OC Traders’ Hope for Chilean Trade
Pact on Hold after Senate Vote
By CHRIS CZIBORR
Orange County companies doing business with Chile are going to have to wait even longer for a free trade pact with South America’s most advanced economy.
Local companies export about $40 million in goods yearly to Chile, and are counting on free trade to help them grow exports.
But last week free trade proponents were dealt a blow when the U.S. Senate voted to give Congress power to alter trade deals if lawmakers believe the pacts would weaken “anti-dumping” statutes and other laws designed to protect U.S. industries from imports.
The vote could derail a trade bill that President George W. Bush has been pushing,one that would expand presidential powers to negotiate international trade deals without Congressional review. Since President Bush took office, this proposed legislation has been called trade promotion authority.
If the Senate’s effort to limit a president’s trade power becomes law, the U.S.-Chile free trade talks could be hampered, said Avi Crane, vice president of international sales with Santa Ana-based Calavo Growers of California, an importer of avocados from Chile.
“The Congress vote doesn’t stop our country’s trade negotiations with Chile, but it does make it more difficult to talk to trading partners,” Crane said. “It weakens the U.S. negotiating position.”
U.S. negotiators had expected to wrap up the bilateral free trade talks with Chile later this year,before last week’s Senate move.
“The trade promotion authority would’ve allowed U.S. negotiators to specify to Chileans, ‘This is what you’ll get back,'” Crane said. “Now they have to tell Chileans that a final free trade deal may be different.”
Calavo Growers, a cooperative of avocado farmers in California, is the biggest marketer of avocados in the U.S. Chile is the largest exporter of avocados into the U.S.,Calavo relies on Chilean avocados during the U.S. winter months when domestic avocado production stops.
U.S. and Chilean negotiators already had been marking time waiting for the bill granting the president trade promotion authority.
When last year’s bilateral trade talks concluded in December, the Chilean and American sides agreed to meet later this year, but U.S. trade officials said they were waiting for Congress to vote on trade authority before continuing the trade talks.
“There’s no question that free trade would help both the U.S. and Chile,” said Esmael Adibi, director and professor of economics at Orange-based Chapman University. “Chile getting free trade would stimulate economic growth there.”
But Adibi said Chile has other pressing issues right now.
“Two things have to happen for Chile’s growth rate to increase: the world economy has to pick up and Argentina needs economic stimulation,” he said. “Plus the Chilean peso has gone down so their ability to buy from us has declined, and they are selling less because of the worldwide slowdown.”
Most Latin American countries now face pressure because of Argentina’s disastrous economy, Adibi said.
“Argentina’s currency is now extremely cheap relative to the countries surrounding them,that could hurt Chile and Brazil because both of those countries rely heavily on exports,” he said. “Since Argentina’s currency was devalued its products are becoming more price competitive at the expense of Chile and Brazil.”
Adibi said Argentina’s problems have made foreign investors and banks more hesitant to put money into healthier economies such as in Chile and Brazil.
While there are some concerns Argentina’s woes could spread to nearby Chile, OC company officials remained cautiously upbeat.
“As of now it appears that our business in Chile will grow, while our business in Argentina will not,” said Jorge Gonzalez, director of South American sales and operations for Fullerton medical device maker Beckman Coulter Inc.
Gonzalez said there is a lack of funding in Argentina,95% of all the hospitals in that country are government owned.
“And the Argentine government has little money,” he said. “Hospitals there are only conducting critical testing, which is resulting in lower volumes, which in turn is affecting our sales.” Recent economic forecasts predict Argentina’s gross domestic product this year will contract by about 8%, while Chile’s gross domestic product is expected to grow by 3.3%.
Irvine-based Iogear Inc. has begun making inroads into Chile. Iogear makes keyboards, computer mouses and other peripherals.
“We’re working with a Santiago distributor and are setting up retail channels with Radio Shack Chile,” said Veronica Lopez, head of business development for Iogear Latin America.
Lopez said that any free trade agreement between the U.S. and Chile would not have much of an effect on the company’s plans there.
“There aren’t a lot of tariffs that affect our products so we wouldn’t see a tremendous impact from free trade,” she said. “Although free trade obviously will make things easier.”
Iogear counts 55 OC workers. n
