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Free Trade Agreement Of Chile

Free Trade Agreement Of Chile


Developing countries, including Chile, have expressed two fundamental concerns about the inclusion of environmental and labour provisions in trade agreements: 1) that their sovereignty could be compromised if such agreements approve higher standards; and 2) that such provisions can be used to justify disguised protectionism. Proponents of free trade in the United States and other developed countries have expressed similar sentiments regarding the inclusion of environmental and labour provisions in trade agreements. For the United States, market access and, in particular, tariff reduction were a central objective of the negotiations. For countries that have trade agreements with Chile, such as Canada, the uniform 6% tariff will be waived for most goods, a benefit that the United States wanted to eliminate. On the other hand, U.S. imports from Chile face different tariffs, although some products enter the United States duty-free under normal trade relations (see Appendix C for the customs processing of Chile`s major exports). Major U.S. imports from Chile are not eligible for duty-free treatment under the Generalized Preference System (GSP), a preferential trade agreement made by industrialized countries for imports from developing countries. The United States and Chile negotiated the timetable for phased tariff reductions on the product negotiation schedule, which differentiates the processing of sensitive products, as was the case with the North American Free Trade Agreement (NAFTA).

However, opposition to bilateral free trade agreements has intensified for both economic and political reasons. Economists, even those who advocate free trade, point out that bilateral (and regional) agreements are bad substitutes for multilateral agreements. While the two countries can improve under a bilateral agreement through the creation of trade relations, the agreement can also lead to a reorientation of trade (and investment), which can have negative consequences for those who are both in and out of the agreement. Although trade policy misappropriations are often difficult to assess, the continuation of negotiations at the multilateral level is a real reflection. (1) Services are an important component of U.S. exports and an important area of negotiation in trade agreements. The United States is the leading provider of financial services (insurance, banks, securities), telecommunications and business advisory services. The free trade agreement between the United States and Chile would reduce barriers and improve disciplines in the provision of these services, but would not significantly alter U.S. imports of these services, and there would likely be no major change in the U.S.

export position. First, Chile has little presence in the United States with respect to these services, and second, Chile is a relatively small market for U.S. services and has been relatively open for some time. (13) However, Chile`s open regionalization and export-oriented trade policy were called into question because they did not focus sufficiently on the country`s diversification of unrefined agricultural and mining products (copper, fish, grapes and wood). Manufactured goods account for less than 15% of total exports, indicating two potential problems. First, confidence in traditional raw materials can generate strong export returns, but profits are unpredictable due to volatile commodity prices (see fluctuations in Chile`s terms of trade in Table 1). (8) Bilateral negotiations have been a difficult task for both countries and, although a comprehensive agreement has been reached, several issues have been controversial for many members of Congress, as expressed in hearings in the House of Representatives and the Senate.