Commodity Fact Sheet
What’s at Stake for Wine?
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. Wine Gains Improved Access to Chile’s Market
Before the agreement … U.S. wine faced a 6-percent tariff. Without preferential access, U.S. wines were at a disadvantage to wines from the European Union (EU). Under a bilateral agreement with the EU, Chile’s tariffs on most EU wines were phased out over 5 years once the agreement was implemented, and Chile phased out its use of protected European geographical terms, such as Champagne, Burgundy, and Bordeaux. Chile has a strong domestic wine industry, and wine imports did not exceed $2 million per year.Chile’s import market is dominated by wine from Argentina. From 2001-2003, U.S. wine exports to Chile averaged $29,000. The U.S. share of Chile’s import market averaged 2 percent from 2001-2003.
With the agreement … U.S. wine gained preferential access to the Chilean market following a graduated schedule that initially reduced only higher tariffs until they catch up with lower tariffs, at which point the tariffs in both countries are reduced at the same rate. Tariffs in both countries will be eliminated in the 12th year of the agreement.
Chilean Wines Secure Improved Access to U.S. Buyers
Before the agreement … The U.S. tariff onbottled wine, one of the lowest in the world, was approximately 6 cents per bottle (the equivalent of less than 2 percent ad valorem in 2001). Imports of Chilean wine grew significantly in the 1990s. Chile was the United States’ fourth largest wine supplier, with sales of $138 million in 2003.
With the agreement … Chilean wines gained preferential access to the U.S. market. The United States will apply the same graduated tariff reductions to Chilean wine exports as Chile will apply to imports from the United States. Thus, wine tariffs in both countries will be eliminated at the end of the 12-year phase out period.
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