RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/REG165/M/1 
16 March 2005 
 
 (05-1093) 
Committee on Regional Trade Agreements 
Thirty-Ninth Session  
 
 
EXAMINATION OF THE CHILE – EL SALVADOR  
FREE TRADE AGREEMENT, GOODS AND SERVICES 
 
Note on the Meeting of 17 February 2005  
 
Chairman: Mr. R. Saborío (Costa Rica) 
  
1. The meeting was convened in document WTO/AIR/2496. 
2. Under Agenda Item C.V of its Thirty-Nin th Session, the Committee on Regional Trade 
Agreements (hereinafter CRTA or the Committee)  took up the examination of the goods and services 
aspects of the Chile - El Salvador Free Trade Agreement (FTA).  The following topics were 
discussed: 
 A. General Remarks 
Goods aspects
: 
 B. Background Information on the Agreement 
 C. Trade Provisions 
  Services aspects
: 
 D. Background Information on the Agreement 
 E. Provisions Affecting Trade in Services 
 
3. The Chairman  stated that the Committee would examin e for the first time both the goods and 
services aspects of the Free Trade Agreement betw een Chile and El Salvador.  The Agreement had 
been signed on 18 October 1999 and had entered into force on 1 June 2002;  it had been notified to the 
WTO on 16 February 2004, as document WT/REG165/N/1 and Corrigendum 1 for the Goods aspects and S/C/N/299 for the Services aspects.  The text of the Agreement appeared in document 
WT/REG165/1 and the text of the Bilateral Protocol in document WT/REG 165/2.  He proposed to 
organize the examination by first asking the Par ties and other Members for general comments, and 
then to turn to the specifics of  the Agreement looking first at the goods aspects, followed by the 
services aspects, using the respective Standard Formats, namely WT/REG165/4 and WT/REG165/5, 
to guide the debate. 
A. G
ENERAL REMARKS  
4. The representative of Chile, speaki ng also on behalf of El Salvador , welcomed the 
opportunity to present matters pertaining to trade in both goods and services of the FTA between 
Chile and El Salvador.  Negotiati ons for a FTA had been launched in  April 1998.  The Agreement had 
entered into force for both countries on 1 June 2002 a nd had been notified on 29 January 2004.  It was 
important to note that the legal aspects of the FTA had been negotiated between Chile and five 
Central American countries, namely Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua.  
However, the provisions applied on a bilateral b asis between Chile and each Central American WT/REG165/M/1 
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 country.  The tariff reduction programmes, rules of origin and the annexes referring to cross-border 
trade in services had been negotiated bilaterally .  Trade between Chile and El Salvador had 
traditionally been low in volume, with a long-st anding balance in Chile's favour.  However, a 
significant proportion of this trade consisted of more highly processed goods in the manufacturing and 
agro-industrial sectors.  Chile and El Salvador ha d signed a modern treaty similar to other treaties 
reviewed by this Committee, notably the Agreement between Chile and Costa Rica.  It contained 
provisions not only in the traditional areas relating to trade in goods, but also in trade in services, 
investment and government procurement.  The FTA had benefited both countries by, inter alia , 
eliminating trade barriers;  facilitating cross-bor der movement of goods and services;  increasing 
investment opportunities;  creating effective proce dures for the implementation and administration of 
the Agreement;  and establishing a framework for bila teral, regional and multila teral cooperation.  All 
of these had enabled trade to expand and diversify, and investment to grow.  She then highlighted 
certain aspects of the Agreement which the Partie s considered particularly relevant and which 
demonstrated its consistency with Article V of th e GATS and Article XXIV of the GATT.  As far as 
goods were concerned, around 4.5 per cent of eight -digit tariff lines had been excluded from trade 
liberalization.  These exceptions represented less than  3 per cent of the bilateral trade between Chile 
and El Salvador.  In connection with the provisions relating to trade in goods, it should be highlighted 
that Chile and El Salvador committed themselves – w ith the exceptions set forth in the FTA – to adopt 
or maintain only the export and import restrictions  which were consistent with Article XI of the 
GATT 1994.  As far as rules were concerned, both c ountries confirmed the rights and obligations set 
out in the WTO Agreements.  With regard to origin , specific rules had been negotiated on the basis of 
a change in tariff classification, leaving the regi onal value content method as an additional alternative 
to the former.  As regards technical barriers to  trade, the FTA represented an advance over the 
relevant WTO Agreement since it applied the sam e principles to qualification requirements and 
procedures, technical standards and licences for cro ss-border services.  In the field of sanitary and 
phytosanitary measures, the Partie s undertook to accept, to the fullest  extent possible, their sanitary 
and phytosanitary measures as equivalent.  The Agr eement also contained provisions needed to ensure 
that the implementation of these rules did not have an adverse impact on trade, as the rules were to be based on scientific principles, would be maintained if they had a firm foundation and were based on 
risk analysis.  The Agreement allowed for the po ssibility, during the transition period, of applying 
bilateral safeguard measures with the obligation to provide compensation, and left open the possibility 
of applying multilateral safeguard s provided that the imports in question represented a substantial 
share and contributed significantly to ser ious injury or the threat thereof. 
5. The representative of Chile continued by saying that services liberalization had been 
established on the basis of the principles of nati onal treatment, most-favoured-nation (MFN) treatment 
and the right to provide services without establishi ng a local presence.  The negotiations had been 
conducted on the basis of negative lists, with no a priori  exclusion of any sector, although it had been 
decided that financial services were to be exclude d from the negotiations.  The concept of negative 
lists afforded a considerable degree of transparen cy given that all Chilean and Salvadoran services 
restrictions were set forth in the Annexes of Reservations.  As to investment, the Agreement 
incorporated the Agreement for the Reciprocal Pr omotion and Protection of Investments, signed by 
Chile and El Salvador on 8 November 1996, as we ll as the commitments on national treatment and 
MFN treatment, and it also established rules on tran sfer and expropriation.  The effects of the FTA, 
which had been observed in the years since it came into  force, had been very positive.  Bilateral trade 
had expanded by around 183 per cent between 2002 a nd 2004, while it had grown by only 54 per cent 
in the preceding five-year period, i.e. 1997 to 2001.  Chilean exports to El Salvador had increased 
more than 2.5 times and Salvadoran exports to Ch ile had risen more than sevenfold between 2002 and 
2004.  At present, more than 65 per cent of trade fro m Chile to El Salvador and 85 per cent of trade 
from El Salvador to Chile was free of duty.  Th e Administrative Commission of the Agreement had 
managed, by means of a fluid dialogue between the Governments, to develop bilateral relations, as 
effective procedures had been devised on both the ad ministration and the dispute settlement side.  The 
Commission had met bilaterally on three occasions to agree on its regulations and improvements in  WT/REG165/M/1 
 Page 3 
 
 
 the dispute settlement system.  The Governments of  Chile and El Salvador were fully committed to 
the multilateral trading system and to agreements such as this, which were built on the basis of the 
WTO disciplines and promoted not only economic grow th and the efficiency of the participants, but 
also multilateral trade liberalization.  She c oncluded by saying that documents WT/REG165/4-5 
contained standard-format information on the FTA's  goods and services aspects, and that the Parties 
remained at the Committee's disposal to resolve any doubts which might arise.  
6. Referring to the Agreement between Central Am erica and Chile and the notification of its 
entry into force as regards Chile and El Salva dor, the representative of the European Communities  
asked whether the Committee would examine all rul es of the Agreement.  He wondered what would 
be the implications of that for future notificati ons and examinations involving the other signatory 
countries, as these would concern the same rul es but different protocols and annexes.  The 
representative of Chile  replied that the rules applied to the five Central American countries;  these 
would therefore be examined following each notifi cation, as it had already been the case with the 
Chile-Costa Rica Agreement.  However, the Commi ttee also examined the Agreement's coverage, and 
that  was a bilateral assessment on the basis of the bilateral protocols.  
7. The representative of the Switzerland  referred to the statement under heading I of 
WT/REG165/4 according to which the five Central Am erican countries already had a trade agreement 
among themselves. He compared that to the EFTA,  and in light of that asked for additional 
information on the organization between these five  countries.  The representative of El Salvador  
replied that Guatemala, El Salvador, Costa Rica,  Honduras and Nicaragua were parties to the sub-
system of Central American integration;  that pr ocess of economic integra tion had been duly notified 
to the WTO under Article XXIV of the GATT.  The in tegration was now at the customs union stage;  
in its continuous improvement process, it also enco mpassed joint negotiations with third countries, as 
had been the case in the Agreement between Central America and Chile. 
Goods Aspects  
 8. The Chairman
 recalled that the terms of reference for the examination of the goods aspects of 
the Agreement had been adopted on 27 April 2004 by the Council for Trade in G oods, and were  
contained in document WT/REG165/3. 
B. GOODS ASPECTS - BACKGROUND INFORMATION ON THE AGREEMENT  
9. The representative of the United States  (US) thanked the Parties for their clear exposition of 
the scope of the Agreement and the report on the good s aspects of the bilateral Protocol.  This had set 
a high standard for transparency on a tariff-line a nd trade coverage basis, which she would find 
heartening to see replicated in submission s to this Committee by other Parties. 
10. The representative of the Japan  echoed the comments just made.  Referring to the category 
"TP", which concerned petroleum products under S ection I.3 of WT/REG165/4, he requested the 
Parties to clarify in detail the meaning of the special treatment vis-à-vis  Chile.  The representative of 
Chile  replied that special treatment meant that a gr oup of petroleum-derived products had a different 
tariff elimination schedule.  There were two gr oups of products, one comprised of HS 2709 and 2711, 
which were liberalized from the entry into force an d would reach zero in 2004;  for the other group, 
the tariff would reach zero in 2006.  She agreed to provide detailed information in writing.   
11. The representative of the Australia  echoed the comments made regarding the information 
provided.  Her delegation had some questions b ased on Annex 3.04(6) which referred to excluded 
products and to the price band mechanism.  This A nnex listed the products Chile subjected to a price 
band mechanism and which were excluded from the FTA.  While in page 3 of  WT/REG165/4 it was 
stated that El Salvador also had a list of excluded products, this was not clear from the actual text of WT/REG165/M/1 
Page 4  
 
 the FTA.  She requested clarification on the goods El Salvador had excluded, if any;  and, for both 
countries, what percentage of bilateral trade th ese excluded products represented.  She requested 
further explanation on how the price band mechanis m worked.  Finally, and given her delegation's 
understanding that Chile had committed to eliminat e the price band mechanism as it related to the 
United States over a twelve-year transition period,  she wondered whether a similar amendment had 
been thought of with regards to El Salvador.  The representative of Chile
 confirmed that her country 
had excluded products which were subject to price bands, and El Salvador had excluded beef, chicken 
meat, pork, dairy products, some vegetables, rice, or anges, lemons, beer and some vehicles.  All these 
exclusions represented less than 3 per cent of bila teral trade.  She recalled that the price band 
mechanism had been brought before a Panel in th e WTO dispute settlement mechanism, following 
which Chile had modified the mechanism so as to  conform to the Panel's conclusions.  In the 
negotiations with the US, Chile had decided to provide 100 per cent tariff reduction for these products 
after the twelve year transition period, i.e. by 2014;  in practice that meant that on 1 January 2015 the price band mechanism would no longer apply to the US  given the tariff liberalization.  She noted that 
the US negotiations had come after those conducted with Central America, and for the moment her 
country had not considered modifying its agreements with Central America;  that issue might however 
arise in the context of the Administrative Commission's future meetings.   
12. The representative of the Colombia
 asked whether the Agreement included any provisions to 
liberalize excluded products.  The representative of Chile  replied that the provisions concerning 
acceleration and liberalization of products, which a pplied to both excluded products and those subject 
to any of the categories, could be discussed in the annual meetings of the Administrative Commission.  
While such an experience had not occurred in the c ontext of this Agreement, it had occurred in other 
agreements;  for example, in the Chile-Mexico FTA, the Commission had decided to accelerate the 
liberalization of certain products.  She highlighted that while the Agreement did not provide for the 
obligation to do so, it was in the spirit of these ag reements that all products under discussion could 
either be liberalized at a faster pace than that  provided for in the Agreement or move from being 
excluded into being subject to liberalization. Sh e reiterated, however, that the Agreement did not 
provide explicitly that 100 per cent of products would be liberalized. 
13. Referring to the table included in page 3 of WT/REG165/4, the representative of Korea  noted 
that staging categories A, B, C and D, which referr ed to the percentage of products for which tariff 
rates would be eliminated within ten years from the date of ratification of th e Agreement, amounted to 
exactly 95 per cent for both El Salvador and Chile.  In that context, he wondered whether this figure 
was a coincidence or was due to a pre-arrangement.  The representative of Chile  replied that this was 
merely a coincidence. 
14. The representative of th e European Communities  requested Chile to clarify the reasons for 
applying a 16-year transition period, and exclusi ons, for products on which there were no imports.  
The representative of Chile  replied that products subject of th e 16-year transition period were those 
considered sensitive;  she would however consult w ith her capital and provide a full reply in writing. 
C. GOODS ASPECTS - TRADE PROVISIONS  
15. The representative of the United States  indicated her delegation's interest in provisions 
concerning co-operation in customs administration regarding expediting and facilitating the flow of 
goods.  She asked what efforts had been taken up to  that date to implement these provisions.  Given 
the larger picture of DDA discussions on trade fac ilitation, and the concerns of certain developing 
countries regarding the perceived difficulties of impl ementing trade facilitation measures, the Parties' 
experience in implementing such provisions might be in structive in this regard .  The representative of 
Chile  replied that she would refer the question back  to her capital for a concrete reply regarding 
implementation, and that a reply would be submitted in writing.  More generally, she noted that both 
Parties had modernized their customs and saw trad e facilitation negotiations in a positive manner;  in  WT/REG165/M/1 
 Page 5 
 
 
 the context of their trade agreements, both countri es had reinforced trade facilitation measures as 
these helped growth and the facilitation of trade.   
16. The representative of Australia  asked whether safeguard provisions had been invoked.  She 
also asked what the significant differences were be tween the safeguards Chapter in the FTA and the 
WTO Agreement on Safeguards.  The representative of Chile  replied that bilateral safeguards had 
never been invoked;  they only applied during the tr ansition period, and up to the level of the MFN 
rate.  As regards the differences between the WTO safeguards and bilateral safeguards, these two 
mechanisms co-existed side-by-side;  while the Parties had reserved their rights to apply global 
safeguards under the WTO Agreement on Safeguards and GATT Article XIX, th e bilateral safeguard 
mechanism would only apply during the transition period.   
17. Referring to the statement made in the third paragraph under Section II.5 of WT/REG165/4, 
the representative of Japan  requested the Parties to confirm wh ether parallelism was ensured in this 
regard, i.e. whether the Party subject to investigatio n for injury determination was also subject to the 
application of the relevant safeguard measures.  The representative of Chile  confirmed that 
parallelism was applied.   
18. The Chairman  said that the first round of examination of the goods aspects of the Free Trade 
Agreement between the Chile and El Salvador had allowed the Committee to clarify some questions.  
However, a number of issues remained pending.  He asked delegations wishing to submit written 
questions to forward them to the Secretariat by  11 March 2005, and for the Parties to submit written 
replies by not later than 22 April 2005.   
19. The Committee took note  of the comments made. 
Services Aspects 
20. The Chairman  recalled that the decision to refer th is Agreement for examination to the CRTA 
had been taken on 25 March 2004 by the Council fo r Trade in Services, as contained in document 
S/C/M/72.  Pursuant to paragraph 7(a) of Article V of the GATS, the CRTA should examine the services aspects of the Free Trade Agreement between  Chile and El Salvador and report to the 
Council for Trade in Services on its consistency. 
D. 
SERVICES ASPECTS - BACKGROUND INFORMATION ON THE AGREEMENT  
21. The representative of the European Communities  noted the need to have a more detailed look 
at all the non-conforming measures and the investme nt agreement integrated into this Agreement 
before submitting any new questions to the Parties, but that for the time being he would request that 
certain aspects be clarified.  Given that in the presentation of the Agreement the Parties had indicated 
that financial services had been excluded but might be  included at a later date, he requested the Parties 
to provide information on the status of th ese negotiations.  The representative of the Japan  requested 
the Parties to provide an explanation of why this sect or was not included in the Agreement.  It was his 
delegation's belief that the financial sector was one of the critical sectors for accommodating the transactions related to international trade in goods as well as in services.  He would like to know how 
this sector would be dealt with in the future.  Fina lly, he requested that the questions posed by the 
representative of the EC be put in writing and circulated among Members. The representative of Chile
 
confirmed that financial services were excluded;  su ch exclusion could be explained in part because of 
the complexity of the negotiations involved.  While  financial services had been excluded in the first 
agreements concluded by Chile, because of Chile's sensitivity, that situati on had changed after the 
Agreement with Central America, and the agreem ents concluded with the United States and the 
European Communities did include financial servic es.  While her country might be more open to 
discuss its inclusion, this was, however, a ma tter for future discussion in the Administrative WT/REG165/M/1 
Page 6  
 
 Commission;  in any case, at that point in tim e there had been no commitment to negotiate the 
inclusion of financial services.   
22. The representative of th e European Communities
 requested that additional factual information 
be provided regarding an y progress achieved on the work programme for the development of an 
investment chapter, as established in Article 10.02.  The representative of Chile  replied that the FTA 
had incorporated the Agreements on the Promoti on and Reciprocal Protection of Investments;  
however, issues relating to access still needed furt her negotiations. She added that work had not 
started for developing an investment chapter;  sh e would check the reasons for that and provide a 
more precise answer later.   
23. The representative of the European Communities  noted that the definition of non-
discriminatory quantitative restrictions (QRs) in Ch apter 11 did not cover the same categories as in 
the GATS;  while that had no impact on the exam ination and consistency of the Agreement with 
GATS Article V, his delegation would be interested  in knowing the reasons for having done so.  He 
noted that this was of interest given that QRs in this Agreement referred only to the number of service 
providers and the operations of any service provi der, but did not include other non-discriminatory 
QRs listed in Article XVI of the GATS.  The representative of Chile  replied that the agreements 
signed by Chile were somewhat based on the NAFTA  model, while the GATS included a mix of both 
discriminatory and non-discriminatory QRs.  In  the former, all non-discriminatory QRs were 
incorporated in the Agreement, that is all non-discr iminatory QRs were listed in Annex 3;  in that 
sense, the Agreement's definition of QRs was not an exhaustive definition, as was the case in the 
GATS. 
E. SERVICES ASPECTS - PROVISIONS AFFECTING TRADE IN SERVICES  
24. The representative of the European Communities  noted that his delegation had some doubts 
regarding the way in which the Parties would achieve  mutual recognition;  in particular, it was not 
clear whether that would be attained through mu tual recognition agreements or the exchange of 
autonomous recognition made by professional associ ations, which, it would appear, had been 
delegated significant power.  He noted that such  clarification was being sought for information 
purposes and not vis-à-vis  the consistency examination, and wo uld be pursued in the regular sessions 
of the Council for Trade in Servic es.  The representative of Chile  replied that the Agreement did not 
include an obligation for the automatic recognition or  re-certification of qualifications and degrees of 
the other Party. 
25. The Chairman  said that the first round of examination of the services aspects of the Free 
Trade Agreement between Chile and El Salvador  had allowed the Committee to clarify some 
questions.  However, a number of issues remained pending.  He asked delega tions wishing to submit 
written questions to forward them to the Secretaria t by 11 March 2005, and for the Parties to submit 
written replies by not later than 22 April 2005. 
26. The Committee took note  of the comments made. 
__________