East Asia (2014) 31:67–91 DOI 10.1007/s12140-014-9203-5
East Asia: Chile’s Missed Opportunity? Alfonso Dingemans
Received: 29 September 2013 / Accepted: 10 February 2014 / Published online: 18 March 2014 # Springer Science+Business Media Dordrecht 2014
Abstract East Asia is regarded in Chile as an opportunity to achieve economic development, because economic integration would place it in East Asia’s value chains. This article suggests that the results of Chile’s economic strategy toward East Asia, based on trade agreements, have had a predominantly quantitative success. The value of exports toward East Asia has indeed increased impressively. However, the qualitative results are less impressive. These agreements are not adequate to achieve structural change, which would enable the Chilean economy to move along East Asia’s value chains. Statistical evidence confirms that Chile is still reduced to a commodity supplier and at the periphery of the chain. To change this situation, Chile has to design first a strategy of how to offer East Asia goods and services beyond commodities. This means looking beyond trade agreements. Keywords Chile . East Asia . Value chains . International economic insertion . Trade agreements . Economic development
Introduction This article attempts to reassess Chile’s apparently successful economic insertion into East Asia.1 Although economic and diplomatic bilateral relations have existed since the nineteenth century [1–4], Chile’s rapprochement with the region—one of the first Latin American countries to do so—has only begun since the 1970s, and especially since the late 1990s. The Chilean strategy, based on the principles of “open regionalism” [5], has relied heavily on the signing of free trade agreements (FTAs). Plurilateral organizations and forums like the Asia-Pacific Economic Cooperation (APEC), the Forum for East Asia–Latin America Cooperation (FEALAC), and the Alliance of the Pacific—besides
1
Unless stated otherwise, East Asia will refer here to China, Japan, and the Republic of Korea because Chilean trade to these three countries amount to 98.8 % of total trade to East Asia in 2010 (COMTRADE figures). If Asia Pacific is considered (as ASEAN+plus EAS), this figures drops to 91.2 %. Additionally, the UN COMTRADE database does not provide individual figures for Taiwan, which are included in China’s.
A. Dingemans (*) Institute of Advanced Studies, University of Santiago, Román Díaz 89, Providencia, Santiago, Chile e-mail:
[email protected]
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possible future vehicles like the Trans-Pacific Partnership (TPP), the Free Trade Area of the Asia-Pacific (FTAAP), the Regional Comprehensive Economic Partnership (RCEP), and perhaps even ASEAN—have been mainly used as a means to improve its network of FTAs. Hence, Chile’s strategy toward East Asia consists principally of improving market access, in which it succeeded with flying colors. However, East Asia is regarded as an opportunity to foster economic development2 as well. In President Piñera’s latest state visit to Vietnam in March 2013, he declared “by establishing ties with the Asian-Pacific world, we are creating the conditions for Chile to be a developed country and to end poverty” [6]. Indeed, much effort has been made by successive governments to bring the regions closer together. The question is how. Chile’s economy could benefit greatly from the technological expertise, among other things, that East Asian companies possess. The challenge for Chilean companies—and of its government—is then to become an active part of these so-called global value chains (GVCs) of East Asian transnational companies (TNCs). This would be of great importance considering first the fragmented nature of world trade [7]—reflected in the increasing volume of trade in intermediate goods by TNCs—and second, the opportunities they offer to developing countries to induce economic development [8–10]. This optimistic outlook on GVCs is inspired by the experience of the “flying geese paradigm” in Asia [11, 12] and more recently of China’s technological upgrade [13, 14]. This Chilean strategy, however, has relied mainly on market forces. The role of the state is strictly subsidiary and limited to supplying an adequate hard and soft infrastructure. The assumption was that lowering tariffs would foster almost automatically these GVCs between East Asian and Chilean companies. The time has come to evaluate whether this strategy has bored fruits. Currently, various efforts have been put forward to describe quantitatively the intricate interindustry and intraindustry relations between countries. The most noteworthy of these is arguably the trade in value added (TiVA) database, a joint effort of the World Trade Organization (WTO) and the Organization for Economic Co-operation and Development (OECD), which allows researchers to map GVCs. As will be shown, data obtained from this database confirm the growing but nonetheless weak economic insertion of Chile into East Asia, which could be characterized as “low quality”. To wit, Chile’s export growth to East Asia is impressive, but it still relies heavily on commodities, without much technological sophistication. Similarly, East Asian foreign direct investment (FDI) is on the rise in Chile but is still heavily concentrated in the mining sector. We thus conclude from the data that it has been unable to upgrade its productive structure. As a main explanation, this article proposes that the current strategy has two major weaknesses. First of all, it assumes that participation in or upgrading within GVCs is the result of market forces alone. Although more empirical evidence should be recollected to reject this hypothesis in general, in the Chilean case this seems highly unlikely given the profound asymmetrical nature of its bilateral relations with East Asian countries, which additionally are skewed in favor of East Asian countries—in almost all dimensions—and thus shape economic incentives against Chile in terms of 2
Here, economic development will be regarded as a change in an economy’s production structure so that it allows to add more value to its products.
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achieving a market-driven integration. Furthermore, Chile is of no geopolitical importance for East Asia. In sum, there are no economic or political reasons for East Asian countries or companies to integrate Chilean companies more into their GVCs, a move which would economically benefit the latter more than the former. Finally, this article argues that a possible solution to this status quo is the definition and subsequent implementation of a more comprehensive and concrete strategy that should answer an until now unanswered question: For what reasons does Chile want to establish a closer economic and political relationship with East Asia? The lack of governance in its current strategy, which could be considered a third weakness, has failed to find a niche in East Asian GVCs, which will allow Chilean companies to upgrade. In other words, Chile should make its companies more attractive on its own. This more comprehensive strategy should give guidance as to in what particular way this should be done. Without it, it seems unlikely that it can overcome its traditional role as a commodity supplier. More importantly, it would turn East Asia in a missed opportunity to achieve a higher level of development. The organization of the articles is as follows. The second section discusses the results of Chile’s international economic insertion into East Asia. The third section assesses Chile’s place in East Asia’s value chains. The fourth section presents the conclusions.
Chile’s Economic Insertion into Asia Historical Background Chile has maintained economic and diplomatic relations with China and Japan since the nineteenth century. Because of the relatively recent foundation of South Korea as an independent country, bilateral relations only began in 1962 [15]. Bilateral trade, however, remained at a fairly low level [16, 1]. The focal point of Chile’s diplomatic and commercial relations was (western) Europe and the USA. Asia was a minor if not largely absent player in Chile’s foreign policy, and this feeling was largely mutual. Until the final quarter of the twentieth century, with the exception of Japan, the other East Asian countries were primarily occupied with domestic issues. As for South Korea—a country that achieved its independence only after the Korean War—Chile established diplomatic relations in 1962 [15]. For the coming decades, South Korea did not play a significant role in Latin America or Chile. The rise of the Asian Tigers has its origins in the 1960s, but results became visible not until the 1980s [17, 18]. Besides, South Korea’s hard and soft power is limited at best. On the part of South Korea, it was not very interested in Latin America, because its development strategy had committed itself almost entirely to East Asia and the USA [19]. The first major rapprochement came in the 1970s, on the part of Chile, when the international community turned its back on Pinochet’s authoritarian regime that had ousted Allende’s government in September 1973. This had left the country politically isolated from its traditional allies in Europe and North America [20]. The reactions of Western Europe and the USA to Chile’s attempts at improving relations can be described as lukewarm at best [20, 21]. Pinochet was desperate to improve the international image of its regime, and all but severed relations with Chile’s traditional
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allies forced him to cast his eyes on nontraditional partners. In addition, it was an inconsistency at best that a country, whose economic strategy was based on trade liberalization, lacked significant diplomatic relations with the international community. Something had to be done. Not all attempts were successful, though. A rather embarrassing episode occurred in 1980 during a planned state visit to the Philippines under the dictatorship of Ferdinand Marcos, which was cancelled practically in midair under US pressure [22, 21]. Chile, then, was forced to adopt a more pragmatist foreign policy [23]. It achieved more success with the bigger East Asian countries, less susceptible to foreign (especially USA and West European) pressure. Interestingly enough, ideological pragmatism had dominated Chinese [23] and Japanese foreign policies as well [24]. Business and politics were considered to be two separated tracks. Bilateral relations with Japan were particularly fruitful and developed into what Ross [24] calls a “strategic alliance.” This allowed Chile to break out of its imposed ostracism and even to attain a certain level of international assertiveness thanks to Japan’s support (ibidem). The curious close relationship between Pinochet’s fiercely anticommunist regime and China’s communist regime reflects a curious mix of China’s need to maintain relations with a country that earlier had given support to their “one-China policy” [25], Deng Xiaoping’s four modernizations that began in 1981, and the complexities of the Cold War where China and the Soviet Union—whose bilateral relations were cut off in the late 1960s3—rivaled for influence in Latin America. As a result, China did not see any reason to dismantle the relationship it had been building with Chile since the 1960s. 4 Being both authoritarian regimes with dubious human rights records, they preferred not to ask about each other’s domestic political situation. With the return of democracy in 1990, Chile decided to deepen its trade relations with Asia [26] as a part of a wider reentry into the international community, especially in political terms. In addition, the new center-left Concertación governments—which had mixed feelings about continuing a neoliberal economic strategy which it had criticized so fiercely during the 1980s—found the largely state-led development of East Asia very alluring, not in the least because of its economic success and dynamism. This profound commitment to improve and deepen its relations with East Asia led to Chile’s participation in various plurilateral, formal organizations, which will be described below. Bilateral Treaties and Plurilateral Interregional Organizations One of Chile’s major successes was its admission in 1994 to APEC, the Asia-Pacific Economic Cooperation [16, 27], a forum founded in 1989 that aims at promoting free trade and economic cooperation throughout the Pacific Rim—as stated in the so-called Bogor Goals—parallel to the increasingly cumbersome multilateral trade negotiations. Its admission was not only prestigious, but it also confirmed Chile’s reacceptance as a full member of the international community and to its commitment, to open regionalism, as already practiced in Asia. Finally, its membership allowed Chile to gain access 3
Recall Nixon’s historic visit to China in 1972 as well. To underscore the noteworthiness of China’s attitude toward Chile, recall that Vietnam cut its diplomatic relations off with Chile after September 1973.
4
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to the necessary networks to sustain such a strategy of open regionalism [16]. In fact, since the second half of the 1990s, Chile has collected a wide array of economic agreements with the major economies of the world, including East Asia (see Table 1), an impressive achievement. Chile’s economic foreign policy was entirely compatible with the doctrine underlying the economic reforms of the 1980s implemented by the (in) famous Chicago Boys. This led to an increasing “economization” of Chile’s foreign policy in general and to an excessive concentration on market access of its trade policy in particular [28]. The unilateral liberalization of the Chilean economy showed its firm belief in free trade [29]. Open regionalism allowed Chile to further it thanks to an intricate network of FTAs5 that improved market access to foreign economies without any commitment to some specific economic (regional) bloc [30]. Mainly for this reason Chile decided not to become a full member of Mercosur.6 The catalyst for the creation of new cooperation entities was the Asian crisis of 1997 [31]. Until then, the attitude of many Asian countries toward Latin America had been one of superiority. After all, Asia had been growing at impressive rates since decades, whereas Latin America was just recovering from the devastating 1982 debt crisis [32]. Latin America seemed to be a synonym of corruption, inefficiency, and muddling. In fact, until the early 1990s, the only Asian country that traded quite intensively with Latin American economies, especially with Chile, was Japan. However, the Asian crisis showed many Asian countries how brittle their own success had been [28]. Suddenly, they became aware that they, too, were still a developing country. Asia became interested in how Latin America managed to get out of its financial disarray. Besides, Latin American economies had actually been growing at impressive rates in the early 1990s as a result of the Washington Consensus reforms (ibidem), which made them interesting in the eyes of East Asian economies eager to diversify their FTA network. A spirit of “connectedness” invaded both regions, and the 1990s became a decade of many “firsts.” In 1996, for example, President Kim Young Sam would become the first South Korean head of state to visit Latin America, marking the beginning of intensified bilateral relations. The Asian crisis, which had devaluated Korea’s won, made its exports there more competitive, stirring Korea’s interest in the region [19], as can be implied from trade and FDI figures. At the same time, South Korean products became an interesting alternative for Latin American consumers, and South Korea’s domestic market with its growing middle class became attractive to Chilean companies. This convergence would result in an FTA in 2004, the first Chile would sign with an East Asian country. After Japan in the 1980s and South Korea in the late 1990s, China would follow suit in the early 2000s. In 2004—under the auspices of the APEC meeting in Santiago— President Hu Jintao visited Chile, the first official visit of a Chinese president to the country. Its accession to the WTO had been the starting point for China’s world quest 5 Another instrument used to deepen economic relations is bilateral investment treaties (BIT), which basically regulate the conditions under which foreign direct investment (FDI) is protected by the host country. In the case of Chile, this network is not as impressive as that of FTAs, although it must be noted that much FTAs cover FDI and do therefore not need an explicit BIT. 6 In Spanish: Mercado Común del Sur, which translates as the Common Market of the South. It was founded in 1991 and includes Argentina, Brazil, Uruguay, Paraguay, and more recently Venezuela.
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Table 1 Economic agreements signed by Chile as of June 2013 COUNTRY
Type of agreement
Date of entry into force
Agreements in force Bolivia
PPA N°22
30-Jun-93
Venezuela
PPA N°23
1-Jul-93
Mercosur (Argentina, Brazil, Paraguay, Uruguay, and Venezuela)
PPA N°35
1-Oct-96
Canada
FTA
5-Jul-97
Mexico
FTA
31-Jul-99
Costa Rica (FTA Chile-Central America)
Bilateral Protocol, FTA
14-Feb-02
El Salvador (FTA Chile-Central America)
Bilateral Protocol, FTA
1-Jun-02
European Union (Germany, Austria, Belgium, Denmark, Spain, Finland, France, Greece, Italy, Ireland, Luxemburg, the Netherlands, Portugal, United Kingdom, Sweden, Cyprus, Slovakia, Slovenia, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Czech Republic, Romania, and Bulgaria)
EPA
1-Feb-03
United States
FTA
1-Jan-04
Republic of Korea
FTA
1-Apr-04
EFTA (Iceland, Liechtenstein, Norway, and Switzerland) FTA
1-Dec-04
China
1-Oct-06
FTA
P-4 (New Zealand, Singapore, and Brunei)
Strategic Transpacific EPA
8-Nov-06
India
PSA
17-Aug-07
Japan
Strategic EPA
3-Sep-07
Panama
FTA
7-Mar-08
Cuba
PSA
27-Jun-08
Honduras (FTA Chile-Central America)
Bilateral Protocol, FTA
19-Jul-08
Peru
FTA
1-Mar-09
Australia
FTA
6-Mar-09
Colombia
FTA
8-May-09
Ecuador
EPA
25-Jan-10
Guatemala (FTA Chile-Central America)
Bilateral Protocol, FTA
23-Mar-10
Turkey
FTA
1-Mar-11
Malaysia
FTA
18-Apr-12
Nicaragua (FTA Chile-Central America)
Bilateral Protocol, FTA
19-Mar-13
Negotiated agreements not in force Signed treaties Vietnam
FTA
China
Supplementary Agreement on Investment of China FTA
Hong Kong, China
FTA
Unsigned treaties Thailand
FTA
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Table 1 (continued) COUNTRY
Type of agreement
Date of entry into force
Agreements under negotiation Trans Pacific Partnership (TPP) (Australia, Brunei, Canada, United States, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam) Deeping of Preferential Trade Agreement with India Alliance of the Pacific (Colombia, Peru, and Mexico) Source: DIRECON
for resources, including Chile, which intensified after 2003. Its hunger for resources boosted their suppliers’ economies remarkably. The so-called super cycle spurred Chile’s economic growth and saved it largely from the depression that had affected the USA and Europe. Indeed, China quickly became Chile’s most important trading partner, which was crowned by an FTA in 2006, the first that China would sign with a Latin American country. Trade between Chile and Japan has still been important since the 1990s, but it did not show the energy of that with China, and it lost therefore some of its previous glare. The Japanese crisis which began in 1991 also affected projects funded by Japan International Cooperation Agency (JICA) and Japan External Trade Organization (JETRO). Nonetheless, the solidness of their relationship was confirmed by a bilateral agreement that came into force in 2007. On a plurilateral level, this rapprochement materialized in the FEALAC, which was created in 1999 to improve the cooperation between both regions. The underlying thought was precisely that both regions were composed of economically dynamic developing countries, complementary to each other, but lacking an official cooperative mechanism. FEALAC was believed to fill that gap, and its original goal was to move beyond the traditional scope of trade and include political dialogue and cooperation [33]. To date, active proposals have been defined to advance toward improved connectivity in matters such as education, small- and medium-size enterprise support, the reform of the United Nations, poverty reduction, disaster prevention, and climate change countermeasures [34]. A third interregional effort is the TPP—its negotiations have been underway since 2010—which was borne out of the Trans-Pacific Strategic Economic Partnership Agreement (P4), an APEC sideline initiative. It originally contemplated Brunei, Chile, New Zealand, and Singapore, but now includes Australia, Canada, Japan, Malaysia, Mexico, Peru, the USA, Vietnam, and South Korea as well, and is considered to be a pathfinder for a future FTAAP, an official APEC initiative. As a high-standard agreement, its scope goes beyond tariff reduction and trade promotion and includes chapters on trade in services, intellectual property, and competition policy [35]. A fourth interregional effort is the Pacific Alliance (Alianza del Pacífico), an initiative propelled by Latin American like-minded, pro-free trade countries—Chile,
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Colombia, Mexico and Peru—and aims at promoting free trade among its members and improving economic integration (as a bloc) with but not limited to Asia.7 Although it is a fairly recent initiative, it has already attracted the attention of China, Japan, and South Korea, all of which are associate members. It remains unclear, though, whether the next Bachelet government will support this Alliance with as much ardor as Piñera. Finally, as a last plurilateral vehicle, during President Piñera’s state visit to Vietnam, Chile has made public its interest in getting closer to ASEAN, the Association of Southeast Asian Nations.8 Its objectives are to sustain independence and sovereignty of member states and to encourage regional and national stability [36]. The (geo) political nature of ASEAN still remains at its core, although trade liberalization has become more important after the Asian crisis. Currently, an RCEP is under negotiation with ASEAN’s FTA members,9 after which it will be open to other countries. It could thus turn into a rival of the US-driven TPP.10 Currently, biannual ASEAN–Latin America Business Forums are already held. In sum, this current infrastructure serves in practice one clear goal: achieve improved market access. With the exception of the yet unclear objectives of the TPP and the RCEP, the bilateral and plurilateral agendas are primarily trade-related. Determinants of the Quality of Bilateral Relationships The infrastructure just described is in reality a vehicle and does not necessarily describe the nature of Chile’s relations with East Asia correctly. Apart from the political context shaped by historical factors (already discussed), its prime determinants are the nature and size of their tradable sectors, the size and characteristics of migration flows, the quality of institutions relevant for doing business (legal and financial infrastructure and logistics), and finally the scope and depth of interactions in the military and political sphere [37]. The first thing that draws our attention is the profound asymmetrical nature of this relationship (see Table 2). Chile is a comparatively large country, almost twice the size of Japan, but it has a low population density—its population is close to a third of South Korea’s. In addition, its GNI pales in comparison with that of East Asia. Although Chile has a relatively open economy, its volume of exports is small in comparison. This applies for their bilateral trade as well. East Asia has replaced (Western) Europe and the USA as Chile’s most important trading partner [38]. Nonetheless, as Table 3 shows, the economic relationship is asymmetrical: The importance of East Asia for Chile is greater than vice versa. The asymmetry is exacerbated by Chile’s level of development and competitive and comparative advantages. Its productive structure lacks the innovation of South Korea 7 Information retrieved from oficial site, http://www.alianzapacifico.net/que_es_la_alianza/la-alianza-delpacifico-y-sus-objetivos/. 8 It was founded in 1967 with the Bangkok Declaration. Today, the ten ASEAN members are Brunei, Cambodia, Indonesia, Laos, Malaysia, Burma, Philippines, Singapore, Thailand, and Vietnam. Associated members are China, Japan, and Korea (ASEAN+3). 9 Australia, China, India, Japan, Korea, and New Zealand. 10 To make matters worse, China’s influence within ASEAN is growing, and thus, the possible rivalry between the RCEP and the TPP could become the clash between China and the USA in terms of gaining economic and/ or political control over the Asia-Pacific.
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Table 2 Basic economic data Figures for 2012
Chile
China
Japan
South Korea
Surface area (km2 thousands)
756
9,600
378
100
Population (millions)
17
1,351
128
50
Gross National Income (Atlas method, billions USD)
249.9
7,731.30
6,107.10
1,133.80
Gross National Income per capita (Atlas method, USD)
14,310
5,720
47,880
22,670
Gross National Income (PPP, billions USD)
372.1
12,205.80
4,630.70
1,548.70
Gross National Income per capita (PPP, USD)
21,310
9,040
36,300
30,970
Exports (millions USD)
90,903
2,167,247
910,826
663,562
Exports (% of GNI)
36.38
28.03
14.91
58.53
Current account balance (millions USD)
−9,497
193,139
60,859
43,335
Source: World Development Indicators, World Bank (2014)
and Japan on the one hand and the enormous potential of economic growth of China on the other. Furthermore, China is catching up and is trying to become a world player in terms of innovation as well. Chile’s greatest appeal for East Asia is basically its natural resources (copper). This is most clearly seen in the case of China [4, 39–41, 37]. Although China’s presence in Latin America has increased exponentially since the 2000s, Chile is not considered a strategic partner but merely a comprehensive cooperation partner [4, 37]. This means that China does not engage in joint ventures in high-tech areas, such as satellite Table 3 Share of exports to Asia-Pacific % of total exports 1962–1970 1971–1980 1981–1990 1991–2000 2001–2012 2012 Asia Pacific Argentina
China
Japan
Korea
5.73 %
6.63 %
9.06 %
8.66 %
14.00 %
15.71 %
Brazil
4.35 %
8.23 %
11.88 %
8.66 %
14.00 %
27.43 %
Chile
10.65 %
16.67 %
17.26 %
26.99 %
33.05 %
43.78 %
Mexico
7.76 %
6.09 %
7.93 %
2.50 %
2.25 %
3.68 %
Argentina
2.27 %
1.06 %
3.11 %
2.08 %
7.33 %
6.38 %
Brazil
0.02 %
0.68 %
1.47 %
2.08 %
7.33 %
17.19 %
Chile
0.13 %
1.45 %
1.99 %
2.41 %
14.04 %
23.77 %
Mexico
0.03 %
0.92 %
0.50 %
0.14 %
0.77 %
1.58 %
Argentina
3.05 %
4.72 %
3.59 %
2.59 %
1.13 %
1.55 %
Brazil
3.02 %
5.99 %
6.34 %
2.59 %
1.13 %
3.30 %
Chile
10.41 %
14.06 %
11.98 %
16.69 %
11.37 %
10.94 %
Mexico
6.82 %
4.76 %
6.31 %
1.45 %
0.67 %
0.72 %
Argentina
0.04 %
0.08 %
0.41 %
0.60 %
1.20 %
1.75 %
Brazil
0.02 %
0.09 %
0.82 %
0.60 %
1.20 %
1.88 %
Chile
0.01 %
0.80 %
2.05 %
4.54 %
5.33 %
5.94 %
Mexico
0.11 %
0.04 %
0.47 %
0.16 %
0.21 %
0.48 %
Source: author’s calculations based on UN-COMTRADE figures
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East Asia (2014) 31:67–91
communications, but instead maintains primarily on commercial relations limited to natural resources. Indeed, when quantifying the economic relations between Chile and East Asia, Table 4 shows that Chile’s exports are largely commodities. There is hardly any diversification of exports. Furthermore, East Asian FDI in Chile has grown, but it remains a marginal destination [38]. In the 1974–2012 period (see Tables 5 and 6), Japan is the biggest East Asian investor in Chile (98.0 %), followed by a distant South Korea (2.8 %). In terms of total FDI inflows to Chile, the importance of East Asian countries has decreased: They represent a mere 8.0 % (China 0.1 %, Japan 7.7 %, and Korea 0.2 %). A final observation is that mining has attracted the majority of East Asian FDI (over 90 %). In turn, Chilean FDI in East Asia is marginal [42]. The foregoing confirms the intensified but asymmetric nature of their bilateral relationship and the ubiquity of commodities. The trade pattern that Chile has tried to overcome repeats itself nonetheless once more. These factors have contributed to shaping the nature of cooperation as well. Chile is a recipient rather than a donor, with a particular emphasis on natural resources. Japan is perhaps the most active of the three by funding concrete projects in the context of the 1978 Agreement of Technical Cooperation.11 South Korea12 is active in the areas of food safety and quality standards, custom matters, academic cooperation, peaceful use of nuclear energy, defense matters, cultural cooperation, and cooperation in the field of telecommunications, although its reach is limited. Finally, China has offered cooperation in the field of science and technology, agriculture, and culture. 13 However, the bulk of these initiatives is concentrated in the areas that are of particular interest to the Chinese economy: the mining sector and agriculture [37]. Another important factor that shapes the depth and quality of bilateral relationships is the presence of migration. The Asian communities in Chile are rather small, even in comparison with Peru, Brazil, and Argentina (ibidem). Similarly, according to figures of the International Organization for Migration, Chilean emigration to East Asia is negligible. Regarding Chile’s institutional quality, according to the World Bank’s Good Governance indicators, it is one of the strongest in Latin America. The same thing applies to its business friendliness, if we are to believe the Doing Business Reports of the World Bank. Finally, the relatively weakest point in Chile’s infrastructures is its logistics. Although according to the World Bank’s Logistics Performance Index, Chile has one of the most efficient and low-cost infrastructures in Latin America, it does not even come close to European or USA, or even East Asian standards [43]. Regarding the last dimension, military and political interactions, Chile’s role is secondary. It is not a strategic ally of any of the East Asian countries, and it has no geopolitical importance for them whatsoever. Even in the case of China, arguably the most developed relation in this aspect, interactions are modest at best [37]. In terms of political interactions, Chile maintains diplomatic relations with all three of them, 11 According to official information: http://chileabroad.gov.cl/japon/en/relacion-bilateral/cooperacioninternacional/ (accessed January 29, 2014). 12 According to official information: http://chileabroad.gov.cl/corea-del-sur/en/relacion-bilateral/cooperacioninternacional/ (accessed January 29, 2014). 13 According to official information: http://chileabroad.gov.cl/china/en/relacion-bilateral/cooperacioninternacional/ (accessed January 29, 2014).
Unrefined copper 1.5 %
1.2 %
1.9 %
1.8 %
3.3 %
Molybdenum ores
Flour or meal for animal feed
5.0 %
5.4 %
Refined copper and copper alloys
Fish fillet or meat
Nitrites; nitrates
Copper waste and scrap
7.2 %
2.7 %
Fuel wood
7.6 %
Iron ores and concentrates
Chemical wood pulp, soda or sulfate, not dissolving grade
Fuel wood
5.0 %
Flour or meal for animal feed
3.9 %
Molybdenum ores
9.0 %
19.3 % Iron ores and concentrates
Unrefined copper
Frozen fish, excluding fillets
Frozen fish, excluding fillets
15.4 %
21.6 % Refined copper and copper alloys
23.6 % Gold content
Chemical wood pulp, soda or sulfate, not dissolving grade
4.3 %
Gold content
28.7 %
58.8 % Gold content
Gold content
37.3 % Refined copper and copper alloys
Commodity % of total exports
Commodity
Commodity % of total exports
2010
Commodity % of total exports
1995
1995
2010
JAPAN
CHINA
Table 4 Top-10 commodities exports to East Asia
Iron ores and concentrates
3.5 %
1.8 %
Gold content
Unrefined copper
4.2 %
4.2 %
Chemical wood pulp, soda or sulfate, not dissolving grade
Wood in the rough
7.7 %
4.4 %
Refined copper and copper alloys
62.0 %
Commodity % of total exports
1995
KOREA
1.8 %
2.8 %
3.7 %
8.2 %
Lead ores
Molybdenum ores
Swine meat
Unrefined copper
1.6 %
1.7 %
2.4 %
4.1 %
6.3 % 11.4 %
Chemical wood pulp, soda or sulfate, not dissolving grade
22.1 %
47.7 %
% of total exports
12.0 % Gold content
52.7 % Refined copper and copper alloys
Commodity % of total exports
2010
East Asia (2014) 31:67–91 77
Molybdenum ores
1.1 %
0.8 %
0.6 %
Wool or animal hair, combed
Wool
Zinc ores
Wood sawn or chipped of a thickness exceeding 6 mm Iron ores and concentrates
0.3 %
Fish fillet or meat
0.5 %
0.9 %
Chemical wood pulp, soda or sulfate, not dissolving grade
Commodity % of total exports
Source: The Observatory of Economic Complexity Atlas
Wood sawn or chipped of a thickness exceeding 6 mm
Wine of fresh grapes
Flour or meal for animal feed
Commodity % of total exports
Mineral or chemical fertilizers, nitrogenous
Commodity
1995
1995
2010
JAPAN
CHINA
Table 4 (continued)
Wine of fresh grapes
Flour or meal for animal feed
3.2 %
1.6 %
Swine meat
4.3 %
Iron ores and concentrates
Commodity % of total exports
2010
Frozen fish, excluding fillets
Builders’ joinery and carpentry of wood
1.3 %
1.1 %
Fiberboard of wood
1.8 %
Wood sawn or chipped of a thickness exceeding 6 mm
Commodity % of total exports
1995
KOREA
0.8 %
0.8 %
1.0 %
Slag, ash and residues
Grapes
Scrap of precious metal
Commodity % of total exports
2010
1.4 %
1.5 %
1.6 %
% of total exports
78 East Asia (2014) 31:67–91
East Asia (2014) 31:67–91
Table 5 East Asian FDI in Chile by receiving sector, 1974-2012
79
Receiving sector
US dollars
% of total
Agriculture and livestock
8,554
0.1 %
Forestry
69,166
1.0 %
Fishing and aquaculture
8,566
0.1 %
Mining and quarrying
6,560,106
90.3 %
Food, beverages, and tobacco
101,181
1.4 %
Wood and paper products
143,146
2.0 %
Chemical, rubber, and plastics
10,810
0.1 %
Other industries
38,933
0.5 %
Electricity, gas, and water
86,084
1.2 %
Construction
1,000
0.0 %
Wholesale and retail trade
107,976
1.5 %
Transport and storage
49,06
0.1 %
Communications
1,041
0.0 %
Financial services
99,056
1.4 %
Insurance
0
0.0 %
Engineering and business services
17,779
0.2 %
Figures in nominal thousands US dollars
Sewage, sanitation, and similar
0
0.0 %
Other services
4,506
0.1 %
Source: Foreign Investment Committee, Chile
Total
7,262,810
100.0 %
separating the political from the economic agenda, which means that the bilateral political agenda is fairly thin-layered. Besides compulsory state visits and occasional mutual support for positions in international organizations, a common political agenda is fairly absent. In sum, all of these factors point consistently to asymmetrical bilateral relationships that are skewed in favor of East Asia. Currently, Chile stands to gain comparatively the most from intensified bilateral relationships. All that Chile has to offer is natural resources and stable institutions, and those are all the East Asian countries have come for. Chile’s Strategies toward East Asia All these factors limit Chile’s policy options toward East Asia. The lack of a more sophisticated productive structure makes it very difficult indeed to overcome the “trap” of a typical commodity exporting economy. Without having many other things to offer, East Asian economies are not very much enticed to look beyond Chile’s copper mines. The incentives simply do not point in any other direction. This does not mean that Chile has not tried to do something about it. The 1970s and 1980s can be best described as an era of improvisation. Political contingencies brought Chile and East Asia (particularly Japan) closer, but this convergence was not really the result of an explicit strategy. The 1990s, however, witnessed a clear strategy on the part of Chile. Its policymakers were determined to improve Chile’s market access to East Asia. The FTAs were the main instruments of a concrete “two-
80
East Asia (2014) 31:67–91
Table 6 Composition of East Asian FDI in Chile by receiving sector Sector
China
Japan
Korea
Agriculture and Livestock
6.8 %
93.2 %
0.0 %
Forestry
53.4 %
46.6 %
0.0 %
Fishing and aquaculture
3.4 %
91.7 %
4.8 %
Mining and quarrying
0.3 %
97.3 %
2.4 %
Food, beverages, and tobacco
0.0 %
98.0 %
2.0 %
Wood and paper products
0.3 %
93.8 %
5.9 %
Chemical, rubber, and plastics
0.0 %
88.0 %
12.0 %
Other industries
0.0 %
69.6 %
30.4 %
Electricity, gas, and water
0.0 %
100.0 %
0.0 %
Construction
0.0 %
100.0 %
0.0 % 14.2 %
Wholesale and retail trade
0.5 %
85.3 %
Transport and storage
0.0 %
100.0 %
0.0 %
Communications
0.0 %
3.8 %
96.2 %
Financial services
43.2 %
56.8 %
0.0 %
Insurance
0.0 %
0.0 %
0.0 %
Engineering and business serv.
0.0 %
100.0 %
0.0 %
Sewage, sanitation, and similar
0.0 %
0.0 %
0.0 %
Other services
21.8 %
78.2 %
0.0 %
Total
1.5 %
98.0 %
2.8 %
Figures in shares of total East Asian FDI by receiving sector Source: Foreign Investment Committee, Chile
track” foreign policy based on open regionalism, which aimed at diversifying Chile’s export markets without losing political independence. Although numerous attempts to broaden this strategy have been made—the idea of transforming Chile into Asia’s access point to Latin America [16] comes to mind—they never really materialized. Its failure is most likely due to a combination of miscalculations regarding Chile’s attractiveness as a production or logistic hub of insufficient additional complementary policies and—most importantly—of the complete lack of a clear vision as to what for Chile intends to deepen its relations with East Asia. The answer, until now, has been that it wants to improve market access, but this stage has already been completed when it signed the various FTAs. Now it is time to do something with this network of agreements. The answer to the former question should point to an articulate set of policies which is encompassed by a broader development strategy. It should come as no surprise that Chile lacks such a strategy as well. Since the early 1980s, successive governments have been managing Chile’s economy rather than steering it in a particular direction, under the assumption that market forces by themselves would give it the right direction. However, in spite of having achieved a relatively high level of income, Chile’s current production structure is qualitatively similar to the one it had decades ago. The most obvious option—considering the asymmetrical nature of their bilateral relationships and the success of the Asian flying geese paradigm—is that Chile
East Asia (2014) 31:67–91
81
becomes a part of East Asia’s GVCs. This option is compatible with Chile’s staunch belief in free-market principles. Standard free trade theory even suggests that an open economy with a relatively low stock of capital will have higher rates of return because of the law of diminishing marginal returns. This would imply that East Asian TNCs would incorporate Chilean companies into their GVCs. The dissemination of technology would ensure that they would move up along the value chain. It begs the question whether this actually has happened.
In Search of Upgrading Value Chains The geographical origin of exported goods, the added value that each country embodies in an other’s exported good, would give us an indication of the nature of their economic relations [44]. Traditional databases cannot be used to decompose this. The WTO and OECD have combined efforts to create a specialized database called TiVA14 which can map these GVCs. First, we need to construct the degree to which one economy adds value to another’s domestic demand. Tables 7 and 8 show the results for 1995 and 2009. Chile is a marginal player in terms of added value to Chinese, Japanese, and Korean domestic demand. Inversely, Japan in 1995 and China in 2009 are important sources of added value in Chile. Second, in 1995, only 1.8 % of Chile’s final demand originated from China, but this jumped to 11.2 % in 2009, making it more important for the Chilean economy. Korea’s role remained the same and Japan’s even diminished. In terms of Chile’s origin of value added in East Asian economies, it remained virtually the same in Japan and Korea, but it increased from 0.3 % in 1995 to 1.2 % in 2009, a nonetheless relevant change. Lastly, intraregional relations remain East Asia’s focal point. The intensified relations between East Asia and Chile pale in the light of these figures, although it is interesting to note that China now depends less on East Asia and more on its domestic production (it dropped from 36.5 % in 1995 to 22.3 % in 2009). The geographic origin of value added embodied in foreign final demand (i.e., exports) confirms our prior conclusions: the asymmetry, the growing importance of China, and the importance of intraregional networks in East Asia (see Tables 9 and 10). A third and last point of evaluation is decomposing a country’s gross exports by sector as well. This will allow us to evaluate the nature of the relationship, specifically whether there are intraindustry or interindustry links between countries. The results are presented for China (Table 11), Japan (Table 12), and South Korea (Table 13). China depended less in 2009 from domestic value added than in 1995 (it dropped from 88.13 to 67.37 %). Although all South American countries increased their participation, Chile is the one with the highest growth. However, when decomposing the origin of this added value, it becomes clear that it is almost entirely owed to an increase of the added value in the mining sector besides other primary commodities. The Chilean industries that do not add value to Chinese exports are still very large. In the case of Japan, among the South American countries, Chile has experienced the highest growth and has profited the most of Japanese exports’ higher dependence on 14
This database can be accessed at http://stats.oecd.org.
82
East Asia (2014) 31:67–91
Table 7 Foreign value added embodied in domestic final demand, 1995 Partner Total
Chile
China
Japan
Korea EU27
NAFTA Eastern Asia ASEAN OECD
Chile
100 %
–
China
100 %
0.3 %
1.8 %
7.8 %
3.2 %
29.5 %
31.2 %
15.2 %
1.9 %
–
20.5 %
6.5 %
22.3 %
18.8 %
36.5 %
6.3 %
Japan
100 %
72.9 %
0.9 %
6.2 %
–
5.8 %
21.2 %
26.8 %
16.7 %
10.4 %
62.3 %
Korea
100 %
0.6 %
3.5 %
24.3 %
–
18.8 %
24.3 %
30.1 %
6.0 %
73.8 %
74.6 %
China does not include Taiwan Source: TiVA Database, OECD-WTO
foreign added value. Alas, the main source of this growth is—yet again—the mining industry. The results for the Korean case are at this stage no surprise. Chile increased its importance in Korea’s value chain but has not upgraded its position. It still remains a peripheral element of Korea’s value chain. There is a quantitative but not a qualitative improvement, which is our general conclusion for the three East Asian countries. Finally, Table 14 shows that Chile’s added value to exports depends largely on Chilean added value. Although it has diminished slightly from 84.90 to 81.54 %, this is still much larger than in the East Asian cases. It is similar to Japan’s case, albeit with one difference. In the Chilean case, its export mix depends on unprocessed natural resources. In fact, mining is now even more important than in 1995 (it increased from 26.50 to 37.53 %). In the Japanese case, this dependence reflects Japan’s endogenous innovation. All the foregoing conveys us a picture of a dynamic economy that has succeeded in gaining higher market shares in Asia. However, it has been largely unsuccessful at upgrading its production through East Asian GVCs. Its qualitative role is exactly the same as in 1995: a supplier of commodities. The sophistication of its productive structure has not been improved, and this has left its role as a peripheral commodity supplier untouched. It did not become an integral part of Asia’s GVCs. This arguably represents Chile’s missed opportunity, unless it begins designing a comprehensive strategy about how to upgrade itself in East Asia GVCs, as a starting point for its own next development stage. This strategy has and will not be achieved by market forces alone and requires complementary, domestic political action. Table 8 Foreign value added embodied in domestic final demand, 2009 Partner Total
Chile
China
Japan
Korea EU27
11.2 %
6.1 %
3.5 % 21.0 % 24.1 %
23.2 %
4.2 %
11.7 % 5.7 % 21.4 % 14.3 %
22.3 %
7.6 %
61.6 %
20.7 %
10.9 %
48.3 %
24.7 %
7.4 %
54.0 %
Chile
100 % –
China
100 % 1.2 % –
Japan
100 % 0.9 % 14.3 % –
Korea
100 % 0.8 % 11.4 %
3.4 % 17.2 % 18.9 %
11.3 % –
China does not include Taiwan Source: TiVA Database, OECD-WTO
NAFTA Eastern Asia ASEAN OECD
17.9 % 16.8 %
57.9 %
East Asia (2014) 31:67–91
83
Conclusions Chile’s integration into the East Asian economies can be considered a quantitative success. Its exports have increased; the Chilean share of added value in the East Asian economies has increased as well. In that sense, all of the instruments used by Chile’s strategy toward East Asia, mainly consisting of (free) trade agreements, have been effective. These agreements aim at improving market access, and in this, they delivered without any doubt. The downside is that the economic relationship between Chile and East Asia has not changed in qualitative terms. This lack of upgrade should not surprise us, considering the Chilean strategy that stresses the quantitative aspects of trade (specifically gaining market access) in detriment of more qualitative aspects (improving its production structure). In hindsight, it seems almost evident that trade agreements by themselves are not the appropriate vehicle to induce structural change, because achieving structural change goes beyond the scope of simple tariff reductions or even cooperation [35]. On top of that, the asymmetrical nature of bilateral relationships with East Asia, in its various dimensions, skews economic incentives for a market-driven integration against Chile. Besides, Chile’s lack of geopolitical importance for East Asia, especially for China and Japan, makes further integration motivated by political interests, initiated by East Asia, highly unlikely. Hence, unless Chile induces structural change by itself first and has therefore something more to offer than just commodities, the prospects for Chilean companies to upgrade their position within East Asian GVCs are rather bleak. GVCs are no charities; they respond to incentives. It seems unlikely that a company would transfer technology to another company—or would engage otherwise in high-risk investments—without the prospect of obtaining some future economic or political gain. It is up to the Chilean stakeholders to wedge their way into the already existing East Asian value chains. The hopes that Chile and many other Latin American countries have put on the structural effects that interregional free trade areas like the TPP or RCEP would generate are therefore largely false. Of course, the weak governance of Chile’s insertion into East Asia does not entirely explain by itself the low-quality ties between the countries. For instance, high transport costs are still an important barrier [38] to more profound economic relations. Chile’s once explicit goal of becoming Asia’s access port to Latin America [45], which can be considered its only attempt at defining a more or less comprehensive strategy, has died a slow death because of its inability to lower them sufficiently. Nonetheless, if the necessity of establishing a closer connection between international trade (or exports specifically) and economic development would be acknowledged by Chilean policymakers, stumbling blocks like these would be more easily identified and hopefully tackled as well. So, Chile’s insertion into East Asia or in any of its subregions requires a more comprehensive, strategic vision [e.g., 27].15 It is time to move beyond a market-driven international economic insertion which Rosales and Kuwayama [42] have called a “de 15 In that sense, it is very symptomatic of the current outlook on the interregional bilateral relationships that China’s Policy Paper on Latin America and the Caribbean has not been met with a concrete answer on the part of Latin America [46].
84
East Asia (2014) 31:67–91
Table 9 Domestic value added embodied in foreign final demand, 1995 Partner Total
Chile
China
Japan
Korea EU27
NAFTA Eastern Asia ASEAN OECD
Chile
100 %
–
China
100 %
0.2 %
1.7 %
19.0 %
4.1 %
24.4 %
19.8 %
28.3 %
4.0 %
–
17.9 %
3.2 %
20.4 %
29.7 %
30.7 %
4.5 %
Japan
100 %
74.7 %
0.3 %
5.3 %
–
6.4 %
19.6 %
33.5 %
17.9 %
11.5 %
64.3 %
Korea
100 %
0.5 %
6.6 %
18.8 %
–
17.0 %
25.7 %
30.0 %
7.4 %
65.0 %
69.3 %
China does not include Taiwan Source: TiVA Database, OECD-WTO
facto integration.” This comprehensive strategy would have to set out the type of economic and political relations that Chile envisions and to propose concrete objectives and policies to achieve them. This would force Chilean stakeholders to answer an apparently trivial question: For what reason does Chile want a closer relationship with East Asia? What does it aspire to achieve? Hopefully, the answer will be more concrete than the standard “to get a chance to becoming a part of the world’s most economically dynamic region.” On a side note, this answer should also consider an overlooked issue by Chilean policymakers. Chile’s “two-track” foreign policy has imbued the belief that FTAs are politically neutral or that conflicts will be avoided because of shared commercial interests. However, growing conflicts in (East) Asia caused by a changing security balance could put Chile in such a position that it would be forced to choose sides. Similarly, the TPP and RCEP are to a large extent mutually exclusive vehicles, because of the foreseeable rivalry between the USA and China over the influence in the Asian Pacific. In other words, there are political consequences to commercial decisions [e.g., 47]. This question, however, goes beyond the scope of this article. The risk of not envisioning a more comprehensive strategy is first that the end of the “super cycle” will decrease Chile’s exports to East Asia and will therefore strain its current strategy. Considering a more inward-looking Chinese economic development— and if the highly developed Japanese economy serves as an example—the Chilean economy will be largely unable to offer products or services that China’s foreseeable higher level of development will be demanding. Of course, the Chilean economy will not collapse, but its development will most likely follow the well-known cyclical Table 10 Domestic value added embodied in foreign final demand, 2009 Partner Total
Chile
China
Japan
Korea EU27
Chile
100 %
–
China
100 %
0.5 %
Japan
100 %
0.4 %
Korea
100 %
0.6 %
15.3 %
8.9 %
3.3 %
20.7 %
20.4 %
29.1 %
2.6 %
56.1 %
–
8.5 %
2.8 %
25.2 %
28.8 %
14.0 %
4.8 %
70.2 %
14.0 %
–
4.5 %
19.2 %
25.2 %
23.3 %
8.9 %
54.1 %
14.9 %
7.1 %
–
18.0 %
23.3 %
23.7 %
6.1 %
52.9 %
China does not include Taiwan Source: TiVA Database, OECD-WTO
NAFTA Eastern Asia ASEAN OECD
0.38
Other services
Source: ViTA Database OECD-WTO
China does not include Taiwan
3.86 6.41
Business services
Transport and storage, post and telecommunication
Financial intermediation
8.77 7.39
Wholesale and retail trade; hotels and restaurants
2.18
Manufacturing nec; recycling 0.16
3.56
Transport equipment
Construction
1.52
Electrical and optical equipment
Electricity, gas, and water supply
3.55 7.74
Machinery and equipment, nec
12.78 6.91
Chemicals and nonmetallic mineral products
2.15
Wood, paper, paper products, printing, and publishing
Basic metals and fabricated metal products
2.86 13.56
Textiles, textile products, leather, and footwear
5.92
Mining and quarrying
Food products, beverages, and tobacco
100.00 10.30
Agriculture, hunting, forestry, and fishing
1995
Source industry
Total
Total
Gross exports China
1.97
7.76
4.41
4.72
10.32
0.26
2.25
3.28
2.13
15.14
4.05
7.27
10.60
2.71
6.89
1.78
7.99
6.45
100.00
2009
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.01
0.00
0.00
0.01
0.05
1995
0.00
0.01
0.00
0.02
0.01
0.00
0.00
0.00
0.00
0.00
0.00
0.01
0.01
0.01
0.02
0.01
0.01
0.05
0.16
2009
Argentina
0.00
0.01
0.01
0.01
0.01
0.00
0.00
0.00
0.00
0.00
0.00
0.02
0.01
0.00
0.00
0.01
0.02
0.01
0.14
1995
Brazil
0.02
0.09
0.02
0.06
0.09
0.00
0.02
0.00
0.00
0.01
0.01
0.13
0.06
0.04
0.02
0.01
0.11
0.17
0.86
2009
Table 11 Shares of value added embodied in Chinese gross exports by source country and source industry (%)
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.02
0.00
0.04
1995
Chile
0.00
0.03
0.01
0.02
0.01
0.00
0.00
0.00
0.00
0.00
0.00
0.01
0.01
0.03
0.00
0.00
0.35
0.00
0.49
2009
0.08
4.96
3.20
6.54
7.87
0.09
1.87
3.50
1.42
6.84
3.40
6.03
10.71
1.61
12.48
2.72
4.97
9.85
88.13
1995
China
1.39
3.19
3.25
2.53
7.63
0.08
1.65
2.73
1.58
9.86
2.99
5.19
7.11
1.92
6.38
1.57
2.78
5.55
67.37
2009
0.05
0.31
0.12
0.16
0.16
0.01
0.08
0.02
0.03
0.39
0.03
0.29
0.34
0.11
0.26
0.00
0.00
0.00
2.37
1995
Japan
0.07
0.43
0.21
0.42
0.43
0.04
0.13
0.21
0.23
0.74
0.18
0.51
0.56
0.10
0.07
0.02
0.01
0.02
4.38
2009
0.01
0.09
0.06
0.08
0.06
0.00
0.03
0.01
0.01
0.05
0.01
0.08
0.26
0.05
0.28
0.01
0.01
0.04
1.13
1995
Korea
0.03
0.42
0.09
0.19
0.20
0.01
0.07
0.03
0.08
1.01
0.09
0.19
0.37
0.05
0.07
0.00
0.01
0.00
2.93
2009
East Asia (2014) 31:67–91 85
4.77 13.25 1.80
Financial intermediation
Business services
Other services
Source: ViTA Database OECD-WTO
China does not include Taiwan
8.51
0.64
Manufacturing nec; recycling
8.86
9.11
Transport equipment
Transport and storage, post and telecommunication
18.39
Electrical and optical equipment
Wholesale and retail trade; hotels and restaurants
6.55
Machinery and equipment, nec
2.65
8.31
Basic metals and fabricated metal products
0.57
10.34
Chemicals and non-metallic mineral products
Construction
2.99
Wood, paper, paper products, printing and publishing
Electricity, gas and water supply
0.30 1.13
Textiles, textile products, leather and footwear
1.49
Mining and quarrying
Food products, beverages and tobacco
100.00 0.35
Agriculture, hunting, forestry and fishing
1995
Source industry
Total
Total
Gross exports Japan
1.67
9.32
4.76
11.78
11.78
0.74
2.40
2.52
10.21
12.74
5.63
8.77
9.05
2.05
0.62
0.75
4.60
0.61
100.00
2009
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.02
1995
0.00
0.00
0.00
0.00
0.01
0.00
0.00
0.00
0.00
0.00
0.00
0.01
0.00
0.00
0.00
0.00
0.00
0.00
0.03
2009
Argentina
0.00
0.00
0.01
0.01
0.01
0.00
0.01
0.00
0.00
0.00
0.00
0.04
0.01
0.00
0.00
0.00
0.01
0.00
0.11
1995
Brazil
0.00
0.01
0.01
0.01
0.02
0.00
0.01
0.00
0.00
0.00
0.00
0.06
0.01
0.00
0.00
0.00
0.04
0.01
0.19
2009
Table 12 Shares of value added embodied in Japanese gross exports by source country and source industry (%)
0.00
0.01
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.03
0.00
0.06
1995
Chile
0.00
0.01
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.01
0.00
0.00
0.10
0.00
0.13
2009
0.00
0.02
0.01
0.02
0.02
0.00
0.01
0.00
0.00
0.03
0.01
0.06
0.04
0.00
0.01
0.00
0.04
0.02
0.31
1995
China
0.02
0.06
0.08
0.05
0.19
0.00
0.04
0.05
0.07
0.40
0.05
0.17
0.19
0.05
0.07
0.02
0.08
0.08
1.68
2009
1.72
12.67
4.42
7.90
8.36
0.53
2.51
0.62
9.01
17.42
6.42
7.56
9.61
2.77
1.04
0.26
0.15
0.20
93.15
1995
Japan
1.46
7.96
4.27
11.12
10.20
0.68
2.18
2.33
9.83
10.85
5.40
7.78
7.76
1.77
0.47
0.66
0.10
0.37
85.21
2009
0.00
0.04
0.02
0.05
0.02
0.00
0.01
0.00
0.00
0.07
0.01
0.07
0.04
0.01
0.01
0.00
0.00
0.01
0.36
1995
Korea
0.01
0.07
0.02
0.05
0.08
0.00
0.02
0.01
0.05
0.14
0.02
0.09
0.07
0.01
0.01
0.00
0.00
0.00
0.64
2009
86 East Asia (2014) 31:67–91
9.50 4.59 9.01 1.42
Financial intermediation
Business services
Other services
Source: ViTA Database OECD-WTO
China does not include Taiwan
9.66
0.81
Manufacturing nec; recycling
Transport and storage, post and telecommunication
5.38
Transport equipment
Wholesale and retail trade; hotels and restaurants
16.19
Electrical and optical equipment
1.95
3.33
Machinery and equipment, nec
0.40
7.71
Basic metals and fabricated metal products
Construction
12.42
Chemicals and nonmetallic mineral products
Electricity, gas, and water supply
2.54
Wood, paper, paper products, printing, and publishing
3.86
Mining and quarrying 0.96
3.02
Agriculture, hunting, forestry, and fishing
7.26
100.00
Total
Textiles, textile products, leather, and footwear
1995
Source industry
Food products, beverages, and tobacco
Total
Gross exports Korea
1.38
11.64
4.13
10.27
9.89
0.38
1.96
0.85
6.60
13.02
3.93
8.22
10.62
1.75
1.64
0.62
11.91
1.19
100.00
2009
0.00
0.00
0.00
0.00
0.01
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.03
1995
0.00
0.01
0.00
0.03
0.01
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.01
0.00
0.00
0.01
0.03
0.01
0.11
2009
Argentina
0.01
0.01
0.02
0.02
0.03
0.00
0.01
0.00
0.00
0.00
0.00
0.08
0.03
0.01
0.01
0.01
0.03
0.01
0.28
1995
Brazil
0.01
0.04
0.01
0.04
0.05
0.00
0.01
0.00
0.00
0.00
0.00
0.11
0.03
0.01
0.00
0.01
0.10
0.04
0.49
2009
Table 13 Shares of value added embodied in Korean gross exports by source country and source industry (%)
0.00
0.02
0.01
0.01
0.02
0.00
0.01
0.00
0.00
0.00
0.00
0.00
0.00
0.02
0.00
0.00
0.09
0.01
0.18
1995
Chile
0.00
0.03
0.01
0.02
0.02
0.00
0.00
0.00
0.00
0.00
0.00
0.01
0.02
0.03
0.00
0.00
0.27
0.00
0.44
2009
0.00
0.04
0.04
0.10
0.12
0.00
0.03
0.01
0.01
0.03
0.02
0.13
0.13
0.01
0.19
0.02
0.08
0.09
1.05
1995
China
0.08
0.20
0.22
0.23
0.53
0.00
0.12
0.08
0.08
1.02
0.15
0.70
0.54
0.10
0.13
0.07
0.29
0.22
4.76
2009
0.11
0.79
0.30
0.58
0.70
0.04
0.17
0.02
0.13
1.23
0.13
0.56
0.82
0.17
0.13
0.01
0.01
0.01
5.91
1995
Japan
0.08
0.46
0.25
0.58
0.58
0.05
0.18
0.07
0.18
0.40
0.19
1.01
0.90
0.10
0.02
0.03
0.01
0.02
5.10
2009
1.04
6.93
3.65
7.72
6.36
0.27
1.44
0.74
4.96
13.31
2.86
5.75
9.57
1.71
6.43
0.79
0.36
2.41
76.29
1995
Korea
0.76
7.32
2.59
7.23
6.36
0.17
1.28
0.61
5.99
9.33
2.86
4.88
6.32
1.13
1.36
0.38
0.22
0.55
59.36
2009
East Asia (2014) 31:67–91 87
0.69 1.17 0.32
Electrical and optical equipment
Transport equipment
Manufacturing nec; recycling
1.51
Business services
Other services
Source: ViTA Database OECD-WTO
China does not include Taiwan
3.94 9.08
Financial intermediation
10.92
1.20
Machinery and equipment, nec
8.83
3.22
Basic metals and fabricated metal products
Transport and storage, post and telecommunication
5.68
Chemicals and nonmetallic mineral products
Wholesale and retail trade; hotels and restaurants
6.25
Wood, paper, paper products, printing, and publishing
3.30
0.98
Textiles, textile products, leather, and footwear
0.39
5.74
Food products, beverages, and tobacco
Construction
28.33
Mining and quarrying
Electricity, gas and water supply
100.00 8.45
Agriculture, hunting, forestry, and fishing
1995
Source industry
Total
Total
Gross exports Chile
1.37
9.26
3.51
9.64
6.17
0.38
0.28
0.26
0.99
0.57
1.44
2.27
6.57
5.35
0.48
3.90
41.59
5.98
100.00
2009
0.05
0.08
0.04
0.10
0.11
0.01
0.02
0.00
0.06
0.01
0.03
0.09
0.16
0.03
0.01
0.07
0.46
0.10
1.41
1995
0.05
0.10
0.03
0.19
0.07
0.01
0.03
0.00
0.02
0.01
0.02
0.07
0.23
0.09
0.02
0.06
0.73
0.21
1.95
2009
Argentina
0.01
0.03
0.07
0.05
0.08
0.00
0.03
0.00
0.05
0.02
0.04
0.15
0.23
0.04
0.01
0.01
0.02
0.02
0.87
1995
Brazil
0.02
0.05
0.03
0.06
0.11
0.00
0.02
0.00
0.01
0.03
0.04
0.10
0.16
0.04
0.01
0.02
0.15
0.04
0.89
2009
Table 14 Shares of value added embodied in Chilean gross exports by source country and source industry (%)
1.29
7.75
3.18
8.93
6.72
0.30
3.03
0.29
0.78
0.16
0.41
2.06
3.42
5.65
0.80
5.57
26.50
8.08
84.90
1995
Chile
1.04
7.67
2.90
6.11
4.76
0.28
0.01
0.20
0.70
0.11
0.67
1.43
4.14
4.64
0.31
3.65
37.53
5.39
81.54
2009
0.00
0.01
0.00
0.01
0.01
0.00
0.00
0.00
0.00
0.00
0.00
0.01
0.02
0.00
0.01
0.00
0.01
0.01
0.10
1995
China
0.01
0.03
0.04
0.04
0.09
0.00
0.02
0.01
0.03
0.06
0.04
0.10
0.16
0.03
0.06
0.02
0.04
0.05
0.86
2009
0.01
0.09
0.05
0.13
0.11
0.00
0.02
0.00
0.05
0.06
0.04
0.06
0.09
0.02
0.00
0.00
0.00
0.00
0.74
1995
Japan
0.02
0.08
0.05
0.42
0.09
0.01
0.02
0.01
0.05
0.03
0.02
0.04
0.11
0.02
0.00
0.00
0.00
0.00
0.99
2009
0.00
0.01
0.01
0.02
0.01
0.00
0.00
0.00
0.01
0.01
0.00
0.01
0.03
0.00
0.02
0.00
0.00
0.00
0.14
1995
Korea
0.01
0.04
0.02
0.16
0.03
0.00
0.01
0.00
0.05
0.02
0.02
0.05
0.10
0.01
0.01
0.00
0.00
0.00
0.54
2009
88 East Asia (2014) 31:67–91
East Asia (2014) 31:67–91
89
pattern of commodity prices [29, 32]. It will therefore have missed the opportunity to link Asia’s development with its own. Second, although Chile has been indeed a pioneer in establishing economic and political ties with East Asian countries, other Latin American countries—especially Peru and Colombia—are rapidly closing the gap. To make matters worse, these countries did design comprehensive strategies, which could place Chile in an unfavorable position. It is therefore time that Chilean stakeholders put their self-indulgence beside them. Unless they want to turn East Asia in a missed opportunity and want to remain caught in their role as a commodity supplier, the time for change is now. Acknowledgments This article has received the financial support of Fondecyt grant no. 3120110. The author acknowledges the very helpful comments of two anonymous referees. All errors and omissions remain the author’s sole responsibility.
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