trade agreements are very real.  The U.S.-Chile Free Trade Agreement immediately eliminated all Chilean tariffs on Caterpillar’s U.S.-made products.  With Chile’s market completely open, Caterpillar was well positioned to fully benefit from increased demand resulting from Chile’s current mining boom.  As a result, Caterpillar’s U.S. exports to Chile nearly doubled, making Chile the company’s fifth largest U.S. export market. 

Karsten Manufacturing Company

The US-Chile Free Trade Agreement has helped Karsten Manufacturing Company increase sales in what was already a good market for the company.  Karsten Manufacturing, located in Phoenix, Arizona, is a leading golf club maker better known by its brand name of PING.  Under the FTA, Chilean duties on PING golf clubs were immediately reduced from six percent to zero in 2004.  By attending an FTA seminar at the Phoenix Export Assistance Center, Karsten Manufacturing was able to confirm that it was filling out documentation correctly in order to maximize the benefits offered by the FTA.  Thanks to the agreement, the PING distributor in Chile now pays less to bring PING equipment into Chile, which in turn reduced the end price to consumers and increased sales.  Karsten Manufacturing Company now sends a substantial shipment of PING golf clubs to Chile on a bimonthly basis.  

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.