 
 RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/REG136/M/1 
6 January 2004 
 
 (04-0015) 
Committee on Regional Trade Agreements 
Thirty-Fifth Session  
 
 
 
EXAMINATION OF THE FREE TRADE AGREEMENT 
BETWEEN CHILE AND COSTA RICA 
 
Note on the Meeting of 3 December 2003  
 
Chairman:  Ambassador J. Meetoo (Mauritius) 
  
1. The meeting was convened in document WTO/AIR/2217/Rev.1. 
2. Under Agenda Item D.X of its Thirty-Fifth Session, the Committee on Regional Trade 
Agreements (CRTA) took up for the first time th e examination of the Free Trade Agreement (FTA) 
between Chile and Costa Rica (goods and servi ces).  The following topics were discussed: 
 A. General Remarks 
Goods aspects
: 
 B. Section I – Background Information on the Agreement 
 C. Section II – Trade Provisions 
 D. Section III – General Provisions of the Agreement   Services aspects
: 
 E. Section I - Background Information on the Agreement 
 F. Section II – Provisions Affecting Trade in Services 
 3. The Chairman
 noted that the FTA between Central America and Chile, and its Bilateral 
Protocol signed between Costa Rica and Chile, form ed an accord that app lied bilaterally between 
those two countries.  Both the Agreement and its Protocol had been signed on 18 October 1999, and 
the Agreement had entered into force on 15 Februa ry 2002.  The goods aspects of the Agreement had 
been notified to the WTO on 14 May 2002, as document WT/REG136/N/1, and the services aspects 
on 24 May 2002, as S/C/N/191.  The text of the Agreement appeared in document WT/REG136/1.  He proposed to organize the examination by first asking the Parties 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 Standard Formats (WT/REG136/3 and WT/REG136/4, 
respectively) to guide the debate.  He recalled the terms of reference for the examination of the goods 
aspects adopted on 24 May 2002 by the Council for Trade in Goods (WT/REG136/2) and the decision to refer the services aspects of the Agreement for examination in the CRTA taken on 5 June 2002 by the 
Council for Trade in Services (S/C/M/60). 
A. G
ENERAL REMARKS  
4. The representative of Costa Rica, speaking also on behalf of Chile,  said that negotiations for 
the FTA had been launched in April 1998, that the two countries had exchanged instruments of WT/REG136/M/1 
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 ratification in January 2002 and that they had no tified the WTO on 16 April 2002.  The legal aspects 
of the FTA had been negotiated between Chile and five countries (Costa  Rica, El Salvador, 
Guatemala, Honduras and Nicaragua), its provisions applying on a bilateral basis between Chile and 
each of them.  The tariff elimination programmes, ru les of origin and the annexes referring to cross-
border trade in services had been negotiated bilatera lly.  Trade between the Parties had traditionally 
been small and in deficit for Costa Rica.  A signi ficant proportion of that trade consisted of highly 
processed goods in the manufacturing and agro-indust rial sectors.  Costa Rica was an important 
platform for Chile's investment and trade with the rest of Central America.  Likewise, Chile provided 
Costa Rica with investment and trade opportunities in South America.  The Parties had signed a 
modern treaty, similar to other treaties reviewed by the CRTA, containing provisions not only in the 
traditional areas (trade in goods), but also trade in services, investment and government procurement.  
The FTA had benefited both countries by, inter alia , stimulating the expansi on and diversification of 
trade, promoting conditions for free competition, reci procally eliminating barriers to trade, facilitating 
the cross-border movement of goods and services,  increasing and protecting investment opportunities 
in both countries, creating effective procedures fo r the implementation and administration of the 
Agreement, and establishing a framework for b ilateral, regional and multilateral cooperation. 
5. Turning to the goods aspects of the Agreem ent, the representative of Costa Rica
 said that 
around 225 eight-digit tariff lines (representing less than 3.8 per cent of the Parties’ bilateral trade) 
had been excluded from trade liberalization.  Chile and Costa Rica had undertaken – with the 
exceptions set forth in the FTA – not to adopt or maintain any prohibition or restriction on the import 
of any product from the other Party or the export or sale for export of any product destined for the 
territory of the other Party, except as stipulated in  Article XI of the GATT 1994.  As for rules, both 
Parties confirmed the rights and obligations under the WTO Agreements.  With regard to technical 
barriers to trade, specific provisions had been estab lished on rights and obligations, harmonization of 
measures, risk assessment, conformity assessment, etc.  The Parties had undertaken to establish 
harmonization systems in the sanitary and phytosanita ry spheres for sampling, diagnosis, inspection 
and certification and to recognize pest- or disease-fr ee areas when objective ev idence of such status 
was provided.  The Agreement provided for the possi bility of applying bilate ral safeguard measures 
during the transition period and the obligation to give  compensation; it also left open the possibility of 
applying multilateral safeguards provi ded that the imports in questi on represented a substantial share 
and contributed significantly to serious injury or the threat thereof.  With regard to subsidies, the 
Parties were governed by WTO rules and had u ndertaken to eliminate all export subsidies on 
agricultural products as from the date of entry into  force of the Agreement.  Services liberalization 
had been established on the basis of the principl es of national treatment, most-favoured-nation (MFN) 
treatment and the right to provide services without establishing local presence.  The negotiations had 
been carried out on the basis of negative lists, with no a priori  exclusion of any sector.  The bilateral 
Air Transport Agreement between Chile and Costa Rica had been incorporated into the FTA so that it 
would be subject to its dispute settlement mechanis m.  It was decided to exclude financial services 
from the negotiations.  The Chapter on Basic Telecommunications services did not apply in the case of Costa Rica and Chile, but only between Chile a nd the other Central American countries.  The 
concept of negative lists afforded a considerable degree of transparency given that all Chilean and 
Costa Rican services and investment restrictions were  set forth in the Annexes of Reservations.  With 
regard to investments, the FTA incorporated the Agreement for the Reciprocal Promotion and 
Protection of Investments, signed by Chile and Costa Rica on 11 July 1996.  This Agreement 
incorporated the commitments on national treatment and MFN treatment, also establishing rules on transfer and expropriation and the possibility of se ttling disputes not only between states but also 
between a state and an investor. 
6. The representative of Costa Rica
 continued, saying that the effects of the FTA, which had 
been observed during over a year since it had come in to force, had been very positive.  Trade between 
Chile and Costa Rica had increased considerably duri ng the previous seven years; this indicated that, 
through the strategic alliance and economic compleme ntarities, trade and investment between the two  WT/REG136/M/1 
 Page 3 
 
 
 countries could increase even more and that the Agreement was acting as a spearhead for opening up 
other markets where the Parties had not traditionally operated.  Since the second half of the 1990s, trade between Costa Rica and Chile had increased by 269 per cent.  While mutual trade stood at 
US$30 million in 1995, by 2002 this figure had more  than doubled to reach US$80.8 million.  This 
dynamism, however, had principally been a reflection of the continued growth of Chilean exports to 
Costa Rica.  During the previous seven years these had grown at an average annual rate of close to 28 
per cent, a situation which explained the long-stan ding balance of trade in favour of Chile.  The 
Agreement was asymmetrical:  on its entry into force Costa Rica had gained access to over 90 per 
cent of the Chilean market free of tariffs, while Chile had gained access to over 70 per cent of the 
Costa Rican market free of tariffs.  The Administ rative Commission of the Agreement would be able, 
on the basis of a flexible dialogue between the G overnments, to solve problems and achieve further 
progress in the bilateral relations.  The Parties were fully committed to the multilateral system and to 
agreements such as the one under consideration, which were built on the basis of WTO disciplines 
and promoted not only economic growth and the effi ciency of the participants, but also multilateral 
trade liberalization.  He concluded by saying that th e Parties were prepared to contribute actively in 
the CRTA examination process and move it towards a conclusion. 
B. S
ECTION I - BACKGROUND INFORMATION ON THE AGREEMENT  
7. The representative of the United States  informed the Parties that her delegation wished to 
review the Standard Format on the goods aspects of the Agreement more closely and that they would 
be submitting written questions.  She also commended th e Parties for the clarity and coverage of the 
information provided in the Standard Format. 
8. The representative of Korea  noted in the Standard Format that categories B, C and D of the 
table on the tariff elimination schedule provided for phasing out periods as of the date of signature of the Agreement.  Given the noticeable gap in time be tween the date of signature of the Agreement and 
its entry into force, his delegation was interest ed in knowing how the phasing out plans had been 
implemented during that period.  Referring to  the same table, the representative of Japan
 asked the 
Parties for an explanation as to why some of the transitional periods exceeded 10 years.  The 
representative of Chile  confirmed that the phasing out of tariffs was triggered by the signature of the 
Agreement and not its entry into force; a more detail ed reply would be provided after referral to her 
authorities.  In reply to the question posed by the representative of Japan, she said that some transition 
periods exceeded 10 years due to the sensitive natu re of certain products, although, she added, a 
commitment to liberalize a sensitive product over a pe riod of 16 years was in her opinion better than 
excluding it altogether. 
C. SECTION II - TRADE PROVISIONS  
9. The representative of Korea  sought clarification on the type of  export restrictions that applied 
to the products listed under Section II:2 of the St andard Format.  The representative of Costa Rica  
asked that the question be submitted in writing. 
10. The representative of Korea  noted that, with respect to the imposition of global safeguard 
measures, the Agreement provided for excepti ons from the WTO Agreement on Safeguards in 
relation to compensation, retaliation and exclusi on.  He wondered how such exceptions could be 
justified under the Safeguards Agreement and pa rallel Panel and Appellate  Body decisions.  The 
representative of Chile  clarified that the Agreement provided for two safeguard mechanisms: one for 
bilateral actions and one for global safeguards.  Bilateral safeguard measures could be applied 
between the Parties during the transition period; the rate of duty was then not allowed to exceed the 
MFN rate.  In the case of application of a global safeguard, the Agreement allowed that the other 
Party be excluded from the measure when imports from that source did not account for a substantial 
share of total imports and did not contribute significan tly to the serious injury caused by imports.  She WT/REG136/M/1 
Page 4  
 
 added that, by excluding that Party from all investig ations and by not considering it neither in the list 
of damages nor in the safeguard action, the provi sions of the Agreement upheld the same kind of 
parallelism established by the WTO Appellate Body. 
D. S
ECTION III - GENERAL PROVISIONS OF THE AGREEMENT  
11. The representative of Korea  noted that according to Section III:4 of the Standard Format, the 
Agreement prevailed in case of inconsistencies with  other international agreements.  He asked the 
Parties whether that was the case al so with respect to inconsistencies vis-à-vis  the WTO Agreement.  
The representative of Chile  acknowledged that the paragraph was dr afted in a way that might lead to 
such an interpretation, although that was not the inte ntion of the Parties since all of their agreements 
had to be compatible with the WTO. 
12. The Chairman  said that the first round of examination of the goods aspects of the FTA 
between Chile and Costa Rica had allowed the Committee to clarify a number of issues, but some remained pending.  He asked delegations wishing to ask questions to submit them in writing to the 
Secretariat by 31 January 2004 and for the Parties to submit replies no later than 31 March 2004. 
13. The Committee took note
 of the comments made. 
E. SECTION I – BACKGROUND INFORMATION ON THE AGREEMENT  
14. The representative of Japan  requested information on the coverage of the commitments and 
whether they were in a positive or negative list format.  The representative of the United States  was 
also interested in receiving more information about  the schedule of commitments; she added that her 
delegation would be submitting further questions in writing.  The representative of Chile  said that the 
Agreement followed a negative list approach, thus a priori  no sector was excluded.  She indicated that 
each Party maintained in its schedule (Annexes I and II of the Agreement) the non-conforming 
measures to which the provisions on national treatme nt, MFN and commercial presence did not apply.  
Annex I referred to reservations taken by each Pa rty on existing measures, while Annex II contained 
reservations taken by each Party on specific sector s in respect of which the Party might adopt or 
maintain measures not subject to certain provisions of  the Chapter on Services.  She clarified that the 
non conforming measures in Annex II were te mporary exclusions and not exclusions per se  since they 
fell under the ambit of the Agreement and might be contemplated for future liberalization. 
F. SECTION II – PROVISIONS AFFECTING TRADE IN SERVICES  
15. The representative of Japan  noted that the Chapter on Telecommunications did not apply 
between Chile and Costa Rica but only between Chile a nd the rest of the Central American countries.  
She wondered whether the Parties could provide further information in that respect.  The 
representative of Chile  indicated that the Chapter on Telecommunications concerned basic services on 
the regulation of access to networks and related activities, which was a sensitive sector and thus 
excluded from the Agreement.  Other telecommunication activities, excluded via Annex II, might be 
considered for liberalization in the future. 
16. The Chairman  said that the first round of examin ation of the services aspects of the FTA 
between Chile and Costa Rica had allowed the Committee to clarify a number of issues, but some 
remained pending.  He asked delegations wishing to ask questions to submit them in writing to the 
Secretariat by 31 January 2004 and for the Parties to submit replies no later than 31 March 2004. 
17. The Committee took note  of the comments made. 
__________ 