SA-CHILE JOINT STUDY

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Joint Study to Enhance Trade andEconomic Relations betweenSouth Africa and Chile2016The Department of Trade and Industry (the dti), South AfricaDirectorate forInternational Economic Relations (Direcon), Chiletowards full scale industrialisation and inclusive growththe dti Customer Contact Centre: 0861 843 384Website: www.thedti.gov.zaJoint Study to Enhance Trade and Economic Relations between South Africa and ChileSA-CHILE JOINT STUDY.indd 112017/01/20 10:23 AM

AcknowledgementsThis paper was commissioned by the Department of Trade and Industry (the dti) on behalf of the government of the Republic of South Africaand the General Directorate for International Economic Relations (Direcon) on behalf of the government of the Republic of Chile.the dti would like to express appreciation to the dti project steering committee for the development of this paper. In particular: Mr Malose Letsoalo – Director: Americas Bilateral Trade Relations Mr Guguletu Mqambalala – Deputy Director: Americas Bilateral Trade Relations Ms Shamira Ahmed – Assistant Director: Americas Bilateral Trade RelationsAs well as oversight by: Ms Xolelwa Mlumbi-Peter – Deputy Director General: International Trade and Economic Development (ITED) Mr Victor Mashabela – Chief Director: Bilateral Trade Relations (rest of the world), ITEDFurthermore, great appreciation to officials for support from: the dti internal stakeholders: ITED-Trade in Services, ITED-Trade Rules, Trade and Promotion South Africa, InvestSA, and the IndustrialDevelopment Division; Department of Agriculture, Forestry, and Fisheries (Food Import and Export Standards Directorate and International Trade Directorate); Department of International Relations and Cooperation (Directorate: Argentina, Chile, Paraguay and Uruguay); Embassy of South Africa in Chile.Direcon would like to express appreciation to its project steering committee for the development of this paper. In particular: Bilateral Economic Affairs: Mr Pablo Urria, Mr Alex Wetzig, Ms Carla Henriquez, Ms Constanza Alegría, and Mr José Miguel Sepúlveda. Studies Department: Mr Alejandro Gutiérrez, Ms Marcela González, Ms Vanessa Maynou, Mr Cristóbal Tabilo and Mr Hernán Gutiérrez.Furthermore, great appreciation to officials for support from: Embassy of Chile in South Africa2Joint Study to Enhance Trade and Economic Relations between South Africa and ChileSA-CHILE JOINT STUDY.indd 22017/01/20 10:23 AM

Contents1. Introduction111.1Background to the study111.2Objectives and outline of the study111.3Environment for strengthening the trade relationship122. Main characteristics of the Chilean and South African economies, and institutional framework2.12.22.32.42.512Chile122.1.1 Macroeconomic features122.1.2 Trade policy Regime: Formulation and implementation142.1.3. Structure and features of the market172.1.4 Banking system and credit policies172.1.5 Employment policies and laws212.1.6 Environmental policies and laws24South Africa272.2.1 Macroeconomic features272.2.2 Trade policy regime: Formulation and implementation312.2.3 Structure and features of the market322.2.4 Banking system and credit policies322.2.5 Employment policies and laws332.2.6 Environmental policies and laws33Trade342.3.1 Chile342.3.2 Composition of exports at six-digit (HS-6)342.3.3 Origin and destination of exports and imports at HS-6362.3.4 South Africa412.3.5 Composition of exports at HS-6412.3.6 Origin and destination of exports and imports at HS-642Trade in services462.4.1 Origin, destination and total Chilean exports and imports services462.4.2 Origin, destination and total South African exports and imports services48Trade agreements negotiated by each party492.5.1 Chile492.5.2 South Africa513. Economic relations between Chile and South Africa3.152Chile523.1.1. Bilateral trade in Goods533.1.2. Exports at HS-6543.1.3. Imports at HS-6553.1.4. Bilateral trade in services553.1.5. Bilateral investments553.1.6. Joint participation in multilateral forums: Matching topics of interest(World Trade Organisation, G77 and other)3.256South Africa563.2.1 Bilateral trade in goods563.2.2 Exports at HS-6573.2.3 Imports at HS-6573.2.4 Bilateral trade in services573.2.5 Bilateral investments573.2.6 Joint participation in multilateral forums: matching topics of interest (World Trade Organisation, G77 and other)59Joint Study to Enhance Trade and Economic Relations between South Africa and ChileSA-CHILE JOINT STUDY.indd 332017/01/20 10:23 AM

4. Analysis of enhancement of trade and investment between Chile and South Africa4.14.2Chile594.1.1 Bilateral trade in goods594.1.2 Opportunities for production linkages634.1.3 Enhancement of trade in services644.1.4 Investment opportunities64South Africa654.2.1 Bilateral trade in goods654.2.2 Opportunities for production linkages664.2.3 Enhancement of trade in services4.2.4 Investment opportunities67675. Trade and investment policies5.15968Chile685.1.1 Measures affecting exports of interest (as identified in 4.1)685.1.2Services795.1.3Foreign investment regimes845.1.4 Trade remedies885.1.5 Government procurement895.1.6 Transparency905.1.7 Intellectual property rights915.1.8. Environment and international trade945.1.9. Labour and international trade6. Cooperation and information exchange on other issues1011046.1Development strategies1046.2Cooperation programme1046.3Customs, sanitary and phytosanitary, and technical barriers to trade1056.4Export and investment promotion1056.5Cooperation in agriculture1056.6Scholarship programme “Republic of Chile – Nelson Mandela”1057. Conclusions1057.1Why South Africa and Chile?1057.2Effects of strengthening the trade telationship between Chile and South Africa1067.2.1. General effects1067.2.2. Effects on trade and investment by main economic sectors1068. Recommendations1069. Annexure1079.1Methodology for effects on Chilean exports to South Africa1079.2Methodology for effects on Chilean imports from South Africa1079.3Methodology for potential opportunities10810. References4109Joint Study to Enhance Trade and Economic Relations between South Africa and ChileSA-CHILE JOINT STUDY.indd 42017/01/20 10:23 AM

TablesTable 1:Main domestic laws and regulations iin relation to foreign Trade, September 201514Table 2:Selected macroeconomic indicators, 2008–201427Table 3:Balance of payments, 2008–2014 (US ‘000)29Table 4:Chilean foreign trade, 2009–2014 (US million and percentages)34Table 5:Chilean exports, 2009–2014 (US million and percentages)34Table 6:Main Chilean exports, 2014 (US million and percentages)35Table 7:Chilean imports, 2009–2014 (US million and percentages)35Table 8:Main Chilean imports, 2014 (US million and percentages)36Table 9:Chilean exports by main markets with and without trade agreement, 2013–2014(US million and percentages)37Table 10: Chile’s destination of exports at HS-6 (US million and percentages)38Table 11: Chilean imports by main markets with and without trade agreements, 2013– 2014(US million and percentages)39Table 12: Chile’s origin of imports at HS-6 (US million and percentages)40Table 13: Composition of top 20 exports from South Africa to the world at HS-6 (US ‘000)41Table 14: South Africa’s leading import partners (2014)42Table 15: South Africa’s leading export and import partners in the Americas (2014)43Table 16: South Africa’s leading export partners (2014)43Table 17: South Africa’s origin and destination of exports and imports at HS-6 (US ‘000)44Table 18: Main export destinations of Chilean services*, 2009–2014 (US million and percentages)48Table 19: Main import origins of Chilean services*, 2009–2014 (US million and percentages)48Table 20: South Africa’s services exports and imports48Table 21: List of trade agreements of Chile, 201549Table 22: Coverage of Chilean trade agreements, 201551Table 23: Trade agreements negotiated by South Africa52Table 24: Chilean trade with South Africa, 2009–2014 (US million and percentages)53Table 25: Chilean exports to South Africa, 2009–2014 (US million and percentages)53Table 26: Main Chilean exports to South Africa, 2014 (US million and percentages)54Table 27: Chilean imports from South Africa, 2003–2014 (US million and percentages)54Table 28: Main Chilean imports from South Africa, 2014 (US million and percentages)54Table 29: Bilateral trade in goods between South Africa and Chile (2010–2014)56Table 30: South Africa’s exports to Chile at HS-6 (US ‘000)57Table 31: South Africa’s imports from Chile at HS-6 (US ‘000)57Table 32: Foreign direct investment flows and stock, 2008–201357Table 33: South Africa’s outward investment to Chile58Table 34: South Africa’s inward investment from Chile60Table 35: Changes in Chilean exports to South Africa by tariff reductions(US million and percentages)60Table 36: Changes in Chilean imports from South Africa by tariff reduction(US million and percentages)61Table 37: Potential Chilean exports to South Africa (US million and percentages)62Table 38: Potential Chilean imports from South Africa (US million and percentages)63Table 39: Indicative potential trade between South Africa and Chile, 2014 (US ‘000)65Table 40: Tariffs affecting South African products of interest69Table 41: Technical barriers to trade, and sanitary and phytosanitary requirementsfor South African products of interest78Table 42: List of agreements dealing with environmental issues95Table 43: List of agreements dealing with labour issuesJoint Study to Enhance Trade and Economic Relations between South Africa and ChileSA-CHILE JOINT STUDY.indd 510252017/01/20 10:23 AM

FiguresFigure 1: GDP, annual growth, 2000–2015 (percentages)13Figure 2: EMBI global spread, average, 2000–2014 (basis points)13Figure 3: Inflation tare, consumer price index, 1990–2014 (percentages)13Figure 4: Services trade evolution, 2005–2014 (US million)46Figure 5: Exports by type of service, 2009–2014 (US million)46Figure 6: Imports by type of service, 2009–2014 (US million)47Figure 7: South African investment in Chile by sector, 1974–2014 (percentages)55Figure 8: Procedure for adoption of a standard746Joint Study to Enhance Trade and Economic Relations between South Africa and ChileSA-CHILE JOINT STUDY.indd 62017/01/20 10:23 AM

Acronyms and on/ExplanationBITsBilateral investment treatiesBricsBrazil, Russia, India, China and South AfricaCEF (Spanish abbreviation)Financial Stability CouncilComesaCommon Market for Eastern and Southern AfricaCorfo (Spanish acronym)Chilean Economic Development AgencyCPIConsumer price indexCSIRCouncil for Scientific and Industrial ResearchDAFFDepartment of Agriculture, Forestry and FisheriesDirecon (Spanish acronym)Directorate for International Economic RelationsDLDecree lawEACEast African CommunityECLACEconomic Commission for Latin America and the CaribbeanEFTAEuropean Free Trade AssociationEMBIEmerging market bond indexEUEuropean UnionFDIForeign direct investmentFICE (Spanish abbreviation)/FCIFForeign capital investment fundsFICER (Spanish acronym)Foreign investment venture capital fundsFNE (Spanish abbreviation)National Economic Prosecutor’s OfficeFTAFree trade agreementGATTGeneral agreement on tariffs and tradeGDPGross domestic productHSHarmonised systemIAACInter-American Accreditation CooperationICNInternational Competition NetworkICTInformation and communications technologyIECInternational Electrotechnical CommissionILOInternational Labour OrganisationIMOInternational Maritime OrganisationInapi (Spanish acronym)Industrial Property OfficeINN (Spanish abbreviation)National Standardisation InstituteInvestSAIPInvestment South AfricaIntellectual propertyIPEAInternational Preliminary Examination AuthorityIPPCInternational Plant Protection ConventionIPRIntellectual property rightsISAInternational Searching AuthorityISOInternational Standardisation OrganisationITACInternational Trade Administration CommissionITEDInternational Trade and Economic DevelopmentJCMJoint consultative mechanismJTICJoint Trade and Investment CommissionJoint Study to Enhance Trade and Economic Relations between South Africa and ChileSA-CHILE JOINT STUDY.indd 772017/01/20 10:23 AM

LGB (Spanish abbreviation)General Law on BanksMEFT (Spanish abbreviation)Ministry of the Economy, Development and TourismMercosur (Spanish acronym)Mercado Común del SurMFNMost favoured nationMLAMultilateral recognition agreementMOUMemorandum of understandingMPCMonetary Policy CommitteeMRAMutual recognition agreementNDPNational Development PlanNedlacNational Economic Development and Labour CouncilNEMANational Environmental Management ActNTNational TreasuryOECDOrganisation for Economic Cooperation and DevelopmentOIEWorld Organisation for Animal HealthP4Trans-Pacific Strategic Economic PartnershipPCTPatent Cooperation TreatyPTAPreferential trade agreementRNM (Spanish abbreviation)National Metrology NetworkRTARegional trade agreementSACUSouthern African Customs UnionSADCSouthern African Development CommunitySAG (Spanish abbreviation)Agriculture and Livestock ServiceSARBSouth African Reserve BankSARSSouth African Revenue ServicesSBIF (Spanish abbreviation)SEC (Spanish abbreviation)Superintendence of Banks and Financial InstitutionsElectricity and Fuels Supervisory AuthoritySENCE (Spanish acronym)National Training and Employment ServiceSernaPesca (Spanish acronym)National Fisheries ServiceSIInternational System of UnitsSMEsSmall and medium enterprisesSPSSanitary and phytosanitaryStats SAStatistics South AfricaSubPesca (Spanish acronym)Undersecretariat of FisheriesSVS (Spanish abbreviation)Insurance Supervisory AuthorityTBTTechnical barriers to tradeTDCATrade, Development and Cooperation AgreementTDLC (Spanish abbreviation)Competition Tribunalthe dtiTISADepartment of Trade and IndustryTrade and Investment South AfricaTPSFTrade policy and strategy frameworkTripsUFTrade Related Aspects of Intellectual Property RightsUnidades de FomentoUNUnited NationsUPOVUnion for the Protection of New Varieties of Plants8Joint Study to Enhance Trade and Economic Relations between South Africa and ChileSA-CHILE JOINT STUDY.indd 82017/01/20 10:23 AM

USUnited States of AmericaVATValue added taxWIPOWorld Intellectual Property OrganisationWTOWorld Trade OrganisationJoint Study to Enhance Trade and Economic Relations between South Africa and ChileSA-CHILE JOINT STUDY.indd 992017/01/20 10:23 AM

Executive summaryPreambleIn 2012, South Africa and Chile signed a memorandum of understanding (MOU) on the establishment of the Joint Trade and InvestmentCommission (JTIC), whose main objective is to enhance dialogue on aspects of trade and regular commercial exchange, strengthenbilateral economic relations, promote investment and growth, facilitate the diversification of trade between Chile and South Africa, andidentify special areas of economic cooperation.During the first JTIC meeting in November 2014, in Santiago, Chile, both countries agreed on a work plan focused on short-term, mediumterm and long-term objectives. In the short term, both parties agreed to participate in each other’s trade fairs and exhibitions as well asexchange business delegations. Over the medium term, the parties identified areas of interest for cooperation and the enhancement of tradeand investment, including 20 products of export interest. Over the long term, South Africa and Chile agreed to conduct a joint study with theaim of exploring opportunities to enhance bilateral trade and investment relations. The competent authority responsible for the study on theSouth African side was the dti and Direcon on the Chilean side.To promote sustainable trade and investment, the study provided an opportunity to exchange information on the policy framework andpolicymaking process relating to trade, investment, financial markets, employment and environment.The study analysed the trends in trade in goods and services, both bilateral and with the rest of the world. While the current trade volumesare low, the potential to increase trade is higher, and there exists opportunities to serve as each other’s gateways into the respectiveregions. Similarly, the study also analysed flows in investments. While there is notable low investment in each other’s economies, data onforeign direct investment (FDI) remains a challenge as it is not available. Despite limitations on data on trade in services, the study identifiedopportunities to enhance trade in services. Chile and South Africa agreed to expand the two-way trade in goods and services based oncomplementarities according to their respective national economic development strategies. FDI also remains low with a growing number ofSouth African companies investing in Chilean sectors such as hospitality, mining and mining-related services. Chilean companies are alsobeginning to invest in South Africa and are exploring opportunities in the rest of the continent.To promote two-way investments, the two countries identified sectors of interest that have the potential to promote production or industriallinkages.1. The following sectors with potential investment opportunities were identified:i.)oil and gasii.) ocean economyiii.) renewable energyiv.) biotechnologyv.) nanomaterialsvi.) miningvii.) audiovisual (filmmaking and video game) servicesviii.) engineering (construction and built environment)2. In addition, there is potential to develop linkages for investment into other markets in Africa and Latin America, with an aim to improveparticipation of both Chile and South Africa in global value chains.The recommendations of the joint study are as follows:i.)To encourage cooperation and, as a first step, work towards conclusion of MOUs in the following areas: customs procedures technical barriers to trade agricultural and related regulated issues; export promotion investment promotionii.)Conduct further studies to identify specific areas for cooperation in the following sectors: mining agriculture aquaculture blue economy green economyiii.) Continue efforts to determine the most appropriate institutional framework to develop the real potential of the bilateral economicand commercial relations that are sustainable in the long term.10Joint Study to Enhance Trade and Economic Relations between South Africa and ChileSA-CHILE JOINT STUDY.indd 102017/01/20 10:23 AM

1. Introduction1.1 Background to the studyDuring the inaugural JTIC in Santiago, Chile, in November 2014, South Africa and Chile agreed to conduct a joint study with theaim of enhancing bilateral trade and investment relations between the two countries. The terms of reference of the joint study werefinalised via a video conference in January 2015. The competent authority responsible for the study on the South African sidewas the dti and Direcon on the Chilean side. Both countries agreed that the draft report of the joint study would be completed bySeptember 2015, with a view to present the study’s recommendations to the political authorities. It was envisaged that the final draftreport would be discussed and finalised during the second meeting of the JTIC.South Africa and Chile continue to enjoy warm and cordial political relations that saw Chile President Michelle Bachelet pay a statevisit to her South African counterpart in August 2014. Both countries signed a MoU to establish a joint consultative mechanism(JCM) in November 1998. The JCM serves as a formal body for high-level bilateral consultations on issues of mutual concern andcommon interest. The JCM is led at the deputy minister level. Topics addressed during consultations included consolidating relationsbetween South Africa and Chile and examining existing bilateral cooperations in various fields. The MoU on the establishment of aJTIC was signed in 2012. The commission is led at a senior official level and the report of the JTIC is tabled at the JCM meeting.The objectives of the JTIC are: incorporating and maintaining a dialogue on aspects of trade and regular commercial exchange,strengthening bilateral economic relations, promoting investment and g

Joint Study to Enhance Trade and Economic Relations between South Africa and Chile 5 Tables Table 1: Main domestic laws and regulations iin relation to foreign Trade, September 2015 14 Table 2: Selected macroeconomic indicators, 2008–2014 27 Table 3: Balance of payments, 2008–2014 (US ‘000) 29 Table 4: Chilean

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