U.S. and Chile Sign Trade Agreement to Reduce Tariffs and Other Barriers

After dragging its feet to show its displeasure over Chile’s opposition to the war in Iraq, the United States signed a free trade agreement Friday with the Latin American country that would lower barriers for U.S. goods and services and could serve as a springboard for a trade zone stretching from Alaska to the tip of South America.

U.S. Trade Representative Robert B. Zoellick called the U.S.-Chile Free Trade Agreement a historic pact that would reduce tariffs, increase intellectual property protections and streamline customs procedures. The deal is the first of its kind in South America.

Officials of AOL Time Warner Inc., United Parcel Service Inc., Lockheed Martin Corp. and Caterpillar Inc. were on hand to witness the signing, according to an official of the National Assn. of Manufacturers, a major backer. Two-way trade between the U.S. and Chile totaled $6.4 billion in 2002.

The Bush administration sent a pointed message to Chile by having the pact signed by Zoellick and Chilean Foreign Minister Maria Soledad Alvear Valenzuela in Miami, far from the U.S. capital.

Just last month, President Bush invited Singapore Prime Minister Goh Chok Tong to the White House for an elaborate ceremony to mark the signing of a similar trade deal.

The president bestowed lavish praise on the Singapore official, noting his country’s strong support for the U.S. anti-terrorism effort and the Iraq war. Both the Singapore and Chile agreements must be approved by Congress.

“In the symbolism of politics, it’s a very significant downgrading to go from what Singapore received, a presidential bright-lights ceremony, to a provincial, ministerial-level gathering,” said Richard Feinberg, director of the APEC Study Center at UC San Diego and a former Clinton administration official. “It’s almost like an event in exile.”

Feinberg and others said the free trade agreement with Chile gives a boost to an otherwise gloomy trade picture and provides momentum to the U.S.-led effort to expand the North American Free Trade Agreement to the rest of Latin America.

“The multilateral negotiations are going nowhere and this gives the bureaucrats something to do,” said Barry Bosworth, a trade specialist at the Brookings Institution in Washington.

Under the U.S.-Chile pact, more than 85% of bilateral trade in consumer and industrial products becomes tariff-free immediately after the agreement takes effect, with the remaining tariffs phased out within four years. The tariffs and quotas on agriculture goods would be phased out over 12 years.

U.S. manufacturers have the most to gain. Frank Vargo, a National Assn. of Manufacturing trade expert, said the agreement levels the playing field for U.S. firms that have been losing “$20 million a week” to companies from Canada and members of the European Union.

Chile already has signed free trade agreements with those countries, giving their firms a leg up.

Not everyone is happy with the Chile deal. Though California almond and walnut growers would benefit from reduced tariffs, producers of canned fruit fear the pact would result in a flood of imported product when the tariffs disappear, said James Christie of Bryant Christie, a Seattle-based trade consulting firm that represents California farmers.