Voluntary Report - public distribution

**Date:** 8/27/2003

**GAIN Report Number:** GM3028

GM3028

**Germany**

**Trade Policy Monitoring**

**Influence of the EU-Chile FTA on U.S. Exports of HTP Products to
Germany**

**2003**

**Approved by:**

![](media/image1.wmf)Karina Ramos

#### U.S. Embassy

**Prepared by:**

Sabine M. Lieberz

**Report Highlights:**

The report examines the likelihood of negative implications of the
Free-Trade-Agreement between Chile and the EU on U.S. exports of fruits,
vegetables and tree-nuts to Germany. Dried prunes is the only product
that is likely to be affected.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Berlin \[GM1\]

\[GM\]

**[1. Introduction]{.underline}**

On November 18, 2002, the EU and Chile signed an "Association Agreement"
that among other things contains provisions to eliminate import tariffs
for agricultural goods over a period of ten years.

While Parliaments in Member States still have to ratify the Agreement,
the bulk of its provisions, including the trade part, have been applied
since 1 February 2003.

The aim of this report is to assess possible implications of the FTA on
German imports of horticultural imports from the United States. For this
report "horticultural products" are defined as products falling under
chapter 7 and 8 of the EU combined nomenclature (equivalent to the
HS-code in the U.S.).

For the full text (1437 pages) of the agreement visit the following
website:

<http://europa.eu.int/smartapi/cgi/sga_doc?smartapi!celexapi!prod!CELEXnumdoc&lg=EN&numdoc=22002A1230(01)&model=guicheti>

EU import tariffs are fixed in annex I of regulation 2656/87 on the
tariff and statistical nomenclature and on the Common Customs Tariff.
The current version for 2003 of the annex is laid down in regulation
1832/2002, which can be found on the following website (932 pages):

<http://europa.eu.int/eur-lex/en/archive/2002/l_29020021028en.html>

Abbreviations:

CN = Combined Nomenclature

CY = Calendar Year (January -- December)

FTA = Free Trade Agreement

HTP = Horticultural and Tropical Products

MT = metric ton(s)

**[2. Overview about German imports from the U.S. and
Chile]{.underline}**

In 2002, German imports of U.S.-origin horticultural products from
chapter 7 and 8 of the combined nomenclature amounted to about U.S. \$
237 million, of which U.S. \$ 226 million (or 95 percent) were generated
by the top 11 products, which are summarized in table 1. Some of these
products Germany also imported from Chile, notably fresh pears, dried
prunes and some tree nuts (see table 2). German customs data does not
show any imports from Chile for pistachios, in-shell almonds,
grapefruits, and hazelnuts, thus Chile was not a competitor for the U.S.
on the German market for these products.

Table 1: German Imports of Horticultural Products from the United States
exceeding 1000 MT or U.S. \$ 1 Million in 2002

+----------+---------------------+------+-------+------+------+-------+
|          |                     | 2001 |       | 2002 |      | T     |
|          |                     |      |       |      |      | ariff |
|          |                     |      |       |      |      | Rate  |
+----------+---------------------+------+-------+------+------+-------+
| CN-Code  | ###### Product      | MT   | \     | MT   | \$   | in %  |
|          |                     |      | $1000 |      | 1000 |       |
+----------+---------------------+------+-------+------+------+-------+
| 0802 12  | Shelled sweet       | 42   | 10    | 42   | 112  | 3.5   |
| 90       | almonds,            | ,239 | 8,338 | ,577 | ,925 |       |
|          | fresh/dried         |      |       |      |      |       |
+----------+---------------------+------+-------+------+------+-------+
| 0802 50  | Pistachios,         | 4    | 1     | 6    | 25   | 1.6   |
| 00       | fresh/dried         | ,402 | 5,343 | ,603 | ,398 |       |
+----------+---------------------+------+-------+------+------+-------+
| 0813 20  | Dried prunes        | 11   | 2     | 9    | 24   | 9.6   |
| 00       |                     | ,144 | 5,595 | ,570 | ,266 |       |
+----------+---------------------+------+-------+------+------+-------+
| 0802 31  | Walnuts in shell,   | 6    | 1     | 8    | 15   | 4.0   |
| 00       | fresh/dried         | ,843 | 2,856 | ,392 | ,976 |       |
+----------+---------------------+------+-------+------+------+-------+
| 0802 32  | Shelled walnuts,    | 2    | 1     | 2    | 12   | 5.1   |
| 00       | fresh/dried         | ,570 | 0,766 | ,792 | ,831 |       |
+----------+---------------------+------+-------+------+------+-------+
| 0805 40  | Grapefruit,         | 20   | 1     | 19   | 12   | 1.5   |
| 00       | fresh/dried         | ,592 | 2,298 | ,303 | ,100 |       |
+----------+---------------------+------+-------+------+------+-------+
| 0806 20  | Raisins excl.       | 7    | 8,063 | 7    | 7    | 2.4   |
| 12       | currants            | ,426 |       | ,490 | ,770 |       |
|          |                     |      |       |      |      |       |
| /        |                     |      |       |      |      |       |
| 18/92/98 |                     |      |       |      |      |       |
+----------+---------------------+------+-------+------+------+-------+
| 0712 20  | Dried onions        | 2    | 5,058 | 3    | 7    | 12.8  |
| 00       |                     | ,478 |       | ,271 | ,196 |       |
+----------+---------------------+------+-------+------+------+-------+
| 0808 20  | Fresh table pears   | 2    | 1,813 | 4    | 3    | 0.0-1 |
| 50       |                     | ,117 |       | ,146 | ,926 | 0.4\* |
+----------+---------------------+------+-------+------+------+-------+
| 0802 21  | Hazelnuts in shell, | 1    | 2,866 | 1    | 2    | 3.2   |
| 00       | fresh/dried         | ,731 |       | ,314 | ,357 |       |
+----------+---------------------+------+-------+------+------+-------+
| 0802 11  | Sweet almonds in    | 328  | 845   | 549  | 1    | 5.6   |
| 90       | shell, fresh/dried  |      |       |      | ,386 |       |
+----------+---------------------+------+-------+------+------+-------+
|          | Total of above      | 101  | 20    | 106  | 226  |       |
|          |                     | ,870 | 3,841 | ,007 | ,131 |       |
+----------+---------------------+------+-------+------+------+-------+

\* Tariff depends on time of year

#### Table 2: Competing German Imports of Horticultural Products from Chile

+--------------+---------------------+-----+-----+------+------+------+
|              |                     | 2   |     | 2002 |      | Ta   |
|              |                     | 001 |     |      |      | riff |
|              |                     |     |     |      |      | Rate |
+--------------+---------------------+-----+-----+------+------+------+
| CN-Code      | Product             | MT  | \$1 | MT   | \$   | in % |
|              |                     |     | 000 |      | 1000 |      |
+--------------+---------------------+-----+-----+------+------+------+
| 0808 20 50   | Fresh table pears   | 6,  | 4,  | 9    | 6    | 0.   |
|              |                     | 347 | 123 | ,249 | ,398 | 0-10 |
|              |                     |     |     |      |      | .4\* |
+--------------+---------------------+-----+-----+------+------+------+
| 0813 20 00   | Dried prunes        | 1,  | 2,  | 3    | 5    | 9.6  |
|              |                     | 517 | 514 | ,082 | ,121 |      |
+--------------+---------------------+-----+-----+------+------+------+
| 0802 32 00   | Shelled walnuts,    | 190 | 1,  | 255  | 1    | 5.1  |
|              | fresh/dried         |     | 370 |      | ,647 |      |
+--------------+---------------------+-----+-----+------+------+------+
| 0802 31 00   | Walnuts in shell,   | 326 | 832 | 180  | 360  | 4.0  |
|              | fresh/dried         |     |     |      |      |      |
+--------------+---------------------+-----+-----+------+------+------+
| 0806 20 12   | Raisins excl.       | 345 | 417 | 290  | 328  | 2.4  |
|              | currants            |     |     |      |      |      |
| /18/92/98    |                     |     |     |      |      |      |
+--------------+---------------------+-----+-----+------+------+------+
| 0802 12 90   | Shelled sweet       | \-  | \-  | 52   | 172  | 3.5  |
|              | almonds,            |     |     |      |      |      |
|              | fresh/dried         |     |     |      |      |      |
+--------------+---------------------+-----+-----+------+------+------+
| 0712 20 00   | Dried onions        | \-  | \-  | 12   | 7    | 12.8 |
+--------------+---------------------+-----+-----+------+------+------+
|              | Total of above      | 8,  | 9,  | 13   | 14   |      |
|              |                     | 734 | 270 | ,120 | ,033 |      |
+--------------+---------------------+-----+-----+------+------+------+

\* Tariff depends on time of year

####### **3. EU Import Tariffs for Horticultural Products where the U.S. and Chile compete**

Table 4 gives a summary of current EU import tariffs for those
horticultural products, where the U.S. and Chile compete on the German
market. Column 3 shows the base tariff, applicable to all countries
outside an FTA. Column 4 states the date from when the tariffs for
imports from Chile will be set to zero. It shows that for all critical
products but pears and onions, tariffs are 0 for Chilean products, while
U.S. imports are still subject to the relevant duty. The higher the
tariff, the bigger the disadvantage for U.S. products compared to
product of Chilean origin. This is especially true for a market as price
sensitive as the German food market.

#### Table 3: EU Import Tariffs for Certain Horticultural Products

  --------------- -------------------------- ------------ --------------------
                                             Tariff Rate  Date of Tariff
                                                          Liberalization

  CN-Code         Product                    in %         for imports from
                                                          Chile

  0712 20 00      Dried onions               12.8         Year 7 (Jan 1, 2010)

  0813 20 00      Dried prunes               9.6          Year 0 (Feb 1, 2003)

  0802 32 00      Shelled walnuts,           5.1          Year 0 (Feb 1, 2003)
                  fresh/dried                             

  0802 31 00      Walnuts in shell,          4.0          Year 0 (Feb 1, 2003)
                  fresh/dried                             

  0808 20 50      Fresh table pears          0.0-10.4\*   Year 0, 4, or 7\*

  0802 12 90      Shelled sweet almonds,     3.5          Year 0 (Feb 1, 2003)
                  fresh/dried                             

  0806 20         Raisins excl. currants     2.4          Year 0 (Feb 1, 2003)
  12,18,92,98                                             
  --------------- -------------------------- ------------ --------------------

\*= Tariff depends on time of year

#### [4. Assessment per product]{.underline}

####### 4.1 Table Pears

When comparing German import volumes from the U.S. and Chile, at first
glance it might appear that out of the U.S. products mentioned above,
fresh pears face the strongest competition from Chile. However, due to
the different production cycle the majority of U.S. and Chilean pears
are imported at different times of the year. While the peak for imports
from the U.S. is from January through April, the peak for Chile occurs
from March/April through August. March and April thus being the only
months, where there really is competition between U.S. and Chilean
pears. The impact of the EU-Chile FTA on U.S. exports of table pears to
Germany therefore can be expected to be marginal.

Table 4: German Imports of Pears from the U.S. and Chile by Month (in
MT)

  ----------- --------- ----------- --------- ----------- ----------- ----------- ----------- -----------
              2000                  2001                  2002                    2003        

              U.S.      CHILE       U.S.      CHILE       U.S.        CHILE       U.S.        CHILE

  JANUARY     **736**   99          **240**   26          **883**     9           **742**     17

  FEBRUARY    **603**   132         **732**   146         **1,059**   38          **1,244**   21

  MARCH       **193**   157         **885**   40          **1,433**   **155**     **415**     **244**

  APRIL       **78**    **1,772**   **204**   **1,087**   **722**     **721**     44          **1,791**

  MAY         35        **705**     24        **1,146**   4           **1,549**   n/a         n/a

  JUNE        \-        **2,121**   \-        **1,072**   1           **3,154**   n/a         n/a

  JULY        \-        **738**     \-        **2,209**   6           **2,556**   n/a         n/a

  AUGUST      2         **1,657**   4         **468**     1           **993**     n/a         n/a

  SEPTEMBER   \-        25          \-        86          \-          68          n/a         n/a

  OCTOBER     \-        71          \-        62          1           \-          n/a         n/a

  NOVEMBER    2         34          \-        4           1           \-          n/a         n/a

  DECEMBER    13        22          28        \-          36          6           n/a         n/a
  ----------- --------- ----------- --------- ----------- ----------- ----------- ----------- -----------

**Chart 1: German Imports of Pears from the U.S. and Chile by Month (in
MT)**

![](media/image2.wmf)

####### 4.2 Dried Prunes

[4.2.1 Chilean export potential]{.underline}

The Chilean annual dried prune production is roughly 30,000 MT. More
than 90 percent of this is being exported. The most recent available
U.N. trade statistics for Chile (2001) show a total export of dried
prunes of 28,462 MT. Most of which are destined to other Latin American
countries (Mexico, Brazil). According to this statistics, Germany ranks
number three in terms of destination, receiving 2,668 MT (9 percent) of
exported Chilean dried prunes. Official German import figures however
only show an import of 1,517 MT for the same period.

The FAS office in Santiago, Chile reports that Chilean industry sources
do not expect an increase in exports to the EU following the FTA (GAIN
report CI2016). However, the same report also mentions a significant
increase in planted area during the past 5 years, which will lead to an
increase in production to 34 -- 35 thousand MT over the coming 3 to 4
years, when the newly planted tree will have reached their full bearing
capacity.

German industry contacts noted that not only has Chile made great
progress in the quality of their prunes in the past years, but they also
offer more stoned fruits than they used to previously.

[4.2.2 Development of U.S. and Chilean shipments to Germany]{.underline}

As indicated above, export and import data vary substantially depending
on the source (see table below), which poses difficulties in making an
objective assessment of the trade developments.

Table 5: Volume and Value of Shipments of Dried Prunes from the U.S. to
Germany according to various sources

<table>
<colgroup>
<col style="width: 12%" />
<col style="width: 12%" />
<col style="width: 10%" />
<col style="width: 9%" />
<col style="width: 9%" />
<col style="width: 9%" />
<col style="width: 8%" />
<col style="width: 2%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="2"><strong>Volume</strong> in MT</td>
<td><p>1998</p>
<p>Jan-Dec</p></td>
<td><p>1999</p>
<p>Jan-Dec</p></td>
<td><p>2000</p>
<p>Jan-Dec</p></td>
<td><p>2001</p>
<p>Jan-Dec</p></td>
<td><p>2002</p>
<p>Jan-Dec</p></td>
<td></td>
<td><p>2002</p>
<p>Feb-Apr*</p></td>
<td><p>2003</p>
<p>Feb-Apr*</p></td>
<td>Percent Change</td>
</tr>
<tr class="even">
<td rowspan="2">U.S. Exports to Germany</td>
<td>U.S. Export Statistics</td>
<td>10,605</td>
<td>8,965</td>
<td>12,917</td>
<td>19,716</td>
<td>8,105</td>
<td></td>
<td>2,901</td>
<td>1,872</td>
<td>-35</td>
</tr>
<tr class="odd">
<td>U.N. Trade Statistics</td>
<td>10,605</td>
<td>8,811</td>
<td>12,917</td>
<td>19,055</td>
<td>8,105</td>
<td></td>
<td>n/a</td>
<td>n/a</td>
<td></td>
</tr>
<tr class="even">
<td colspan="2"><p>German Imports from U.S.</p>
<p>German Office of Statistics</p></td>
<td>13,230</td>
<td>10,070</td>
<td>11,053</td>
<td>11,144</td>
<td>9,570</td>
<td></td>
<td>2,917</td>
<td>2,723</td>
<td>-7</td>
</tr>
<tr class="odd">
<td colspan="2"></td>
<td rowspan="2"></td>
<td rowspan="2"></td>
<td rowspan="2"></td>
<td rowspan="2"></td>
<td rowspan="2"></td>
<td></td>
<td rowspan="2"></td>
<td rowspan="2"></td>
<td rowspan="2"></td>
</tr>
<tr class="even">
<td colspan="2"><strong>Value</strong> in U.S. $ 1000</td>
<td></td>
</tr>
<tr class="odd">
<td rowspan="2">U.S. Exports to Germany</td>
<td>U.S. Export Statistics</td>
<td>19,531</td>
<td>18,419</td>
<td>23,344</td>
<td>33,776</td>
<td>17,827</td>
<td></td>
<td>7,277</td>
<td>5,087</td>
<td>-30</td>
</tr>
<tr class="even">
<td>U.N. Trade Statistics</td>
<td>19,531</td>
<td>18,127</td>
<td>23,344</td>
<td>33,796</td>
<td>17,827</td>
<td></td>
<td>n/a</td>
<td>n/a</td>
<td></td>
</tr>
<tr class="odd">
<td colspan="2"><p>German Imports from U.S.</p>
<p>German Office of Statistics</p></td>
<td>28,192</td>
<td>22,428</td>
<td>23,352</td>
<td>25,595</td>
<td>24,266</td>
<td></td>
<td>7,327</td>
<td>7,316</td>
<td>0</td>
</tr>
</tbody>
</table>

\* The months of February through April were chosen because the tariff
provisions went into effect February 1, 2003. April was the most current
month for which trade data was available.

N/a = data not yet available

Table 6: Volume and Value of Shipments of Dried Prunes from Chile to
Germany according to various Sources

<table style="width:100%;">
<colgroup>
<col style="width: 26%" />
<col style="width: 8%" />
<col style="width: 0%" />
<col style="width: 9%" />
<col style="width: 0%" />
<col style="width: 9%" />
<col style="width: 0%" />
<col style="width: 9%" />
<col style="width: 0%" />
<col style="width: 8%" />
<col style="width: 0%" />
<col style="width: 1%" />
<col style="width: 0%" />
<col style="width: 8%" />
<col style="width: 0%" />
<col style="width: 8%" />
<col style="width: 8%" />
</colgroup>
<tbody>
<tr class="odd">
<td><strong>Volume</strong> in MT</td>
<td colspan="2"><p>1998</p>
<p>Jan-Dec</p></td>
<td colspan="2"><p>1999</p>
<p>Jan-Dec</p></td>
<td colspan="2"><p>2000</p>
<p>Jan-Dec</p></td>
<td colspan="2"><p>2001</p>
<p>Jan-Dec</p></td>
<td colspan="2"><p>2002</p>
<p>Jan-Dec</p></td>
<td colspan="2"></td>
<td colspan="2"><p>2002</p>
<p>Feb-Apr*</p></td>
<td><p>2003</p>
<p>Feb-Apr*</p></td>
<td>Percent Change</td>
</tr>
<tr class="even">
<td><p>Chilean Exports to Germany,</p>
<p>U.N. Trade statistics</p></td>
<td>1,091</td>
<td colspan="2">2,073</td>
<td colspan="2">1,640</td>
<td colspan="2">2,668</td>
<td colspan="2">n/a</td>
<td colspan="2"></td>
<td colspan="2">n/a</td>
<td colspan="2">n/a</td>
<td></td>
</tr>
<tr class="odd">
<td><p>German Imports from Chile</p>
<p>German Office of Statistics</p></td>
<td>724</td>
<td colspan="2">1,171</td>
<td colspan="2">1,325</td>
<td colspan="2">1,517</td>
<td colspan="2">3,082</td>
<td colspan="2"></td>
<td colspan="2">783</td>
<td colspan="2">1,203</td>
<td>54</td>
</tr>
<tr class="even">
<td><strong>Value</strong> in U.S. $ 1000</td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="odd">
<td><p>Chilean Exports to Germany,</p>
<p>U.N. Trade statistics</p></td>
<td>1,267</td>
<td colspan="2">3,014</td>
<td colspan="2">2,565</td>
<td colspan="2">3,882</td>
<td colspan="2">n/a</td>
<td colspan="2"></td>
<td colspan="2">n/a</td>
<td colspan="2">n/a</td>
<td></td>
</tr>
<tr class="even">
<td><p>German Imports from Chile</p>
<p>German Office of Statistics</p></td>
<td>996</td>
<td colspan="2">1,720</td>
<td colspan="2">2,032</td>
<td colspan="2">2,514</td>
<td colspan="2">5,121</td>
<td colspan="2"></td>
<td colspan="2">1,277</td>
<td colspan="2">2,093</td>
<td>64</td>
</tr>
</tbody>
</table>

\* The months of February through April were chosen because the tariff
provisions went into effect February 1, 2003. April was the most current
month for which trade data was available.

N/a = data not yet available

Germany records imports according to country of production, as opposed
to the country of shipping. This means that if the German import figure
is higher than the U.S./U.N. export figure, the difference is most
likely a result of the product being shipped through another country,
such as the Netherlands. U.S./U.N. statistics would then state the
products as having been shipped to the Netherlands, when in fact it is
consumed in Germany.

Finding a reasonable explanation for the difference if the German import
figure is lower than the U.S./U.N. export figure is more difficult.
Small difference can be explained through the fact that intra-EU imports
only have to be recorded if the annual value of all imports of that
company exceeds Euro 200,000, while all imports from outside the EU are
recorded by customs, irrespective of volume or value.

Also, sometimes exports that are destined for a specific country are
re-directed to a different country while being on the ocean, without the
original export documents and statistics being up-dated.

All of this is unlikely to explain the huge difference of about 8,000 MT
for U.S. shipments to Germany, in 2001. U.S. export figures for that
year are exceptionally high compared to 1998 through 2000 and 2002. We
therefore suspect that other factors not known to us must be involved.

Based on the assumption that all the imports that Germany recorded
really occurred and that all exports to Germany really ended up there,
in case of diverging data we decided to use the higher of the two
figures. In our opinion this method results in a more realistic set of
data than either of the above quoted sources alone.

Table 7: Adjusted Volume and Value of Shipments of Dried Prunes from the
U.S. and Chile to Germany

<table style="width:100%;">
<colgroup>
<col style="width: 18%" />
<col style="width: 9%" />
<col style="width: 9%" />
<col style="width: 9%" />
<col style="width: 9%" />
<col style="width: 9%" />
<col style="width: 2%" />
<col style="width: 8%" />
<col style="width: 9%" />
<col style="width: 13%" />
</colgroup>
<tbody>
<tr class="odd">
<td></td>
<td rowspan="2"><p>CY</p>
<p>1998</p></td>
<td rowspan="2"><p>CY</p>
<p>1999</p></td>
<td rowspan="2"><p>CY</p>
<p>2000</p></td>
<td rowspan="2"><p>CY</p>
<p>2001</p></td>
<td rowspan="2"><p>CY</p>
<p>2002</p></td>
<td></td>
<td rowspan="2"><p>2002</p>
<p>Feb-Apr*</p></td>
<td rowspan="2"><p>2003</p>
<p>Feb-Apr*</p></td>
<td rowspan="2">Percent Change</td>
</tr>
<tr class="even">
<td></td>
<td></td>
</tr>
<tr class="odd">
<td><p>Volume in MT</p>
<p>US</p></td>
<td>13,230</td>
<td>10,070</td>
<td>12,917</td>
<td>19,716</td>
<td>9,570</td>
<td></td>
<td>2,917</td>
<td>2,723</td>
<td>-7</td>
</tr>
<tr class="even">
<td>Chile</td>
<td>1,091</td>
<td>2,073</td>
<td>1,640</td>
<td>2,668</td>
<td>3,082</td>
<td></td>
<td>783</td>
<td>1,203</td>
<td>54</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td>Value in U.S. $ 1000</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td>US</td>
<td>28,192</td>
<td>22,428</td>
<td>23,352</td>
<td>33,796</td>
<td>24,266</td>
<td></td>
<td>7,327</td>
<td>7,316</td>
<td>0</td>
</tr>
<tr class="even">
<td>Chile</td>
<td>1,267</td>
<td>3,014</td>
<td>2,565</td>
<td>3,882</td>
<td>5,121</td>
<td></td>
<td>1,277</td>
<td>2,093</td>
<td>64</td>
</tr>
</tbody>
</table>

\* The months of February through April were chosen because the tariff
provisions went into effect February 1, 2003. April was the most current
month for which trade data was available.

The table shows exceptionally high U.S. exports to Germany in 2001
followed by a steep decline in 2002. For February through April 2003,
which is the first quarter after the FTA went into effect, U.S. exports
show a decline in volume by 7 percent while the export value remained
stable.

By excluding the year 1999, Chilean shipments to Germany show an upward
trend for the past years, which continues in the first quarter after the
FTA went into effect. Chilean shipments increased by 54 percent, while
their value increase by 64 percent compared to the same period of the
previous year.

[4.2.3. German Prune market]{.underline}

The German prune market basically consists of 3 segments:

a)  products that are imported pre-packed and branded

b)  products that are imported in bulk and packed in Germany under a
    brand name

c)  products that are imported in bulk and packed in Germany under a
    retail brand

It can be assumed that competition for the U.S. from Chilean prunes will
be strongest in category b) and c), while branded products are not so
easily exchanged. Unfortunately neither the California Prune Board nor
the *Waren-Verein der Hamburger Börse (*Association of trade in dried
fruits, nuts, processed fruits, and similar commodities) have figures
about the percentages of the three categories.

For some uses, some German importers prefer smaller sized prunes for two
reasons. The smaller prunes look better than the large prunes,
especially in mixtures. Smaller prunes are also cheaper. According to
German industry sources, the U.S. only provides limited amounts of small
size prunes, which puts them at a disadvantage compared to Chile and
explains some of the shift in shipments in 2002, before the FTA went
into effect.

Chile is not yet able to supply prunes in cans. In this market segment
the U.S. has an advantage. However, German industry sources suspect that
it is only a matter of time until Chile will acquire the necessary
know-how and machinery and also supply prunes in this type of packaging.

[4.2.4 Conclusion for Dried Prunes]{.underline}

Chile has gained market share for dried prunes in Germany in recent
years, due to the fact that they offer cheaper small sized prunes. The
EU-Chile FTA grants shipments from Chile an additional 9.6 percent
advantage on prices compared to shipments from the U.S. Germany is a
very price sensitive market. It can therefore be concluded that the
EU-FTA will enhance the trend of increasing shipments of Chilean dried
prunes to Germany, and consequently aggravate competition for U.S.
exports on this market.

####### 4.3. Tree nuts

[4.3.1. Chilean export potential]{.underline}

According to U.N. trade data Chile exported the following tree-nuts:
walnuts, almonds, chestnuts and hazelnuts in quantities of 7,358 MT,
2,869 MT, 90 MT, and 17 MT, respectively, in 2001. Out of these exports,
561 MT of walnuts and 6 MT of hazelnuts were destined for Germany.
According to German import data, imports of almonds from Chile in the
years 1997 through 2002 amounted to 2, 0, 28, 0, and 52 MT respectively.
Thus, all German import volumes of tree-nuts from Chile except for
walnuts are too small to represent significant competition for U.S.
produce in Germany.

[4.3.2. Walnuts]{.underline}

As with prunes, the Chilean industry does expect a significant increase
in walnut exports to Europe following the FTA. In their view the size of
the U.S. walnut crop and resulting exports plays a much bigger role than
a reduction in EU import tariffs (see GAIN report CI 3003).

However, Chilean production of walnuts is expected to increase from
11,900 MT in 2001/02 to 16,000 MT by 2007/08. It can be expected that
much of this growth is destined for export, as Chilean domestic demand
does not drive consumption.

Making the same assumptions as in chapter 3.2.2 the shipments of walnuts
from the U.S. and Chile to Germany are summarized in table 8. Annual
shipments of the U.S. are about 11-12,000 MT, while Chilean shipments
add to 300 --600 MT. Generally the variation is larger in value than in
volume for the U.S. while it is larger in volume than in value for
Chile. In the three month of February through April 2003, both, the U.S.
as well as Chile were able to increase their shipments in volume and
value.

Table 8: Adjusted Volume and Value of Shipments of Walnuts (in-shell and
shelled) from the U.S. and Chile to Germany

<table>
<colgroup>
<col style="width: 19%" />
<col style="width: 9%" />
<col style="width: 8%" />
<col style="width: 9%" />
<col style="width: 9%" />
<col style="width: 9%" />
<col style="width: 3%" />
<col style="width: 8%" />
<col style="width: 9%" />
<col style="width: 9%" />
</colgroup>
<tbody>
<tr class="odd">
<td></td>
<td><p>CY</p>
<p>1998</p></td>
<td><p>CY</p>
<p>1999</p></td>
<td><p>CY</p>
<p>2000</p></td>
<td><p>CY</p>
<p>2001</p></td>
<td><p>CY</p>
<p>2002</p></td>
<td></td>
<td><p>2002</p>
<p>Feb-Apr</p></td>
<td><p>2003</p>
<p>Feb-Apr</p></td>
<td>Percent Change</td>
</tr>
<tr class="even">
<td><p>Volume in MT</p>
<p>US</p></td>
<td>12,005</td>
<td>11,431</td>
<td>12,309</td>
<td>10,870</td>
<td>11,183</td>
<td></td>
<td>889</td>
<td>1,454</td>
<td>64</td>
</tr>
<tr class="odd">
<td>Chile</td>
<td>274</td>
<td>612</td>
<td>407</td>
<td>561</td>
<td>435</td>
<td></td>
<td>3</td>
<td>22</td>
<td>633</td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td>Value in U.S. $ 1000</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td>US</td>
<td>29,558</td>
<td>24,874</td>
<td>28,669</td>
<td>26,491</td>
<td>28,808</td>
<td></td>
<td>3,440</td>
<td>5,489</td>
<td>60</td>
</tr>
<tr class="odd">
<td>Chile</td>
<td>2,133</td>
<td>2,383</td>
<td>2,319</td>
<td>2,202</td>
<td>2,008</td>
<td></td>
<td>23</td>
<td>40</td>
<td>74</td>
</tr>
</tbody>
</table>

\* The months of February through April were chosen because the tariff
provisions went into effect February 1, 2003. April was the most current
month for which trade data was available.

Concerning quality, FAS/Santiago reports: "... only a small proportion
of the \[Chilean\] walnut crop is considered to be of high quality by
international standards."

However, the walnuts that are imported from Chile to Germany have a very
good reputation for their quality and are sold at a premium. Chile
currently does have a competitive advantage for shelled walnuts, as
cheap labor enables producers to hand crack almost all walnuts. However,
labor costs are increasing, which will result in more and more
mechanization and will abolish this advantage in the long run.

#### Table 9: Average Import Prices for Walnuts of Various Origins in Germany

  ------------- ---------- --------- ---------- --------- ---------- ---------
                2000                 2001                 2002       

                In-shell   shelled   In-shell   shelled   In-shell   shelled

                (U.S.      (U.S.     (U.S.      (U.S.     (U.S.      (U.S.
                \$/kg)     \$/kg)    \$/kg)     \$/kg)    \$/kg)     \$/kg)

  U.S.          1.96       3.58      1.88       4.19      1.90       4.60

  Chile         2.15       7.80      2.56       7.20      2.00       6.45

  World (All    2.00       3.79      1.95       3.96      1.91       4.25
  Imports)                                                           
  ------------- ---------- --------- ---------- --------- ---------- ---------

[4.3.3 Conclusions for walnuts]{.underline}

The EU-Chile FTA is not expected to have a significant influence on the
competition between U.S. and Chilean walnuts on the German market. The
premium for Chilean walnuts compared to U.S. produce is much higher than
the tariff reduction of 4 percent.

[4.4. Raisins]{.underline}

Turkey is the main supplier of raisins to the German market with 65
percents of the shipments. 11 percent of the imports are sourced from
the U.S., amounting to 7,490 MT in 2002. Chilean shipments of raisins to
Germany are very volatile, ranging from 290 MT in 2002 to 1,349 MT in
1999. Chile's market share of the German market for raisins varied
between 0.4 and 2 percent in that period.

**Table 10: Average Import Prices for Raisins of Various Origins in
Germany**

  ----------------- ------------- ------------- ------------- --------------
                    1999          2000          2001          2002

                    (U.S. \$/kg)  (U.S. \$/kg)  (U.S. \$/kg)  (U.S. \$/kg)

  U.S.              1.76          1.32          1.09          1.04

  Chile             1.44          1.42          1.21          1.13

  World (All        1.18          1.06          0.86          0.83
  Imports)                                                    
  ----------------- ------------- ------------- ------------- --------------

Since 2000, average import prices for Chilean raisins have been higher
than for raisins from the U.S. The premium for Chilean raisins was much
higher than the tariff of 2.4 percent. Therefore even after the
elimination of the tariff through the EU-Chile FTA, on average Chilean
raisins will be more expensive than raisins from the U.S.

**[5. Overall Conclusion:]{.underline}**

The evidence examined in this report suggests that out of the examined
products, U.S. exports of dried prunes will face the most negative
impact from the EU-Chile FTA. For all other products factors outside the
agreement play a much bigger role than the FTA itself.

For dried prunes, the EU-Chile FTA grants Chilean prune shipments an
additional 9.6 percent price advantage. This is expected to aggravate
the current competitive disadvantage for the U.S. for bulk shipments,
resulting from production in Chile, and a preference by German importers
for the smaller-sized and less expensive Chilean product.

For pre-packed branded products the U.S. currently has an advantage for
the fact that Chile does not supply this kind of product. However, it is
expected that it is only a matter of time until this changes.

With only three month of trade data available since the FTA went into
effect, it is still too early to assess the impact of the FTA based on
statistics. Significant shifts in shipments will only show at a later
stage.

Related reports:

+--------------------+-------------------------------------------------+
| CI2016             | Dried Fruit Annual Report                       |
+--------------------+-------------------------------------------------+
| CI3003             | Tree Nuts Annual Report                         |
|                    |                                                 |
|                    | <http:/                                         |
|                    | /intranetapps/GainFiles/200301/145785206.pdf>). |
+--------------------+-------------------------------------------------+