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CHILE
Trade pact signed with US
LADB
1/14/2003
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Chile and the United States announced on Dec. 11 that they had concluded negotiations for a bilateral Free Trade Agreement (FTA) that could go into effect by the middle of this year. US and Chilean non-governmental organizations criticized the lack of citizen input in the negotiating process. This was the third FTA reached by Chile last year. Earlier, the country negotiated pacts with the European Union and South Korea.

Chilean-US trade totals US$6 billion annually. The treaty would immediately eliminate US tariffs on 85 percent of consumer and industrial goods, while most remaining industrial product tariffs would be eliminated within four years. Chile would phase out its tariffs on 75 percent of US agricultural goods within four years, with all tariffs phased out within 12 years.

The final round of talks began Dec. 2 in Washington, with discrepancies on several key issues, including intellectual property, labor policies, environment protection and mutual market access to agricultural products. The two countries agreed that they would enforce their laws on workers’ rights and the environment, with violations punishable by fines paid by the offending government.

One of the major contested provisions concerned a tax Chile imposed in the 1990s on inflows of short-term foreign investments — a tax that many economists say protected the country from the financial upheavals that have devastated other emerging markets. The United States had insisted on ending such controls, but negotiators reached a compromise in which Chile would be allowed to impose controls on most short-term capital for up to 12 months, as long as this did not "substantially impede" financial flows.

The government of President Ricardo Lagos, industrialists and bankers applauded the agreement, while farmers and small and mid-sized manufacturers reacted with caution and non-governmental organizations were strongly critical. Several members of Chile’s opposition National Renovation (RN) party also criticized the agreement, arguing that the FTA will ultimately harm Chilean farmers because of extensive US agricultural subsidies. Chile, which has sought inclusion in the North American Free Trade Agreement (NAFTA) with the United States, Canada and Mexico, signed bilateral agreements with Canada in 1996 and Mexico in 1998. Talks with the United States began in January 2001 amid protests by environmentalists and other activists in Chile.

 


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