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THE CHALLENGES FACING TRADE PROMOTION in TODAY's WORLD, Mr. Hector Casanueva, Director of Prochile, CHILE

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THE CHALLENGES FACING TRADE PROMOTION in TODAY's WORLD, Mr. Hector Casanueva, Director of Prochile, CHILE THE CHALLENGES FACING TRADE PROMOTION IN TODAY’S WORLD Mr. Hector Casanueva Director of ProChile CHILE The goal of this Conference is not only to share our mutual experiences but also our organization’s different points of view regarding trade promotion in a new world, in a different world, in a world that has changed very rapidly over the past ten years and even more so over the past five. We are actors in a new unchangeable reality in which we function with the sensation that there are aspects that we are not able to control. There is a growing complexity. Today, our world is much more open, but at the same time, much more difficult. Within this context, trade promotion has to make policies, strategies and instruments adapt and I think that this might be this conference’s greatest added-value: supporting the liberalization process of world trade. There is a word used often these days: globalization. Today, our planet is much more integrated from a point of view of politics, economics, social issues, trade and communications in which international relations go beyond those of a State. The latter has had a strong impact on trade because communications today allow consumers and producers to be informed of what is happening in any part of the world. This leads to more informed and more sophisticated consumers and, subsequently, more demanding and more informed and efficient producers. All of this has an enormous impact on cultural patterns that are becoming more universal and global. There are new actors in the international system. International economic relations are no longer only issues involving agreements between Governments and States, but also carry over into the daily work of companies, universities and even non-governmental organizations. In today’s world, the bases are democracy and the market. The first, generates the possibilities for free citizens to exist, free to choose politically, free to choose culturally, free to choose regarding all aspects and dimensions of their lives. The other base of the international system is the market in the allocation of resources. The important thing is that consumers concur freely. Today we have a world that is increasingly advancing toward greater proportions of political and economic freedom: free citizens and consumers. This global economy is also characterized by a greater diversity, increasing competition, more countries competing, more companies competing and traditional comparative advantages beginning to erode. Competitiveness is systematic. One competes systematically and not only with a product. Competitiveness is linked to infrastructure, ports, information systems, elements of management that make it increasingly important for companies and countries to take into account these new perspectives. It also has to be mentioned that new factors of competitiveness such as technical standards, environmental regulations, etc., are emerging. As a consequence, the distinguishing trait of this new world we are living in is that of international competitiveness. Increasingly, relations are about competition, and therefore, the challenge facing our countries, our companies and ourselves is that of supporting and working to improve the competitiveness of our products, companies and our countries. Competitiveness factors that are both exogenous and endogenous to companies have to be the focal point of export promotion efforts and, for that matter, the overall promotion of foreign trade. Within this context, I would say that international competitiveness has two basic components. One is productive development, which is technological innovation, development of new products and on-site training. And the other is trade promotion which is positioning products in the international market through a complementary association between productive development and synergetic trade promotion, where productive development adjusts the export supply, but the inducing agent behind the adjustment of the export supply is trade promotion. The latter has the market information which allows to perceive consumer tendencies, and consumer potential, with importers and the demands of the international market. Thus, in this scenario marked by increased political and economic freedom, with free citizens and consumers, a situation arises that is important to understand from the point of view of foreign trade promotion organisms. In this setting of free trade, where countries and companies compete against each other, not all compete under the same conditions. Economic freedom, the free trade that we have been achieving and the gigantic stimulus to international trade provided by the Marrakech Agreement has led to greater trade opportunities for companies and countries. However, not all of them are in the condition to favorably take advantage of them. Today, 17% of the goods and services exported in the world are from developing countries and more advanced economies participate in almost 80% of the exports of goods and services. I am not referring to an issue of unfairness “per se”, nor an ideological nor political issue. What I am setting forth is a reality that effectively reveals that the increased trade and international freedom we have mentioned is mainly taken advantage of by those countries with more technology, financing and a better productivity track record and, hence, greater international competitiveness. If we look at it from the point of view of the companies, I have some statistics from Chile that one could extrapolate to many developing or intermediate countries. Of the total of Chilean export businesses 83% are small and medium-sized companies; however, the value exported by the small and medium-sized companies only represents 3.5% of the total exported. This also reveals at the micro level a serious competitiveness problem. Naturally, companies with more support and technology or that can acquire technology or have access to more favorable credit terms are more competitive. Therefore, we can see that in the promotion of exports, and in general, foreign trade promotion the key is to support the competitiveness of the companies and the countries to propitiate the participation of all in the benefits of free trade. We consider that this is the fundamental mission of our trade promotion agencies: to collaborate in order for those that do not yet have the possibilities to compete under favorable conditions in this free environment of free trade, to improve their positioning in the world. What kind of trade promotion do we need to achieve this objective? In first place, trade promotion needs to put an end to the distinction made between importing and exporting, between only promoting exports and not imports. When we see a trade mission we have the tendency to ask if they are coming to buy or sell: if they come to sell we are not interested and if they come to buy we are interested. We have to cease this attitude because all business activity is now integral. Today, the issue is that of generating foreign trade opportunities in general. In second place, trade promotion has to be associative amongst companies and between the private and public sectors. It also has to be systematic and continuous from the moment the decision to produce is taken to the moment the product reaches the final consumer. It is very important not to confuse export promotion or foreign trade promotion with product publicity. In this sense, the promotion of foreign trade covers a wide spectrum of factors that range from the organization of the exportable national supply, to the adjustment of the exportable supply incorporating also investment promotion and strategic alliances. Trade promotion also needs to concentrate on those sectors that require more capital and technology and, lastly, on the promotion of joint-ventures and international marketing. The essence of this focus of foreign trade promotion is the market- product axis where the market generates what is produced. And it is the market that that helps to answer those classic questions regarding what to produce, whom to produce for and how to produce it. The emphasis must be placed on the intelligence of the market or on the acquiring of information relevant to markets that allow promotion organisms to process that information, place it at the disposal of the private sectors of our countries and by means of this information take the decisions to adjust the export supply and to take decisions regarding the positioning of these products in the international market. The key is a systematic focus and the strategic base is the permanent adjustment of the export supply. With this objective in mind, our agencies need to evolve based on the logic and dynamics of the private sector without leaving aside the point of view of the public sector. We, the public sector, are guided by the principle of common good and must act accordingly with a long term perspective in support of our businessmen but not forgetting that we are public servants and that we have to protect the interests of our entire society. We have to work closely with the private sector and under the unwavering principle of co-responsibility regarding the programs of foreign trade promotion with the principle of co- financing these programs with the private sector and the principle of free access by all exporters to these promotion programs. Our policies have to look, I insist, at the long term and our services have to be fundamentally based on demand, responding to an effective demand, and have to be flexible and not slowed down by bureaucracy. What is the main challenge we are facing today within an international context and according to the regulations of the international community? Our organisms have to adjust their policies, programs and instruments. Therefore, our promotion efforts must respect international standards and this will be one of the main issues dealt with at this conference. Trade promotion favors and does not obstruct free trade. Trade promotion allows us to compete more effectively and to increase international trade.
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