RESTRICTEDWORLD TRADE
ORGANIZATIONWT/REG38/M/2
14 July 1998
(98-2774)
Committee on Regional Trade Agreements
Eighteenth Session
EXAMINATION OF THE FREE TRADE AGREEMENT
BETWEEN CANADA AND CHILE
Note on the Meeting of 7 July 1998
Chairman:  Mr. Claude Bouah-Kamon (Côte d'Ivoire)
1. Under Agenda Item D.I of its Eighteenth Session, as found in Airgram WTO/AIR/871, the
Committee on Regional Trade Agreements (CRTA) took up the examination of the Free TradeAgreement between Canada and Chile.  The following topics were discussed:
A. General Statements
B. Trade Provisions
- Scope- Rules of Origin
- Safeguards
A. General Statements
2. The Chairman said that this was the second round of examination of the Canada-Chile Free
Trade Agreement (CCFTA).  Summary records of the first round of examination, held during the
Committee's Seventeenth session in May, had b een circulated as document WT/REG38/M/1. A
number of supplementary  questions had been  submitted in writing, but  the Parties had not yet been
able to respond to them.  However, he asked the Parties to highlight the main aspects of the questions
and answers and invited delegations to make comments of a general nature.
3. The representative of Canada regretted the fact that it had not been possible to provide the
answers to the questions submitted at the last mee ting.  The Parties would be in a position to submit
these replies shortly, in a matter of days rather than weeks.  Perhaps the best approach would be to
revert to substantive discussion in the September meeting. His delegation had received a dozen
questions dealing essentially with the coverage of  the Agreement and with the treatment extended to
certain products, in particular, dairy, poultry and eggs, which were not subject to tariff elimination.
Other questions had dealt with dispute settlement pr ocedures.  He was of the view that it would be
preferable to have the full replies before commenting on them, but he asked  Members if there were
any points which needed to be clarified from the summary records of the last meeting.
B. Trade Provisions
4. The representative of Japan said he had some questions on rules of origin and safeguards.
Concerning rules of origin, his delegation had submitted several detailed written questions, includingWT/REG38/M/2
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whether the Parties had raised local content ratios.  He wondered whether either Chile or Canada had
local content requirements to confer origin in order to export duty-free from Canada to Chile or vice-
versa.  He had given an example of this which related to the computer industry in the meeting on
systemic issues the day before.  He wondered if the rules of origin in the CCFTA might have an
impact on third-countries' trade into either Chile or Canada.
5. The representative of Canada asked the Japanese representative to submit the question in
writing, as he was not sure he understood the nature of it. Rules of origin, by definition, included
some degree of local content.  The purpose of rules of origin was to enable the granting of
preferential treatment to products manufactured or originating in one of the Parties to the Agreement.
Most of the rules of origin in the CCFTA operated on the basis of a change in tariff classification.
When an import under one tariff heading was re-exported under a different tariff heading, and
therefore as a different product, the transformation through the change in  tariff classification becamesufficient to confer origin and the particular prod uct was therefore entitled to preferential treatment.
This was a general response on the operation of the rules of origin in the Agreement; questions in
writing would be appreciated.
6. The representative of Japan said that his delegation would provide written questions.  He
asked if the Parties would consider the following example of exports from Chile to Canada.  Prior to
the formation of the free-trade area, a company in Chile could import raw material or parts from any
source in the world and assemble it into a final product, thereby changing its tariff classification.  He
wondered if, after the formation of the free-trade area, there was a requirement that the raw material
or parts be sourced within the free-trade area in order that the final product could be exported duty-
free into the other Party.  He had also asked if th e Parties had raised their local content ratios.  For
example, had the Parties put in place new rules of origin with local content or value-added
requirements which had not existed prior to the formation of the free-trade area?
7. The representative of Canada replied that since rules of origin were a technical issue which
should be referred to experts, he would comment only briefly.  As mentioned in the last meeting, prior
to entry into force of the Agreement the trade be tween the Parties had been  governed by the MFN
principle and  there had been no need for rules of origin applicable to their bilateral trade. Perhaps the
only exception would have been the rules of origin used under the Generalized System of
Preferences (GSP), but this was different in nature to the Article XXIV Agreement which was in
existence between Canada and Chile.
8. The representative of Australia asked for clarification regarding the treatment of Chile's wheat
imports from Canada (paragraphs 16 and 21 of document WT/REG/38/M/1), given that on re-reading
the summary records it was not clear precisely what the situation was.  Although he would provide hisquestion in writing, he thought that it might be useful to point out that there appeared to be some
ambiguity in the responses given in the previous meeting.  The Parties had said that the Chilean tariffs
on imports of milling wheat and wheat flour would be phased out over a period of 17 years.  In
response to another question, the representative of Chile had said that specific duties would not be
eliminated over time on wheat imports, but that, over a five year period, Chile would open a windowfor harvest periods each year during which Canadian wheat could enter Chile duty-free. The situation
was unclear and it would be useful if the Parties could provide some clarification, together with some
data on actual Canadian wheat exports into Chile over the last years.  According to the summary
records, the 1996 figures for wheat imports from Canada had been skewed due to a "plague".  The
representative of Chile asked the representative of Australia to submit his question in writing and
pointed out that the same question had been raised by the representative of the European
Communities.
9. The representative of Japan referred to paragraph 46 of the summary records dealing with
safeguards, where it was said that the Parties would apply safeguards among themselves when "theWT/REG38/M/2
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quantity of goods from the partner accounted for a substantial share of the total imports and when the
goods from the partner contributed significantly to the injury".  He asked for clarification of the
meaning of "a substantial share which contributed significantly" as this expression seemed to be
vague.  He pointed out that if the Parties did not apply safeguards among themselves but only against
third countries, his delegation could hardly consider that the industries were facing serious injury orserious social or economic crisis.  Safeguards had to  be applied in a non-discriminatory manner.  His
delegation did not agree with the statement made by the Parties in paragraph 48 of document
WT/REG38/M/1 that the application of safeguard measures in the Agreement was consistent with
WTO rules.
10. The representative of Canada said that this was not a new area for the Committee since the
provisions on safeguards in the CCFTA paralleled very closely those that existed in other agreements
which had been subject to examination and for which some differences of view had been registered.The Agreement itself provided guidance as to how  the test of substantial share and contribution to
injury had to be fulfilled before a global safeguard action could be applied to the imports of the other
Party.  In his view, this provided an adequate balance between the obligations of Article XXIV:8, for
the elimination of duties and other restrictive regulations of commerce, and the obligations of the
WTO Agreement on Safeguards, to apply measures on an MFN basis.  It was the Parties's view thatthere was no inconsistency here and that the formulation of safeguard provisions was in line with the
objective and purpose of Article XXIV and the WTO Agreement on Safeguards.  He added that his
delegation would be pleased to provide further details in writing.
11. The representative of Japan asked for some clarification on the meaning of "substantial
share".  If the "substantial share" of imports from the other Party was set at a large number, for
example 60 per cent, this would mean that if the share of imports from the other Party constituted less
than this, e.g. 59 per cent, then the importing Party would not apply safeguards to the other Party, but
only to imports from third countries.  This struck him as unfair.  He requested details on the figures
used to determine the "substantial share".  The re presentative of Canada said he would provide a
written reply to the representative of Japan.
12. The Chairman invited delegations to submit their detailed questions in writing by 22 July.
Parties should respond to them by 31 July in order to allow the Secretariat time to distribute them and
to continue with the examination in September.
13. The representative of Canada asked delegations to submit their questions as soon as possible
in order to give the Parties sufficient time to respond.
14. The Committee took note of the comments made.
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