RESTRICTEDWORLD TRADE
ORGANIZATIONG/SG/Q2/CHL/4
12 October 2000
(00-4189)
Committee on Safeguards Original:  Spanish
NOTIFICATION UNDER ARTICLE 12.1( a) OF THE AGREEMENT ON
SAFEGUARDS ON INITIATION OF AN INVESTIGATION AND
THE REASONS FOR IT
NOTIFICATION UNDER ARTICLE 12.1( b) OF THE AGREEMENT ON SAFEGUARDS ON
FINDING A SERIOUS INJURY OR THREAT THEREOF CAUSED BY
INCREASED IMPORTS
NOTIFICATION PURSUANT TO ARTICLE 12.1( c) OF THE AGREEMENT ON
SAFEGUARDS OF A DECISION TO APPLY A SAFEGUARD MEASURE
NOTIFICATION UNDER ARTICLE 12.4 OF THE AGREEMENT ON SAFEGUARDS
BEFORE TAKING A PROVISIONAL SAFEGUARDS MEASURE REFERRED
TO IN ARTICLE 6
Replies from CHILE to the Questions Posed by the EUROPEAN COMMUNITIES1
and the UNITED STATES2 Regarding the Notifications of CHILE3
The following communication, dated 14 September 2000, has been received from the
Permanent Mission of Chile.
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EUROPEAN COMMUNITIES
I have the honour to transmit herewith the replies from the Government of Chile to the written
questions from the European Communities, circulated in document G/SG/Q2/CHL/3, in connection
with the review of the safeguard measures notified by Chile concerning wheat, wheat flour, sugar and
edible vegetable oils, distributed in documents  G/SG/N/6/CHL/2 , G/SG/N/7/CHL/2 and Suppl.1,
G/SG/N/8/CHL/1 and Suppl.1, and G/SG/N/10/CHL/1 and Suppl.1, as well as the replies to the
questions concerning the notificati on on cotton socks (G/SG/N/6/CHL/3).
                                                     
1 G/SG/Q2/CHL/3.
2 G/SG/Q2/CHL/2.
3G/SG/N/6/CH/2, G/SG/N/6/CHL/3, G/SG/N/7/CHL/2 + Suppl.1 and G/SG/N/8/CHL/1 –
G/SG/N/10/CHL/1 + Suppl.1.G/SG/Q2/CHL/4
Page 2
Notifications concerning wheat, wheat flour, sugar and edible vegetable oils (G/SG/N/6/CHL/2,
G/SG/N/7/CHL/2 + Suppl.1, G/SG/N/8/CHL/1 + Suppl.1, G/SG/N/10/CHL/1 + Suppl.1)
Question 1
Can Chile please explain why four different products were covered in one single
proceeding?
Question 2
Can Chile please provide all pertinent inform ation on the finding of threat of serious
injury caused by increased imports, including information on all injury factors listed in
Article 4.2(a) of the WTO Agreement on Safeguards for each of the four products?
Replies
Concerning wheat, wheat flour, sugar and vegetable oils
1. Although the four products in question were investigated simultaneously, an individual
analysis was carried out for each one.  The equivalent of four separate, parallel investigations were
carried out.
2. Please find attached a copy of the minutes of the 193rd meeting of the investigating authority,
which include the final determination on the recommended safeguard measures.
Notifications concerning cotton socks (G/SG/N/6/CHL/3)
Questions
(a) Can Chile confirm that the investigation only covers cotton socks and not socks of
synthetic fibres?
(b) Can Chile provide data on the volume and value of total imports into Chile of the
product covered by the investigation since 1995, including a geographical breakdown
per exporting country?
Replies
Concerning cotton and synthetic-fibre socks
1. The investigation covers synthetic fibre socks and cotton socks separately.
2. Please find attached tables of statistics for imports by country of origin from 1995 to
January-April 2000.
UNITED STATES
I have the honour to transmit herewith the replies from the Government of Chile to the written
questions from the United States (G/SG/Q2/CHL/2) in connection with the review of the safeguard
measure notified by Chile in documents G/SG /N/6/CHL/2, G/SG/N/7/C HL/2 and Suppl.1, and
G/SG/N/10/CHL/1 and Suppl.1.G/SG/Q2/CHL/4
Page 3
Question
1. Please provide to the Safeguards Committee a copy of the underlying determinations.
This would enable both the Committee and a ffected exporting members to better evaluate
Chile's finding of threat of serious injury a nd its determination to apply a safeguard measure.
Reply
Please find attached a copy of the minutes of the 193rd meeting of the investigating authority,
which include the final determination on the recommended safeguard measures.
Question
2. Has Chile excluded any exporting countries from the application of the safeguard
measure?  If so, please identify them and explain the basis for doing so.
Reply
No, Chile has not excluded any exporting country from the measures, as triangulation is
highly probable in this case.G/SG/Q2/CHL/4
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MINUTES OF THE 193RD MEETING OF THE NATIONAL COMMISSION RESPONSIBLE FOR
INVESTIGATING THE EXISTENCE OF DISTORTIONS IN THE PRICE OF IMPORTED
GOODS, HELD ON 7 JANUARY 2000
__________________________________________________________________________________
The present meeting was attended by the following members of the Commission:
Chairman, Inspector-General of the Economy Mr. Iván Seguel Cáceres
Representatives of the Central Bank of Chile:
- Director of Foreign Trade and Trade Policy Mr. Ricardo Vicuña Poblete
- Deputy Representative of the Director for
Macroeconomic PlanningMr. Sergio Lehmann Beresi
Representative of the Ministry of the Economy,
Development and ReconstructionMr. Roberto Paiva Reinero
Representative of the Ministry of Foreign Affairs Mr. Alejandro Jara Puga
Representative of the Ministry of Finance Ms María Eugenia Wagner Brizzi
Representative of the Ministry of Agriculture Mr. Sergio Ramos CórdovaNational Director of Customs Mr. Enrique Fanta Ivanovic
Also in attendance were:
Deputy Representative of the Minist ry of Finance Ms Catalina Bau Aedo
Deputy Representative of the Ministry of Foreign
AffairsMr. Jorge Culagovski Drobny
Deputy Representative of the Ministry of the Economy,
Development and ReconstructionMs Lucia Cangas León
Deputy Representative of the Ministry of Agriculture Mr. Hernán Burgos Mujica
Representative of the National Director of Customs Mr. Freddy González Valdés
Technical Secretary of the Commission Mr. Claudio Vicuña Urqueta
193-01-0100 Final Resolution in the Safeguard Investigation Concerning the Products Subject to
Price Bands
The Chairman of the Commission, Mr. Iván Seguel Cáceres, acting in his capacity as
substitute for Mr. Rodrigo Asenjo Zegers, called the meeting to order and reminded the members
present that the meeting was being held in order to  analyse the final report of the investigation and to
decide whether to recommend definitive measures concerning imports of wheat, wheat flour, sugar
and edible vegetable oils, classified under the tariff headings 1001;  1101;  1701;  and 1507 to 1515,
and listed in detail hereunder.  He invited the Technical Secretary to take the floor in order to give the
background to the case, after which there would be a period for discussion among the members.
Following the presentation and the debate, the decision on whether to recommend definitive
measures was put to a vote.  It was thereby agr eed, by the majority of members of the Commission, to
recommend the application of definitive measures, considering that this would fulfil the requirements
established in the legislation currently in force and, in particular, that the facts available demonstrated
increased imports in the products in question and the imminence of a greater increase if the duty wereto be reduced to 31.5 per cent, and under such conditions as to threaten to cause serious injury toG/SG/Q2/CHL/4
Page 5
domestic industry.  This decision was adopted with the abstention of the representatives of the
Central Bank.
Considering that the sum of the tariff in for ce and the surcharge could exceed the level bound
in the WTO, it was noted that the resolution was adopted by the majority required in Article 9.5 of
Law 18,525.
The Resolution is given in full hereunder:
FINAL RESOLUTION OF THE SAFEGUARD INVESTIGATION CONCERNING IMPORTS OF
WHEAT, WHEAT FLOUR, SUGAR AND EDIBLE VEGETABLE OILS, CLASSIFIED UNDER
TARIFF HEADINGS 1001;  1101;  1701;  AND 1507 TO 1515.
On 23 August 1999, the Ministry of Agriculture requested that the Commission initiate
ex officio a safeguard investigation concerning imports of wheat, wheat flour, sugar and edible
vegetable oils, classified under tariff headings 1001;  1101;  1701;  and 1507 to 1515, listed in detail
hereunder, and requested the application of an ad valorem  tariff surcharge to imports of those
products, in order to allow the full operation of the corresponding price bands.  The investigation wasinitiated ex officio by the Commission on 9 September 1999, notice of which was published in the
Diario Oficial on 29 September 1999.
The Commission met on 22 October to decide to recommend provisional measures, a decision
which it communicated to the Ministry of Finance on 29 October 1999.  The provisional measure waspublished in the Diario Oficial on 26 November 1999.
The measure adopted by the Ministry of Finance consisted of an ad valorem  tariff surcharge
determined by the difference between the general tariff added to the ad valorem  equivalent of the
specific tariff determined by the price band, and the level bound in the WTO for wheat, wheat flour,sugar and edible vegetable oils.
A public hearing was held on 25 November 1999, which was attended by the following
interested parties:
1. Mr. Ronald Fischer and Mr. Eduardo Engel, economists from the University of Chile;
2. Company representatives from Carozzi S.A.;
3. Company representatives from Cox Trading;
4. Representatives of the Embassy of the Argentine Republic;
5. Representatives of the Argentinian Milling Industry Federation;
6. Representatives of the Government of Mexico (SECOFI);
7. Representatives of Watt's Alimentos S.A.;8. Representatives of the Oil Industry Asso ciation of the Argentine Republic (CIARA);
9. Representatives of the Centre for Cereal Exporters of the Argentine Republic;
10. Representatives of the National Soft  Drinks Association (ANBER);  and
11. Company representatives from IANSA.
All the information given in the public hearing was duly considered in the Commission's
analysis of the matter under discussion.
However, a special mention should be given to the argument put forward by the National Soft
Drinks Association and Cox Trading that the investig ation carried out was invalid and illegal.  In this
regard, the Commission expressly points out that it has adjusted its procedure to conform to the
provisions of international agreements, domestic la ws and the regulations in force in Chile.  The
written versions of the arguments put forward in the hearing before the Commission are attached to
the minutes of the 189
th meeting, held on 25 November 1999.G/SG/Q2/CHL/4
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In its analysis of imports, the Commission has taken into account the fact that the normal
operation of price bands has been a decisive factor in preventing a greater increase in imports, and
consequently the trend in imports cannot be considered without bearing this factor in mind.  Even so,
there has been an increase in imports in absolu te terms which threatens to cause injury to the
production sectors concerned.  In its analysis, the Commission has taken into account the periodcommencing when, for each product, the specific tariffs determined by the application of the price
band, added to the general tariff, exceeded the level bound in the WTO. Without prejudice to this
analysis, information prior to this period shall also  be considered for comparison and assessment.  In
this regard, the Commission points out that:
- Imports of wheat (in tonnes) increased by 6 per cent in 1998 in comparison with the
previous year.  Over the first ten months of 1999, imports rose by 281 per centcompared with the same period in 1998.  There was an increase in imports from 1993
to 1996, with a drop in 1997.  Imports of wheat flour fluctuated, but this can be
explained by their low volume.  Nevertheless, the Commission notes that wheat flour
represents an alternative way of importing wheat if direct imports prove to be more
costly or are subject to a higher tariff, so it is necessary to apply a treatment similar to
that applicable to wheat.
- Imports of refined sugar (almost 100 per cent of total sugar imports) fell by 27 per
cent in 1998 in comparison with the previous year.  Over the first ten months of 1999,
they increased by 14 per cent.  Imports also showed an upward trend between 1994and 1997.
- Imports of the two main edible vegetable oils increased by 23 per cent in 1998
compared with the previous year.  Over the first ten months of 1999, imports fell by
24 per cent.  In relation to this reduction, the Commission points out that there was anabnormal situation in 1999 concerning the behaviour of importers as a result of the
tariff disputes regarding the tariff headings for oil imports.  From 1993 to 1997, the
level of imports was similar.
The Commission notes the significant differences between recent import prices resulting from
full application of the band and prices resulting from imposition of a tariff ceiling of 31.5 per cent.
This substantiates the forecasts of a greatly accelerated increase in imports that would occur (or has
already occurred) unless the full duties specified in  the bands are applied.  The increase in imports,
and the potential for further substantial increases, has occurred at a time when international prices of
the products investigated have been subject to sizeable and rapid decreases.
The Commission has also taken into account that the c.i.f. prices of Chilean imports are
closely linked to international prices (the behaviour of commodities) and domestic prices similarly
shadow trends in import prices.  Predicted trends in international prices for these products are also
negative;  i.e., prices should remain at their present levels or fall even more.
The situation described has left the Commission convinced of the existence of an imminent
threat of injury if only the tariff ceiling of 31.5 per cent is applied, which can be summarized as
follows:
(i) In the case of wheat, a decrease of 34 per cent in the area under cultivation is
expected (from 370 thousand hectares to 244 thousand hectares);  a decrease of 28 percent in production (less than the reduction in the area cultivated as crop yields
continue to improve);  10 per cent fall in prices;  a decrease of 35 per cent in direct
employment;  and a drop of 20 to 90 per cent in net profit margins depending on the
level of production.  This means that around one third of approximatelyG/SG/Q2/CHL/4
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90,000 producers will cease this activity.  As is the case for sugar beet and rape, the
capacity of utilisation indicator has not been estimated because it is not relevant to
agricultural crops;
(ii) for sugar (sugar beet), the aforementioned indicators used to assess injury are even
more significant, showing a reduction of around 80 per cent in production, area undercultivation and employment, and a 28 per cent decrease in prices, meaning that 90 per
cent of producers will cease this activity.  Very high losses are expected in the sugar
industry, with a 28 per cent reduction in the value of output and related losses
amounting to US$10 million;
(iii) in the case of oils (rape), indicators show a drop of 54 per cent in production and a
decrease of around 60 per cent in employment (direct and indirect), marginalizingover 63 per cent of producers.  Losses in the oil industry are estimated to include an
8 per cent fall in the value of output, a US$3.2 million reduction in production.  It
should also be noted that a decrease in rape cultivation will have an impact on wheat
yields because rape is sold in rotation with wheat (30,000 hectares of rape allow the
rotation of around 100,000 hectares of wheat).
Wheat, rape and sugar beet account for over half the surface area and production of annual
crops in Chile, and represent around 30 per cent of employment.
This negative impact is felt particularly at the regional level, as three regions (VIII, IX and X)
account for the majority of domestic production (79 per cent of wheat, 99.7 per cent of rape and
59.2 per cent of sugar beet), with similar figures for areas under cultivation.  In these regions, the
importance of the agricultural sector in producti on, rural population and employment is significantly
higher than at the national level:  the proportion of agricultural GDP is three times higher than the
national figure;  the rural population figure is 2.5 times higher and the figure for agriculturalemployment is similar.
Consequently, in accordance with current laws and having examined the evidence and
information available, the National Commission Responsible for Investigating the Existence of
Distortions in the Price of Imported Goods, at its 193
rd meeting on 7 January 2000, by the majority
required in Article 9.5 of Law 18,525, when the sum of the tariff in force and the surcharge exceeds
the level bound in the WTO,
RESOLVES:1. To recommend the application of a definitive ad valorem  tariff surcharge to imports of
products classified in the following list of tariff headings:
Wheat: 1001.9000
Wheat flour: 1101.0000
Sugar: 1701.1100;  1701.1200;  1701.9100;  1701.9900
Edible vegetable oils: 1507.1000;  1507.9000;  1508.1000;  1508.9000;  1509.1000;  1509.9000;  
1510.0000;  1511.1000;  1511.9000;  1512.1110;  1512.1120;  1512.1910;  
1512.1920;  1512.2100;  1512.2900;  1513.1100;  1513.1900;  1513.2100;  
1513.2900;  1514.1000;  1514.9000;  1515.2100;  1515.2900;  1515.5000;  
and 1515.9000.
2. The level of the definitive safeguard, for each import operation, shall be determined by the
difference between the general tariff added to the ad valorem  equivalent of the specific duty
determined by the mechanism set out in Article 12 of Law 18,525 – and its relevant annualG/SG/Q2/CHL/4
Page 8
implementing decrees – and the level bound in the WTO for these products.  The surcharge may not
exceed the levels thus calculated.
3. The provisions of Article 9.1 of the Agreement on Safeguards shall be taken into
consideration with regard to the treatment applied to developing countries.
With regard to bilateral trade with Mexico, the Commission notes that the products under
investigation are excluded from the tariff reduction process established in the trade agreement
between Chile and Mexico, which means that it will not be necessary to make the determinations
indicated in Article 6-03 thereof.
In the case of trade with Canada, the Commission notes that Canada is one of the main
suppliers of wheat and edible vegetable oils.  With regard to wheat flour, the Commission has takeninto account that wheat flour represents an alternative way of importing wheat, so it is necessary to
apply a treatment similar to that applicable to wheat.   Canada is also an exporter of sugar to Chile, so
the difficulty of appellation of origin of this product needs to be considered.
The Commission notes that Peru is a supplier of sugar and edible vegetable oils but does not
appear to account for imports of wheat and wheat flour, and in any case, the difficulty in determining
the origin of these products needs to be considered.
4. The Ministry of Finance shall be informed so that it can communicate the present
recommendation to the President of the Republic for decision.
The meeting was adjourned.
(Signed)
CLAUDIO VICUÑA URQUETA
Technical Secretary(Signed)
IVÁN SEGUEL CACERES
Inspector-General of the Economy,
Substitute Chairman of the Commission
Santiago, 7 January 2000.
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