WORLD TRADE
ORGANIZATIONWT/REG38/5
23 May 2002
(02-2850)
Committee on Regional Trade Agreements Original:  English
FREE TRADE AGREEMENT BETWEEN CANADA AND CHILE, SERVICES
Communication from the Parties
I. BACKGROUND INFORMATION ON THE AGREEMENT
1. Membership and Dates of Signature, Ratification and Entry Into Force
The Parties to the Agreement are the Government of Canada and the Government of the
Republic of Chile.
The Canada-Chile Free Trade Agreement (CCFTA) was signed on 5 December 1996, and
was subsequently ratified by the respective legislatures before entering into force on 5 July 1997.
A summary of the Agreement was provided to Members in a communication to the
Committee on Regional Trade Agreements dated 10 April 1997.1  The Agreement was notified to the
Council on Trade in Goods on 6 October 1997 in accordance with Article XXIV:7(a) of GATT 1994,2
and to the Council on Trade in Services on 26 November 1997 in accordance with Article V:7(a) ofGATS.
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2. Type of Agreement
The CCFTA marks a significant further guarantee of liberalization in the area of services
through its substantial sectoral coverage and the prohibition of new or more discriminatory measures.
In addition, it includes a mechanism to lock in future liberalization of existing non-conforming
measures maintained by a Party and listed in Annex I of the Agreement.  Transparency is greatly
enhanced by the listing of discriminatory measures in the Annexes.  The CCFTA is designed tofacilitate trade between Chile and Canada and does not raise barriers to services trade with WTO
Members outside the CCFTA.  The CCFTA also includes provisions on temporary entry which
provide for expedited entry for investors, business visitors, intra-company transferees and other
business professionals of both Parties.
Canada and Chile have also agreed to monitor carefully the ongoing implementation process
and to seek further opportunities for liberalization following implementation.
3. Scope
The CCFTA is a comprehensive trade agreement, covering trade in goods and services,
investment and dispute settlement mechanisms.  This document presents a report on the CCFTA
following the standard format for trade in services.
                                                     
1 WT/REG38/1.
2 WT/REG38/N/1.
3 S/C/N/65.WT/REG38/5
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The CCFTA, including Chapters G, H, I, and K, cover all four Modes of GATS.  Chapter H
provides for comprehensive coverage of cross-border trade in services, which includes Modes 1, 2
and 4.  It applies to measures respecting, inter alia , the production, distribution, marketing, sale and
delivery of a service; the purchase or use of or payment for a services; and the access to and use of
transportation systems.  Disciplines include national treatment, MFN treatment, the right to provide aservice without local presence as well as a mechanism to deal with mutual recognition of professional
services.
In the area of investment (Mode 3), Chapter G provides a comprehensive definition of
investment, requires national treatment and MFN treatment, imposes disciplines to eliminate
performance requirements, limits nationality and residency requirements for boards of directors,
ensures strict disciplines on capital transfers, on expropriation and, in addition to state-to-state disputesettlement, also provides for investor-state dispute settlement.
Chapter I contains specific rules with respect to measures relating to public
telecommunications transport networks and services and value-added telecommunications services,
providing for disciplines with regard to access to and use of public telecommunication transportnetworks and services.
In addition, Chapter K deals with the temporary movement of natural persons (Mode 4),
providing access for a broadly defined group of business visitors, traders and investors, intra-company
transferees, and a lengthy list of professionals.
The Agreement has substantial services sectoral coverage.  Certain air services elements are
excluded from the application of Chapter H on cross-border trade in services, but not from the
application of Chapter G on investment.  With respect to financial services, there is extensive
application of key investment disciplines (Mode 3) dealing with expropriation, transfers and a
comprehensive investor-state dispute settlement mechanism (Articles G-09, G-10 and Section II of
Chapter G).  Both Canada and Chile have agreed to seek further liberalization in the financial services
sector (Annex G-01.3 (b)).
4. Economic and Trade Data
Trade data attached in the Annex.
II. PROVISIONS AFFECTING TRADE IN SERVICES
1. Provisions of the Agreement Relating to the Elimination of Article XVII Inconsistent
Measures
The Agreement requires its Parties to accord to persons of the other Party and services
provided by them treatment no less favourable than that accorded in like circumstances to its persons
and services provided by them (Article H-02).  Similarly, the Agreement also requires its Parties to
accord to investors of the other Party and their investments treatment no less favourable than thataccorded in like circumstances to its investors and their investments (Article G-02).  These
requirements are subject to certain reservations found in Annexes I through IV of the Agreement.
Under Articles H-06(1) and G-08(1), each Party could lodge reservations aimed at
maintaining existing non-conforming measures.  Existing non-conforming measures are listed inAnnex I.  While Articles H-02, H-03, H-05 and G-02, G-03, G-06, G-07 do not apply to amendments
to existing non-conforming measures set out in Anne x I, this is so only to the extent that suchWT/REG38/5
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amendments do not decrease the conformity of a measure, as it existed immediately before the
amendment, with Articles H-02, H-03, H-05 and G-02, G-03, G-06, G-07.
II.1.1 Treatment of services and services providers from third countries
There are no provisions which affect the treatment of services and service providers from
third countries and no modifications to the schedules of specific commitments are proposed.  No
provisions in the Agreement raise the level of restrictions on trade in services for any other WTO
Member.
2. Rules of Origin
Chapter G applies in particular to measures adopted or maintained by a Party relating to
investors of the other Party and their investments.  “Investment” is broadly defined and an
“investment of an investor of the other Party” means an investment owned or controlled directly or
indirectly by that other Party or a state enterprise thereof, or a national or an enterprise of that Party.
“Enterprise of a Party” is broadly defined and incl udes an enterprise constituted or organized under
the law of that Party.  Chapter H applies to meas ures adopted or maintained by a Party relating to
cross-border trade in services by service providers of the other Party.  As indicated above, the concept
of cross-border trade in services covers Modes 1, 2 and 4 of the GATS.  “Service provider of a Party”
means a person of that Party – a national or an enterprise of that Party – that seeks to provide or
provides a service.  These definitions give broad scope to Chapters G and H of the Agreement.
There are specific denial of benefits provisions incorporated into Chapters G and H.
Article G-13 provides in particular that subject to prior notification and consultation, the Parties may
withhold the benefits of Chapter G to an investor of the other Party that is an enterprise of such Party
and to investments of such investors if investors of a non-Party own or control the enterprise and the
enterprise has no substantial business activities in the territory of the Party under whose law it isconstituted or organized.  Article H-11 contains a similar provision in the context of cross-border
trade in services.
No changes in the criteria used for the purpose of determining the origin of services or
services providers were introduced as a result of the implementation of the Agreement.
3. Standards/Recognition
Section I of Annex H-10.5 to Chapter H (Cross-Bo rder Trade in Services) contains provisions
with respect to the processing of application for licences and certifications, the development of
professional standards and temporary licencing of professional services.
4. Safeguards
The CCFTA does not contain any specific provisions for safeguards on trade in services.
General and security exceptions are provided for in Chapter O.  Article O-04 permits governments to
adopt or maintain measures to address serious balance-of-payments difficulties or the threat of such
difficulties provided that those measures conform to certain disciplines set out in this Article.
5. Subsidies and State-aid
Subsidies or State-aid on trade in services are excluded from Chapters H (Article H-01(2)(d)),
and are exempted from key provisions of Chapter G (Article G-08(6)(b)).WT/REG38/5
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6. Description of Any Treatment Provided in the Agreement Relating to Government
Procurement
The CCFTA does not contain specific government procurement provisions.  Government
procurement on trade in services is excluded from Chapter H (Article H-01(2)(c)), and is exemptedfrom key provisions of Chapter G (Article G-08(6)(a)).
7. Sector-specific Provisions
Chapter I deals with measures relating to public telecommunications transport networks and
services and value-added telecommunications services, providing for disciplines with regard to access
to and use of public telecommunication transport networks and services.
III. GENERAL PROVISIONS OF THE AGREEMENT
1. Exceptions and Reservations
Exceptions are listed under Chapter O of the Agreement and include general exceptions, as
follows:  measures regarding national security, balance of payments measures, taxation and cultural
industries.
2. Accession
The Agreement is not open for accession.
3. Dispute Settlement Procedures
The institutional arrangements set out in the CCFTA (Chapter N on institutional arrangements
and dispute settlement procedures) ensure joint decision-making and effective dispute resolution.
Canada and Chile have an equal voice in resolving problems through ready access to objective disputesettlement panels providing authoritative interpretations.
The CCFTA thus obliges Canada and Chile to seek agreed interpretations and reach agreed
solutions.  In the event that any matter arises th at might affect the operation of the CCFTA, either
country may request consultations with the other.  Should consultations fail to resolve the matter,
either country may request a meeting of the Co mmission.  The CCFTA directs the Commission to
settle the dispute promptly.  If a mutually acceptable solution is not reached, either Party may initiatearbitral panel proceedings whose ruling is binding.  These provisions provide an effective, timely and
final procedure for the settlement of disputes.
Chapter N, Section III also provides for the establishment of an Advisory Comm ittee on
Private Commercial Disputes.  The purpose of this Committee is to report and providerecommendations to the Commission on issues related to arbitration and other procedures for the
resolution of private international commercial disputes in the free trade area.
Article N-05 provides that a complaining Party retains the discretion to settle any matter,
arising under both the CCFTA and the WTO Agreement, in either forum.  Article N-05.4 furtherprovides that once dispute settlement procedures have been initiated either under the CCFTA
(Article N-07) or under the WTO Agreement, the foru m selected shall be used to the exclusion of the
other, unless the responding Party claims that its action is subject to Article A-04 (Relation to
Environmental and Conservation Agreements) and requests that the matter be considered under theWT/REG38/5
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CCFTA:  in such case, the complaining Party has sole recourse to dispute settlement under the
CCFTA.
4. Relation with Other Trade Agreements
Under Article A-03.1, the Agreement affirms the Parties' existing rights and obligations with
respect to each other under the Marrakesh Agreement Establishing the World Trade Organization  and
other agreements to which such Parties are party.  Article A-03.2 provides that, in the event of any
inconsistency between the CCFTA and such other agreements referred to under Article A-03.1, the
CCFTA shall prevail to the extent of the inconsistency, except as otherwise provided in the CCFTA.
As indicated in the section on Dispute Settlement, subject to the terms of the Agreement,
Article N-05 reaffirms the Parties right to refer disputes to the WTO.
5. Institutional Framework
The CCFTA establishes the Free Trade Commission and the FTA Secretariat.  The main body
created by the Agreement is the Canada-Chile Free Trade Commission, which is constituted when theMinisters meet.  The Commission is constituted for the purposes of supervising implementation and
furthering elaboration of the Agreement, considering matters affecting operation of the Agreement,
resolving disputes regarding interpretation or appl ication, supervising the work of working groups and
committees, establishing and delegating responsibilities, seeking advice of persons outside
government, establishing rules and procedures and convening meetings.
The Secretariat supports the Commission and acts as a registrar for dispute settlement panels.The Commission supervises the work of the seven bodies created to further the Agreement.
They are the Committee on Trade in Goods and Rules of Origin, the Sub-Committee on Agriculture,the Customs Sub-Committee, the Committee on Telecommunications Standards, the Committee on
Anti-Dumping and Countervailing Measures, the Advisory Committee on Private Commercial
Disputes, and the Working Group on Temporary Entry.
IV. OTHER
Chapter J contains specific obligations in regard to monopolies and state enterprises which
complement the provisions of Chapters G and H.
Article J-02(3) imposes obligations with respect to the behaviour of monopolies.   It provides
that each Party shall ensure, through regulatory co ntrol, administrative supervision or the application
of other measures, that any privately-owned monopoly that it designates and any government
monopoly that it maintains or designates: "(a) acts in a manner that is not inconsistent with the Party's
obligations under (the) Agreement...(b) acts solely in accordance with commercial considerations in
its purchase or sale of the monopoly good or service....(c) provides non-discriminatory treatment to
investments of investors, to goods and to service providers of another Party in its purchase or sale of
the monopoly good or service...(d) does not use its monopoly position to engage, either directly orindirectly, including through its dealings with its parent, its subsidiary or other enterprise with
common ownership, in anti-competitive practices in a non-monopolized market in its territory...".
Articles J-03(2) and (3) impose obligations with respect to the behaviour of state enterprises.
Article J-03(2) provides that each Party shall en sure, through regulatory control, administrative
supervision or the application of other measures, that any state enterprise that it maintains orestablishes acts in a manner that is not inconsistent with the Party’s obligations under Chapter GWT/REG38/5
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(Investment) wherever such enterprise exercises any regulatory, administrative or other governmental
authority that the Party has delegated to it, such as  the power to expropriate, grant licences, approve
commercial transactions or import quotas, fees or other charges.  Article J-03(3) provides that each
Party shall ensure that any state enterprise that it maintains or establishes accords non-discriminatory
treatment in the sale of its goods or services to investments in the Party’s territory of investors of theother Party.WT/REG38/5
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ANNEX
International Trade in Services with Chile, 1990 to 1999
(millions of dollars - millions de dollars)
Receipts 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Travel 18 13 11 10 10 13 15 8 15 13
Transportation, of which 1 3866796496
    F r e i g h t 1113363323
Commercial Services 12 14 9 22 26 106 62 98 38 36
  Engineering, Construction,
and Technical Services.. .. .. 18 19 96 55 87 30 28
  Insurance, and Other
Financial Services.. .. .. .. 22111  -
  Management Services .. .. .. .. 222233
  Miscellaneous Services to
Business2211252522
  Other Services .. .. .. .. 211333
G o v e r n m e n t  S e r v i c e s 3333333555
Total - All Services 46 38 29 41 46 130 86 115 67 60
Payments 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Travel 6 5 9 11 14 18 24 35 25 24
T r a n s p o r t a t i o n 32375 1 68 1 263
  of which
    Freight  - - 142 1 21211
C o m m e r c i a l  S e r v i c e s 34244 1 96453
G o v e r n m e n t  S e r v i c e s 1111233444
Total - All Services 13 12 16 23 25 56 42 55 40 35
..  Figures not available or not appropriate.
-   Zero or to small to be expressed.
Canadian Direct Investment Abroad: Chile
in millions of dollars (year-end book value)
Sector 2000 2001
Electrical and elect ronic products 29 X
General services to business 49 45
Construction and related activities 4 3
Metallic minerals and metal products 2,710 2,388
Energy X X
Finance and insurance X X
Total 5,732 5,632
X  Confidential due to secrecy requirements of the Statistics Act.
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