RESTRICTEDWORLD TRADE
ORGANIZATIONWT/REG38/M/3
16 October 1998
(98-3999)
Committee on Regional Trade Agreements
Nineteenth Session
EXAMINATION OF THE FREE TRADE AGREEMENT
BETWEEN CANADA AND CHILE
Note on the Meeting of 24 September 1998
Chairman:  Mr. Claude Bouah-Kamon (Côte d'Ivoire)
1. The Committee on Regional Trade Agreements (CRTA) took up the examination of the Free
Trade Agreement between Canada and Chile under Ag enda Item F-VI of its Nineteenth Session, as
found in Airgram WTO/AIR/915/Rev.1,
2. The Chairman recalled that the Committee had held two previous rounds of examination for
this Agreement during the Seventeenth and Eighteenth Sessions.  Minutes of those meetings were
found in documents WT/REG38/M/1 and 2.  The Committee had used as the basis of its discussion
information provided by the Parties in the form of the Standard Format, found in document
WT/REG38/2.  In document WT/REG 38/4, dated 16 September, additional questions and replies had
been circulated in a layout which also corresponded to that of the Standard Format.  The day'sdiscussion would follow the same structure.  He then reminded Members of the desirability of moving
on to the phase of considering a draft report for the examination.
3. The representative of Canada said that it was the Parties' hope that, after this third round of
examination, the Committee could move on to the phase of considering a draft examination report.
The Parties considered their Agreement to be in full  conformity with the provisions of Article XXIV.
4. The representative of Chile confirmed what the representative of Canada had said in opening
remarks on behalf of both Parties.
5. The representative of the United States sa id his delegation appreciated the information
provided by the Parties with regard to trade stat istics, in particular the information provided in
document WT/REG38/4, the Annex of which containe d a considerable amount of trade data.  This
should be seen as an exemplar for the kind of information that enhanced transparency in the
examination process.  He would encourage parties to other agreements to be as diligent in providingsuch information.
6. The representative of the European Communities said his delegation also appreciated the
information provided by the Parties in document WT /REG38/4.  He noted that the answer to the first
question listed products which were subject to a transition period that exceeded 10 years.  Four
categories of products were listed - i.e. beef, wheat and wheat meal, meat sausages and sugar;however, Annex III of the same document, which gave trade data on imports into Chile of products
subject to a phase-out of longer than 10 years, listed additional products (e.g., birds eggs, potato
flakes, ham, pig fat, gasoline, tyres) which did not seem to fall under those four categories.  The
Parties' answer did not seem really to justify th is exceptional treatment in the context of their
Agreement.  The answer bore on the apparent distor tions caused in the international market for these
products as a result of the practices of third countries.  Perhaps the Parties could provide additional
justification for this arrangement.WT/REG38/M/3
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7. The representative of Japan said his delegation was also concerned over the transition period
exceeding 10 years for beef, wheat and wheat meal, meat sausages and sugar.  The Parties had stated
that this treatment was due to sensitivities, but if the transition period exceeded 10 years, his
delegation might consider these items to be effectively excluded.  For example, to prevent future
RTAs from starting with coverage of 50 or 60 per cent with a transition period of 20 or 30 years, itwould seem wise for the Committee to be strict on the transition period.  His delegation therefore
would join the EC delegation in questioning th e justification given for the longer periods.
8. The representative of Hong Kong, China said his delegation supported the statement made by
the representative of Japan.  This was a very fundamental point, and its implications should be
considered.
9. The representative of Chile said with respect to the perceived inconsistency between the
answer given under "Scope" and the statistics in Annex III of the document, that the simple
explanation was that the reply given under "Scope" was indicative of the type of items which were in
the list of items with a transition period of longer than 10 years, whereas Annex III more precisely
identified these items.  It was important to show that this did not account for a large percentage of
trade between the two countries.  Regarding the po ints made by the representatives of Japan and
Hong Kong, China, he responded that the WTO allowed for a phase-out period longer than 10 years inexceptional cases, and the Parties were of the view that they were well within the limits prescribed by
the WTO rules.  He would verify these answers with his capital.
10. The representative of Japan said his delegation appreciated the answers provided regarding
statistics but was not yet satisfied with the replies to questions on rules of origin.  How did non-
preferential rules of origin differ from preferential Canada-Chile rules of origin?  Was the local-content ratio in the case of non-preferential rules of  origin lower than that in the preferential Chile-
Canada rules of origin?  The volume of trade might be different according to whether non-preferential
rules of origin or preferential Canada-Chile rules of origin were used.
11. With respect to the differences in rules of origin and the preferences granted, the
representative of Canada said that she would attempt to shed new light on this subject which had been
discussed previously.  While most of the Agreemen t did not have value-content rules, to respond to
this rules of origin question it seemed easier to use a value-content example.  Prior to the Canada-
Chile Agreement, if a product, for example, had come into Chile from off-shore and had been further
manufactured and then imported into Canada, it would have entered Canada at the m.f.n. rate of
11 per cent, with cumulation allowed under m.f.n. trea tment according, for example, to an m.f.n. rule
of origin of 50 per cent.  Now, under the Canada-Chile Agreement, when something was imported
into Chile, further manufactured, and then sent to Canada, it might have to meet a 60 per cent rule oforigin – but in meeting that 60 per cent rule of origin, the product was entitled to duty-free entry.
Although some might view this as an increase in the content ratio, the Parties would disagree.  The
Canada-Chile Agreement was a whole new agreement and did not concern m.f.n. treatment; the m.f.n.
treatment for that product would continue to benefit from an m.f.n. rate of duty at 11 per cent; what
resulted from the Canada-Chile Agreement was the fact that there was an increased opportunity forimports from off-shore to benefit from the free trade agreement, whether trade flowed from Canada
into Chile or from Chile into Canada.  That was what had changed, and that was what was more
liberal.  Otherwise, two unrelated concepts were being confused.
12. The representative of Japan thanked the Parties for their replies explaining cases in which
they would and would not apply safeguards internal ly between the Parties.  His delegation understood
the explanation but did not agree with that interpretation of Article XXIV and the Agreement on
Safeguards.  The Agreement on Safeguards required each WTO Member to apply safeguards
irrespective of source, on an m.f.n. basis without discrimination.  His delegation would therefore like
to reiterate its concerns in this area.WT/REG38/M/3
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13. The Chairman said that any additional questions should be submitted in writing by mid-
October.  The Parties should then respond with their written replies as soon as possible, so that a
document containing the information might be circulated expeditiously.  Chairman Noirfalisse would
then be in contact with delegations to determine if a further round of examination were necessary or if
the Secretariat should begin drafting the examination report.
14. The Committee took note of the comments made.
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