Sebastián Gabay and Alan Mai, senior students in the Bachelor’s Program in International Studies, won third place on October 14, 2014, in the first Essay Contest organized by the Latin America–Asia Pacific Observatory of the Latin American Integration Association (ALADI).
The contest evaluated entries from all ALADI member countries, awarding third place to Gabay and Mai’s essay, titled: “Trade Effects of the Chile-China FTA: A Step Toward Trade Liberalization or a Stumbling Block?”
The value of the study lies in its methodology. “It’s quite simple, but it yields results,” said Gabay. Using only trade data, they assessed whether the FTA is beneficial or not.
Regarding the challenges of conducting this study, Mai commented: “The FTA is quite recent. It began in 2006. While there is some information available, it’s not very extensive.”
First, they analyzed trade. They used a nine-year time series (the most recent data they had available). They examined the ten categories most frequently imported by China, identifying who the suppliers were in 2004 and who the suppliers were—for those same categories—in 2013.
In the second part, they analyzed Chile’s exports. “If China has a comparative advantage and Chile imports those products, then that creates trade,” Gabay explained.
“The study concludes that the FTA examined in this research has been beneficial to Chile; in other words, it has generated new trade for Chile. China has become a major supplier to Chile, and trade volumes have increased in most of the product categories analyzed,” the study notes in its conclusions.
Chile and China
It was a long process before they settled on those two countries. They chose Chile because of its similarities to Uruguay. They chose China because of its key role in Asia (which they consider a very important region, especially for their careers).
“At first, it was a bit of a hassle. We tried to analyze trade relations between Chile and Asia as a whole. We realized it was very difficult. So we narrowed it down,” Mai explained. “Focusing on bilateral relations was more than enough,” Gabay added.
Chile shares a close bond with Uruguay. It is a neighboring country in the region. Furthermore, their economies are similar in size. But it has chosen a different path, the student noted.
Uruguay and China
“It’s difficult to compare situations,” Gabay explained, adding that there have been signs of more fluid interaction in Uruguay. However, certain structural and political factors in the country prevent it from moving in that direction.
“Uruguay should reflect deeply on how to improve and gain a degree of autonomy that it currently lacks,” Mai said. He also noted that Chile was different from our country and, for that reason, achieved different results.
According to Mai, Chile’s agreement with China was secured thanks to previous agreements. This is what Chilean diplomats call “the domino effect.” China, not wanting to be left out, followed in the footsteps of other countries.
Gabay emphasized the importance of economic partnerships: “It’s not so much about who you partner with, but how many. The more partners you have, the greater the benefits.”
Finally, the students spoke about the support they received in writing the essay. “We used the tools the faculty provided us,” Gabay said.
They highlighted the support they received, particularly from one professor: economist Juan Labraga. “He’s a huge fan of international trade. He enjoys this kind of work, and we have his support. He encouraged us, gave us papers to read, and guided us,” said Gabay.
“Even before we asked him to be our thesis advisor, he was already a huge help to us during the preliminary workshop,” Mai added.