WORLD TRADE  
ORGANIZATION  WT/REG234/2 
21 November 2008 
 
 (08-5699) 
Committee on Regional Trade Agreements  Original:   English 
  
 
STRATEGIC ECONOMIC PARTNERSHIP AGREEMENT  
BETWEEN JAPAN AND CHILE 
 
Questions and Replies
 
 
 
 The following communication, dated 18 and 21 November 2008, is being circulated at the request of the delegations of Japan and Chile.   This document reproduces the questions addressed to the Parties and the responses submitted. 
 
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Questions from the Delegation of Canada
 
 
Cross-Border Trade in Services  
 
1. The report discusses issues related to the scope of the Cross Border Trade in the 
Services Chapter.  In this regard, in the St rategic Economic Partnership Agreement between 
Japan and Chile, there is a GATS-type Article 1-3-C provision at Article 106.2(g) in the Cross-Border Trade in Services Chapter which carves-out services supplied in the exercise of 
governmental authority from the provisions of the Chapter.  In addition, both Japan and Chile 
maintain an Annex 7 (Reservation for future  measures) reservation for Social Services 
(page 662 for Japan and page 677 for Chile).  Wi th respect to this, Canada would be interested 
in knowing what services (please provide specific examples) within Chile and Japan's domestic regulatory regimes are covered by Article 106.2( g) which are not already covered by the 
reservations on Social Services in Annex 7?  
 There are social services which are supplied in the exer cise of governmental authority 
referred to in subparagraph 2(g) of Article 106 (Scope of the Cross-Border Trade in Services), for 
instance, those under the National Pension Plan, the Unemployment Insurance System and Public 
Nursing-Care Insurance System in Japan.  These social services are carved out of Chapter 9 
(the Chapter on Cross-Border Trade in Services) pursuant to the said subparagraph, and accordingly, 
they are not governed by any commitments and reser vations of each Party under Chapter 9.  On the 
other hand, there are social services which ar e supplied by service suppliers other than the 
governmental authorities, such as nursing-case service , child-care service and others.  These services 
are NOT carved-out, and therefore governed by the commitments of each Party under Chapter 9.  At 
the same time, it is likely that certain regulatory measures by the Party may affect the supply of these 
services.  For example, a Party may require a nursing home to have local presence in the Party (or be 
a domestic corporation of the Party) in order for su ch nursing home to be approved as a beneficiary of 
public insurance.  Such measures are reserved in Anne x 7.  This is the reason why the reservations in 
the sector of social services are set out in Annex 7,  in addition to subparagr aph 2(g) of Article 106. 
  WT/REG234/2 
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   In addition, Article 106.2 g) carves out all services supplied in the exercise of governmental 
authority from the scope of application of the Chapte r.  However, the Cross Border Trade in Services 
Chapter of the EPA was negotiated under a negative list approach and one of the effects of this 
approach consists in to consolidate the current non- conforming measures contained in the legislation.  
 
 In this regard, the justification for the reserva tion in Annex 7 was to address very clearly that 
these specific sectors (CPC 913, 92 & 93 regardi ng public education) are not subject to the 
commitments on National Treatment, Most Favoured  Nation Treatment, Performance Requirements, 
Senior Management and Boards of Directors, and Local Presence.  2. There is a notation in Article 107 on National Treatment that indicates "For greater 
certainty, nothing in this Article shall be cons trued to require either Party to compensate for 
any inherent competitive disadvantage which result s from the foreign character of the relevant 
services or service suppliers".  Could the Parties explain the objective of this note and provide 
specific examples of cases where competitive disadvantage is inherent and results from the 
foreign character of the relevan t services or service supplier? 
 No response received. 
 
3. The Cross-Border Trade in Services chapter does not include a provision on market 
access with respect to disciplining non-di scriminatory and discriminatory quantitative 
restrictions.  Could the Parties explain the rati onale for not including such provisions in the 
CBTS chapter? 
 No response received. 
 
Questions from the Delegation of the European Communities
 
 
4. Paragraph 18 of the factual presentation states that "[a]s regards trade in goods, no 
overall implementation period is explicitly stat ed in the Agreement.  However, the Parties' 
schedules of concessions for merchandise trade for esee a transition period of up to 15 years for 
some products.  In addition, tariff negotiations are scheduled to take place in either 2009 or 
2011 for a number of products".  Paragraph 20 makes reference to different categories of 
liberalization, including the renegotiation in either 2009 or 2011 (category R). 
 Could the Parties explain the reasons for su ch extended implementation period in some 
products? 
 As regards RTA’s consistency with WTO rules,  there is a general view shared by many 
WTO members that the transition period for tariff liberalization under RTAs should not exceed 10 years but that a longer period may be admitted in exce ptional cases.  This EPA is consistent with the 
general view.  Under this EPA, however, with respect to certain  products, extended implementation 
period is exceptionally given due to their sensitive character.   In addition, Chile’s negotiating principles incl ude the idea of not having exclusions and reach 
short periods for the implementation.  In order to  address one of the Parti es sensitiveness in some 
products, both Parties agreed to create a longer cate gory with the intention to include products which 
would be otherwise out of the scope of the Agreement.  
  In the same vein, a special category, category R,  was created.  It includes products that even 
though are not currently subject to any kind of tari ff reduction, will maintain their status as products 
covered by the Agreement.  In this manner in the near future (2009 and 2011) the products under this 
category will be negotiated.  WT/REG234/2 
 Page 3 
 
 
   Could the Parties give an indication of % of total lines and % of imports, in each of the 
Parties schedules that are foreseen to be  renegotiated in either 2009 or 2011?  
 
 As for the products which are subject to renego tiation in 2009, 0.01% of total tariff lines in 
Japanese schedules and 0.0007% of imports by value from Chile to Japan (2004-2006) may be 
concerned.  As for the products which are subject to  renegotiation in 2011, 2.7% of total tariff lines in 
Japanese schedules and taking into consideration period 2004-2006, 1.4% of imports by value from Chile to Japan may be subject to renegotiation.  If we consider only imports for 2005, it corresponds 
to 2.6% of imports from Chile.  
 Considering Chilean schedules, there are 1.5 % of the tariff lines subject to renegotiation, 
which represent 0.01 % of imports from Japan in 2005.   Renegotiation will take place only when either Pa rty requests for it pursuant to Article 14.3 of 
this EPA.   Also, any further concession will not be made unless both Parties reach an agreement as a 
result of the negotiation. 
 
 Are the time liberalization schedules presented in Tables III.2 (Chile) and Table III.3 
(Japan) fundamentally dependant on the announced renegotiation?  
 The time liberalization schedules are fundamentally based on the schedules of concessions as 
provided for in this EPA.  With respect to cert ain products which are subj ect to renegotiation in 
future, results of renegotiation are not taken into account in the time liberalization schedules shown in 
the Chart III.3.   Once the negotiation of Category R products is done those products should be reallocated in 
the corresponding category (as a result of the negotiation).  The rest of the products (i.e. those that are 
already in other category different from R) will remain with the same treatment. 
 
5. The factual presentation indicates that by the end of implementation in 2022, a total of 
94.2% of tariff lines and 99.9% of imports from  Japan by Chile will be duty-free whilst only 
89% of tariff lines and 92% by value of Jap an imports from Chile will be liberalized. 
 Could the Parties elaborate on the reaso ns for this asymmetrical liberalization? 
 
Japan's response
 
  The figures concerning the liberalization commitm ents reflect the results of the negotiations 
between both Parties, taking into consideration each Party’s specific interests or concerns.  Japan 
conducted the negotiations aiming to achieve well-bala nced commitments.  The Japan’s liberalization 
commitments are substantial and high-level enough to be consiste nt with the WTO benchmark, 
i.e. liberalization of “substantially all the trade”.  On top of the liberalization ratio as indicated in the 
Factual Presentation (which includes tariff elimin ation within 10 years), Japan also made the 
commitments to eliminate duties beyond 10 years, reduce duties or establish special arrangements for 
tariff rate quotas, for certain sensitive products. 
 
Chile's response
 
 
 The figures concerning the liberalization commitm ents reflect the results of the negotiations 
between both Parties, taking into  consideration each Party’s specific interests or concerns.  
   WT/REG234/2 
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  6. Could the Parties confirm whether they have  agreed to pursue further liberalization 
regarding current commitments trade in services? If  so, could the Parties explain the scope and 
objectives of these new commitments? 
 There is no agreement on further liberalization on trade in services. 
 
Questions from the Delegation of the United States
 
 Goods liberalization  
 
7. According to paragraphs 24 and 25, and Annex 1 (Tables A.1 and A.2) of the 
Factual Presentation:  
Japan will eliminate duties on 89% of all tariff lines and 92% of imports from Chile 
under the agreement.  Though 95.8% of industria l goods tariffs are duty-free by the end of the 
implementation period, only 60.1% of agricul tural tariffs are duty-free under the agreement.  
 
Chile will eliminate duties on 94.2% of all tariff lines covering 99.9% of imports from 
Japan under the agreement.  Though 97.3% of indu strial tariffs are duty-free by the end of the 
implementation period, only 74.3% of agricultural tariff lines are duty-free under the 
agreement. 
  For what reasons did Japan undertake less liberalization than Chile?  
 
Japan's response
 
 
 The figures concerning liberalization commitme nts reflect the results of the negotiations 
between both Parties, taking into  consideration each Party’s specific interests or concerns.  
  Japan’s liberalization commitments are substa ntial and high-level e nough to be consistent 
with the WTO benchmark, i.e. liberalization of “substantially all the trade”.  On top of the 
liberalization ratio as indicated in the Factual Pr esentation (which only includes tariff elimination 
within 10 years), Japan also made the commitments to eliminate tariffs beyond 10 years, reduce tariffs 
or establish special arrangements for tari ff quotas, for certain sensitive products. 
 
8. How do the Parties explain the highly di sproportionate liberalization between the 
industrial and agricultural sectors?  
 The figures concerning the liberalization commitm ents reflect the results of the negotiations 
conducted by both Parties, taking into considerati on each Party’s specific interests and concerns.  
 Additional reply by Japan
 
 
 Japan considers that in the ag ricultural, forestry and fishery sector, in addition to the tariff 
elimination commitments within 10 years, Japan al so made the commitments to eliminate tariffs over 
more than 10 years, reduce tariffs or establish special arrangements for tariff quotas, for certain 
sensitive products and as a result, approximately 94 .4% of the total import (2005) of agricultural, 
forestry and fishery products from Chile by Japan by value is subject to tariff elimination or reduction. 
In the case of the industrial products, nearly 100% of the import by value from Chile to Japan is 
subject to tariff elimination. 
    WT/REG234/2 
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  9. Could the Parties please explain how their tariff elimination commitments in agriculture 
achieve the “substantially all trade” st andard set out in GATT Article XXIV?  
 Pending agreement between WTO Members, GATT Article XXIV paragraph 8 does not 
specify a quantitative benchmark for assessing “substa ntially all the trade” and moreover does not 
mandate a sector by sector assessment.  The onl y condition regarding sectors that is clear in 
Article XXIV is that no exclusion of a major sector  is allowed, although Members' views also differ 
on what constitute a major sector.  In that sense , the Japan Chile EPA doesn’t exclude any (major) 
sector.  
10. Paragraph 18 of the Factual Presentation not es that “tariff negotiations are scheduled to 
take place in either 2009 or 2011 for a number of products.”  How did the Parties decide what 
products would be negotiated later?  What is ex pected to change between the conclusion of the 
agreement in 2007 and the resumption of negotia tions in 2009 or 2011?  How was it decided 
which lines would be subject to negotiations in 2009 and 2011? 
 The reason was because, with regard to some  products, it was necessary to spend more time 
to study the trade flows in order to determine the elimination categories.  The products included were 
products of high sensitivities in the Parties.   The products which will be negotiated in  2009 and 2011 are those products which both 
Parties agreed to list under category R, in the ta riff schedule.  By doing so, both Parties committed 
themselves to negotiate these products in the coming years independently of what has been already 
negotiated and put into effect.  More specifica lly, the products under categories different from 
Category R will maintain their current tariff elimin ation schedule.  In rela tion to how the Parties 
decided which product to list in category R, these are the product which initially were going to be 
excluded of the scope of the Agreement but thanks to  the creation of this category, an opportunity is 
created to reconsider in the near  future the decision to liberalize certain products, taking into account 
the sensitivity of each product and possible future developments in domestic structure adjustment 
process for it.  
11. Please provide the average duty rate by HS chapter and
 HS section for the lines that 
remain dutiable.  
Japan's response  
 
 Calculations provided by the WTO Secretariat – See Annex Tables A.1-A.2.  Chile's response
 
 
 Calculations provided by Chile – See Annex Table A.3 
 
TBT 
 12. Could the Parties explain why the princi ples laid out by the TBT Committee 
(G/TBT/1/Rev.8 dated 23 May 2002) were relegated to a “best effort” in a “Joint Statement” at 
the signing of the Agreement, rather th an accepted in the Agreement itself?  
 The principles in the decision of TBT Co mmittee mentioned in the Joint Statement 
(IX. Decision of the Committee on Principles for the De velopment of International Standards, Guides 
and Recommendations with relation to Articles 2, 5 and Annex 3 of the Agreement) relate to 
commitments under the international standardizi ng body.  This is the reason why the phrase 
“best efforts” is used in a bilateral “Joint Statement”. WT/REG234/2 
Page 6  
 
  SPS 
 13. Paragraph 43 of the Factual Presentation not es that the FTA calls for the establishment 
of an enquiry point in Article 13.  As envisioned  by the FTA, is this enquiry point the same as 
the one envisioned under the WTO SPS Agreement?   
 The Enquiry point in the EPA is establishe d to maintain a contact point between both 
countries, which will allow us to answer any r easonable enquiries regarding SPS measures and, if 
required, to also provide relevant information.  It is different from the one established in the 
WTO SPS Committee, which aims to give and receive notifications of SPS measures from all the WTO members.  In Chile, in the case of the EPA the enquiry point is the General Directorate for 
International Economic Affairs of the Ministry of  Foreign Affairs and under the WTO, it is the 
Agriculture and Livestock Service from the Ministry of Agriculture. 
  In Japan, the enquiry point established in South America Division, Latin American and 
Caribbean Affairs Bureau of the Ministry of Foreig n Affairs pursuant to this EPA is different from the 
one established in Standards Information Service in  International Trade Division, Economic Affairs 
Bureau of the Ministry of Foreign Affairs under the WTO SPS Agreement.  Services  14. Paragraph 61 of the Factual Presentation no tes that the cross-border services chapter of 
the SEPA does not contain market access provisions along the lines of Article XVI of the GATS. 
 Are measures of the kind included in GATS Article XVI listed anywhere in the SEPA or 
in Parties’ Annexes, such that service suppliers  of one Party are able to determine whether 
markets access restrictions that may affect thei r operations exist in the territory of the other 
Party? 
 The Parties in the CBTS Chapter of the EPA lis ted reservations in Annexes 6 and 7 regarding 
national treatment provision.  The measures contai ned in the reservations can be construed as 
discriminatory or non-discriminatory quantitative restri ctions of the kind referre d in subparagraph 2 of 
GATS Article XVI that may affect services and services suppliers.    In addition, commitments with respect to lo cal presence discipline could be interpreted as 
setting forth a commitment of the kind included in subparagraph 2of GATS Article XVI  15. Japan’s Annex 7 entry for “new services” not es that its reservations for new services do 
not apply for services that are recognized or th at should have been recognized by reference to 
the Japan Standard Industrial Classification or the United Nations Central Product Classification. 
 Paragraph 20 of the Introduction to the Central Product Classification  (Principles used in 
constructing the CPC) notes that “the CPC, covering all goods and services, is a system of 
categories that are both exhaustive and mutually exclusive.”  On this basis, can Japan explain 
how any service could be construed as not bein g classified in the CPC for the purposes of 
determining whether a service should have been recognized? 
 
 
  WT/REG234/2 
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  Japan's response  
  The Parties have agreed on the set of criteri a of a “New Service”.  Annex 7 of the EPA 
stipulates that any (but solely) services "classified positively and explicitly" in the CPC at the time of 
entry into force of the EPA should have been rec ognized by the Parties.  There may be a case where 
new services which could not be foreseen at the ti me of entry into force of the CPC and the EPA 
emerge in the future as a consequence of technologi cal advances.  The CPC is only exhaustive as to 
the services that had been recognized by the time when the CPC was drawn up and adopted. 
Paragraph 59.B.2. of the Introduction to the Provi sional Central Product Classification admits that 
certain services may not be classified unde r the categories specified in the CPC. 
 16. Tables IV.7 of the Factual Presentation not es that Japan reserves the right to adopt any 
measure relating to the supply of services in an y mode of supply in wh ich those services were 
not technically feasible at the entry into force of the Agreement. 
 Could Japan comment on why it envisions a need to impose discriminatory measures on 
services that become technically feasible?  How is  this consistent with the objectives of an 
agreement designed to liberalize trade betwee n the Parties?  How is broadly reserving the 
capacity to impose future discri minatory measures consistent with the GATS Art. V obligation 
to provide for the elimination of substantially all discrimination? 
Japan's response
 
 
 This EPA takes the “negative list” approach to  specify the reservations made by the Parties. 
This means that the Parties are bound by the oblig ations stipulated in the EPA, such as National 
Treatment, unless reservations are made in the Anne xes 6 and 7.  However, when a new and unknown 
service established due to the innovation of technology or other means, it is highly likely that a new 
regulation regarding such new service is introduced.  Considering the particularity of regulation of 
services and the structure of this EPA as menti oned above, it was considered as necessary for the 
Parties to reserve the right to impose appropriate measures in respect of new services that would be 
created after entry into force of the EPA. 
 
 In respect of the provision on “elimina tion of substantially all discrimination” 
(subparagraph 1.(b) of GATS Article 5), both Parties have eliminated the discriminatory measures in 
sectors broader than those for which they made co mmitments in their respective Schedules of Specific 
Commitments of the GATS.  The Parties are also committed to National Treatment in all the sectors 
except a limited number of sectors reserved in Anne xes 6 and 7.  For these reasons, it is considered 
that this EPA is consiste nt with GATS Article 5. 
 WT/REG234/2 
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  ANNEX 
  
Table A.1 
Japan: Average final tariff of the rema ining dutiable lines, by HS chapter 
HS 
chapter Description Remain 
dutiable Average final 
tariff (dutiable) 
01 Live animals 8a 8.5 
02 Meat and edible meat offal 64a 18.1 
03 Fish and crustaceans, molluscs and other aquatic invertebrates 147 6.4 
04 Dairy produce; birds' eggs; natural honey;  edible products of animal origin, not 
elsewhere specified or included 65a 26.9 
07 Edible vegetables and cer tain roots and tubers 10a 10.7 
08 Edible fruit and nuts;  peel of citrus fruits or melons 12 18.8 
09 Coffee, tea, mate and spices 2 12.0 
10 Cereals 13a 35.0 
11 Products of the milling industry; malt;  starches;  inulin; wheat gluten 58a 21.7 
12 Oil seeds and oleaginous fruits; miscellane ous grains, seeds and fruit; industrial or 
medicinal plants; straw and fodder 10a 16.2 
13 Lacs; gums, resins and other ve getable saps and extracts 1 16.5 
15 Animal or vegetable fats and oils and th eir cleavage products; prepared edible fats; 
animal or vegetable waxes 38a 12.9 
16 Preparations of meat, of fish or of crust aceans, molluscs or other aquatic invertebrates 87a 13.9 
17 Sugars and sugar confectionery 37a 43.1 
18 Cocoa and cocoa preparations 21a 23.0 
19 Preparations of cereals, flour, starch or milk; pastrycooks' products 129a 20.6 
20 Preparations of vegetables, fruit,  nuts or other parts of plants 86a 23.7 
21 Miscellaneous edible preparations 57a 24.3 
22 Beverages, spirits and vinegar 11a 17.5 
23 Residues and waste from the food i ndustries; prepared animal fodder 2a 12.8 
24 Tobacco and manufactured tobacco substitutes 5 11.2 
25 Salt; sulphur; earths and stone; plaste ring material, lime and cement 1b - 
29 Organic chemicals 3 10.0 
35 Albuminoidal substances; modified starches; glues; enzymes 5a 16.7 
41 Raw hides and skins (other than furskins) and leather 3 24.3 
42 Articles of leather; saddlery and harn ess; travel goods, handbags and similar 
containers; articles of animal gut (other than silk-worm gut) 4 11.9 
43 Furskins and artificial fur; manufactures thereof 21 17.9 
44 Wood and articles of wood; wood charcoal 46 6.4 
50 Silk 6 b - 
64 Footwear, gaiters and the like;  parts of such articles 29 26.0 
Total 981 18.0 
 
a Combination of ad valorem  and specific duties (for tariff lines with non ad valorem  components, only the ad valorem  part of the 
 rate was included in the calcu lation of the tariff averages). 
b Specific duty 
 
Note: Based on the HS 2002 nomenclature.   Calcula tions exclude tariff lines having an in-quota rate. 
 
Source:  WTO estimates based on data provided by Japan.  WT/REG234/2 
 Page 9 
 
 
  Table A.2 
Japan:  Average final tariff of the rem aining dutiable lines, by HS section  
HS section and description Remain dut iable Average final tariff (dutiable) 
I Live animals and animal products 284a 13.3 
II Vegetable products 106a 19.9 
III Animal or vegetable fats and oils 38a 12.9 
IV Prepared food etc. 435a 21.8 
V Mineral Products 1b - 
VI Chemicals and chemical products 8a 14.2 
VIII Hides and skins 28 17.7 
IX Wood and articles 46 6.4 
XI Textiles and textiles articles 6 b - 
XII Footwear, headgear 29 26.0 
Total 981 18.0 
 
a Combination of ad valorem  and specific duties (for tariff lines with non ad valorem  components, only the ad valorem  part of the 
rate was included in the calcula tion of the tariff averages). 
b Specific duty 
 
Note: Based on the HS 2002 nomenclature.   Calcula tions exclude tariff lines having an in-quota rate. 
 
Source:  WTO estimates based on data provided by Japan. 
 WT/REG234/2 
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  Table A.3 
Chile:  Average duty rate by HS chapter and HS section for the lines that remain dutiable (2007) 
HS section and description 
  MFN 
avg.% Total 
No of 
lines MFN 
avg.% Total 
No of 
lines MFN 
avg.% Total 
No of 
lines MFN 
avg.% Total 
No of 
lines MFN 
avg.% Total 
No of 
lines 
Category X R TQ P Total 
I Live animals and animal products 6 118 6.2 54 9.7 24   6.5 196 
   Chapter 2 6 12 9.2 4 9.7 24   8.5 40 
   Chapter 3 6 81 6 44     6 125 
   Chapter 4 6 25 6 6     6 31 
II Vegetable products 6 45 6 5     6 50 
Chapter 7 6 6       6 6 
Chapter 8   6 3     6 3 
Chapter 10 6 15       6 15 
Chapter 11 6 16       6 16 
Chapter 12 6 8       6 8 
Chapter 13   6 2     6 2 
III Animal or vegetable fats and oils 6 2 6 11     6 13 
Chapter 15 6 2 6 11     6 13 
IV Prepared food etc. 6 101 6 68 6 6 6 2 6 177 
Chapter 16 6 14 6 40 6 3   6 57 
Chapter 17 6 28       6 28 
Chapter 18 6 13       6 13 
Chapter 19 6 21       6 21 
Chapter 20 6 4 6 19 6 3 6 2 6 28 
Chapter 21 6 16 6 2     6 18 
Chapter 22 6 1 6 7     6 8 
Chapter 23 6 2       6 2 
Chapter 24 6 2       6 2 
V Minerals 6 1       6 1 
Chapter 25 6 1       6 1 
VI Chemical and products 6 1       6 1 
Chapter 38 6 1       6 1 
IX Wood and articles 6 3 6 1     6 4 
Chapter 44 6 3 6 1     6 4 
XI Textile and textile articles 6 1       6 1 
Chapter 50 6 1       6 1 
XII Footwear, headgear 6 5       6 5 
Chapter 64 6 5       6 5 
XV Base metals and  products 6 7       6 7 
Chapter 76 6 7       6 7 
Total 6 284 6.1 139 9 30 6 2 6.2 455 
 
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