RESTRICTEDWORLD TRADE
ORGANIZATIONWT/REG38/4
16 September 1998
(98-3513)
Committee on Regional Trade Agreement
CANADA-CHILE FREE TRADE AGREEMENT
Questions and Replies
This document reproduces questions addressed to the Parties and the joint responses provided
by them.  The questions and replies set out below are organized in accordance with document
WT/REG38/2.
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I. BACKGROUND INFORMATION ON THE AGREEMENT
3. Scope
It is envisaged that trade in a number of products will be liberalized under the
Agreement over a period longer than ten years.  The WTO Understanding on Article XXIV
provides that the reasonable period of time foreseen in Article XXIV:5(e) for the formation of
free-trade areas should exceed ten years only in exceptional cases.  What products are affected
by transitional periods longer than ten years a nd how is this exceptional treatment justified?
The CCFTA identifies products on which Chile will exceptionally remove its tariffs over a
period longer than 10 years.  These products are:
- Beef (15 years)
- Wheat and wheat meal (18 years)
- Meat sausages (15 years)
- Sugar (16 years)
These products are very sensitive given the high distortions created in the international market
by subsidies granted by other countries.  Despite their sensitivity, the Parties agreed it was preferable
to have these products included in the Canada-Chile Free Trade Agreement (CCFTA) disciplines and
subject to a longer phase-out period, rather than excluded from coverage altogether.
Could the Parties provide data on the propor tions of trade for each item which has a
phase-in period of more than ten years?  What are the reasons for having these extended
implementation periods?  Do the Parties envisa ge accelerating these implementation periods?
Refer to the response to question 1, and to Annex III to this document which provides
additional data  The CCFTA does contain provisions (Article C-02) enabling the Parties to agree toaccelerate the tariff elimination timetables, which would be pursued on the basis of joint industry
agreement.  No discussions are currently underway in this regard.WT/REG38/4
Page 2
Statistics provided in WT/REG38/2 suggest that 99 per cent of two-way trade is covered
by the CCFTA.  Could the Parties conf irm the proportions of trade for which:
- duties are eliminated
- other regulations of commerce are eliminated (with details of what these "other
regulations of commerce" are).
The CCFTA incorporates comprehensive provisions concerning tariff and non-tariff barriers
to trade between the Parties, including tariff elim ination, disciplines in respect to import and export
restrictions, prohibitions against the use of customs user fees and export taxes, and so forth.  Annex I
to this document provides details on the proportion of trade subject to duty elimination  As Members
well know, there is currently no agreed definition of the term "other regulations of commerce" in thecontext of Article XXIV, which continues to be the subject of discussion under the Committees'
consideration of systemic issues.  It is therefore not possible to provide data which presupposes a
common understanding of the meaning of this term.
4. Trade Data
The Trade statistics provided by the parties cover data for the years 1994-96.  Can the
parties update the data with trade figures for 1997?
Please see Annex I to this document for 1997 figures.
Have the Parties undertaken any studies which point to possible effects of the CCFTA
on third parties?  If so, what were their findings?
Please refer to Annex II to this document for statistics on trade between CCFTA Parties and
with non-parties.  The Parties have not undertaken any studies specifically addressing the impact of
the CCFTA on third parties.  Such assessments woul d in any case be difficult to undertake given that
the CCFTA has been in effect for only one year.  However, the Parties are of the view that the higher
incomes generated by the trade liberalization provisions of the CCFTA should stimulate higher
demand for imports from third countries given the high degree of openness of the Canadian andChilean economies.
Could the Parties provide information on tr ade creation effects, i.e., data on trade
(volume) of major products with third countries before and after the formation of the
Agreement?
See Annex I to this document, and the response to question 5.
II. TRADE PROVISIONS
1. Import Restrictions
1.1 Duties and charges
Please provide details of bilateral trade in poultry, egg and dairy products.  Is trade in
these products excluded entirely from the coverage of the agreement, or just from theprogramme of tariff elimination?WT/REG38/4
Page 3
In the last four years there have been very small volumes of trade in items not destined for
complete tariff elimination.  These items are certain dairy, poultry and egg products.  Annex II to this
document provides details of bilateral trade in these products.
All products are covered by the CCFTA, including dairy, poultry and egg products.  For
example, Article C-00 makes it clear that the Chapter on National Treatment and Market Accessapplies to goods of a Party including dairy, poultry and eggs.  However, the specific provisions related
to tariff elimination vary from product to product in accordance with each Party's Schedule to Annex
C-02.2.  In the case of dairy, poultry and egg products, Canadian in-quota tariffs are being eliminated.
Canada will retain its MFN tariff quotas and MFN over-quota tariffs for certain dairy, poultry and egg
products, while Chile will retain its MFN tariffs for the same products.
What are the precise arrangements with regard to durum wheat, milling wheat and
wheat flour?  When will restrictions on trade in these goods be removed?  Will Chile's system of
price bands remain?
Durum wheat is in schedule B which covers a period of 6 years for tariff elimination.
According to this schedule, by 1 January 2002 trad e in durum wheat will be completely tariff free.
Since 1 January 1998, the tariff level on durum wheat has been 6.5 per cent and is not subject to the
system of price bands.
For wheat and wheat flour, items subject to the system of price bands, tariffs will be phased
out over a period of 18 years reaching zero tariff by 1 January 2014.  The specific schedule for tariff
elimination will be defined before 2004.
The system of price bands, which has been in place since mid-1980s, was designed to
minimize the effects of fluctuations in international prices on the domestic economy.  It coversimports such as wheat, wheat flower, sugar, and vegetable oils for human consumption.  No additional
products have been added to this list and there are no plans to do so in the near future.
In Chile, imports of commodities under the price band system represent a high proportion of
domestic demand.  For example, in 1996 this included 27 per cent for sugar, 37.4 per cent for wheat
and 92.1 per cent for oil for human consumption.  These statistics should suggest that the price bandsystem is not used as a protectionist device against imports.
A number of goods are exempt from the CCFTA (e.g. dairy, poultry and egg products).
Do the parties envisage including exempt products  in the agreement at some time in the future?
When will in-quota tariffs be removed?  Will out-of-quota tariffs remain?  If so, at what level
and how would the parties justify their continuation?
All products are covered by the CCFTA, including dairy, poultry and egg products.  For
example, Article C-00 makes it clear that the Chapter on National Treatment and Market Accessapplies to goods of a Party including dairy, poultry and eggs.  However, the specific provisions related
to tariff elimination vary from product to product in accordance with each Party's Schedule to Annex
C-02.2.  For most dairy, poultry and eggs products, duties on in-quota tariff items were eliminated
immediately upon implementation of the agreement; the remaining 3 lines, at the 8 digit H.S. level,
will be duty free no later than 1 January, 2003.  Canada will retain its MFN tariff quotas and MFNover-quota tariffs for dairy, poultry and egg products, while Chile will retain its MFN tariffs for the
same products.  The volume of trade on which duties will not be eliminated by the end of the
transition period accounts for less than half of one percent of bilateral trade in the last four years.  The
CCFTA is fully consistent with Article XXIV:8(b) as substantially all trade between the parties will
be duty free at the end of the transition period.WT/REG38/4
Page 4
2. Export Restrictions
2.2 Quantitative restrictions
Could Chile please explain the rationale fo r maintaining export restrictions on the
export of copper and other resources for national industry.  What definition is given to the
concept of "other resources for national industry"?  Are there any plans to lift these
restrictions?
Law 16624 requires enterprises qualifying as "Gran Mineria"  (i.e. enterprises with production
of copper greater than 75,000 tons per year) to reserve copper for supply to the national industry.
This law was promulgated in 1967 to ensure that copper volumes were available for domestic
manufacturing and semi-manufacturing industries and it was compatible with the development modelof that period which was based on industrialization via import substitution.  It should be noted that
Law 16624 refers only to copper and does not mention the possibility of restraining exports of other
resources.  In the current development model, which relies on market freedom, openness of the
economy and external orientation, law 16624 is less relevant and its elimination in the near future is
currently under discussion.  Annex C-08 of the CCFTA already provides that Chile will bring Law16624 into conformity with the CCFTA within two years of the entry into force of the CCFTA.
3. Rules of origin
Have the Parties raised local content ra tios to grant origin, in the process of
harmonization of rules of origin?
After the formation of the free-trade area, h ave the Parties introduced rules of origin
which require that the raw material or parts be sourced within the free-tr ade area in order that
the final product could be exported duty-free into the other Party?
Have the Parties put in place new rules of origin with local content or value-added
requirements which had not existed prior to the formation of the free-trade area?
As, prior to the implementation of the CCFTA, there were no rules of origin between the
Parties to the Agreement, there were no local conten t ratios to raise nor were there rules of origin to
harmonize.  Prior to implementation of the Agreement, goods from Chile entered Canada under either
the GATT-negotiated non-preferential Most-Favoured-Nation Tariff or the unilaterally applied
Generalized System of Preferences and, in both instances, cumulative origin is allowed.  For purposes
of the bilateral CCFTA, new rules of origin, based on the Harmonized System of tariff classification,
were developed.
In order that a good exported from one Party may receive preferential tariff treatment under
the Agreement upon entry into the other Party, the good must qualify as an originating good under the
rules of origin set out in the Agreement.  The rules of origin applicable to some goods require that
certain of the raw materials or parts qualify in their own right under the rules of origin as goods
originating in the free trade area.
As indicated in the reply to the first part of this question, new rules of origin, based on the
Harmonized System of tariff classification, were developed for purposes of the bilateral CCFTA.
Some of these rules may require that certain of the materials used to produce the good in question
qualify in their own right as originating in the free trade area, while other rules may require that, in
addition to satisfying a required change in tariff classification, the good must also satisfy a regional
value-content requirement.WT/REG38/4
Page 5
5. Safeguards
It is stated that the Parties would appl y safeguards among themselves when "the
quantities of goods from the partner accounted fo r a substantial share of the total imports and
when the goods from the partner contributed significantly to the injury" (WT/REG38/M/1).
Could the Parties clarify the meaning of "substantial share which contributed
significantly" as this expression seems to be vague?
What is the legal justification for not applying safeguards among parties but only
applying them against third countries, especially if imports from the other Party contribute to
the injury?
Under Article F-02, either party taking an emergency action under Article XIX of the
GATT 1994 and the WTO Agreement on Safeguards shall exclude imports of the party unless:
imports from the other Party account for a substantial share of total imports; i.e. imports will not beconsidered accounting for a substantial share if imports from the Party are not among the top five
suppliers, measured over the most recent three year period; and imports from the other Party
contribute importantly to the serious injury, or threat thereof. In making that determination,
investigating authorities shall consider such factor s as change in the import share of the other Party
and the level and change in the level of imports from the other Party. Imports from the other Partyshall not normally be considered as contributing importantly if the growth of such imports during the
period of the injurious surge in total imports is a ppreciate lower than the growth rate of total imports
during that period.
The Parties are of the view that in accordance with the provisions outlined above, the
application of a bilateral safeguard action and/or the exclusion from another CCFTA Party'sapplication of a global safeguard action under certain circumstances, does not conflict with GATT
Article XIX and the WTO Agreement on Safeguards in the context of a free-trade agreement under
GATT Article XXIV.  The provisions of CCFTA Articles F.01 and F.02 are consistent with the
practices in place under other Article XXIV arrangements that provide for the application of a
bilateral safeguard action and/or the exemption of Parties to a free-trade arrangement from globalsafeguard actions.
III. GENERAL PROVISIONS OF THE AGREEMENT
3. Dispute Settlement Procedures
In respect of Dispute Settlement, could the parties please explain the rationale for
allowing a complaining party to settle any matter which arises under both the Free Trade
Agreement and the WTO Agreement in either forum.  How are the rights of other WTO
Members preserved, if dispute settlement takes place in the bilateral forum?
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 further
provides that once dispute settlement procedures have been initiated either under Article N-07 or
under the WTO Agreement, the forum selected shall be used to the exclusion of the other, unless the
Party claims that its action is subject to Article A-04 (relation to Environmental and ConservationAgreements) and requests that the matter be considered under the CCFTA: in such case, the party has
sole recourse to dispute settlement under the CCFTA.  WTO Agreement dispute settlement
proceedings are deemed to be initiated by a Party's request for a panel, such as under Article 6 of the
Understanding on Rules and Procedures Go verning the Settlement of Disputes .  Where an obligation
is unique to an Agreement, Parties will avail themselves of the Dispute Settlement provisions of theWT/REG38/4
Page 6
affected Agreement.  Where the coverage of Agreements overlaps, the Parties may choose.  In respect
of disputes between the Parties respecting antidumping measures and countervailing duty measures,
the CCFTA parties have agreed in CCFTA Article M-07(3) that subject to some exceptions, disputes
shall be settled in accordance with the WTO Agreement.
It is the view of the CCFTA Parties that the Agreement concluded is fully consistent with
WTO obligations, and does not raise potential for conflict.  Such intention is clear from the CCFTA
Preamble which indicates that the Parties resolved, among other things, to "Build on their respective
rights and obligations under the Marrakesh Agreement establishing the World Trade Organization and
other multilateral and bilateral instruments of cooperation".  Thus, the Parties were mindful of the
need to reach an agreement which was entirely consistent with WTO obligations.
Finally, the CCFTA Parties would note that WTO rights of third parties are not affected in
any way by the CCFTA: any such parties are free to pursue WTO dispute settlement proceedings.
Why is a dispute settlement relating to actions subject to Article A-04 (Environmental
and Conservation Agreements) reserved automa tically to the bilateral rather than the
multilateral forum, even where WTO ri ghts and obligations may be involved?
Paragraph (2) of Article N-05 is a reflection of the importance the Parties placed on
environment-related matters in the negotiation of the CCFTA.  Paragraph (2) reflects the Parties'sensitivity to environmental issues and their comm itment to ensuring high levels of cooperation in
meeting conservation and environmental objectives.  Building on existing WTO rules, the CCFTA's
dispute resolution rules and institutions are partic ularly responsive to these unique and specialized
CCFTA obligations.
Paragraph (2) was established to provide a responding Party with the means to ensure that a
complaining Party could not avoid its Article A-04 commitment by choosing the WTO forum.
Article A- 04 was established to ensure that CCFTA would not derogate from a Party's right to take
action under the specific trade obligations in the environmental and conservation agreements set out
in Article A-04.  The WTO had no equivalent rule to that set out in Article A-04.  The Parties
determined that where Article A-04 could be applie d, it would be appropriate that disputes on such
actions would be pursued under the CCFTA.
It should be noted that paragraph (2) does not provide that only CCFTA dispute settlement
procedures may be invoked.  Rather, a complaining Party has the initial choice of forum, subject to a
responding Party's right to request that the matter be considered under the CCFTA (which would
result in the complaining Party having recourse to dispute settlement solely under the CCFTA in that
case).
The Parties simply wanted to ensure that a Party would not be precluded from recourse to the
CCFTA dispute settlement process, in respect of those matters involving obligations unique to the
CCFTA, unless the parties to a dispute agreed otherwise.
IV. OTHER
Can the Parties provide any comment on the possible effects of the CCFTA on their
overseas investment, particularly in the Asian region?
The CCFTA is not expected to result in changes in the patterns of investment of either Party
in third countries.WT/REG38/4
Page 7
ANNEX I
Update of Trade Figures Provided in WT/REG38/2
Trade Covered by the CCFTA
Data for 1997 (millions of Cdn $):
(a) Total two-way trade covered by the Agreement: 920.4
(b) Total two-way trade: 923.8
(c) Percentage of trade covered by the CCFTA with respect to total bilateral trade: 
99.6%
Trade Data
Table 1
Canada Imports from Chile
(CDN $ millions)
Total Covered by the
CCFTA% of Total Covered
1995 279 279 100
1996 342 342 100
1997 325 325 100
Table 2
Canada's Imports from Chile: Major Products
(CDN $ millions)
1995 1996 1997
Copper Ores and Concentrates (HS 2603) 12.5 82.8 32.5
Grapes, fresh or dried (HS 0806) 76.7 78.7 78.7
Wine of fresh grapes (HS 2204) 27.5 38.5 51.2
Fruit and vegetable Juices (HS 2009) 10.3 20.2 16.2
Apples, pears and quinces, fresh (HS 0808) 12.9 18.3 14.9
Note: Figures are calculated using Canada's imports reported in Canadian dollars and Chile's imports reported
in US dollars. The overall figures are converted to Canadian dollars by multiplying by an averageexchange rate for each year.WT/REG38/4
Page 8
Table 3
Chile: Imports from Canada
US $ millions)
Total Covered by the
CCFTA% of Total Covered
1995 315.1 314.4 99.8
1996 408.1 406.2 99.5
1997 432.5 430.1 99.5
Table 4
Chile's Imports from Canada: Major Products
(US $ millions)
1995 1996 1997
Wheat and Meslin (HS 1001) 42.9 119.2 51.6
Coal and solid fuels from coal (HS 2701) 25.7 31.1 36.0
Transmission apparatus, etc. (HS 8525) 15.7 14.3 12.9
Line telephony electr appar (HS 8517) 6.4 14.3 12.7
Newsprint, roll/sheets (HS 4801) 3.2 10.9 6.9
Percentage of 1997 Trade Subject to Immediate Tariff Elimination,
Phased Tariff Elimination and Not Subject to Tariff Elimination
Details of 1997 Bilateral Trade:
Table 5
Canada:  1997 Imports from Chile
(CDN $ million)
Value %
Imports Subject to Tariff Elimination on Implementation 218 88
Imports Subject to Phased Tariff Elimination (less than 10
years in all cases)38 12
Imports not Subject to Tariff Elimination 0 0
Total 1997 Imports from Chile 325 100WT/REG38/4
Page 9
Table 6
Chile:  1997 Imports from Canada
(US $ million)
Value %
Imports Subject to Tariff Elimination on Implementation 292.8 67.7
Imports Subject to Phased Tariff Elimination (2 - 10 years) 89.7 20.8
Imports Subject to Phase out of longer than 10 years 47.6 11.0
Imports not Subject to Tariff Elimination 2.4    0.5
Total 1997 Imports from Canada 432.5 100.0
Sources: Chilean imports to Canada - Statistics Canada
Canadian imports to Chile - Comercio Exterior del Banco Central de Chile
Trade Between CCFTA Parties and Non-Parties: 1995 - 19971
Table 7
Canada: Imports from Chile: 1995-1997
(CDN $ million)
Total % Growth
1995 279 n/a
1996 342 22.58
1997 325 -4.97
Table 8
Canada: Imports from Rest of World  1995-1997
(CDN $ million)
Total % Growth
1995 225,629 n/a
1996 232,648 3.32
1997 272,101 16.72
                                                     
1All figures are based on import data provided by Canada and Chile. Canadian statistics are provided in Canadian
dollars and are based on Canadian sources (Statistics Canada). Chilean statistics are provided in U.S dollars and are based on
statistics from Comercio del Banco Central de Chile.WT/REG38/4
Page 10
Table 9
Chile: Imports from Canada: 1995 - 1997
(US $ million)
Total % Growth
1995 315.1 n/a
1996 408.1 29.51
1997 432.5 5.98
Table 10
Chile: Imports from Rest of World: 1995 – 1997
(US $ million)
Total % Growth
1995 14,588
1996 16,402 12.4
1997 17,679 7.8WT/REG38/4
Page 11
ANNEX II
Details of Bilateral Trade in  Dairy, Poultry and Egg Products2
Table 11
Chile's Imports from Canada, 1996 & 1997 - Dairy, Poultry and Egg Products
(Imports not Subject to Tariff Elimination)
(US $ thousands)
HS Code Description 1996 1997
0105.11.00 Fowls of the Species Gallus domestic weighing not more than 185g 33 73
0105.12.00 Live poultry: turkeys 18 0.00
0402.10.00 Milk and cream, concentrated or containing added sugar or other sweetening
matter, in powder, granules or other solid forms, of a fat content, by weight,
not exceeding 1.5%0.00 58
0403.90.00 Powdered Buttermilk, whether or not concentrated or containing added sugar
or other sweetening matter or flavoured or containing added fruit, nuts orcocoa41 0.00
0404.10.00 Whey and modified whey, whether or not concentrated or containing added
sugar or other sweetening matter131 41
0405.10.00 Butter 411 0.00
0405.90.00 Butter and other fats and oils derived from milk; dairy spreads. Other 346 0.00
1806.20.00 Other preparations with cocoa of content exceeding 2 kg 0 77
2106.90.90 Remaining food preparations not elsewhere specified or included 864 1,123.00
2309.90.10 Dairy substitutes used in feeding calves 0.00 22.00
2309.90.90 Other Preparations of a kind used in animal feeding 77.00 974
Note: for trade in products of the 0407.00.00 classification (Bird's eggs, in shell, fresh, preserved or cooked), subject to
tariff phase out longer than 10 years, see Annex III.
                                                     
2As with all other bilateral trade statistics provided in this submission, the Parties have used Canadian sources
(Statistics Canada) for Canadian imports from Chile, and Chilean sources (Comercio Exterior del Banco Central de Chile)
for Chilean imports from Canada.WT/REG38/4
Page 12
Table 12
Canada's Imports from Chile 1996 & 1997 - Dairy, Poultry and Egg Products
(CDN $ thousands)
HS Code Description 1996 1997
0105.11.00 Fowls of the Species Gallus domesticus weighing not more than 185g 0 0
0105.12.00 Live poultry: Turkeys 0 0
0402.10.00 Milk and cream, concentrated or containing added sugar or other sweetening
matter, in powder, granules or other solid forms, of a fat content, by weight,
not exceeding 1.5%00
0403.90.00 Powdered Buttermilk, whether or not concentrated or containing added sugar
or other sweetening matter or flavoured or containing added fruit, nuts or
cocoa00
0404.10.00 Whey and modified whey, whether or not concentrated or containing added
sugar or other sweetening matter00
0404.90.20 Blended dairy powders - over access 0 0.951
0405.10.00 Butter 00
0405.90.00 Butter and other fats and oils derived from milk; dairy spreads. Other 0 0
0407.00.00 Bird's eggs, in shell, fresh, preserved or cooked 0 0
2309.90.10 Preparation of a kind used in animal feeding – other 0 0WT/REG38/4
Page 13
ANNEX III
Table 13
Chile: 1997 Imports from Canada of Products Subject to Phase Out Longer than 10 years
HS Code Description Imports from Canada
($US thousands)% of Total Imports from
Canada
0407.00.00 Bird's eggs, in shell, fresh, preserved or cooked 416 0.10
0710.10.00 Potatoes, frozen, uncooked/steamed boiled in water 16 0.00
0713.10.00 Dried leguminous vegetables, shelled, whether or not
skinned or split1697 0.39
1105.20.00 Potato Flakes 95 0.02
1601.00.00 Sausages and similar products, except those
containing meat123 0.03
2004.10.00 Potatoes, prepared or preserved o/t by vinegar or
acetic acid, frozen3245 0.75
0203.22.00 Hams, shoulders and cuts thereof; of swine, bone-in,
frozen99 0.02
0203.29.00 Swine spare ribs, frozen 999 0.23
0209.00.00 Pig fat lean meat free & poultry fat unrendered, fresh,
chilled, frozen or cured269 0.06
2710.00.10 Motor gasoline (including aviation spirits) 16 0.00
2710.00.63 Finished lubricated oil 152 0.04
2710.00.64 Lubricated oil 120 0.03
4012.20.00 Used, pneumatic tires 5 0.00
1001.90.00 Wheat nes and meslin 40335 9.33
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