WORLD TRADE  
ORGANIZATION  WT/REG169/4 
8 July 2005 
 
 (05-3047) 
Committee on Regional Trade Agreements Original:   English 
  
 
FREE TRADE AGREEMENT BETWEEN THE REPUBLIC OF KOREA AND CHILE 
 
SERVICES ASPECTS
 
 
Communication from the Parties  
 
 The following communication, dated 6 July 2005,  is being circulated at the request of the 
Delegations of the Republic of Korea and Chile.  
_______________ 
 
 
I. BACKGROUND INFORMATION ON THE AGREEMENT 
1. Membership and dates of signature,  ratification and entry into force. 
 The Agreement between the Republic of Chile (C hile) and the Republic of Korea (Korea) on 
the Establishment of a Free Trade Area (Free Tr ade Agreement) was signed on February 15.  The 
Agreement entered into force on April 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 i nvestment (Chapter 10), cross-border trade in 
services (Chapter 11), telecommunications (Chapt er 12), temporary entry of business persons 
(Chapter 13) and competition (Chapter 14).  The Ag reement, including these Chapters, can be found 
at:  
<www.direcon.cl>  
or  <http://www.mofat.go.kr/mofat/mk_a0 13/mk_b069/mk_c219/118 3971_23531.html> 
  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.  
  This is a “negative list” approach agreement,  meaning that all sectors are liberalized unless a 
Party takes a specific reservation (“Non-conformi ng measure”) in the respective Chapter.   
 
 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 services  encompasses the following modes of supplies: 
cross-border, consumption abroad and presence of natural persons (modes 1, 2 and 4 of GATS).  On 
the other hand, the Chapter on investment, covers  commercial presence (mode 3), granting protection WT/REG169/4 
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to the investments of investors made on a primary, manufacturing or services.  Market access for telecommunications is captured under the Chapte rs on investment and cross-border services.  The 
Chapter on telecommunications provides regulatory di sciplines relating to 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 Chile and Korea is presented in 
the Annex.   
II. PROVISIONS AFFECTING TRADE IN SERVICES 
1. Elimination of Discriminatory Restrictions 
 This is a “negative list” approach agreem ent, meaning that all sectors are liberalized 
(e.g., telecommunications services, audiovisual services, professional services, construction and engineering, express delivery, tourism, distribution services, adult education and training, 
environmental services, energy services, among 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 provisions  on national treatment (Articles 10.2, 11.2), 
local presence (Article 11.4), performance requireme nts (Article 10.7) or senior management and 
boards of directors (Article 10.8) do not appl y.  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 non-conforming m easures are set forth in one annex and a second 
annex provides very limited flexibility for sectors or  sub-sectors for which new or more restrictive 
measures can be introduced.    
 Even in the limited areas for which exis ting non-conforming measures are recorded, the 
amendment to these non-conforming measures does not  decrease the conformity of the measure as it 
existed immediately before the amendment.  
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 ar ticle that refers to licensing and certification 
(Article 11.10) and an annex on professional servi ces that addresses the possibility of simplifying 
procedures.  
 
4. Safeguards  
 In Services Chapter, there is no specific provision that refers to this issue. 
 
5. Subsidies and State-aid 
 In relation to commercial presences, accordi ng to Article 10.9.5(b), National Treatment and 
Senior Management and Boards of Dir ectors, do not apply to subsidies.  
  WT/REG169/4 
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 On the other hand in relation to Article 10.7 (Performance Requirements) the Parties are not allowed to enforce certain requirements commitm ent or undertaking, in connection with the 
establishment, acquisition, expansion, management , conduct or operation of an investment of an 
investor of a Party or of a non-Party in its territory.    
 The scope of the cross-border services Ch apter excludes subsidies or grants.   
 
6. Government Procurement 
 The provisions on Government Procurement (C hapter 15) apply to the entities included in 
schedules for in Annex 15.1. 
 
 The Agreement provides for National Treatme nt and Non-Discrimination in regards to 
procurement of goods, services, and construction ser vices of the each Party for the entities covered, 
subject to specified thresholds and certain exceptions.   
 The Agreement provides robust disciplines on procurement procedures, including bid 
challenges (Article 15.13) exchange of informati on on technology and cooperation (Article 15.14), 
and transparency (Article 15.5).  
7. Sector-Specific Provisions 
 The Agreement contains a Chapter on Telecommunications Services and on Temporary Entry 
of Business Persons.   
 
III. GENERAL PROVISIONS OF THE AGREEMENT 
1. Exceptions and Reservations 
 Chapter 20 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. 
  Also subsections (a), (b) and (c) of Artic le XIV of GATS does not apply to any provision 
related to services.   
 Moreover, tax and taxation meas ures (excluding custom duty) do not apply to the Agreement, 
except as otherwise stated en in Article III of GATT.   Korea and Chile include reservations (“non-c onforming measures”) to the investment and 
cross-border Chapters as noted in Section II.1 above.   
 
2. Accession 
 No specific provisions.  
 
3. Dispute Settlement Procedures 
 Chapter 19 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 
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. WT/REG169/4 
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  According to Chapter 19, the complaining party may request the establishment of a panel.  The parties may agree on the procedures.  Ot herwise, Annex 19.10 applies (Model Rules of 
Procedure) which establishes certain fundamental  procedural related to presentation of written 
submissions, operation of the panel, the hearing etc.   
 
 The final report of a panel shall be binding to th e Parties and shall not be subject to appeal.  If 
the resolution is not adopted, the complaining Part y may suspend the application of benefits of 
equivalent effect to the Party complained.  The su spension of benefits shall last until the responding 
Party implements the decision of the panel’s fi nal report or until the Parties reach a mutually 
satisfactory agreement on the dis pute, depending on the case.  Upon written request of the Party 
concerned, the original panel shall determine wh ether the level of benefits suspended by the 
complaining Party is excessive.     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.  
  An investor of a Party may submit to arbitra tion claim that the other Party has breached an 
obligation  relating to the Investment Chapter or Ar ticle 14.8 (Public Enterprise), and that the investor 
has incurred loss or damage by reason of, or arising out of, that breach.  
 Unless the disputing parties otherwise agree, the Tribunal shall comprise three arbitrators, one 
arbitrator appointed by each of the disputing pa rties and the third, who shall be the presiding 
arbitrator, appointed by agreement between the dispu ting parties.  The final award of a panel shall be 
binding to the Parties and shall not be subject to appeal.  4. Relation with Other Trade Agreements 
 The Parties reaffirm their existing rights and obligations with respect to each other under 
existing bilateral and multilatera l 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. 
 
 According to Article 21.4 of the Agreement, the Parties agree that “The Agreement between 
the Government of the Republic of Chile and th e Government of the Republic of Korea on the 
Reciprocal Promotion and Protection of Investments” (BIT) shall no longer be in effect upon the entry 
into force of the Agreement, as well as all the rights and obligations derived from the BIT.  
 5. Institutional Framework 
 The Agreement establishes a Free Trade Commi ssion that will supervise the implementation 
of the Agreement and evaluate the results obtained in  the course of the application of this Agreement. 
The Free Trade Commission will meet at least annually.  
IV. OTHER 
Transparency 
 
 Chapter 17 addresses transparency issues.  Th is Chapter sets out a number of requirements 
designed to foster openness, transparency and fa irness in the adoption and application of the 
administrative measures covered by the Agreement.   For example, the Chapter requires that each 
government must promptly publish all laws, regul ations, procedures and administrative rulings of 
general application concerning s ubjects covered by the Agreement, and also provide interested 
persons a reasonable opportunity to comment on them.  Furthermore, a party must provide  WT/REG169/4 
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information upon request from the other party concerning any action that it has taken or intends to take.    
Anti-competitive Behavior 
  Chapter 14 of the Agreement addresses an ti-competitive business conduct.  Under the 
Agreement, the Parties undertake to apply their r espective competition laws in a manner consistent 
with this Chapter so as to avoid that the benef its of the liberalization process in goods and services 
may be diminished or cancelled out by anti-compe titive business conduct.  To this end, the Parties 
agree to cooperate and coordinate between their co mpetition authorities.  The Parties also agree to 
cooperate and coordinate betw een themselves for the implemen tation of competition laws 
  Each Party retains the right to designate private and public monopolies.  The Parties will ensure that monopolies so designated shall be subj ect to the rules of competition, insofar as the 
application of such rules does not obstruct the perform ance, in law or in fact, of the particular tasks 
assigned to them.  WT/REG169/4 
Page 6 STATISTICS OF TRADE IN SERVICES: KOREA-CHILE  
 
(Unit: US$ 1,000) 
2001 2002 2003 2004  
Exports * Imports ** Exports * Imports ** Exports * Imports ** Exports * Imports ** 
Travel 79 206 185 406 81 169 83 637 
Transportation 5,598 3,432 7,702 3,233 21,824 6,729 26,392 8,381 
Insurance 2 375 10 213 - 169 - 474 
Financial services - - 7 56 - 2 - - 
Government services. n.i.e 65 1, 132 15 1,180 2 1,285 269 1,545 
Miscellaneous business, 
professional and technical services 2,152 12,273 1,623 10,732 2,271 16,934 4,301 13,549 
Merchanting and other 
trade-related services 879 471 - 316 - 289 80 725 
Telecommunications 29 5 15 52 14 8 179 11 
Construction - - - - - - - 70 
Royalties and license fees - - - 3 - - - - 
Computer and information - - - - - - - - 
Personal, cultural and 
recreational 1 30 - 9 - 128 - 17 
Total 8,805 17,924 9,557 16,200 24,192 25,713 31,304 25,409 
(Source: Bank of Korea, *: Korea’s Exports to Chile, **: Korea’s Imports from Chile) 
 
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