Exporting to Asia (Part 2)

After analyzing the general characteristics of the Asian region which affect the opportunities for exporters, let us pause briefly to consider the most relevant of Chile's exports to Asian markets.

1 – Chile’s exports are concentrated in a small basket of goods; mainly commodities. A brief review of Chile’s exports shows that copper (in its many forms), iron, molybdenum, cellulose and a few more items represent the overwhelming majority of our exports - 90% or more of sales. This characterizes all countries with the exception of those such as Australia.

2 - Firms that export from Chile are relatively few. Most are large industrial and mining enterprises. SMEs have a distant, and truly secondary, role in the sector.

3 - Major export markets (China, Korea, Japan and more recently India) make up the bulk of the export sector.

Though present in Chile’s export trade with other regions, the abovementioned features are more accentuated in Asia.

In light of the above situation, the challenges are clear:

1 - Systematically develop new types of exports constituted of principally “non-commodity” products, which also have higher added-value. To move in this direction, the FTAs are fundamental tools, whereas these agreements can prevent the development of staggered tariff measures (the greater the production process, the higher the tariff) designed to protect domestic manufacturing sectors.

In this regard much remains to be done. We have, however, seen progress. For example, Chile exported 253 products to China in 2003. In 2006, the number rose to 307, though still lower than 487 different products sold to Japan, the Asian market is looking increasingly attractive to Chile. In Korea, during the same period the increase was from 179 to 286 products. In India, our newest export market, the increase only included a change from 70 to 122 types of goods.

2 - Increase the number of exporting firms in each market, especially the SME segment.
This challenge will be best faced by a combination of market indicators and instruments designed with market share and branding in mind. Obviously, for SMEs this is a more complex subject, whereas Asian transaction costs are substantially higher compared to other regions such as MERCOSUR, NAFTA and the EU. This is due to factors involving geographical distance, cultural differences, etc.

3 - The third challenge is penetrating markets where Chile has little trade presence, as in the case of India. Despite expectations that India will be one of the 10 largest markets for Chile, Chile often overlooks the fact that Southeast Asia, as a whole, represents a region larger than Japan, Australia or New Zealand. To meet this challenge, we hope that the P4 implementation and the upcoming FTAs with Australia, Thailand, Malaysia and India will be key factors in the Chilean export strategy.