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US And Chile Reach Free Trade Agreement

Washinigton Outlook

James A. Morrissey, Washington Outlook

The United States and Chile have reached a free trade agreement that has been well received by the textile industry but has received only a lukewarm endorsement from importers of textiles and apparel. The key element, and also a bone of contention, is a country of origin provision that says in order for products to be eligible for duty-free treatment, they must be made of yarn and fabric from the participating countries. Importers contend that the yarn-forward provision is entirely too restrictive and will discourage trade within the countries. The agreement will permit the importation of a limited amount of goods, known as Tariff Preference Levels, made with yarn or fabric from other countries. In the case of fabric, this will amount to one million square meters annually and two million square meters of cotton and man-made fiber apparel. Chile is one of the few countries where the US currently enjoys a textile trade surplus, with $41 million in exports and only $1 million in imports.The agreement contains strong provisions designed to protect fabric and clothing designs and patents, and calls for heavy penalties for goods that circumvent the rule of origin. For example, the Chilean government guarantees it has authority to seize and destroy counterfeit goods and the equipment used to produce them. It also provides for criminal and monetary penalties.The final text of the agreement still needs to be worked out and signed by the respective governments, and Congress will have the final say as to whether it approves or disapproves of it.By James A. Morrissey, Washington Correspondent December 2002