Chile–United States Free Trade Agreement
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The United States-Chile Free Trade Agreement is a
free trade agreement A free trade agreement (FTA) or treaty is an agreement according to international law to form a free-trade area between the cooperating state (polity), states. There are two types of trade agreements: Bilateralism, bilateral and Multilateralism, m ...
(FTA) between the
United States The United States of America (USA), also known as the United States (U.S.) or America, is a country primarily located in North America. It is a federal republic of 50 U.S. state, states and a federal capital district, Washington, D.C. The 48 ...
and
Chile Chile, officially the Republic of Chile, is a country in western South America. It is the southernmost country in the world and the closest to Antarctica, stretching along a narrow strip of land between the Andes, Andes Mountains and the Paci ...
signed on June 6, 2003. The pact came into force on January 1, 2004. On that date, tariffs on 90% of U.S. exports to Chile and 95% of Chilean exports to the United States were eliminated. The agreement also established that Chile and the U.S. will establish duty-free trade in all products within a maximum of 12 years (2016). In 2009, bilateral trade between the United States and Chile reached US$15.4 billion, a 141% increase over bilateral trade levels before the U.S.-Chile FTA took effect. In particular, U.S. exports to Chile in 2009 showed a 248% increase over pre-FTA levels.


History

The first steps toward a trade agreement between the two countries began in 1992 when U.S. President
George H. W. Bush George Herbert Walker BushBefore the outcome of the 2000 United States presidential election, he was usually referred to simply as "George Bush" but became more commonly known as "George H. W. Bush", "Bush Senior," "Bush 41," and even "Bush th ...
agreed with Chile's President
Patricio Aylwin Patricio Aylwin Azócar (; 26 November 1918 – 19 April 2016) was a Chilean politician from the Christian Democratic Party of Chile, Christian Democratic Party, lawyer, author, professor and former senator. He was the 30th president of Chil ...
to "want to pursue free-trade negotiations as quickly as that is feasible." At the 1994 Summit of the Americas U.S. President
Bill Clinton William Jefferson Clinton (né Blythe III; born August 19, 1946) is an American politician and lawyer who was the 42nd president of the United States from 1993 to 2001. A member of the Democratic Party (United States), Democratic Party, ...
, Canada's Prime Minister,
Jean Chrétien Joseph Jacques Jean Chrétien (; born January 11, 1934) is a retired Canadian politician, statesman, and lawyer who served as the 20th prime minister of Canada from 1993 to 2003. He served as Leader of the Liberal Party of Canada, leader of t ...
, and
Ernesto Zedillo Ernesto Zedillo Ponce de León (; born 27 December 1951) is a Mexican economist and politician. He was the 61st president of Mexico from 1994 to 2000, as the last of the uninterrupted 71-year line of Mexican presidents from the Institutional Re ...
, the President of Mexico, had agreed to admit Chile to the
North American Free Trade Agreement The North American Free Trade Agreement (, TLCAN; , ALÉNA), referred to colloquially in the Anglosphere as NAFTA, ( ) was an agreement signed by Canada, Mexico, and the United States that created a trilateral trade bloc in North America. The ...
(NAFTA). In February 1997 Chile's President
Eduardo Frei Ruiz-Tagle Eduardo Alfredo Juan Bernardo Frei Ruiz–Tagle (; born 24 June 1942) is a Chilean politician and civil engineering, civil engineer who served as president of Chile from 1994 to 2000. He was also a Senate of Chile, Senator, fulfilling the role of ...
visited the U.S. Congress and declared his support for his country to join NAFTA. However, NAFTA expansion could not be accomplished because the Clinton administration failed to obtain “ fast-track” negotiation abilities from the U.S. Congress. Meanwhile, Chile signed a pact with Canada in 1996 and with Mexico in 1998. On August 1, 2002, the U.S. Senate granted fast-track authority to President
George W. Bush George Walker Bush (born July 6, 1946) is an American politician and businessman who was the 43rd president of the United States from 2001 to 2009. A member of the Bush family and the Republican Party (United States), Republican Party, he i ...
to negotiate a free trade agreement with Chile and other countries. On December 11, 2002, the U.S. Trade Representative Robert Zoellick announced it had reached an FTA agreement with Chile. On January 30, 2003, President Bush notified the U.S. Congress of his intention to sign the treaty within 90 days. Negotiations were complicated by Chile's opposition to an imminent U.S. invasion of Iraq. U.S Trade Representative Robert Zoellick stated that both President Bush and the U.S. Congress were "disappointed" by Chile's lack of support in the Iraq war and said there was no set time-frame for a signing of the pact. On April 23, 2003
U.S Secretary of State The United States secretary of state (SecState) is a member of the executive branch of the federal government of the United States and the head of the U.S. Department of State. The secretary of state serves as the principal advisor to the p ...
Colin Powell Colin Luther Powell ( ; – ) was an Americans, American diplomat, and army officer who was the 65th United States secretary of state from 2001 to 2005. He was the first African-American to hold the office. He was the 15th National Security ...
said the FTA would be signed and approved but they were looking for the appropriate moment to submit it to Congress. On May 7, 2003, President Bush said the "important FTA with Chile would go ahead". The treaty was finally signed on June 6, 2003, at the Vizcaya Palace in
Miami Miami is a East Coast of the United States, coastal city in the U.S. state of Florida and the county seat of Miami-Dade County, Florida, Miami-Dade County in South Florida. It is the core of the Miami metropolitan area, which, with a populat ...
by Chile's Foreign Affairs Minister Soledad Alvear and Zoellick. It was ratified by the
U.S. House of Representatives The United States House of Representatives is a chamber of the bicameral United States Congress; it is the lower house, with the U.S. Senate being the upper house. Together, the House and Senate have the authority under Article One of th ...
on July 24, 2003, by a vote of 270–156, and ratified by the
U.S. Senate The United States Senate is a chamber of the bicameral United States Congress; it is the upper house, with the U.S. House of Representatives being the lower house. Together, the Senate and House have the authority under Article One of the ...
on July 31, 2003, by a vote of 65–32. It was ratified by the
Chamber of Deputies of Chile The Chamber of Deputies () is the lower house of Chile's Bicameralism, bicameral National Congress of Chile, Congress. Its organisation and its powers and duties are defined in articles 42 to 59 of Chile's current Chilean Constitution of 1980, ...
on October 7, 2003, by a vote of 87–8, and ratified by the
Senate of Chile The Senate of the Republic of Chile is the upper house of Chile's bicameral National Congress, as established in the current Constitution of Chile. Composition According to the present Constitution of Chile, the Senate is composed of forty ...
on October 22, 2003, by a vote of 34–5. The treaty was promulgated by President Bush on September 3, 2003, and by Chilean President
Ricardo Lagos Ricardo Froilán Lagos Escobar (; born 2 March 1938) is a Chilean lawyer, economist and social-democratic politician who served as president of Chile from 2000 to 2006. During the 1980s he was a well-known opponent of the Chilean military di ...
on December 4, 2003.


Provisions

The text of the Free Trade Agreement is divided into twenty-five sections, listed and summarized as follows:


Preambles

A summary of political goals of the agreement, including “CONTRIBUTE to hemispheric integration and the fulfillment of the objectives of the Free Trade Area of the Americas”


Initial Provisions

Relate objectives of the agreement.


General Definitions

This chapter lays the framework for the FTA and sets definitions to be used throughout the agreement in order to assure uniformity.


National Treatment and Market Access for Goods

Define tariffs and customs general regulation, safeguards, and equivalences of nomenclatures for several goods. Chile eliminate tariffs immediately on
pork Pork is the culinary name for the meat of the pig (''Sus domesticus''). It is the most commonly consumed meat worldwide, with evidence of pig animal husbandry, husbandry dating back to 8000–9000 BCE. Pork is eaten both freshly cooke ...
and pork products, beef
offal Offal (), also called variety meats, pluck or organ meats, is the internal organ (anatomy), organs of a butchered animal. Offal may also refer to the by-products of Milling (grinding), milled grains, such as corn or wheat. Some cultures strong ...
,
durum wheat Durum wheat (), also called pasta wheat or macaroni wheat (''Triticum durum'' or ''Triticum turgidum'' subsp. ''durum''), is a tetraploid species of wheat. It is the second most cultivated species of wheat after common wheat, although it repres ...
,
barley Barley (), a member of the grass family, is a major cereal grain grown in temperate climates globally. It was one of the first cultivated grains; it was domesticated in the Fertile Crescent around 9000 BC, giving it nonshattering spikele ...
, barley malt,
sorghum ''Sorghum bicolor'', commonly called sorghum () and also known as great millet, broomcorn, guinea corn, durra, imphee, jowar, or milo, is a species in the Poaceae, grass genus ''Sorghum (genus), Sorghum'' cultivated for its grain. The grain i ...
, soybeans and
soybean meal Soybean meal is used in food and animal feeds, principally as a protein supplement, but also as a source of metabolizable energy. Typically 1 bushel (i.e. 60 lbs. or 27.2 kg) of soybeans yields 48 lbs. (21.8 kg) of soybean meal. Mos ...
, pasta, breakfast cereals, cereal preparations, and sunflower seeds. Access for beef on both sides will be liberalized over 4 years, beginning with a 1,000-metric-ton quota, a 10-percent annual growth factor, and a linear phase-out of the out-of-quota tariff rate. Access for poultry on both sides will be completely liberalized over 10 years Chile's duty on many dairy products, including
skim milk Skimmed milk (British English), or skim milk (American English), is made when all the milkfat is removed from whole milk. It tends to contain around 0.1% to 0.3% fat. Background Historically, skimmed milk was used for fattening pigs, and was re ...
powder A powder is a dry solid composed of many very fine particles that may flow freely when shaken or tilted. Powders are a special sub-class of granular materials, although the terms ''powder'' and ''granular'' are sometimes used to distinguish se ...
, whey, and cheeses, will be eliminated in 4 years; duties on other dairy products will be eliminated in 8 years. Tariffs on U.S. and Chilean wines are being progressively harmonized down to the lowest wine tariff rate and will be eliminated by 2016. Higher effective tariffs will remain for wheat, wheat flour, and sugar during the 12 year transition period under the FTA due to the application of an import price band system.


Rules of Origin and Origin Procedures

The FTA employs product-specific rules of origin similar to those contained in the NAFTA, defining the general rule to consider a good as affected for the agreement when “the good is wholly obtained or produced entirely in the territory of one or both of the Parties” distinguish it from “simple combining or packaging operations” that are not covered by this FTA.


Customs Administration

Regulate custom operation in terms of timing, penalties, information, and others. Established three years for adapt Chilean custom procedures.


Sanitary and Phyto-Sanitary Measures

Chile following US phytosanitary demands.


Technical Barriers to Trade

Establish cooperation on regulatory issues, such as equivalence of technical regulations and standards.


Trade Remedies

Define standards and conditions for safeguard measures.


Government Procurement


Investment

Establish “national treatment” for investors of the other party, compromising a treatment no less favorable, in like circumstances, to its own investors. The same criterion is defined for services, including financial.


Cross-Border Trade in Services


Financial Services


Telecommunications

Compromise each party to ensure that enterprises of the other Party have access to and use of any public telecommunications service offered in its territory, on reasonable and non-discriminatory terms and conditions, including buy enterprises of this area.


Temporary Entry for Business Persons

Facilitate temporary entry for business persons, excluding citizenship, nationality, permanent residence, or employment on a permanent basis


Electronic Commerce

Eliminate any customs duties on digital product from parties.


Competition Policy, Designated Monopolies, and State Enterprises

Regulate procedures to designate monopolies that could affect the other party, including
state enterprise A state-owned enterprise (SOE) is a business entity created or owned by a national or local government, either through an executive order or legislation. SOEs aim to generate profit for the government, prevent private sector monopolies, provide goo ...
s.


Intellectual Property Rights

Strengths compromises from Chile in terms of copyright and control of piracy.


Labor

Reaffirm obligations as members of the International Labor Organization (ILO) and compromises domestic labor law enforcement


Environment

Establish an Environment Affairs Council with representatives of the Parties, which shall meet at least once a year, to discuss environmental issues related with the agreement.


Transparency

Regulate communication between parties.


Administration of the Agreement


Dispute Settlement


Exceptions


Final Provisions

Including annexes, measures and side letters.


Views in favor of U.S.-Chile FTA

Proponents of the US-Chile FTA claim that the reduction in trade barriers brought on by the pact will lead to an increase in trade between the two countries.
USTR Site on Chile FTAAmerican Enterprise Institute 2006 Event: "U.S.-Chile Free Trade Agreement: Building on Success"


Views opposed to the U.S.-Chile FTA


Environment and social issues

Opponents of the US-Chile FTA claim that it will worsen Chile's over-dependence on scarce natural resource exports, and contribute to worsening inequality in both countries.


Labor

In this topic critics point out the agreement's weakness of effectively realizing its commitments. For instance, the agreement doesn't consider sanctions for weakening or violating domestic labor laws.


Quotas and regulatory issues

Opponents of the US-Chile FTA claim that it will worsen Chile's over-dependence on scarce natural resource exports, and contribute to worsening inequality in both countries. The former Chilean minister of foreign relations, Hernán Errázuriz questioned whether the accord should “even be called a free trade agreement” because it “contains quotas for many products, allows the United States to retain broad antidumping attributes and does not control the damage of billions of dollars in distorted
agricultural subsidies An agricultural subsidy (also called an agricultural incentive) is a government incentive paid to agribusinesses, agricultural organizations and farms to supplement their income, manage the supply of agricultural products, and influence the ...
.”


Short-term capitals’ regulation

The U.S. House Representative
Barney Frank Barnett Frank (born March 31, 1940) is a retired American politician. He served as a member of the U.S. House of Representatives from Massachusetts from 1981 to 2013. A Democratic Party (United States), Democrat, Frank served as chairman of th ...
, criticizes the agreement for their deregulation over short-term capital flows, a key factor for Chile's successful economy.
Citizens' Trade Campaign Site on Chile FTA


See more

* Rules of Origin *
Market access In international trade, market access refers to a company's ability to enter a foreign market by selling its goods and services in another country. Market access is not the same as free trade, because market access is normally subject to condition ...
*
Free-trade area A free trade area is the region encompassing a trade bloc whose member countries have signed a free trade agreement (FTA). Such agreements involve cooperation between at least two countries to reduce trade barriers, import quotas and tariffs, and ...


References


Congressional Research Service Report on "The U.S.-Chile Free Trade Agreement: Economic and Trade Policy Issues"Congressional Research Service Report on "Free Trade Agreements with Singapore and Chile: Labor Issues"U.S. House Ways and Means Committee Hearing on US-Chile FTAGlobal Trade Watch discussion paper on Chile FTA and economy
{{DEFAULTSORT:Chile-United States Free Trade Agreement Free trade agreements of the United States Free trade agreements of Chile 2003 in Chile 2003 in the United States Treaties concluded in 2003 Treaties entered into force in 2004 Chile–United States relations Presidency of Ricardo Lagos Foreign policy of the George W. Bush administration