WORLD TRADE WT/TPR/M/28
12November 1997
ORGANIZATION(97-4927)
Trade Policy Review Body
23-24 September 1997
TRADE POLICY REVIEW
CHILE
MINUTES OFMEETING
Chairperson adinterim :H.E. Mr.Celso Lafer (Brazil)
Page
I. INTRODUCTORY REMARKS BYTHE CHAIRPERSON 2
II. OPENING STATEMENT BYTHE REPRESENTATIVE OFCHILE 3
III. STATEMENT BYTHE FIRST DISCUSSANT 6
IV. STATEMENT BYTHE SECOND DISCUSSANT 9
V. STATEMENTS BYMEMBERS 12
VI. REPLIES BYTHE REPRESENTATIVE OFCHILE
AND ADDITIONAL COMMENTS 20
VII. CONCLUDING REMARKS BYTHE CHAIRPERSON 28WT/TPR/M/28
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I. INTRODUCTORY REMARKS BYTHE CHAIRPERSON
1. Thesecond Trade Policy Review ofChile washeldon23and24September 1997. The
Chairperson welcomed thedelegation ofChile, ledbyAmbassador Alejandro Jara,andthediscussants,
H.E. MsEveline L.Herfkens oftheNetherlands andH.E. Mr.Krirk-Krai Jirapaet ofThailand. As
usual, bothdiscussants would speak intheirpersonal capacities andnotasrepresentatives oftheir
countries.Inaccordancewiththeestablishedprocedures,thediscussantshadmadeavailable,inadvance,
outlines ofthemain issues theyintended toraise.
2. TheChairperson recalled thepurpose oftheTrade Policy Reviews andthemain elements of
theprocedures forthismeeting. Thereport bytheGovernment ofChile wascontained in
document WT/TPR/G/28 andthatoftheWTO Secretariat indocument WT/TPR/S/28; themainissues
toberaised bythediscussants werecontained indocument WT/TPR/D/13. Copies ofwritten questions
submitted byninedelegations (Norway, NewZealand, Hong Kong China, Canada, Japan, Korea,
Australia, theEuropean Union andtheUnited States) hadbeentransmitted tothedelegation ofChile.
Iffullreplies could notbeprovided during themeeting, supplementary written replies could beprovided
later.
3. TheChairperson stated thattheTPRM wasaconfidence-building element ofWTO procedures.
Herecalled thatthemechanism wasnotintended toserve asabasis fortheenforcement ofspecific
obligations under theAgreements, orfordispute settlement procedures; rather, toachieve greater
transparency inpolicy making andassessment. Through suchtransparency, public disclosure could
inhibit secretive tradepolicy making, exposing policies tothelightof"reasonable consideration", and
reinforcing ademocratic vision oftheinternational economic order. Thereciprocity ofinterests inherent
intheWTO could beadequately perceived andjudged onlyifpublic disclosure made them visible.WT/TPR/M/28
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II. OPENING STATEMENT BYTHE REPRESENTATIVE OFCHILE
4. Therepresentative ofChile saidthatChile wastoday ahealthy economy inmacroeconomic
terms. Thiswascause forsatisfaction, allowing theauthorities tofacethefuture withoptimism based
onsolidachievements. Hecitedthehigheconomic growth rate-6percentoverthelasttenyears -
andother positive macroeconomic indicators andprojections.
5. Henoted, however, thatitwasimportant to:(i)deepen andrefine certain reforms (e.g., in
thesocial security andfinancial systems); (ii)introduce regulatory frameworks tomeetthechallenges
presented bygrowing globalization (e.g., competition policies); (iii)improve thequality ofthelabour
force bymeans ofsubstantial investment ineducation; and(iv)ensure afairer andmore broadly based
distribution ofthebenefits ofeconomic growth bymeans ofsocial policies aimed atcombating poverty,
improved access tohealth andeducation, andtaxreforms toensure anon-regressive taxation system.
6. Carehadbeentakentoensureeconomicstability.Oneexamplewasthelegalreserverequirement
applied toshort-term capital, mainly portfolio investment, attracted byrelatively highdomestic interest
rates; inaddition tothereserve requirement, foreign capital wasrequired toremain inthecountry
foroneyearbefore being repatriated; thisdidnotaffect remittances ofprofits. These requirements
wereofaprudential nature, aimed atensuring currency stability andlimiting destabilizing movements
ofspeculative capital. Given theirimportance tomacroeconomic stability, nochange inthismeasure
wasenvisaged.
7. Hesaidthattradeindicators werealsopositive; increasing liberalization hadledtoasignificant
diversification ofexports, interms ofboth markets andexport products. Trade liberalization had
beenconsolidated bythecombined effects ofactive participation inthemultilateral trading system,
theconclusion ofsub-regional andbilateral tradeagreements, andtheunilateral reduction ofprotective
measures.
8. Heemphasized thattheframework provided bythemultilateral trading system hadbeenand
would continue tobethemain priority forliberalization. Chile hadapproved theresults ofthe
Uruguay Round, thelegaltextsofwhich haddirect force oflawinChile. These results would be
fullyimplemented within theagreed time-limits. Itwashoped thatnewmultilateral negotiations could
beinitiated bytheendofthiscentury inorder topromote theliberalization oftrade andinvestment.
9. Oneimportant component oftheliberalization oftheChilean economy wastheseries ofbilateral
andsub-regional trade agreements concluded byChile since 1991. Free-trade agreements hadbeen
reached with Mexico, Venezuela, Colombia, Ecuador andMERCOSUR. Theassociation with
MERCOSUR involved theliberalization ofsubstantial volumes oftrade, andthecoverage would be
extended toareas suchasservices andinvestments. Thetreaty signed withCanada notonlyliberalized
more than80percentofreciprocal trade upon entry intoforce, butalsocovered freetrade in
cross-border services, investments andtelecommunications, andareciprocal exemption from the
application ofanti-dumping duties.
10. Chile washoping fortheapproval ofthefast-track procedure toallow theresumption of
negotiations foraccession toNAFTA. Theexisting agreement withMexico wastobeextended to
include cross-border trade inservices, investment, andcompetition policy. Free-trade agreements
were alsobeing negotiated withPeru, Panama andtheCentral American countries. Inthecontext
ofabroad Framework Cooperation Agreement withtheEuropean Union, signed in1996, preparatory
work wasproceeding fornegotiations fortheliberalization oftrade andinvestment withtheUnion.WT/TPR/M/28
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11. Chile wasalsoamember ofAPEC, which wascommitted toliberalizing tradeandinvestments
bytheyear2010, primarily bymeans oftrade agreements. IntheIndividual Action Plansubmitted
byChile itwasmade clearthattheliberalization process would becarried outacross-the-board rather
thanonasectoral basis.
12. Therepresentative hoped thatnegotiations tosetupaFreeTrade AreaoftheAmericas (FTAA)
would beformally initiated inApril 1998, during thesecond Summit oftheAmericas tobeheldin
Santiago.
13. Inthesphere ofinvestment, Chile hadsigned 37investment protection andpromotion
agreements. Chile hadrecently began negotiations withCanada onadouble taxation agreement, and
hoped toconclude similar agreements withother countries inthefuture.
14. Attheunilateral level, Chile intended tocontinue opening uptheeconomy. Since thelastTrade
Policy Review, Chile hadreduced by4percentage points theadvalorem tariff applied uniformly to
allimports (from 15percentto11percent). Moreover, theGovernment hadrecently prepared a
bill,forsubmission toCongress, providing forfurther unilateral liberalization through thereduction
ofcustoms duties from11percentto8percent. Chile hadalsocarried outother unilateral initiatives
intelecommunications, financial services andprivatization ofportservices, inaddition toimplementing
trade facilitation measures, including themodernization ofcustoms facilities.
15. TheSecretariat Report stated thatthediversity ofrulesoforigin intheagreements concluded
byChile could beanobstacle totheircoherent application andtheoptimum choice ofsuppliers. The
Chilean authorities wereaware ofthisriskand,forthatreason, hadendeavoured toensure thatrules
oforigin were asuniform andspecific aspossible; Chile hadalsotriedtomake suchrules asopen
andflexible aspossible toallow thepurchase ofsupplies ofinputs fromthirdcountries. These rules
oforigin hadnoprotectionist effects.
16. Chilean policy oninternational labour andenvironmental issues wasreflected intheManpower
CooperationAgreementandtheEnvironmentalCooperationAgreementwithCanada.Thesecooperation
agreements werelegally separate fromandunconnected withthefree-trade agreement withthatcountry.
Bothagreements required theparties tomonitor compliance withdomestic legislation nottoenvisage
tradesanctions andtofacilitate thedevelopment ofwide-ranging bilateral cooperation inbothspheres.
17. Chile'seconomic policy wasguided bytheprinciple ofneutrality. Ingeneral, alleconomic
activities andallpersons, natural andlegal, national andforeign, weresubject tosimilar rules, ensuring
national treatment andnon-discrimination. Theprohibition ofarbitrary discrimination wasenshrined
inthePolitical Constitution. Naturally, therewereexceptions topolicy neutrality, designed tocorrect
external effects orrespond toother development imperatives.
18. Inthiscontext, Chile operated three export subsidy programmes which would bephased out
withintheperiodallowedbytheAgreementonSubsidies.Onesuchprogrammerelatedtotheautomotive
sector, where annual production came close to18,000 units. Another programme wasdesigned to
allow duty-free entry forcapital goods insofar asthese wereusedforexport purposes. Given thelow
tariffs applied inChile, theimpact ofthisprogramme wasminimal. Thethirdprogramme provided
forthe"simplified" system ofrefunds of10percentofthevalue ofexports where thetariffclassification
wasnohigher thanUS$5 million; expenditure under theprogramme amounted toroughly 1percent
ofthevalue ofChilean exports. Thenature andscope oftheseprogrammes didnotjustify thesuggestion
thattheywere themain reason forthediversification andgrowth ofexports.WT/TPR/M/28
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19. Intheforestry sector aninitial subsidy tocover planting costs hadbeenmaintained formany
years andcontributed decisively tothedevelopment ofthesector. Thissupport programme hadbeen
discontinued in1995, buttheNational Congress wasconsidering aplantogrant aplanting subsidy
directed towards small-scale producers andareas ofenvironmental deterioration. Chile hadachieved
efficient useofthisrenewable resource, bystriking anappropriate balance between felling and
re-afforestation, thereby exerting apositive influence ontheenvironment.
20. Inagriculture, aprice bandsystem applied tosugar, vegetable oils,wheat andwheat flour.
Thissystem wasmerely intended toreduce theimpact ofprice fluctuations oninternational markets
onthedomestic market; suchfluctuations were aconsequence, interalia,ofthesubsidies applied
bythemain world producers. Apart from thespecific dutytowhich application oftheprice band
maygaverise,onlythemost-favoured-nation tariff wasapplied. Thecombined levelofbothtariffs
mayatnotimeexceed 31.5percent,which wasthebound rateforsuchproducts under theUruguay
Round. However, under thesystem, international price increases mayreduce import duties tozero.
Noother measures (quotas, tariffied measures orsubsidies foragricultural exports) wereapplied by
Chile.
21. Regarding anti-dumping andcountervailing measures, fewmeasures hadbeenapplied, and
hadbeenlimited tocases inwhich serious injury hadbeenproven. Inaddition, themeasures hada
duration ofonlyoneyearandcovered onlythemargin ofinjury, i.e.lessthanthedumping margin.
Chile hadbeensuccessful inpreventing these measures from being transformed intoinstruments of
selective protection. Asnoted earlier, thefree-trade agreement withCanada provided forreciprocal
exemption fromanti-dumping investigations andmeasures onceaproduct entered either market duty
free; Chile regarded thisasahealthy precedent.WT/TPR/M/28
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III. STATEMENT BYTHE FIRST DISCUSSANT
22. Thefirstdiscussant (H.E. MsEveline L.Herfkens) saidthatChile wasthemost stable and
liberal economy inLatin America; ithadanexemplary sustained macroeconomic performance and
consistently opentrade policy. Thetwodemocratically elected governments since theprevious TPR
in1990 hadcontinued anddeepened thetransformation according totextbook-fundamentals on
macroeconomic policy andfurther liberalization, withtheadditional commitment ofensuring growth
withequity. Thesuccess ofthesetwogovernments wasevident through: (i)thelevelofsavings which
hadreached East-Asian levels, partly duetoareform ofthepension system; (ii)investment ratesof
thesameorder;(iii)strongincreasesincapitalinflows,inducedbyprudentmacroeconomicmanagement
andwell-defined legalandregulatory frameworks; (iv)diversification inexport products, reducing
thedependency oftheeconomy oncopper; and(v)diversification inexport markets, particularly Asian
markets andChile'sdirect neighbours. Inthiscontext shenoted thattheprevious week'sEconomist
hadconcluded, "theprospects ofintegration intheSouthern Cone offerscope forChilean dreams that
NAFTA, amere trade agreement, cannot match...". Would theGovernment confirm thisoutlook?
Shealsoinvited theGovernment toelaborate ontheextent towhich theproliferation ofbilateral and
regional agreements introduced acomplex structure ofincentives toproducers andconsumers, whose
impact wasdifficult toassess andwhich could leadtodistortions thatwere incompatible withthe
generally liberal trade policy pursued. Sheadded thatChile hadbeenclimbing steadily intheranks
oftheWorld Competitiveness Yearbook oftheWorld Economic Forum, andwasnowin13thplace,
ahead oftheRepublic ofKorea andBelgium.
23. Shewelcomed thefactthataftertwodecades ofunder-investment andlackofmaintenance,
infrastructure wasnowhighontheGovernment 'spriorities: thiswasofparticular relevance inthe
export drive andcompetitiveness ofacountry which wasalready geographically handicapped inits
effort tointegrate intheworld economy. Shenoted thatChile'shigheconomic growth hadbeendriven
byimproved productivity andcompetitiveness, duetoprogressive liberalization inastable economic
environment andthattheGovernment intended tofurther openupitstrade.
24. Sheraised twoissues ofamore general nature, based onlessons learned from theChilean
experience: first, whether Chile followed orshaped theevolving 'Washington '(Bretton Woods)
consensus? andsecond, howdidglobalization/liberalization impact onthedifferent strata ofChile's
population?
25. Shenoted thatChile hadindeed followed thetextbook bothinitsmacroeconomic policies and
byopening uptheeconomy. However, infurther fine-tuning, Chile seemed tobeahead oftheevolving
consensus. Forinstance, through astrong commitment since 1990 tobotheducation andsocial
development through increased social expenditures, improved quality ofservice delivery andtargeting
anddecentralizing ofbothtransfers andsocial programmes. Only recently hadtheimportance of
education andequity ininducing stronger economic growth gained wider acceptance. Sheadded that
ontheroleoftheStateintheeconomy, foryears asubject ofdebate withahighideological content,
theChilean approach waspragmatic, aswasseenintheroleoftheStateinthecopper sector, inwhich
itappeared thatnotownership butgovernance mattered. Chile hadnointention toprivatize CODELCO
(themostimportant generator offoreign exchange andfiscal revenues) buthadensured ample room
forprivate investment inthissector. Ontheother hand, shenoted, thatinthehealth andinfrastructure
(roads, ports) sectors Chile hadinitiated private financing, concessions andparticipation ahead ofthe
pack; thishadprompted adiscussion which finally lettoanaction programme "facilitating private
involvement ininfrastructure", agreed intheWorld Bank Development Committee inHong Kong the
weekend prior tothisreview meeting.WT/TPR/M/28
Page7
26. Another areainwhich many participants inHong Kong hadreferred totheChilean example
wasitssuccess inavoiding thenegative impact ofvolatile short-term capital inflows. Ofcourse, its
sound andsustained macroeconomic andstructural adjustment policies hadbeencrucial inthisregard,
butthecapital control instruments through stifftaxes andreserve requirements onshort-term capital,
hadbeen veryeffective inensuring thatcapital flows were mostly forrealinvestments orofa
medium/long-term nature. Assuchitwould helpshape thefurther discussions intheIMFonthepros
andconsofcontrols onthecapital account.
27. Finally, aninteresting Chilean experience formany commodity-dependent developing countries
wastheCopper Stabilization Fund, which seemed tohavebeenquite effective asashock-absorber,
atleasttotheextent thatitlimited theimpact ofprice volatility onfiscal revenue. Sheasked ifthe
Government would consider following theNorwegian andKuwaiti examples ofallowing theFund
toinvest abroad orbykeeping partofitsearnings offshore, tohelpneutralize theimpact ontheexchange
rate.
28. Thediscussant mentioned thatChile didnothavelegislation forimplementing safeguard actions.
Sheasked theGovernment whyitpreferred torelyonanti-dumping andcountervailing measures to
protect domestic industry against injury from imports.
29. Shethenfocused onthesecond general theme: howglobalization andliberalization impacted
thedifferent strata ofChile'spopulation. Given theinternational debate ontheoverall effects of
globalization ondeveloping countries andChile'sstrong record ofstabilization andliberalization,
sheasked theChilean representative theeffect oftradeliberalization on(i)overall income distribution,
(ii)theincidence ofpoverty: howindices liketheGini-coefficient ortheportion ofincome going to
thelowest 10-20 percenthadevolved overtheliberalization period. What hadhappened tothe
distribution ofrealwages. What hadbeentheimpact oftradeliberalization onthenumber ofabsolute
poor.
30. Shenoted thatintheGovernment Report there wasastrong commitment to'theguiding
principles ofequality anddevelopment withequity '.Shealsonoted theimprovement ofsocial indicators
andthedecrease inthenumber ofpoorliving below thepoverty line-thanks tosustained economic
growthcoupledwithtarget-orientedsocialpolicies.However,astheGovernmentacknowledged,income
distribution figures showed thatgrowth hadnotbenefited thedifferent population groups tothesame
degree. Shecommended theGovernment fortheshare offiscal expenditure (more thantwothirds
ofthestatebudget) allocated tosocial policies andtheeffectiveness ofitsvarious programmes.
31. Attheregional level, theGovernment attempted todealwithpoverty inthefarnorth andsouth,
e.g.,through export-processing zones. Hadthese beeneffective inproviding results? Shenoted that
theactivitiesintheseareasseemedtobelimitedtomarketingcompanies,whichnormallydidnotgenerate
much employment.
32. Partoftheagriculturalsectorhadbecomehighlycompetitive(theveryproductiveexportsector),
butthiswasnotthecasefortheproduction ofimportables. Sheenquired about thesource ofthisduality.
Sheaskedifprimarilysmall-holderscontinuedtoproducetheitemsforwhichtheGovernmentmaintained
aprice-band system (wheat, wheat flour, edible oils,sugar). What wastheGovernment 'sjudgement
ofthestatement (page 80)intheSecretariat Report thatmany ofthese small-holders didnothavethe
capacity toadjust tothedemands ofamodern economy. IftheGovernment agreed withtheanalysis,
should itnotswitch toasystem ofdirect income support topoorfarmers?
33. Noting thattheservices sector contributed 58percenttoGDP, shesaidthat,consistent with
itstrade policy ingeneral, Chile wasahead ofitscommitments andasked whether Chile waswillingWT/TPR/M/28
Page8
tobinditsactual stateofliberalization inWTO. Sheexpected thatChile would putanoffer onthe
tableregarding theongoing negotiation onfinancial services attheWTO, andinvited theGovernment
tousethisopportunity togiveanindication astowhen theywould doso.
34. Shealsoasked whyChile hadnotparticipated inthePlurilateral Agreement onGovernment
Procurement.
35. Onmarketaccessfortheleastdevelopedcountries,shenotedthestatementmadeattheSingapore
Ministerial Meeting bytheChilean Minister ofEconomic Affairs, Mr.Alvaro García, that"global
welfare andworldwide security mean thatwe,theother members, must allopenupourmarkets to
[theLDCs ']exports ofgoods andservices". Sheinvited theGovernment toelaborate onthe
implementation byChile ofthisprinciple inviewoftheforthcoming High-Level Meeting onLDCs.
Shenoted thatChilean imports oftextiles weresubject tovarious charges andduties, andrugsfaced
a50percent(luxury goods) tax.
36. Finally,thediscussantagreedwiththeconcernexpressedbytheChileanauthorities(Government
Report, page6)regarding thelackofprogress overthepasttwoyears inaccession procedures: "the
accession totheWTO ofnewmembers isessential tothecontinued strengthening ofthemultilateral
trading system". Sheinvited theGovernment 'ssuggestions onhowWTO Members could improve
thescore onthisissue.WT/TPR/M/28
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IV. STATEMENT BYTHE SECOND DISCUSSANT
37. Thesecond discussant (H.E. Mr.Krirk-Krai Jirapaet) saidthatheshared theviews expressed
bythefirstdiscussant regarding Chile'sgeneral economic development. Hewould, therefore, limit
hispresentation toChile'strade policies.
38. Chile'seconomicandtradesuccesseswerearesultoftheliberalandopeneconomictradepolicies
applied sincethe1970's.Theprivatization ofstate-owned enterprises andtheliberalization ofmarkets
werethebasis forthepresent success, astheyattracted foreign investment andcreated confidence in
theChilean economy. Chile hadalsomanaged todiversify production andtrade. Forexample, Chile
traditionally depended solely oncopper exports, butin1995 Chile'strade surplus doubled inspite
oftheweak price ofcopper. Thisimplied thattheagriculture andmanufacturing sectors hadbegun
toplayamore important rolethanbefore. Chile hadalsosuccessfully diversified itsexport markets.
While theUnited States remained Chile'slargest export market, theAsian andMERCOSUR markets
hadbecome increasingly important. Hehadnoticed thatChile'sexports toAsiaweremainly destined
toJapan, andwondered whether cultural differences ordistance determined thisoutcome.
39. TherewerelessonstobelearnedfromChile'simplementationofopenregionalismanditsvarious
bilateral agreements. Heasked howtheChilean Government viewed theimpact ofthese bilateral and
regional arrangements onitsfuture traderegime, andtherelationship between these arrangements and
itsmultilateral commitments. Henoted thattheapplication ofdifferential tariffratesandrulesoforigin
among itstrading partners deserved special attention. Hewasalsointerested inhearing theauthorities '
definition of"open regionalism".
40. Incommenting onsectoral developments, thediscussant noted thatChile’snon-services GDP
hadaccounted forapproximately 40percentofthetotal, ofwhich themanufacturing sector had
contributed 48percent, mining 26.4percent, andagriculture, forestry andfisheries 24.8percent.
In1996, (according totheEconomist Intelligence Unit) therehadbeenanincrease inthemanufacturing
share innon-service sectors toapproximately 50.3percent, withaslight decline inimportance of
agriculture, forestry andfisheries, whose share fellto23.9percent. Agricultural exports hadincreased
from32percentoftotalexports in1990to37.2percentin1995, duemainly todiversification towards
more profitable cashcrops suchasfruitandvegetables, aswellastheexpansion oftheprocessing
sector. Manufacturing exports hadincreased slightly from9.7percentto11.7percent,andthetotal
value ofmanufacturing exports hadincreased by230percentin1990-96, while totalvalue added in
thesector during thesame period hadincreased byonly140percent.
41. However, hedrew attention tothefactthat(a)copper hadremained Chile'smost important
single export earner with29percentofthetotalexport in1995; and(b)there appeared tobesome
changes inthecomposition ofexport products; however, themajority ofChile’sexport earnings were
stillattributable torawmaterials andprocessed natural products. Hepointed outthatsuchdependency
onafewcommodities might dampen future economic growth because ofthelowvalue added insuch
exports.
42. Recent developments showed thattherehadbeensubstantial efforts bytheChilean Government
topromote growth inagricultural andforestry processing. Hesought clarification ontheuseofthe
simplified dutydrawback system for25percentofthevalue ofmanufactured exports, thedeferred
payment ofcustom duties, fiscal credit, andother taxbenefits fortheimportation andpurchases of
capital goods. Healsoshared thatviews ofthefirstdiscussant regarding agriculture.
43. Heobservedthattheautomotiveindustry,thoughsmallrelativetootherafore-mentionedsectors,
received special benefits under Section 0andtheexport balancing requirements oftheMotor VehicleWT/TPR/M/28
Page10
Statute. These programmes allowed theindustry tobenefit from partial ortotalreduction ofimport
duties andfiscal credit fortheuseandexportation ofnational components. Thesector wasalsosubject
tolocal-content andexport-performance requirements inrelation togovernmental assistance.
44. Henoted thatmost oftheabove-mentioned schemes were presently permitted under the
transitional period fordeveloping countries, butsome wererequired tobeamended tobeinlinewith
theexisting WTO Agreements (e.g., thesimplified dutydrawback scheme andthedeferred payment
oftaxes andduties). Heenquired about theplans oftheChilean Government tocopewiththepossible
misallocation ofresources andover-production ofsubsidized products, aswellasitsobligations in
theWTO.
45. Onthewhole, Chile employed veryfewprotective schemes formostofitsimports. Moreover,
theGovernment Report indicated thatChile wasplanning further liberalization, interalia,through
trade facilitation, which included standardization ofcustom clearance forms, increasing useofan
Electronic DataInterchange System andtheuseofasimplified regime fortemporary admission of
goods intransit.
46. However, oneofthestriking measures which heconsidered warranted clarification wasthe
authority bywhich thePresident wasempowered toestablish minimum customs values orintroduce
surcharges when itwasbelieved thattheprice ofimports might cause serious damage tothedomestic
market. Thiswasaform ofsafeguard but,according toChile’snotification totheCommittee on
Safeguard Measures, thecountry hadnoSafeguards Law. Hesought clarification regarding the
difference between thismeasure andWTO provisions.
47. Heobserved that,asaresult oftheUruguay Round, Chile hadreduced itsbound ratefrom
35percentto25percentformostproducts andto31.5percentforsome agricultural products, such
asdairy products, wheat andwheat flour, oilseeds andoleaginous fruit. Hewelcomed Chile'suniform
applied rateof11percentformost products withonlysome exceptions andtheplanforfurther
reductions. However, there weresome products subject tovarious taxandsurcharge schemes such
astheagricultural products under theprice bandmechanism, which might increase theeffective rate
ofprotection. Heasked about thepossibility ofreducing theeffective rate,andwhether Chile intended
tolimitthescope forvarying tariffs within thebound rateswhich waspossible, given thewedge between
thebound applied rates.
48. Ontheissue ofstandards andother technical requirements, thesecond discussant welcomed
thenews thatChile wasintheprocess ofpreparing abilltoestablish aninstitutional andconsistent
regulatory framework forallaspects ofnational standardization practices, which came under the
Agreement onTechnical Barriers toTrade. However, theapplication ofsanitary andphytosanitary
regulations wasstillunder theadministration ofanumber ofministries including theMinistry of
Agriculture andLivestock Service, theMinistry ofHealth, andtheNational Fisheries Service ofthe
Ministry ofEconomy, Development andReconstruction. Itwasencouraging tolearn from the
Secretariat ’sReport, thatChile wasseeking toachieve thefullest possible harmonization with
international sanitary andphytosanitary standards. Heasked whether theChilean representative could
provide some indications oftheplans andtheschedule toaccomplish suchtasks. Healsoreferred
toanumber ofbilateral agreements related tophyto- andzoo-sanitary matters which Chile hadsigned
recently. Hequestioned theneedforsuchagreements, given thatallparties weremembers oftheWTO
andwere subject totheprovisions oftheAgreement onSanitary andPhytosanitary Measures.
49. Chile wasalsointheprocess ofpassing anAnti-Dumping Lawconsistent withtheratified
WTOAgreementontheImplementationofArticleVI.ThePresidentcouldalsoapplyminimumcustoms
values under theLawonRegulation ofMerchandise Imports. Hethought itpertinent toseekclarificationWT/TPR/M/28
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onChile’simplementation ofthese provisions, particularly regarding theirconsistency withtheWTO
Agreements.
50. Heobserved thattheChilean authorities hadadmitted thatinfiveareas thenational legislation
wasconsidered inconsistent withtheWTO 'sTRIPS Agreement. Chile haduntiltheyear2000tobring
itslawandregulations intoconformity withtheTRIPS Agreement, buthewasinterested inhearing
about plans andprogress regarding these amendments.
51. While Chile notified three export subsidies schemes totheCommittee onSubsidies and
Countervailing Measures, further clarification would bewelcome onother programmes mentioned
intheSecretariat ’sReport, suchastheactivities oftheDirectorate ofExport Promotion andMarketing
Assistance (PROCHILE), andthe“Agricultural Fund”established in1995 topromote agricultural
exports withabudget ofUS$10 million in1995, andofUS$7.1 million in1996.
52. Toconclude hesaidthatChile wasintheforefront ofthedesign oftradepolicy. Ithadevidently
benefited fromadvancing itstradepolicy beyond many ofitscommitments under themultilateral trading
system, andthere wereplans forfurther liberalization. Heappreciated Chile'sefforts toputitsname
firmly onthemapofglobal trade.WT/TPR/M/28
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V. STATEMENT BYMEMBERS
53. Therepresentative ofNorway noted thatChile hadcontinued tomake efforts toimprove its
trade policy framework; ithadimplemented theWTO Agreement andhadbecome astrong defender
ofthemultilateral trading system. Chile'seconomic growth inrecent years hadbeenimpressive,
attributable innosmall waytoitstrade policies. Unilateral tariff reductions, bilateral andregional
tradeagreements, aswellasstrong support forthemultilateral trading system, hadcharacterized Chilean
tradepolicy. Atthesametime, Chile hadactively triedtoreduce itstraditional dependence onexports
ofrawmaterials andtoincrease exports ofmanufactured goods. Inmany ways Chile could beseen
asamodel tobefollowed byother countries similarly placed.
54. Hesaidthatingeneral Norwegian exporters hadfewcomplaints about thewayChile'strade
regime operated andsome hadevensaidthatitwasaseasytotradewithChile aswiththeirScandinavian
neighbours. However, hisdelegation hadseveral questions regarding Chile'strade regime, some of
which hadbeensubmitted inwriting. Inthisregard, hefirstasked whether Chile hadanyplans to
reduce unilaterally thelevelofbound tariffs.
55. Heobserved thatChilean international maritime transport policy wasbased upontheprinciple
offreedom ofmaritime navigation. However, pursuant tothe1974bilateral convention, allmaritime
transportation between Brazil andChile must withsome exceptions becarried onvessels flying the
Chilean orBrazilian flag.Inthiscontext heasked whatwerethequantity andvalue ofgoods transported
inconformity withthisagreement andwhether theChilean Government could indicate theextracosts
forbuyers/transporters associated withthelackofcompetition under theagreement; whether large
amounts ofcargo werebeing shipped viatransit countries toavoid thecargo preference rules inthe
agreement; andwhether theagreement could actually havehadanegative impact ontrade between
Chile andBrazil. Heasked whether there were anyplans torevise theagreement.
56. Therepresentative alsoasked whether improvements inlabour standards inChile werearesult
ofitseconomicdevelopment,orwhethersuchevolutionalsoreflectedabeliefthatbetterlabourstandards
could provide asounder basis foreconomic growth, ashadbeentheexperience inNorway.
57. Therepresentative ofNewZealand commended theChilean Government foritseconomic
performance, which reflected theprogressive approach ithadtaken totrade liberalization. Thiswas
evident, among other ways, inthesuccessful negotiation offree-trade agreements withMexico,
Venezuela, Ecuador, Colombia, MERCOSUR andCanada, itscommitment toAPEC anditsongoing
andplanned work toopenitseconomy totheUnited States andtotheEuropean Union. Suchabroad
sweep ofpreferential tradepartners, coupled withthepotential oftheFreeTrade AreaoftheAmericas,
suggested thatthere might onlybeasmall number ofWTO Members leftpaying thefullMFN price
ofbusiness withChile within thenextdecade orso.Hehoped thatChile'sopenattitude totrade and
economic liberalization would spread tothose lastremaining MFN partners. Thedelegate alsohoped
thatthegeneral example ofanopen approach would serve toinspire others tomove toward
comprehensive liberalization ofthemultilateral trading system.
58. Hecommended Chile foroperating arelatively lowanduniform tariffstructure, andwelcomed
plans forthefurther reduction oftheuniform tariff. Henoted, however, thatthetransparency usually
associated withsuchauniform tariff wassomewhat blurred bythedifferential treatment afforded to
various countries under thenumerous bilateral andregional agreements towhich Chile wasparty.
59. Heremarked thatsimple andtransparent controls attheborder werekeytotrade facilitation.
Thisincluded sanitary andother quality controls, especially onimports offoodstuffs. Inthisrespect
hewaspleased tolearnthatChile'snational requirements regarding labelling andmarking werebasedWT/TPR/M/28
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oninternational requirements andthat,when thatwasnotpossible, national requirements were not
intended tocreate barriers totrade. However, Chilean quality grading requirements formeatimports
denied traders theoption ofusing international norms orassessing conformity withChilean requirements
onthebasisofequivalency. While Chile'sconformity assessment requirements forquality assurance
purposes could bemet,theywere expensive forthird countries andmore difficult tomeet thanfor
Chilean nationals. Inthisrespect theyappeared tobemore trade restrictive thannecessary tofulfil
alegitimate objective.
60. Hewaspleased tonotethatChile wascurrently drafting anewcompetition lawtotakeaccount
ofthecontinued economic liberalization. Healsowelcomed Chilean planstoupdate legislation covering
anti-dumpinginvestigations,customsregulations,andintellectualproperty,inordertoensureconsistency
withWTO Agreements.
61. Therepresentative ofHong Kong, China commended Chile'sfirmcommitment tomaintain
aliberal andtransparent traderegime. Thishadnodoubt contributed toitsremarkable economic growth
since 1990. Healsopraised Chile foritsrelatively simple, easily comprehensible trade measures,
anditscontinuous efforts inunilateral trade liberalization. Thiswasevidenced byChile'sapplication
ofauniform tariff at11percentanditsplantofurther reduce therateto7or8percent.
62. Itwasunderstandable thatChile hadplaced suchemphasis onaccess ofitsgoods andservices
toforeign markets, since foreign trade amounted to90percentofitsGDP. Heremarked thatthe
number ofregional tradeagreements thathadbeenconcluded orwerebeing negotiated wasconsiderably
high. While Chile's"open regionalism" policy wasinaccordance withthespiritofGATT Article XXIV
onRTAs andshould besupported, noWTO Member should losesightoftheprimacy ofthemultilateral
trading system anditsimportance inestablishing rules anddisciplines. With anincreasing number
ofagreements, andcoverage extending tomost ofthemajor destinations ofitsexports andsources
ofitsimports, Chile would sooncome toapointwhen itwould beworth reflecting about thejustification
forretaining tariffs andother trade barriers forparties outside theRTAs. Among other advantages,
hesaidthatatrade regime withconsistent anduniform practices across-the-board would bethemost
business-friendly andincur theleastadministrative costs.
63. Therepresentative ofCanada, referring totheliberal, transparent trade regime thatChile had
maintained foralmost twodecades, saidthatitsmarket-oriented policies hadalsoencouraged an
entrepreneurial spirit andanequally strong private sector.
64. Among themany bilateral agreements signed byChile wastheCanada-Chile FreeTrade
Agreement (CCFTA), which hadentered intoforce theprevious July. Chile wastobecongratulated
foritsimplementation ofthevarious obligations under theCCFTA; thiswould leadtoamore intense
trading relationship between thetwocountries. Since theprevious TPR, bilateral tradebetween Canada
andChile, aswellasCanadian investment inChile, hadmore thandoubled. Canada hadbecome the
second largest foreign investor inChile.
65. Hecongratulated Chile foritswidespread political andeconomic reforms undertaken since
thebeginning ofthe1980s, inparticular theunilateral trade reform since 1990, which hadresulted
inanannual GDPgrowth averaging 7percentandadecline intherateofinflation from27.3percent
in1990to6.6percentin1996. Chile hadcarried outmajor public expenditure inareas suchashealth,
housing andeducation.
66. Therepresentative alsocommended Chile fortheapplication oftariffs below theWTO ceiling
binding commitments andencouraged Chile totaketheearliest opportunity tobinditstariff rateat
thelower applied rates. Heencouraged Chile toparticipate intheITA.WT/TPR/M/28
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67. Hesaidthattheencaje policy remained aconcern forCanadian investors. Theencaje related
toarequirement that30percentofforeign loanfunds mustbeplaced inanon-interest-bearing account
attheCentral Bank ofChile foroneyear. Thispolicy alsoapplied toforeign borrowings byChilean
funds.
68. Therepresentative ofJapan expressed appreciation forChile'sliberal andtransparent trade
regime andopenness toforeign direct investment, citing theuniform applied tariff rateof11percent.
Chile'sforeign investment regime wasgenerally based ontheprinciple ofnon-discrimination between
nationals andforeigners.
69. Commenting onChile'sinvestment policy, healsoreferred totheencaje scheme. TheChilean
authorities hadexplained thattheobject wastoregulate speculative inflows; however, thescheme
alsoapplied toforeign investment orfunds lentbyaforeign parent company oraforeign bank. This
raised thetotalcostofbusiness andcould discourage foreign direct investment. Heunderstood that
theChilean Government hadmade improvements tothisscheme inApril 1997, andasked iffurther
improvements were planned.
70. Hesought more details about preferential regimes forcertain regions andsectors, andasked
whether theChilean Government hadanyintention ofrevising them.
71. Therepresentative alsosought further details about Chile'sregional agreements regarding:
therelationship between theComplementarity Agreements withMexico, Bolivia, Venezuela, Colombia
andEcuador, andtheLAIA agreements. Whether thecomplementarity agreements hadbeennotified
totheWTO. How theagreement withBolivia could bejustified under Article XXIV oftheGATT
sinceitdidnotenvisage freetrade; whythephasing-out period forMERCOSUR andCanada exceeded
tenyears, given theprovisions ofArticle 3oftheUnderstanding ontheInterpretation ofArticle XXIV
oftheGATT; andwithin thecontext ofMERCOSUR whether tariffs onwheat andwheat flourwould
bereduced oreliminated, andwhether there were anyother products whose tariffs would notbe
eliminated.
72. Healsoasked forfurther information on:(i)therulesoforigin applied intheChile-Canada
Free-trade Agreement, which were based onthose ofNAFTA, but'modified 'toprovide greater
flexibility; (ii)theprohibition ontheimport ofusedautomobiles, andthecriteria forexceptions to
thisprohibition; (iii)thejustification forusing import quotas within theframework ofpreferential
trade agreements, since thiswasnotauthorized under Article XXIV oftheGATT; (iv)which foreign
products weresubject toeco-labelling; (iv)which lawenabled theoffice oftheComptroller-General
toensure theprinciples ofnon-discrimination, efficiency, transparency andintegrity forgovernment
procurement; (v)whyChile hadnotadopted theWTO Plurilateral Agreement onGovernment
Procurement andifthere were anyplans toso;and(vi)theexport promotion scheme forsalmon
conducted byCORFO andPROCHILE, andwhether PROCHILE gaveanysubsidies forpromoting
theexport ofproducts suchasfish.
73. Onintellectual property protection, heobserved thattheChilean authorities hadindicated at
leastfiveareas ofinconsistency between theChilean intellectual property legislation andtheTRIPS
Agreement andasked whether these weretobebrought intoconformity withtheTRIPS Agreement.
Healsoinquired howinfringement ofintellectual property rights were prevented andpunished.
74. Henoted thatminimum import prices forpowdered milk, sugar, rice,wheat flourandmaize
hadnotbeenappliedsince1995.HeenquiredwhetherthismeasurehadbeeneliminatedunderArticle4:2
oftheAgreement onAgriculture andwhether Chile intended tomake further useofthismeasure.WT/TPR/M/28
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75. Concerning services, heasked ifrestrictions onthepresence ofsenior andspecialized foreign
personnel could beeliminated, andsought clarification onprocedures forrenewal ofadmission. He
noted that,under theschedule ofhorizontal commitments, foreign investors werenotallowed totransfer
theircapital abroad before three years, butthatinpractice theForeign Investment Lawallowed the
transfer ofcapital oneyearafterithadbeenbrought intoChile. Heasked ifChile intended tobind
thisasaspecific commitment under theGATS. Forforeign bankbranches operating inChile, only
thecapital effectively invested inChile wastaken intoconsideration, notthatoftheparent house;
heasked whyChile maintained thisscheme andifthere wereplans torevise it.Re-insurance could
beobtained abroad provided thatthere-insurer complied withprudential requirements, suchasthe
minimum capital requirement, andheenquired whether these requirements alsoapplied todomestic
re-insurers.
76. Therepresentative oftheRepublic ofKorea saidthatheunderstood Chile could hadavoided
many ofthetrade frictions experienced byother countries because, asadeveloping country pursuing
apolicyofforward-looking,export-orientedeconomicgrowth,ithadundertakenmeasuresthatenhanced
openness andinstitutional transparency.
77. Heasked about Chile'splanstoreduce theapplied uniform advalorem tariffby3to4percentage
points. Referring totheencaje system, heasked iftheChilean Government planned toalleviate the
application ofthesystem toprotect investors. Ontheissueofgovernment procurement henoted that
foreigners without prior registration were notallowed toparticipate inpublic tenders, andasked if
theChilean Government hadanyplans toswitch toanopencompetitive tender.
78. Therepresentative ofAustralia congratulated Chile onitsnotable record ofeconomic growth,
andonitseconomic andsocial indicators. Henoted thatChile'stradepolicy wasliberal andtransparent.
Chile hadbeenaconsistent supporter intheWTO ofproposals forfurther tradeliberalization ingoods,
services andagriculture.
79. Headded thatChile wasafounding andactive member oftheCairns Group, which was
committed tofurther reform ofglobal agricultural markets inthenextround ofagriculture negotiations.
Chile wasalsoanactive member ofAPEC, themembers ofwhich hadundertaken toachieve freetrade
andinvestment intheAsiaPacific region bytheyear2020 atthelatest.
80. Therepresentative sought anassessment from theChilean authorities oftheeffect ofits
membership ofvarious overlapping preferential trade agreements, noting thattheresult might beto
introduce distortions. Australia wasalsointerested inlearning whether Chile'sproposed anti-dumping
provisions would beconsistent withthose oftheCanada-Chile FTA. Inaddition towritten questions
onpreferentialtradingagreements,therepresentativewantedtoknowwhetherChileintendedtomaintain,
under future MFN liberalization, themargins ofpreference ithadnowgranted toitsvarious FTA
partners.
81. Hewasalsointerestedintheoperationoftheprice-bandsystemapplyingtoagriculturalproducts.
Australia commended Chile fornothaving applied measures under theprice-band system forseveral
years, andasked ifChile intended toremove more products from thesystem. Finally, hesaidthat
hisGovernmenthadreceivedindicationsthatChilewasconsideringtheintroductionofaminingroyalties
tax,andwould appreciate anyinformation onChile'splans inthisrespect.
82. Therepresentative oftheEuropean Union pointed totheimprovement inincome percapita
andother social indicators, butobserved thatthese general figures could conceal other factors. He
alsonoted Chile'soutstanding tradedevelopment anddiversification oftradepatterns sincetheprevious
Trade Policy Review. Hecomplemented Chile onthesteps toward liberalization thattheyhadWT/TPR/M/28
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consistently taken andtheconsistent support thattheChileans gavetoliberalization initiatives. He
remarked ontheimportance oftheservices sector intheChilean economy, andunderlined thecountry 's
achievement intheliberalization ofbasic telecommunications. Hewasinterested inlearning when
Chile'soffer fortheongoing negotiation onfinancial services would bemade.
83. Inorder toestablish some continuity intheTPRexercise andtoseehowthings haddeveloped,
helisted aseries ofmatters thatwere raised atthelastTPRofChile in1991 andthatwere stillof
concern in1997. Intheprevious review, ithadbeensuggested thatChile might reduce bound levels
ofdutytoincrease predictability; reference hadbeenmade totheprice-band system andtheuseof
minimum customs values; there hadalsobeenquestions regarding regional trading arrangements,
and,inthelightofdiscussion atthepresent meeting heasked howChile sawtherelationship between
regional initiatives andmultilateral negotiations. Reference hadalsobeenmade ontheprevious occasion
tosanitary andphytosanitary regulations. Animport prohibition onusedcarswasstillineffect. On
theother hand export controls oncopper seemed tohavebeenremoved, awelcome development.
Reference hadalsobeenmade tothesimplified dutydrawback scheme, which wasstillanissue. The
finalmatter hadbeenthesocial costofliberalization programmes andmeasures taken torelieve poverty,
andhewasinterested inlearning more about theChilean approach.
84. Heasked whether Chile hadanyplans toexpand thecoverage ofitsGSPscheme, andwhether
there were anyplans tohelpleastdeveloped countries. Hesought information onthesteps thatthe
Chilean authorities were taking tobring theirIPRlegislation intolinewiththeTRIPS Agreement.
Patent protection forpharmaceutical products, wasofinterest; heunderstood thatlocal production
wasmainly concentrated oncopying foreign pharmaceuticals. Observing thattrademarks weregranted
fortenyears andcould onlyberenewed foronefurther ten-year period, hesaidthatthiswasnotentirely
consistent withtheTRIPS Agreement andasked when itwould bebrought intoconformity. There
appeared tobenoprotection forplant varieties, asrequired bytheTRIPS Agreement.
85. Questions hadbeensubmitted inwriting onseveral issues ofparticular interest totheEU,for
example, taxation ofalcoholic beverages, restrictions onwine imports, andtrans-shipment offish,
inparticular, swordfish, inChilean ports.
86. Therepresentative oftheUnited States alsocommended Chile foritsliberal trading policies,
citing inparticular theuniform applied tariff of11percentandthelowering orelimination ofmany
other barriers totradeinrecent years. Herequested information onthecurrent status ofplans tofurther
reduce tariffs andtowhatextent wasChile prepared tobindthese reductions. TheGovernment had
alsosought tomitigate many internal factors thatonceacted torestrict Chile'scompetitiveness in
international markets. Chile'seconomic andsocial reforms hadhadpositive effects onitsparticipation
intheglobaltradingsystem.ChilehadfollowedanexemplarypathinhonouringitsWTOcommitments.
87. Herequestedinformationregardingthemaintenanceofthe30percentcashreserverequirement,
which could beapotential hardship toforeign investors. Heenquired about Chile'splans toeliminate
theTRIM intheautosector. Healsoasked whether Chile'smembership oftheWorld Bank's
International Centre fortheSettlement ofInvestment Disputes, meant thatChile wasprepared tooffer
anautomatic, unconditional righttointernational arbitration inthecaseofsuchdisputes.
88. Therepresentative sought confirmation thatChile didnotuserulesoforigin fornon-preferential
purposes, anddidnotrequire acertificate oforigin forimports receiving MFN treatment. Additionally,
heasked Chile toidentify thepreferential regimes forwhich cumulation ofcontent wasallowed for
purposes ofmeeting therules oforigin, andthespecific level ofchange intariff classification (i.e.
change ofheading, change ofsubheading) required when suchamethodology wasusedforpreferential
rules oforigin.WT/TPR/M/28
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89. According totheSecretariat Report, duties under theprice-band system wereapplied within
thelimits ofthe31.5percentceiling binding forcertain agricultural goods. Asaresult, nominal
protection andtheEffective Protection Rate(EPR) forwheat hadbeenhigher thantheuniform tariff.
Heasked ifChile wastaking anystepstoensure thatthelevelofprotection didnotexceed thebound
rate. Heinquired whether changes inChile'sexcise taxstructure could beexpected toreduce to
non-discriminatory levels thedifferential between locally produced pisco, andimported whisky, rum
andother distilled liquors. While Chile'ssanitary andphytosanitary regulations were apparently
consistent withinternational standards, Chile hadnotprovided anyinformation onwhether imports
were accorded "national" treatment asrequired under Article IIIoftheGATT 1994 andtheSPS
Agreement. Heremained concerned thatpoultry exports toChile wererequired tomeeta10percent
salmonella tolerance while itwasunclear ifdomestic Chilean poultry wasalsorequired tomeetthis
tolerance. Heasked howChile ensured thatalldomestic producers metthatrequirement.
90. Henoted thatinitsSPSnotification, Chile indicated thatithadattempted todraftcomprehensive
foodstandards inlinewiththeCodex Alimentarius. These standards weresettoenter intoforce on
9November 1997. Although thenotification comment period ended on15July1997, theUnited States
hadrequestedandbeengranteda45-dayextension,to29August1997.However,whilehisGovernment
hadsubmitted extensive comments onareas ofinterest, theyhadnotyetreceived aresponse. He
expected thatChile would takeallcomments intoaccount priortotheadoption ofitsfinalregulations,
asrequired under theWTO.
91. Therepresentative alsovoiced concern thatChile didnotallow imports ofU.S.wheat, even
when accompanied byUSDA certification thatsuchshipments werefreeofthefungus Karnal Bunt,
butimposed additional sourcing andtesting requirements. Inbilateral consultations, hisauthorities
hadprovided evidence thatChile'srequirements weremore restrictive thanwasnecessary toensure
thatitsplanthealth objectives wereachieved. Heurged Chile toensure thatitsdecisions onthisissue
werebased onthescientific evidence anddidnotimpose unnecessary restrictions oninternational trade.
92. Healsorequested clarification ofChile'sintentions astothetermofpatents, andthestatus
ofprotection forsemi-conductor mask works. Hesought clarification ontheexistence ofcopyright
protection forcomputer software andencrypted satellite signals. Heenquired whether rental and
importation rights ofcopyright holders were alsoprotected.
93. Thehorizontal section ofChile'sGATS schedule contained limitations onmode 3(commercial
presence), related tovarious criteria onemployment, industrial andtechnological development, domestic
competitiveness andChile'sintegration intotheworld economy. While thesewerecommendable goals
inandofthemselves, theyappeared toseriously undermine thecommercial value andpredictability
ofChile'ssectoral commitments intheGATS. Hewasinterested inlearning about Chile'sintentions
andthetimetable foreliminating thishorizontal restriction. According totheSecretariat Report, Chile
inpractice currently offered better conditions thanthose stipulated intheirschedule ofcommitments,
heenquired whether Chile hadplans tobring itsGATS schedule intolineatleastwithexisting practice.
94. Oncorelabour standards, heremarked that,since 1989, anumber oflegislative reforms had
beenenactedremovingpreviousrestrictionsonworkerrights.Forexample,1991amendmentspermitted
theformation ofnational union confederations. Heunderstood thatadditional labour reform legislation
wasnowbeing considered bytheChilean Congress. HisGovernment wasinterested inknowing the
status ofthatlegislation.
95. Therepresentative ofColombia commended Chile'smacroeconomic performance; thiswas
good news notonlyforChile, butalsoforitsneighbours andtrade partners. Chile wasimportantWT/TPR/M/28
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forColombia asatrading partner andaninvestor, withasubstantial increase intrade resulting from
thefree-trade agreement.
96. Therepresentative ofBrazil noted thatinflation hadbeenbrought down, butthatcertain forms
ofindexation persisted; heasked about theindexation mechanisms andtheiruse. Hesought more
information about Chile'splans toreduce theuniform tariff, andmore specifically, ontheexpected
impact ofthisreduction onChile'spreferential agreements. Heasked ifChile hadanymethodology
forharmonizing theapplication ofrules oforigin. Healsoasked about plans tobring theuseof
minimum prices intolinewithWTO customs valuation procedures. Hewasinterested inlearning about
anyintentions tobring theagricultural andtextiles sectors intolinewiththegoals evolved inthe
Uruguay Round andenquired about Chile'sproposals intheareaofanti-dumping.
97. Therepresentative ofArgentina saidthatChile'seconomic history showed successful insertion
intheinternational economy, thanks todisciplined, intelligent andtimely macroeconomic policies;
thisencouraging experience should beanexample forother countries.
98. Therepresentative ofSwitzerland noted theprofound transformation oftheChilean economy
intheprevious 20years, from import substitution toadevelopment strategy based onanexpansion
ofmarkets through export promotion, theencouragement ofprivate investment, andmacroeconomic
stabilization. Thesuccess ofthestrategy wasevident. Hecongratulated Chile forcontinuing theprocess
ofunilateral trade liberalization, which hadalsoconsiderably benefited itspartners through increased
market opportunities. Hementioned themany bilateral agreements thatChile hadnegotiated since
1990, aswellasthose thatthecountry wasinprocess ofnegotiating anditsactive roleinAPEC.
Inthisrespect, heasked whatrepercussions theagreement withMERCOSUR wasexpected tohave
onChilean import duties.
99. Therepresentative oftheCzech Republic noted theincrease intrade between hiscountry and
Chile; thevolume ofimports fromChile hadgrown during thelastfiveyears by350percent,while
Czech exports hadincreased by210percentinthesame period. With averylimited number of
exceptions, Chilean foreign trade policy wasfullyliberalized andCzech exporters didnotfaceany
burdensome non-tariff barriers indealing withtheirChilean tradepartners. Heconsidered thatasingle
procurement system orprocedure would facilitate access toCzech entrepreneurs, andenquired whether
theChilean authorities intended todraftsome newunifying legislation inthisarea. Thenumber of
preferential tradeagreements inwhich Chile tookpartwasimpressive. Heasked ifChile could elaborate
onfurther plans forcooperation withtheEuropean Union.
100. TherepresentativeoftheSlovakRepublicnotedthattherelativelyopenforeigndirectinvestment
policy, combined withsound macroeconomic policies, hadcontributed substantially tooutstanding
macroeconomic performance. Hewelcomed theGovernment 'sintention toreduce further theuniform
tariff andasked ifthiswould alsomean areduction ofthe25percentlevelofceiling bindings. He
considered thatdiversifying production andexports towards higher value added would benecessary
tosustain thecurrent level ofgrowth oftheeconomy. Harmonization ofrules oforigin among
preferential agreements would beapositive step. Hesaidthatonlyafewrestrictive elements in
agricultureandintheautomotiveindustrydiminishedtheneutralityoftheappliedtariffandhaddistortive
effects. Anopen, liberal approach intheservices sector, especially inbanking andtelecommunications,
would alsobring about improvements ininfrastructure performance.
101. TherepresentativeofIndiacommendedChile'seconomicreformandtradeliberalizationpolicies,
noting thephenomenal ratesofgrowth, thelowlevels ofunemployment andthehighlevels ofdomestic
savings andinvestment. Theuniform tariff provided apredictable andtransparent trading system;
hewelcomed Chile'sintention toreduce itsMFN tariff. However, tariff neutrality, which hadbeenWT/TPR/M/28
Page19
maintained forsome years, wassomewhat diminished because ofthedifferential tarifftreatment under
regional arrangements andthedifferent rules oforigin being followed under these arrangements. It
would beinChile'slong-term interest todiversify itsexports andtoexpand intovalue-added sectors.
102. Therepresentative ofEgypt saidthattheSingapore Declaration clearly stated thattheWTO
hadnothing todowiththeissue oflabour standards, therefore itwasnotthefunction oftheTPRB
oranyother WTO body toexamine theissue.
103. Therepresentative ofHungary noted Chile'seconomic success anditsactive roleasamember
oftheWTO. Heappreciated Chile'sefforts inthemultilateral liberalization oftrade inagricultural
goods asamember oftheCairns group. Hecontrasted thiswiththedualism intheChilean agricultural
sector. Helooked forward toreceiving theChilean offer intheongoing negotiations onfinancial
services, andhoped thatHungarian exporters would inthefuture takeadvantage oftheopen, growing
Chilean market.WT/TPR/M/28
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VI. REPLIES BYTHE REPRESENTATIVE OFCHILE AND ADDITIONAL COMMENTS
104. TheChairperson invited therepresentative ofChile tofocus hisresponses onfourmainthemes:
(i)macroeconomic issues; (ii)thebalance inChile'strade policies among multilateral, regional and
bilateral approaches; (iii)adiscussion ofspecific trade-related measures andpolicies; and(iv)sectoral
elements oftrade policies.
(i) Macroeconomic issues
105. Therepresentative ofChile noted that,asalready mentioned intheGovernment Report, the
authorities 'objective wastoattain growth withequity. Thishadresulted inincome growth anda
decrease inthenumber ofpeople under thepoverty line. However, income distribution remained
unchanged. Toreduce thisinequality, theGovernment planned tocontinue toinvest ineducation,
health andhousing. Heexplained thattherapid growth experienced byChile waspartly duetothe
highrates ofsavings andinvestment; average investment for1991-96 was25.6percentofGDP.
Thiswasmainly domestic, withpublic investment accounting foralmost onequarter, hence reliance
onforeign financing waslow.Regarding thesocial anddistributive impact oftheliberalization process,
while liberalization hadbenefited thecountry asawhole, theimpact uponthedifferent income strata
hadvaried. Social policy hadafundamental roleinsmoothing outtheeffects ofopening uptheeconomy.
Infact,oneoftheGovernment 'spriorities wastoensure thatthebenefits oftheprocess ofliberalization
would befairly distributed among thepopulation. Inresponse tothequestion posed byBrazil regarding
theindexation mechanism, hesaidthatinflation hadbeencontrolled through theadoption ofappropriate
monetary andfiscal policies. Indexation, which wasnowreduced, hadbeenaffected through theuse
ofindexed contracts established inUF(Unidad deFomento ),adjusted daily according toexpected
inflation, nottopastinflation. However, theCentral Bank wastaking thefirststeps towards the
de-indexation ofthecurrency byissuing nominal paper.
106. While copper wasstillthemajor export product, inthelasttwodecades bothexport products
andmarkets haddiversified: in1991-96 thenumber ofexported items increased from2,796 to3,886,
andthenumber ofmarkets from122to167. CODELCO, astate-owned enterprise runonefficiency
principles, wasthemajor producer andcopper marketing company inChile. Given theimportance
ofCODELCO 'sprofits inthenational budget, astabilization fundhadbeencreated asabuffer against
international price fluctuations. Thismechanism worked asexplained intheSecretariat Report. The
reserve requirement forincoming capital wasacentral element ofthemacroeconomic stabilization
policy; theobjective wastodiscourage speculative capital movements. Theauthorities considered
thatthisincreased stability intheeconomy and,thus, reduced therisksformedium- andlong-term
investments.
107. TheChairperson commented onfourissues. First, henoted thatinthelasttwoadministrations
Chile hadstressed growth withequity, anissueofimportance toeveryone today. Second, hethanked
theChilean delegation fortheexplanation regarding theindexation mechanism thattheyused, which
hadbeendesigned toeliminate theinertial component ofinflation. Hefound theexplanation given
bytheauthoritiesonCODELCOandthestabilizationfundespeciallyinteresting,sincethiswasaclassical
theme incountries relying onprimary exports which were subject toprice fluctuations. Chile had
gonefromtheclassical viewofinter-governmental commodity agreements toaresponse thattookinto
consideration thespecificity ofthemarket. Ontheissue oftheencaje ,henoted thatthevolatility of
capital andtheprudential reasoning thatunderscored theChilean position wasapositive approach to
aglobal, systemic problem.
108. Thefirstdiscussant saidthattheChilean explanation oftheencaje wasveryimportant, since
market stability wasintheinterest ofinvestors. Sheagain commended theGovernment foritsWT/TPR/M/28
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acknowledgement thattherewerecostsandbenefits ofliberalization todifferent groups ofthepopulation
andforitsefforts toredistribute thebenefits evenly among thepopulation, eventhough, sheconcluded,
ontheincome distribution sidetheChilean experience hadnotyetdelivered.
109. Therepresentative ofCanada saidthathehadunderstood thepoint made bytheauthorities
regarding theprudential reasons andvolatility fortheencaje .Nevertheless, hewanted tohighlight
theadditional costimposed byhaving todeposit thisamount ofmoney without anytypeofinterest
orcompensation fortheyearandquestioned whynointerest waspaid.
110. Therepresentative ofJapan alsonoted thattheencaje increased thetotalcostofbusiness
discouraging foreign direct investment andasked theChilean Government tothink again about the
system.
111. Inresponse, therepresentative ofChile saidthattheencaje wasameasure toensure that
speculative capital didnotcome intothecountry totakeadvantage ofdomestic interest rateswhich
were higher thanthose thatprevailed intheinternational markets. Without thismeasure, itwould
notbepossible tomaintain higher interest ratestoensure monetary stability. Themeasure heldfor
onlyoneyearforincoming portfolio investment, butwasnotapplicable toforeign direct investment
and,hence, didnotimpose anadditional costtoforeign direct investors. Moreover, theinvestor did
notnecessarily havetoputthe30percentinChile, buthadthechoice ofpaying thefinancial costs
ofencaje andcould make useofthefunds asfrom thedaytheyentered thecountry. Hestressed
thattheGovernment wasnotappropriating thismoney forother useanditwasavailable atanytime.
(ii) Thebalance inChile'strade policies among multilateral, regional andbilateral approaches
112. Therepresentative ofChile reiterated thatChile'spriority wasmultilateralism, which was
themostefficient wayofliberalization andofavoided distortions. Thisexplained Chile'sinterest in
thenewround ofmultilateral negotiations. However, Chile didnotexpect fullmultilateral liberalization;
hence, bilateral andsub-regional agreements wereseenasanecessary complement tothemultilateral
processes, allowing more rapid progress towards opening uptheeconomy, while ensuring improved
market access. Moreover, thepattern ofregional trade implied that,ifChile didnottakepartinthese
agreements, itsexports would beatadisadvantage. Healsonoted that,inLatin America, trade
agreementsalsohadapoliticalconnotation,particularlyinthecaseofMERCOSUR.Inaddition,opening
uptheeconomy through trade agreements entailed certain disciplines andopened thepossibility of
using adispute settlement mechanism toresolve mutual problems. Hedefined theconcept ofopen
regionalism asunderstood bytheChilean Government. Suchagreements allowed Chile tonegotiate
independently withother WTO Members; theagreements should notincrease thelevelofprotection
tothirdparties, hence thequality oftherulesoforigin wascrucial; andother countries should also
benefit fromtheconcessions negotiated byChile, inconditions ofequality andreciprocity. Headded
thatChile'sfree-trade agreements envisaged theelimination ofimport duties andothertraderestrictions.
Most reciprocal trade under these agreements would beliberalized within tenyears, butforcertain
sensitive goods alonger period wasforeseen. Heclarified thattheagreement withSouth American
countries andMexico were Agreements ofEconomic Complementarity, covered bytheTreaty of
Montevideo of1980, which formed theLatin American Integration Association (LAIA). These
agreements hadbeennotified totheCommittee onTrade andDevelopment under theEnabling Clause.
Some free-trade agreements provided fortheuseofpreferential quotas, meaning thatthepreference
applied onlytothatquota. Imports above thisquota would paytheMFN applied tariff rate.
113. Heconfirmed thatChile didnotapply non-preferential rules oforigin. Allitsfree-trade
agreements allowed fortheaccumulation principle inmeeting origin requirements. Thespecific level
ofchange intariff classification varied byproduct. Therules oforigin inthefree-trade agreementWT/TPR/M/28
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withCanada wereNAFTA rules, which weremore flexible forallproducts except textiles, clothing,
footwear andplastics. Flexibility wasadded totherules oforigin byallowing change oftariff
classification atthesub-tariff levelandbyreducing thevalue ofregional content.
114. Therepresentative ofUruguay considered thattherecould beproblems when acountry entered
intoandparticipated indifferent trading agreements; theprovisions ofoneagreement andanother
might notbe100percentcompatible. Heasked theChilean delegation howChile dealtwithsuch
problems. Inreply, therepresentative ofChile saidthattheycould notofferasolution, butinitstrade
agreements Chile hadattempted tousethestructure oftheWTO, sothatthedisciplines would befully
consistent withthemultilateral disciplines. Chile hadalsomade aneffort tostickasclosely aspossible
toatypeofagreement which would beinharmony withother agreements, thusavoiding problems
ofconflict. Herecognized, however, thattherewerecases where tension might begenerated because
ofthelackofharmony incertain details ofdifferent agreements. Inhispersonal opinion theproblem
could berelated totheolder institutions inLatin America foreconomic integration; these needed to
berevised inthelightoftheextended quality andscope ofthenewtrading agreements.
115. Therepresentative ofAustralia referred tothesometimes difficult relationship ofliberalization
through multilateral liberalization andthrough preferential agreements andasked whatChile thought
about theneedtopreserve preferential margins under thefree-trade agreements. Inresponse, the
representative ofChile pointed outthatChile'spolicy hadnotbeenoneofnegotiating agreements in
order toobtain access toothermarkets andpreserve preferential markets indefinitely. Chile'spreference
wastoopenuptheeconomy while seeking access toother markets, butnotthrough instruments that
would freeze preferential margins. Despite thenumber ofexisting agreements andthose under
negotiation, Chile wasstillkeenly interested inlaunching negotiations inthehemisphere tosetaFree
Trade Area oftheAmericas andtocomply withAPEC. Inthiscontext, healsorecalled the
Government 'sintention ofreducing tariffs further. Thisshowed thatChile'sengagement inbilateral
andregional liberalization waswithin awider framework ofopenness, notintended tofreeze markets.
116. TheChairperson observed thatChile hadclearly emphasized itscommitment tothemultilateral
trading system. Chile hadalsounderlined thattherelationships inLatin America, specifically in
SouthAmerica,madebothdemocracyandopeneconomiesaconvergenttheme.Thiswasveryimportant
because there could benotrade without peaceful conditions andtheissue ofpeace intheregion was
related totheintermingling ofthistwothemes.
(iii) Specific trade-related measures andpolicies
117. Inresponse toquestions posed bytheNorwegian andCanadian delegations regarding the
difference between thebound rateandtheapplied tariff, theChilean representative saidthatthebound
raterepresented abalance between Chile'srights andobligations negotiated during theUruguay Round.
HesaidthattheChilean Government hadprepared adraft law,tobesenttoCongress, which
contemplated thereduction oftheapplied tariff from 11to8percent. Thismeasure required full
compensation oftheforgone fiscal revenue, inorder toguarantee thecontinuation ofthesocial
programmes.
118. Ondomestic taxes onliquor hesaidthatadraftbillbefore Congress, proposed ataxthatdid
notdistinguish among liquors butwhich would varyaccording tothealcohol content. Thedraftbill
hadalready beenapproved intheChamber ofDeputies andwasbeing discussed intheSenate.
119. Inresponse toquestions fromNewZealand andHong Kong China regarding customs valuation,
hesaidthatLawNo.18,525 established customs valuation norms similar tothose intheWTO Customs
Valuation Agreement, namely thatthenormal customs value wasthe"transaction value". However,WT/TPR/M/28
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Chile hadinvoked thedispositions ofArticle XX,paragraphs 2,3,and4ofAnnex IIIoftheCustoms
Valuation Agreement topostpone theapplication ofthisAgreement. Minimum customs values, could
onlybeapplied bythePresident oftheRepublic iftheCommission incharge ofinvestigating the
existence ofdistortions inthepriceofimported merchandise sorecommended following thecompletion
ofaninvestigation. Minimum values could onlybeapplied foroneyearandcould beapplied inany
sector oftheeconomy. From 1January 2000, Chile would apply theWTO Customs Valuation
Agreement; Chile wasalready applying WTO customs valuation procedures initstrade withCanada
andMERCOSUR.
120. Hestated thattheWTO Agreements, andLaw18,525 anditsregulations governed therules
andprocedures inanti-dumping andcountervailing cases inChile. Adraftbillbefore theCongress
wasintended tomake some parts oftheAgreements onSubsidies andCountervailing Measures
operational. Forinstance, itwould establish asystem ofadministrative review, establish shorter time
periods foraccelerated investigations, allow forthereimbursement ofpaidduties, andestablish a
maximum of150daystoundertake aninvestigation. Thisdraftbillwasinaccordance withtheWTO
Agreements. Thebillhadalready beenapproved intheChamber ofDeputies andwasbeing discussed
intheSenate. Headded thatanti-dumping andcountervailing duties could onlybeimposed foroneyear.
121. ThetariffsurchargesmentionedinLawNo.18,525couldbeappliedwhentherewasacomplaint
thatgrowing imports withdistorted prices wereaffecting domestic production andcausing serious injury
(grave daño).Thismeasure toocould onlybeimposed foroneyear, thesurcharge plustheapplied
tariff could notexceed thebound tariff rates, anditwasapplied onanMFN basis. Hepointed out
thatthissurcharge didnotconstitute asafeguard inthesense ofArticle XIXofGATT 1994, because
itcould notexceed thebound rate. Since 1991, onlythree surcharges hadbeenapplied, andnone
since 1993. Heemphasized thatChile hadnodomestic legislation toapply thesafeguards inthesense
ofArticle XIX.
122. Therepresentative ofParaguay asked whether thesurcharge wasapplicable toallcountries
inrespect toagiven product orifitwasapplicable onlytothatcountry which intheopinion ofthe
Chilean authorities gaverisetothedistortion. Therepresentative ofChile answered thatthesurcharge
applied toallcountries except those withwhich Chile hadentered intofree-trade agreements.
123. Inresponse toquestions posed byCanada, Hong Kong China, Japan, Korea andNorway on
government procurement, therepresentative saidthatgovernment procurement wasdecentralized to
giveflexibility topublic agents; thesystem wastransparent andnon-discriminatory; itensured equal
opportunity fordomestic andforeign suppliers; andthere werenoinstructions thatastateenterprise
oragency hadtogivepreference toadomestic product. Thus, Chile fullysubscribed totheprinciples
oftransparency andnon-discrimination. Stateenterprises inChile weresetupbylawwiththeobligation
toself-finance, andweresubject totaxes aswereallother enterprises. Chile didnotwanttoburden
suchstateenterprises, which hadtocompete withprivate enterprises, withgreater administrative costs
related topreferences incertain tendering andbidding procedures. Chile wasaunitary State; thus
theserulesandstandards applied across thewhole economy andtoallstateagencies. TheGovernment
Procurement Agreement waslessthanperfect, since itsscope waslimited anditdidnotgivefull
guarantee ofMFN treatment atthestateorsub-federal level. IfthisAgreement were tobeapplied
across-the-board tothepublic sector inChile, itwould force theauthorities toundo theefforts they
hadmade towards decentralization. Hence, foracountry asopen asChile, thecostofsigning the
GPA asitstood would exceed anypossible benefit. IftheAgreement were tobemodified ina
favourable direction, Chile might revise itsposition.
124. Inresponse tothequestion posed bytheEuropean Union regarding wine, hesaidthatChilean
wines reached analcoholic level of11.5percentwithout anytreatment, hence, in1985, thislevelWT/TPR/M/28
Page24
hadbeenestablished astheminimum alcohol content. Inorder totreatbothdomestic andimported
wines equally, thisstandard wasalsoapplied toforeign wines.
125. Regarding thetechnical standards applied tomeat, hesaidthatthelawdidnotpretend todefine
quality but,rather, toclarify origin; thelawhadbeenadopted toprotect consumers. Chilean producers
demanded thattherequirement apply equally toimported meat. Henoted thatquality standards were
notgenerally accepted inthisarea. Meat imports nowaccounted foruptoonethird ofnational
consumption. Onsanitary standards forpoultry, hesaidthat93percentofpoultry meat produced
inChile showed lessthan10percentprevalence ofsalmonella andthesame standard wasapplied
toimports. Imports ofwheat from theUnited States were notprohibited, butChile hadrequired a
health certificate since theappearance ofKarnal BuntintheUnited States. TheUnited States was
apparently onlyabletocertify thatwheat originated in"areas where there wasnoKarnal Bunt", not
thatspecific shipments were unaffected; Chile considered thistobeinsufficient.
126. Chilean legislation didnotprovide forpreferential regimes forthedifferent sectors, other than
under theAutomotive Statute, whose benefits hadbeendiminishing withtime. There were some
measures applied totheextreme zones ofthecountry inorder topromote development intheseisolated
areas. However, none ofthese programmes discriminated between nationals andforeigners. Such
measures included customs facilitation, andinvestment andtaxincentives. Thetwofreezones were
partofthese programmes; bothindustrial andcommercial activities tookplace inthezones.
127. Thesimplified drawback system topromote exports covered onlyminor exports (i.e.annual
exports ofamaximum value ofUS$5 million); thesystem would berevised toeliminate thesubsidy
component which hadarisen duetotheunilateral reduction oftariffs. Thismechanism applied toall
sectors oftheeconomy. Thesystem ofdeferred payment ofduties forcapital goods onlyconstituted
asubsidy ifthedebtwasforgiven when thecapital good wasusedtoproduce exportable goods and
services. PROCHILE wasaunitwithin theGeneral Directorate ofEconomic Relations oftheMinistry
ofForeign Affairs; itsrolewastopromote exports, forinstance, through commercial attachés abroad,
information andadvertisement campaigns, trade shows, etc.PROCHILE 'sservices didnotdepend
uponexport performance. PROCHILE andtheMinistry ofAgriculture administered theAgriculture
Promotion Fund.
128. Thefirstdiscussant noted thatinthecaseofChile theexport processing zones mainly attracted
marketing companies, which didnotproduce much employment. Sheasked about theeffectiveness
ofthepolicy.
129. Therepresentative oftheEuropean Union thanked theChilean delegation forthereplies on
taxation onalcoholic beverages. Hehoped thatthelegislation would bepassed expeditiously bythe
Senate. Hesought more information regarding restrictions onwineimports andsaidthattheEUwould
continue bilateral discussions onthismatter.
130. Therepresentative ofNewZealand thanked theChilean delegation fortheresponse onSPS
standards regarding meat, andnoted thatanimportant component ofhisquestion concerned the
relationship between theChilean system andinternational requirements. Herequested awritten response
focusing onthiscomponent.
131. Therepresentative ofChile saidthatsome answers would beprovided inwriting, butexplained
thatmeatclassification onwasnotasanitary orphytosanitary requirement, butatechnical standard.
132. Inresponse tothecomments fromthesecond discussant andthequestions posed byCanada,
theEuropean Union, andJapan regarding Chile'stimetable toputitsdomestic legislation onintellectualWT/TPR/M/28
Page25
propertyrightsintoconformitywiththeTRIPSagreement,therepresentativeofChilesaidthatsignificant
progress hadbeenmade regarding industrial property andauthor 'srights. However, somelegalchanges
werestillrequired, including clarification ofdomestic norms aswellasthecreation ofcertain legal
bodies. Thefirststep,toidentify areas where changes wererequired, hadalready beenaccomplished.
Thesecond stage, which wasunder way,entailed studying thedifferent areaswhich required redrafting
oftherelevant legislation; thiswould befinalized before 1January 2000, when Chile'sintellectual
property legislation would befullyinaccordance withtheTRIPS Agreement. Cases ofinfringement
ofintellectual property rights fellwithin thecompetence oftheordinary criminal courts. Dataonthe
number ofarrests ortrials inthisareawere notreadily available.
133. Inresponse tothequestions posed bytheEuropean Union, theChilean representative saidthat
trade marks inChile could berenewed indefinitely forten-year periods. Chilean LawNo.19,342
of3November 1994 afforded protection forplant varieties. Theindustrial property lawprovided
protection forinventions already patented abroad orwhich hadapatent application pending abroad,
provided thattheoriginal application, onwhich theapplication made inChile would bebased, was
dated after30September 1991 (thedateonwhich thecurrent lawentered intoforce inChile). In
response toquestions from theUnited States, hesaidthatLawNo.17,336 protected computer
programmes. There wasnoexplicit protection forintegrated circuit layouts, butthesecould beprotected
bymeans ofapatent iftheymetpatentability requirements. Regarding coded satellite signals, hesaid
thatradio andtelevision transmission weredulyprotected through thecopyright legislation asarelated
right. However, itwasnotanoffence todecode scrambled satellite transmissions, butinanycase,
theproblem didnotexistinChile. Astoleasing andimporting foraholder ofcopyrights, thisright
wasprotected expressly inthecaseofproducers ofphonograms; therewasabroad rightofdistribution
inother cases.
134. Hesaidadraftbillhadbeenprepared tomodernize theinstitutions thatdealtwithcompetition
andtheLawof1973.
(iv) Sectoral elements oftrade policies
135. Therepresentative ofChile said, inresponse toquestions from Australia, Canada, the
European Union, andtheUnited States, thattheprice-band mechanism wasdesigned tobuffer the
domestic market from international price fluctuations. Themechanism hadbeenapplied since the
mid-1980s towheat, wheat flour, edible vegetable oilandsugar. Aconsiderable share ofdomestic
demand forsuchproducts wasmetbyimports, demonstrating thattheprice-band mechanism wasnot
designed toblock imports. Given themethodology forcalculating thetariff surcharge orrebate, it
wasimpossible forthetotalvalue ofthedutytoexceed thebound rateof31.5percent. Thebound
ratefordairy products wastheresult oftheUruguay Round negotiations. Given thesensitivity of
these products, ithadbeenconsidered necessary tobindatthishigher rate,especially asduring the
negotiations, major exporters hadnotremoved theirhighsubsidies.
136. TheGovernment operated threeprogrammes tosupport irrigation through: (i)thepromotion
ofprivate investment; (ii)thereconstruction andrehabilitation ofmedium andsmall irrigation projects
tobroaden access toirrigation; and(iii)thepromotion ofbigger projects toirrigate newareas. In
allcases, water waspaidforbytheproducer. Another programme, co-financed withtheprivate sector,
wasaimed attheregeneration ofsoilproductivity.
137. Theprice forsugar beetwassetbyIANSA, aprivate enterprise, indirect negotiation with
theproducers; there wasnogovernment intervention inthisprocess.WT/TPR/M/28
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138. Inresponse toquestions regarding theautomotive sector, therepresentative saidthat
LawNo.18,483 covered the"export compensation programme" which made itpossible forassemblers
ofvehicles toimport parts without paying thetariff when itcould beshown thattheyhadexported
anamount equivalent totheirimports. Theuseofsection "0"wasintended toidentify theparts or
components forcompanies importing under thesystem. Infact,onlythreeautomotive companies were
benefitingfromthisprogramme,buttheprogrammewastobedismantledbytheyear2000inaccordance
withtheWTO Agreements.
139. Forenvironmental reasons theprohibition ontheimport ofusedcarswasnottobeeliminated.
There were some exceptions tothismeasure, forinstance ambulances.
140. Inthelastseven years, thelegalframework fortelecommunications, infrastructure, transport
and,more recently, thefinancial sector hadbeenreformed topromote theoverall productivity ofthe
Chilean economy. Intelecommunications, thereform hadbegun in1985withtheprivatization ofthe
localandinternational telephone companies. Thepresent regulatory framework could besummarized
asfollows: (i)separation between theregulatory roleoftheState andtheentrepreneurial function
oftheprivate sector; (ii)freecompetition; (iii)dismantling ofbarriers toforeign direct investment
ortotheimport ofequipment; (iv)regulation ofinterconnection services among concessionaires;
and(v)establishment ofamulti-carrier system forlong-distance international callsin1994. Asa
result ofthisreform, thenumber oflineshadincreased substantially andinternational tariff rateshad
decreased by50percent. Chilean legislation onmaritime transportation wasbased ontheprinciple
ofreciprocity. Chile could onlyapply cargo reserve measures asaresponse toameasure applied by
another country.
141. Recalling Chile'sactive participation inthevarious services negotiations, heemphasized that
Chile hadmaintained itslistofcommitments infinancial services attheendoftheUruguay Round,
andin1995 improved itseffort during thefinancial service negotiations. Inthecurrent negotiations
Chile wasworking onaconditional offerwhich could bepresented inOctober. Intelecommunications,
Chile hadassumed commitments infullrespect oftheprinciple ofnon-discrimination ininternational
telephony, reflecting itsopenregime initsschedule ofcommitments; asadditional commitments, Chile
hadincorporated thewhole reference paper. Inmaritime transport, Chile hadalsoparticipated actively
intheprocess, submitting aconditional offer.
142. Chile waswilling toparticipate andcontribute totheprocess ofservices negotiations thatwould
permit progressive liberalization onamultilateral, plurilateral andbilateral basis. However, Chile
wasonlyready toassume commitments inthese areas insofar asitobtained equivalent concessions
fromitstrading partners. Chile'spresent schedule ofcommitments forservices intheWTO contained
alimited number ofMFN exemptions, reflecting thisguiding principle.
143. Therepresentative ofCanada sought clarification astohowChile planned tohelpagricultural
exports adjust tomore demanding markets, improve farmmanagement, modernize thefarmsystem
andimprove datacollection methods. Henoted thattheChilean delegate hadreferred toanagricultural
promotion production system under Prochile andasked ifthiswasthesystem tobeusedtoimprove
andmodernize management atthefarmlevel, orifthere wasamuch broader promotion programme.
Hesought further details onthethree export subsidies notified totheWTO.
144. Therepresentative ofAustralia sought information ofthestateofdiscussions onthemining
royalty tax.
145. Thesecond discussant saidthat,coming fromanASEAN country, heunderstood whycountries
cooperated, buthenoticed thatthiswasalengthy process which needed alotofeffort. InthisprocessWT/TPR/M/28
Page27
there might besome unintentional discrimination against outsiders. Hehoped thatChile would not
betoooccupied withtheregional cooperation process attheexpense ofcountries outside theregion,
particularly inAsia. Heasked whatsortofmeasures Chile usedtopromote tradewithAsian countries
other thanJapan. Onanti-dumping hesaidthathehadheard complaints about countries initiating
investigations andcreating aharassment effect oncountries being imposed withthese measures. He
therefore suggested that,inpreparing thenewanti-dumping law,Chile might consider making initiation
ofanyanti-dumping investigation more difficult andmaking theprocess fairer toexporters.
146. Onthepoints raised byCanada, therepresentative ofChile saidthattheywould beanswered
inwriting andbilaterally. Concerning themining royalty taxhesaidthathehadnoinformation
regarding thetaxatpresent. Inresponse tothesecond discussants 'points, heanswered thatChile
would notcontinue along theroadofliberalization attheexpense ofother trading partners, andsaid
thatChile attached ahighpriority totheprocess ofliberalization towhich itwascommitted within
APEC.WT/TPR/M/28
Page28
VII. CONCLUDING REMARKS BYTHE CHAIRPERSON
147. Thesecond Trade Policy Review ofChile wasconducted on23-24 September 1997. These
remarks, prepared onmyownresponsibility, areintended tosummarize thediscussion andnottobe
afullreport: thiswillbecontained intheminutes ofthemeeting.
148. Thediscussion developed under fourmain themes: macroeconomic issues; thebalance in
Chile'strade policies among multilateral, regional andbilateral approaches; adiscussion ofspecific
trade-related measures andpolicies; andsectoral elements oftrade policies.
149. Some Members noted thatthefocus ofChile'strade policies hadmoved towards regionalism
inthepastsixyears, while maintaining astrong commitment tothemultilateral system. Chile was
congratulated onitsgenerally openandliberal system, andontheliberalization which hadtaken place
inservices trade; however, some Members noted thatthere were some areas ofgoods trade where
fewchanges hadoccurred since theprevious review.
Macroeconomic issues
150. Members commended Chile'sremarkable macroeconomic performance since1990, which had
beenassisted byprogressive liberalization; thehighrateofgrowth combined withgrowing social equity;
andthereduction ofunemployment andinflation. Onemember sought clarification regarding the
useofindexation mechanisms intheeconomy andtheirrelationship toinflation.
151. Membersnotedthat,sincethelastreview,therehadbeensomediversificationinexportproducts
andmarkets, butthatChile remained reliant onasmall range ofexports, especially copper. Inthis
regard, theeffectiveness oftheCopper Stabilization Fund asashock-absorber washighlighted; one
member asked about thepossibility ofcreating anoffshore fundtoreduce possible negative effects
onexports from realexchange rateappreciation. Itwasnoted thatState involvement haddecreased
substantially throughout theeconomy; however, there were noplans toprivatize CODELCO.
152. Members welcomed Chile'sgenerally liberal andnon-discriminatory foreign direct investment
regime.Questionswereraisedregardingtheuseofacompulsorydepositorencajesystemforinvestment
funds; while some Members feltthatthismeasure mayhavecontributed tomonetary stability, others
expressed concern about itspossible restrictive effects.
153. Inreply, therepresentative ofChile noted thattheauthorities hadputemphasis ongrowth with
equity, asshown byanincrease inpercapita income andamarked reduction inthenumber ofpersons
below thepoverty line. However, thedistribution ofincome wasrelatively unchanged; thiswasa
priority concern. High savings andinvestment hadcontributed largely toeconomic growth: the
importance ofexternal factors haddeclined. While trade liberalization hadcontributed togrowth it
didnothavethesameeffect across theeconomy, hence theimportance ofsocial programmes tospread
thebenefits ofliberalization. Inflation hadbeencontrolled basically through monetary policy, with
overall confidence generated bystrictobservance ofinflation targets andbyfiscal surpluses; thedegree
ofindexation -based onpastinflation -hadbeenreduced. Therepresentative confirmed thattherole
oftheCopper Stabilization Fund was,ascovered inthedocumentation, tobeabuffer against world
price fluctuations. Heexplained thattheencaje system, acentral element ofmonetary policy, was
areserve requirement limited toportfolio capital inflows, anddesigned tominimize speculative flows;
itbenefited investors directly byreducing theriskoffinancial fluctuations.WT/TPR/M/28
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Multilateralism, regionalism andbilateralism
154. QuestionswereaskedregardingthebalanceinChile'stradepoliciesbetweenmultilateral,regional
andbilateral approaches, andtheemphasis currently given totheconclusion ofagreements withregional
entities. Inthisconnection, specific questions wereposed about Chile'srelations withNAFTA, the
recently concluded FreeTrade Agreement withCanada, thestatus ofnegotiations foraframework
agreement withtheEuropean Union, thenetwork ofagreements withLatin American partners, including
theconsistency withLAIA provisions ofthecomplementarity agreements withsome Members, and
thenewagreement withMERCOSUR. Members questioned theeffects ofthewiderange ofagreements
onthetransparency andpredictability ofChile'strade policies. Chile'smembership ofAPEC was
generally commended; inthisconnection, clarification wassought onChile'sdefinition of"open
regionalism".
155. Aquestion wasasked ontheextent towhich Chile wasfacilitating imports fromleastdeveloped
countries.
156. Inreply,therepresentativeofChilesaidthatmultilateralismwasChile'stoppriority.However,
Chile sawbilateral andregional agreements asessential toadvance theopening ofitsowneconomy
andnewexport markets. Itwasalsoimportant torecall thepolitical dimension ofsuchagreements
inLatin America, inparticular South America, andtherelationship between openeconomies andthe
development ofdemocracy.
157. Heemphasized thatmosttradewould beliberalized within tenyears, although alonger period
wasallowed forsome sensitive items. Henoted thattheagreements within South America, andthat
withMexico, wereunder LAIA, covered bytheEnabling Clause. Tariff quotas covered imports under
preferential rates; there werenorestrictions onimports under MFN rates. Henoted thatthere were
nonon-preferential rules oforigin andgavedetails oftheoperation ofpreferential rules.
Specific trade-related measures andpolicies
158. Ingeneral Members commended Chile'sopentrade regime, inparticular, theuniform tariff.
Some Members sought clarification about theproposal toreduce thetariffby3to4percentage points.
Noting thegapbetween WTO bound ratesandtheMFN applied rate,several Members asked ifthere
were anyplans tobindcloser totheapplied rate.
159. SomeMemberssoughtclarificationregardinganapparentdifferencebetweentaxationofdomestic
andimportedspirits.InformationwassoughtonChile'simplementationoftheWTOCustomsValuation
Agreement. Some Members alsoinquired whyChile hadnotsigned thePlurilateral Agreement on
Government Procurement andencouraged theauthorities todoso.Members recognized thatChile's
national requirements regarding standards weregenerally based oninternational provisions; however,
someconcerns wereraised regarding thepotential impact ofhealth andsanitary requirements asabarrier
totrade.
160. Clarification wasalsosought regarding thestatus oftheAgreement onImplementation of
Article VIoftheGATT 1994 inChilean law,progress withnewanti-dumping legislation, andthe
useofanti-dumping measures inlightofprovisions agreed upon intheFreeTrade Agreement with
Canada. Theabsence ofsafeguard legislation washighlighted byseveral participants.
161. Members noted theexistence ofcertain export subsidies andsought clarification astowhether
Chile hadimplemented anymeasures toeliminate them. Inaddition, Members sought clarificationWT/TPR/M/28
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regarding theexport promotion activities ofPROCHILE, andtheAgricultural Fundestablished in1995
topromote agricultural exports.
162. Onintellectual property, some Members sought information regarding progress inamending
Chile'slegislation tobring itintocompliance withtheTRIPS Agreement. Members welcomed the
authorities 'initiative todraftanewcompetition law.
163. Inreply, therepresentative ofChile saidthattheaverage bound tariffof25percentforindustrial
products represented abalance reached intheUruguay Round. Adraftlawhadbeenprepared toreduce
theflatapplied ratefrom 11to8percent; theExecutive believed thatthisreduction would needto
beoffset toguarantee thecontinuity ofsocial programmes. Concerning liquor taxation, adraftlaw
hadbeensenttoCongress which would ensure equal taxtreatment, varying onlyaccording tothe
alcoholic content. Chilean customs valuation wasinaccordance withtherelevant WTO Agreement;
variations ontransaction value wereinlinewiththeprovisions oftheAgreement. Heexplained the
application ofminimum customs values; these would disappear withthefullapplication oftheWTO
Agreement. TheWTO provisions wereapplied inChile'sagreements withCanada andMERCOSUR.
164. Therepresentative confirmed thattheWTO Agreements onanti-dumping andcountervailing
measures hadtheforce oflawinChile andwerethebases ofprocedures being applied. Adraftbill
hadbeenbrought toCongress togiveoperational effect tocertain rules. Tariff surcharges maybe
applied foroneyearmaximum within GATT bindings: theydidnotapply toFTApartners andwere
not"safeguards" inthesense ofGATT Article XIX. They hadnotbeenusedsince 1993.
165. Therepresentative gavedetails ofChilean government procurement procedures, which were
basedontransparency,non-discrimination,flexibilityanddecentralization.Thesameproceduresapplied
across thepublic sector. Stateenterprises wererequired tobeself-financing andtooperate onaprivate
enterprise basis. Chile regarded theapplication oftheGPA ascomplex, bureaucratic andcostly;
moreover, itdidnotguarantee MFN treatment below federal level. Chile thushoped thatanywider
agreement would include notonlytheprinciples oftransparency andnon-discrimination, butalso
flexibility anddecentralization.
166. Therepresentative provided details oftheoperation ofChilean standards, sanitary and
phytosanitary measures inrelation towine, beefandlamb, chicken andwheat; hegaveassurance that
national treatment wasapplied. Theonlypreferential sectoral regime wastheautomotive programme,
which wasbeing phased out.Programmes fordistant regions ofthecountry covered taxation, customs
facilitation andinvestment incentives anddidnotdiscriminate against foreigners. Exports benefited
from adutydrawback system forimported inputs andasimplified system forminor exports. The
simplified system wasnotsector-specific; anysubsidy component wasbeing phased out.Deferred
tariffs oncapital goods onlyinvolved asubsidy inthose cases where atariff waiver wasgranted on
condition thatthecapital good wasemployed inthemanufacture ofexports; thiswould bereduced
bytheprocess ofliberalization. Healsoexplained theroleofPROCHILE inproviding governmental
services toexports.
167. Therepresentative ofChile alsoprovided information onChile'slegislation andpractices, as
wellasrecent advances, intheareaofintellectual property. Anychanges required tobring legislation
intolinewith theWTO TRIPS Agreement were being studied andwould becompleted by
1January 2000, asrequired fordeveloping countries. TRIPS caseswerehandled bytheordinary courts,
notbyadministrative processes. Intheareaofcompetition policy, Chile hadextensive jurisprudence,
butwasdrafting anewlawtomodernize theinstitutional andlegal framework inthelightofthe
international environment.WT/TPR/M/28
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Sectoral elements
168. Some Members questioned thepricebandmechanism onsome import-competing agricultural
goods; theynoted thatthesystem could leadtohighprotection andaffect resource allocation. This
policy wascontrasted withChile'sgenerally active support forinternational liberalization ofagricultural
trade, through theCairns Group. Members asked whether consideration wasbeing given todirect
income support forpoorfarmers.
169. Some delegations asked about policies topromote theautomotive industry, namely theexport
balancing scheme, domestic-content requirements, export subsidies andtheprohibition onimports of
usedcars. Onemember asked fordetails ontheproposal foraroyalty taxonmining. Another
mentioned concerns regarding permission forthetrans-shipment offishinChilean ports.
170. Several Members noted thatChile'sliberalization efforts intheservices sector wereahead of
itsWTOcommitmentsandaskedifthiswouldbereflectedinanimprovementinChile'sGATSbindings.
Details wererequested onseveral specific aspects, forexample, theelimination ofhorizontal restrictions
regarding commercial presence, themaritime agreement between Chile andBrazil, thefurther
liberalization ofthetelecommunications sector, Chile'sinvolvement intheongoing negotiations on
financial services, theremoval oftheadditional taxlevied oninsurance premia when insurance services
were contracted abroad, andprudential requirements applied toforeign anddomestic re-insurers.
171. Inreply toquestions raised regarding thepricebandmechanism, therepresentative stated that
themechanism (applying towheat, wheat flour, edible oilsandsugar) wasestablished tobuffer domestic
prices against international pricefluctuations. Therepresentative noted thatimports ofgoods covered
under thismechanism wereconsiderable, amounting inthecaseofedible oilsto92percentofdomestic
consumption. Itwasunlikely thatthebound rateof31.5percentcould bebreached bythemechanism.
Regarding dairy products, therepresentative replied thatChile considered the31.5percentbound
level(against anapplied rateof11percent)appropriate given thesensitivity ofthissector forChilean
agriculture. Healsoclarified policy regarding irrigation programmes andthePlanfortheRecovery
ofSoilProductivity. Thepurchase price ofsugar beetwassetbyIANSA, aprivate enterprise, in
negotiation withproducers andwithout government intervention.
172. Therepresentative clarified theoperation oftheautomotive programme, dating fromthe1980s.
Currently, onlythree enterprises benefited. Headded thattheprogramme would bephased outby
theyear2000, inaccordance withChile'scommitments under theTRIMS Agreement. Theprohibition
onimports ofusedvehicles wasforenvironmental reasons andthere were noplans toliftthis.
173. Regarding theservices sector, therepresentative mentioned thatinthelastseven years
telecommunications, infrastructure, transport andfinancial services hadgone through animportant
process oflegalreform. Intelecommunications, theprivatization ofthelocalandinternational telephone
companies hadbegun in1985, andtherewasfreecompetition inthesector. Asaresult ofthereform,
rateshaddecreased by50percentandthenumber oflineshadincreased substantially. Thefinancial
sector hadalsobeensubject toimportant reforms, including therecent approval ofanewbanking law,
covering three major areas: internationalization oftheChilean banking system, widening thescope
ofbanking activities, andadoption oftheBasle norms. Regarding maritime transportation, thedelegate
clarified thatChilean legislation wasbased ontheprinciple ofreciprocity. Chile regretted thatmaritime
transport negotiations hadnotbeenabletoadvance.
174. Headded thatChile hadparticipated actively intheWTO services negotiations. Inthe1995
financial services negotiation, Chile submitted animproved offer, andinthecontext ofthepresent
negotiation Chile waselaborating aconditional offer, which ithoped tosubmit inOctober. Chile hadWT/TPR/M/28
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assumed MFN commitments ininternational telephony andhadreflected itsopenpolicy initslistof
commitmentsinthisarea.HeemphasizedthatChilewaswillingtoparticipateinanyservicesnegotiation
toensure progressive liberalization inthissector onamultilateral, plurilateral andbilateral basis.
*
* *
175. Toconclude, Ishould liketoemphasize some mainelements. First, Chile'sfocus, since1990,
ongrowth withequity isanexemplary combination ofeconomic andsocial policies, going nowwell
beyond theso-called "Washington consensus". IamsureMembers willalsowelcome Chile'scontinuing
emphasis oneconomic stability andthesuccess thathasbeenachieved. Ialsowelcome theclear
statements thathavebeenmade byChile ontherelationship between themultilateral andregional aspects
oftheirpolicies, andthedetailed answers given onspecific questions, including those ongovernment
procurement,sanitarystandards,regionalandexportsupport,intellectualproperty,andsectoralpolicies.
Finally, Iamsurethatthediscussion thatwehaveheldinthepasttwodayswillhavecontributed to
theimportant transparency obligation thatIstressed inmyopening statement.