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U.S. Free Trade Agreement With Chile Sets Table For Other FTAs

by 5m Editor
20 June 2003, at 12:00am

US - While the newly-signed free trade agreement (FTA) between the United States and Chile is indeed beneficial to U.S. farmers, the ground-breaking trade accord’s most important result may prove to be its influence toward the passage of 2 more FTA's

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While the newly-signed free trade agreement (FTA) between the United States and Chile is indeed beneficial to U.S. farmers, the ground-breaking trade accord’s most important result may prove to be its influence toward the passage of a Central American Free Trade Agreement (CAFTA) and a comprehensive Free Trade Agreement of the Americas (FTAA), according to U.S. Meat Export Federation (USMEF) trade analysts.

The U.S. FTA with Chile was signed on June 6 in Miami by U.S. Trade Representative Robert Zoellick and Chilean Foreign Minister Soledad Alvear and the Bush Administration is expected to submit the agreement to Congress for ratification this week. The pact is historic as the first free trade agreement between the U.S. and a South American country. It also removes important trade barriers that previously restricted U.S. meat exports to Chile; pork tariffs will now be removed entirely, and beef products will be tariff-free within four years. All other tariffs and quotas on agricultural products will be removed within 12 years, and the agreement means U.S. farmers will gain equal or greater access to Chile than European Union or Canada farmers now enjoy from their own FTAs with Chile.

But USMEF Trade Development Vice President Richard Fritz rates the Chilean FTA’s market opportunity for U.S. red meat as secondary to the greater significance of the agreement’s implications for CAFTA and FTA of the Americas. Fritz was a member of a special trade meeting convened at American Meat Institute (AMI) headquarters in Washington, D.C., on June 12 to discuss CAFTA with five Latin American meat company executives and trade specialists from USMEF, National Cattlemen’s Beef Association (NCBA) and National Pork Producers Council (NPPC).

“The Chilean FTA is more significant to U.S. meat exporters as a potential precursor to the passage of CAFTA, which could provide an even greater market opportunity for U.S. beef, pork and lamb exports,“ Fritz said. “The fact that Chile’s Agriculture and Livestock Service now accepts FSIS certification as equivalent to its own is critically important. Central American countries may now be similarly influenced while negotiating an endorsement of the U.S. plant inspection system.“

Prior to the Chilean FTA, U.S. red meat plants desiring to export to Chile had to be inspected and certified individually by Chilean officials before export status was granted – all paid for by the U.S. plant. Under the new FTA, Chile will accept standard certificates issued by USDA’s Food Safety and Inspection Service (FSIS) and will thus remove unnecessary sanitary and phytosanitary (SPS) restrictions to free trade. Deputy U.S. Trade Representative Peter Allgeier commented on June 11 that the Bush Administration sees Chile’s FTA as a “model“ but not a “photocopy“ for future trade agreements with the five Central American countries involved in CAFTA negotiations.

USMEF Western Hemisphere Vice President Homero Recio, who also attended the June 12 AMI trade meeting in Washington, D.C., agreed with Fritz on the importance of the Chilean FTA towards the CAFTA and FTAA negotiations.

“The fact that the Chilean FTA includes acceptance of FSIS certification and very favorable duty rates for beef, pork and lamb bodes well for our negotiating stance regarding CAFTA,“ Recio said. “Finalizing beneficial terms in CAFTA and FTAA should be the true long-term goal for U.S. meat exporters. Chile is a good short-term win, but those broader FTAs are the true prizes on which to focus.“

Fritz commented that the Chilean FTA may open a few select avenues for U.S. meat exports.
“I am cautiously optimistic about specific U.S. meat export opportunities in Chile, especially for processed pork products in certain niche markets now that all pork tariffs are removed,“ said Fritz, who recently visited Chile firsthand to gauge the retail and restaurant market potential for U.S. meat. “Certain family-style restaurant chains have expanded dramatically in Chile, and some opportunities exist there for U.S. pork and beef sales. Value-added U.S. pork will compete very well in Chile now.

“But transportation costs and other factors have led to Argentine and Brazilian beef being significantly cheaper than U.S. beef in Chile recently,“ added Fritz. “Also, Chilean consumers are not familiar with the benefits of U.S. grain-fed beef, so it is an uphill battle. Brazil’s grass-fed beef dominates the Chilean market and more consumer education is needed about U.S. grain-fed beef qualities like marbling.“

“Value-added U.S. pork products are very competitive in the Chilean market, and the total elimination of pork tariffs will really help our exports,“ adds Recio. “USMEF plans to provide its members with an in-depth market snapshot of export opportunities in Chile by year’s end and we’ll help U.S. exporters target prime accounts and specific markets with sales potential.“

In 2002, nearly all of Chile’s beef imports came from nearby South American countries Brazil, Paraguay, Uruguay and Argentina – despite Chilean FTAs in effect with both Canada and the European Union. Brazil alone contributed 70 percent of Chile’s 2002 beef imports with 72,093 metric tons (mt) out of Chile’s yearly beef import total of 102,171 mt. The U.S. was tenth in beef exports to Chile in 2002 with only 0.02 mt.

By contrast, Central America is already a viable market for increased U.S. red meat exports; U.S. pork including pork variety meat exports to Central and South America for January-March 2003 increased 19 percent by volume over the first three months of 2002 for a value of $6.28 million – even without a Central American FTA. U.S. pork including pork variety meat exports to Honduras alone increased 72 percent by volume and 32 percent by value to $1.57 million for January-March 2003 compared to those same months in 2002

Source: U.S. Meat Export Federation - 18th June 2003

5m Editor