Chile and United States Sign Free-Trade Agreement

Article excerpt

Chile and the US announced on Dec. 11 that they had successfully concluded negotiations to sign a bilateral Free Trade Agreement (FTA). The announcement was made in Washington, DC, by US Trade Representative (USTR) Robert Zoellick and Chilean Foreign Relations Minister Soledad Alvear. US and Chilean nongovernmental organizations criticized the lack of citizen input in the negotiating process.

The agreement could go into effect by mid-2003, given that the US Congress authorized trade promotion authority (also known as fast-track) for US President George W. Bush to expedite trade-agreement approval (see NotiSur, 2002-11-08). Chile's parliament is also expected to support the accord.

This is the third FTA reached by Chile this year. Earlier, the country successfully negotiated an FTA with the European Union (EU), which is about to be ratified and signed by the Chilean Congress, and another with South Korea.

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

A paper distributed by the Office of the USTR cited a study claiming the US-Chile FTA would add US$4.2 billion to the US GDP by increasing exports of US firms. That is about 0.04% of US output.

Difficult issues resolved

Concluding the negotiations was not easy. The fourteenth and 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 talks were scheduled to end Dec. 6, but both parties agreed to extend them. Chilean President Ricardo Lagos sent Alvear and Finance Minister Nicolas Eyzaguirre to Washington on Dec. 7 to reinforce the Chilean negotiating team.

The two countries agreed that they would enforce their laws on worker rights and the environment, with violations potentially punishable by monetary fines paid by the offending government.

A major contested provision concerned a tax Chile imposed in the 1990s on inflows of "hot," short-term foreign investments--a tax credited by many economists with protecting the country from the financial upheavals that have devastated other emerging markets. The US Treasury had insisted on ending all such controls, but negotiators agreed to a compromise in which Chile would be allowed to impose such controls on most short-term capital for up to 12 months, as long as this did not "substantially impede" financial flows.

"This is a historic day for Chile," said Eyzaguirre.

Regarding intellectual-property rights, particularly for the pharmaceutical industry, Chile agreed to rules on transparency and protection, "which in the long term will be to our benefit," said Eyzaguirre.

Although the exact terms of the agreement are not known, Dante Donoso, coordinator of the Alianza Chilena por un Comercio Justo y Responsable, warned that Chile could be contradicting the "spirit of Doha," established at the ministerial meeting of the WTO last year, to exempt urgently needed medicines from patent rules.

Several members of the Chilean opposition Renovacion Nacional (RN) also criticized the agreement, arguing that, given the heavy agricultural subsidies by the US government, the FTA will ultimately harm Chilean farmers. "It should not be that in Chile the price and the cost of international treaties with countries like the US, which are very protectionistic of their agricultural sector, end up being paid by hundreds of thousands of small-scale farmers and campesinos who over the years have been ruined," read a statement by Sens. Jose Garcia and Alberto Espina, and Deputies Jose Antonio Galilea and Francisco Ovalle. …