In Wisconsin

Export Q&A: Making the Most of Free Trade Agreements

Export Q&A: Making the Most of Free Trade Agreements

Q: South America stretches from north of the equator to close to the Antarctic. How does this broad range of climates affect the demand for imported products?

A: Climate does not play a major role in general industry demand, which is, by and large, shaped by specific needs for certain products and services in each country. Local climates and cultures more closely influence import demand from consumer-led sectors such as food and retail. For agriculture specifically, microclimates and inverse seasons to the U.S. play a key role in the production and availability of a large variety of produce year-round.

Q: What are some of the cultural differences between South American countries and the U.S. that exporters need to consider?

A: There are a number of differences between South American and U.S. cultures that companies must be aware of to be successful in the market. The largest cultural divide is the perception of time, which Latin cultures view far less rigidly than the U.S does. Punctuality for meetings and adherence to deadlines are two frustrations commonly expressed when doing business in Latin cultures. Wariness of outsiders is common and foreigners will have to establish personal relationships in order to be successful. Business interactions will begin with formalities, followed by casual conversation before progressing to business. Although business customs in Chile are more similar to the U.S. than other Latin cultures, these differences should still be acknowledged.

Q: How have trade agreements between the U.S. and Argentina and Chile affected the ability of American exporters to compete in those markets?

A: Both the recently signed bilateral Trade and Investment Framework Agreement (TIFA) with Argentina and the 2004 United States-Chile Free Trade Agreement (FTA), have greatly strengthened trading ties to these respective countries, and represent a significant advantage for American companies. For example, Chile’s FTA eliminated duties on 100 percent of U.S. exports to the country. Additionally, banks, insurers, deliverers and information technology companies now enjoy the protection of U.S. copyrights, trademarks and patents in both agreements. Furthermore, the agreements open up major government procurements to U.S. bidders.

Q: What is the role of Mercosur?

A: Mercosur, or the “common market of the South,” promotes the free movement of goods, services and people among Argentina, Brazil, Paraguay, Uruguay and Venezuela. The goal is to unify South America as a single economic bloc and remove obstacles to regional trade. To achieve this, Mercosur has eliminated trade tariffs among member nations, established a singular external tariff and distributed visas that allow citizens of member countries to live, attend school and work in other Mercosur nations. The organization also recognizes associate members, who receive tariff reductions but lack full voting rights. The associate members of Mercosur currently include Bolivia, Chile, Colombia, Ecuador and Peru.

The U.S. currently does not have any free trade agreements with Mercosur members, meaning that U.S. exports to those countries incur taxes of up to 35 percent of CIF value, (the U.S. does have a free trade agreement in place with associate member Chile) depending on the type of product being imported (the 2013 average was 22 percent).

INterconnect: June 2016>