Chile views the recently finalised memorandum of understanding (MoU) on the creation of a Joint Trade and Investment Commission with South Africa as the starting point for the negotiation of a preferential trade agreement (PTA) with the Southern African Customs Union (Sacu).
“We’re aiming at a PTA with Sacu,” confirms Chilean Under Secretary (Deputy Minister) for Foreign Affairs Fernando Schmidt. The signing of the MoU is the first step. “This is the opening of talks. It’s a win-win situation.”
The South American country already has free trade agreements (FTAs) with most Latin American countries, but Chile also has PTAs with some countries, such as India. “There are many different forms [of trade agreements],” he observes.
Chile is well known for its commitment to free trade. “We have announced that we will lower our tariffs to zero for all imports from all countries,” he highlights. “But FTAs are essential for other issues – nontariff barriers, phytosanitary barriers, customs agreements. It’s not just tariffs. There are no fewer than 12 disciplines that are regulated under an FTA.”
“Chile has also deregulated its airspace. Airlines from any country can fly internal routes in Chile without restrictions, without reciprocity,” cites Schmidt. “Today, a couple of companies are being approved – one Swedish, one Mexican – they serve the Chilean domestic market. A Uruguayan airline, Pluna, is already serving our domestic market.”
A second instrument to promote bilateral investment between South Africa and Chile has also been finalised – an Agreement on the Avoidance of Double Taxation. Currently, trade between the two countries is running in Chile’s favour. According to South African Revenue Service figures, last year, South African imports from Chile amounted to R834 622 926 while South African exports to Chile were worth R604 083 784. In 2010, the figures were R579 329 403 and R450 454 011 respectively and in 2009 R861 737 835 and R446 718 467 respectively.
In an address to the Institute for Global Dialogue and the University of South Africa early last month, Schmidt emphasised Chile’s belief in the principles of freedom, including economic freedom. “In the economic field, we also believe in free entrepreneurship, with all the safeguards that it requires to ensure equity and transparency, with all the safeguards to ensure the regulatory role of the State.”
Concerning the issues surrounding a trade agreement between his country and South Africa and Sacu, as well as the value of such an agreement, he pointed out that, in the years since the FTA between Chile and Australia had come into force, trade between those two countries had grown at a rate of 21% a year despite the fact that both are southern hemisphere countries with similar climates and similar products.
“To have a PTA with Sacu – this is something very important,” he affirmed. “This is something the countries concerned have already negotiated with the European Union and the European Free Trade Area countries. This creates new opportunities. Opportunities for our people and entrepreneurs.”
The current global crisis has not altered Chilean perceptions. “[W]e strongly believe that the solution to the problems that affect today’s world is not to become secluded inside our own borders,” he asserted. “The solution does not lie in protectionism, but in opening up even further to the world.
“We want to cut down on costs, diversify our trade, become more efficient, allow our people to access new and better goods and services,” explained Schmidt. “We want to be innovative in addressing our challenges and so here is a clear invitation to South Africa, an important country on this continent and globally.”