Trade to Flow Freely between Chile and the US ; A Free-Trade Agreement Being Signed Friday Is the First of Its Kind in South America

Article excerpt

Next month, in the small southern Chilean town of Tome, a local fabric factory will start operating again - after being closed for more than a year.

Once a modest mill, the rebuilt plant is going global, supplying a large US clothing maker with fine textiles. Thanks to the new US- Chile free-trade agreement, which will be signed Friday in Miami, the fabrics will enter the US duty-free, instead of being hit with tariffs of up to 36 percent.

"We were looking forward to this free-trade agreement; that is why we selected Chile," says Juan Pablo Grez, general manager of the US-backed partnership that has taken over the mill site. The plant will supply Tom James, the world's largest manufacturer of custom- made dress apparel, based in Nashville, Tenn.

Tom James, which until now had no Latin American presence, is just one of many multinational companies choosing Chile as its base of regional operations.

While Chile already provides a stable environment for business and has long promoted itself as the economic gateway to Latin America, it now has a trump card.

Chile will be the first country in South America to sign a free- trade agreement with the US. And it will be at the forefront as the Bush administration pushes for the Free Trade Area of the Americas (FTAA), covering all 34 countries from Canada down to the southern tip of Patagonia.

Analysts agree the US-Chile agreement is the most important development in Western Hemispheric trade since the North American Free Trade Agreement (NAFTA) took effect in 1994.

The agreement creates incentives for US manufacturers, banks, insurers, telecommunication companies, agribusinesses, and most other US enterprises to enter the Chilean market with virtually no restrictions. US companies, for example, will no longer have to exclusively use Chilean raw materials in their products.

Tariffs on 85 percent of traded consumer and industrial goods will be eliminated immediately - most will be gone in four years, and all will completely disappear within 12 years. The textile and apparel industry is one of the big winners, with tariffs being scrapped immediately. By contrast, tariffs on farm goods will be withdrawn more slowly and selectively.

Chile's National Chamber of Commerce says two-way trade - worth more than $8 billion annually - could jump 30 percent. The Chilean- American Chamber of Commerce says Chile's GDP could rise between one and three percentage points through the deal.

For its part, Chile wants to attract American companies with a higher level of technology to break its reliance on copper exports and agricultural products. …