NCPA - National Center for Policy Analysis

Chile Mines Free Trade Pact with United States

June 6, 2003

U.S. business leaders are hoping a U.S.-Chile free-trade agreement to be signed today will inject new life into an economy that until recently was one of South America's few success stories.

There is some reason for optimism.

  • Since a similar Chilean free-trade pact with the European Union took effect on Feb. 1, noncopper exports to the 15-nation bloc have taken off, rising 27.4 percent in the first quarter.
  • Chileans also expect to export more value-added goods, such as jams rather than fruit.
  • And the EU has imported more goods from regions outside Santiago, where the country's manufacturing industry is concentrated, helping spread economic development more evenly throughout country.
  • The U.S. deal could help boost Chilean exports by as much as 15.9 percent.

The planned treaty enjoys broad legislative support in both countries, so it could take effect early next year. Then Chile "will have free trade with more than 50 percent of the world's gross domestic product," Finance Minister Nicolas Eyzaguirre said.

For U.S. business, the trade pact means regaining a level playing field with European rivals, as well as with Mexico and Canada, which also have free-trade deals with the United States. The United States primarily exports high-quality manufactured goods, such as computers, mining machinery and cars to Chile.

Source: Stephan Kueffner, Chile Hopes Trade Pact Will Revive Its Economy," Wall Street Journal, June 6, 2003.


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