No one is more delighted about the impact of 2004’s U.S.-Chile Free Trade Agreement of 2004 than Tom Tjerandsen, North American managing director of the Chilean Fresh Fruit Association. Chilean exports of fresh fruit to U.S. and Canada have grown from 2 million boxes — the equivalent of 48 million pounds — in 1980 to a projected total of more than 100 million boxes in 2012.
In 2011, North American imports of Chilean fresh fruits amounted to 891,000 metric tons. Chile implemented its free trade agreement with Canada in 1997, seven years before the U.S. signed its free trade pact with Chile. (The association doesn’t track how much fruit winds up in Canadian hands because Canadian-bound exports are usually delivered to the U.S. by ship, and then trucked from Philadelphia to Canada. As a result, they are tracked by U.S. Customs as U.S. exports.)
Only 10 percent of that northbound traffic ships by air, “because there is not enough space in airplanes” to meet the growing demand, Tjerandsen said.
Although that might sound like a slow way to deliver a product with a short shelf life, the ocean supply chain from Chile is so efficient it takes the same time, 11 days, for Chilean fruit to reach the U.S. East Coast from Valparaiso, Chile, by refrigerated container ship — often via Philadelphia’s Tioga Terminal — as it takes to ship fruit grown in California by rail to the U.S. East Coast. A faster but significantly more costly eastbound alternative is to use trucks to deliver the containers of fruit from U.S. West Coast ports to the East Coast.
Free trade between Chile, the U.S. and Canada has “simplified commerce between a number of countries not only by lowering duties, but also by leveling the playing field in terms of transparency,” Tjerandsen said.
Before the FTAs were enacted, “there had been periodic allegations that Chile was dumping” in the U.S., but the agreements “made it possible to review” charges — selling the exports at prices below domestic values — objectively.
Fresh fruit is hardly the only area where bilateral U.S.-Chile trade has skyrocketed. U.S. imports from Chile have jumped from $3.7 billion in 2003, the year before the FTA was enacted, to $9.1 billion in 2011. U.S. exports to Chile have grown from $2.7 billion in 2003 to $15.9 billion over the same period, as Chile’s consumer markets, eager for U.S. goods, have grown at a strong pace. In that time, the U.S. also has reversed a trade deficit to a rare bilateral trade surplus.
Trade experts caution against making too many forecasts about U.S. imports from Colombia on the basis of Chile’s skyrocketing exports of fresh fruit and other high-value-added agricultural products such as wines. Chile’s success at upgrading its transportation infrastructure has made an enormous difference, Tjandersen said.
Because of these improvements, it has become much faster and easier for Chilean truckers to deliver these products over a dedicated truck lane at the highly efficient Pacific port of Valparaiso. Colombia’s ambitious plans to spend billions of dollars on upgrading its ports and roads are essential to reducing its logistics costs. Such a process is expected to take years to complete.
In other respects, Colombia and Chile offer major contrasts in economics and demographics. Chile’s population is much smaller than Colombia’s — 9 million versus 44 million — making Colombia a much more attractive potential destination for U.S. exporters of consumer goods.
Colombia, however, is also much more dependent than Chile on complex patterns of river and road transportation. Central Chile’s location in the temperate Southern Hemisphere, with a geography that mirrors that of California, gives that country a comparative advantage Colombia can’t match.
“Chile fills a void by providing U.S. retailers with a seamless 12-month supply of fruits,” Tjandersen said. “They can’t afford to have empty space in their fruit sections.”
Colombia’s major exports to the U.S. — oil, gas, coal, fruits, vegetables and textiles, for example — enjoy comparative advantages in the U.S. that aren’t dependent on any special seasonal difference, given Colombia’s tropical location.
Chile’s experience with free trade agreements also shows just how tricky it can be to implement every last commitment to intellectual property rights written into an FTA. In mid-February, Sen. Orrin Hatch, R-Utah, complained in a letter to U.S. Trade Representative Ron Kirk that “the draft legislation Chile has proposed to meet its commitments falls far short of its obligations under (the) free trade agreement.” Thus, “the Chilean government’s failure to implement the terms of the Chilean FTA has significantly harmed U.S. innovators.” Hatch requested the USTR “begin steps (to) initiate bilateral dispute settlement proceedings.”
Was Hatch playing politics? Or has he identified a genuine weakness in Chile’s IPR that could have an impact on IPR enforcement provisions in the Colombia treaty?
Lewis cautions against worrying about such “nitpicking” with the Chilean FTA. “The Chilean FTA happened so long ago, it was time to fine-tune it,” he said. “But they are splitting hairs” by disputing a detail in the agreement that was “never a deal maker or breaker” in the first place.
Contact Alan M. Field at email@example.com.