Global Policy Forum

By Gustavo González

Chile and the United States wrapped up negotiations Wednesday -- though not without a dose of suspense -- on a bilateral free trade accord, which experts say will give Washington a boost as leader of the hemisphere-wide talks to create the Free Trade Area of the Americas (FTAA).

In Chile, the Ricardo Lagos government, industrialists and bankers applauded the agreement, while farmers and small and medium manufacturers received the news with a cautious attitude, and civil society groups launched a volley of criticisms.

"This free trade treaty sets a precedent and the Chilean government is thus responsible for advancing the FTAA through a bilateral channel that benefits the United States," Dante Donoso, coordinator of the Chilean Alliance for Fair and Responsible Trade, said in a conversation with IPS.

The outcome of talks officially begun in January 2001, the agreement was announced by Chile's Foreign Minister Soledad Alvear and the U.S. Trade Representative Robert Zoellick Wednesday afternoon in Washington, where the final nine days of the negotiations took place.

"We have reached a good agreement with the United States, the world's leading economic power. Chile will have a free trade agreement that will mean more jobs, more work, more development and more growth for this country," Lagos said Wednesday morning, prior to the official announcement of the accord.

Nicolás Eyzaguirre, Chile's minister of the Treasury, whose last-minute trip to Washington proved vital for resolving the remaining sticking points and giving the agreement the green light, said, "This is an historic day for Chile."

"I would not say that Chile had to give in," said the minister about the final terms of the talks, though he admitted that the Chilean delegation had to accept "some rules and procedures" about intellectual property rights and liberalisation of the financial market.

The new agreement could enter into force by mid-2003, given that U.S. President George W. Bush holds "fast-track" or "trade promotion" authority to expedite the approval process in the U.S. Congress. In Chile, too, there is majority support in parliament for the accord.

Chilean-U.S. trade totals 6.0 billion dollars annually. The treaty would immediately eliminate tariffs on 85 percent of consumer and industrial goods, said U.S. official Zoellick.

Minister Alvear, meanwhile, noted that 87 percent of Chilean exports to the United States would be exempt from tariffs in the first year of the treaty, and tariffs on the remaining items would be gradually reduced over the next 12 years.

The free trade treaty with the United States marks yet another achievement for the Lagos administration, which in April finalised talks on cooperation and trade agreement with the European Union, and in October signed a bilateral accord with South Korea, its first with an Asian-Pacific nation.

The seed of a Chilean trade alliance with the United States was planted in 1991, and at the first Summit of the Americas, in 1994, Chile was invited to join the North American Free Trade Agreement (NAFTA, comprising Canada, Mexico and the United States).

But then- president Bill Clinton failed to obtain fast-track authority so the deal was dropped in 1996. However, with a bilateral treaty with Mexico already in hand, Chile negotiated another with Canada that same year.

Lagos visited Washington in 2000 and obtained Clinton's promise to negotiate a free trade agreement, paving the way for the talks that began in January 2001, under the Bush administration.

The process leading up to the trade agreement "with the most solid economy in South America," as Bush describes Chile, has been watched closely because it is seen as sort of a litmus test for the FTAA, the hemisphere-wide treaty being negotiated by 34 countries.

In the middle of last week, Lagos warned that Chile would not sign the agreement if the United States continued to insist on limited quotas for imports of dairy and other agricultural products.

Alejandro Foxley, former Treasury minister and current senator, said Monday that the United States should agree to the Chilean demands if the Bush administration did not want to feed into the position of Brazil's president-elect, Luiz Inácio Lula da Silva.

Brazil, under the Fernando Henrique Cardoso government, worked to shore up support for its role as Latin American leader in international forums. Lula is largely picking up where Cardoso left off, and is calling for a united Latin America that should negotiate as a bloc with Washington.

Although the United States made some concessions on farm trade questions, new difficulties arose in the final days as the Washington team demanded liberalisation of the capital market and protection for intellectual property.

The United States asked Chile to eliminate its requirement for a guaranteed deposit for all foreign financial investments. Although the measure is not currently implemented, it could be reactivated as a mechanism against capital flight.

As for intellectual property rights, particularly for the pharmaceutical industry, Chile in the end agreed to rules on transparency and protection, "which in the long term will be to our benefit," commented Chilean official Eyzaguirre.

Although the exact terms of the agreement are not yet known, activist Donoso warned that in the intellectual property arena, Chile could be contradicting the "spirit of Doha", established at the ministerial meeting of the World Trade Organisation in the Qatar capital last year, to exempt urgently needed medicines from patent rules.

Gustavo Rojas, director of Chile's National Society of Agriculture, said the treaty is a good agreement, but noted that "agro-industry in general tends to be protected in the industrialised countries, and the Chilean negotiators -- regrettably and unjustifiably -- failed to break that imbalance."

The National Confederation of Medium, Small and Micro Industry and Services and Craftworks said it is inappropriate to sign a free trade agreement with the United States without first ensuring that measures are in place to allow Chilean producers to compete with those U.S. sectors.

The Confederation is urging the Lagos government to invest in improving technology and the export capacity of small and medium companies and crafts industries.

From a more global perspective, Donoso, coordinator of the Chilean Alliance for Fair and Responsible Trade, says that signing a free trade accord with the United States in the current context contradicts the objectives for strengthening democracy established in the 1990s with the Initiative for the Americas.

Chile is negotiating an exclusive trade agreement with the world's superpower, whose government is following a pro-war, militaristic agenda, "preparing aggression against Iraq," said Donoso.

The Lagos government acted "without solidarity or a common vision with the other Latin American countries" by ignoring the positions of Brazil, Venezuela and Ecuador, which challenge the FTAA negotiations currently taking place under U.S. hegemony, added the activist.

Furthermore, there was no formal or ongoing participating by civil society in the negotiations, beyond some informational meetings, which only produced a highly criticised committee, said Donoso.

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