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
