Canada and Chile:  A Great Deal to Celebrate

Canada and Chile have much to celebrate this year as July 2017 will mark the 20th anniversary of the historic Canada-Chile Free Trade Agreement (CCFTA)—a deal that has seen two-way merchandise trade between the two countries more than triple since it came into force.

During a state visit to Canada by Chilean President Michelle Bachelet earlier this week, International Trade Minister Francois‑Philippe Champagne announced the addition of a chapter on trade and gender, the first of its kind for any G20 country. Champagne and Chilean Foreign Affairs Minister Heraldo Muñoz signed several amendments to modernize the deal including the gender chapter and new elements in the investment chapter, new chapters on sanitary and phytosanitary measures and technical barriers to trade and technical amendments to the existing government procurement chapter.

The trade and gender chapter acknowledges the importance of applying gender perspective to economic and trade issues to ensure that economic growth benefits everyone. It confirms the intention of both parties to enforce their respective international agreements on gender from a rights perspective and provides a framework for Canada and Chile to cooperate on issues related to trade and gender, including women’s entrepreneurship and the development of gender-focused indicators.

The CCFTA came into force July 5, 1997, making it one of Canada’s oldest trade deals, and the first with a South American nation. It was Chile’s first comprehensive trade agreement with another country. Bilateral trade reached $2.4 billion in 2016.

“The Agreement has been extremely beneficial for both Canada and Chile. It is the cornerstone of our bilateral commercial relationship,” says Geoff White, senior trade commissioner with the Canadian Trade Commissioner Service (TCS) in Santiago, Chile. “From a trade commissioner perspective, we are working in an environment where we are privileged to have the profile and the positive relationship that we have here.”

Modernizing the Agreement will make what has been an effective and mutually-beneficial trade tool even better, says White, adding the new chapter on trade and gender and the updates to the investment chapter are a reflection of the progressive approach to trade adopted by both countries.

“The Agreement has opened trade between Canada and Chile in all sectors—tariffs on virtually all bilateral trade in goods were eliminated,” says White.

“Absolutely, it has paid off. The Agreement has been important for trade, and it’s also been very significant for investment,” adds White. Canada is now the fourth largest investor in Chile (after the United States, Spain and the Netherlands) and the top foreign investor in Chile’s mining sector.

Foreign direct investment (FDI) into Chile stood at $16.5 billion in 2016, making it Canada’s top investment destination in South America and 11th worldwide. FDI in Canada from Chile amounted to $767 million in 2016. A 2013 study conducted by Global Affairs Canada’s Office of the Chief Economist on the Economic Impact of the Canada-Chile Free Trade Agreement concluded that Canada’s overall economic welfare gains from this Agreement were approximately $250 million annually.

Canada’s top imports from Chile are precious stones and metals—mostly gold and silver to be refined in Canada; copper—Chile is the world’s largest copper producer; fruits; beverages—mainly wine; and, fish and seafood. Canada’s top exports to Chile include machinery; mineral fuels and oils—principally coal; pharmaceutical products; cereals; and, meats. Machinery and pharmaceuticals especially are considered “high value-added” exports that support highly skilled jobs and technological innovation in Canada, says White.

Chile provides an ideal environment for Canadians doing business abroad, says White. An agreement between Canada and Chile to avoid double taxation works in tandem with the FTA to foster good business conditions, he adds.

“When it comes to trade we are like-minded nations and we do have a lot in common,” says White, citing similarities in resource-based trade such as mining as an example. “It’s a safe business environment with a strong adherence to the rule of law and where Canadian companies are well-established.”

Canada and Chile’s trade relationship has flourished under the CCFTA, and modernizing the Agreement will help ensure its continued success, says White.

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