Free trade agreement to be signed with Chile, first in South America

Thursday, June 5th 2003, 12:00 am

By: News On 6

WASHINGTON (AP) -- Culminating a process begun almost nine years ago, Chile on Friday will become the first South American country to sign a free trade agreement with the United States.

The agreement will be formalized at a ceremony in Miami held against a background of lingering American resentment over Chile's refusal to back the U.S.-led war against Iraq.

The Bush administration courted Chile, a fellow U.N. Security Council member, but to no avail.

U.S. officials, asking not to be identified, said the ceremony could have been held earlier but was delayed, in part, because of the disagreement over Iraq. Technical reasons also contributed to the delay.

U.S. Trade Representative Robert Zoellick and Chilean Foreign Minister Soledad Alvear will head their respective delegations to the signing ceremony.

The last significant free trade breakthrough for Washington in the Western Hemisphere dates back to 1993 when Mexico joined Canada and the United States in the North American Free Trade Agreement.

Progress on trade issues was impeded largely by an unfavorable political climate during the Clinton administration.

The National Association of Manufacturers estimates that the absence of a free trade agreement with Chile costs the United States 20,000 jobs annually.

Alvear has said the accord may contribute to nearly 1 percent growth in Chile's GNP, in addition to creating much needed jobs.

The accord will eliminate or lower tariffs in as much as 85 percent of the bilateral trade exchange, which now stands at around $6 billion a year. That figure could grow by one third over the next five years as a result of the accord, according to Alvear.

In addition to Canada and Mexico, the United States also has free trade agreements with Israel and Jordan. The Chile agreement requires Senate ratification, as does a recently signed trade agreement with Singapore.

The administration also is negotiating a similar accord with Central America and hopes to complete the process by December.

Officials say the agreement with Chile will have a positive impact on efforts to achieve a 34-nation hemisphere-wide free trade agreement by a January 2005 target date. That goal is at the heart of the administration's policy toward Latin America and the Caribbean.

Administration officials believe the FTAA, the shorthand term for the agreement, will be a catalyst for hemispheric economies, many of which have poor growth rates.

The FTAA will give these countries the incentive to carry out reforms and will make them much more attractive to foreign investors, the officials say. It also will provide them with unprecedented access to the U.S. market, by far the world's wealthiest.

Secretary of State Colin Powell will review the status of the negotiations during a planned visit to Chile where he will meet with fellow Organization of American States foreign ministers early next week.

Brazilian President Luiz Ignacio da Silva, whose country co-chairs the FTAA negotiations with the United States, will meet with President Bush in Washington on June 20.