Recent Chilean Trade Policy facing Asia: Assessment of the FTAs with China and Japan

Andrés R. Schuschny, José Elías Durán Lima and Carlos J. de Miguel

No 331668, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: Chile has been at the forefront of trade liberalization in Latin American and Caribbean (LAC). After a first wave of agreements with his mayor partners in the Western Hemisphere and Europe, now Chile is focused on his partners in the Asian-Pacific Rim. Currently, there are Partial FTA negotiations with China and Japan. Using the GTAP CGE model and database, this paper assesses the effects of these two FTAs. The study takes into consideration all the previous FTA signed and currently in force in the country as well as most important recent trade agreements among the Latin American countries. Several scenarios for both FTAs are calibrated including the exclusion of sensitive products, unemployment possibilities and capital accumulation schemes. The results suggest that the FTAs will foster Chilean exports in both Japanese and China markets, especially in the case of light manufactures (meat, milk, and food products) and agricultural products (fruits and vegetables). Moreover, they will produce a positive shock fostering trade and diversifying export’s content of Chilean products to Japan/China – for example, the share of copper in total exports is reduced in more than 10% - as well as to other markets. Given that the Chilean trade pattern differs from other LAC of the Pacific Rim regarding Asia, trade deviation is negligible. The exclusion of sensitive products in the agreements reduces the positive outcomes for Chile. The results for Japan and China are quite tiny. However, it opens market access and investment opportunities toward LAC thought their Chilean partner and his regional web of FTAs. Welfare results are very positive for Chile, increasing nearly 0.7% of GDP while for his Asian partners welfare remains the same. The main conclusion points out a complementary trade relationship among these countries. The agreements also strengthen the Chilean GDP growth strategy based on trade liberalization, and make Chile a platform for business within LAC. On the other hand, Japan would recover its market share in LAC which has been decreasing over the lasts years, while China continues boosting its presence in the regional and Global market.

Keywords: Research Methods/Statistical Methods; International Relations/Trade (search for similar items in EconPapers)
Pages: 52
Date: 2007
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