• Thanks to sustained food and copper exports, Chile ended 2007 with GDP growth of 5.2%, up from 4.0% in 2006. Rising public expenditure on social programmes and infrastructure has stimulated employment and bolstered consumption, while rising fuel and food costs have caused a rapid resurgence in inflation. Externally, the slowing US economy together with stronger Chilean peso is expected to weigh on the growth of Chile's external trade. However, Chile's exports are expected to continue to fare well on the back of its expanding free trade agreements (FTAs). On the whole, the Chilean economy is forecast to register growth of another 5.0% in 2008.
• Hong Kong's total exports to Chile increased by 2% to US$400 million in 2007, while its imports from Chile decreased by 1% to US$166 million.

Current Economic Situation

The Chilean economy grew at a faster pace in 2007, when GDP registered growth of 5.2%, up from 4.0% in 2006. Expanding government spending on social programmes and infrastructure has moderated unemployment, and in turn boosted private consumption. However, high fuel and food prices have elevated prices, causing inflation rate to stay far above the target rate of 3%. Externally, Chile's overall exports increased on the back of strong food and copper demand and its expanding network of FTAs. On the other hand, imports, mainly consumer and intermediate goods, also increased.

Looking ahead, the Chilean economy will grow on the back of expanding public consumption and investment. The improving employment prospects will continue to bolster private consumption, likely creating a greater demand for imports. On the other hand, Chile's exports will be further strengthened under its extensive web of FTAs. In particular, Chile's exports to Asia, especially China and Japan, are expected to fare well following the operation of the Chile-China and Chile-Japan FTAs. On the whole, the Chilean economy is forecast to register growth of another 5.0% in 2008.

Trade Policy

Chile's import system is based on the principle that all goods may be freely imported and anyone may engage freely in international trade transactions. As such, importers are not subject to any registration requirements. However, they are required to hire an accredited customs broker to enter the merchandise if the FOB value of such merchandise is higher than US$500. The use of a customs broker is not mandatory in several other instances, including merchandise entering into a free trade zone.

Chile adopts the Harmonised System for Tariff Classification and affords at least most favoured tariff treatment to all its trading partners. Virtually all imports are subject to a most-favoured-nation (MFN) duty of 6% ad valorem. Apart from import duties, products imported and/or circulated in Chile are essentially subject to a value-added tax (VAT) of 19% as domestic goods, excise taxes and some other charges, including an airport tax.

Regarding safeguard measures, Chile has been extremely restrained in its use of trade remedies. It does not apply any anti-dumping (AD) or countervailing (CV) measures on imports from the Chinese mainland or Hong Kong. Besides, Chile does not have any import quotas in place, nor does it impose any licensing requirements on imports or have any pre-shipment inspection requirements. However, certain goods require approval or certification prior to importation, while other goods require approval or certification for customs clearance.

Concerning foreign exchange, Chile does not impose any limits on the amount of currency derived from trade operations that can be brought in or out of the country, although Chilean exporters and importers with a total export or import value of US$5 million or higher on an FOB basis in any single year are required to provide certain information to Chile's Central Bank.

Over the past two decades, Chile has developed an extensive web of FTAs with a range of partner countries in the Americas, Asia, Europe and the Pacific region. Specifically, Chile has negotiated FTAs with the US, the EU, Bolivia, China, Canada, Central America, Colombia, Ecuador, Japan, Mercosur (Argentina, Brazil, Paraguay, Uruguay and Venezuela), Mexico, Panama, Peru, South Korea, the Pacific-4 (New Zealand, Singapore and Brunei) and the European Free Trade Association (Iceland, Liechtenstein, Norway and Switzerland). Meanwhile, Chile has also concluded partial trade agreements with Cuba and India, and is currently negotiating FTAs with Australia and Malaysia.

On 18 November 2005, Chile signed its FTA with China, which entered into force on 1 October 2006. Roughly half of China's exports to Chile in value terms were afforded duty-free treatment upon entry into force of the agreement. Duties for an additional 21% of China's exports are to be phased out in equal stages over a five-year period, while duties on 26% of China's exports will be phased out over a ten-year period. Only some 3% of China's exports are excluded from the scope of the free trade agreement. Three tariff phase-out rounds have already taken place since the entry into force of the agreement in October 2006, which means that products subject to five-year staging currently face a 2.4% duty rate, while products subject to ten-year staging currently face a 4.2% duty rate.

Chilean standards and technical regulations do not distinguish between foreign and domestic goods. Chile has so far issued over 1,000 technical regulations covering a broad spectrum of products. Standards, on the other hand, are voluntary and are adopted through consensus among parties from both the public and private sectors who are invited to participate in the consultations. The National Institute for Standardisation (INN) has overall responsibility for the elaboration of standards. In addition, Chile is a member of the Pan-American Standards Commission (COPANT), the International Organisation for Standardisation (ISO), the Inter-American Metrology System (SIM) and the InterAmerican Accreditation Cooperation (IAAC).

Chile has labelling regulations in place for a wide range of products. In general, products commercialised in Chile must be labelled with the name or registered brand and address of the producer or importer, the country of origin and care instructions. The information included must be accurate and be provided in Spanish.

There are two free trade zones in Chile: the Free Zone of Iquique (ZOFRI), Region I, in the far north, and the Free Zone of Punta Arenas (PARANEZON), Region XII, in the far south. ZOFRI is a major entry point for products bound for Bolivia and Peru, Paraguay and northern Argentina. ZOFRI encompasses the free ports of Arica and Iquique, while PARANEZON also has a free port. Each free trade zone is equipped with manufacturing, packaging and exporting facilities. Imports entering the free zones of Iquique and Punta Arenas are duty-free. However, imports leaving the free trade zones to enter the Chilean market pay full tariff and VAT charges.

Hong Kong's Trade with Chile^

Chile is Hong Kong's 44th largest export market. Hong Kong's total exports to Chile increased by 21% in 2006, and by another 2% in 2007. Main exports to Chile included telecommunications equipments & parts (shared 15% of total), footwear (9%), articles of apparel, of textile fabrics (9%), computers (8%), audio & video recorders & players (8%), and toys, games and sporting goods (8%).

On the other hand, Chile is Hong Kong's 45th largest source of imports. Hong Kong's total imports from Chile decreased by 1% in 2007, after growth of 2% in 2006. Leading import items included fruit and nuts (shared 52% of total), meat and edible meat offal (10%), copper (9%), alcoholic beverages (5%), fish, crustaceans, molluscs and other aquatic invertebrates (5%), and leather (4%).