Benefits of the Us - Chile Free Trade Agreement

Benefits of the US- Chile Free Trade Agreement

The meeting of minds between Chile and the United States has brought about a long awaited union pertaining to free trade. Chile responded enthusiastically when presented with the opportunity to become a part of 1994's North American Free Trade Agreement (NAFTA) but because of the issue of presidential fast-track trade negotiation authority, the merger did not come to fruition. Now, nearly a decade later -- after negotiations began in the year 2000 -- Chile and America have come to their own agreement with regard to free trade, one that is both historic and comprehensive in nature.

On September 3, 2003, President George W. Bush signed the United States - Chile Free Trade Agreement (FTA). Which went into effect on January 1, 2004. Chile was the first country in Latin America to sign this type of agreement with the United States. The United States - Chile Free Trade Agreement allows two nations to strengthen and develop economic relations and to establish free trade between them.

The Government of the United States of America and the Government of the Republic of Chile, resolve to:

(a) Strengthen the special bonds of friendship and cooperation between their nations

(b) Contribute to the harmonious development and expansion of world trade and provide catalyst to broader international cooperation.

(c) Create an expanded and secure market for the goods and services produced in their territories.

(d) Avoid distortions in their reciprocal trade.

(e) Establish clear and mutually advantageous rules governing their trade.

(f) Ensure a predictable commercial framework for business planning and investment.

(g) Build on their respective rights and obligations under the Marrakesh Agreement establishing the World Trade Organization and other multilateral and bilateral instruments of cooperation.

(h) Enhance the competitiveness of their firms in global markets.

(i) Foster creativity and innovation, promote trade in goods and services that are the subject of intellectual property rights.

(j) Create new employment opportunities and improve working conditions and living standards in the respected territories.

(k) Build on their respective international commitments and strengthen their cooperation on labor matters.

(l) Protect and enhance and enforce basic workers' rights.

(m) Implement this agreement in a matter consistent with environmental protection and conservation.

(n) Promote sustainable development.

(o) Conserve protect and improve the environment, including through managing natural resources in their respective territories and through multilateral environmental agreements to which they are both parties.

(p) Preserve their flexibility to safeguard the public welfare; and

(q) Contribute to hemispheric integration and the fulfillment of the objectives of the Free Trade Area of the Americas (http://www.chileusafta.com/agreement/Preamble_United_States_Text.pdf).

The benefits of a Free Trade Agreement for the United States are significant. A major factor in the agreement is that Chile has free trade agreements with Canada, and the European Union, two main competitors of the United States. The National Association of Manufacturers estimates that, due to the lack of a free trade agreement with Chile, American exporters lost $800 million in sales last year. A Free Trade Agreement will help to ensure that we enjoy market access, treatment, prices and protection at least as good as our competitors. Consumers will benefit from lower

prices and more choices. With a free trade agreement, the United States will improve its competitive position.

One of the immediate benefits of the US-Chile FTA will be the rapid elimination of tariffs on industrial goods. More than 85 percent of bilateral trade in industrial and consumer products became duty free immediately upon the entry into force of the FTA. The Agreement will eliminate tariffs on goods and services, over a 10-year period for industrial goods and a 12-year period for agricultural products.

Chile's luxury tax on automobiles will be phased out over four years, while the number of vehicles subject to the tax will drop quickly upon implementation of the Agreement. Immediate duty-free access includes heavy machinery and equipment, automobiles and automotive parts, computers and other IT products, medical equipment, and wood and paper products.

Service providers will receive important benefits in the Chilean market. In addition to facilitating market access, the FTA includes provisions to ensure that regulatory authorities use open and transparent administrative procedures, consult with interested parties before issuing regulations, provide advance notice and comment periods for proposed rules, and publish all regulations. While commitments to improve market access apply to nearly every service division, the FTA includes special provisions regarding financial services, telecommunications, and e-commerce.

The Agreement with Chile also expands access to larger markets in South America, such as Argentina and Brazil, which already have free trade agreements with Chile. One of the most important benefits of the Agreement is that it establishes a

secure predictable legal structure for United States investors in Chile. Added to the political and economic stability of Chile, this creates a great environment for American businesses.

According to Mr. Christopher Padilla, Assistant US Trade Representative, Intergovernmental Affairs and Public Liaison "Small and medium-sized enterprises will benefit from the tariff-eliminating provisions of the U.S.-Chile FTA. In recent years, U.S. companies have faced competition from firms in Canada and Mexico who already enjoy the benefits of these countries' free trade agreements with Chile. Additionally

U.S. small businesses will substantially benefit for the progressive agreements on transparency in law, customs facilitation and intellectual property rights protection".

Negotiators secured important benefits for agricultural goods, and with more than 75 percent of agricultural tariffs to be eliminated within four years, and remaining tariffs to