Trade monitoring

The fifth Trade Policy Review of Chile has allowed us to have a better understanding of Chile’s trade, and investment policies since its last Review in 2009, and the challenges that it faces. Our discussion has benefitted from the constructive participation of the Chilean delegation, headed by Mr Andrés Rebolledo, Director General of International Economic Relations at the Ministry of Foreign Affairs, and by the valuable comments from the discussant, the Permanent Representative of Hong Kong, China to the WTO, Ms Irene Young. Members appreciated Chile’s response to the more than 320 advance written questions, and we look forward to answers to any outstanding questions no later than one month after this meeting

The shuffle of jobs offshore (or back onshore) has caught the attention and concerns of policy makers. The structural shifts in industrial structures are creating new winners and losers. Unskilled labour-intensive parts of the manufacturing production process have been increasingly offshored by advanced country firms to relatively unskilled labourabundant developing economies. This “offshoring” phenomenon is expected to reduce jobs for low- and semi-skilled workers in advanced economies while increasing them in developing economies. At the same time, resulting productivity increases in advanced economies can raise the demand for native workers – at least in complementary tasks. The empirical literature suggests that fears of job-losses due to offshoring in advanced economies are often exaggerated – restricted largely to the short-run. Policy makers can address these concerns through strengthening social safety nets in the short run and instituting skills-upgrading programmes to create a more flexible labour force in the long run. Greater challenges lie ahead for these policy makers, with an increasing number of services jobs being offshored from developed to developing economies. Even in developing economies, services offshoring can worsen inequality by raising skill premiums, thereby making investment in education equally crucial there. Looking ahead, given increasing wages in certain developing economies, increasing transport costs, new technologies and concerns about separating R&D from manufacturing activities, there is a possibility of a large number of manufacturing and services tasks returning to advanced economies.