WORLD TRADE  
ORGANIZATION  WT/COMTD/RTA/4/3 
26 July 2010 
 (10-3985) 
Committee on Trade and Development 
Dedicated Session on Regional Trade Agreements Original:   English 
 
 
 
PREFERENTIAL TRADE AGREEMENT BETWEEN CHILE AND INDIA (GOODS) 
 
Questions and Replies  
 
 
 The following communication, dated 20 July 2010, is being circulated at the request of the delegations of Chile and India.   This document reproduces the follow-up
 questions addressed to Chile and India following the 
Committee on Trade and Development's 4th Dedicated Session on Regional Trade Agreements, and 
the responses submitted.  
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 Follow-up questions from the delegation of the European Union
 
 
1. Paragraph 3(a) of the Enabling Clause states that any differential and more favourable 
treatment provided under this clause shall be desi gned to promote and facilitate trade, and not 
to raise barriers to or create undue difficulties for the trade of any other contracting Parties.  
Therefore, could the Parties explain how this Ag reement can promote the expansion of trade if 
the preferential margins granted to each other are insignificant and the lion's share of tariff 
lines are not covered by this Agreement?  Given the marginal coverage of this Agreement, and 
the fact that it does not offer conditions favouri ng the promotion or the diversification of the 
existing bilateral trade, aren't these suffici ent factors to create "undue difficulties" in 
facilitating and expanding bilateral trade?  If the Parties were not ready to grant each other 
substantial preferences and reciprocally liberalize their trade, why did the Parties engage into 
this Agreement? 
 
2. On a general note, and given the fact that both Chile and India are strong economies, 
and major traders, and that they have substa ntial experience in negotiating bilateral 
agreements- notably Chile, who has a large number of FTAs in place – could the Parties explain 
why they considered necessary to negotiate first a very limited trade arrangements as a first 
step to a real FTA? 
 
3. On notifications obligations (Section E.7), we note that both Chile and India have a 
number of outstanding notifications.  Could Chile  and India indicate the expected timeframe for 
submitting the outstanding notifications? 
 
Follow-up questions from the delegation of the United States  
 
4. We appreciate the Parties' attempt to answer our question concerning whether the 
Agreement satisfies the conditions of paragraph 3( a) of the Enabling Clause, however, we do not 
find all of the Parties' answers responsive.  Specifically, our understanding from the Factual WT/COMTD/RTA/4/3 
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  Presentation is that 100 per cent of Chile's top 25 exports and 100 per cent of India's top 25 
exports remain dutiable under th e Agreement.  Therefore, duties on those goods that are the 
most highly traded between the Parties are not eliminated under the Agreement.  We recall that 
paragraph 3(a) of the Enabling Clause states that " Any differential and more favourable treatment 
provided under this clause: shall be designed to  facilitate and promote the trade of developing 
countries and not to raise barriers to or create  undue difficulties for the trade of any other 
contracting parties ;"  If the duties on those goods that are the most highly traded between the 
Parties are not eliminated, we do not see how the treatment provided under the Agreement facilitates or promotes the trade of developing countries in any real sense. 
 
(i) We again request that the Parties please clarify precisely what economic benefits 
either Party accrues from this Agreement when very few tariffs are eliminated and, among the tariffs that are reduced, the difference between the MFN tariff and the preferential tariff is so little in many cases. 
 
5. Given the past review of the US-Chile FTA in  the CRTA, we would like to note some of 
the economic benefits that have accrued to Chile from full liberalization of its tariffs.  In 2007, 
bilateral trade between the United States an d Chile reached $17.3 billion, a 170 per cent 
increase over bilateral trade levels before the US-C hile FTA took effect on 1 January 2004.  
Further, US imports from Chile grew from $3.71 billion in 2003 to $9.0 billion in 2007, an 
increase of 143 per cent.  We also note that in  the CRTA's recent review of the Australia-Chile 
FTA, these countries eliminated tariffs on 100 per cent of tariff lines.  Given the proven 
economic benefits that have accrued to Chile fr om the full liberalization of trade under its other 
RTAs and its willingness to enter into RTAs that "facilitate and promote" trade, we continue to 
be puzzled by both Chile's and India's apparent lack of trade liberalization under the current RTA being reviewed today.  We do not agree with the Parties' conclusion in its response that the 
Agreement "satisfies the conditions of 3(a)" partic ularly to facilitate and promote trade, when 
tariffs are not meaningfully reduced or eliminated  on the top 25 exports from either Party.  The 
Parties have not attempted in their repl y to provide evidence to the contrary. 
 
(i) To resolve this, we look forward to  the Parties providing further written 
information on how the Agreement facilitates and promotes trade -- given what 
can only be described as the disappointingly low level of tariff elimination or 
reduction under this Agreement. 
 
6. We appreciate the Parties' response that indica tes that the Parties are "in the process of 
deepening and widening the concessions" under this Agreement. 
 
(i)
  Given this information, will the Parties make a future notification of this 
Agreement under Article XXIV? 
 
Response from Chile and India  
 
 The Framework Agreement, signed in 200 5 between India and Chile, envisages the 
conclusion of a partial scope Preferential Trading Agreement (PTA) as a first step aimed at increasing 
bilateral trade and to create a conducive enviro nment to negotiate a Free Trade Agreement.  
Therefore, the concessions offered by Chile and In dia to each other under the PTA are limited since 
the Agreement is only a stepping stone towards the expansion of future bilateral economic 
engagement. 
  After implementation of the PTA in 2007, the percentage of total bilateral trade under the 
PTA during 2007-08 and 2008-09 was 87.40 per cent and 77.48 per cent respectively.  This  WT/COMTD/RTA/4/3 
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  demonstrates that a significant amount of bilatera l trade between the two sides took place under the 
aegis of the PTA.   In 2007-08, out of the top 25 bilaterally traded items, 10 Chilean items and 12 Indian items were covered by the PTA.  Likewise, in 2008-09, 8 Ch ilean items and 11 Indian items of India- Chile 
PTA figured in the top 25 traded items.  In these top 25 traded items, percentage share of Chilean 
items under the PTA was 93.46 per cent (in 2007-08 ) and 93.49 per cent (in 2008-09) respectively.  
Over the same period, percentage share of Indian items under the PTA was 26.82 per cent  
(in 2007-08) and 19.92 per cent (in 2008-09) respectively.  This shows that the top 25 traded items of the two sides were covered in the PTA in 2007-08 and 2008-09. 
 
 It is mentioned that the reference to paragra ph 3(a) of the Enabling Clause has to be made to 
the entire phrase and not to a portion of it.  The PTA is fully compliant with Article 3(a) of the 
Enabling Clause.  The PTA is "designed to facilita te and promote the trade of developing countries 
and not to raise barriers to or create undue difficulties for the trade of any other contracting Parties".  
Furthermore, there is no requirement under the Enabling Clause for agreements negotiated by 
developing countries to cover "subs tantially all the trade", as is the case of Article XXIV of GATT. 
  The PTA envisages that both parties periodica lly review the progress of the implementation 
of the Agreement to ensure the benefits of trade e xpansion.  Accordingly, to gain optimal results and 
benefits from the PTA, the process of deepen ing and widening the Agreement has already 
commenced.  Request lists have been exchanged and negotiations are underway. 
  With regard to outstanding notifications, it is mentioned that the India-MERCOSUR and 
India-Afghanistan PTA have already been notified.   For other pending notifications, work is in 
progress. 
 
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