WORLD TRADE  
ORGANIZATION  WT/REG160/4 
14 January 2005 
 
 (05-0151) 
Committee on Regional Trade Agreements Original:   English 
  
 
FREE TRADE AGREEMENT BETWEEN THE UNITED  STATES AND CHILE 
 
SERVICES ASPECTS
 
 
Communication from the Parties  
 
 The following communication, dated 11 January 2 005, is being circulated at the request of the 
Delegations of the United States and Chile.  
_______________ 
 
 
I. BACKGROUND INFORMATION ON THE AGREEMENT 
1. Membership And Dates Of Signature, Ratification And Entry Into Force. 
 The Agreement between the United States of America (United States) and the Republic of 
Chile (Chile) on the Establishment of a Free Trade Area (Free Trade Agreement) was signed on June 
6, 2003.  The Agreement entered into force on January 1, 2004. 
 
2. Type Of Agreement 
 In Article 1.1 of the Agreement, the Parties establish a free-trade area consistent with    
Article XXIV of the GATT 1994 and Article V of the GATS. 
 
3. Scope 
 The Agreement contains chapters addressing cross-border trade in services (Chapter 11), 
investment (Chapter 10), telecommunications servic es (Chapter 13), financial services (Chapter 12), 
and temporary entry of business pe rsons (Chapter 14).  The Agreement, including these chapters, can 
be found at www.ustr.gov
 or www.direcon.cl . 
 
 The Agreement has substantial services sector al coverage and provides for the absence or 
elimination of substantially all discrimination, thereby meeting GATS Article V (1) requirements.  
The Parties affirm that nothing in the Agreement seeks to increase the level of services restrictions 
vis-à-vis non-Parties. 
 
 This is a “negative list” agreement, meani ng that all sectors are liberalized unless a Party 
takes a specific reservation (“Non-confor ming measure”) in the Agreement.   
  The Agreement covers the four modes of ser vices delivery established in Article I.2 of the 
GATS.  The chapter on cross-border trade in servi ces encompasses cross-border supply, consumption 
abroad and presence of natural persons (modes 1, 2 and 4) and the chapter on investment, rights for 
investors in manufacturing and services, including commercial presence (mode 3).  However, rights for financial services suppliers are provided in a separate financial services chapter that covers WT/REG160/4 
Page 2  
 
 investment in regulated financial institutions and cross-border supply of financial services (modes 1, 
2, 3 and 4).  Market access for telecommunications is captured under the Chapters on investment and 
cross-border services.  The Chapter on telecommunications provides regulatory disciplines on access to and use of public telecom networks and other telecom issues.       
 4. Trade Data 
 Statistical data on the evolution of trade in  services between the United States and Chile is 
presented in the Annex.    II. PROVISIONS AFFECTING TRADE IN SERVICES 
1. Elimination Of Discriminatory Restrictions 
 This is a “negative list” agreement, meaning that all sectors are liberalized (e.g., financial 
services, computer and related services, telecommunications services, audiovisual services, professional services, construction and engineering, express delivery, tourism, distribution services, 
adult education and training, environmental service s, energy services, others) unless a Party takes a 
specific reservation (“Non-conforming measure”) in the Agreement.   
  Each Party maintains a limited schedule of “non-conforming measures” to the investment and 
cross-border services chapters to which the provisi ons on national treatment (Articles 10.2, 11.2), 
most-favored-nation treatment (Articles 10.3, 11.3) local presence (Article 11.5), market access 
(Article 11.4), performance require ments (Article 10.5) or senior ma nagement and boards of directors 
(Article 10.6) do not apply.  Each Party mainta ins a limited schedule of “non-conforming measures” 
to the financial services chapter to which the provi sions on national treatment (Article 12.2), most-
favored-nation treatment (Article 12.3), market access (Article 12.4), cross-border (Article 12.5) or 
senior management and boards of directors (Article  12.8) do not apply.  The investment and cross-
border services non-conforming measures can be found in  relevant annexes to Chapters 10 and 11 
(investment and cross-border services).  Existing no n-conforming measures are set forth in one annex 
and a second annex provides very limited flexibility fo r sectors or sub-sectors for which new or more 
restrictive measures can be introduced.  The financ ial services non-conforming measures can be found 
in the relevant annex to Chapter 12 (financial services).     
 Even in the limited areas for which existing non-conforming measures are recorded, if either 
Party liberalizes a particular non-conforming m easure, that degree of liberalization becomes 
automatically bound for the purposes of the FTA.   Regarding elimination of discriminatory measur es, for financial services, Chile will phase-in 
commitments according to specified time frames in  three areas: asset management services for 
voluntary pension plans, insurance branching, and certain insurance brokerage services.    
 
2. Rules Of Origin 
 The Agreement includes a chapter on rules of origin (chapter 4), but the language in the 
Agreement is directed to trade in goods, not services. 
 
3. Standards/Recognition 
 The cross-border services chapter contains an article on mutual recognition and an annex on 
professional services that relate to the possibility of mutual recognition.    WT/REG160/4 
 Page 3 
 
 
 4. Safeguards  
 The agreement includes a chapter on safeguard measures (Chapter 8), but the language in the 
Agreement is directed to trade in goods, not services.  
5. Subsidies And State-Aid 
 The scope of the cross-border services chapter excludes subsidies or grants.  The investment 
chapter excludes subsidies or grants from the scope of many of the core obligations.  The financial 
services chapter includes subsidies or grants within  its scope although it excludes certain activities or 
services when not provided under a situation of competition. 
 6. Government Procurement 
 The provisions on Government Procurement (C hapter 9) apply to the central government 
entities, sub-central government entities, and other government-related entities listed in the schedules 
for each country.   
 The Agreement provides for National Treatment  and Non-Discrimination in regards to goods 
and services of the each Party for the entities covered,  subject to specified thresholds and certain 
exceptions.    The Agreement provides robust disciplines on procurement procedures, including advance public notice of purchases and transparent bid review procedures. 
 
7. Sector-Specific Provisions 
 The Agreement contains chapters on financ ial services and telecommunications services as 
noted above.    
 
III. GENERAL PROVISIONS OF THE AGREEMENT 
1. Exceptions And Reservations 
 Chapter 23 of the Agreement addresses excepti ons.  The Free Trade Agreement does nothing 
to require any Party to provide in formation contrary to its essential security interests; or to prevent 
any Party from taking necessary actions to protect its security interests.  The Agreement incorporates 
GATT 1994 Article XX and GATS Artic le XIV for various chapters. 
   The United States and Chile include reservations (“non-conforming measures”) to the investment, cross-border services and financial servic es chapters as noted in Section III above.   
 2. Accession 
 No specific provisions.  
 
3. Dispute Settlement Procedures 
 Chapter 22 addresses institutional and administrative arrangements. The Free Trade 
Agreement sets out detailed procedures for a tr ansparent government-to-government dispute 
resolution process, and provides that the parties sh all attempt through cooperati on and consultations to 
arrive at a mutually satisfactory resolution of an y matter.  Disputes arising under both the agreement WT/REG160/4 
Page 4  
 
 and the WTO generally may be settled in either  forum at the discretion of the complaining 
government. The agreement places priority  on reaching an amicable settlement. 
  The Free Trade Commission created under the ag reement (see item 5 below) is the initial 
forum for resolution of disputes.  If the Free Trade Commission is unable to resolve a dispute within a 
specified period (generally 60 days), the complaini ng party may request the establishment of a panel.  
The parties will establish rules of procedure th at will require the protection of confidential 
information, provide for open hearings and public  release of submissions, and also provide an 
opportunity for the panel to accept submissions  from nongovernmental entities in the parties’ 
territories.   
 
 In disputes involving the Agreement's “commercia l” obligations, if the parties are unable to 
reach agreement on a resolution following receipt of the final report of the panel, the parties shall 
enter into negotiations to develop mutually accepta ble compensation.  If the parties are unable to 
agree on compensation, or if the complaining part y considers that the defending party has failed to 
implement the agreed resolution, the complaining pa rty may provide notice that it intends to suspend 
the application of benefits of equivalent effect.   The provisions on investment in Chapter 10 also contain provisions to resolve disputes between one Party’s investor and the Government of  the other Party.  The provisions on financial 
services in Chapter 12 tailor the Agreement’s di spute settlement procedures in some respects. 
 
4. Relation With Other Trade Agreements 
 The Parties reaffirm their existing rights and obligations with respect to each other under 
existing bilateral and multilateral agreements to which both Parties are party, including the WTO 
Agreement.  The Parties reserve the right to a dopt or maintain measures that accord preferential 
treatment pursuant to trade agreements in force or  signed prior to entry into force of the FTA. 
 
5. Institutional Framework 
  The Agreement establishes a Free Trade Commission that will supervise the implementation 
of the agreement and assist in the resolution of di sputes that may arise between the parties regarding 
its interpretation or application.  The Free Trade Commission will meet at least annually. 
  
 
IV. OTHER 
Transparency 
  The Chapter on Transparency sets out require ments designed to facilitate communications 
between the Parties on any matter covered by this Ag reement.  It also provides the obligation for each 
Party to ensure that its laws, regulations, procedur es, and administrative rulings of general application 
respecting any matter covered by the Agreement are promptly published or otherwise made available 
in such a manner as to enable interested persons and the other Party to become acquainted with them.   
Furthermore, it requires that, to the extent po ssible, Parties shall publish in advance proposed 
measures and provide interested persons and the ot her Party a reasonable opportunity to comment.  
Finally, this Chapter provides for independent re view and appeal of final administrative actions. 
 
 
 
 
  WT/REG160/4 
 Page 5 
 
 
 Anti-competitive Behavior 
  
 Chapter 16 of the Agreement addresses an ti-competitive business conduct.  Under the 
Agreement, each Party agrees to est ablish or maintain an authority responsible for enforcement of 
measures to proscribe anticompetitive business conduct.   WT/REG160/4 
Page 6  
 
 ANNEX I.A 
U.S. IMPORTS FROM CHILE 
 - Chile was the United States= 43rd largest supplier of goods in 2003 . 
 
- U.S. goods imports
 from Chile totaled $3.7 billion  in 2003 , a 2.2 percent decrease ($81 
million) from 2002, and an increase of 104% over the last nine years.  U.S. imports from Chile account for 0.3% overall U.S. imports in 2003. 
 - The five largest import categories in 2003 were:  fruit and nuts (grapes) ($798 million), fish 
and seafood (salmon fillets) ($630 million), w ood ($591 million), copper ($400 million), and 
beverages (wine) ($140 million). 
 - U.S. imports of private commercial services*
 (i.e., excluding military and government) 
were $650 million in 2003 , down 12.2% ($90 million) from 2002, but up 56.3% ($234 
million) from 1994 levels.  Travel and transporta tion categories accounted for most of U.S. 
services imports from Chile. 
 - Sales of services in the United States by majority Chile-owned firms were $29 million.
 
 
*NOTE: Refers to private services trade not including U.S. military sales, direct defense expenditures, and other 
miscellaneous U.S. government services. 
 
Trade Balance  
 - The U.S. goods trade deficit  with Chile was $990 million
 in 2003, a 15.8 percent decrease 
($185 million) over 2002. 
 - The United States has a service trade surplus
 of $382 million with Chile in 2003. 
 
Historical Trade Data  
 
U.S. Goods Trade with Chile (in billions of dollars)  
 
  
2000  
2001  
2002  
2003  
2004* 
 
Balance  
0.2  
-0.4  
-1.2  
-1.0  
-1.0 
 Exports  
3.5  
 3.1  
 2.6  
 2.7  
 3.6 
 Imports  
3.2  
 3.5  
 3.8  
 3.7  
 4.5 
*Annualized based on data for January-October 
 
U.S. Services Trade with Chile (in billions of dollars)  2000-2004  
 
  
2000  
2001  
2002  
2003  
2004* 
 
Balance  
0.5  
0.4  
0.4  
0.4  
 
 
Exports  
1.4  
1.3  
1.2  
1.0  
 
 Imports  
0.9  
0.9  
0.7  
0.7  
 
*Data not available.  WT/REG160/4 
 Page 7 
 
 
 Investment  
 
- U.S. foreign direct investment (FDI) in Chile (stock)  was $10.0 billion in 2003, a 0.1 
percent decrease from 2002. 
 
- Chile FDI in the United States (stock)  was $63 million in 2003. 
 - Sales of services  in Chile by majority U.S.-owned affiliates were $2.3 billion
 in 2002 (latest 
data available). 
 
*NOTE: Refers to private services trade not including U.S. military sales, direct defense expenditures, and other 
miscellaneous U.S. government services. WT/REG160/4 
Page 8  
 
 ANNEX I. B 
CHILEAN IMPORTS FROM THE UNITED STATES 
 
• The United States was Chile’s second largest supplier of goods in 2003.   
 
• Chilean goods imports  from the United States totaled $2.5 billion
 in 2003, an increase of 0.3 
percent from 2003, and a decrease of 4.9% over the last nine years.  Chilean imports from the United States account for 14.6 percent of overall Chilean imports in 2003. 
 
• The five largest import categories in 2003 we re: machines, apparatuses of recording or 
reproduction of sound ($706 million), nuclear r eactors, boilers and machines ($427 million), 
vehicles and tractors ($188 million), optical instruments, photograph or cinematography ($136 million), and plastics and their manufacturers ($130 million) 
 
• Sales of services  in Chile by majority U.S.-owned affiliates were $2.9 billion 
in 2001 (latest 
data available). 
 
Historical Trade Data  
 
Chilean Goods Trade with the United States (in billions of dollars) 
 
  
2000  
2001  
2002  
2003  
2004* 
 
Balance  
-0.1  
0.6  
1.1  
1.0 1.2 
 
Exports  
3.0  
3.2  
3.5  
3.5  
4.2 
 Imports  
3.1  
2.6  
2.4  
2.5  
3.0 
*Data for January to November 
Source: Chilean Custom Service 
 
Investment  
 
• U.S. foreign direct investment (FDI) materialized in Chile (stock)  was $47.9 million in 
2003, a 19.2 percent decrease from 2002.   
 
• U.S. direct investment in Chile is primarily concentrated  in communications, electricity, 
gas and water and wood an d papers products.   
 
__________