WITH FTA, U.S.-CHILE TRADE GROWS 133 PERCENT IN

UNCLAS SANTIAGO 000267 SIPDIS SIPDIS STATE FOR WHA/BSC COMMERCE FOR SARA MCDOWELL STATE PLEASE PASS TO USTR FOR SUE CRONIN E.O. 12958: N/A TAGS: ETRD EFIN PREL KIPR CI SUBJECT: WITH FTA, U.S.-CHILE TRADE GROWS 133 PERCENT IN THREE YEARS ¶1. Summary. The Chilean-American Chamber of Commerce released on February 12 its 2006 report on U.S.-Chile trade. The numbers showed continued strong growth under the Free Trade Agreement (FTA),with bilateral trade up by 32 percent. Chilean exports to the U.S. jumped 43 percent compared to 2005, reaching almost USD 9 billion. U.S. exports to Chile rose a more modest 18 percent in 2006, surpassing USD 5.5 billion. The headline news was the stellar growth, 133 percent, in bilateral trade over the first three years of the FTA. The MFA is working on a similar study of the FTA's effects. Preliminary data showed substantial growth over the first three years of the FTA, even when accounting for factors like the high price of copper and inflation. Despite the roaring success of the FTA, issues remain such as market access for some U.S. products, such as poultry and beef, and the overarching challenge of a poor Chilean record on protecting intellectual property rights. End Summary. ¶2. The Chilean-American Chamber of Commerce (AmCham) released on February 12 its end-of-year study of the U.S.-Chile trade relationship in 2006. The relationship showed continued strong growth, with bilateral trade growing by an aggregate 32 percent. Chilean exports to the U.S. totaled almost USD 9 billion in 2006, surging 43 percent over last year. The major Chilean exports to the U.S. were refined copper, salmon and unrefined copper. Factoring out the high price of copper in 2006, AmCham estimated that Chilean exports to the U.S. still grew by 18 percent. AmCham reported that 2,084 Chilean firms exported 1,993 different products to the U.S. market in 2006, a slight drop in the number of firms and products over ¶2005. ¶3. The growth in U.S. exports to Chile was a more modest 18 percent, totaling over USD 5.5 billion. The major U.S. exports to Chile were petroleum products, automobiles, and mining and construction equipment. High oil prices during parts of 2006 inflated the value somewhat of U.S. exports to Chile, but AmCham estimated that even factoring out higher oil prices, U.S. exports to Chile grew a very respectable 16 percent. AmCham listed 11,795 U.S. firms as exporting 4,995 products to Chile in 2006. This represented growth in both the number of U.S. companies dealing with Chile and U.S. products reaching the Chilean market. ¶4. The Chilean government is also trying to assess the benefits of the first three years of the FTA. Though its study is not complete, GOC officials told Senior Econoff that the initial data supported an equally rosy view of the FTA's success. The GOC study factored out inflation and the high prices of copper and oil to look at real rather nominal trade growth. According to GOC sources, removing those factors still showed growth of 62 percent in U.S.-Chile bilateral trade during the FTA's first three years. ¶5. Comment: However, as with all fairy tales, it is not perfect in paradise. Significant issues remain in the implementation of the FTA, especially from the U.S. perspective. The GOC has been slow to get over the technical hurdles that will allow the U.S. to export poultry and beef to the Chilean market. Agricultural talks are scheduled in Washington for April 17 and 18 that will hopefully allow more U.S. exports into Chile. ¶6. Comment Continued: The other major issue marring the otherwise stellar performance of the FTA is Chile's poor record on intellectual property rights (IPR). On January 8, 2007, USTR placed Chile on the Priority Watch List. Chile has a particularly poor record of protecting proprietary data and patents in the pharmaceutical sector. There was also evidence in 2006 that piracy of music, films and movies worsened. The major obstacle facing improved protection of IPR is the absence of any explicit GOC policy on IPR or the political will to make substantive improvements in IPR protection a priority. KELLY