FTA Is the Path to Survival: Says a Chilean Diplomat

“Multilateral trade agreements require much patience and involve complicated processes. If trade determines the survival of your country, you need to be more active in shaping bilateral or multilateral trade frames,” said Chile’s Deputy Foreign Minister Alberto Van Klaveren during a two-day visit to Seoul to attend the 4th high-level policy consultation on May 3. Known as a European expert after serving as Chilean ambassador to the European Union (EU) and as ambassador to three EU countries, Klaveren forecasted that a free trade agreement (FTA) between the EU, one of the world’s major economies, and Korea would exert significant influence to the global economy following the Korea-U.S. FTA. He also gave a positive review of the Korea-Chile FTA that was enacted in 2004. Dong-A met Klaveren last Thursday in the Lotte Hotel in Seoul.

- Please give a review of the three years since the conclusion of Korea-Chile FTA.

“Through the FTA, not only a 232 percent increase in Korea-Chile trade was possible, but also Chile was able to enhance the competitiveness of its individual industrial sectors. The trade and economic cooperation boosted by the FTA will lead to collaboration in politics and in the security realm.”

- Please give an advice on trade negotiations with the EU.

“The negotiation process with the EU is inevitably complex because it is a combination of 27 member countries, each making its own voice heard. But once the EU makes a decision, it pushes it to the end. As long as South Korea gains a better understanding of the EU and its members, a successful negotiation will be possible. Consulting Korean corporations already operating in the EU market is also an essential task. Chilean wine successfully penetrated the EU market, the home of wine, thanks to benchmarking Chilean corporate strategies already doing business in the region.”

- Explain Chile’s enthusiasm for FTAs (Chile had struck 17 bilateral FTAs before the Korea-Chile FTA).

“Relying on a multilateral trade framework may be convenient, but it yields little progress. Chile was compelled to open its markets to a greater extent and gain more access to major economies so as not to fall behind its competitors. To this end, Chile levied a 6 percent uniform duty on all import items. Chile then went on to strike bilateral FTAs with its major trade partners to stay ahead of competition.” (When Augustus Pinochet took power in a coup in 1973, his regime appointed many Chicago school economists to drive an open-market policy. As a result, the manufacturing sector gained momentum and Chile accomplished constant economic growth.)

-Explain the Spaghetti Bowl Effect and how a bilateral FTA complicates trade and hurts business by setting sporadic tariff levels.

“Some idealists say a multilateral trade agreement in a broader sense is good enough. However, this is nothing but a textbook theory. Trade negotiations paint a far more complicated picture in real life. Negotiators often face challenges in settling on an agreement because various interests are at stake. In addition, poor countries often make the negotiations more difficult. These factors explain why the Doha trade talks are going at a snail’s pace.”

spear@donga.com