WT/REG330/2  
 
21 February 2014  
(14-1092)  Page: 1/3  
Committee on Regional Trade Agreements  Original: English/Spanish  
 
FREE TRADE AGREEMENT BETWEEN CHILE AND MALAYSIA 
(GOODS) 
QUESTIONS AND REPLIES 
 The following communication, dated 7 February 2014, is being circulated at the request 
of the delegations of Chile and Malaysia.  
 This document reproduces the questi ons addressed to the Parties and the 
responses submitted.  
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 Questions from the delegation of Chinese Taipei 
 General Provisions of the Agreement 
Trade in Services and Investment 
 1.1.  Page 20, paragraphs 4.22 and 4.23:  According to the Secretariat's Factual 
Presentation, the Parties will undertake consultations regarding the inclusion of Chapters on Services, Investment and Fi nancial Services to the Agreement within 
two years of the Agreement coming into effect.  
a. Why did the Parties decide for this FTA that the said consultations should be on 
the inclusion of Chapters on Services , Investment and Financial Services, 
instead of on both Goods and Services as  contained in most of the FTAs signed 
by the Parties previously? Could the Parties please ex plain the main reason for 
the special arrangement in this case? 
Response from Malaysia 
 
 In June 2007 when Malaysia and Chile commenced the first round of FTA negotiations, both Parties agreed to undertake negotiations for a co mprehensive FTA that included Goods, Services 
and Investment. As negotiations on the modalities of the Services Chapter and Investment 
Chapter were progressing very slowly and both Parties could not reach any agreement on these two Chapters despite after having five rounds of negotiations in May 2009, a decision was 
therefore taken by both to fast track and conc ludes negotiations in the Goods and Cooperation 
Chapters first. This is to allow both Parties to reap immediate benefits from the Agreement. 
MCFTA in Goods was then concluded in May 2010 and signed in November 2010. The Agreement 
entered into force in February 2012. 
 
b. Since 25 February 2012, when the Agreement entered into force, have there 
been any subsequent negotiations between the Parties regarding the 
Agreement on Services and Investment? If  so, could the Parties please provide 
us with details of the results and/or an y other relevant information arising out 
of such consultations? 
 Both Parties have yet to convene any subsequent negotiations regarding the Agreement on 
Services and Investment.   WT/REG330/2 
 
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  Questions from the delegation of the Dominican Republic 
 
1.2.  With regard to Annex 4-A of the Chile-Malaysia Trade Agreement, are the 
certification bodies and the operational pr ocedure for the verification and issuance 
of the certificate of origin the same as those established for other trade agreements 
currently in force in Chile? 
 The agreements signed by Chile provide for different types of certification of origin 
mechanisms. In some agreements, Chile negotiated issuance via self-certification, while in others 
an authority certification process was establishe d (internally there are also differences between 
both mechanisms).  
 The origin verification process is directly related to the certificate of origin issuance process 
established in the agreement. In the case of self-certification, the customs office of import contacts the exporter or producer directly, while for authority certification, the customs office 
of import requests information from the competent authority in the exporting party. 
 1.3.  Paragraph 3.8 states that "Chile is […] authorized to maintain its price band 
system, provided it is applied in a consis tent manner with its rights and obligations 
under the WTO Agreement". 
a. Could Chile please explain what its pr ice band system consists of and why 
it is used? 
 The price band system was established pursuant to Chilean Law No. 18.525 (30 June 1986), 
Article 12 of which was amended by Law No. 19.897 (2003). The consolidated text 
of Law No. 18.525 was issued as DFL No. 31 (Ministry of Finance, 22 April 2005). 
 
 The system modifies tariffs on the basis of in ternational price variations. If the international 
price of any of the stipulated products (wheat flour, wheat or sugar) is lower than the "floor" 
of the band, an import tax is applied on top of the general tariff that Chile applies to the rest 
of the world (MFN tariff, currently 6%). The amo unt of the tax will be equal to the difference 
between the international price and the "floor".  
 If the international price of the product exc eeds the "ceiling" level of the band, the tariff 
is reduced by an amount equal to the difference between the current international price and the "ceiling". It is possible to reduce the MFN tariff by a maximum of 6% (zero tariff), while 
the maximum duty levied is the "bound" tariff (maximum level for each product in respect of which 
Chile has undertaken a commitment before the WTO).  
b. How does this mechanism work for cereal products, flour and sugar? 
 The price band system applies to wheat, whea t flour and sugar. The floor and ceiling values 
of the price band for sugar are 286 and 313 dollars f.o.b. per tonne, respectively, while the floor and ceiling values of the price band for wheat are 114 and 134 dollars f.o.b. per tonne, 
respectively. For wheat flour, the system does not establish a band as such; instead, the duties 
and reductions determined for wheat are applied, multiplied by a factor of 1.56.  
c. Are any other agricultural prod ucts covered by this system? 
 No other agricultural products are covered by the price band system. 
 
 "Malaysia grants Chile a duty -free preferential tariff rate quota of 1,000 metric 
tonnes for each of four (nine-digit) poultry products. The out of quota tariff is set at 20%".  
 Could Malaysia please explain why it gr ants this quota for the four poultry 
products?  
 Malaysia has some tariff lines that have Tariffs Rate Quota (TRQ). These products include 
those four poultry products. Malaysia grants this quota for the four products to Chile as part of the outcome of negotiations and in return for other concessions offered by Chile. The out-of-quota WT/REG330/2 
 
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  tariff at 20% is also offered for the same products under the other bilateral FTAs, 
e.g. Malaysia-Pakistan Comprehensive Economic Partnership Agreement (MPCEPA) and Malaysia-Australia FTA (MAFTA).   
1.4.  "The Parties' other regional trade agreements in force (both notified 
and non-notified) are listed in Table 5.1". 
 In Table 5.1, we note that Chile has 35 regional trade agreements, both notified 
and non-notified, many of which are with groups of countries such as the 
European Economic Community, MERCOSUR, Central America and the Trans-Pacific 
Strategic Economic Partnership, and that it is currently negotiating new agreements, including with the Dominican Republic. 
 
a. Could Chile please explain why it has signed so many agreements? 
With a view to liberalizing the economy, all available channels have been used to give Chile's 
trade policy an outward orientation, including unilateral market opening and multilateral 
and bilateral trade negotiations.  
 Does Chile prefer to increase trade in goods and services through a policy 
of bilateral and regional agreements or by finding a global solution within the WTO and 
Doha Round framework?  
 Unilateral liberalization does not improve conditions of access to other markets. The best 
way to achieve this objective is through negotiations within the multilateral trading system, the liberalization of which falls within the scope of an international treaty that avoids discrimination 
and has an efficient dispute settlement mechanism. However, the pace of multilateral discussions 
is not rapid enough to reach the necessary cons ensus, given the diversity of interests of the 
participating Members. A relatively small economy like Chile has very limited capacity to exert 
any influence in the resolution of these proble ms. Bilateral initiatives are therefore useful 
as a supplementary way of achieving substant ial outcomes more expeditiously than would 
be possible at the multilateral level. Bilateral negotiations provide a particularly effective alternative when they are conducted, as in the ca se of Chile, with all of the country's suppliers. 
 
 This policy of bilateral market opening reflects a development strategy based on an economy open to the world, competitive in terms of products and equitable 
in its performance. Opening up bilaterally is complementary to and fully consistent with the 
multilateral trading system, because it has been  demonstrated that preferential agreements, 
whether regional or bilateral, achieve liberalization in less time, with broader scope and mostly 
without exclusions, than that needed for the play ers to fine-tune the outcomes of a negotiating 
round at the multilateral level.   For Chile, the WTO is vital, since it establishes, through its Agreements, binding disciplines, 
which are implemented by way of the constant endeavours of its various bodies. Trade measures 
adopted by Members therefore remain subject to scrutiny by them, in the light of the 
disciplines agreed. 
 
b. Please explain why Chile has more than ten agreements which have not 
been notified. 
 
 In full compliance with its obligations under the Transparency Mechanism for Regional Trade Agreements, Chile is holding bilateral consultations with its counterparts on how and when to jointly notify these outstanding regional trade agreements. 
 
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