Canada and Chile:
Five Years
as
Free Trade Partners
The Canada-Chile Free Trade Agreement entered into force in July 1997. Designed to foster increased trade and investment among the partners, the CCFTA contains an ambitious schedule for tariff elimination and reduction of non-tariff barriers, as well as comprehensive provisions on the conduct of business in the free trade area. These include disciplines on the regulation of investment, services, competition and the temporary entry of businesspersons.
Both partners agreed to immediately eliminate tariffs on a broad range of products at the time of entry into force of the CCFTA. Tariffs on the remaining industrial and resource-based goods have been phased-out over different periods and bilateral trade will be practically tariff-free starting January 1, 2003.
Trade Results
The perception by some that trade tends to only benefit the richer Party has been contradicted by the results of the Canada-Chile FTA. The evidence shows that our Agreement has benefited both Partners.
An analysis of trade statistics from both Chilean and Canadian sources shows that each country has become a dynamic market for the other, with strong growth in two-way trade.
Total two-way trade in goods, based on both Canadian and Chilean import statistics, reached $US 839 million in 2001, a 26% increase over 1997.
Highlights of the increasingly important trade relationship:
- Canada is one of the few economies (and the only one among the G-7) that posted record exports to Chile during the recession of 1999 that led to lower imports in general;
- Canada has doubled its share of the Chilean market for imports. In 2001, Canada's market share reached 2.6%;
- Among members of the FTAA, Canada become the fastest growing market for Chilean exports in 2000, with a 40.5% increase over the previous year;
- Chilean exports to Canada almost doubled from US$235 million in 1997 to US$414 million in 2001, a 76% growth in the first five years of the CCFTA;
- The number of Chilean companies that export to Canada grew by more than 30%, from 310 in 1996 to 415 in 2001. Chilean products that have benefited the most include wood and wood products, wines, grapes, apples and other fruits.
By reducing barriers to trade and investment, the CCFTA has stimulated expanded opportunities for Canadian and Chilean firms of all sizes. Small and medium-sized companies (SMEs), which are the engines of economic growth and job creation in the two countries, have taken full advantage of these opportunities.
For example, Highland Homes Ltd, a Cottlesville, Newfoundland-based company provided 840 wood homes for the "Primavera" community, located just outside Temuco, Chile's fastest growing city. The company's impressive achievements in Chile have led to tripling the current staff to 20 and have created jobs throughout Newfoundland in related sectors, including window, door and floor manufacturing. Another example is Sport Seats International Inc. of Calgary, that has signed a distributor agreement and secured deals in Chile which have so far generated more than $100,000 in sales of its patented light-weight hiking cane that, unfolded, becomes a comfortable and convenient seat.
A sector that has been a clear success for Chilean exporters is wood, especially wood boards and mouldings. Chilean exports to Canada of these products have increased from US$75 thousand in 1997 to US$9.1 million in 2001. One of the most active Chilean companies in this sector has been Comercial Corza, S.A. This company, which started exporting to Canada in 1998, reached sales to Canada of US$1.6 million in 2001; and has already surpassed this figure in 2002 (in August, Corza's exports to Canada had already reached a record US$2.7 million).
Another example of how trade liberalization under the CCFTA has benefited Chilean SMEs is Machasa, S.A., which has increased its exports of denim to Canada from US$64 thousand in 1997 to US$2 million in 2001.
Investment
The CCFTA has had a stimulative impact on investment. Cumulative Canadian Foreign Direct Investment (FDI) in Chile reached US$6.5 billion in 2001. This represents 13.5% of foreign investment in Chile and puts Canada as the third most important foreign investor in the country.
Canadian Direct Investment in Chile -2001
| Sector |
Value ($MM US) |
| TOTAL |
6,538,532 |
| Agriculture |
8,737 |
| Construction |
2,732 |
| Electricity, Gas and Water |
582,432 |
| Industry |
1,257 |
| Mining |
4,189,877 |
| Fishing and Aquaculture |
20,899 |
| Services |
434,587 |
| Silviculture |
103 |
| Transport and communications |
42,410 |
The most important sector that has benefited from Canadian investment is mining. In this sector, small and medium sized companies have also had an important participation.
Coupled with growing environmental awareness, increased mining activity has strengthened the demand for analytical services from Vancouver-based ALS Environmental. In February 2001, the ALS group of laboratories opened its newest facility —one of the best equipped in South America— in Santiago.
The Canada-Chile Agreement on Labour Cooperation (CCALC)
The CCALC, which entered into force at the same time as the CCFTA, commits both countries to seven broad objectives, including improving working conditions and living standards and promoting labour principles to protect worker rights. To accomplish these goals, the CCALC creates institutions and mechanisms for cooperative activities, inter-governmental consultations, as well as for independent evaluations and dispute settlement related to obligations for the enforcement of labour laws.
A review of the implementation of the CCALC was recently carried out and shows that cooperative activities since 1997 have helped government officials, labour experts, unions and business representatives to identify fields of common interest, exchange information and build networks between Canada and Chile. Several workshops have been held on topics such as employment standards, occupational health and safety, industrial relations, labour legislation, income security and service delivery mechanisms. Based on the conclusions of the review, the cooperation program will be broadened in the coming years as more opportunities are created for information exchanges, site visits and technical cooperation.
The CCALC has created a strong cooperative relationship between Canada and Chile, which serves both countries in bilateral and multilateral contexts such as the Inter-American Conference of Ministers of Labour. It has become an important vehicle through which both countries can address, on an ongoing basis, the labour dimensions of closer commercial ties.
The Canada-Chile Agreement on Environmental Cooperation (CCAEC)
The CCAEC came into force along with the CCFTA as well. Under the CCAEC, Canada and Chile agree to enhance environmental cooperation and to effectively enforce environmental laws, such as those governing water, air, toxic substances, and wildlife. In keeping with Article 3 of the CCFTA, in which Parties commit to ensure that their laws and regulations provide for high levels of environmental protection and agree to strive for their improvement, Chile is undergoing a three-stage process to strengthen and reform its environmental legislation. This process to systematize, avoid norms' duplication and give better coherence to environmental legislation, is being executed by Universidad Diego Portales in Santiago and is supervised by Chile's National Commission for the Environment (CONAMA)
The Agreement establishes the forum through which Canada and Chile conduct cooperative activities, which are carried out through work programs. Four themes have been identified for work programme activities: 1) enforcement and compliance with environmental legislation; 2) participation of civil society in environmental management; 3) trade and environment; 4) health and environment. Over the last five years, numerous cooperative activities have been held under the work programs including policy dialogues and workshops with Canadian and Chilean technical experts.
An outstanding example of this cooperation is the Trade and Environment Round Table, which is a mechanism to foster policy dialogue between the two countries on the linkages between trade and environment. Four round tables have been held to date, each focussed on a specific topic: precaution, environmental assessments of trade negotiations, certification and the relationship between the WTO and multilateral environmental agreements. The round tables provide a forum for public participation in addition to providing a regular venue for policy dialogue and exchanges between officials.
Cooperation in other fora
Recognizing their shared interests, Canada and Chile have worked together to advance trade liberalization in other fora. The two countries are coordinating their efforts to ensure that the Free Trade Area of the Americas negotiations continue to progress towards the goal of concluding by January 2005. Canada and Chile also cooperated with other countries to launch the new round of WTO negotiations, known as the Doha Development Agenda, and are actively engaged in the ongoing discussions.
For further information about the CCFTA, please visit our websites:
Canada: www.dfait-maeci.gc.ca/tna-nac/bilateral-en.asp
Chile: http://www.direcon.cl/otros_acuerdos_tlc_canada.php
(spanish only)
Pierre S. Pettigrew
Minister for International Trade |
María Soledad Alvear V.
Minister of Foreign Affairs |
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