Chile-Trade Policy and Export Performance

A fundamental element of the Aylwin government's economic program was the maintenance of Pinochet's foreign-trade policy. Early on, the forces of the CPD coalition pointed out that an open external sector was a fundamental component of their economic package. One of the early decisions of the Aylwin government was to open the Chilean economy further to international competition. This was done by reducing import tariffs from 15 percent to 11 percent, except for expensive luxury goods or commodities governed by a price band.

Data on exports for the 1989-91 period reveal three telling developments. First, the share of traditional mining exports showed a clear downward trend. Second, there was a significant increase in the shares of the agricultural and manufacturing sectors. (In 1991 fruits and forest products constituted 85 percent of total exports, and the agricultural sector accounted for about US$1.2 billion, or about 14 percent of total exports.) Third, an increasing proportion of manufacturing exports were going to industrial countries (see table 32, Appendix).

Exports in 1991 showed a noteworthy increase in shipments toward other Latin American countries. Chile signed a trade accord with Argentina and in 1992 was working on a trade accord with Venezuela and Colombia. In 1991 Chile signed a bilateral free-trade agreement with Mexico, under which each country would gradually reduce tariffs on three categories of products. The Chile-Mexico bilateral accord, which took effect on January 1, 1993, called for the removal of tariffs on almost all of Chile's trade with Mexico by about 1996. Chile was hesitant in the early 1990s to join the other countries in South America in participating in regional trading agreements, such as the Southern Cone Common Market (Mercaddo Común del Cono Sur-- Mercosur; see Glossary), or the renewed Andean Group (see Glossary). By early 1994, however, Chile was ready to join Mercosur and was expected to become a member in January 1985.

Chile's exports were also moving rapidly beyond the scope of Latin America. An important goal in the area of trade diplomacy was a free-trade agreement with the United States. On October 1, 1990, Chile and the United States signed a framework agreement on trade and investment aimed at negotiation of a proposed Chile-United States free-trade accord similar to the North American Free Trade Agreement ( NAFTA; see Glossary) among the United States, Mexico, and Canada. The United States remained Chile's most important trade partner, although in 1991 the value of Chilean exports to Japan surpassed the value of exports to the United States by US$10 million, and in 1992 the figure rose to at least US$52 million. Japan accounted for US$900 million of Chile's US$1.5 billion surplus in 1991.

Data as of March 1994