Savoring Chile

American food and beverage manufacturers are gearing up for new sales opportunities in South America, once the free- trade agreement recently negotiated by the United States and Chile wins final approval. The agreement would lift tariffs on more than 85 percent of manufactured goods from both countries in the first year, with most of the remaining tariffs set to end within four years.

The pact would grant immediate access for many U.S. processed food items, including breakfast cereals, pasta, and french fries. The agreement is subject to approval by Congress and by Chile's parliament. Trade officials were planning to bring it to Congress early this year.

The Bush administration sees the agreement as a model for what could be the world's largest free-trade zone by 2005, covering 34 nations in the Western Hemisphere. Analysts say the overall economic impact from trade with Chile will be relatively small, compared to that between the United States and its largest trading partner, Canada.

The Grocery Manufacturers of America, which worked with the office of the U.S. Trade Representative as the agreement was developed, says the pact is right in line with its goal of increased global market access. "We are pleased with the innovative elements aimed at eliminating competitive disadvantages for U.S. products in Chile," says s.v.p. and chief government affairs officer Mary Sophos.

The pact has vocal opponents, including farmers, who have lobbied for high tariffs to protect against a flood of cheaper imports. Some members of the dairy industry fear the agreement paves the way for other pacts with Australia and New Zealand, two of their major competitors.