WASHINGTON — The U.S. and Chile concluded negotiations on a free-trade agreement Wednesday designed to immediately strip away tariffs on 87 percent of all consumer and industrial products, including apparel and textiles.
This story first appeared in the December 12, 2002 issue of WWD. Subscribe Today.
The pact is expected to be signed by next spring, then sent for Congressional votes in the U.S. and Chile. The two top trade negotiators for the U.S. and Chile said Wednesday they are hopeful both governments will pass the trade bill by the end of 2003.
The U.S. and Singapore agreed to a yarn-forward rule of origin, which requires textiles and apparel to be made of yarn and fabric sourced within the free-trade area, but the agreement does allow for some exceptions.
The U.S. allowed for some tariff preference level provisions in the agreement, which will allow Chile to use a certain amount of cotton and man-made fiber from any country in the world and still receive duty breaks.
Under the terms of the TPL provision of the agreement, 2 million square meters equivalent of cotton and man-made fiber from anywhere in the world can be used in apparel production in Chile for 10 years and still receive the U.S. duty breaks, according to a U.S. trade official, who spoke only about background. After 10 years, the amount of apparel made with fabric and yarns from third countries and receiving duty breaks will be reduced to 1 million square meters equivalent.
In addition, Chile can send 1 million SME of cotton and man-made fiber fabric made with yarns from anywhere in the world to the U.S. and receive duty breaks.
Duties on all TPLs, as well as apparel made of American or Chilean yarn and fabric, will be eliminated immediately upon implementation of the agreement.
“We see this as a win-win,” the trade official said. “Chile sends us so little and we were able to give them a tiny TPL and take care of their needs as well.”
The TPLs granted by the U.S. would cover all current trade with Chile.
Chile is a small supplier of textiles and apparel to the U.S.
For the year ended in September, textile and apparel imports from Chile totaled 2.78 million square meters equivalent, or 0.1 percent of the total apparel and import market in the U.S., according to the U.S. Department of Commerce. In terms of value, imports totaled $13.56 million for the year ended in September.
Carlos Moore, senior vice president of the American Textile Manufacturers Institute, which opposes any TPLs, said the allowances given to Chile renders the strict rule of origin “meaningless.”
“Regardless of the current level of trade, it means that U.S. textile mills will not benefit from a yarn-forward rule of origin to the extent that any properly negotiated FTA should call for,” Moore said. “The purpose of any free-trade agreement is to benefit countries inside the agreement and not countries outside of the agreement, as these TPLs surely do.”
On the other side of the debate, Brenda Jacobs, Washington trade counsel for the U.S. Association of Importers of Textiles and Apparel, said importers will probably explore the trade deal because of Chile’s proximity to the U.S.
“For those already doing business there, this is a good way to save money,” she said. “Whether it invites new companies remains to be seen, though.”