Commodity Fact Sheet
What’s at Stake for Beef?
On Dec. 11, 2002, the United States concluded negotiations on a free trade agreement (FTA) with Chile, the first such arrangement with a South American country. The U.S. – Chile Free Trade Agreement entered into force on January 1, 2004. This agreement provides America’s farmers, ranchers, food processors, and the businesses they support with improved, and in many cases, new access to Chile’s market of 15 million consumers. This comprehensive agreement calls for duty-free access on all products and addresses other trade measures for both countries.
U.S. Beef Gains Improved Access to Chile’s Dynamic Economy
Before the agreement… U.S. beef and other meats were restricted due to differences in meat inspection regulations. Consumer cuts of beef were also denied access unless labeled and graded according to Chilean standards which differed from U.S. standards. Without preferential access, U.S. beef was at a disadvantage to product from Brazil, Uruguay, Paraguay and Argentina, regional countries that have advantages in transportation and existing trade agreements with Chile. The U.S. share of Chile’s beef import market averaged less than 1 percent from 2001-2003.
With the agreement… Both governments agreed to immediately recognize each others’ grading systems, making it possible for USDA to certify beef product for export to Chile. A technical working group was established for the purpose of recognizing Chile and the United States’ respective red meat inspection systems. U.S. fresh and frozen beef products (HTS Codes 020110, 020120, 020213, 020210, 020220 and 020230) gained preferential access as tariffs were reduced over 4 years and then eliminated in the fourth year of the agreement. In the first year of the trade agreement a tariff-rate quota (TRQ) of 1,000 tons was established, which rose to 10 percent annually over four years and then eliminated. Virtually all of Chile’s beef imports come from its South American neighbors; Brazil, Argentina, and Uruguay combined captured the majority of Chile’s import market. However, this agreement has helped U.S. beef find its niche in the high-end, higher valued Chilean beef market.
Chilean Exporters Secure Improved Access to U.S. Buyers
Before the agreement… Chilean beef was prohibited from accessing the U.S. beef market because USDA has not recognized Chile’s meat inspection system.
With the agreement… Upon approval of Chile’s meat inspection system, Chilean beef (same six commodity groups noted above) gained preferential access to the U.S. market following the same schedule set up for U.S. beef entering Chile’s market. That is, tariffs were reduced over 4 years and then eliminated in the fourth year of the trade agreement. Upon implementation of the agreement, Chile received a tariff-free quota of 1,000 MT of beef to ship into the U.S., which rose to 10 percent annually over four years and then eliminated. The FTA also eliminated the 4 percent tariff Chile faced on beef on the existing WTO tariff-rate quota amount that is allocated among WTO members. A net importer of beef products, Chile has not posed a threat of becoming a significant supplier to the U.S. market.
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