PRESS/TPRB/62
24September 1997
TRADE POLICY REVIEW BODY
REVIEW OFCHILE
TPRB 'SEVALUATION
TheTrade Policy Review Body oftheWorld Trade Organization (WTO) concluded itssecond
review ofChile 'strade policies on23and24September 1997. ThetextoftheChairperson 'sconcluding
remarks isattached asasummary ofthesalient points which emerged during thediscussion.
Thereview enables theTPRB toconduct acollective examination ofthefullrange oftrade
policies andpractices ofeach WTO member country atregular periodic intervals tomonitor significant
trends anddevelopments which may have animpact ontheglobal trading system.
Thereview isbased ontworeports which areprepared respectively bytheWTO Secretariat
andthegovernment under review andwhich cover allaspects ofthecountry 'strade policies, including:
itsdomestic laws andregulations; theinstitutional framework; bilateral, regional andother preferential
agreements; thewider economic needs andtheexternal environment.
Arecord ofthediscussions andtheChairperson 'ssumming-up, together with these tworeports,
willbepublished induecourse asthecomplete trade policy review ofChile andwillbeavailable from
theWTO Secretariat, Centre William Rappard, 154ruedeLausanne, 1211 Geneva 21.
Since December 1989, thefollowing reports have been completed: Argentina (1992), Australia
(1989 &1994), Austria (1992), Bangladesh (1992), Benin (1997), Bolivia (1993), Brazil (1992 &1996),
Cameroon (1995), Canada (1990, 1992, 1994 &1996), Chile (1991 &1997), Colombia (1990 &1996),
Costa Rica (1995), Côted'Ivoire (1995), theCzech Republic (1996), Cyprus (1997), theDominican
Republic (1996), Egypt (1992), ElSalvador (1996), theEuropean Communities (1991, 1993 &1995),
Fiji(1997), Finland (1992), Ghana (1992), Hong Kong (1990 &1994), Hungary (1991), Iceland (1994),
India (1993), Indonesia (1991 and1994), Israel (1994), Japan (1990, 1992 &1995), Kenya (1993),
Korea, Rep. of(1992 &1996), Macau (1994), Malaysia (1993), Mauritius (1995), Mexico (1993),
Morocco (1989 &1996), New Zealand (1990 &1996), Nigeria (1991), Norway (1991 &1996), Pakistan
(1995), Paraguay (1997), Peru (1994), thePhilippines (1993), Poland (1993), Romania (1992), Senegal
(1994), Singapore (1992 &1996), Slovak Republic (1995), South Africa (1993), SriLanka (1995),
Sweden (1990 &1994), Switzerland (1991 &1996), Thailand (1991 &1995), Tunisia (1994), Turkey
(1994),theUnitedStates(1989,1992,1994&1996),Uganda(1995),Uruguay(1992),Venezuela(1996),
Zambia (1996) andZimbabwe (1994).
MORE 97-4020 PRESS/TPRB/62
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TRADE POLICY REVIEW BODY
Review ofChile
CONCLUDING REMARKS BYTHE CHAIRPERSON
Thesecond Trade Policy Review ofChile wasconducted on23-24 September 1997. These
remarks, prepared onmyown responsibility, areintended tosummarize thediscussion andnottobe
afullreport: thiswillbecontained intheminutes ofthemeeting.
Thediscussiondevelopedunderfourmainthemes:macroeconomicissues;thebalanceinChile's
trade policies among multilateral, regional andbilateral approaches; adiscussion ofspecific trade-related
measures andpolicies; andsectoral elements oftrade policies.
Some Members noted thatthefocus ofChile 'strade policies hadmoved towards regionalism
inthepastsixyears, while maintaining astrong commitment tothemultilateral system. Chile was
congratulated onitsgenerally open andliberal system, andontheliberalization which hadtaken place
inservices trade; however, some Members noted thatthere were some areas ofgoods trade where few
changes hadoccurred since theprevious review.
Macroeconomic issues
Members commended Chile 'sremarkable macroeconomic performance since 1990, which had
been assisted byprogressive liberalization; thehighrateofgrowth combined withgrowing social equity;
andthereduction ofunemployment andinflation. Onemember sought clarification regarding theuse
ofindexation mechanisms intheeconomy andtheir relationship toinflation.
Members noted that,since thelastreview, there hadbeen some diversification inexport products
andmarkets, butthatChile remained reliant onasmall range ofexports, especially copper. Inthis
regard, theeffectiveness oftheCopper Stabilization Fund asashock-absorber washighlighted; one
member asked about thepossibility ofcreating anoffshore fund toreduce possible negative effects
onexports from realexchange rateappreciation. Itwasnoted thatState involvement haddecreased
substantially throughout theeconomy; however, there were noplans toprivatize CODELCO.
Members welcomed Chile 'sgenerally liberal andnon-discriminatory foreign direct investment
regime. Questions were raised regarding theuseofacompulsory deposit or"encaje" system for
investment funds; while some Members feltthatthismeasure mayhave contributed tomonetary stability,
others expressed concern about itspossible restrictive effects.
Inreply, therepresentative ofChile noted thattheauthorities hadputemphasis ongrowth with
equity, asshown byanincrease inpercapita incomes andamarked reduction inthenumber ofpersons
below thepoverty line. However, thedistribution ofincome wasrelatively unchanged; thiswasa
priority concern. High savings andinvestment hadcontributed largely toeconomic growth: the
importance ofexternal factors haddeclined. While trade liberalization hadcontributed togrowth it
didnothave thesame effect across theeconomy, hence theimportance ofsocial programmes tospread
thebenefits ofliberalization. Inflation hadbeen controlled basically through monetary policy, with
overall confidence generated bystrict observance ofinflation targets andbyfiscal surpluses; thedegree
ofindexation -based onpastinflation -hadbeen reduced. Therepresentative confirmed thattherole
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oftheCopper Stabilization Fund was, ascovered inthedocumentation, tobeabuffer against world
price fluctuations. Heexplained thatthe"encaje" system, acentral element ofmonetary policy, was
areserve requirement limited toportfolio capital inflows, anddesigned tominimize speculative flows;
itbenefited investors directly byreducing theriskoffinancial fluctuations.
Multilateralism, regionalism andbilateralism
QuestionswereaskedregardingthebalanceinChile'stradepoliciesbetweenmultilateral,regional
andbilateral approaches, andtheemphasis currently given totheconclusion ofagreements with regional
entities. Inthisconnection, specific questions were posed about Chile 'srelations with NAFTA, the
recently concluded Free Trade Agreement with Canada, thestatus ofnegotiations foraframework
agreement withtheEuropean Union, thenetwork ofagreements withLatin American partners, including
theconsistency with LAIA provisions ofthecomplementarity agreements with some Members, and
thenewagreement with MERCOSUR. Members questioned theeffects ofthewide range ofagreements
onthetransparency andpredictability ofChile 'strade policies. Chile 'smembership ofAPEC was
generally commended; inthisconnection, clarification wassought onChile 'sdefinition of"open
regionalism".
Aquestion wasasked ontheextent towhich Chile wasfacilitating imports from least developed
countries.
Inreply, therepresentative ofChile saidthatmultilateralism wasChile 'stoppriority. However,
Chile sawbilateral andregional agreements asessential toadvance theopening ofitsown economy
andnew export markets. Itwasalsoimportant torecall thepolitical dimension ofsuch agreements
inLatin America, inparticular South America, andtherelationship between open economies andthe
development ofdemocracy.
Heemphasized thatmost trade would beliberalized within 10years, although alonger period
wasallowed forsome sensitive items. Henoted thattheagreements within South America, andthat
with Mexico, were under LAIA, covered bytheEnabling Clause. Tariff quotas covered imports under
preferential rates; there were norestrictions onimports under MFN rates. Henoted thatthere were
nonon-preferential rules oforigin andgave details oftheoperation ofpreferential rules.
Specific trade-related measures andpolicies
Ingeneral Members commended Chile 'sopen trade regime, inparticular, theuniform tariff.
Some Members sought clarification about theproposal toreduce thetariff by3-4percentage points.
Noting thegapbetween WTO bound rates andtheMFN applied rate, several Members asked ifthere
were anyplans tobind closer totheapplied rate.
SomeMemberssoughtclarificationregardinganapparentdifferencebetweentaxationofdomestic
andimported spirits. Information wassought onChile 'simplementation oftheWTO Customs Valuation
Agreement. Some Members alsoinquired why Chile hadnotsigned thePlurilateral Agreement on
Government Procurement andencouraged theauthorities todoso.Members recognized thatChile 's
national requirements regarding standards were generally based oninternational provisions; however,
some concerns were raised regarding thepotential impact ofhealth andsanitary requirements asabarrier
totrade.
Clarification wasalsosought regarding thestatus oftheAgreement onImplementation ofArticle
VIoftheGATT 1994 inChilean law,progress with newanti-dumping legislation, andtheuseofanti-
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dumping measures inlight ofprovisions agreed upon intheFree Trade Agreement with Canada. The
absence ofsafeguard legislation washighlighted byseveral participants.
Members noted theexistence ofcertain export subsidies andsought clarification astowhether
Chile hadimplemented anymeasures toeliminate them. Inaddition, Members sought clarification
regarding theexport promotion activities ofPROCHILE, andtheAgricultural Fund established in1995
topromote agricultural exports.
Onintellectual property, some Members sought information regarding progress inamending
Chile 'slegislation tobring itintocompliance with theTRIPS Agreement. Members welcomed the
authorities 'initiative todraft anew competition law.
Inreply, therepresentative ofChile saidthattheaverage bound tariff of25percentforindustrial
products represented abalance reached intheUruguay Round. Adraft lawhadbeen prepared toreduce
theflatapplied ratefrom 11to8percent; theExecutive believed thatthisreduction would need to
beoffset toguarantee thecontinuity ofsocial programmes. Concerning liquor taxation, adraft law
hadbeensenttoCongresswhichwouldensureequaltaxtreatment,varyingonlyaccordingtothealcoholic
content. Chilean customs valuation wasinaccordance with therelevant WTO Agreement; variations
ontransaction value were inlinewith theprovisions oftheAgreement. Heexplained theapplication
ofminimum customs values; these would disappear with thefullapplication oftheWTO Agreement.
TheWTO provisions were applied inChile 'sagreements with Canada andMERCOSUR.
Therepresentative confirmed thattheWTO Agreements onanti-dumping andcountervailing
measures hadtheforce oflawinChile andwere thebases ofprocedures being applied. Adraft bill
hadbeen brought toCongress togiveoperational effect tocertain rules. Tariff surcharges maybeapplied
foroneyear maximum within GATT bindings: they didnotapply toFTA partners andwere not
"safeguards" inthesense ofGATT Article XIX. They hadnotbeen used since 1993.
Therepresentative gave details ofChilean government procurement procedures, which were
based ontransparency, non-discrimination, flexibility anddecentralization. Thesame procedures applied
across thepublic sector. State enterprises were required tobeselffinancing andtooperate onaprivate
enterprise basis. Chile regarded theapplication oftheGPA ascomplex, bureaucratic andcostly;
moreover, itdidnotguarantee MFN treatment below federal level. Chile thus hoped thatanywider
agreement would include notonly theprinciples oftransparency andnon-discrimination, butalso
flexibility anddecentralization.
The representative provided details oftheoperation ofChilean standards, sanitary and
phytosanitary measures inrelation towine, beef andlamb, chicken andwheat; hegave assurance that
national treatment wasapplied. Theonly preferential sectoral regime wastheautomotive programme,
which wasbeing phased out. Programmes fordistant regions ofthecountry covered taxation, customs
facilitation andinvestment incentives anddidnotdiscriminate against foreigners. Exports benefited
from aduty drawback system forimported inputs andasimplified system forminor exports. The
simplified system wasnotsector-specific; anysubsidy component wasbeing phased out. Deferred
tariffs oncapital goods only involved asubsidy inthose cases where atariff waiver wasgranted on
condition thatthecapital good wasemployed inthemanufacture ofexports; thiswould bereduced
bytheprocess ofliberalization. Healsoexplained theroleofPROCHILE inproviding governmental
services toexports.
Therepresentative ofChile alsoprovided information onChile 'slegislation andpractices, as
well asrecent advances, intheareaofintellectual property. Anychanges required tobring legislation
intolinewiththeWTOTRIPSAgreementwerebeingstudiedandwouldbecompletedby1January2000,
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asrequired fordeveloping countries. TRIPS cases were handled bytheordinary courts, notby
administrative processes. Intheareaofcompetition policy, Chile hadextensive jurisprudence, butwas
drafting anewlawtomodernize theinstitutional andlegal framework inthelight oftheinternational
environment.
Sectoral elements
Some Members questioned theprice band mechanism onsome import-competing agricultural
goods; they noted thatthesystem could lead tohigh protection andaffect resource allocation. This
policy wascontrasted withChile 'sgenerally active support forinternational liberalization ofagricultural
trade, through theCairns Group. Members asked whether consideration wasbeing given todirect
income support forpoor farmers.
Some delegations asked about policies topromote theautomotive industry, namely theexport
balancing scheme, domestic content requirements, export subsidies andtheprohibition onimports of
used cars. One member asked fordetails ontheproposal foraroyalty taxonmining. Another
mentioned concerns regarding permission forthetranshipment offishinChilean ports.
Several Members noted thatChile 'sliberalization efforts intheservices sector were ahead of
itsWTO commitments andasked ifthiswould bereflected inanimprovement inChile 'sGATS bindings.
Details were requested onseveral specific aspects, forexample, theelimination ofhorizontal restrictions
regardingcommercialpresence,themaritimeagreementbetweenChileandBrazil,thefurtherliberalization
ofthetelecommunications sector, Chile 'sinvolvement intheongoing negotiations onfinancial services,
theremoval oftheadditional taxlevied oninsurance premia when insurance services were contracted
abroad, andprudential requirements applied toforeign anddomestic re-insurers.
Inreply toquestions raised regarding theprice band mechanism, therepresentative stated that
themechanism (applying towheat, wheat flour, edible oilsandsugar) wasestablished tobuffer domestic
prices against international price fluctuations. Therepresentative noted thatimports ofgoods covered
under thismechanism were considerable, amounting inthecaseofedible oilsto92percentofdomestic
consumption. Itwasunlikely thatthebound rateof31.5 percentcould bebreached bythemechanism.
Regarding dairy products, therepresentative replied thatChile considered the31.5 percentbound level
(against anapplied rateof11percent) appropriate given thesensitivity ofthissector forChilean
agriculture. Healsoclarified policy regarding irrigation programmes andthePlan fortheRecovery
ofSoil Productivity. Thepurchase price ofsugar beet wassetbyIANSA, aprivate enterprise, in
negotiation with producers andwithout government intervention.
Therepresentative clarified theoperation oftheautomotive programme, dating from the1980s.
Currently, only three enterprises benefited. Headded thattheprogramme would bephased outbythe
year 2000, inaccordance with Chile 'scommitments under theTRIMS agreement. Theprohibition
onimports ofused vehicles wasforenvironmental reasons andthere were noplans toliftthis.
Regarding theservices sector, therepresentative mentioned that inthelastseven years
telecommunications,infrastructure,transportandfinancialserviceshadgonethroughanimportantprocess
oflegal reform. Intelecommunications, theprivatization ofthelocal andinternational telephone
companies hadbegun in1985, andthere wasfreecompetition inthesector. Asaresult ofthereform,
rates haddecreased by50percentandthenumber oflines hadincreased substantially. Thefinancial
sector hadalsobeen subject toimportant reforms, including therecent approval ofanewbanking law,
covering three major areas: internationalization oftheChilean banking system, widening thescope
ofbanking activities, andadoption oftheBasle norms. Regarding maritime transportation, thedelegate
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clarified thatChilean legislation wasbased ontheprinciple ofreciprocity. Chile regretted thatmaritime
transport negotiations hadnotbeen able toadvance.
Headded thatChile hadparticipated actively intheWTO services negotiations. Inthe1995
financial services negotiation, Chile submitted animproved offer, andinthecontext ofthepresent
negotiation Chile waselaborating aconditional offer, which ithoped tosubmit inOctober. Chile had
assumed MFN commitments ininternational telephony andhadreflected itsopen policy initslistof
commitments inthisarea. Heemphasized thatChile waswilling toparticipate inanyservices negotiation
toensure progressive liberalization inthissector onamultilateral, plurilateral andbilateral basis.
***
Toconclude, Ishould liketoemphasize some main elements. First, Chile 'sfocus, since 1990,
ongrowth with equity isanexemplary combination ofeconomic andsocial policies, going now well
beyond theso-called "Washington consensus". IamsureMembers willalsowelcome Chile 'scontinuing
emphasis oneconomic stability andthesuccess thathasbeen achieved. Ialso welcome theclear
statements thathave been made byChile ontherelationship between themultilateral andregional aspects
oftheir policies, andthedetailed answers given onspecific questions, including those ongovernment
procurement, sanitary standards, regional andexport support, intellectual property, andsectoral policies.
Finally, Iamsurethatthediscussion thatwehave held inthepasttwodays willhave contributed to
theimportant transparency obligation thatIstressed inmyopening statement.
END