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U.S. – Chile Free Trade Agreement – Setting the Standard 
 
by kmhagen October 31, 2005

The Free Trade Agreement between the United States and Chile promises fairness and transparency to a dynamic market.

The Free Trade Agreement (FTA) signed between the United States and Chile, which went into effect on January 1, 2004, is a comprehensive agreement tsets the standard for Latin America.  It covers traditional trade issues such as tariffs and quotas, rules of origin, customs procedures, and dispute resolution.  The agreement also covers foreign investment, labor and environmental regulations, government procurement, intellectual property rights, and electronic commerce.

Chile

Chile, a country roughly 3,000 miles long and an average of about 100 miles wide, with nearly 16 million inhabitants and a rich diversity of topographies and climates, offers a very promising market for U.S. goods and services.  Its dynamic economy, often cited as exemplary in Latin America and the world, is marked by steady growth, solid macroeconomic fundamentals and policies, strong institutions, transparent regulations, open markets, and a desire to develop alliances with the principal markets of the world.

Consumer Goods and Industrial Products

The Free Trade Agreement provides significant benefits to consumers, and to large and small businesses in both countries, by eliminating bilateral tariffs, lowering trade barriers, promoting economic integration, and generally expanding economic opportunities.  Benefits can be seen in lower prices on products traded between the two countries, and new international markets for exporters of goods and services from both countries.  Small businesses could be particularly benefited by the provisions of the agreement and the cooperation arrangements that have been set up to provide information, share know-how and expertise, and facilitate import and export procedures.

Tariff Reductions

One of the immediate benefits of the Free Trade Agreement is the reduction in costs resulting from the rapid elimination of tariffs.  As soon as the agreement was approved, 85% of industrial products and consumer goods could be traded duty-free between the two countries.  The majority of the remaining items were scheduled to be duty-free within four years, with all tariffs on industrial products completely phased out within ten years.

Some of the key U.S. export sectors that gain immediate duty-free access to the Chilean market include agricultural and construction equipment, autos and auto parts, computers and information technology products, medical equipment, and paper products.  Textiles and apparel are duty-free provided they meet the agreement’s rules of origin, generating opportunities for producers of fiber, yarn, fabric, and finished apparel.

For agricultural products, more than 75% of the tariffs are eliminated in the first four years of the agreement, and the rest of the agricultural tariffs are scheduled to be phased out over 12 years.  There is also be a phase-out of Chile’s price bands on wheat, wheat flour, edible vegetable oil, and sugar.  Tariffs on Chilean wines are equalized with the current U.S. tariff rates, and then phased-out.  U.S. farmers and ranchers have duty-free treatment for exports of pork and pork products, beef and beef products, soybeans and soybean meal, durum wheat, feed grains, potatoes, certain processed food products, and distilled spirits.

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