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A Strategy for the Successful Conclusion of the
South Korea-Chile Free Trade Agreement


Master’s Project
Commercial Diplomacy Program
Monterey Institute of International Studies

Sunyoung Kim
April 30, 2002


Faculty Advisors: Professor Geza Feketekuty
Professor William Arrocha
Professor Bill Monning


Table of Contents

Foreword
Executive Summary
Introduction
Background

  1. ‘New trade policy’
  2. South Korea-Chile Free Trade Agreement
    1. Chile as South Korea’s first FTA partner
    2. Preliminary Negotiations
    3. FTA Negotiations and Current status
  3. South Korea-Chile Economic Relations
    1. Overview of Chilean Economy
    2. South Korea-Chile Bilateral Trade
      3) South Korea-Chile Agricultural Trade
      • - Chile’s agricultural sector
      • South Korea’s agricultural sector
      • Agri-food trade with Chile
  4. WTO Agricultural Negotiations

Analysis

  1. Analysis of Economic effects of a South Korea-Chile FTA
  2. Commercial Analysis of the FTA impact on the South Korean Fruit Industry
  3. Political Analysis
  4. Public Opinion
  5. International Legal Aspects

Recommendation
Domestic Strategy

  1. Public campaign strategy
  2. Domestic consensus building strategy on agricultural liberalization
  3. Legislative strategy

Negotiation Strategy
References
Tables

Table 1. Number of regional trade agreements notified to GATT/WTO
Table 2: Chile’s trade agreements
Table 3: South Korea’ trade balance with Chile
Table 4: 2000 South Korea-Chile Bilateral Trade
Table 5: leading Chilean Fresh fruit Exports to the World, 1995-1999
Table 6: South Korean Agricultural production, by sector 1999
Table 7: Fruit production and cultivated area Production
Table 8: Chilean Fresh Fruit Exports to South Korea
Table 9: Expected Economic Effects of a South Korea-Chile FTA
Table 10: Domestic grape production and imports
Table 11: Comparison of marketing season between Chilean grapes and local grapes
Table 12: Price comparison between local and Chilean imported grape

Appendices

Appendix 1: A Timetable of South Korea-Chile FTA Negotiations
Appendix 2: Comparison of South Korea-Chile agriculture and bilateral trade 1999
Appendix 3: Current positions of major government agencies, interest groups and NGOs on the FTA
Appendix 4: Major Stakeholder Analysis Chart for a South Korea-Chile FTA

Operational Documents

Exhibit 1: Briefing Memo to the Prime Minister
Exhibit 2: Op-Ed piece to the Local Newspapers
Exhibit 3: Sample letter to the Ministry of Agriculture and Fishery
Exhibit 4: Press release on the formation of tripartite commission


FOREWORD

This project was completed to fulfill a requirement for a Master’s Degree in Commercial Diplomacy from the Monterey Institute of International Studies (MIIS).

For the purpose of this project, I assume the role of a trade official for the Republic of South Korea Ministry of Foreign Affairs and Trade (MOFAT, hereafter). My specific task is to develop a comprehensive strategy to successfully complete the South Korea-Chile Free Trade Agreement (FTA) negotiation. The negotiation has stalled at the final phase, mainly due to mounting opposition from the South Korean agricultural community.

MOFAT is responsible for developing and coordinating South Korea’s international trade, commodity, and direct investment policy, and directing negotiations with other countries on such matters. Since 1998, MOFAT has led the South Korea-Chile FTA negotiations.

I chose this subject because a South Korea-Chile FTA, if concluded, will mark South Korea’s first ever free trade agreement, and thus will carry significant implications for their trade policy. I hope that my project can help conclude a South Korea-Chile FTA by providing MOFAT with strategies to build domestic consensus on opening the agricultural market. The timeframe for this report is the short-term (years 2002–2003).

I thank my project advisor Professor Geza Feketekuty for his guidance. I also thank Professor William Arrocha and Bill Monning for their input and enthusiasm throughout the entire study at the MISS.


EXECUTIVE SUMMARY

In 1998, the South Korean government, with the ultimate goal of building an open trading country, decided to pursue free trade agreements (FTAs) with major trade partners. The main objective, to overcome the structural weakness of the South Korean economy, sharpened after the 1997 financial crisis. The crisis prompted South Korea to adapt to the changing economic environment, i.e., the recent trend of growing regional integration in the world economy.

Since its decision to open the economy, the government has been negotiating its first FTA with Chile. After four rounds of negotiations, the process stalled due to a wide difference on tariff concession schedules, particularly regarding exception items of agricultural products. South Korea insists that sensitive fruits like grapes, apples, and pears retain tariffs, while Chile calls for South Korea to abolish tariffs on all Chilean products, including agricultural goods, within 10 years of signing an FTA.

The bilateral trade pact is expected to have a positive economic effect for South Korea. It is likely to boost exports by $660 million and improve South Korea’s welfare by $960 million, while creating new export opportunities in Latin American markets. Chile’s open trade policy and its experience in concluding FTAs with other countries would provide invaluable experience to South Korea, not only in its attempts to further liberalize its own economy, but also in its pursuit of FTAs with larger economies such as Japan and the US.

Despite potential economic benefits, the agricultural sector poses obstacles to the conclusion of the South Korea-Chile FTA. Though the agreement’s impact on South Korea’s agricultural sector is likely to be small due to seasonal growing differences between the two countries, agricultural groups, in conjunction with other NGOs, have waged a fierce campaign against the agreement. In addition, negative public opinion towards trade liberalization and presidential election politics are working against the successful conclusion of the FTA deal.

To maximize the effect of a South Korea-Chile FTA, the South Korean government should attempt to conclude the FTA with Chile as soon as possible. In order to overcome the domestic opposition, MOFAT must develop a domestic strategy to mitigate farmers concerns and a negotiation strategy to resolve differences on the agricultural concession schedule with Chile.

To these ends, the following strategy is recommended:

  • By forming alliances with proponent groups, MOFAT should proactively engage in a dynamic public campaign to educate the public on potential benefits and costs of the FTA to the national economy. MOFAT could turn the public discussion from whether to conclude the FTA to how to best compensate potential losers of the FTA.
  • To address potential harm to the agricultural sector, MOFAT should propose a tripartite commission, comprised of representatives from government agencies, business groups and agricultural organizations. The main task of the commission is to reach an agreement on specific compensation measures for farmers greatly impacted by the South Korea-Chile FTA.
  • To resolve differences on the agricultural concession schedule, rather than exclude sensitive products from the agreement (except rice), the government might agree to an extra-long tariff phase-out period of 15 years for fruits like apples and pears. As for grapes, seasonal duties should be considered. The agreement must include special safeguard measures that protect against import surges for most import-sensitive products.

INTRODUCTION

In his annual report to the President on the 2002 diplomatic agenda, Minister for Foreign Affairs and Trade Choi Sung-hong made it clear that a top diplomatic priority for the year would be MOFAT’s pursuit of an early conclusion to the free trade agreement with Chile. Launched in 1998, the South Korea-Chile FTA negotiation stalled in 2000 at the fourth round of talks. The main sticking point is the discrepancy on tariff concessions, particularly regarding agricultural products.

To successfully conclude the agreement, MOFAT must overcome major challenges on the domestic front. First, the agricultural community is posing fierce opposition to the South Korea-Chile FTA out of fear that the increase of cheap Chilean fruit imports will severely hurt the local fruit industry and therefore destroy the domestic agricultural sector. Second, a presidential election is approaching in December, and politicians do not wish to lose farmers’ votes. It is thus politically difficult for the government to achieve Parliament ratification this year. Third, without adequate understanding of the benefits of free trade to the South Korean national economy, public opinion remains largely negative toward the government’s new FTA policy.

To overcome domestic challenges and make the negotiation a success, MOFAT must build domestic consensus among stakeholders on opening the agricultural market and compensating farmers affected by the FTA. The biggest problem during the last two years of negotiations has been the lack of consensus among domestic interest groups, government agencies and politicians. This has from the outset greatly restrained flexibility and strength at the negotiating table. Given the political sensitivity surrounding the agricultural sector during this election year, MOFAT, in conjunction with other government agencies, should take extra effort to promote free trade among the general public prior to the height of the presidential campaign in November/December. If presidential candidates pledge to thwart the negotiation by taking sides with farmers, the chances for successful conclusion of the South Korea-Chile FTA are slim.

This report presents a strategy for domestic consensus on agriculture for the South Korea-Chile negotiation. Domestic consensus will pave the way for parliamentary ratification and make possible a negotiation strategy to mitigate domestic farmers’ concerns and resolve differences on the agricultural concession schedule with Chile. This report provides background information on the South Korea-Chile FTA initiative and the current state of the FTA negotiations. It addresses the South Korea-Chile FTA in terms of economic benefits, commercial effects on the local fruit industry, and the domestic politics surrounding the agricultural sector.


BACKGROUND


1. ‘New trade policy’

In 1998, the South Korean government, with the ultimate goal of building an open trading nation, reversed its previous opposition to regional trade blocks and decided to pursue free trade agreements (FTAs) with major trade partners. The main objectives were to overcome the structural weaknesses of an economy crippled from a financial crisis, and to maximize the economic benefits of market expansion and foreign investment. The reversal of policy reflected concern for being left out from the growing regional integration of the world economy.

The government’s decision took into consideration the following factors:

? Accelerating restructuring and opening of the South Korean economy
The 1997 economic crisis exposed a structural weakness in the South Korean economy. To stimulate growth, the government implemented a series of economic reforms, including unilateral trade liberalization measures that have contributed to a rapid recovery. The government recognized that new trade pacts could help plug the South Korean economy’s structural weakness by encouraging inflows of foreign capital and management skills, and by injecting new competition into the domestic market.

? The spread of Regional Trade Agreements (RTAs) in world trade
Since its accession to the General Agreement on Tariffs and Trade (GATT) in 1967, South Korea has maintained steadfast devotion to the multilateral trading system and has not entered into preferential trading arrangements. Meanwhile, the number of regional trade economic agreements notified to GATT/WTO rapidly expanded in the 1990s, as shown by the following Table 1.

Table 1: Number of regional trade agreements notified to GATT/WTO

 

1948~

1954

1955~

1959

1960~

1964

1965~

1969

1970~

1974

1975~

1979

1980~ 

1984

1985~

1989

1990~

1994

1995 ~

2001.3

Number of notifications

2

3

12

9

21

19

6

5

47

101

Total notified

2

5

17

26

47

66

72

77

124

225

Source; WTO Secretariat (2001)

The spread of regionalism has been accompanied by drastic increases in intra-regional trade, inter-regional trade, and total world trade. According to IMF trade statistics, the share of world trade within the framework of regional agreements grew steadily from 22.5% in 1959 to 66.3% in 1997. The increase in intra-regional and inter-regional trade signals the importance of regional economies in the world.

The European Union now has 29 regional and bilateral free trade or special customs agreements, and is in the process of negotiating with 12 additional countries. NAFTA members are entering into FTAA negotiations, which aimed to link North and South American regions under one trade region. Japan has completed a free trade agreement with Singapore and is exploring options with ASEAN countries, Canada, Mexico, and Chile. And China, a WTO newcomer, is pursuing an FTA with the ASEAN countries. The Untied States recently signed an US-Jordan FTA agreement and US-Vietnam bilateral trade agreement, and is also negotiating FTAs with Chile and Singapore. The US is discussing a ‘Pacific 5’ formula involving Singapore, Chile, New Zealand and Australia, and is negotiating Free Trade Areas of Americas.

All told, there are 130 regional free trade and customs agreements in the world; South Korea belongs to none, leaving South Korean exporters at a disadvantage in world markets. The government has recognized the necessity of joining a regional block to secure stable export and investment markets and to defend South Korean exporters against the discriminatory effects of other regional groups. In addition, if the potential FTA partner is already a member of another FTA, it would be easier for South Korea to gain access and diversify its exports to a larger regional market.

? Strengthening Political and Economic Ties
Economic cooperation could have important spillover effects on political and diplomatic cooperation, covering such issues as security, environment, labor and cultural exchanges. By deepening the economic partnership with major trading partners through FTAs, South Korea can strengthen cooperative efforts on other important political and foreign policy goals, including cooperation in multilateral fora such as the WTO, OECD and IMF.

In November 1998, the Inter-Ministerial Trade Policy Coordination Committee (ITPCC) formally announced that South Korea would first seek a FTA with Chile, then would explore the economic feasibility of FTAs with such other trading partners as the US, Japan, New Zealand and Thailand. In December 1998, the government formed a special task force on a South Korea-Chile FTA. The task force consisted of five working groups, covering market access, trade rules, services, intellectual property and legal procedures.

South Korea has since been conducting a joint feasibility study of FTAs with Japan, New Zealand and Thailand at the level of private institutes. South Korea is also engaging in ongoing informal talks on the formation of ASEAN+3 (i.e., South Korea, Japan and China), which could counterbalance other major regional economic blocs such as NAFTA and the EU.

2. South Korea-Chile Free Trade Agreement

1) Chile as South Korea’s first FTA partner

South Korea chose Chile as its first FTA partner because of high complementarities in trade structure and the potential to learn from Chile’s plentiful experience in negotiating regional trade agreements. Chile, in turn, chose South Korea for its influence with neighboring Asian countries, and for its growth potential given reforms in several sectors, including the financial sector. The South Korean government specifically chose Chile as its first FTA partner for the following reasons:

  • The structure of South Korea-Chile bilateral trade is complementary
    The South Korea-Chile FTA is likely to benefit both countries because the two economies are highly complementary in their trade structures. Chile exports primary goods like copper and wood products, which are highly complementary to South Korea’s exports of manufactured goods like automobiles and electronic products. Also, since Chile’s agricultural export structure is centered on fruits and vegetables, the political burden of South Korea’s agricultural market opening, particularly on the sensitive sectors of rice and beef, is expected to be less severe.
  • It is South Korea’s interest to pursue an FTA with a small economy like Chile’s
    Before establishing FTAs with large trade partners such as the US and Japan, South Korea needed to pursue strategic FTAs with smaller partners to gain negotiating and operational experience. An FTA with a relatively small economy like Chile will require lower adjustment costs on the South Korean economy, yet force South Korea to update many of its outdated economic institutions and practices. Following this adjustment period, South Korea will be in a better position to enter into FTAs with Japan, the US, or other major economies. It is thus in South Korea’s interest to start a FTA with a smaller country and in this respect, Chile showed strong interest in signing a FTA with South Korea.
  • We can learn from Chile’s negotiation experience in establishing multiple RTAs
    Chile is one of the most active countries in terms of liberalizing trade and establishing FTAs. Chile has already signed several FTAs with neighboring Latin American countries and Canada. It is also currently discussing FTAs with the US and the European Union. Chile’s open trade policy and its accumulated experience in concluding FTAs makes it a model for South Korea, not only in its attempts to further liberalize its own economy, but also in its pursuit of further FTAs with larger economies.

Table 2: Chile’s Trade Agreements

Chile is negotiating Free Trade Agreements (FTAs) with:

The United States, the European Union, the European Free Trade Association

Chile has negotiated FTAs with:

Canada (1997), Mexico (1998), Central America (2001)

Chile has comprehensive market opening agreements with:

Bolivia (1993), Venezuela (1993), Colombia (1994), Ecuador (1995), Peru (1998)

Chile joined Mercosur (the South American Common Market, which includes Argentina , Brazil , Paraguay and Uruguay ) as an associate member in 1996. It is now engaged in FTAA negotiations.

  • Chile can serve as a gateway to the South American Market
    Through an FTA with Chile, South Korea can secure export market access to Chile, but moreover can use Chile as a base to extend exports to other Latin American countries. In the meantime, Chile can take advantage of South Korea’s trade links to widen market access to other Asian countries. Experience in FTA negotiation across the Pacific is essential for both countries to open further FTA opportunities. In addition to FTA negotiations with South Korea, Chile is researching alternative FTAs with Japan, New Zealand and Singapore. Chile’s goal is to form FTAs with all APEC members by 2010.

2) Preliminary Negotiations

South Korea and Chile reached an agreement to establish an FTA at the bilateral summit talks of the APEC leaders’ meeting in November 1998. A South Korea-Chile FTA Joint Committee Meeting was held in Chile to discuss the specific negotiation procedures. In April 1999, the two governments initiated the first high-level meeting for FTA negotiations. The main goal of this meeting was to discuss in depth the current economic situation of the two countries and major issues related to an FTA on the basis of the previously exchanged questionnaire. The second meeting was held in June 1999 in Santiago, Chile.

The two countries, after extensive exchange of information within FTA coverage, designed the Framework Agreement. Based on the draft of the Framework Agreement proposed by the South Korean government, both sides agreed on three basic principles of a South Korea-Chile FTA: 1) a comprehensive FTA, 2) liberalization in all areas, and 3) transparency. The scope of coverage includes seven specific subjects: goods, services, investment, IPR, government procurement, competition policy, and other legal matters such as dispute settlement. After two successful high-level meetings, the heads of state declared an official launch of South Korea-Chile FTA negotiations at the APEC summit meeting in September 1999.

3) FTA Negotiations and Current Status

Currently, the South Korea-Chile FTA is negotiated through 5 groups, each with representatives from 15 government agencies (e.g., MOFAT, the Ministry of Finance and Economy, the Ministry of Commerce, Industry and Energy, the Ministry of Agriculture and Fishery, etc.). For its part, the Chilean negotiation team is led by the Ministry of Foreign Affairs.

? 1st round of negotiation (December 14-17,1999)
The two countries reviewed the draft text of the agreement prepared by the Chilean government. Each government agreed to set up five working groups covering market access, technical barriers, service and investment, trade remedy rules, and other legal issues such as dispute settlement. The two sides set January 1, 2000 as a starting point for negotiation and agreed to conclude the FTA agreement by the end of 2000. The agreement was set to take force in July 2001. The current effective tariff rate would be applied as a base for tariff negotiation.

? 2nd round of negotiation (February 29-March 3, 2000)
The countries exchanged a tariff concession schedule of products. South Korea provided a tariff concession schedule for manufactured goods and agreed to present a tariff concession schedule for agricultural products (including forestry and fisheries products) prior to the third round of negotiations.

? 3rd round of negotiation (May 16-17, 2000)
Each country expressed strong complaints about the other’s concession schedule. Chile griped that South Korea’s tariff elimination schedule on the primary Chilean agricultural products had been withdrawn after the WTO agricultural negotiations. For its part, South Korea complained that its vital manufactured products had been excluded from the Chilean concession schedule. Both sides agreed to exchange a list of products of main concern.

In June 2000, Chile presented a revised tariff concession schedule of products. The schedule suggested that upon implementation of the agreement, 40% of products would get immediate duty free access, the tariff for 27% of products will be phased out within 5 years, the tariff for 32% of products would be phased out within 10 years, and 1% of products would receive special treatment.

The agricultural tariff schedules South Korea presented were as follows: 15% of Chilean agricultural products would get immediate duty-free access, tariffs for 31% of products would be phased out within five years, tariffs for 12.7% of products would be phased out within 10 years, tariffs for 1.5% of products would be phased out over the 5-year-period after 5 years of suspension, tariffs for 4.5% of products would be phased out within 15 years, and 1.3% of products, including rice, would be excluded from the concession schedule. Furthermore, such sensitive fresh fruit products as apple, pears, and grapes would be excluded, or the tariff elimination schedule would be put off until after related WTO agricultural negotiations.

? 4th round of negotiation (December 12-15, 2000)
Major differences over the concession schedules continued throughout the fourth round of negotiation. While South Korea continued to insist that some sensitive agricultural products be exempt, Chile insisted on no exceptions and, if not, that some manufacturing products from the tariff concession be excluded. The negotiation ended unsuccessfully and the fifth round of talks was put off.

To break the deadlock, the two countries agreed to hold a high-level meting in June 2001 to revise and adjust their respective tariff concession schedule. Both sides reconfirmed their political will to continue the FTA negotiation at the bilateral foreign ministers’ meeting during the APEC Summit in October 2001.

? Current state of the negotiations
After a year of suspension, the two countries held a working-level meeting in February 2002 in which South Korea presented the latest proposal on a tariff concession schedules. This included a new recommendation on Chilean fruit imports. Chile is expected to offer a revised proposal after which it will be decided whether the fifth round of negotiations should be held to finalize the deal.

At present, while offering immediate duty free access for all Chilean manufactured goods except copper cathodes (of which tariffs will be phased out by 10 year period), South Korea insists that such sensitive fruits as grapes, apples and pears retain their tariffs. Chile remains unchanged in its position on no exceptions, calling for South Korea to abolish tariffs on all Chilean products, including agricultural goods, within 10 years of signing an FTA. If not, Chile insists that it will exclude such manufacturing sectors as textiles, foot wear, washing machines and refrigerators vital South Korean exports.

It should be noted that 80 percent of agreements have already been reached in such areas as competition, trade rules and dispute settlement. The sticking point for the conclusion of South Korea-Chile FTA is South Korea’s agricultural concession schedule. Narrowing positions on fresh fruits like apples, pears and grapes, at the core of contention, will be the key to a successful outcome.

South Korea-Chile Economic Relations
Chile was the first Latin American country to approve the South Korean government in 1949. Since they established diplomatic ties in 1962, South Korea and Chile have expanded mutual cooperation in economic and political affairs. The two countries will be celebrating the 40th anniversary of diplomatic relations in April. Over the four decades, Chile’s exports to South Korea shot up from $3 million in 1971 to $902 million, while Chile’s imports from South Korea, increased from $17,000 in 1971 to $592 million in 2000.

1) Overview of the Chilean Economy
Chile has a market-oriented economy with ample foreign trade. Imports and Exports account for over 50 percent of the country’s gross domestic product. In 1999, exports increased to $18.3 billion from $15.6 billion. Imports increased to $16.9 billion from $14 billion the previous year. Unilateral trade liberalization, including the elimination of most non-tariff measures, has left Chile with a relatively open economy. There is wide consensus across the political spectrum in favor of economic liberalization.

Chile is endowed with rich mineral resources near the sea, which have turned it into the world’s leading copper and iodine producer, and a growing source of gold and non-metallic minerals. It abandoned import substitution in favor of free-market policies in the mid-1970s, more than a decade before the rest of Latin America. This unleashed competition and productivity growth and permitted an expansion of the traditional export industries of mining and fishing. The free market fostered the development of new sectors, such as cellulose, fruit, salmon, wines and methanol production, and a variety of services, including tourism. Chile’s strong and increasingly diversified export sector has been its main engine of economic growth over the past two decades.

Between 1991 and 1997, Chile recorded real GDP growth of about 8 percent per year. The economy slowed during the financial crisis and a severe drought in 1999 caused negative economic growth for the first time in over 15 years. By the end of 1999, exports and economic activity picked up the pace. Chile recorded 5.4% GDP growth in 2000.

Chile’s key industries today are copper, other minerals, foodstuffs, fish processing, iron and steel, wood, transport equipment, cement and textiles. Its main export items are copper, fish, fruits, paper/pulp and chemicals. Copper accounts for 42 percent of exports, other minerals (gold, iron, nitrate, titanium, and others) approximately 20 percent, fresh fruit 10 percent, fish and fish products 7 percent, and pulp and paper 6 percent. Chile’s main trading partners are the United States (which takes 22 percent of exports and provides 20 percent of imports), Japan (9 and 10 percent), Germany (10 and 8 percent), and Brazil (7 and 8 percent).

Chile’s single import tariff rate was cut from 9% in 2000 to 8% in 2001 and is scheduled to fall further, to 7% in 2002 and 6% in 2003.

2) South Korea-Chile Bilateral Trade

In 2000, South Korea-Chile bilateral trade totaled $1.5 billion. South Korean exports to Chile in 2000 totaled $592 million, while imports totaled $902 million. South Korea is Chile’s 6th largest export market in the world, and Chile is South Korea’s second largest trading partner in Latin America. Since the mid 1990s, the bilateral trade volume has remained between $1.1-1.6 billion annually. South Korea has run a constant trade deficit with Chile of about $0.3-0.5 billion. Chile is the only country in Latin America to which South Korea is indebted. Exports from Chile to South Korea grew at 12.7% from 1991 to 1999, while Chile’s global exports grew at 7.3%.

Table 3: South Korea’s trade balance with Chile (Unit: US $ millions)

 

‘96

‘97

‘98

‘99

2000

Export

640

655

567

455

592

Import

331

1162

707

815

902

Trade balance

-187

-507

-139

-360

-310

Source: South Korea

  • Trade Association

The economic size of Chile is relatively small, and trade volume between the two countries is a small percentage of South Korea’s total trade. South Korea’s exports to Chile accounted for around 0.3-0.5% of South Korea’s total exports of US $175.8bn in 2000. Imports from Chile were less than 0.8% of South Korea’s total imports of US $159.2bn in 2000. South Korea paid an average tariff for exports to Chile of 8.9%, while Chile paid an average tariff of 3.6% in 2000.

South Korea’s primary exports to Chile include transportation vehicles, laundry machines, polyethylene, and such electronic products as refrigerators, televisions, and microwave ovens. South Korea’s primary imports from Chile include copper, copper ore and concentrates, iron ore and concentrates, methanol and other refined copper. (See Table 4: South Korea-Chile Bilateral Trade 2000)

Table 4: 2000 South Korea -Chile Bilateral Trade (Unit; millions, %)

Exports to Chile

Imports from Chile

Sector

Amount

%

Sector

Amount

%

Total Exports

592

100

Total Imports

902

100

Automobiles

164

27.8

Copper cathodes

462

51.2

Vehicle with cargo capacity

49

8.6

Copper ores and concentrates

195

21.6

Transmission equipment

29

4.9

Chemical wood pulp

72

8.0

Textiles

28

4.8

Methanol

38

4.2

Gasoline for other uses

28

4.7

Iron and ores

36

3.9

Ethylene politereftalate

27

4.6

Zinc and ores

16

1.8

Laundry machine

26

4.3

Wood pulp

14

1.5

Auto parts

17

2.9

Fishery frozen

12

1.3

Other transportation vehicles

17

2.8

Fresh grapes

10

1.2

Television

15

2.6

Animal feeds

10

1.1

Rubber tires

14

2.4

Molybden/concentrates

9

1.0

Refrigerator

11

1.8

Material wood

6

0.7

Steel. Prod

10

1.6

Particleboard

3

0.3

Source: MOFAT, 2001


3) South Korea-Chile Agricultural Trade

  • Chile’s Agricultural Sector

Chile’s land area is 756,946 square km, 7% of which is arable. Agriculture and forestry accounts for about 7% of GDP (1999). Most Chilean agriculture production is modern and efficient, achieving high yields. Among sectors that have expanded rapidly are fruit, poultry, pork and dairy processing, pasta manufacturing and wine and snack food production. Chile’s agricultural sector (including forestry and fisheries products) now accounts for over 35% of total exports.

Chile is the largest fruit exporter in the world. Major crops include apples, table grapes, pears, apricots, plums, peaches, oranges and avocados, etc. (See Table 5: Leading Chilean Fresh Fruit and Vegetable Exports to the World, 1995-1999). The Chilean fruit industry utilizes the most advanced technologies, production techniques, genetics, marketing and business strategies to produce and sell high quality fruit on the world market.

About 50% of Chile’s fruit production is exported, with the US accounting for about 40% of its fruit exports, followed by Europe, Latin America and the Far/Middle East. In 1999, the export of agricultural products totaled about US $1.5 billion worth of dollars, with fresh fruits like grapes, apples and kiwis totaling about US $1.1 billion. Grapes, in particular, accounted for about 40% of the total Chilean agricultural exports.

Table 5: Leading Chilean Fresh Fruit Exports to the World, 1995-1999 (US$ millions)

Fruits

1995

1996

997

1998

1999

Grapes

519.7

598.5

635.6

265.3

 605.6

Apples

226.5

267.8

213

265.3

259.4

Avocados

38.3

23.7

32

75.8

90.5

Pears

80.9

100.2

85.6

79.7

82.9

Plums

62.4

76.2

72.7

61.2

76.3

Kiwi fruits

77

86.6

79.3

98.3

71.9

Others

157.1

191.5

173.4

172.5

209.6

Total

1,161.90

1,344.50

1,291.60

1,364.70

1,395.60

Source: Prochile based on Central Bank of Chile

  • ApplesSouth Korea’s Agricultural Sector

With the population shifting to urban areas, and the continued growth of the manufacturing and services sectors, the agricultural sector declined from 45 percent of South Korea’s GDP in 1964 to just 5.4 percent in 1999. South Korea imports about 70 percent of its agriculture, and that percentage is expected to increase over time. In 1998, South Korea’s 1.4 million farming households produced $26.6 billion in output with rice accounting for nearly one-third of this production. Table 6 presents the major output of South Korean agriculture.

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