MercoPress. South Atlantic News Agency

WTO cautions Chile on its free-trade accord policy

The numerous free-trade agreements signed by Chile have boosted the country's business atmosphere, attracted investment and are described as an example for the rest of Latin American.

However that same proliferation is causing distortions and Chile remains highly dependent on commodities exports. A report from the World Trade Organization, WTO recommends the continuation of the current policy of unilaterally liberalizing the economy.

That is one of the several conclusions of the WTOs report on Chile's trade policy in the five years running from 1997 to 2002 which also indicates that such complexity "may undermine the neutrality of economic policies, and may result in trade and investment diversion." The growing number of Chile's preferential trade agreements, including bilateral accords signed with the United States, Canada, Costa Rica and the European Union, is "creating an elaborate system of different tariffs and rules of origin that could result in economic distortions," warns the WTO report.

The report points out that the tariffs being applied by Chile diverge both among the different preferential trade agreements and product groups, generally as a consequence of the different agreements' timetable.

To minimize these impacts WTO recommends Chile should continue to unilaterally liberalize its economy, "a strategy that has allowed it to achieve an enviable development record." According to the WTO experts, trade is playing "an increasingly important" role in Chile's economy, with its share of gross domestic product, GDP, rising from 56% in 1997 to 66% in 2002.

A majority of Chilean exports are commodities mainly copper, which represents 42% of total overseas sales; agriculture accounts for 37% of exports. Chile's most important export markets are the European Union, United States and Japan. Argentina is Chile's main supplier of imports followed by EU and the US. The report also indicates that the contribution of manufacturing to Chile's GDP in the five year period has dropped to approximately 16%, turning the country into a "net importer of all major categories of manufactured goods".

"The service sector is now the most important segment of the economy regarding GDP contribution and overall employment", adds the report underlining that foreign investors are given the same guarantees and treatment as domestic businessmen, with few exceptions, such as maritime shipping.

Another interesting aspect of the report shows that in Chile the use of non-tariff barriers seems to be limited. "Chile makes modest use of contingency measures; currently it imposes no anti-dumping or countervailing duties" underlines the WTO report.

However in the report's conclusions Mary Whelan from Ireland, who headed the review group, underlined WTO support for Chile's efforts in adopting free-market policies. The WTO panel also praised Chile's "generally transparent trade policy, solid macroeconomic strategy and its important advances in reducing poverty".

Finally the report emphasizes that Chile's economy "has become stronger and is better integrated in global markets which has allowed it to withstand several international economic crises in the last six years".