WORLD TRADE  
ORGANIZATION   
WT/REG230/4 
18 October 2011  
 
(11-5156) 
Committee on Regional Trade Agreements Original:   English/ 
 Spanish 
 
 
 
ECONOMIC INTEGRATION AGREEMENT BETWEEN CHINA AND CHILE  
(SERVICES) 
 
Questions and Replies 
   The following communication, dated 13 October 2011, is being circulated at the request of the delegations of China and Chile.  
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  This document reproduces the questions addressed to the Parties and the responses submitted.  
Questions from the Delegation of Argentina 
 
Scope 
 1. Paragraph 12 of the Factual Presentation states that the Agreement does not apply to 
financial services or maritime cabotage. 
 
 (a) Could the Parties please expl ain why these services were excluded? 
 
 The exclusion of both sectors was the final outcome of a negotiation where the Parties 
expressed their interest and sensitivities regarding those sectors.   
 Concerning Financial Services, Chile has mainta ined a policy to negotiate these disciplines in 
a self-contained and separate Chapter.  This exclusi on was discussed and agreed by both Parties.  
  For China, excluding the maritime cabotage is in line with China's commitments in the WTO. 
 
 (b) Do the Parties plan to include these services at a later stage? 
 
 The Committee on Trade in Services has been estab lished, the Parties will discuss the relevant 
issues in the Committee. 
 
Denial of benefits 
 
2. Paragraph 13 of the Factual Presentation states that a Party may deny the benefits of the Agreement to service suppliers of the other Party where the service is being supplied by a 
juridical person owned or controlled by persons of a non-party or the denying Party, and the 
juridical person has no substantial business ac tivities in the territory of the other Party. 
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   Could the Parties please define "substantial business activities"? 
 
 Article XXVIII (m) of GATS includes the concept "substantive business operations".  The 
Parties understand that "substantive business activities" in  this Agreement is in line with "substantive 
business operations" in GATS.  Market access 
 
3. According to paragraph 14 of the Factua l Presentation, there is no commitment on 
capital transfers linked to the provision of serv ices under modes 1 and 3 (similar to that found 
in footnote 8 to Article XVI), since this is expected to be regulated in a future investment 
agreement between Chile and China. 
 
 Could the Parties indicate whether any progress has been made with regard to the 
conclusion of this agreement? 
 
 The Parties have already initiated the negotiati ons on this subject.  As we are still in the 
negotiations process, we cannot give mo re information about this issue.  
 
Liberalization commitments 
 
4. According to paragraph 22 of the Factua l Presentation, Article 9 of the Agreement 
stipulates that three years after the entry into forc e of the Agreement, it may be reviewed taking 
into account the developments, laws and regulations  on trade in services of the parties as well as 
the progress made at the World Trade Organization and other international organizations of which both Parties are members.  It is also stated that the Agreement does not contain any 
provisions on the modification of schedules and compensations comparable to Article XXI of 
the GATS. 
 Could the Parties please confirm whether commitments may be modified or withdrawn 
as a result of the review?  
 Article 9, was established with the aim that the Parties assume new commitments after the 
entry into force of the Agreement.  It is unders tood that the Parties cannot withdraw commitments.  
 
Question from the Delegation of Peru 
 5. Article 4 states that each Party's commitments are set forth in the schedules in Annex II.  
This Article also states that the Parties agree to incorporate their schedules of commitments 
under the GATS into the Supplementary Agreeme nt, with the exception of commitments 
relating to financial services.  The report, ho wever, indicates that commitments in some 
subsectors have been improved in the Annex II schedules with respect to the GATS schedules (as shown in Tables III.3 and III.4). 
 Since both schedules form part of the Supplementary Agreement, is there any 
mechanism or agreement that establishes which commitment prevails if a Party's schedules 
contain different commitments for the same subsec tor?  Does the most favourable treatment for 
the services supplier prevail? 
 
 The Agreement between the Parties is that th e commitments scheduled in the Agreement will 
prevail from the scheduled in the GATS.  If no co mmitments are listed in the Agreement the GATS 
commitments will prevail.  
  WT/REG230/4 
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  Questions from the Delegation of the Separate Customs Territory of Taiwan, Penghu, Kinmen, 
and Matsu 
 
Trade Environment (Pages 1, 3 & 5, paragraphs 3-5 & 8)  
 
6. As indicated in the Report, both China and Chile have run constant deficits in their 
global trade in services over the period 2000-2009.  Chart I.3 shows a surplus in favour of Chile 
in terms of total bilateral services trade with  China for 2008-2009.  Table I.6 shows a steep 
decline in the stock and flows of Chinese investment in Chile between 2007 and 2009. 
(a) How much added value has been created by  the Agreement and what impact has 
it had on the long-running deficits in global trade in services for each of the 
Parties? 
 The improved market access provided by both Pa rties would help enhance bilateral trade in 
services and reduce trade deficit.  China has obtaine d WTO plus market access in the Chilean market 
for legal service, construction and architecture, computer, real estate, advertisement, mining, 
distribution, education, environment, tourism, spor ts and air transport services.  Chile would benefit, 
especially in computer, mining, environment, sports and air transport services.   The objective of this Agreement is to facilita te the export and import of services between both 
countries.  Additionally the purpose is to increase the general export of Services for both countries. 
The Parties are not looking to revert their defi cits but looking to increase their Services exports. 
 
(b) Why was there no significant growth in Ch ina's exports of commercial services 
to Chile between 2008 and 2009, as shown in Chart I.3? 
(c) What were the main reasons for the steep d eclines in stocks and flows of Chinese 
investment into Chile, as shown in Table I.6? 
 For question (b) and (c), the answer would be: 
  In 2009, as the financial crisis hurt the global economy further, the growth of the global trade 
in goods slackened, and that of the intern ational trade in services dipped substantially. 
 
Scope and Definitions (Page 7, paragraph 12)  
7. The scope of the Agreement is narrower than that of the GATS in that it excludes 
subsidies, financial services and maritime cabotage. 
(a) Why does the Agreement specifically inte nd to exclude financial services and 
maritime cabotage? 
 For China, excluding the maritime cabotage is in  line with China's commitments in the WTO. 
 
 Concerning Financial Services, Chile has mainta ined a policy to negotiate these disciplines in 
a self-contained and separate Chapter.  This exclusi on was discussed and agreed by both Parties.  
  Parties do not consider that the scope of the Agreement is narrower than that of the GATS.  
The exclusions from the Agreement are not intended to be permanent.  The Parties are obliged to 
review this situation on a periodical basis. 
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  (b) How does limitation of the scope in the Agreement comply with the obligation 
provided for in GATS Article 16 (Market Access)?  
 Parties consider that the exclusion regarding financial services, maritime cabotage and 
subsidies does not contradict the provisions cont ained in GATS Article XVI (Market Access).  We 
have to bear in mind the application of  GATS Article V (Economic Integration).  
 
 The exclusion of financial services from the Agreement means that the GATS financial 
services commitments apply between the Parties.  
 
(c) How does the exclusion of subsidies in th e Agreement comply with the obligation 
provided for in GATS Article 17 (National Treatment) with regard to the 
commitments undertaken in the Agreemen t and the GATS schedules to service 
sectors or sub-sectors? 
 In China's schedule of specific commitments, regarding the horizontal commitments, in the 
column of Limitation on national treatment, the co ntent is "Unbound for all the existing subsidies to 
domestic services suppliers in the sectors of audio- visual, aviation and medical services.  Unbound for 
all subsidies to domestic services suppliers in the new commitments in sectors listed in the  China-Chile FTA services schedule.  Unbound for al l the subsidies to domestic services suppliers in 
any new sector and sub-sector scheduled in the future services negotiations after signing the 
China-Chile FTA services Agreement." 
  
 With regards to subsidies, the Parties commit to take on board the outcome of the multilateral 
negotiations on this matter.  
Denial of Benefits (Page 7, paragraph 13) 
8. According to Article 10 of the Agreement, subj ect to prior notification and consultation, 
a Party may deny the benefits of the Agreement to service suppliers of the other Party where the 
service is being supplied by a juridical person owne d or controlled by persons of a non-party or 
the denying Party, and the juridical person has no  substantial business activities in the territory 
of the other Party.  
(a) What does "substantial business activities" mean in the Agreement?  What 
requirements apply? 
 Article XXVIII (m) of GATS includes the concept "substantive business operations".  The 
Parties understand that "substantive business activities" in  this Agreement is in line with "substantive 
business operations" in GATS. 
 
 We do not have a specific definition, this i ssue will be analysed on a case-by-case basis.  
 
(b) How many cases applying to this Article on  denial of benefits have there been to 
date? 
 There is no any case since the entry into force of this Agreement. 
(c) How does this Article conform to th e obligation provided for in GATS 
Article 5.6? 
 
   WT/REG230/4 
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   In GATS, there is MFN clause, so the specifi c commitments are multilateralized.  But in the 
China-Chile FTA Services Agreement, there is no MFN clause, so for the commitments which are 
beyond the commitments to the WTO, it is only a kind of preferential treatment between China and 
Chile. 
 
Liberalization Commitments 
Chile  
Horizontal Commitments (Page 12, paragraph 40)  
 
9. The Agreement includes a restriction that does not appear in Chile's GATS schedule on 
the right to adopt measures establishing rights or preferences to original ethnic groups. 
(a) Why does Chile intend to include such a restriction in the Agreement? 
 Chile has introduced this restriction to its last  agreements, because it is a very sensitive issue. 
Parties should have flexibilities to protect their "Original Ethnics Groups".    
(b) What does the term "original ethnic groups" mean in Chile and what is its 
scope?  How many major measures have been adopted to provide these rights or preferences to "original ethnic groups"? 
 "Original ethnic group" are identifying the na tives of Chile, there is no definition in the 
Agreement.   
(c) How does this restriction conform to the obligations provided for in 
GATS Articles 16 (Market Access) and 17 (National Treatment)? 
 We believe there is no inconsistency with Ar ticles 16 and 17 thus Members have the rights to 
adopt measures establishing rights of pref erences to original ethnic groups.  
 Regulatory Provisions  
Domestic Regulation (Page 15, paragraph 53)  
 10. According to Article 5.4 of the Agreement, th e Parties shall consult periodically aiming 
at removing any remaining citizenship requirement s for the licensing or certification of each 
other’s service suppliers. 
 
(a) For which service sectors or sub-sectors does citizenship in the territory of the 
Parties still remain a requirement? 
 In the case of China in the sectors, such as Legal services and Medical and dental services, 
there is citizenship requirements.   For greater certainty, it is suggested to check the Agreement's 
Annex on the specific commitments. 
 
 Chile has very few sectors with citizenship requirements.  
 
(b) For the Parties, which will be the priori ty service sector or sub-sector to be 
consulted in the short term on the removal of the citizenship requirement? 
 The Parties need to make cons ultations with their relevant bodi es in order to identify the areas 
of interest. 
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  (c) What is the difference, if any, between "citizenship requirements" and 
"permanent residency or nationality requirements"? 
 This redaction is a result of the negotiation and most probably considers the sensibilities of 
one of the Parties. The common understanding is that there is no difference between these 
expressions.  
 
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