Chiles Economic Growth - Assignment Example

Assignment Introduction Chile has emerged as a model in representing the policy of reforming unilateral trade. Motive behind trade liberalization is to eradicate the barriers for free exchange of goods amongst the nations. This may include removal of tariff or granting certain relaxation in the trade policy. Policy makers of Africa, Latin America, South Asia and Eastern Europe are looking forward to implement this type of trade policy. By liberalizing the trade policy, Chile’s economic growth has improved and thus elevated to seven percent. Chile’s trade policy is overviewed with positive interest in the recent space by the entire nation’s policy maker (The National Bureau of Economic Research, 1998). With this concern, the assignment intends to establish certain methods by which Chile has been able to perform unilateral trade liberations successfully to the full elimination of quantitative restrictions and exchange controls. Establishing the Method of Unilateral Trade Liberalization in Chile Implementation of Unilateral Trade Liberalization in Chile Trade liberalization of Chile could be classified under five stages of development process. Generally, unilateral trade liberalization technique involves the risk sharing mechanism. By deducting the interest of domestic political affairs, the unilateral trade relaxation may get blocked. The unilateral tariff cutback by a certain degree gets rid of this incompetence, but at certain situations, the factor concerning trade liberalization becomes more effective in the nation (Edwards and Lederman, 1998). Trade liberalization is duly considered to be one of the significant topics from the preceding two decades as a form of economic policy for the developing countries. It is worth mentioning in this regard that public-private partnership has played a pivotal role in framing the emerging economy for Chile. The reduction of tariff towards the import of goods aided the private enterprises of the nation to grow extensively. In the past, executing free trade agreement has always been a subject of conflict for the agricultural sector. Agricultural product has been the issue of dynamic export arena accounting for fifteen percent of total exports. The main contrast appears from the traditional inward thoughts of the people (Saez, 2005). The first stage ranged from the period of 1974-1978 and thus categorized by the reduction and the simplification of trade barriers. The second stage could be identified from 1978-1982, which reflected the picture of variation of its stabilization program. The third phase may be stated as the reversal stage that ranged from 1983-1985. It was the phase where Chile confronted severe economic recession. Fourth stage sums up the recovery of Chile’s economy after the recession period and covers the period of 1985-1990. Fifth stage from 1991 to present recognizes the transition of Chile’s economy by implementation of free trade agreement and voluminous growth (Edwards and Lederman, 1998). Advantages of Unilateral Trade Liberalization in Chile Chile enjoys the freedom of trade policy in South and Central America. For this particular reason, the nation ranked seventy-fifth position in the international corrupt index. Chile is being placed in top position as the first South and Central American country to reach the top index in its own region. Despite of facing the recent economic recession, Chile has retained its first position as a global leader acting as a model for its counterpart (The Heritage Foundation, 2015). Chile’s economic policy has attracted the attention of foreign investors and thus fostered its growth by export development. Unilateral trade liberal format has placed Chile as the soundest economy of its region in Latin America. Chile’s recent success is the fruit of its market oriented economic policy. Chile’s trade policy is recognized to be transparent and well recognized one as compared to others throughout the globe. In the year 2010, Chile suffered economic crisis due to the occurrence of a natural calamity i.e. earthquake, but it recovered with increased investment and private cooperation. Chile remains open to economic crisis because of heavy reliance to copper export (Meyer, 2014). The economic policy of Chile remains open to trade and investment, which differs from rest of the world and thus needed for sustained growth. Freeing the trade has exclusively helped the poor to uplift the economic status from the last decade. On a further note, Chile’s economic growth has been driven by agricultural and industrial sector that also aided in realizing its further growth in future (Meyer, 2014). Governmental Support to the Liberalization Process of Chile Chile’s liberal economic structure can be determined as the result of strong economy and low inflation rate. Chile’s economic policy has been renewed in stages from 1973 to 1997. In this period of growth, Chile faced several difficulties but it turned up with its open economic structure. Chile is open to foreign direct investment in all sectors including services wherein market access is found to be much greater. Amendment of the banking laws seeks to raise the foreign investment. Chile is drafting its law for the intellectual property. The result of Chile’s growth is due to the structural policy blended with sound macroeconomic policy (World Trade Organization, 2015). Chile’s trade policy aimed to lessen poverty line and inflation. The approaches made by the respective government of Chile in considering the grouping of economic, political and strategic objectives that the policymakers have in mind to cope up with the macro level international restrictions that the nation face are deemed to be noteworthy in the circumstance of liberalization procedure. This complex set of considerations, which logically vary from country to country based on their resources and perceived opinions, eventually generate a specific set of political as well as financial trade-offs among various strategic objectives, where Chile has marked the differences and thus attained significant position in Latin America. The economic policy of Chile has led its economy to flourish and growth and likewise placed itself as a role model in front of the whole world and encouraged the inclusion of this policy in its liberalization procedure (Aggarwal and Espach, 2004). Unilateral Trade Liberalization in Transactional Level Chile’s model of unilateral trade liberalization has set itself as a role model amongst the Latin American based nations. The aim of the trade policy reforms in Chile has made greater inward of private orientation. This successful private orientation aids in rapid growth of the country’s economy like Chile. Export mechanism allows the economy of the nation to grow at a maximum level. Private investors get interest for making investments where they find flexibility in doing trade. The World Trade Organisation appreciates Chile’s free trade policy, as it has implemented the seed of a new reform, which is attracting the attention of foreign investors (Bouzas and Kieffman, 2003). Incorporation into the world economy has proven to be an influential means for the countries to endorse their respective economic growth, development and poverty reduction programs. Policies that are making economy open to trade and investment with the rest of the world are essential for sustained and prolonged economic growth. Opening up their economies to the global economy has been necessary in allowing several developing countries to widen competitive benefits in the production of certain products in similar trend like Chile (World Trade Organisation, 2015). Conclusion From the above analysis and discussion, it can be ascertained that the unilateral trade of liberalization is on the process to get adopted by the developing countries. This might be owing to the reason that trade liberalization removes the barriers like tariff duty and certain other relaxations for smooth conduct of export and import business. Chile has attracted the attention of foreign investors to conduct trade. Though Chile has faced several difficulties in lifting its economy, it presented itself as a model to the world about how to turn up with open trade policy by gaining effective governmental support for the liberalization process. References Aggarwal, V. K., & Espach, R. (2004). Diverging trade strategies in Latin America: An analytical framework. Retrieved from http://basc.berkeley.edu/pdf/articles/Diverging%20Trade%20Strategies%20in%20Latin%20America.pdf Bouzas, R., & Keifman, S. (2003). Making trade liberalization free. Retrieved from http://www.piie.com/publications/chapters_preview/350/7iie3470.pdf Edwards, S., & Lederman, D. (1998). The political economy of unilateral trade liberalization in Chile. Retrieved from http://core.ac.uk/download/pdf/6743860.pdf Meyer, J. (2014). Chile: Political and economic conditions and U.S. relations. Retrieved from https://www.fas.org/sgp/crs/row/R40126.pdf Saez, S. (2005). Implementing trade policy in Latin America. Uganda: United Nations Publications. The National Bureau of Economic Research. (1998). The political economy of unilateral trade liberalization: The case of Chile. Retrieved from http://www.nber.org/papers/w6510 The Heritage Foundation. (2015). Index of economic freedom. Retrieved from http://www.heritage.org/index/country/chile World Trade Organization. (2015). Chiles trade regime leads to strong economic growth, but increasing emphasis on regional agreements complicates trade policy. Retrieved from https://www.wto.org/english/tratop_e/tpr_e/tp60_e.htm Read More