• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Chile: Better of Joining NAFTA or MERCOSUR?

Extracts from this document...

Introduction

Chile: Better of Joining NAFTA or MERCOSUR? For many, Chile represents a natural first step in expanding hemispheric trade. Although Chile is a relatively small market, its political stability, growing export-oriented economy, and pro-market reforms over the past decade and a half positioned the country as a prime candidate for integration with NAFTA of MERCOSUR. In 1996 Chile's population was roughly 15 million. GDP was $56.4 billion and per capita income was $ 3,848.Chile's total trade in goods was #33.2 billion, with exports of $15.4 billion and imports of $17.8 billion. (World bank, World Development Report, Washington, DC: The world Bank, 1997). Traditional products such as minerals (cooper), fishmeal, and wood pulp account for most of Chile's export revenues; however, the share of trade earnings from export of wood manufactures, basic metal products, fruits, and wine is increasing. Chile imports oil, chemicals, industrial and transportation equipment, share parts and food products, including wheat, live animals and meat, and tropical commodities such as coffee. Chile's trade is well distributed among Western Hemisphere countries, the nations of Western Europe, and Asia (see appendix, Table 1). In 1996, the United States, Canada, and Mexico (NAFTA) accounted for 25.0% of Chile's trade, while the European Union represented 18.6%, the Asia-Pacific countries 22.8%, and MERCOSUR 18.7%. The United States is Chile's principal trading partner, receiving 16.7% of Chile's exports and accounting for 30.5% of its imports. ...read more.

Middle

General Pinochet relinquished control of the government while remaining chief of the army after Patricio Aylwin was elected president in 1990. Today, Chile faces the change of consolidating and expanding its export markets, and attracting long-term foreign investment in order to carry its "new" domestic development strategy based on an open economy, export promotion and the discipline of competition. Accordingly, Chile has created an expanding network of bilateral free trade agreements, having signed over 12, and maintained an overall 11% tariff rate (low by Latin American Standards). At the end of 1944, Chile joined the Asian-Pacific Economic Cooperation Forum (APEC) as the only non-Asian member of the organization besides the NAFTA countries. In June 1996, Chile became associated with MERCOSUR and the Europe Union (but not as fully fledged member). In 1997, Chile finalized a bilateral agreement with Canada and initiated bilateral discussion with Mexico. Chile has been waiting to begin formal negotiation for membership in NAFTA since 1994. Would Chile be better off joining NAFTA or MERCOSUR? Conventional trade theory holds that if the comparative advantage held by a country's industries in world trade is increased of preserved by membership in a particular trading bloc, said membership can lead to trade creation and enhanced country welfare (that is, higher GDP, jobs, and income)(Salvatore, Dominick, International Economics, Upper Saddle River, N.J.: Prentice-Hall, Inc.1995, pp.30-36). ...read more.

Conclusion

887 5.8 282 1.6 1169 3.5 ASIA-PACIFIC 4959 32.3 2601 14.5 7560 22.8 JAPAN 2496 16.3 950 5.3 3446 10.4 SOUTH COREA 864 5.6 557 3.1 1421 4.3 ANDEAN CM 1009 6.6 914 5.1 1923 5.8 Table 2. Chile's exports to the World, NAFTA and MERCOSUR (Average 1990-94) bi Commodity Type, Value (million US$), and % Share Commodity Type World NAFTA MERCOSUR US $ % US $ % US $ % All 9.6000.8 100.0 1.608.4 16.8 1.041.9 10.9 Non-manufactures 4.809.1 100.0 876.9 18.2 453.4 9.4 Manufactures 4.346.7 100.0 728.8 16.8 584.1 13.4 Not Classified 445.0 100.0 2.7 4.3 4.4 8.7 Table 3. Chile's Exports (Average 1990-94) to NAFTA and MERCOSUR by Commodity Type, Value (US$), and % Share Commodity Type NAFTA+MERCOSUR NAFTA MERCOSUR US $ % US $ % US $ % All 2.650.3 100.0 1.608.4 60.7 1.041.9 39.3 Non-manufactures 1.330.3 100.0 876.9 65.9 453.4 34.1 Manufactures 1.312.9 100.0 728.8 55.5 584.1 44.5 Not Classified 7.1 100.0 2.7 38.0 4.4 62.0 Table 4. Spearman Rank Correlation Coefficients for Chile's Exports to NAFTA and MERCOSUR by Commodity Type, Against Chile's Exports to the World Commodity Type Chile-NAFTA Chile-MERCOSUR All 0.94 0.77 Non-manufactures 0.90 0.78 Manufactures 0.94 0.76 POLI 307 Dr. Leila Atraqchi CLASS PRESENTATION "CHILE: NAFTA OR MERCOSUR?" Student: Svetlana Avdeeva ID #: 4457188 March 30, 2004 1 ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level UK, European & Global Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level UK, European & Global Economics essays

  1. CRITICALLY EVALUATE THE THEORIES OF ABSOLUTE ADVANTAGE (ADAM SMITH MODEL) AND COMPARATIVE ADVANTAGE (DAVID ...

    Consumption and production after trade for the two countries is shown in the Table. Consumption and Production after Trade Cheese (lbs) Wine (gals) Consumption Production Consumption Production U.S. 18 24 5 0 France 6 0 3 8 World Total 24 24 8 8 In order for consumption of both goods to be higher in both countries, trade must occur.

  2. Why has GDP growth been so slow in Somalia?

    of polarization of two political parties, the larger the budget deficit is likely to be (in a model where the optimal policy is budget equilibrium). The polarization and likelihood of defeat create incentives for politicians to behave myopically and incur large ?scal de?cits whilst in power.

  1. Where does the World Trade Organisation fit in the overall scheme of international public ...

    Put another way, it would be both pie-in-the-sky and wrong to rely unduly on GATT-style diplomacy. However, the latter has been squeezed too tightly. It needs to be revived, for without it the WTO will not get out of its rut and advance.

  2. David Ricardo theory of comparative advantage

    Finally, the model assumes that technology differences are the only differences that exist between the countries. With so many unrealistic assumptions it is difficult for some people to accept the conclusions of the model with any confidence, especially when so many of the results are counterintuitive.

  1. Outline the debate about whether 'export-led growth' is better or worse than 'import substituting ...

    Between 1965 and 1990, Asian economies boosted their global trade share by 6%, largely by promoting manufacturing industry for foreign markets. A high level of investment in education and training, coupled with government incentives including preferential interest rates, reductions in tariffs and tax concessions, succeeded in attracting a level of foreign direct investment equal to 5-7% of GDP22.

  2. Free essay

    does uk housing market warrant government intervention

    As a result Concerns about the risk involved in speculative house building leads to a tendency towards conservatism in the industry and thus reduces the responsiveness of supply to market price signals. It is in the interest of residential builders not to overstretch themselves and maintain as steady a supply (under-supply)

  1. trading blocs

    4 - Worsening social conditions. Regional trade agreements and the opening of frontiers could lead to a flood of the inhabitant of the poorest countries of the agreement. As far as NAFTA is concerned, there is an hostility against this agreements because we can notice that it entails the lay

  2. Carbon Credit Trading

    This costless alternative involves minimal risks - product prices do not increase; returns remain steady and predictable; production processes are not altered, so workers needed (and thus staff turnover rates) are unchanged. The "Do Nothing" strategy is in favour of consumers, investors and employees, meaning that Heinz exercises organizational stakeholder responsibility.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work