Chile Mercosur Free Trade Agreement

Chile has more or less comprehensive free trade agreements with the United States, Canada, the European Union, EFTA, South Korea, Japan, Central America and Mexico. In June 2005, it reached a four-lane agreement with its Pacific neighbours Brunei, New Zealand and Singapore (P-4). In June 2006, it signed a free trade agreement with Panama. In February 2010, it signed a contract with Guatemala. Products manufactured or marketed in each Member State`s free trade zones are eligible for the protection scheme if this results in an un anticipated increase in imports, but which can cause damage or damage to the importing country. Brazil`s President Michel Temer travelled to Santiago to sign the agreement with his counterpart, Chilean President Sebastian Pinera. The agreement creates tariffs in 17 key sectors, including services and electronics, and eliminates additional mobile phone charges between the two countries. Chile is the first Latin American country to have sealed a free trade agreement with China (2005) and to work with Beijing since early 2007 to extend the agreement to services and investment. Other agreements in this regard were reached during President Bachelet`s visit to China in April 2008. The service contract came into effect in August 2010. Mercosur was born in 1991, when Argentina, Brazil, Paraguay and Uruguay signed the Treaty of Asuncion [PDF], an agreement that called for “the free movement of goods, services and factors of production between countries.” The four countries agreed to abolish tariffs, introduce a common external tariff of 35 per cent on certain imports from outside the bloc and pursue a common trade policy vis-à-vis third countries and blocs. The members of the Charter hoped to create a common market similar to that of the European Union and even considered the introduction of a common currency. Member States agreed that all free trade areas that were already in operation in August 1994 could be operated normally under Mercosur, with all those to be created taking into account the legal guidelines in force during the same period or in Congress.

This means that a member nation can no longer create new, more privileged free trade zones. Mercosur is an effective agreement for its members. Wednesday`s agreement removes the latest tariffs between the two South American economies. The majority has previously been reduced as part of a complementary agreement between Chile and the Mercosur bloc countries. Member States can assess goods from these areas with the common external tariff used for Mercosur or, for some special products, the national tariff applicable in each Member State. In this way, products from free trade zones can benefit from the more favourable tax treatment provided by the southern common market, imported into the normal customs areas of each Member State, or, in the case of certain special products, the normal customs treatment that prevails in each country. Products outside Mercosur are heavily taxed, so local businesses do not feel the need to compete with large international companies. Experts say that integration has been further stifled as Mercosur`s economies continue to resort to protectionist strategies [PDF] and are reluctant to create value chains or regional production centres. Instead, Latin America`s traditional dependence on exports of low-value-added raw materials, particularly to China, continued during the commodity price boom of the 2000s. Many economists say this has contributed to disappointing trade growth in the bloc, which has declined since 1998 as a share of overall membership trade.

The Caribbean country`s accession protocol was signed in 2006 by all the presidents of the bloc countries. The Uruguayan and Argentine congresses then approved the accession of the new member. The Brazilian Congress did not do so until December 2009. However, the Paraguayan Congress did not approve it and therefore prevented the Caribbean nation from fully joining it.

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