Proposal for a COUNCIL DECISION on the signature and provisional application of certain provisions of an Association Agreement between the European Community and its Member States, of the one part, and the Republic of Chile, of the other part

(presented by the Commission)

EXPLANATORY MEMORANDUM

1. The attached proposals constitute the legal instruments for the signature, provisional application and conclusion of an Association Agreement between the European Community and its Member States, of the one part, and the Republic of Chile, of the other part:

(i) Proposal for a Council Decision for the signature and provisional application of the Agreement;

(ii) Proposal for a Council Decision for the conclusion of the Agreement.

2. Chile's relations with the European Community are presently covered by the Co-operation Agreement signed on 21 June 1996 (entered into force 1 February 1999), as modified by subsequent protocols. The Council adopted its negotiating directives on 13 September 1999 and the Commission formally launched the negotiations for an Association Agreement in November 1999. At the fifth round, the EC and Chile exchanged their tariff offers and after that, negotiations progressed at a fast pace and were finally concluded at the end of the tenth round in April 2002. On the occasion of the second EU-Latin America and the Caribbean Summit in Madrid on 17 May 2002, Prime Minister Aznar, Chilean President Lagos and Commission President Prodi signed a joint declaration acknowledging the conclusion of the negotiations. The text of the Agreement was initialled by the negotiators of the Commission and the Government of Chile in Brussels on 10 June 2002.

The proposed Association Agreement will contribute to consolidate and strengthen the EU presence in Chile and more generally in the South Cone region, both in political and in trade terms. Furthermore, the proposed Agreement will promote economic growth and support sustainable development, to the benefit of both the EU and Chile.

3. The EU-Chile Association Agreement is similar in pattern to other association agreements but has no precedent in terms of wide-reaching coverage of the trade part. The Agreement will have an unlimited duration and will open the way to deepen relations in a wide number of fields, based on reciprocity and partnership. Respect for the principles of democracy, human rights and the rule of law, as well as the promotion of sustainable development constitute key principles on which the proposed Agreement is based.

4. The proposed Agreement consists of three main components which are political dialogue, co-operation and trade. It also includes general and institutional provisions to sustain those components.

(1) Political dialogue: the EU and Chile will pursue a regular political dialogue and strive to co-ordinate positions and undertake joint initiatives in international fora. They shall in particular co-operate in the fight against terrorism.

(2) Co-operation: the Agreement includes provisions in the area of economic co-operation, science, technologies and information society, culture, education and audio-visual, state reform and public administration and social co-operation. The Agreement also provides for commitments and co-operation in re-admission, in the control of illegal immigration, and in combating drugs and organised crime;

(3) Trade: an ambitious and innovative agreement, covering the following elements

- a free trade area in goods covering the following elements:

(1) the progressive and reciprocal liberalisation of trade in goods over a maximum transitional period of 10 years reaching a full liberalisation for 97,1% of bilateral trade, underpinned by strong and transparent rules. The rules of origin applicable are in line with the rules of origin set out in other preferential trade agreements;.

(2) rules that aim at facilitation of trade through, inter alia:

(i) an Agreement on Trade in Wines and on Trade in Spirits Drinks and Aromatised Drinks that will grant reciprocal protection to protected names and, in the case of wines, to reciprocally accepted oenological practices;

(ii) an Agreement on Sanitary and Phytosanitary Measures applicable to Trade in Animals and Animal Products, Plants, Plant Products and other Goods and Animal Welfare that will facilitate trade in animal, animal products and plants, whilst safeguarding public, animal and plant health and that establishes co-operation in developing animal welfare standards;

(iii) provisions in areas such as customs and related procedures, standards, technical regulations and conformity assessment procedures.

- A free trade area in services: the reciprocal liberalisation of trade in services in conformity with Article V GATS with a comprehensive sectoral coverage and a number of specific commitments largely beyond each side's GATS commitments

- liberalisation of investment: through the principles of national treatment and non-discrimination for establishment

- the reciprocal opening government procurement markets containing provisions which ensure the respect of principles such as national treatment, non-discrimination and transparency as well as a substantive set of procedural rules. The entities covered include central entities and sub-central entities as well as public undertakings.;

- the liberalisation of current payments and capital movements, in conformity with the engagements undertaken in the framework of the international financial institutions and with due consideration to each Party's currency stability.

- the adequate and effective protection of intellectual property rights, in accordance with the highest standards, through a listing of international conventions

- a mechanism for competition that foresees in the co-operation, consultation and exchange of non-confidential information between the competition authorities of both sides; and

- an automatic, fast and efficient dispute settlement mechanism which builds on existing and proposed WTO disciplines. The mechanism is designed to primarily avoid disputes by including a consultation system.

(4) Institutional and general provisions: the Agreement provides for the establishment of an Association Council to meet at ministerial level and to supervise the implementation of the Agreement. It shall be assisted in the performance of its duties by an Association Committee and by the Special Committees established in the Agreement. The Association Council shall inform the Association Parliamentary Committee established in the Agreement and representatives of the EU and Chile's civil societies on the implementation of the Agreement. It shall also be assisted by a joint consultative Committee composed of members of the European Economic and Social Committee and of the Chilean corresponding institution.

5. As regards the issue of financial responsibility for unrecovered, reimbursed or remitted import duties following administrative errors, the package agreed with Chile includes a joint declaration by which the EC and Chile agree to work within the framework of the proposed Agreement on the establishment of provisions in this regard.

6. The Commission is of the opinion that, based on existing practice and jurisprudence, the negotiated trade package should be considered compatible with the relevant WTO provisions. Full liberalisation of trade in goods will cover 97,1% of traditional bilateral trade, with, per sector, 100% full liberalisation of industrial trade, 80,9% of agricultural trade and 90,8% of fisheries trade. Article XXIV:8(b) of the GATT 1994 requires that duties and other restrictive regulations of commerce are eliminated on 'substantially all trade' between the parties. Although the exact definition of this term is still open, the established EC benchmark is that full liberalisation must cover at least 90% of trade. As this benchmark is met, and furthermore as no major sector of trade is excluded, these requirements can be considered to be met. Furthermore, liberalisation will be on a balanced basis and will be completed within the maximum transitional period of ten years permitted under Article XXIV:5 and Paragraph 3 of the Understanding on Article XXIV of the GATT 1994. Finally, nothing in the proposed Agreement requires the parties to raise the level of duties applicable to the trade of third Party Members of WTO, as required by Article XXIV:5(b) of the GATT 1994.

7. As for services, the Commission considers that the agreement is an economic integration agreement meeting the relevant tests of GATS Article V. Although certain services sub-sectors i.e. audio-visual, air transport (with the exception of aircraft repair, selling and marketing and CRS services) and maritime cabotage are explicitly excluded from the coverage, the agreement should still be considered to have "substantial sectoral coverage" in the sense of GATS Article V:1(a). In addition, as the agreement excludes no mode of supply a priori, provides for the elimination of substantially all existing discrimination in the covered sectors and includes a provision for a further liberalisation of services trade between the Parties, all requirements of GATS Article V:1 can be considered to be met. Furthermore, the Agreement will not lead to the raising of overall levels of barriers to the trade in services of non-parties Members of the WTO in the covered sectors and sub-sectors and equality of treatment of the service suppliers of other WTO Members established within the territory of any of the parties to the Agreement will not be affected, as required by as required by GATS Article V:4 and GATS V:6 respectively.

8. At the request of the Chilean authorities, there shall be no Interim Agreement to be simultaneously proposed by the Commission to the Council for a Decision. Instead, pending the entry into force of the Agreement, the European Community and Chile have agreed on the provisional application of certain provisions of the Agreement, mainly related to trade, co-operation and the institutional framework, as mentioned in Article 2 of the Council decision on the signature of the Agreement.

9. The Commission has judged the results of the negotiations to be satisfactory, and the Commission requests the Council:

- to authorise the signature, on behalf of the European Community, of the Association Agreement between the Community and Chile;

- to approve the provisional application of certain provisions of the Association Agreement pending its entry into force;

- to conclude the Association Agreement with the Republic of Chile on behalf of the Community.

The European Parliament will be called upon to give its assent to this accord.

The Member States are also parties to the Agreement, which therefore needs to be approved by them according to their internal procedures.

Proposal for a COUNCIL DECISION on the signature and provisional application of certain provisions of an Association Agreement between the European Community and its Member States, of the one part, and the Republic of Chile, of the other part

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Article 310 thereof in conjunction with Article 300 (2), first paragraph, first and second sentence;

Having regard to the proposal from the Commission [1],

[1] OJ C [...] , [...], p. [...]

Whereas:

(1) On 13 September 1999 the Council authorised the Commission to open negotiations for an Association Agreement between the European Community and its Member States, of the one part, and the Republic of Chile, of the other part;

(2) These negotiations have been concluded and the Agreement was initialled on 10 June 2002;

(3) The European Community and the Republic of Chile have undertaken to apply provisionally certain provisions of the Agreement pending its entry into force;

(4) The Association Agreement should be signed on behalf of the Community and the provisional application of certain of its provisions should be approved.

HAS DECIDED AS FOLLOWS:

Article 1

1. The President of the Council is hereby authorised to designate the person(s) empowered to sign, on behalf of the European Community, the Association Agreement between the European Community and its Member States, of the one part, and the Republic of Chile of the other part, together with the annexes and protocols attached thereto, and the declarations made by the European Community unilaterally or jointly with the other Party that are attached to the Final Act.

2. The text of the Agreement, annexes, protocols and the Final Act is attached to this decision.

Article 2

The following provisions of the Agreement shall be applied on a provisional basis pending its entry into force: Articles 3 to 11, Article 18, Articles 24 to 27, Articles 48 to 54, Article 55 (a), (b), (f), (h), (i), Article 56 to 93, Articles 136 to 162, and Articles 172 to 206.

Article 3

The President of the Council shall give the notification provided for in Article 198(3) of the Agreement on behalf of the European Community.

Article 4

1. The position to be taken by the Community within the Association Council and the Association Committee established by the Agreement shall be adopted by the Council, on a proposal from the Commission, in accordance with the corresponding provisions of the Treaty.

2. A representative of the Council shall preside over the Association Council and present the position of the Community. A representative of the Commission shall preside over the Association Committee and present the position of the Community.

3. The Community shall be represented by the Commission in the Special Committees established by the Agreement or set up by the Association Council in accordance with Article 7.

Article 5

1. For the purpose of applying Article 29(2) of Annex V of the Agreement the Commission is hereby authorised, in accordance with the procedure laid down in Article 75 of Regulation (EC) No 1493/1999, to conclude the instruments required to amend the Agreements.

2. For the purpose of applying Article 16(2) of Annex VI of the Agreement the Commission is hereby authorised, in accordance with the procedure laid down in Article 15 of Regulation (EC) No 1576/89, to conclude the instruments required to amend the Agreement.

Done at Brussels, [...]

For the Council

The President