RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/REG160/M/1 
14 March 2005 
 
 (05-1076) 
Committee on Regional Trade Agreements 
Thirty-Ninth Session  
 
 
 
EXAMINATION OF THE FREE TRADE AGREEMENT BETWEEN  
THE UNITED STATES AND CHILE, 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 Free Trade Agreement (FTA) betw een the United States and Chile.  The following 
topics were discussed: 
 A. General Remarks 
Goods aspects
: 
 B. Background Information on the Agreement 
 C. Trade Provisions  D. General Provisions of the Agreement   Services aspects
: 
 E. Background Information on the Agreement 
 F. 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 FTA between the United Stat es and Chile.  The Agreement had been signed on 
6 June 2003 and had entered into force on 1 Janua ry 2004;  it had been notified to the WTO on 19 
December 2003, as document with double symbol WT/REG160/N/1 – S/C/N/262.  The text of the 
Agreement appeared in document WT/REG160/1.  He pr oposed to organize the examination by first 
asking the Parties and other Members for general comme nts, and then to turn to the specifics of the 
Agreement looking first at the goods aspects, fo llowed by the services aspects, using the respective 
Standard Formats, namely WT/REG160/3 and WT/REG160/4, to guide the debate. 
A. GENERAL REMARKS  
4. The representative of the United States  stated that the Agreement that had been signed by 
Chile and the United States (US) in 2003 was the product of extensive US-Chilean collaboration in 
economic relations.  It was a partnership for gr owth and for creating economic opportunities between 
the two countries.  It would serve the interests of  workers and consumers in both countries.  Since 
implementation of the Agreement on 1 January 2004 , imports from the US to Chile had increased 
from USD2.5 billion to USD3 billion and US impor ts from Chile had increased from USD3.7 billion 
to USD4.5 billion.  The high standards of the US -Chile FTA were indicative of the two countries' WT/REG160/M/1 
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 commitment to economic liberalization and openness.   The Agreement was fully consistent with the 
Parties' WTO obligations and built upon their co mmitments under the WTO.  She then highlighted 
some of the Agreement's key provisions.  The Agreem ent included coverage of substantially all trade 
in industrial goods and agricultural products and substantial sectoral coverage in services.  It 
incorporated TRIPs-consistent standards for copyright protection, provided for important 
liberalization in information technology and co ntained trade-related e nvironmental and labor 
provisions.  Customs duties on all goods originating in  either Party would be eliminated within 12 
years.  More than 85 per cent of two-way trade in industrial and consumer products had become duty-
free immediately, with most remaining duties eliminat ed within four years.  More generally, over 90 
per cent of the total amount of trade between the US and Chile would be liberalized within a period of 
four years following entry into force of the Agreem ent.  Nearly 87 per cent of US exports were 
provided immediate access to the Chilean market, and the United States had provided immediate 
market access on about 94 per cent of US tariff lin es, covering nearly 80 per cent of Chilean exports. 
The United States and Chile had agreed on 16 diff erent staging categories to eliminate tariffs on 
goods, including the over-quota tariffs for all pref erential tariff-rate quotas (TRQs).  On rules of 
origin, the Agreement established clear and predicta ble criteria for determining the eligibility of a 
good for preferential treatment.  These criteria were based on the principle of substantial 
transformation and also included comprehensive produc t-specific rules of origin for all agricultural, 
textiles and apparel, and industrial goods.  The Ag reement also contained a series of provisions and 
formulae to help enterprises determine the origin  of the goods they produced, including regional value 
content, accumulation and de minimis  rules.  Textiles and apparel were duty-free immediately and 
limited yearly amounts of textiles and apparel c ontaining non-US or non-Chilean yarns, fibers or 
fabrics might also qualify for duty-free treatment.  Li mited yearly amounts did not originate in either 
Party and therefore were not subject to full liberalization.   
5. The representative of the United States
 continued by saying that US-Chile FTA had 
substantial services sectoral coverage and provided fo r the absence, or elimination of substantially all 
discrimination.  This was a "negative list" agreemen t, which meant that all sectors were liberalized 
unless a Party took a specific reservation, or "non-conforming measure", in the Agreement.  The Agreement covered the four modes of services deliver y established in Article I.2 of the GATS.  The 
chapter on cross-border trade in services encompasse d cross-border supply, consumption abroad and 
presence of natural persons, and the chapter on investment covered rights for investors in 
manufacturing and services, including commercial presence.  The Agreement also had chapters 
specifically addressing financial services and telecommunications.  The Agreement included a 
bilateral safeguard procedure to aid domestic industri es that sustained or were threatened with serious 
injury due to increased imports resulting from th e phase-out of import duties under the Agreement. 
The Agreement also included a special safeguard to  address the possibility that duty elimination under 
the Agreement could result in damaging levels of te xtile or apparel imports.  The intellectual property 
rights provisions of the Agreement clarified and bu ilt on existing international standards, with an 
emphasis on new and emerging technologies. The Agre ement included state-of-the-art protection for 
trademarks and copyrights, as well as expanded prot ection for patents and undisclosed information. 
The Agreement also called for strong enforcement m echanisms.  With respect to "digital products", 
the FTA included ground-breaking rules prohibiting duties on and discrimination against digitally-encoded products transmitted over the Internet, including computer programs, video, images, and 
sound recordings.  For software and other digital products that were physically traded, the Parties 
agreed to apply customs duties on the basis of the va lue of the carrier medium – e.g., a CD or other 
product.  The Agreement also contained trade-rela ted labor and environmental provisions.  Chile and 
the US had affirmed the importance of not waiv ing or derogating from their domestic labor and 
environmental laws in order to encourage trade or  investment.  The two countries also had committed 
to not fail to effectively enforce their domestic  labor and environmenta l laws.  Both Parties 
recognized that cooperation enhanced opportuniti es for promoting the respect of labour and 
environmental standards and would engage in speci fic cooperative projects set out in Annexes to the 
Agreement.  The Agreement's strong dispute settlement  rules provided equivalent remedies to enforce  WT/REG160/M/1 
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 panel decisions under the Agreement, regardl ess of whether they addressed the Agreement's 
commercial, labour or environmental provisions.  The Parties hoped this information would give 
Members a greater understanding of the terms of this  Agreement and would be pleased to answer any 
questions Members might have. 
6. The representative of Chile  stated that there was no doubt that the FTA between Chile and the 
US was a major Agreement in terms of market access  in goods.  Furthermore, it afforded an additional 
gain in certainty for their exporters, who, since the signing of this Agreement, did not have to depend 
on the GSP preferences granted unilaterally to Chile by the US.  As evidenced by the earlier 
presentation, the coverage of this Agreement we nt beyond goods to include services, investment, 
government procurement and improvements in customs administration, inter alia .  More importantly, 
however, and worthy of special mention were the im provements at the institutional level.  The Parties 
had made a series of commitments on transparency and public participation in the different areas of 
the Agreement and this enabled citizens to become  involved in the various implementation processes, 
thereby strengthening g overnance and accountability, that is democracy.  
Goods Aspects 
7. The Chairman  recalled the terms of reference for the examination of the goods aspects of the 
Agreement that had been adopted on 26 January 2 004 by the Council for Trade in Goods, and were  
contained in document WT/REG160/2. 
B. GOODS ASPECTS - BACKGROUND INFORMATION ON THE AGREEMENT  
8. The representative of Japan  referred to the point made under Section I.3 of document 
WT/REG160/3, which stated "More generally, over 90 per cent of the total amount of trade between 
the United States and Chile will be liberalized within  a period of four years following entry into force 
of the Agreement."  Noting that the 90 per cent figure included trade covered by tariff reduction 
commitments and by preferential TRQs, he recalle d that Article XXIV:8 of the GATT 1994 used the 
term "eliminate" for consideration of an RTA's consistency with the WTO Agreement.  Noting that in 
previous discussions some Members had argued th at in evaluating the product coverage, only the 
trade subject to tariff elimination within ten years w ould be included - rather than also considering the 
trade subject to reduction -  he would be interested in having the Parties' views on this question.  The 
representative of the United States  replied that the tables included in page 2 of WT/REG160/3 
provided a reply:  Table A indicated that in the initial four years of operation, duties would be eliminated on just over 78 per cent of imports from Ch ile based on 2003 trade data;  adding to that the 
13.9 per cent of total imports that would enter both duty-free and quota-free in the first four years of 
operation, as shown in Table B, it was clear that there would be no duties or quotas on 92 per cent of 
trade under the terms of this Agreement.  Therefore,  there was no trade subject to reduction in the first 
four years included in the 90 per cent of trade cited in the text.  As it could also be seen in the Tables, 
beginning in year 12, every tariff line would be duty-free and quota-free. 
9. The representative of th e European Communities
 (EC) indicated that calculations tended to 
indicate that after ten years the US would have comp letely liberalized 97.6 per cent of the tariff lines 
and 94 per cent of trade, with the equivalent figur es of 97.3 and 98.3 per cent, respectively, for Chile. 
He also noted that the FTA provided for a twelve-y ear-transition period for both Parties and that 6 per 
cent of the US imports of Chilean goods, equivale nt to approximately USD 235 million, would only 
be liberalized by the US twelve years after the en try into force of the FTA;  that amounted to more 
than three times the flexibility provided for Chile in  terms of percentage of trade and 5.5 times or 
more in terms of  value of imports.  Given these calculations, he requested in particular the United 
States to explain the reasons for making use of the possibility under the WTO rules to go beyond a 10 
year transition period "only in exceptional cases".  His delegation would be interested in knowing 
exactly what these exceptional cases were for the US  for the products that fell under the bulk of USD WT/REG160/M/1 
Page 4  
 
 235 million.  Finally, he would like to know why th e Parties considered th at these "circumstances" 
warranted greater flexibility on the part of the US th an on the part of Chile.  The representative of the 
United States
 replied that the reason for the twelve-year transition period was the commitment to 
cover every tariff line and eliminate every tariff and TRQ on all trade between the US and Chile.   
10. The representative of Australia  asked what had been the fill rates since implementation of the 
TRQs;  whether these had increased in line with the increases specified in the text of the Agreement;  
whether these preferential TRQs had impacted on third parties;  and whether there was a process for reallocation of unused quotas.  The representative of the United States
 indicated that she would look 
for the information and reply later.  
C. GOODS ASPECTS - TRADE -RELATED PROVISIONS  
11. Referring to the statement made in Section II. 1.1 of WT/REG160/3, which was of concern for 
his delegation, the representative of the European Communities  welcomed the US move to eliminate 
its merchandise processing fee which had long da maged not only EC's exporters but also other 
countries';  he noted however that this benefit w ould only be used by Chilean producers.  For his 
delegation, that raised additional concerns with the existing MFN regi me, due to its added element of 
discriminatory treatment.  His delegation would lik e to know in what way the US considered the 
elimination of the merchandise fees for Chilean produc ts to fulfil the requirements in GATT Article 
XXIV with respect to neutrality, in particular that  other regulations of co mmerce should not be higher 
or more trade restrictive, and the broader ques tion of derogation from various GATT Articles.  The 
representative of the United States  replied that, as far as the requirements of Article XXIV were 
concerned, the Parties had not raised the level of barriers vis-à-vis  third parties under the terms of this 
Agreement by any actions in the Agreement.   
12. Regarding rules of origin, the repr esentative of the European Communities  asked what was 
the purpose and reason of Article 3.9 concerning goods re -entered after repair or alteration.  Referring 
to the language in Article 4.1.1(a) and (c), he requ ested the Parties to clarify the definition of certain 
aspects of the Agreement, and in particular the di fferences that existed betw een the definition of (a) 
and (c).  The representative of the United States  indicated that replies would be submitted in writing.  
13. The representative of Australia  asked whether safeguard provisions had been invoked.  She 
also asked what were the significant differences be tween the safeguard provisions in the FTA and the 
WTO Agreement on Safeguards.  Also regarding safeguards, the representative of Switzerland  
requested the Parties to provide a definition of "rel ative to domestic production".  With respect to the 
first question, the representative of Chile  replied that the bilateral mech anism had never been invoked;  
this mechanism aimed at protecting domestic indus tries that might have been injured during the 
transition period, that is until tariffs reached zero , through a mechanism of  price bands. The Parties 
would provide a detailed answer in writing, since this mechanism was distinct from other bilateral 
safeguard mechanisms that Chile had in the contex t of other RTAs.  She stressed that the mechanism 
could only be applied during the transition period and be invoked if a domestic industry in one of the 
Parties was injured following the trade liberalization of the relevant product;  it was  different from 
other mechanisms in that the measure was global and would be applied without any MFN 
discrimination, consistently with WTO rules.  With  respect to the second ques tion, she requested that 
the question be put in writing. 
14. With respect to Section II.8, the repr esentative of the European Communities  noted that he 
had some questions concerning the Agreement's specific safeguard measures for agriculture and 
textiles and how those related to the general bilate ral emergency actions.  First, he requested the 
Parties to describe in more detail how the stringenc y of requirements of applying these safeguards for 
general bilateral, agricultural and te xtiles compared.  Second, whether th ere was an injury test for the  
application of agriculture safeguards.  Third,  and al so regarding agriculture safeguards, he noted that    WT/REG160/M/1 
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 the Annex listed 52 items for the US and 15 for Chile ;  he would like to know the reasons for that 
asymmetry.  Fourth, taking into account the Annex re ferred to in the latter question, he asked how 
much of total trade between the Parties, specially ag ricultural trade, was subject to safeguards.  Fifth, 
why did the Parties consider that there was a need for a specific verification procedure of origin for 
textiles, if compared to the rul es of origin Chapter as a whole.  He also noted that more detailed 
questions would be submitted in writing.  Concerning question five , the representative of the United 
States  replied that her country always had that type of provision on textiles rules of origin, under anti-
circumvention measures.  Regarding how the agricu lture safeguard mechanism worked, she said that 
US and Chile used a tariff snap-back mechanism to  protect against unusually low import prices during 
the transition period, that is until the tariffs reached zero;  after twelve years, or once the tariff reached 
zero, that particular safeguard would cease to exis t.  The mechanism allowed for the possibility of 
adding duties to the preferential tariff, but it never we nt above the MFN rate existing at the time.  The 
actual amount of the additional charge depended on the relation between the import price of an item 
and the trigger price that was set out in the Agreem ent;  the lower the import price relative to the 
trigger price, the higher would be the duty added.   The maximum total import charge that was allowed 
would only raise the duty to existing MFN rates.  The trigger price was based on historic import prices 
based on actual trade values.  Regarding the third question, that was part of the negotiations and 
certainly did not affect the overall coverage of the Agreement.  She noted that upon receipt of written 
questions, the Parties would provid e more information in writing. 
15. The representative of Australia  asked whether the agricultural safeguard mechanism had been 
invoked and on what products.  She asked how the additional import charges were determined, in 
particular whether it was the difference between the unit import price and the trigger-price or 
something else.  The representative of the United States  replied that the agricultural safeguard 
mechanism had not been invoked so far.  The re ply to the second question would be submitted in 
writing.  The representative of Malaysia  requested the US to provide that oral reply given in writing. 
16. Noting the reply according to which the trigge r price was built on historic import prices, 
which presumably would end up as an average, th e representative of the European Communities  
asked whether the Parties had built a buffer between  the trigger price average and the historical 
average or whether the historical average was si mply used.  The representative of the United States  
indicated that a reply would be submitted in writing. 
17.  The representative of Korea  commended the Parties of the Agreement for the high degree of 
liberalization as well as its broad coverage, enco mpassing government procurement and intellectual 
property rights (IPRs), areas for which the WTO Ag reements did not provide an exception for RTAs 
like GATT Article XXIV and GATS Article V.  While his delegation had not yet thoroughly 
examined the Agreement, he had already some questi ons to pose.  First, whether this bilateral FTA 
had any WTO-plus element that was a TRIPs-plus el ement.  Second, if there was such preferential 
treatment, would the Parties extend the treatme nt to other WTO Members under the TRIPs MFN 
principle.  Noting that the obligation contained in paragraph 5 of Article 17.1 only concerned the 
rights and obligations of the  Parties to the FTA, he asked whether there was any understanding or 
result of discussions during the negotiations betwee n the Parties regarding the rights and obligations 
of other WTO Members.  That was a systemic  problem in the WTO and it would be greatly 
appreciated if the Parties could indicate their view on the issue.  Given the technical nature of the 
question, the representative of the United States  indicated that replies would be submitted in writing. 
D. GOODS ASPECTS - GENERAL PROVISIONS OF THE AGREEMENT  
18.   The representative of the European Communities  highlighted that his delegation would 
submit a number of written questions regarding disp ute settlement procedures.  While this issue was 
not an issue where the Committee measured complian ce with WTO rules, his delegation would like to WT/REG160/M/1 
Page 6  
 
 take this opportunity, unless the Pa rties strongly objected to it, to get some information on how this 
ambitious and strong dispute settlement mechanism worked.   
19. The Chairman
 said that the first round of examination of the goods aspects of the Free Trade 
Agreement between the United States and Chile had a llowed 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.   
20. The representative of the United States  indicated that the Parties' ability to reply to the 
questions by the set deadline would depend on th e volume of written questions submitted, and she 
asked the Chairman to be indulgent with respect to the deadline.  Noting the importance of making 
efforts to abide by the work calendar, both to  the Secretariat and the Committee, the Chairman  
indicated however that he had ta ken note of the point made.   
21. The Committee took note  of the comments made. 
Services Aspects 
22. 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 FTA between the United St ates and Chile and report to the Council for Trade 
in Services on its consistency. 
E. 
SERVICES ASPECTS - BACKGROUND INFORMATION ON THE AGREEMENT  
23. The representative of the European Communities  noted the need to have a more detailed look 
at all the non-conforming measures listed in the Annexes before reaching a conclusion on the scope 
and elimination of discriminatory restrictions.  Once that assessment had been completed, written questions might be submitted.  Referring to the general question about "exc lusion" of sub-federal 
structures from the Agreement, he noted that this represented a danger of legal uncertainty  because if 
competence was devolved to the lower levels, then automatically everything could be excluded from 
the Agreement from one day to the other.  In that respect, he noted that the Parties might be in a 
position to provide information to indicate that this  was not the case, in particular that the internal 
division of competence between the federal, local and sub-federal government  would not change, at 
least with regards to the application of the Agr eement.  Noting that the Agreement was based on a 
negative-list approach, and that at least one of  its Parties had excluded local and sub-federal 
governments, another question might be whether th e Parties could provide a positive list of what 
discrimination all WTO Members faced according to  the GATS, but that was no longer faced by 
Chile.  Assessment might also be needed of the im plications of the specific non-conforming measures 
on mode 4 for GATS commitments vis-à-vis  other WTO Members.  The representative of the United 
States  noted that it appeared that the Standard Form at had provoked some questions from the part of 
delegations and that the Parties were looking forward to receiving comprehensive questions.  
24. While noting that the Agreement was based on a negative-list approach, the representative of 
Japan  asked whether there was any particular sector in  which the level of the Parties' commitments 
under this Agreement was lower than the level of  commitments made under the GATS.  Replying to 
that, the representative of Chile  said that this was not the case, as all commitments made by both the 
US and Chile went further than the GATS.  WT/REG160/M/1 
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 F. SERVICES ASPECTS - PROVISIONS AFFECTING TRADE IN SERVICES  
25. Noting that in Section II.1 of WT/REG160/4 it was stated that each Party maintained a 
limited schedule of "non-conforming measu res", the representative of the Australia  asked what the 
Parties' intentions were with respect to the liber alisation of these non-conforming measures.  Replying 
to that, the representative of Chile  said that, as in all such Agreemen ts, the idea was that the Parties 
would annually review them to assess the possibilit y of further liberalization.  While there was no 
specific commitment to do so in the Agreement, th e Agreement included a "ratcheting" concept, that 
is once one of the Parties liberalized measures list ed in Annexes 1, such level of openness would be 
automatically bound for the bilateral trade between both Parties.   
26. Referring to the statement made under Secti on II.5 of WT/REG160/4, the representative of 
the Australia  requested the Parties to give examples of activities or services not provided under a 
situation of competition.  The representative of the United States  indicated that a reply would be 
provided in writing. 
27. The Chairman  said that the first round of examination of the services aspects of the Free 
Trade Agreement between the United States and Ch ile 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. 
28. The Committee took note  of the comments made. 
__________