RESTRICTEDWORLD TRADE
ORGANIZATIONG/SG/Q2/CHL/5
27 September 2000
(00-3898)
Committee on Safeguards Original:  Spanish
NOTIFICATION UNDER ARTICLE 12.1(B) OF THE AGREEMENT ON
SAFEGUARDS ON FINDING A SERIOUS INJURY OR THREAT
THEREOF CAUSED BY INCREASED IMPORTS
NOTIFICATION PURSUANT TO ARTICLE 12.1(C) OF THE
AGREEMENT ON SAFEGUARDS
Replies by CHILE to the Questions Posed by GUATEMALA1
Regarding the Notifications of CHILE2
The following communication, dated 14 September 2000, has been received from the
Permanent Mission of Chile.
1. Does Chile intend to extend the safeguard measure?
It is not possible to answer this question for the time being.  Under Article 21 of the
Regulations on the application of safeguard measures (Ministry of Finance Decree 909), such
measures may be extended once only, for a period not exceeding one year, on the request of the
applicant, which must be made within 30 (thirty) days prior to the expiry of the original period, where
the circumstances justifying its application persist.  The application will be approved subject to a
favourable report of the Commission.
2. If so, how long does Chile intend to extend it by?
See previous reply.
3. If Chile does not intend to extend the measure, what does it intend to do once that
measure has expired?
The question refers to the intention of the Chilean authorities once the safeguard measure has
ceased to have effect, provided that it is not extended.  At that time the Chilean authorities will make
an appropriate assessment.  Since the purpose of th is exercise in the Committee is to review the
notification of the definitive safeguard measure which was applied, the implementation of Chile'sfuture trade policy, which does not necessarily concern a safeguard measure, should not be discussed
in this Committee.
                                                     
1 G/SG/Q2/CHL/1.
2 G/SG/N/8/CHL/1-G/SG/N/10/CHL/1 and Suppl.1.G/SG/Q2/CHL/5
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4. In what form is the measure being applied?
The level of the definitive safeguard, for each import transaction, will be determined by the
difference between the General Tariff plus the ad valorem  equivalent of the specific duty determined
by the mechanism set out in Article 12 of Law No. 18.525 - and its corresponding annual
implementing decrees -  and the level bound in the WTO for these products.
5. How much sugar and oil (in US dollars and metric tonnes) has entered since the
measure was introduced?
See separate table.
6. Has Chile considered the possibility of either lifting the measure or reducing it in some
way before the established expiry date?
Under Article 20 of the Regulations, the Commission may recommend to the President of the
Republic, through the Ministry of Finance, at any time and when it has information that would
warrant so doing, that the application of the tariff  surcharges in force should be modified or lifted
before the expiry date.
Before making such a recommendation, the Commission must first have heard the interested
parties' views on the information which, in its opinion, makes it necessary to modify or lift the
measure adopted.  The interested parties will be deemed to have been heard after 10 (ten) workingdays from the relevant communication to that effect sent by the Commission, whether or not they
have expressed comments on the information brought to their attention.
To date, such a situation has never arisen.
7. Has compensation been granted to all the countries affected by the measure?
8. If so, to which countries has it been given, what form has it taken, and what negotiation
procedure was used?
9. If the answer to question 7 is no, why has no form of compensation been granted?
Replies to question 7, 8 and 9:
No Member has requested compensation under the Agreement on Safeguards.
10. How much has injury to the domestic industry diminished since Chile started applying
the measure?
Chile operates a price band mechanism designed to alleviate international price fluctuations
for wheat, edible vegetable oils and sugar.  This  measure, which maintains the linkage between the
domestic industry and the external market, has so far prevented the occurrence of serious injury in thedomestic industry for the products in question.
However, the significant fall in international prices of these products in the last three years
has constituted and continues to constitute an imminent threat of injury to the production of the
products concerned.
Furthermore, the way in which the price band mechanism operates meant that the tariffs
applied to the relevant imports exceeded the levels bound by Chile in the WTO.G/SG/Q2/CHL/5
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Consequently, resort was made to the application of safeguards as a provisional measure, in
accordance with domestic legislation and WTO rules, in order to prevent the actual injury that would
have arisen if the tariff levels determined by the price band mechanism had been limited.
11. How long does Chile think it will take before its domestic industries recover the
conditions which existed prior to the threat of injury?
As explained in the previous reply, this will happen when the international price situation
returns to a position similar to that which existed before the safeguard measure became necessary.
At the same time, constant efforts to increase investment and improve technology will allow
the production of these crops to compete under similar conditions to those which prevailed before the
threat of injury.
12. If injury to the domestic industry has diminished, to what extent is this true, in terms of
increased production or area under cultivation?
This question is answered by the reply to question 10.
13. What measures will be taken by Chile to improve the competitiveness of its domestic
industry once the safeguard measure has expired?
As the question assumes the expiry of the safeguard measure, information about any other
measure (as distinct from a safeguard) that Chile may adopt in favour of the domestic industry is
provided below as a gesture of goodwill and transparency:
As indicated, the problem which arose was due to an exceptional fall in international prices.
As the price situation returns to previous levels, the domestic industry will return to its normal state ofcompetitiveness.  Domestic production of wheat, vegetable oil (rape or colza) and sugar (beet) is
efficient and competitive.  The yields of these crops are among the highest in the world.
Furthermore, the Chilean Government designed and constantly updates a set of programmes
aimed at enhancing the competitiveness of the agricu ltural industry, through research, improved levels
of health and the incorporation of technology into  production, as reported in notifications to the
Committee on Agriculture of the WTO.  It is worth mentioning two programmes for their special
impact on the cultivation of rape and sugar beet.  They are, firstly, the soil regeneration programme to
improve productivity, of particular importance in the region of the country where these crops are
concentrated, and secondly, action relating to financing, production management and transfer of
technology carried out by the Agricultural Development Institute.
14. Does Chile intend to apply safeguard measures to any other products?
15. If so, to which products?
Any safeguard measure that Chile may apply in respect of other products will be on the basis
of a prior investigation and in conformity with its domestic legislation and the rules of the WTO.
At present, a provisional safeguard measure has been imposed for socks made of synthetic
fibres;  in addition, an investigation was initiated on powdered milk and liquid UHT milk, following
which a provisional measure was imposed on imports of such products.
16. On what grounds has the measure been applied, given that in 1998 there was a 25 per
cent decrease in total sugar imports compared to the previous year?G/SG/Q2/CHL/5
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The measure was applied on the basis of the reasons set out in the replies to
questions 10 and 13.
Because of the nature of its natural resources and its climate, Chile has a shortfall with
respect to domestic demand and although its sugar industry is efficient, it is necessary to import
sufficient to satisfy the domestic market each year.  Although there was a decrease in imports in 1988,the trend in imports for the period concerned shows a significant increase and total imports in 1999
were 13 per cent higher than in 1998.  Consequently, the decrease in imports in 1998 is much rather a
reflection of the exceptional increase in imports in 1997.
17. What was the time-period used to indicate that there had been an increase in imports in
absolute terms?
The analysis is based on 1997, 1998 and the first half of 1999.
Sugar imports increased significantly during the first half of 1999 compared with the same
period for 1998.  Imports of oils, on the other hand, decreased in the first half of last year.
Nevertheless, there was an increase in the imports of those products in the form of blended edible oils.
18. Under which Article of the Agreement on Safeguards is Chile applying a variable
safeguard measure (with tariff)?
We wish to point out that there is no provision in the Agreement on Safeguards which
prevents such a possibility.
The purpose of emergency measures in the international rules is to provide an adequate
response to distortions which affect prices.  Consequently, the defensive response of the domestic
industry must be proportional to its cause.  This is laid down in Article 5 of the Agreement onSafeguards.  The variable tariff used ensures that the surcharge applied does not exceed what is
necessary to prevent any possible injury, and is limited by the provisions of Law No. 18.525.
19. On what legal basis is Chile using Law No. 18.525 (Price Band) as a safeguard measure?
The price band mechanism is not and should not be seen as a safeguard measure, in WTO
terms, since it is not triggered  per se  by the requirements of Article XIX of the GATT or those of the
Agreement on Safeguards.  On this occasion, Chile initiated an investigation under the Agreement on
Safeguards in respect of goods subject to price bands, and on determining that the requirements of the
international agreement were met, it was decided to impose the appropriate safeguard measure.
For that purpose, Chile uses Article 9 and 11 of Law No. 18.525, and Supreme Decree No. 16
which adopted into Chilean law the Marrakesh Agreement and its agreements, and Ministry of
Finance Decree No. 909.
20. What were the base period and calculation method used by Chile in claiming that there
was a substantial reduction in production and area under cultivation for sugar (83 per cent and76 per cent respectively) and oil (54 per cent and 60 per cent respectively)?
As indicated, the problem investigated concerns a threat of injury.
The calculations effected reflect the fact that knowledge of future prices by economic
operators determines their decisions on production levels.  Furthermore, considering that import
prices of the products in question are influenced by the corresponding tariff levels, areas sown and
planted with the respective primary products, rape and sugar beet, will vary as these conditions
change.G/SG/Q2/CHL/5
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Based on the foregoing consideration, a potential injury was determined as a result of limiting
first for the production period 1999-2000 and then for 2000-2001, the import tariff to 31.5 instead of
allowing it to fluctuate freely under the price band system.  This resulted in lower domestic prices for
imports. The new values for areas under cultivation and production were then determined by applying
the historic ratio between import prices and immediately subsequent levels of sowing the productsconcerned, with the results indicated in the question.
21. What is the relationship between the a pplication of the safeguard measure and the
expiry of the exemption from application of the price band?
There is no exemption.
22. If Chile established the measure on the basi s of threat of injury, why did it not apply
quotas on the basis of Article V of the Agreement on Safeguards, which would maintain normal
access?
Chilean law only allows the investigating auth ority to apply safeguard measures in the form
of ad valorem  tariff surcharges.  Moreover, the Agreement on Safeguards allows Members to choose
the form of application of measures without requiring the use of a particular form.
23. Why was the investigation initiated ex officio and not supported by a major proportion
of the domestic industry?
Article 9 of Law 18.525 on "Rules for the import of goods into the country", empowers the
National Commission responsible for investigating the existence of distortions in the price of
imported goods to initiate investigations ex officio when it has sufficient grounds for so doing.
The products for which it was decided to apply safeguard measures, i.e. wheat, sugar and
edible oils, represent in total some 50 per cent of the annual area under cultivation in the country, half
of the value of production of those crops, and between 30 and 35 per cent of direct rural employment.
In addition, a high proportion of the producers who grow these products are small-scale farmers.  It
therefore involves a set of highly sensitive categories  of domestic agriculture, which demand constantand priority attention by the Chilean Ministry of Agriculture.
The urgency of the necessary measures and the difficulty for producers of making a
presentation for the reasons explained above, led the Ministry of Agriculture to submit the case to the
Commission on Distortions and to re quest it to proceed ex officio.
The Agreement on Safeguards does not preclude the initiation of an investigation on the
initiative of the authorities, nor does it require that the investigation should be initiated with the
support of a major proportion of the domestic industry.
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