The Comprehensiveness of Chilean Free Trade Agreements: Ide Apec Study Center Working Paper Series 01/02 - No. 7
The Comprehensiveness of Chilean Free Trade Agreements: Ide Apec Study Center Working Paper Series 01/02 - No. 7
The Comprehensiveness of
Chilean Free Trade Agreements
Mikio Kuwayama
Yusuke Kuwayama
MARCH 2002
The Comprehensiveness
of Chilean Free Trade Agreements */
March 2002
*/ This paper is submitted for Project “WTO Liberalization Process and the Formation of FTA Networks
in the Asia Pacific Region”, of the APEC Study Center of the Institute of Developing Economies, Japan
External Trade Organization (JETRO), Chiba, Japan.
**/ The authors are Economic Affairs Officer, International Trade and Integration Division of the
Economic Commission for Latin America and the Caribbean (ECLAC), and student of Amherst College,
Massachusetts, the United States, respectively. The views expressed herein are those of the authors and
do not necessarily reflect the views of the United Nations. This document has been reproduced without
formal editing.
CONTENTS
I. Introduction ............................................................................................. 1
II. Trade Performance and Negotiation Strategies in the 1990s .......... 3
III. The Chilean Conception of “Open Regionalism” .......................... 10
III-1. The Concept ........................................................................................... 10
III-2. Trade and Investment Effects ................................................................ 12
III-3. Chilean “New” and “Deep Regionalism” ............................................. 17
III-4. Chilean Regionalism: A “Stepping Stone” towards Multilateralism? .. 21
IV. Comprehensiveness of Chilean FTAs ............................................. 25
IV-1. Reduction of Tariffs and Non-Tariff Measures .................................... 25
IV-2. Trade in Services ................................................................................... 29
IV-3. Investment ............................................................................................. 35
IV-4. Rules of Origin (RO) ............................................................................. 40
IV-5. Antidumping and Safeguards ................................................................ 42
IV-6. Standards and Conformance ................................................................. 44
V. Chile and United States FTA ............................................................. 47
V-1. The Implication of Chile/US FTA for the Free Trade of the Americas
(FTAA) ............................................................................................................ 48
V-2. Negotiation Process and Problem Areas ................................................ 48
VI. Conclusions ........................................................................................ 54
References ................................................................................................ 58
i
LIST OF GRAPHS AND TABLES
ii
I. Introduction
Chile in the past two decades has been a showcase of trade liberalization and economic
reforms not only in Latin America but also worldwide. What is not well known,
however, is that though the country has followed this “opening-up” policy via three
routes of liberalization (unilateral, regional and multilateral), the most dominant since
the mid 1990s have been bilateral and plurilateral preferential trade agreements (PTAs),
in the form of free trade agreements (FTAs), rather than common markets or customs
unions. In fact, in the Western Hemisphere, Chile is one of the Latin American
countries, besides Mexico, which has promoted one of the most active policies of FTAs.
These agreements not only address the “border” issues but also deal with a wide
dimension of trade and investment that were once thought to be internal issues (e.g.
investment, services trade, competition policy, government procurement, enforcement
of intellectual property rights, labor and environmental issues). Another new aspect of
Chilean FTAs is the geographical coverage, going far beyond the countries in Latin
America covering the United States, Canada, the Asia-Pacific, and Europe.
The FTAs or other agreements signed by Chile are believed to operate under the
principle of “open regionalism” and to have a “GATT/WTO plus” focus. More
importantly, they are said to be “comprehensive” in nature and scope that involve
almost all aspects of bilateral economic relations. The Chilean conception of open
regionalism involves first the extension of preferences through FTAs that are
compatible with the rules and regulation of the WTO, especially in conformity with
Article XXIV of GATT 1994 and Article V of GATS, and that might go beyond the
rights and obligations of the WTO. Their conception also involves the progressive
removal of barriers to economic exchange and proactive measures to reduce transaction
costs at the national and regional levels, by way of harmonizing facilitation policies and
improving infrastructure among member countries. This conception of open regionalism,
however, does not satisfy the more exigent understanding of the concept that requires
the extension of liberalization benefits to non-members on an unconditional Most
Favored Nation (MFN) basis. Nonetheless, this is partially compensated for by the
unilateral tariff reductions of the past two decades and particularly by the current
program of unilateral reduction of MFN rates by 1% annually to reach 6% in 2003.
1
Under this orientation towards open regionalism, the country’s FTAs are seen as
a “stepping stone” towards the deepening of the WTO multilateral process, more than
just the consistency of FTAs with the WTO. Although they are quite aware that
discrimination is the essential feature of regionalism, the Chilean authorities view their
version of “open regionalism” as an effective strategy of international economic
opening, which stresses bilateral/regional cooperation on the reduction of bilateral or
intra-regional transaction costs. This strategy is conducive to a reduction of
uncertainties and improvement of credibility, thus making it easier for the private sector
to plan and invest.
The objective of the paper is to describe the nature of the Chilean trade strategy
in the 1990s and to shed light on the degree of “comprehensiveness” of Chilean FTAs
by analyzing basically two aspects, namely: i) how “wide” the FTA in question is in
terms of number of negotiation areas (i.e., the inclusion of border as well as non-border
issues); and ii) how “deep” the principles, disciplines and modalities are within one
negotiation sector. To address the second aspect of comprehensiveness, several
negotiation areas are examined in Chapter III, in comparison to the major bilateral,
regional, plurilateal agreements that exist within the Western Hemisphere.
The paper argues that the Chilean strategy has been comprehensive but at the
same time selective in some aspects. By selecting the areas that are important to
individual countries, Chile and its trade partners not only address the access problems of
each trade route, but also keep a realistic agenda in light of the lack of interest of some
countries to go beyond the rules set by the WTO. Chile also has several “sensitive”
sectors to which the government considers it appropriate to apply a differential
treatment or protracted schedule for their liberalization. The paper suggests, however,
that the strong NAFTA-like nature of the Chilean FTAs, the existent and forthcoming
alike, is likely to reduce the problems of coordination that may arise from the
multiplicity of FTAs. This foundational relation facilitates the convergence process
among them. This resemblance to the NAFTA is at present providing a solid foundation
and framework for the forthcoming Chile/United States FTA. At the same time, the
similarity in structure assists the attempt of the United States to use the latter FTA as a
template for the Free Trade of the Americas (FTAA). In this context, Chapter IV
2
describes the negotiation process of Chile/US FTA and points out some of the
difficulties encountered.
When considered within a global scale, Chile is a country with a small population (15
million) and limited internal market (GDP of US$71 billion and Per Capita GDP of
US$ 4,580 in 2000). To cope with this reality, Chile has opted for a process of trade
liberalization in order to increase its presence in the global market. Since the beginning
of the 1990’s, this liberalization has been intense and dynamic, with active policies
based on both foreign policy and economic considerations. These efforts have been
accompanied by the deregulation of key sectors of the economy and the introduction of
greater competition in areas such as the supervision of banks, insurance companies, and
securities, and have opened new fields of business. Privatization and private investment
in public infrastructure have been promoted, all with a greater level of transparency.
20.0
15.0
10.0
5.0
0.0
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Chile’s growth pattern, especially since the mid 1980s, can be categorized as
“export-led” (Agosin, 1997). Export expansion and diversification have elevated
substantially the country’s openness, transforming it into one of the most open Latin
American economies (Graph 1). In 1995 constant dollars, towards the end of the 1990s,
exports and imports accounted for roughly 35% and 30% of GDP, respectively. Exports
3
of non-factor services have also risen drastically.
Nonetheless, this seemingly flawless export performance has not been free of
problems. The export sector is in a gradual process of recuperation from the Asian crisis,
which lasted to 1999 (Graph 2), while the country faces a persistent deficit in its current
account. Furthermore, although the share of nontraditional products in total exports rose
substantially over the last decade, there remain doubts about the ability of the current
natural resource-based export structure to sustain high rates of growth over the medium
and long term. Such dependency may dampen future economic growth because of the
high instability of export income and the low value-added in such exports. Chilean
exports originate from large firms, whereas small and medium-sized firms present less
than 5% of total national exports (Corfo 2000). There also still remains other structural
problems related to low technological and human capabilities in the productive sector in
general and some export sub-sectors in particular (Silva 2001).
12 20
percentage
10 10
8 0
6
-10
4
2 -20
0 -30
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
EX IM EX Growth IM Growth
1
Chile has implemented Economic Complementation Agreements (ECAs) with the following countries or
groups (Bolivia, Colombia, Ecuador, MERCOSUR, Peru and Venezuela (the agreement with Cuba is pending
for approval) and FTAs with Canada, Mexico and Central America (Costa Rica, El Salvador, Honduras,
Guatemala, and Nicaragua). The negotiation of Chile/Central America agreement, which came into effect in
February 14th, 2002, was divided into two parts; the first corresponded to the joint commitments of all the
4
pact (for a summary of many agreements, see Table 1). In April 2000 Chile began
negotiations on an FTA with the European Union, and similar negotiations are
underway with the Republic of Korea. Efforts are also being made to work out FTAs
with the European Free Trade Association (EFTA), New Zealand, Australia, Singapore
and Japan. In early December 2000, Chile began negotiations on a FTA with the United
States, also envisioned as a NAFTA-style pact. The negotiations for a FTA with the
United States are likely to act as a catalyst on the establishment of the Free Trade Area
of the Americas (FTAA). In addition, full membership for Chile in the Common Market
of the South (MERCOSUR) could bring great advantages if the technical difficulties
posed by tariff discrepancies can be overcome. Thanks to these efforts, Chile has been
able to consolidate itself as one of “nodes” of “new generation” FTAs in the Americas,
besides Mexico (IDB 2000).2
Chile’s trade policy has been executed through three pillars of liberalization,
unilateral, regional and multilateral. What stands out the most among these pillars is the
country’s strong adherence to bilateral and plurilateral agreements from the beginning
of the 1990s. In fact, Chile is one of the Latin American countries that has promoted
one of the most active policies of these agreements. In addition, Chilean trade
integration policies of the 1990’s differ from those promoted since the 1960’s in three
respects: i) they involve FTAs instead of the creation of common markets or customs
unions; ii) they have dealt with the different dimensions of trade and investment; and
iii) they involve agreements that are not limited to the countries in the region (although
priority is given to them), such as the United States, Canada, the Asia-Pacific
economies, and the European Union, as is the case of the Latin American Integration
Association (ALADI) (Sáez and Valdés 1999). It is important to point out that the
ongoing FTA negotiations do not take place necessarily within a sub-regional or
regional context; the present initiatives involve countries and groupings that are not
geographically contiguous.
Although other countries in the Western Hemisphere also made important
advances in regional integration by way of FTAs, the majority of the accords signed in
countries, while the second to the bilateral protocols. On the same date, the bilateral protocol between Chile
and Costa Rica also came into effect.
2
A “node” can be defined as a country or group of countries that pursue FTAs with a broad range of partners,
geographically contiguous or not, for the purpose of diversifying their trade and investment flows.
5
the early 1990’s belong to the so-called “first generation”, based on the structure of the
ALADI model; these agreements deal mainly with tariff and non-tariff barriers on the
movement of goods across national borders. They are based on the structure of the 1980
Treaty of Montevideo, ALADI’s founding charter, which is limited to regulating the
trade of goods. These agreements have general regulations on trade and have only a
“fragile” disposition on dispute settlement. The so-called Economic Complementation
Agreements (ECAs) signed by Chile belong to this category.
The agreements made during the latter half of the decade belong to the “second
generation”, mimicking the composition of NAFTA. These agreements take into
account those aspects that were once thought to be internal issues, such as provisions on
investment, services trade and competition policy, government procurement,
enforcement of intellectual property rights, etc., and often have dispute settlement
procedures similar to those of the WTO. The FTAs signed by Chile with Canada and
Mexico belong in this category. The agreement with Central America, which came into
effect in February 14th 2002, has also a similar structure. Chile’s agreement with
MERCOSUR goes somewhere in between, surpassing ECAs with a detailed agenda of
bilateral integration, but whose norms do not reach the complexity of an NAFTA style
agreement (Sáez 2001; IDB 2000).
As a result, FTAs and other agreements signed by Chile have “cascading”
effects where one agreement leads to another with increasing liberalization
commitments (Devlin and Estevadeordal 2001). Chile began the cascading process by
signing a simple ALADI-type FTA with Mexico first, later signing a number of similar
agreements with other countries in Latin America, and by then attempting to enter the
more comprehensive NAFTA. When this attempt failed due to the lack of the fast-track
authority of the United States, the country turned to Canada to sign a NAFTA-like
agreement. Chile then upgraded its simple Mexican FTA to NAFTA-like standards.
It should be recalled that the first generation agreements signed by Chile
(Mexico, Venezuela, Colombia and Ecuador) were being negotiated in parallel to the
Uruguay Round. These agreements cover principally tariff reductions and to a much
lesser extent commitments on air and maritime transport. During the Uruguay Round,
the member countries agreed to bind “ceiling tariffs” at rates much higher than those
6
actually applied. For these reasons, the first generation agreements did not present
serious problems of coordination with respect to the multilateral system.
MEXICO - Came into force: 1 January 1992 - Trade in goods: tariff reduction program completed
(ECA No. 17)a - 2 programs of linear tariff reduction lasting 4 and 6 - New treaty: services and investment; includes
years, respectively intellectual property, technical obstacles
- Rules of Origin: Based on modified ALADI and - Sanitary and phyto-sanitary measures
NAFTA - Air transport
- Opening of negotiations on financial services, anti-
dumping measures, and government purchases in
1999
VENEZUELA - Came into force: 1 July 1993 - General rules based on the ALADI model
(ECA No. 23) - 2 programs of tariff reduction lasting 4 and 6 years, - Trade in goods: tariff elimination program complete
respectively - Treaty envisages an undertaking to expand trade in
- Rules of Origin: Based on Resolution 78 of ALADI services
COLOMBIA - Came into force: 1 January 1994 - General rules based on the ALADI model
(ECA No. 24) - 2 programs of tariff reduction lasting 4 and 5 years, - Trade in goods: tariff elimination program complete
respectively - Negotiations have been begun to incorporate trade in
- Rules of Origin: Based on Resolution 78 of ALADI services and investment
ECUADOR - Came into force: 1 January 1995 - General rules based on the ALADI model
(ECA No. 32) - 2 programs of tariff reduction lasting 3 and 5 years, - Trade in goods: tariff elimination completed
respectively - Treaty envisages an undertaking to expand trade in
- Rules of Origin: Based on Resolution 78 of ALADI services, the matter is being studied
PERU - Came into force: 1 July 1998 - General rules based on the ALADI model
(ECA No. 38) - 4 tariff reduction programs lasting 5, 10, 15, and 18 - Trade in goods: tariff reduction program underway; to
years, respectively be completed 1 January 2012
- 5 special tariff reduction programs for textile sector - Treaty envisages an undertaking to expand trade in
lasting 3, 6, and 8 years, respectively services
MERCOSUR - Came into force: 1 October 1996 - Less elaborate rules than in the NAFTA models, but
(ECA No. 35) - 2 tariff reduction programs started in 1997, lasting include other areas of integration
until 2013 - Trade in goods: tariff reduction program underway; to
be completed by 1 January 2014
- Participation in institutional structure of MERCOSUR
- Physical integration
- Undertaking to negotiate on trade in services
BOLIVIA - Came into force: 6 April 1993 - Partial-Scope Agreement covering a specific number
(ECA No. 22) of products
- It is proposed to expand this agreement to incorporate
more products
Source: Prepared with the data from the Department of Economic Studies of DIRECON; Sabastían Saéz and Juan Gabriel Valdés
“Chile and its “lateral trade policy”, CEPAL Review, No. 67, April 1999, Table 3; and Sabastían Saéz “”Aspectos institucionales y
económicos en las negociaciones comerciales de Chile”, in Antoni Estevadeordal and Carolyn Robert eds., Las Americas sin
barreras, Inter-American Development Bank, Washington D.C., 2001.
a
ECA: Economic Complementation Agreement
7
Chile’s orientation towards unilateralism up to 1993 was related to the fact that
the country was not a major trading entity at the world level, and that it did not have
“natural” trading partners. Both meant that Chile could always keep encountering
niches in external markets (Meller 1996). By contrast, the agreements of newer
generations (with MERCOSUR or Canada) were negotiated when the Uruguay Round
commitments had been already in vigor, and when new areas such as services and
investment had appeared on the multilateral agenda as binding commitments. This
required greater coordination efforts among distinct branches of Chilean authorities
(Jara 2001).3 The country’s arduous efforts in export diversification have enabled the
country to rank itself as one of the largest exporters of certain products as well, whose
national production strongly affect their prices at the international levels.4
Perhaps the single most important reason for the change of emphasis from
unilateralism in the 1970s and 1980s to the signing of FTAs was that the already low
Chilean tariff at the end of the 1980s (15%, lowered to 11% in 1991). This low level of
tariff meant that large efficiency gains were unlikely to be reaped by further unilateral
liberalization. At the same time, the country’s main trading partners maintained high
tariffs or other trade barriers for products in which Chilean producers had attained
comparative advantage.
Another reason for forging FTAs was the costs associated with not having such
agreements. For instance, not having a FTA with the member countries of MERCOSUR
would have generated a shift in the group’s imports away from Chile toward suppliers
within MERCOSUR. The entry into force of MERCOSUR’s common external tariff left
without effect the previous tariff preferences granted to Chile by individual
MERCOSUR members in agreements signed in the framework of ALADI. Similar costs
were also thought possible from the expansion eastward of the European Union, and
from Mexico’s membership in the NAFTA.
3
The most important challenges in coordination to the Government and the private sector in Chile involved the
issues related to: different models of rules of origin (see Chapter III); effects on preferences that arise from
unilateral tariff adjustments or from new bilateral agreements. The latter often results in needs for
compensation for the old trade partners (Jara 2001).
4
Trade expansion and diversification in the last two decades converted Chile into one of the largest exporters
of certain items on the world level, such as copper and other minerals (nitrates, iodine, lithium), fisheries
(salmon, trout, fish meal), pulp and processed wood, fresh fruits (table grapes, avocados, apples, kiwi, etc.) and
wines.
8
During the early 1990’s, Chile had avoided getting involved in customs unions.
The bilateral and multilateral trade accords signed by Chile on the most part did not
interfere with the country’s ability to discuss trade policies with other countries, and
also maintained Chile’s autonomy in handling its internal macroeconomic policies. For
example, Chile has received many invitations to join the MERCOSUR, but has declined,
hoping for a chance to join the even more prestigious NAFTA. This hope, however, was
redirected due to the inability of the United States to work out the Chilean accession to
NAFTA, as well as to the booming trade figures between Chile and the MERCOSUR.
Since 1990, these numbers grew from US$ 1.8 billion to almost US$ 4.5 billion by 1995.
Such figures prompted the eventual signing of a FTA between Chile and MERCOSUR
(O’Keefe 1998).
Chile’s global objective of FTAs seems to be twofold: i) mutual trade openness
among signatory countries; and ii) the reduction of transaction costs of international
economic relations, by providing a set of rules applicable to the members which ensure
stability, stimulate transparency through specific obligations, and ensure the fulfillment
of the rules through instruments which reduce the incentives to depart from them
(“lock-in” effects). In short, Chilean FTAs emphasize “dynamic” effects more than
“static” ones.5
5
In reference to the recent Chilean trade diplomacy, Sáez and Valdés (1999) stress that economic theory
alone cannot answer the question of what type of agreements should be negotiated. The Vinerian criteria
clearly do not answer all the questions regarding to agreement types, mainly because they do not address
all the issues involved in the present state of international trade. In their view, international agreements
have two functions. First, they promote a trade openness that allows the countries involved to take
advantage of the benefits of trade. Such desire for openness stems from the base established by game
theory, which rationalizes the increase of trade barriers if no negotiations are made. A joint strategy will
insure the full employment of the gains from comparative advantage. Secondly, they reduce the
transaction costs that are incurred in international economic relations. These are the costs that cannot be
eliminated with a unilateral decision, and require a set of rules to ensure a stable trade environment. In
addition to these new dimensions of trade policy, there is a pre-established condition of international trade
that must be taken into account. Taking full advantage of the opportunities granted by trade depends not
only on the policies of the country, but in the end requires the cooperation of its trade partners. Operating
in an international market incurs costs that originate from uncertainty and domestic market flaws, as well
as deficiencies in transparency and irregular patterns of behavior on the part of trade partners. Thus, it is
the function of international agreements to correct these market failures, reducing the transaction costs of
trade and investment.
9
III. The Chilean Conception of “Open Regionalism”
Our country adheres fully to the principle of open regionalism, that conceives regional
agreements as a mechanism to expand trade and investment, but that upholds the
requirement that these agreements strengthen an ever freer world trade system. This is
the formula that allows to make unilateral opening of our economy compatible with the
signing of bilateral agreements and at the same time to actively participate in
multilateral negotiations.
Similarly, Van Klaveren (1997; 1998) asserts that the “open” character of
Chilean regionalism in practice manifests in three ways. First, distinct options available
for regional markets are not seen as mutually exclusive, but rather complementary. This
way, there is no incompatibility issue between MERCOSUR and FTAA or between the
membership to APEC and the deepening of relationships with the European Union.
Second, the agreements are open to new members (i.e., inclusiveness, rather than
exclusiveness, of membership). And third, the deepening process of regional schemes is
likely to be compatible with global trade, by avoiding the surge of new barriers in goods
and services that are imported from outside the region, a minimum requirement for a
FTA to be justified under Article XXIV of GATT. He emphasizes that the last point is
probably the most decisive element of the Chilean open regionalism, but in turn admits
that it is a more difficult condition to satisfy, because by definition a trade agreement of
a preferential character tends to discriminate against third countries. 6
6
The term, regionalism inevitably involves preferential reductions of trade and non-trade barriers among a
subset of countries that might, but not necessarily, be geographically contiguous, while multilateralism means a
non-discriminatory reduction of trade barriers extended to the whole set of countries of the world trading
system. Therefore, discrimination is the essential feature of regionalism. But then, unilateral reduction of such
barriers will be also deemed multilteralism (Srinivasan 1998). In this sense, as Bhagwati (1998) stresses, it is
necessary to distinguish between multilateralism as a “process” (i.e., multilateral trade negotiations) for
liberalization and mulitlateralism (i.e., MFN) as an “outcome”.
10
At least in the Chilean context, there is consensus with regard to two principles
of trade: i) agreements should limit trade diversion in the Vinerian sense to a minimum;
and ii) agreements should increase the volume of trade among the members, while at the
same time maintaining the volume of trade with the rest of the world (Kemp and Wan’s
theorem). The latter, an underpinning of the Chilean open regionalism, suggests that
agreements should not create additional trade barriers to third countries, thus ensuring a
positive movement in overall wellbeing. 7 An additional criterion may be that other
countries should also benefit from the concessions made by Chile, in conditions of
equity and reciprocity (WTO 1997: 21).8
A more strict interpretation of open regionalism, however, would require not
only open membership but also the extension of concessions and privileges under
unconditional MFN basis to non-members. Admittedly, the strong focus on the Chilean
FTAs does not lead to an automatic multilateralization of the concessions on a MFN
fashion. However, in practice, the liberalization schedules of Chile’s FTAs that have a
similar timetable would lead to a convergent tariff structure and other measures around
the year 2006 (including the FTAA and the time schedule that was agreed in the IV
Ministerial Conference in Doha).
Thus, paradoxically, the proliferation of FTAs gradually nullifies the importance
of tariff preferences offered by FTAs themselves, and at the end what matters the most
is the final result (converged, low tariffs and non-tariff barriers), not the process (by
way of bilateral or plurilateral FTAs or multilateral negotiations). While it is necessary
to maintain preferences for FTA partners in the short and medium term, the signing of
FTAs with almost all trade partners would eventually lead to zero effective tariffs on
almost all imports, or free trade, contrary to the high “bound” MFN rates of
7
Analyzing the case of MERSOCUR, Estevadeordal, Goto and Sáez (2000) argue that there has been a
dramatic trade expansion in both intra-regional and inter-regional trade, suggesting that this regional agreement
has brought about trade creation rather than trade diversion. On the other hand, those who advocate total
reliance on the multilateral process argue that RTAs divert trade by creating preferential treatment for member
countries vis-à-vis non members. They maintain that trade diversion is still substantial, as found in the case of
European Union (Frenkel and Wei 1998) and Mercosur (Yeats 1997) and, Bhagwati (1998) asserts, in NAFTA
as well. Despite 50 years of efforts in trade reduction, there still remain serious discrimination and trade
diversion (Bhagwati 1998; Hoekman, Schiff and Winters 1998).
8
The need for reciprocity reflects, in a sense, the conformity of Chile’s open regionalism with that of the
United States: the U.S. concept of open regionalism that liberalization should be extended to non-members
only on a conditional MFN basis through reciprocity to avoid free rider problems, comes into conflict with the
Asian conception of open regionalism that trade and investment liberalization is based on an unconditional
MFN fashion.
11
GATT/WTO. From this perspective, in the future the tariff issues will become less
important in the FTA negotiations, and as this occurs, the relevance of other issues in
FTAs will become more paramount.
Another critical, and often controversial, element of open regionalism is the
interpretation of Article XXIV of the GATT. In the area of goods exports, one of the
most relevant questions is whether to allow the exclusion of certain products from the
tariff reduction process, as this article does. In general terms, the standard is to eliminate,
within a reasonable period (ten years), customs duties and other obstacles to trade for
“substantially all the trade”. The questions are whether “substantially” should be
interpreted qualitatively (i.e., no major sectors such as agriculture or textiles are
excluded) or quantitatively (i.e., share of trade of the member countries). The same
ambiguity remains in the area of trade in services (GATS V).
The issue of whether the proliferation of FTAs would ultimately lead to zero
effective tariffs and/or protection on all imports depends not only on the number of
FTAs that the country signs but also on the coverage of the agreements signed. If
products and sectors (and measures and “modes of supply” in the case of services) that
are exempt from the liberalization obligations are numerous and/or adopt a more lenient
liberalization time-schedule, it becomes increasingly difficult for an individual FTA to
perform as a propelling force to reach free trade. In this respect, Chile does not exclude
a priori any sector or product from trade negotiations, except the controversial price
band on several agricultural products. 9 Furthermore, as mentioned earlier, Chile avoids
raising barriers to trade with countries outside the region, a principal condition of
Article XXIV for authorizing the establishment of an FTA.
Chile’s trade with its free trade partners has grown substantially over pre-agreement
levels in almost every case (see Table 2) (IDB 2000: Table 13). Export growth to non-
FTA members has been spectacular as well. In this sense, Chile seems to have done
9
For example, with Chile/Mexico agreement since January 1st of 1998, bilateral trade in goods has been totally
free of tariffs, with an exception of several agricultural products. In the case of Chile/Canada agreement, 80%
of all tariffs that were affecting the bilateral trade were eliminated immediately after the agreement came into
effect. The general liberalization program will continue to 2003, while a special liberalization program will be
12
quite well in minimizing trade diversion with third countries. The present scheme of
unilateral tariff reduction (i.e., a five-year plan to reduce tariffs by one percentage point
per year to 6% by January 1st, 2003) is testimony that Chile maintains its commitment
to apply free trade policies based on the MFN principle. Chile’s highly diversified
foreign trade by region of origin and destination is a cause for, or a result of, the
government posture that the optimal policy is to negotiate FTAs with all of main trading
partners. The export diversification process can be also seen in number not only of
market destinations but also of products and exporters (Silva 2001).10
1990 304.6 652.0 57.7 56.2 1469.2 12.9 2159.8 3279.8 8580.3
1993 566.8 1089.2 130.8 61.1 1655.2 54.4 2839.7 2544.5 9416.2
1997 1118.8 1863.1 376.3 131.0 2710.5 67.4 5629.0 4144.1 17017.0
1998 1185.0 1633.8 488.5 143.5 2603.7 71.7 3692.8 4148.3 14753.9
1999 1059.8 1520.2 622.8 173.5 3087.5 94.8 4319.1 4123.0 15914.6
2000 1228.0 1709.1 819.7 243.7 3183.7 107.0 5235.0 4540.9 18425.0
2001 (1st half) 675.8 855.1 401.6 137.9 1789.9 2405.8 2407.8 9609.6
Imports of Goods
1990 506.3 1124.0 100.8 224.3 1373.4 4.4 915.4 1882.4 7023.4
1993 454.7 1761.0 209.7 203.1 2477.4 19.4 1853.8 2312.3 10629.8
1997 914.2 3193.2 1076.2 432.5 4332.6 71.1 2904.2 3957.8 18111.6
1998 720.7 3130.3 849.9 494.5 4025.8 37.2 2822.5 3850.3 17087.4
1999 795.3 3092.4 578.8 407.7 3022.5 33.4 2197.7 2848.5 14022.0
2000 993.5 4337.7 615.6 512.0 3338.5 19.3 2722.4 2880.3 16842.5
st
2001(1 half) 418.0 2476.6 272.8 217.5 1528.7 1366.0 1606.4 8566.0
Source: Prepared with the data from the Department of Economic Studies of DIRECON, “Comercio Exterior de Chile”,
various years, and el Banco Central de Chile, “Indicadores de Comercio Exterior”, various years.
a
Chile maintains an Economic Complementation Agreement (ECA) with this group.
b
Comprises figures from Argentina, Brazil, Paraguay, and Uruguay.
c
Comprises figures for Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua.
d
Comprises the APEC countries, excluding the United States, Canada, Mexico, Australia, New Zealand and Russia.
applied to a limited number of products, which will continue to the year 2014. This agreement also establishes
not to increase any existing tariff, nor adopt a new tariff.
10
The number of product items exported by the country increased from 2,300 in 1990 to almost 3,790 in 1999,
while the number of exporters rose from 4,100 to 6,020 during the same period. Similarly, the destination
countries for exports jumped from 122 to 174 during the decade (Chile, Foreign Investment Committee 2001).
13
More importantly, Chile has emphasized the importance of sub-regional,
regional or even hemispheric markets. The underlying thinking is that regional trade
agreements (RTAs), in a framework of open regionalism, can be a device to foster a
diversification of exports, towards more connected to overall regional markets, fostering
economies of scale: in the presence of economies of scale, what otherwise would be
a costly trade diversion, can become a cost-reducing and welfare-enhancing trade
diversion (Freund 1998). RTAs can enhance non-traditional exports, differentiated
products and products of more value-added and intensive in knowledge, because the
typical export basket to regional markets consists of these goods and services, which is
distinct from that to developed economies with a much larger share of primary products.
Thus, the learning curve associated with experience in regional markets can serve as a
platform for new international markets (Devlin and Ffrench-Davis 1998).
In this context, it is important to point out that the Chilean export basket to its
neighboring countries shows a much higher concentration of manufactured exports,
which are not common to Chilean exports to the developed world. Pursuit of regional
markets is thought not only to minimize the major cost of bilateral FTAs, which is trade
diversion, but also bring about “dynamic” effects that are associated with regional
integration.
It should be noted that the dynamic expansion and diversification of Chilean
exports involved not only the goods sectors but also trade in services. While the
participation of agriculture, mining, fisheries, and manufacturing in GDP dropped to
35% in 1999 from 38% in 1990, that of services increased from 62% to 65% during the
same period. As of October 2000, while the sectors related to goods absorbed 29.5% of
national labor force, the services sectors employed the rest. In addition, Chilean trade in
services has grown from US$ 1.8 billion in 1990 to 4.1 billion in 1998, at a rate 44%
faster than the exports of goods; services exports grew 10.5% per year, whereas goods
exports grew at an annual rate of 7.4%. Services represent roughly 20% not only of total
Chilean exports but also imports (Table 3). The dynamism of this sector is also reflected
in that almost 40% of the materialized foreign direct investment (FDI) between 1990
and 1998 was directed to this sector, with a total amount of US$ 12.7 billion (Prieto
2001).
14
Table 3: Share of Services in Total Exports and Imports:
Merchandize and Services
Exports Imports
Source: extracted from ECLAC (2001), Panorama de la inserción internacional de América Latina y
el Caribe, Table III. 11a, p. 97
11
Either (1998) argues that incentives for small countries going into RTAs with larger countries can be
substantial because a reform-minded small country can more easily achieve reform after linking up with a
large country, since the RTA gives the small country a significant advantage over other small countries in
attracting FDI. When tariffs are low, the value of FDI is greater, making developing countries more eager
to sign RTAs, even if they are required to make most of the concessions.
15
Table 4: FDI Statute (DL600) by Country of Origin 1974 - June 2001:Materialized Investment
(US$ millions)
1974- 1990-
Country/period 1996 1997 1998 1999 2000 2001 a/ Total
1989 1995
United States 2,248 4,097 2,264 935 1,358 1,909 734 1,118 14,663
Spain 527 263 488 1,498 896 4,583 711 280 9,245
Canada 499 2,376 571 811 899 450 665 103 6,375
United Kingdom 384 508 232 201 412 311 205 168 2,420
Australia 241 343 109 181 385 6 38 197 1,500
Japan 144 372 148 164 323 224 53 53 1,482
Italy 21 33 325 19 6 51 96 914 1,463
South Africa 42 419 74 476 330 40 4 10 1,395
Netherlands, The 177 126 121 363 169 181 83 84 1,305
France 95 135 66 63 150 608 43 24 1,184
Cayman Islands 5 121 13 194 85 214 39 1 672
Argentina 33 178 97 60 97 47 92 7 610
Finland 0.1 359 59 13 84 3 3 - 521
Switzerland 56 196 46 45 104 44 0.2 1 493
Bermuda 21 141 1 11 241 41 15 1 473
Germany 67 105 - 7 26 147 69 9 9 425
Belgium 11 5 80 0.1 103 104 20 20 345
Brazil 75 73 16 26 26 48 5 8 276
Other 462 742 119 145 160 150 184 127 2,089
Total per
5,111 10,592 4,822 5,230 5,973 9,086 2,998 3,125 46,936
period
a/ provisional figures as of June 30, 2001
Source: Chile, Foreign Investment Committee (www.foreigninvestment.cl)
16
III-3. Chilean “New” and “Deep” Regionalism
In Latin America, a “New Regionalism” began to appear in the second half of the 1980s
and consolidated itself in the 1990s. This new regionalism contrasts to the old Post-War
integration initiatives that were characterized by: i) the state-led import substitution
industrialization model of development; ii) an inward-looking orientation; iii) a high
level of selectivity with the application of multiple positive lists; and iv) skepticism
regarding private markets and great concern about the presence of, and dependence on,
foreign firms (Devlin and Estevadeordal 2001).
The new regionalism supports structural reforms to make economies more open,
market-based and competitive. The scope of liberalization disciplines in the new
regionalism tends to be comprehensive and more rapid, universal and sustained in terms
of application. It also attracts foreign investment and has more functional and cost
effective institutional arrangements. Another facet of the new regionalism refers to a
multi-dimensional process of regional integration that includes political, social and
cultural aspects.12 Mistry (1995) argues that new FTAs have built-in features, which
make them multilaterally friendly rather than multilaterally resistant. The new
regionalism is driven by market forces rather than fiat, the forces of globalization,
transnationalization and global competition, by the globalization of financial markets,
capital flows, consumer demand, and by the global ease with which technology and
innovation can now cross national frontiers. Thus, the very forces that are driving
regionalism are compelling it to be multilaterally friendly.
The central features of the new regionalism in Chile are therefore regional
liberalization which work in tandem with unilateral and multilateral trade opening,
product differentiation, economies of scale, competition, investment and learning-by-
doing and externalities. Another main feature is the liberalization not only of goods but
also of services, movements of capital and labor, 13 the harmonization of regulatory
12
For example, Van Klaveren (1997; 1998) and Palacios (1995) identify a new regionalism in Latin America
which involves a significant process of convergence between diverse initiatives at the sub-regional, regional
and even hemispheric levels, and a new orientation towards the rest of the world based on much less rigid and
non-exclusive alliances and groupings.
13
These new contexts of trade were first addressed in the Tokyo Round of GATT in 1974-1979, where the
trend of discussing technical barriers, government purchases, anti-dumping and countervailing duties, and
subsidies was set. Such advances were furthered in the negotiations of the Rome Treaty, NAFTA, and the
Uruguay Round, when even newer issues like services, intellectual property, and investment were dealt with. In
17
regimes and trade facilitation measures,14 and the emergence of North-South regional
agreements. In fact, reducing transaction costs at the regional level, by way of
harmonizing facilitation policies and improving infrastructure, (e.g.,
telecommunications, transport, 15 and trade finance among member countries, has
become an important policy objective. The new regionalism also involves new
approaches to older issues, such as rules of origin, contingent measures for imports, and
dispute settlements. Due to this orientation, open regionalism is often referred to
interchangeably as new regionalism whose main features are the liberalization of
domestic regulatory measures.
In trade literature, dealing with “beyond the border” issues has been termed
“deeper integration.” In “shallow integration”, which revolves around reducing
measures applied “at the border” (tariffs, quotas, etc.), different national regulatory
policies are determined and administered at the national level. In deep integration,
common rules and policies and/or supra-national implementation are adopted, and
international negotiations have increasingly centered on domestic regulatory policies
that are alleged to impede the ability of foreign firms and products to contest a market.
Hoekman (1998: 4) goes even further to say that deep integration “consists of explicit
actions by governments to reduce the market segmenting effect of differences in
national regulatory policies that pertain to products, production processes, producers
and natural persons. In practice, this requires decisions not only that a partner’s policies
are equivalent (mutual recognition) but also to adopt a common regulatory stance in
specific areas (harmonization). The latter approach may be complemented by decisions
to cede enforcement authority to a supra-national authority”.
The FTAs or other agreements signed by Chile are said to be “comprehensive”
in nature and scope that involve almost all aspects of bilateral economic relations, the
trade of goods (market access, rules of origin, customs procedures), services,
addition, there have been recent efforts to include the topics of the environment and labor rights in the
negotiations.
14
The inclusion of the last, facilitating trade through non-tariff and non-border reforms, is a new focus of the
concept. Such initiatives and measures of trade facilitation can be narrowly focused, such as customs
harmonization and mutual recognition of product standards, or could be quite far-reaching, as with cooperation
in enforcing national competition polices and deregulation of key domestic markets (deep integration).
15
One of the major reasons that MERCOSUR was interested in having Chile join the Southern Cone trade bloc
was to facilitate access to Chile’s ports and from there the markets of the Asia-Pacific. A manifest of this
interest of MERCOSUR is Titles XII and XIV of the Chile-MERCOSUR Agreement, which, among others,
18
investments, trade remedies (safeguards, antidumping and compensatory rights) norms
and standards (sanitary and phytosanitary measures), trade-related issues (competition
policy, intellectual property rights, government procurements), institutional issues
(transparency, dispute settlement), labor and environmental issues. In addition, the
Government of Chile considers the participation of its citizens (the civil society), to be
fundamental to the formulation of State policy (Silva 2001).
Open/new/deep regionalism has a variety of implications for the new
dimensions of market access: the issue of market access has now to be approached in a
broader manner than what prevailed earlier. It is necessary to embrace the continuum of
trade, investment and competition policies that impede the international contestability of
markets. Whether the economies benefit from a particular FTA depends on the scope
and coverage of its provisions and the nature of the enforcement mechanism. As a
consequence, trade policy today is typically far more complex to describe, negotiate or
implement than the earlier ones. The bilateral and multilateral agreements of recent
“generation” that have been signed by Chile precisely have this character of “intrusion”
to the areas previously considered solely as domestic issues.
Chile has incorporated these new areas into the accords it ties with its partners,
although not all of Chile’s potential trading partners are interested in going beyond the
dimensions achieved in the WTO. For instance, the current treaty with Canada
incorporates the highest rights and obligations so far in FTAs signed by Chile with
respect to services and investment, but it does not incorporate such aspects as
intellectual property rights, technical standards, sanitary and phytosanitary measures,
and government procurement.16 On the other hand, the treaty with Mexico incorporates
such aspects.17 Chile and Canada considered that the WTO rules, together with their
own respective legislation, already addressed these matters satisfactorily (Jara 2001).
obliges the signatory countries to execute a protocol on physical integration, with a goal of establishing a bi-
oceanic corridor from the Atlantic to the Pacific (O’keefe 1998).
16
Even in the case of Chile/Canada FTA, cross-border financial services are excluded from the commitments
on services. The same exclusion of financial services also applies to the Chile/Central American FTA.
17
In contrast to NAFTA, in Chile/Mexico FTA, there are no chapters on financial services and government
procurements. However both governments made specific commitments in Article 20-08 to begin negotiating
these chapters before the determined dates. Both governments have also committed themselves to negotiating
the elimination of antidumping duties on imports. According to the declaration of the Second Vice-Ministers
Meeting of Chile/Mexico FTA November 2000, a series of meetings has been sustained between the two
parties to advance in these areas (www.direcon.cl). Chile is not a member of the WTO Agreement on
Government Procuremet.
19
Therefore, Chilean strategy has been comprehensive in most areas but selective
in some cases. By selecting the areas that are important to individual countries, Chile
and its trade partners not only address the access problems of each trade route, but also
keep a realistic agenda in light of the lack of interest of some countries to go beyond the
rules set by the WTO. Individual institutional and other weaknesses should also be
taken into account (Sáez and Valdés 1999). Chile also has several “sensitive” sectors to
which the government considers it appropriate to apply differential treatment or a
protracted schedule for their liberalization. In addition to several agricultural products,
financial services are often regarded as “sensitive” areas. Given the limited human and
financial resources that developing countries like Chile have available for trade
negotiations, it is not always wise of these countries to “spread thin” among
simultaneous negotiations in distinct areas on different geographical fronts.
The costs of having a myriad of agreements derive basically from the problems
in achieving coherence and convergence, in coordinating negotiators efforts, and in
monitoring the negotiation and implementation processes, and in using effectively the
dispute settlement mechanisms. There is also a serious problem that decision makers of
the private sector must encounter with respect to a complex, and often conflictive,
business prospect that results from various negotiations. At the same time, the
multiplicity of negotiation areas requires the availability of highly capable professionals.
Also, the incorporation in this process of interrelated, multiple negotiation areas calls
for participation and articulation of government officials from various ministries and
departments and their coordinated efforts with other economic agents particularly of the
private sector (Jara 2001). However, the costs of multiplicity would be less insofar as
the agreements with diverse trade partners converge in terms of tariff structures,
liberalization timeframes and similarities in norms and disciplines. There also exist
economies of scale in the learning process of government officials and the business
community with respect to negotiations and benefits and costs involved in those
agreements.
20
III-4. Chilean Regionalism: A “Stepping Stone” towards
Multilateralism?
21
provides a homogeneous normative framework that would reduce diversity and lessen
the need to design bilateral disciplines in some cases. Due to Chile’s high dependence
on foreign trade, it is in the interest of the country for clear, WTO-based procedures to
exist. Such procedures are followed by the other member countries, and provide a
guarantee that the rest of the world is working toward a greater liberalization of trade.
WTO is a vital organ in the areas of dispute and controversy resolution (DIRECON
2000). In fact, Chile has appealed to the Dispute Settlement Body numerous times, both
at the consulting level and at the highest level of the panel.
Another Chilean persuasion in support of multilateralism is that outcomes of
multilateral negotiations provide a minimum level of commitments and a reference
framework. In particular, the Uruguay Round has considerably elevated the “floor” and
the breadth of such reference. The Chilean authorities think that deeper and stronger
disciplines and commitments in many areas which go beyond the traditional “border”
restrictions, together with a strategy of “single undertaking”, facilitates results that
would deepen even more some specific areas in bilateral negotiations. Conversely, the
NAFTA and the similar agreements signed by Mexico, and to a lesser extent by Chile,
possibly contribute, in a complementary manner, to clarifying the structure and focus of
the disciplines and procedures of more “modern” WTO (Jara 2001). The bilateral
agreements signed by Chile are intended to fill in the gaps that still remain after the
implementation of unilateral tariff reductions and multilateral negotiations through the
WTO. From this perspective, Chilean bilateral and plurilateral trade agreements have
been essential complements to the existence of WTO and other standard trade
liberalization schemes.
The WTO is not free of limitations and imperfections, however. The Uruguay
Round, while enabling countries like Chile to strengthen its links with the rest of the
world, also manifested the weaknesses of the multilateral nature of the organization.18
Moreover, the results of the Uruguay Round have fallen short of the expectations held
18
The negotiations were long and complicated, originally intended to end in December 1990 but instead going
on for several more years. The fate of the GATT, which first developed its multilateral trade system in the late
1940’s, was uncertain. Such uncertainty prompted the major powers to look elsewhere. The United States
began to promote an active policy of bilateral trade negotiations (Israel, 1985; Canada, 1989; NAFTA, 1992),
the European Union signed the Maastricht Treaty and continued to grow, APEC became the main economic
forum for the region, and Latin America began to concentrate on MERCOSUR.
22
by Chile. The issue of market access of agricultural products is still unsatisfactory, and
the international trade scene is still susceptible to arbitrary and hidden barriers to trade.
Moreover, Sáez (2001) argues that the multilateral system contains certain
principles that could inhibit the negotiation capacity of a small country like Chile. In
effect, the MFN clause, which is the pillar of the WTO system, can be a limiting factor
for a small country; not being a large producer of a good at the world level might
signify a scarce negotiation power or maneuverability in certain sectors. For these
reasons, Chile negotiated bilaterally the liberalization of the automotive sector towards
the Mexican market in a more favorable condition. The rules of origin in Chile-Mexico
FTA are simpler than those of NAFTA (see Chapter III of this paper), and since 1996
this trade is totally liberalized without any restriction. As a result, Chilean car exports to
Mexico jumped from US$ 21,480 in 1996 to US$ 22 million in 1997 and to US$ 41
million in 1998. The elimination of these barriers would not have been possible for
Chile in a multilateral negotiation, given that the country is not an influential supplier of
the good in question at the international level.
Chile is a founding member of the WTO, having joined at the Marrakech
Agreement in 1995 after the approval of the national Congress. As such, it has had to
implement the agreements concluded during the Uruguay Round and restructure its
internal legislation. To comply with the WTO commitments, three export subsidy
programs are now being phased out within the period allowed by the Agreement on
Subsidies. One such program related to the automotive sector.19 Another program was
designed to allow duty-free entry for capital goods insofar as they were used for export
purposes. The third program provided for the “simplified” system of refunds of 10% of
the value of exports.20
The Chilean negotiation positions at the multilateral forum have been guided by
several principles. First and foremost is the need for transparency in the negotiations so
19
More precisely, Chile did not meet the deadline of January 1, 2000 for eliminating the measures in the
automotive sector that are inconsistent with the measures of local content and trade balancing of the TRIMS
agreement. On December 29, 1999, the Chilean authorities requested an extension in its deadline until May 31,
2000. In July 2000, the authorities requested and was granted an additional “informal” extension until
December 31, 2000.
20
The simplified duty drawback system, established in 1985, entitled the exporter to a 10%, 5% or 3% rebate
on the FOB value, depending on the total value of goods exported. Starting on January 1st 1999, reimbursement
of indirect taxes on inputs incorporated into exported goods has been eliminated, and the 10% rebate on the
FOB value of exports not exceeding US$ 10.5 million has been reduced to 9%, according to the five-year plan,
23
that the WTO members can have an active participation in a comprehensive, integral
decision-making process. Second, the member countries should stick to the “standstill”
principle, which will later keep them from making internal decisions that reduce market
access. And third, Chile wants the negotiation results to be compiled as a “single
undertaking”, in a way that nothing is decided until everything is decided. This way, the
interests of all the member countries in different negotiating sectors can be considered
adequately. Furthermore, the forthcoming negotiations should take into account Special
and Differentiated treatment for developing countries when the negotiated matters are
those that could exceed these countries’ capacity to implement them. Prior to the Doha
Ministerial Meeting, Chile insisted that the next multilateral negotiations should not last
more than three years, with a mid-term ministerial revision (DIRECON 2000).21
As in the WTO conference in Seattle in 1999, during the Ministerial Conference
in Doha in 2001, the Chilean authorities expressed interests in initiating a broad
negotiation agenda, whose contents should include especially the following issues: i) an
ambitious and credible mandate on agriculture as a central issue of the agenda; ii) a firm
treatment of antidumping rights; and iii) environmental measures in the multilateral
rules and disciplines that would preserve the balance between sustainable development
and free trade (WTO 2001a). In addition, in the preparation for the Conference, the
Government made a series of proposals in areas such as: i) agriculture as participating
member of the Cairns Group; ii) revision of antidumping mechanisms; iii) trade in
services; iv) fishery subsidies; and v) a reformulation of dispute settlement mechanisms.
Although the outcomes at the IV Ministerial Meeting in November 2001, in
Doha, Qatar, fell short of Chilean government’s expectations in some areas, the Doha
declaration contains texts that might have important ramifications for the country. The
authorities think that it is important to have the WTO member countries committed in
agriculture to comprehensive negotiations aimed at substantial improvements in market
access and reductions of all forms of export subsidies and trade-distorting domestic
reducing 1 percentage point per year, down to 6% in the year 2002, and then all rebate rates will be fused to a
single 3% in the year 2003. This system cannot be used in conjunction with the regular drawback.
21
Chile has been an active participant at the WTO forums. In the area of services, for instance, together with
Australia and New Zealand, the country has brought forward a proposal on its liberalization. Also, it is
interesting to note that Chile, on its own, made a proposal on WTO negotiation in trade services, by way of the
so-called “clusters” approach. The objective of this idea was to respond to the fact that supply of one service
requires supply of other related-services. This way, a restriction in one service can affect others in a kind of
24
support. Aside from the ongoing negotiations on agriculture, there will be negotiations
on fisheries and anti-dumping laws (as part not only of Subsidies and Countervailing
Measures but also of environment), two areas that are of great importance to Chile. The
inclusion of a text on the reduction and elimination of tariffs, including tariff peaks and
tariff escalation, as well as non-tariff barriers, without a priori exclusions of any sector,
was another achievement. The stated objectives were achieved without making
“sacrifices” in other areas such as environment, government procurement, and dispute
settlement, because the Chilean position basically coincided with that of the developed
counties (www.direcon.cl, El Mercurio November 17, 2001).
Meanwhile, possible progress in future negotiations in new areas such as
competition policy, investment or electronic commerce might should facilitate the
country’s bilateral negotiations in those areas. These are the areas in which Chile is
inclined to assume greater commitments of liberalization.
The “comprehensiveness” can be looked at two ways: i) by how “wide” the FTA in
question is in terms of number of negotiation areas involved (i.e., the inclusion of
border as well as non-border issues); and ii) how “deep” the disciplines and modalities
are within one negotiation sector (e.g., the “negative” vs. “positive” approach of
negotiation in the sector of trade in services). In this chapter, several negotiation areas
are examined to address the second aspect of comprehensiveness.
Within the realm of unilateral decisions, Chile has been employing an aggressive
reduction in the general tariff rate as part of the country’s trade policy. In 1991, the
majority party of the Chilean Congress (the Democratic Coalition) promoted the
reduction of the general tariff on imports from 15% to 11%. This was followed in 1998
by the approval of a scheme to reduce the tariff by one percent every year, starting in
“production supply-chain” of services. For example, trade in forestry should benefit in liberalization if the
25
1999, until a rate of 6% is reached in 2003. At present, Chile’s applied MFN tariff is 8%
across-the-board. The drop in nominal tariffs, coupled with tariff structures for those
countries that Chile has trade agreements, means that once the tariff reduction process is
completed in 2003, the average effective tariff will be 3% to 4%. In terms of
liberalization, this new tariff structure will place Chile on a level similar to Belgium,
France, Spain and Italy (Chile Foreign Investment Committee, 2001).
Also, as a result of the Uruguay Round, Chile reduced its bound rate from 35%
to 25% for most products and to 31.5% for some agricultural products, such as dairy
products, wheat and wheat flour, oilseeds and oleaginous fruit.22 Chilean “bound” rates
are generally lower than those of other Latin American countries (ECLAC 2001).23
As a result of bilateral efforts, many countries that are involved in trade with
Chile face a lower rate than that of the general tariff. Discrepancies in the effective and
general tariff rates appear due to agreements signed primarily with countries within the
hemisphere. Table 6 shows how the effective tariff rate on Chilean imports has changed
at the turn of the year. These variations between the rates for January 2001 and the
month before exist because of the aforementioned reduction of the general tariff by 1%,
plus further reductions resulting from the individual PTAs that Chile has signed with its
trade partners. While most countries experienced a drop in the tariff that they face, there
are some exceptions, most notably Ecuador and Mexico. These irregularities occur due
to changes in the composition of relevant imports, mostly related to the seasonal
phenomena of Chilean trade. Despite these specific cases of increasing tariffs, the
overall tendency toward a lower total tariff rate should continue until reaching a rate of
5.5% at the end of 2001 (Cámara de Comercio de Santiago 2001b).
As expected, Chile’s method of using numerous FTAs has been received with
mixed reviews. Many agree that all lateral reductions in trade barriers are beneficial, be
they multi-, uni-, bi-, or plurilateral. In this sense, all types of “lateral” initiatives should
be supported because they are important opportunities in trade. However, some argue
connected services such as transport, engineering services, etc. were to be also liberalized (DIRECON 2000).
22
Chile applies a price band system for a certain number of agricultural products, namely sugar, wheat, wheat
flour, and vegetable oils. Under this system, in cases of imports carrying costs under the floor value, specific
additional tariffs are applied to the general ad-valorem duty in order to equalize such value. If import costs
exceed the ceiling price, tariff reductions are applied to the general ad-valorem duty to prevent exceeding that
value level.
26
that the prevailing system turns the general tariff into a highly differentiated one,
resulting in reduced protection for some sectors, while others enjoy levels much greater
23
Recently on August 22, 2001, Chile notified the WTO to raise the bound rate on sugar from 31.5% to 98%.
In accordance with Article XXVIII of the GATT, the country offered compensations to its principle sugar
suppliers, such as Argentina, Guatemala and Brazil (DIRECON 2001,www.direcon.cl).
27
than the current general tariff. Such critics propose a uniform tariff reduction ruled by
the government, which would supposedly improve Chile’s linkages to the global
economy. On the other hand, Agosin (1997), for instance, argues that Chile should
reduce tariffs to zero on imported capital goods and inputs not produced in the country,
and that there is no urgency to reduce tariffs on consumer good imports. In effect, the
myriad of FTAs has made the country’s tariff reduction process not only
“comprehensive” but also “complex”.
Contrary to the typical message of FTAs, under which preferential tariff
reduction is welfare inferior to non-preferential tariff reduction, Wonnacott and
Wonnacott (1981) argue that FTAs could produce more gains thanks to improved
market access to trading partners. If a country were to negotiate FTAs with all of its
trade partners, it would end up with zero effective tariffs on all imports, or free trade,
despite the legal existence of positive MFN tariffs. Chile follows such a strategy of
sequentially negotiating bilateral FTAs with all of its significant trade partners. This
sequencing of FTAs, titled “additive regionalism” recently by Harrison, Rutherford and
Tarr (2001), may produce gains that are significantly larger than unilateral free trade.
Critics of Chile’s additive regionalism strategy (e.g., Donoso and Hachette 1996) argue
that agreements with South American countries are unlikely to be beneficial for Chile,
and that it is not worthwhile delaying the benefits of unilateral and multilateral
liberalization to pursue these agreements. They suggest that agreements worth pursuing
are its major trading partners (i.e., the EU, the United States and Japan).
Advocates of regionalism, such as Butelmann and Meller (1995), on the other
hand, consider that additive regionalism would progressively reduce trade diversion
costs for Chile, lower the effective average tariff of the country and provide significant
improved market access in partner countries. Moreover, they argue that Chile should
unilaterally lower its external tariff while simultaneously pursuing additive regionalism
to further reduce trade diversion costs. Harrison, Rutherford and Tarr (2001) find that
this strategy is likely to provide Chile with gains many multiples of the static gains from
unilateral free trade. Meller (1996) argues that given the proliferation of FTAs, the best
strategy for a small country like Chile is to enjoy preferential market access in such a
manner that the small country can play the “hub and spoke game”.
28
Excluding health, sanitary and phytosanitary measures and concerns to public
morals and national security, import quotas and other quantitative restrictions, as well as
licensing, surveillance mechanisms, and cartels are prohibited as non-tariff measures
(NTMs) in Chile. There are neither export licenses nor controls on exports required in
the country. The only exception is the prohibition of the importation of used motor
vehicles excluding certain public utility vehicles.
On the other hand, the Government of Chile claims that its exports face real and
potential NTMs placed by trading partners. According to the Ministry of Economy, as
of the year 2000 the country faced 220 non-tariff measures that were identifiable and
significant in 14 countries. Those countries that figure with a high frequency are
Argentina and Brazil, followed by the United States, the European Union and Mexico
(Cámara de Comercio de Santiago 2001a). Though the norms on non-trade barriers are
clearly established in the WTO framework, they are not easy to detect and even harder
to eliminate. The bilateral or plurilateral route of negotiation can be thought to be a
more effective way to address the issue of NTMs that are often specific to the market
condition of the country/region in question.
Trade in services occurs in many different areas, involving all economic activity that is
not represented by tangible goods. Key sectors in this type of trade include
transportation, telecommunications, financial services, publicity, consulting, energy,
entertainment, and tourism. Most services are not affected by tariffs, but instead are
susceptible to laws, norms, and disciplines that discriminate against foreign services or
service providers.
Services liberalization is a relatively new topic, negotiations for which had
started in the early 1990’s and culminated in the General Agreement on Trade in
Services (GATS). GATS came into force on January 1, 1995 and Chile is a founding
member of the agreement. As for the Western Hemisphere, the strongest push for
liberalization began in 1994, when NAFTA came into force. In the hemisphere, fourteen
29
sub-regional agreements on trade in services have been made since then (see Table 7).24
Such dynamism in the services area shows an increased interest of the countries in the
matter, as well as an acknowledgement that such growth is indispensable for economic
development.
Chile’s relatively open service trade regime is in contrast to its relatively limited
GATS commitments. In particular, Chile maintains a “horizontal” limitation, applying
to all sectors in its GATS schedule, under which authorization for foreign investment in
services industries may be contingent on a number of factors including employment
generation, use of local inputs and competition. Chile has made WTO commitments on
most basic telecommunications services, by adopting the Fourth Protocol to the GATS
on Basic Telecommunications, which makes commitments in domestic and
international long distance, and adopted the reference paper on regulatory commitments.
The country also signed the Fifth Protocol to the GATS on Financial Services, thus
making market access and national treatment commitments in banking, insurance and
other financial services. 25 With regards to air transport services, both passenger and
freight, Chile aims to implement an open skies policy through bilateral agreements
(APEC 2001).
It should be stressed that all of the fourteen subregional arrangements in trade in
services go well beyond those defined at the multilateral level in their objectives
(including GATS), the type of disciplines, and the scope of liberalization (Table 7).
According to Stephenson (2001b: 24), the negotiating posture of Latin American
countries at the GATS has been rather cautious, while that at the regional level in the
area of services liberalization has been strongly pro-active. “All of these agreements go
beyond the GATS in either developing deeper disciplines, or providing for greater
liberalization and market access opportunities for service providers, or enhancing
transparency – or a combination of all three. Two sub-regional agreements even posit
24
The other trade and integration arrangements contain no provisions specific to services or to the liberalization
of trade in services, although definitions on services are set out in the annex to the CARICOM. The
Chile/MERCOSUR and Bolivia/MERCOSUR agreements include a short chapter on services, with a few
provisions.
25
However, during the 1997 WTO financial services negotiations, Chile made commitments neither for asset
management services, including the management of mutual funds or pension funds, nor for financial
information services. Chile also reserved the right to apply economic needs and national interest tests to the
licensing of foreign financial service suppliers. In practice, however, Chile has allowed foreign banks to
establish as branches or subsidiaries and to provide the same range of services that domestic banks are allowed.
30
the complete removal of all restrictions affecting services and service providers falling
within their arrangement, while other agreements posit an effective standstill or
prohibition on the adoption of any new restrictive measures. A few agreements even set
out the unconditional application of both MFN and national treatment”.
A major difference between the WTO and the subregional negotiations on trade
in services is that the former follows the “bottom-up” (positive-list) approach while the
latter, the “top-down” (negative-list) approach (Prieto and Stephenson 1998;
Stephenson 2001b). The former method was agreed on and applied during the Uruguay
Round and is established at the multilateral level under GATS. Points of emphasis
include the creation of commitments in market access and treatment of foreign
providers in specific service sectors. Periodic rounds of negotiations serve to add
liberalization in sectors not originally considered. MERCOSUR, with its Protocol of
Montevideo on Trade in Services (December 1997), also follows this approach, pushing
for common markets in specific timeframes. MERCOSUR hopes for a higher level of
services liberalization, as does GATS, but is also working toward the complete
elimination of all barriers affecting trade in services, whatever the sector.
Chile is more involved in the latter “top-down” approach, which was first
pioneered in NAFTA. This method commits the members involved to liberalizing all
forms of discriminatory treatment faced by all service sectors, excluding certain sectors
and measures that are clearly stated in accompanying reservations. The Chile-Mexico
sub-regional agreement uses this approach, as do the Chile-Canada and Chile-Central
America agreements. None of the NAFTA-type agreements contain schedule
modification procedures because schedules of commitments are not addressed by the
agreements in the first place.26
Another differentiating element is an article on local presence that is contained
in the agreements signed by Chile with Mexico and Canada as well as in NAFTA, the
Group of 3 (Colombia, Mexico and Venezuela), Mexico’s bilateral agreements with
Bolivia, Costa Rica, and Nicaragua, and the Central American/Dominican Republic
Providers of securities and asset management services have also been allowed to establish 100% owned
subsidiaries in the country (USTR, Foreign Trade Barriers, 2001).
26
It is reported that there is still no consensus regarding which approach should be adopted in FTAA. Business
representatives from the 34 member countries are split over the issue. Some U.S. civil society and labor groups
oppose using a negative-list approach because they believe it later may limit public social policies if exceptions
for particular sectors are not built into the agreement.
31
agreement. This article prohibits any party of a given agreement to require a foreign
service provider to establish itself locally in order to supply a traded service. This “right
of non-establishment” is harmonized within these NAFTA-type agreements.
When dealing with principles on trade in services, the agreements signed in the
Western Hemisphere are rather homogeneous, and those signed by Chile are no
exception. Except for the CARICOM Protocol II, all fourteen sub-regional agreements
contain obligations in both Most-Favored-Nation (MFN) treatment and National
Treatment. Such uniformity stresses the importance of these two principles in trade in
services. Those agreements following the NAFTA model treat them as unconditional
principles. One more relevant principle to service trade is transparency, which is
mentioned in all of the agreements. Such articles require the publication of measures
relevant to trade in services, and in some cases the notification of said measures. The
NAFTA-type agreements go further, sometimes requiring the notification of changes in
existing laws and proposals for such change. In the case of Canada-Chile FTA, both
governments agree to monitor the ongoing implementation process and to seek further
opportunities for liberalization following implementation (WTO 1997).
The coverage of service sectors is also comprehensive in all of the agreements
concluded in the Western Hemisphere, containing substantive provisions on trade in
services, with very few specific exceptions, although country-specific exceptions can be
made for certain service sectors; these exceptions are stated in a list of reservations to a
given agreement.27
With regard to the rules and disciplines in trade in services, there are also some
areas that are uniform in many of the agreements. Domestic regulation is one of them;
while GATS recognizes the need for WTO members to regulate their services to
achieve national objectives, it stipulates that these regulations must be transparent and
run with due process. Laws governing services must not be more obstructive to trade
than necessary, and members must explain the objectives upon request, allowing trade
partners to comment upon them. MERCOSUR follows a similar provision. Neither
NAFTA nor the NAFTA-type agreements contain an article on domestic regulation per
se in their chapter on trade in services. Instead, these agreements contain a version of
27
The exceptions are generally confined to air transport services (routing), and services that are carried out in the
exercise of government functions on a non-competitive basis.
32
the GATS provision that is more narrowly focused and applies only to the licensing and
certification of professional service suppliers.
The mutual recognition of licenses and certificates is also an area of
convergence in rules and disciplines, allowing service providers to consider different
aspects of allowing other WTO members their accession to the agreements.
Quantitative restrictions is another, which deals with non-discriminatory measures that,
in the case of the NAFTA-type agreements, may be added or removed via negotiations
and notifications. None of the agreements contain provisions in subsidy disciplines,
while all allow member countries to deny the benefits of the agreement to services that
are under its juridical power.
The possibility for general safeguard action with respect to services is not
contained in the trade and integration agreements of the Western Hemisphere, though it
is found in the GATS. None of the agreements signed by Chile contain an article on
general safeguard action. Some of the other agreements, however, do contain such an
article or allow for future regulation to be developed. 28 On the other hand, general
provisions on dispute settlement for services are contained in all of the agreements. The
Chile/Canada agreement contains additional provisions on dispute settlement in the
chapter on Temporary Entry of Business Persons.
When viewing all of the sub-regional agreements made in the trade in services,
there are also some areas of divergence. However, within the scope of the agreements
involving Chile, these areas are consistent, and very often different from the rest of the
agreements. Furthermore, these areas tend to be similar to those of NAFTA, which
proves the foundational relationship between this agreement and those signed by Chile.
They include a “standard of treatment” clause that requires members to provide service
providers of other member countries the better treatment afforded by the principles of
MFN and National Treatment. None of the other agreements deal with such provision.
28
However, safeguard action in the case of balance-of-payments difficulties is foreseen in most agreements
including NAFTA, the Group of 3, Andean Community and Central America with the Dominican Republic.
The bilateral treaties signed by Mexico with Bolivia, Costa Rica and Nicaragua specify that procedures for the
establishment of disciplines on safeguards will be developed.
33
Table7: Summary of Areas Relevant to Trade in Services
AGREEMENT PRINCIPLES
MFN Treatment National Treatment Transparency No Local Presence
Chile-Canada Yes Yes Yes Yes
Chile-Central America Yes Yes Yes Yes
Chile-Mexico Yes Yes Yes Yes
Andean Community Yes Yes Yes No
GATS Yes Yes Yes No
MERCOSUR Yes Yes Yes No
CARICOM No Yes Yes No
NAFTA Yes Yes Yes Yes
Group of Three Yes Yes Yes Yes
Bolivia-Mexico Yes Yes Yes Yes
Costa Rica-Mexico Yes Yes Yes Yes
Central America-Dom. Republic Yes Yes Yes Yes
CARICOM-Dom. Republic Yes Yes Yes Yes
Mexico-Nicaragua Yes Yes Yes Yes
Mexico-Northern Triangle Yes Yes Yes Yes
AGREEMENT RULES AND DISCIPLIENS (AREAS OF CONVERGENCE)
Domestic Quantitative Subsidy
Recognition Denial of Benefits
Regulations Restrictions Disciplines
Chile-Canada Yes Yes Yes No Yes
Chile-Central America Yes Yes Yes No Yes
Chile-Mexico Yes Yes Yes No Yes
Andean Community Yes Yes Yes No Yes
GATS Yes Yes Yes Future Yes
MERCOSUR Yes Yes Yes Future Yes
CARICOM Yes Yes Not Specified No Yes
NAFTA Yes Yes Yes No Yes
Group of Three Yes Yes Yes No Yes
Bolivia-Mexico Yes Yes Yes No Yes
Costa Rica-Mexico Yes Yes Yes No Yes
Central America-Dom. Republic Yes Reference: GATS Yes No Yes
CARICOM-Dom. Republic Yes Yes Yes No Yes
Mexico-Nicaragua Yes Yes Yes No Yes
Mexico-Northern Triangle Yes Yes Yes No Yes
ARGEEMENT RULES AND DISCIPLINES (AREAS OF DIVERGENCE)
Standard of Treatment of Monopoly General Modification of
Treatment Investment Disciplines Safeguards Schedules
Separate
Chile-Canada Yes Yes No ---
Chapter
Bilateral
Chile-Central America Yes Yes No ---
Agreement
Separate
Chile-Mexico Yes Yes No ---
Chapter
Decisions 439 and
Andean Community No Separate Decision No ---
291
GATS No Within GATS Yes Future Yes
MERCOSUR No Separate Protocols Separate Protocol No Yes
CARICOM No Within Protocol II Separate Protocol Yes Not Specified
NAFTA Yes Separate Chapter Yes No ---
Group of Three No Separate Chapter Yes No ---
Bolivia-Mexico No Separate Chapter No Future ---
Costa Rica-Mexico No Separate Chapter Future Future ---
Central America-Dom. Republic No Separate Chapter Yes Future ---
CARICOM-Dom. Republic No Separate Chapter Yes No ---
Mexico-Nicaragua No Separate Chapter Future Future ---
Mexico-Northern Triangle No Separate Chapter No Future ---
Source: Extracted from Stephenson (2001a), “Multilateral and Regional Services Liberalization by Latin America and the
Caribbean”, OAS, Washington D.C.
34
The treaties that Chile has agreed to also consistently set out disciplines on
monopoly service providers, ensuring that monopoly suppliers do not abuse their
position in the market, or perform actions inconsistent with the WTO guidelines
assumed by a member. State-owned enterprises are also included in these advanced
agreements.
Many agreements have provisions that deal with the relationship between
services and investment. While GATS and MERCOSUR include these within the
agreement, NAFTA and the NAFTA-type models including the ones involving Chile set
out the rules and disciplines in investment in a separate chapter. These provisions allow
for the entry of investments from member countries, implementing country-specific
exceptions when necessary. The agreement between Chile and Central America has the
unique characteristic of bilateralism, containing bilateral investment treaties for between
each Central American country and Chile.
IV-3. Investment
The past decade saw a marked increase in bilateral and regional agreements dealing
with investment. This increase was accompanied by a strong growth in the flow of
portfolio investment and foreign direct investment (FDI), particularly in Latin America
and the Caribbean. During the 1990’s, FDI inflows to the region increased from
US$ 8.9 billion in 1990 to US$ 93.5 billion in 1999, an almost 1000 percent jump. In
the case of Chile, the FDI flowing into the country sat at US$ 9 billion in 1999 (see
Table 4).29
29
In Chile, foreign investment can be made through two mechanisms, the Foreign Investment Statute, Decree
Law 600, and Chapter XIV of the Compendium of Foreign Exchange Regulations of the Chilean Central Bank.
The former establishes a special regime of foreign investment through which the investor opts to submit a
foreign investment application and after the authorization of investment enter into contract with the Chilean
State under the previsions of Decree Law 600, which grants special conditions for the investor, such as the right
to transfer their capital and the net profits repatriation to other countries, the guarantee of non discrimination
against the foreign investments and the companies participating therein and tax stability. The latter, on the other
hand, establishes a general mechanism of registration of foreign investment and loans. This allows the free
entry, use and exit of investment flows which only consist of freely convertible foreign exchange. The Central
Bank may not screen or otherwise reject the foreign investment. In addition, there has been a substantial
amount of foreign investment inflow through the modality of American Depository Receipts (ADRs), which
amounted to US$ 10,263 million during 1990 and June 2001, in comparison to US$ 41,825 million and
US$ 5,110 million under DL 600 and Chapter XIV, respectively, in the same period
(www.foreigninvestment.cl).
35
Throughout the decade, more than seventy bilateral investment treaties (BITs)
have been signed within the hemisphere. While most of these agreements deal with
standards of treatment of investment and investors, the laws and regulations of the host
state regarding the admission of investments, and dispute settling mechanisms, several
agreements go beyond this scope by including a right of establishment and a list of
reservations. This is in contrast to a general exception, which deals with entire sets of
obligations instead of being a country-specific list. NAFTA and the Group of 3 FTA
follow this new approach, as do a handful of bilateral agreements. The Chile-Mexico
and Chile-Canada FTAs are part of this handful, allowing the agreements to incorporate
a market access component to the protection element. These agreements do not attract
investment on their own, but instead complement the determinants of FDI flows.
During the 1990s, Chile has negotiated a large number of BITs that are officially
called Investment Promotion and Protection Agreements (IPPAs) and/or Agreements on
Double Taxation with almost all countries in the Western Hemisphere (Table 8). The
country is also currently negotiating or has negotiated IPPAs with a large number of
countries in other parts of the world including the APEC economies. With respect to
APEC, IPPAs with Australia, China, Republic of Korea, Malaysia, and the Philippines
have been in force, while the ones with Indonesia, New Zealand, and Vietnam are
awaiting ratification. Those under negotiation are Singapore, Thailand and Russia
(APEC 2001). Japan has not entered into a BIT with Chile. In the case of Mexico and
Canada, Investment Chapter of the Free Trade Agreement guarantees those rights and
stipulates corresponding obligations. In recent years, Chile has implemented an active
policy in Double Taxation Treaties, signing agreements with some APEC’s economies,
among others, Mexico, Canada and Peru.
The principles that have led the development of Chile’s investment regime in the
1990s are said to be the following: i) National Treatment; ii) MFN; iii) no performance
requirement; iv) no restrictions on the appointment of senior management and directors;
and v) a possibility of resolving disputes by international arbitration. Those remaining
measures which may still restrict such general principles are found in the sectors or sub-
sectors of privatization, aboriginal affairs, oceanfront land ownership,
telecommunications, transport networks and services, radio communication and
submarine cables, fisheries, government services (APEC 2001). Several additional
36
issues are incorporated in some of the agreements that deal with newly discussed
components of trade. For example, there are provisions in the Chile-Canada FTA that
prevent investment activity from harming domestic health, safety, and environmental
concerns.
A key characteristic of a BIT is its definition of investment, which makes up its
substantive scope. Most agreements involving the countries in the hemisphere adopt a
“broad, open-ended, asset-based” definition of investment.30 For instance, in the Chile-
Canada and Chile-Mexico agreements, the definition encompasses portfolio as well as
direct investment, including loans to enterprises. However, some agreements try to
avoid specific monetary and speculative flows that are not related to investments. The
Chile-Canada FTA is one of them, excluding “real estate or other property, tangible or
intangible, not acquired in the expectation or used for the purpose of economic benefit
or other business purposes.” (Robert 2001).31 As for which investors are covered by an
agreement, both bilateral FTAs signed by Chile consider the place of incorporation of a
company to determine its nationality, as do NAFTA and the Group of 3. Other
agreements use the location of the management or seat of the company, or the
nationality of the people controlling the company, as the criteria for investor coverage.
When it comes to general standards of treatment, almost all the agreements
incorporate provisions on fair and equitable treatment. Such standard is unrelated to the
domestic laws of member countries, and is usually combined with the principle of full
protection and security or that of nondiscrimination. The Chile-Canada FTA provides
for disciplines on non-discriminatory treatment through national treatment and MFN
clauses. In addition, this FTA carefully limits the conditions for expropriation and
guarantees investors of both parties fair and adequate compensation if an expropriation
were ever to occur; it insures that the interests of investors are protected when a host
country expropriates their investment. It also allows investors to take advantage of
30
There are some exceptions to this rule; for instance, CARICOM’s Protocol II does not define investment,
while Decision 291 of the Andean Community covers only foreign direct investment.
31
One of the difficult areas in negotiation relating to the definition of investment between Chile and Canada
was the encaje policy of Chile. This policy required that a certain percentage of foreign loan funds must be
placed in non-interest-bearing account at the Central Bank of Chile for one year. This policy also applied to
foreign borrowings by Chilean funds. The Chilean authorities argued that the objective of this policy was to
regulate speculative capital inflows. Other countries including Canada, however, argued that this raised total
cost of business and could discourage foreign direct investment. The deposit requirement was reduced from
30% to 10% in June 1998 and to zero two months later. The encaje system was later abandoned in 2001.
37
investor-state dispute settlement provisions that offer access to expedient international
arbitration procedures.32
32
The most controversial arrangement of this type is Chapter 11 of NAFTA (more details see Chapter IV of
this paper). This chapter provides a broad set of investor protection and investment liberalization rights to
foreign investors, and obligations for governments. It contains an investor-state dispute settlement process,
which has been strongly criticized by civil society groups. The investor-state arbitration process is initiated
directly by the foreign investor against the host government, with little information and transparency provided
to the public (IISD and WWF, 2001). The results of the process are binding on both participants, and there are
limited opportunities to appeal or review a decision. As of April 2001, there were 17 such cases that have been
initiated.
38
As mentioned earlier, the Chile-Canada and Chile-Mexico agreements add a
right of “establishment” factor to this standard, and they require national treatment and
MFN treatment. Most NAFTA-type agreements grant investments and investors the
better of national and MFN treatment.33 Most agreements also contain exceptions to the
rule, such as treatment at federal and sub-federal levels in NAFTA. The Chile-Canada
and Chile-Mexico agreements likewise have a general exception for taxation treaties,
which covers not only the investment chapter but also the entire agreement (Robert
2001).
In addition, the NAFTA-type agreements prohibit performance requirements for
both goods and services. Most bilateral agreements, however, do not address the issue.
Once again, the Chile-Canada and Chile-Mexico agreements are special in that they
prohibit requirements in levels of local content, purchase of local goods and services,
foreign exchange balancing, domestic sales, export percentages, technology transfer,
and supplier exclusivity as conditions for “establishment, acquisition, expansion,
management, conduct, or operation of a covered investment.” Some of these areas are
also prohibited from subsidies or investments.
The general dispute settlement mechanisms present in the FTAs signed in the
region are also used to solve investment disputes between member countries. However,
in those cases when an investment instrument is used, there usually exists a reference to
a specific institutional arbitration mechanism, be it under the Convention on the
Settlement of Investment Disputes between States and Nationals of Other States (ICSID
Convention) or the United Nations Commission on International Trade Law
(UNCITRAL). In any case, most agreements urge investors and host countries to solve
the dispute by themselves via consultations and negotiations. They may require a certain
elapsed period before the dispute can be brought to arbitration, or allow the investor to
bring disputes to local courts of the host state. In Chile’s investment agreements, the
foreign investor is guaranteed of the right to submit a claim before the local courts or
before international tribunals, the latter being ICSID or UNCITRAL.
33
In contrast, The Andean Community and CARICOM do not include an MFN provision.
39
IV-4. Rules of Origin (RO)
Chile does not apply non-preferential rules of origin but its network of rules of origin
(RO) schemes is complex. Chile is a signatory to ALADI since 1981, and applies the
specific scheme of origin contained in Resolution 78. Bilateral agreements signed
afterwards by Chile are in accordance with this resolution, including ECAs with
Colombia, Venezuela, Ecuador and Peru. An association trade agreement with
MERCOSUR, effective as of October 1, 1996, contains a special set of RO. Both the
FTAs with Canada (1997) and Mexico (1998) contain a set of specific RO.
More specifically, the RO requirements of the ALADI outlined in Resolution 78
are relatively simple and their applications in distinct agreements signed within the
ALADI framework introduce uniformity (Jara 2001). Generally, in order for any good
to enjoy any ALADI preferential tariff arrangement, the product must either originate or
be made with inputs that originate within the territory of the signatory countries. A good
that has foreign inputs will be also accorded preferential treatment if it is sufficiently
transformed within the territory of a member country so as to achieve a new tariff
classification heading under the ALADI’s harmonized tariff schedule (NALDISA).
When a new tariff heading classification is not achieved, the good will still receive
preferential tariff treatment if the total CIF value of the foreign inputs does not represent
50% of the FOB price of the final product (Resolution 78, Annexes 1 and 2).
Meanwhile, the RO requirements between Chile and MERCOSUR are more
detailed than those found in ALADI or even in the MERCOSUR agreement itself (Title
III, Article 13, Annex 13), because mainly of Chile’s association, not a full membership,
in MERCOSUR. This means that Chile does not observe MERCOSUR’s Common
External Tariff (CET) system but applies its own duties on all goods coming from the
outside world, which in most cases are lower than those applied by MERCOSUR. This
associate membership, in turn, calls for a RO scheme that prohibits third parties to use
Chile as a conduit for getting their foreign products into MERCOSUR and avoid paying
the higher MERCOSUR CET.
Under these RO provisions, goods that are made wholly from products native to
Chile or MERCOSUR enjoy intraregional free trade treatment. Those goods that do not
originate in Chile or MERCOSUR and have not undergone a substantial transformation
within the region with a new classification under NALDISA may still qualify for the
40
benefits, though no more than 40% of the FOB value of the final product can reflect the
CIF value of non-regional inputs.
The RO requirements in the Chile/Canada agreement (under Chapter D and
Annex D-01) includes a liberal 35% regional content requirement when the transaction
value method is employed, or 25% when the net cost method is used for a large number
of manufactured goods for a duty-free treatment between the two countries. Therefore,
the ROs in the agreement with Canada are more flexible for all products except in
agriculture, textiles, clothing, footwear, and plastics and chemicals. The rules stipulate
also de minimis exceptions.34 The RO for these exempt products have been relaxed on a
transitional basis. Flexibility is added to the rules of origin by allowing change of tariff
classification at the sub-tariff level and by reducing the value of regional content. In
comparison, the minimal regional content requirements in the NAFTA are either 60% or
50% respectively. The RO requirements in the Chile-Mexico agreement (under Chapter
4, Annex 4-03) are similar to those of NAFTA, and incorporate the concepts of
transaction value (50%) and net cost methodologies (40%) in determining the regional
content requirement of goods, as well as de minimis exceptions. In this FTA, the
minimis threshold is 8%, instead of the 9% level in the Chile/Canada FTA. Both
agreements have special provisions for the automotive sector.
In sum, in the old agreements singed by the countries in the hemisphere, mostly
under the ALADI framework, there is a general rule applied across-the-board based on a
change in tariff classification at the heading level or, alternatively, a regional value-
added rule of at least 50% of the FOB export value. However, in the new generation
agreements, mostly those that follow the NAFTA model of RO, these general rules are
accompanied by additional product-specific rules negotiated at the 6-digit level of the
Harmonized System. The regional content provisions in the Chilean FTAs with Mexico
and Canada are, however, less stringent than those of NAFTA. The RO rules governing
the MERCOSUR and MERCOSUR bilateral agreements with its associate members
34
Under the minimis provisions, a good shall be considered to be an originating good if the value of all non-
originating materials used in the production of the good that do not undergo an applicable change in tariff
classification is not more than 9% of the transaction value of the good, adjusted to a F.O.B. basis, or, if the
transaction value of the good is unacceptable under Article 1 of the Customs Valuation Code, the value of all
such non-originating materials is not more than 9 % of the total cost of the good. However, these provisions do
not apply to all product groups.
41
(i.e., Chile and Bolivia), as well as the Central American Common Market’s ROs, can
be considered intermediate models between the above-mentioned two models.
The proliferation of complex ROs could be considered as a step backwards from
the simpler arrangements which are common in the ALADI agreements (Devlin and
Estevadeordal, 2001). The diversity of RO in the agreements concluded by Chile can be
an obstacle to their coherent application and the optimum choice of suppliers. The
Chilean authorities are aware of this risk, and for this reason they have endeavored to
ensure that rules of origin are as uniform as specific as possible.
The regulations governing the rules and procedures in antidumping and countervailing
cases in Chile are the WTO Agreements35 and Law 19,612 and its Regulation Decree
No. 575. These measures can only be imposed for one year. In 1999 the Congress
approved Law 19,612 that modifies a previous one (Law 18,525), allowing the country
to impose safeguard measures according to Article XIX of GATT. It could be used if a
specific product is being imported in such increased quantities and conditions as to
cause or threaten to cause “serious damage” to the domestic industry. Safeguards shall
be applied for one year, renewable only for one additional year. This law is not only in
compliance with the Agreement on Safeguards of the WTO and does not use all the
provisions contemplated by this organization (APEC 2001: 84), but is also more exigent
in that the WTO safeguards are permitted for a period of four years and are renewable
for an additional four years.
The tariff surcharges mentioned in Law 18,525 can be applied when there is a
complaint that growing imports with distorted prices are affecting domestic production
and causing serious injury. This measure too could only be imposed for one year, the
surcharge plus the applied tariff cannot exceed the bound tariff rates, and it is applied on
an MFN basis. This surcharge does not constitute a safeguard in the sense of Article
XIX of GATT 1994, since it cannot exceed the bound rate (WTO 1997: 23).
Antidumping investigation cases affecting countries of the Western Hemisphere
are many. The United States and Brazil are the leading targets of these investigations in
42
the region, accounting for 63% of the cases initiated against FTAA countries between
1987 and the first semester of 2000. The countries in a second tier were Argentina,
Canada, Mexico and Venezuela (about 30% of the cases), followed by other 12
countries (share of 7%). The distribution by users of antidumping had a similar profile.
During the period, Chile initiated 5 cases against FTAA countries (in comparison to 7
cases with the rest of the world), while the country was the target of 16 cases initiated
by FTAA countries (none from the rest of the world) (Tavares, Macario and Steinfatt
2001).
Most regional agreements in the Western Hemisphere allow the use of
antidumping measures among their members according to WTO rules. Chapter
Nineteen of NAFTA contains a dispute settlement mechanism on antidumping and
countervailing duties, providing for binding binational panel reviews of cases for goods
of member countries and changes to existing laws of the parties. In the case of
CARICOM, for example, these rules have been explicitly included in the Protocol VIII
that was signed in March 2000. The member countries of MERCOSUR are expected
eventually to eliminate antidumping.
At the world level, there are only four regional trade agreements in which the
member countries have abolished antidumping measures among themselves and the
Canada-Chile FTA (1996) is one of them.36 For each good, the anti-dumping exemption
comes in effect when the tariffs on that good have reached zero in both countries, or
after six years, whichever is earlier. This initiative might have resulted from a high
possibility that implementing an EU-style elimination of safety valves would be costly
for partners such as Canada and Chile which still have a low level of economic
integration; the bilateral trade flows represent roughly 1.5% for Chile and less than
0.1% for Canada. “The experience of particular integration agreements, including the
free trade area between Canada and Chile (and possibly that between Chile and Mexico)
with the replacement of safeguards for antidumping might provide further insights into
additional parameters that might be needed to be taken into account when balancing the
35
They are: the Agreement on Implementation of Article VI of the GATT 1994, the Agreement on Subsidies
and Countervailing Duties, Article VI of GATT 1994, and the WTO Agriculture Agreement.
36
The other three agreements are: the European Union (EU), the European Economic Area (EEA), that came
into force in 1994 by the treaty signed between EU and the European Free Trade Association (EFTA), and the
Closer Economic Relations Agreement (CER) between Australia and New Zealand.
43
costs and benefits of different institutional alternatives to protect domestic producers
from import competition” (Tavares, Macario and Steinfatt 2001: 30).
The elimination of antidumping is replaced by a special transitional safeguard.
Chapter F (Article F-02) of the Canada-Chile agreement provides special rules for
safeguard actions during the transition period and states that “each Party retains its
rights and obligations under Article XIX of the GATT 994 and the Agreement on
Safeguards of the WTO Agreement except those regarding compensation or retaliation
and exclusion from an action to the extent that such rights or obligations are
inconsistent with this Article”. The FTA with Mexico and the ECA with Peru also
stipulate conditions that limit the use of global safeguards of the WTO for reciprocal
trade. The ECA agreements with Venezuela, Bolivia, Ecuador, and Cuba have
dispositions on safeguards that are based on the ALADI rules. A safeguard regime was
also adopted with MERCOSUR in 1999.
It is interesting to note that Chile/Mexico FTA in Article 20-08 (b) stipulates
that both countries would start, within one year after its entry in effect, negotiations on
reciprocal elimination of antidumping rights, as is practiced in Chile/Canada agreement.
In the case of Chile’s FTA with Central America, antidumping and unfair trade
practices do not have specific provisions. While it confirms the rights and obligations in
conformity with the WTO norms, the agreement only specifies that the member
countries are committed to promote reforms in the framework of WTO or FTAA so that
these measures would not become hidden trade barriers, and that the member countries
will establish a work program on this area two years after the entry in effect of the FTA.
In contrast, the agreement provides detailed provisions on safeguards, bilateral and
global. This absence of antidumping rules can be also interpreted another manifestation
of the Chilean authorities’ desire to deal with the issue of antidumping more decisively
in the WTO framework.
In order to guarantee free flows of goods and services and to give non-discriminatory
treatment between national and foreign products, as well as to use international
standards, most agreements include standards, technical regulations and conformity
assessment procedures. Chile’s policy on this are based on: i) non-interference with the
44
free operation of markets and freedom of trade; ii) non-discriminatory treatment
between domestic and foreign products and between foreign products; iii) the use of
international standards as a basis for national standards, when possible; and iv)
transparency (APEC 2001). Chile has 2,265 voluntary standards, 76% of which are
based on international standards.37
There are two approaches to categorizing the treatment of standards in the
Western Hemisphere. There is the objective of harmonization on the one hand, and the
objective of compatibility on the other. Harmonization requires the countries in question
to have identical policies, as well as common physical standards and technical
regulations. Also, it requires a permanent institutional mechanism to oversee the
coordination of such standards. Compatibility is a different approach in that all it
requires is that the standards used by member countries do not create barriers to trade.
Such goal can be achieved by making the standards more identical, by promoting the
integrity of the interfaces, or recognizing their equivalency. Such recognition in trade
qualifications allows the countries to use the traded goods and services in similar ways.
In general, those integration arrangements present in customs unions set out
harmonization as their overriding policy objective, while those integration arrangements
found in FTAs emphasize a compatibility approach (see Table 9). This contrast can be
seen, for instance, between MERCOSUR, which declares a commitment to gradually
harmonize existing national standards, and NAFTA, which mandates its members to
“make compatible of a specific standard or conformity assessment procedure”
(www.sice.oas.org/stanards).
Although all of the bilateral FTAs of the hemisphere explicitly consider
standards in their provisions, they can be broken into two groups: The first consists of
five ECAs signed by Chile with Mexico (1992), Bolivia, Venezuela, Colombia and
Ecuador, which do not contain explicit disciplines on standards but rather a general
article or chapter promoting economic cooperation in this area (Stephenson 1998). The
agreements with Colombia and Ecuador, however, go further to admonish the member
37
The preparation of standards is carried out in accordance with the Code of Good Practice of the TBT
Agreement criteria. Once standards have been approved by the National Standardization Institute (INN)
Council, they are usually given official status, though remaining voluntary, by the relevant Ministry by means
of Decrees or Resolutions. INN standards are usually based on international standards such as ISO
(International Organization for Standardization), IEC (International Electrotechnical Commission) and
45
countries to follow the principles of the MFN treatment, notification and exchange of
information, and to utilize international standards when elaborating national ones (see
Table 9). Furthermore, these two treaties set out the goal of trying to achieve
compatibility as between parties on standards, and to seek mutual recognition of their
certification system and laboratory testing results.38
The second category of agreements consists of the two signed by Mexico, with
Bolivia and Costa Rica. In these agreements, the parties reaffirm their rights and
obligations under the TBT Agreement of the WTO, such as MFN treatment, national
treatment, transparency and notification, establishment of enquiry points, and use of
international standards. The stated policy objective in these two agreements is to bring
about compatibility. Similar to the NAFTA approach, the benefits of mutual recognition
of conformity assessment systems and procedures are recognized, while conformity
assessment bodies are to be accredited or recognized on equally favorable terms
(Stephenson 1998).
With respect to Chile, a compatibility approach has been present also with
MERCOSUR. The agreement confirms the rights and obligations under the TBT
Agreement, though it does not contain detailed provisions on standards. The parties
strive for compatibility in the area of standards. The less ambitious nature of
commitments can be explained by the fact that as an associate member of MERCOSUR,
Chile tries to retain relative sovereignty on the matter of standards. The Chile-Mexico
agreement is guided by provisions and disciplines in Chapter 8 of the FTA that are
similar to those of the WTO TBT Agreement.
In some cases, Chile’s commitments include disciplines that extend beyond TBT
Agreement provisions in areas such as transparency, equivalence, mutual recognition,
and risk assessment. In addition, Chile’s FTAs with Canada and Mexico include
provisions on technical norms in the telecommunication sector.39
CODEX. For example, the INN participates as a member in eight ISO Technical Committees and as an
observer in 135 ISO of these committees.
38
Standards and technical regulations set out specific characteristics of a product - such as its size, shape,
design, functions and performance, or the way it is labeled or packaged. The difference between a standard and
a technical regulation lies in compliance. While conformity with standards is voluntary, technical regulations
are by nature mandatory. Conformity assessment procedures are technical procedures - such as testing,
verification, inspection and certification - which confirm that products fulfil the requirements laid down in
regulations and standards.
39
Standards-related measures relate to attachment of terminal or other equipment to public telecommunications
transport networks.
46
Table 9: Comparison of Policy Objectives Towards Standards
in the Western Hemisphere
Conformity
Standards Technical Regulations Certification
Assessment Procedures
CACM Harmonize -- -- --
CARICOM Harmonize -- -- --
Make Compatible Seek to Approve or
NAFTA Promote Compatibility Make Compatible Seek Mutual Grant Licenses on Equal
Recognition Terms
Make Compatible Seek to Approve or
Group of Three Promote Compatibility Make Compatible Seek Mutual Grant Licenses on Equal
Recognition Terms
Make Compatible Seek to Approve or
Mexico-Bolivia Promote Compatibility Make Compatible Seek Mutual Grant Licenses on Equal
Recognition Terms
Make Compatible Seek to Approve or
Mexico-Costa Rica Make Compatible Make Compatible Seek Mutual Grant Licenses on Equal
Recognition Terms
Seek Mutual Seek Mutual
Chile-Colombia Promote Compatibility --
Recognition Recognition
Seek Mutual Seek Mutual
Chile-Ecuador Promote Compatibility --
Recognition Recognition
47
happening as trade partners also apply the multilateral commitments. Meanwhile, the
Chilean government seeks to incorporate elements of the NAFTA model, particularly
those related to services and investment, into the forthcoming Chile/US FTA as a
further step of consolidation of the NAFTA model.
V-1. The Implication of Chile/US FTA for the Free Trade of the Americas
(FTAA)
The imminent Chile/US FTA is widely viewed as a model case for the FTAA. As the
USTR (2001) suggests, this FTA demonstrates the commitment of the United States to
free trade throughout the Western Hemisphere and sets the stage for further trade
liberalization in the region. Conversely, the FTAA is likely to bring with it a
convergence process among various FTAs that exist in the hemisphere under the
NAFTA model (Sáez 2001). From this perspective, Chile is already anticipating the task
of normative harmonization in the FTAA. More importantly, the Chilean government
believes that the Chile-United States agreement could provide an impetus to the FTAA
negotiations since the country’s objectives insofar as FTAA and the United States are
concerned are similar: to open up markets, establish trade and investment norms and
regulations, and implement an efficient and practical conflict-resolution mechanism
(www.direcon.cl/usaantec2.htm).
Despite the adoption by both countries of the NAFTA as a prototype of
negotiations, each country obviously tries to conserve and protect national interests. The
ongoing negotiation process examined in this chapter highlights the difficulties
encountered and conflictive areas. Though market access problems in the traditional
sense still remain important, issues of “new” and “deep” regionalism are increasingly
becoming key elements of negotiation.
Chile and the United States initiated negotiations for an FTA in December 6, 2000.
Since that date, ten rounds of negotiation have taken place. The negotiations are
expected to conclude in the mid 2002. The economic implications of the FTA for Chile
are obvious because the United States is Chile’s top trading partner, though Chile is
48
currently ranked 32nd in the US imports. Strong interests on the part of the United States
reflect their desire to use this agreement as a platform to consolidate the NAFTA
process within the hemisphere as in the form of FTAA.
The complexity and the degree of comprehensiveness of ensuing negotiations
can be appreciated by looking at what issues are being negotiated between the world
economic giant and a small but emerging economy. In the sphere of trade of goods,
market access, rules of origin and customs procedures are the major issues. In the area
of trade remedies, safeguards, anti-dumping and compensatory rights are being
negotiated. Sanitary and phytosanitary issues, technical specifications and standards, are
the major negotiation areas with respect to norms and standards. In trade in services and
investment, practically all areas are covered including the treatment of transport,
telecommunications, advertising and consulting services. It is important to note that
financial services as well as electronic commerce, and business visas are being
separately discussed/negotiated. Other trade-related issues cover competition policy,
intellectual property rights, and government procurement. As a comprehensive FTA,
institutional aspects such as transparency and dispute settlement are also included.
Furthermore, labor and environmental issues are also addressed. While all the above-
mentioned standards and disciplines should be consistent with those of the WTO, the
Chilean government aspires to go much further. “One of the merits of a bilateral
agreement is that it allows for a much more in-depth analysis of certain topics than is
possible in a scenario in which there are more than 140 members, such as the WTO”
(www.direcon.cl/usaantec.2htm).
In spite of many rounds of negotiations, both countries are still at odds over the
extent of the initial tariff cut.40 Chile has argued for an ambitious schedule that would
cut tariffs to zero on 85% of trade as soon as the FTA goes into effect. Under the
Chilean plan, tariffs on the remaining 15% would be phased out over five or ten years.
40
The original proposal of the United States was to immediately eliminate US tariffs on two-thirds of imported
Chilean products as soon as the FTA takes effect. On the other hand, the Chilean officials argue that this
proposal is not sufficient; this is slightly more than the volume of Chilean products that already enter the US
market duty-free under the unilateral tariff preferences or the MFN rate. The U.S. proposal divided the
remaining third of Chilean exports to the U.S. into three baskets: one which contains goods eligible for a short-
term tariff phase-out; another that would be eligible for a long-term tariff phase-out; and a third which would
consist of sensitive products for which tariff reduction has yet to be decided. In contrast, Chile offered a
proposal with three groups that would benefit from immediate phase-out, five and ten year phase-outs, and a
group of sensitive products that would be to be decided. The majority of items that the United States placed for
49
On the other hand, the United States envisages a much more modest schedule, with an
immediate zero tariff applied to just over half of trade. The United States is not
necessarily advocating or excluding a phase-in that is longer than ten years.41 Although
the two sides seem to have settled for three tariff phase-out phases “immediately” upon
agreement, after four and eight years, they will yet have to divide products among those
“baskets”. More importantly, negotiators have yet to decide how to deal with products
in a “fourth basket”, which on the U.S. side includes key Chilean agricultural products
sensitive for U.S. producers (Inside U.S. Trade 2001c; 2001d; 2001k; 2001f).42
Agriculture is a sensitive area for both countries. Chile is known to have
assumed the position that it will not insist on U.S. elimination of domestic support as
part of the agreement, but that it pushes for a deal to enable it to maintain the price-band
system of tariffs on some of its own sensitive agricultural commodities, including sugar,
vegetable oil, and wheat (Inside U.S. Trade 2001d). Removal of the price band is a top
priority for many U.S. agricultural groups, who are pressing the issue more as a
precedent for other agreements, such as the FTAA, than for its actual market access
(Inside U.S. Trade 2002). Both countries will likely explore transitional tariff-quotas
based on the model of NAFTA for certain agricultural products. Under NAFTA, the
sugar tariff-rate quota establishes a quota for duty-free access with built-in progressive
reductions for the over-quota tariff. The foregoing is a good example of potential
benefits of a bilateral FTA in which a particular concern of a small country (Chile’s
price-band scheme) can be crossed against another concern of a larger trade partner
(domestic support program of the United States). This kind of give/and take situation is
most unlikely to happen in a multilateral negotiation forum.
In the area of investment, both parties have not reached an agreement on the
extent to which the U.S.-Chile FTA should reflect broad investor protections that are
included in the NAFTA. Business groups in the United States call for investment
provisions modeled after the NAFTA (specifically provisions under Chapter 11) to be
included in the FTAA and bilateral agreements with Chile and Singapore. The major
immediate tariff elimination are already at zero tariff, which means that the U.S. basket would add actually as
little as 2% of current trade to that category.
41
In the NAFTA, the most sensitive category has a fifteen year phase-out period, in addition to the
“immediate” “five” and “ten” year categories.
42
The U.S. proposal was reportedly to have included some key Chilean exports like wine and salmon on the
U.S. “sensitive” list.
50
issues include guarantees of non-discriminatory and fair and equitable treatment,
protections against government actions that amount to expropriation of investment, and
provisions allowing investors to sue host governments for damages at arbitration panels.
U.S. environmental, labor and consumer NGOs are concerned that investment rules
could undermine a government’s ability to act in the public interest. Their biggest
concern is over the prospect that private investors would be given direct access to
investor-state dispute settlement to challenge government non-compliance with FTAs.
Governments can be required to pay the investor monetary damages if the investor’s
complaint is upheld in an arbitration panel (U.S. Inside Trade 2001a; 2001j). 43 The
Bush administration will have to formulate a position on this issue if it wants to put
forward modified NAFTA investment-language in the U.S.-Chile FTA.
It seems that in the negotiations to date the United States is advocating a
“product-specific” approach to preferential rules of origin in the FTAA, the Chile FTA
and the Singapore FTA. This approach requires negotiators to establish for each product
or product sector, the degree of working or processing necessary within the parties of
the agreement to transform non-originating component materials into originating goods
eligible for preferential tariff treatment. As discussed earlier, the NAFTA predominantly
adopts a product specific “tariff shift” approach, whereby the degree of working or
processing is represented by a specified change in HS system tariff classification for
each product or sector. This approach is contrasted with rules of origin based on a single
generally applicable rule, such as a single uniformly applied “tariff shift” standard or a
“regional value contest” test that has been applied by Chile as in MERCOSUR. The
United States thinks that the former approach not only provides more certainty and
transparency, but also compensates for a deficiency of the HS tariff nomenclature in
which a shift does not necessarily reflect a particular transformation for a product
(USTR, Federal Register; May 4, 2001).
43
The longstanding effort of Canada and Mexico to clarify Chapter 11 not only calls for a more transparent
arbitration process, but also to seek to limit how expropriation prohibitions and guarantees of fair and equitable
treatment can be used to limit governments’ legitimate regulatory authority, especially on environmental
matters. The Canadian authorities, for example, have argued that expropriation of investment, which requires
compensation, is different from interference with an investment, which does not. Furthermore, Canada argues
that the obligations of Chapter 11 should in no way be read to unduly restrict the governments’ ability to
legislate for the public good, for instance, where the environment or the health of their citizens are involved.
51
Regarding services, the U.S. and Chile are reported to have agreed to a negative
list approach44 and the two sides have exchanged a list of reservations of service sectors
that they do not want to liberalize through the FTA process. Negotiations include
financial services and temporary entry of services personnel. In the former, which is a
“sensitive” area, one of the most difficult areas so far has been insurance and asset-
management for Chile’s privatized pension system. It has been reported that the U.S.
mutual fund firms and other financial companies are seeking to compete with Chilean
firms in handling pension investments and wish to phase out all restrictions on where
these funds can be invested. American firms want the Chilean rules changed so that
Chileans will have the choice to select an American firm to handle the voluntary part of
the investments (savings of additional funds). In addition, they desire to be able to be
hired by AFPs (Pension Fund Administrators) to administer individual accounts in the
mandatory portion (i.e., a mandatory savings program through employers that is
administered by private Chilean financial firms). Currently, only 20% of the funds in
the mandatory system can be invested abroad. On insurance business, U.S. firms are
interested in being able to operate as branches, where Chile currently allows only
operation through wholly owned subsidiaries or in joint venture with Chilean partners.
In addition, American firms are pushing Chile to adopt “best practices” in regulating
insurance to ensure transparency and speed up the introduction of new products into the
market (Inside U.S. Trade 2001i).
The United States government is reportedly resisting Chile’s demand for
expedited temporary entry for services personnel because this deal would set a
precedent for regional Latin American agreements. Though it is certain that the United
States seeks to have Chile as a model for other countries’ trade liberalization in many
service sectors, it would not like to accede to Chile’s request for liberalization in the
cross-border movement of services personnel, fearing that it could serve as a precedent
for the FTAA (Inside U.S. Trade 2002). Chile presses for the same treatment provided
in the Chile/Canada agreement, that calls for expedited visa procedures for personnel in
specified services without work authorization.
The U.S. telecommunications industry is also pushing for the Chile/U.S. FTA to
44
The United States advocates the negative-list approach in FTAs, arguing that though it is ambitious, it
provides countries with flexibility to deal with domestic sensitivities by scheduling reservations.
52
serve as model and incorporate WTO-plus commitments. The United States wants Chile
to accept procedures that make it easier for competing telcom firms to tap into existing
lines or lease them. In addition, the United States also wants Chile to commit to private
ownership of the telecommunications industry. Although the Chilean industry is already
privatized, the agreement would serve as a template for other countries, which still
maintain government control over basic telephone service. In the express delivery
service industry, the United States is pushing for text that will prevent the Chilean
postal service from subsiding competitive express delivery service in Chile or giving
such a service other unfair advantages, although the Chilean postal service does not at
present have an express delivery service. This U.S. interest originates from the desire to
press for similar language with other countries in the FTAA (Inside U.S. Trade 2002).
On government procurement, both sides agreed to exchange offer lists on what
types of projects will be opened to bidding from foreign firms. Issues remaining in this
area include, among others, whether foreign companies can bid on federal, state or local
projects, and the extent to which bidding would be open to some aspects of defense
contrasts. A clear understanding on differential treatments in accordance with the level
of governments is an important issue in the forthcoming FTAA.
The U.S. has expressed interest in handling electronic commerce in both the
Chilean and Singaporean FTA. The latest WTO ministerial declarations asked countries
to work until 2003 on the institutional arrangement for discussing future rules
applicable to e-commerce and, in the meantime, refrain from imposing duties on e-
commerce transactions. As of November, before talks in Miami, the United States had
not yet tabled a proposal for handling labor and environment issues (Inside U.S. Trade
2001b).45 Chile is supposedly objecting to the enforcement of labor and environmental
provisions through trade sanctions.
45
The Office of USTR has sought comment on the draft environmental review of the proposed U.S.- Chile
FTA (the draft review is available www.ustr.gov/enviornment/environmental.shtml). The Office of USTR
requested public comments regarding the scope of the environmental review, including the potential
environmental effects that might arise from the Chile agreement and the potential implications for
environmental laws and regulations. The final review will be made publicly available on the conclusion of the
agreement negotiations.
53
VI. Conclusions
54
agreements adopt a “GATT/WTO-plus” focus. This way, a common multilateral basis
is being reinforced and built-on in regional arrangements. This reinforcement building-
on process, in turn, could facilitate the adoption of such disciplines in the FTAA. The
negotiation on the Chile/United States FTA up to now clearly shows this process of
reinforcement. In a sense, Chile is already anticipating the task of normative
harmonization within the hemisphere.
For instance, in the area of trade in services, the Chilean FTAs and other FTAs
in the hemisphere go beyond the GATS in either developing deeper disciplines, or
providing for greater liberalization and market access opportunities for service providers,
and/or enhancing transparency. The “negative-list” approach and the “right of non-
establishment” are harmonized within these NAFTA-type agreements. These FTAs
apply a “standard of treatment” clause that requires members to provide service
providers of other member countries the better treatment afforded by the principles of
MFN and National Treatment.
The similarity between Chilean FTAs and other FTAs in the Western
Hemisphere can be also observed in the area of investment. Most NAFTA-type
agreements grant investments and investors the better of national and MFN treatment.
Most agreements also contain exceptions to the rule, such as treatment at federal and
sub-federal levels as in NAFTA. Furthermore, the NAFTA-type agreements prohibit
performance requirements. In addition, the Chile/Canada FTA limits the conditions for
expropriation and guarantees investors of both parties compensation if an expropriation
were ever to occur.
A rather unique feature among regional trade agreements, even at the world
level, is found in the Chile/Canada agreement, in which both countries negotiated a
mutual exemption from the application of antidumping. Elimination of the right to
impose antidumping duties was an issue to which the Canadians, as well as the
Mexicans, gave a high priority within the NAFTA, but they were unsuccessful in
securing in the face of U.S. opposition.
With respect to rules of origin, in the old agreements singed by the countries in
the hemisphere, mostly under the ALADI framework, there is a general rule applied
across-the-board based on a change in tariff classification at the heading level or,
alternatively, a certain threshold of regional value-added in the FOB export value. In
55
contrast, in the new generation agreements, mostly those that follow the NAFTA model
of rules of origin, these general rules are accompanied by additional product-specific
rules negotiated at a determined level of the Harmonized System. Admittedly, the
complexity of rules of origin makes it difficult to produce a convergence process among
the Chilean and other FTAs.
Although Chile’s attempts to incorporate new areas into the agreements are clear,
there is no fixed “package” of sector coverage. For instance, while the current FTA with
Canada incorporates the highest rights and obligations so far in FTAs signed by Chile
with respect to services and investment, it does not incorporate such aspects as
intellectual property rights, technical standards, sanitary and phytosanitary measures,
and government procurement. On the other hand, the Chile/Mexico FTA incorporates
such aspects. Chile and Canada considered that the WTO rules, together with their own
respective legislation, already addressed these matters satisfactorily. By selecting the
areas that are important to individual countries, the country tries to establish a realistic
agenda in light of the lack of interest to go beyond the WTO rules. Both agreements, as
well as Chile/Central American FTA, explicitly exclude cross-border financial services
from their liberalization commitments, though the agreement with Mexico calls for
specific commitments to begin negotiations before a determined date. Chile and its FTA
partners have other “sensitive” items, and depending on the trade partner, the basket of
products for a differential treatment on liberalization differs accordingly. In this sense,
the Chilean strategy has been selective.
Meanwhile, Chile considered that the WTO rules, together with its own
respective legislation, already address the matters satisfactorily and that it is more
preferable to strengthen the multilateral framework for these areas. The issue of
antidumping, intellectual property rights and the standards and conformance, might be a
case in this respect. In the case of the latter, the ECAs signed by Chile do not contain
explicit disciplines on standards but rather a general article that promote economic
cooperation. The agreement with MERCOSUR does not contain detailed provisions on
standards, though it confirms the rights and obligations under the TBT Agreement of
the WTO. Provisions and disciplines of the second generation Chilean FTAs are also
similar to those of the WTO TBT Agreement.
56
The multiplicity of current FTAs whose “width” and “depth” are not yet uniform
across trade partners and between “generations” can be significant costs to a small
country like Chile, making the convergence process among FTAs more difficult and at
the same time raising levels of protection and transaction costs. Obviously, the type of
convergence that may be necessary between FTAs depends on the depth of the
agreements themselves: the convergence by way of tariff reductions, conformance and
standards, etc, might be easier to achieve, while convergence in other policy instruments,
such as services, investment, competition, rules of origin, antidumping and safeguards,
government procurement, movement of labor, environment etc. might be a more
difficult task. However, given the strong NAFTA focus as a basis, it would be easier for
the Chilean FTAs, the existent as well as forthcoming, to harmonize the plethora of
agreements, based on a common set of NAFTA standards and regulations and similar
liberalization time frames.
57
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2001.
_____(2001f), “U.S. Chile push for exchange of tariff lists by July talks”, June 1, 2001.
_____(2001g), “U.S.-Chile talks make slow progress as U.S. proposals delayed”, April
13, 2001.
_____(2001i), “U.S. financial services firms urge patience to win demands in Chile
talks”, December 14, 2001
60
_____(2001j), “U.S. industry pushes NAFTA investment model in future agreement”,
April 27, 2001
_____(2001k), “U.S. proposal in Chile talks saves deepest tariff cuts for last”, August
10, 2001.
IISD (International Institute for Sustainable Development) and WWF (World Wildlife
Fund) (2001), Private Rights, Public Problems: A guide to NAFTA’s
controversial chapter on investor rights, Winnipeg, Manitoba, Canada.
López, Carolina, and Jacingt Soler Matutus (1998), “”Open Regionalism versus
Discriminatory Trading Agreements”, ASEAN Economic Bulletin, Vol. 14, No.3.
61
Mladinic, Carlos, A. (2000), Apertura al exterior y negociaciones comerciales;
lecciones y experiencias del caso chileno, Instituto Interamericano de
Cooperación para la Agricultura (IICA), Agencia de Cooperación, Santiago,
Chile.
O’Keefe, Thomas (1998), “The Evolution of Chilean Trade Policy in the Americas:
From Lone Ranger to Team Player”, SICE Foreign Trade Information System.
Puga, Diego and Anthony J. Venables (1998), “Trading Arrangements and Industrial
Development”, The World Bank Economic Review, Vol. 12, No. 2.
Robert, Maryse (2001), “Multilateral and Regional Investment Rules: What Comes
Next?”, OAS Trade Unit Studies, Organization of American States, Washington
D.C.
62
Sáez, Sebastián and Juan Gabriel Valdés (1999), “Chile and its “lateral” trade policy”,
in Cepal Review 67, ECLAC, Santiago, Chile.
Schiff, Maurice and L.Alan Winters (1998), “Dynamics and politics in regional
integration arrangements: an introduction”, The World Bank Economic Review,
Vol.12, No.2.
Stephenson, Sherry (2001a), “Deepening Disciplines for Trade in Services”, OAS Trade
Unit Studies, Organization of American States, Washington D.C.
Tavares de Araujo Jr., José, Carla Macario and Karsten Steinfatt (2001), “Antidumping
in the Americas”, Serie comercio internacional, No. 12, ECLAC, Santiago,
Chile.
Van Klaveren, Albert (1998), “Inserción internacional de Chile”, in Cristían Toloza and
Eugenio Lahera eds., Chile en los noventa, Presidencia de la República, Dolmen
Ediciones, Santiago, Chile.
USTR (Office of the United States Trade Representative) (2001), Draft Environmental
Review of the Proposed U.S.-Chile Free Trade Agreement,
http://www.ustr.gov/environment/environmental.shtml.
Wonnacott, Paul and Ronald Wonnacott, “Is Unilateral Tariff Reduction Preferable to a
Customs Union? The Curious Case of the Missing Foreign Tariffs”, American
Economic Review, Vol. 71, No.4, September.
WTO (World Trade Organization) (2001a), “Chile: Statement by H.E. Mr. Heraldo
Muñoz, Under-Secretary of Foreign Relations”, (WT/MIN(01)/ST/48),
November 10.
63
_____(2001b) “Communication from Chile: The Negotiations on Trade in Goods”,
(S/CSS/W/88), May 14.
Yeats, A. “Does Mercosur’s Trade Performance Raise Concerns about the Effects of
Regional Trade Agreements”, Policy Research Working Paper Series, No. 1742,
World Bank, Washington D.C.
64
List of Publications from the IDE APEC Study Center
FY 1995/96
No.1 Hiroki Kawai and Iwao Tanaka, “Measuring the Cost of Protection in Japan”, 1990.
No.2 Fumio Yoshino, “Trade Impediments of Agricultural Products and Food”.
No.3 Haruko Yamashita, “Factors Affecting Domestic Price Differentials in the Japanese Fisheries
and Marine Products”.
No.4 Kunihiro Ohishi, “Factors Affecting Domestic Price Differentials in the Petroleum Products”.
No.5 Hideki Ishikawa, “Factors Affecting Domestic Price Differentials in the Japanese Electric and
Electronic Machinery Products”.
No.6 Akiko Hirano, “Legal Aspects of the Institutionalization of APEC”.
No.7 Tatsushi Ogita, “The APEC Policy-Making Process in Japan”.
No.8 Jiro Okamoto, “An Approach towards Australia's Foreign Economic Policy Making Process”.
FY 1996/97
1. Report
Chapter I General Perspective on the Economic And Technology Cooperation of APEC (by
Keiji Omura)
Chapter II Trade Flow and Foreign Direct Investment in APEC Region (by Satoru Okuda)
Chapter III Constant-Market Share Analysis and Open Regionalism: A Study Suggestion (by
Hiroya Ichikawa)
Chapter IV Development and Stability of the Asia-Pacific Regional Market: How to Stabilize
the Development Path of the East-Asian Market by Establishing a Framework for
Better Risk Management (by Toshihiko Kinoshita)
Chapter V Human Development in the Case of Small and Medium Sized Enterprises (by
Tomohiro Uchida)
Chapter VI APEC Cooperation for Adjustment toward Emerging Problems (by Masatake
Wada)
Chapter VII Japan's ODA and APEC (by Takeshi Mori)
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No.10 Kunihiro Ohishi, “Survey of Impediments to Trade and Investment in Japan -Distribution
Services”.
No.11 Hidenobu Okuda, “Impediments in Japanese Banking Industry”.
No.12 Tsutomu Chano, “Impediments to Service Trade in the Insurance Sector”.
No.13 Masanao Terashima, “Trade and Investment Barriers, and Domestic-Foreign Price
Differentials in Transport Services”.
No.14 Schunichi Hiraki, “Impediments in Construction and Engineering Services”.
No.15 Haruko Yamashita, “Trade Impediments and Domestic Price Differentials in the Japanese
Telecommunications Sector”.
No.16 Kazuhiko Yokota, “Impediments to International Service Transactions in the Health-related
and Social Services Sector”.
No.17 Shujiro Urata and Hiroki Kawai, “The Cost of Regulation in the Japanese Service Industries”.
No.18 Marina Fe B. Durano, “Barriers to Cross-Border Provision of Services within the APEC: with
a Focus on the Movement of Persons”.
No.19 Kahlil Rowter, “Training as a Vehicle for Enhanced Growth: A Study of Human Resource
Development Needs for Enhanced Investment and Cooperation among APEC Members”.
No.20 Li Kun Wang , “The Effect and Strategy of Trade Liberalization for China”.
No.21 Zhao Jiang Lin, “Openness of China’s Manufacturing Sectors and Its APEC Policy”.
Center for APEC Studies, Nankai University, Economic Policy in APEC: The Case of China Policy.
Institute of Economics and Social Research, Faculty of Economics, University of Indonesia, Economic
Policy in APEC: The Case of Indonesia.
Philippine Institute for Development Studies, Economic Policy in APEC: The Case of the Philippines.
Faculty of Economics, Chulalongkorn University, Economic Policy in APEC: The Case of Thailand.
FY 1997/98
1. Report
APEC/IAP and Negotiations for the Accession to the WTO in 1997 (by
Daisuke Takoh)
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No.3 Atsusuke Kawada, “Current Situation and Outlook for Economic and Technical Cooperation
among Developing Countries in APEC: Singapore Cooperation toward Neighbouring Asian
Developing Countries”.
No.4 Shunji Karikomi, “The Development Strategy for SMEs in Malaysia”.
No.5 Nobuhiro Horii, “APEC Cooperation and Strategies for the Introduction of Renewable Energy
into Developing Countries”.
No.6 Colin K.L. Chang, “Lessons in Technology Development: The Japanese Experience”.
Urban Ecosystem Management, Institute for Environment and Development (LESTARI), Universiti
Kebangsaan Malaysia, Urbanization and Environment in Malaysia: Managing the Impact.
Tsai She Hsien, Taiwan Research Institute, A Study in the technological Development of Taiwan’s
Enterprise and Technology Transfer with Direct Investment. (in Japanese).
FY 1998/99
1. Reports
Chapter I “Potential” APEC Sub-regions: Current Status and Future (by Satoru Okuda)
Chapter II The AFTA-CER Linkage Dialogue: An Endeavour for Closer Relations between
SRTAs within APEC (by Jiro Okamoto)
Chapter III Vietnam in APEC: Changes in Trade Patterns after the Open Door Policy (by
Mai Fujita)
Chapter IV Development Policies for Small and Medium Enterprises in APEC: In the Case
of the Philippines (by Mayumi Fukumoto)
Chapter V Capital Account Liberalization in Emerging Markets: Lessons from the Asian
Currency Crisis (by Shunji Karikomi)
Chapter VI Korea’s New Accounting Standards and Its Impact on APEC (by Shiro
Takahashi and Satoru Okuda)
Future Prospects of Supporting Industries in Thailand and Malaysia
Edited by Ryuichiro Inoue and Shigeru Itoga
Ratana Eiamkanitchat, “The Role of Small and Medium Supporting Industries in Japan and Thailand”.
Rajah Rasiah, IKMAS, UKM and Faculty of Economics and Business, UNIMAS, State Support and
Machine Tool Subcontracting Links in Malaysia : Microelectronics and Passenger Car
Assemblies.
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Kitti Limskul, Faculty of Economics, Chulalongkorn University, Future Prospects of Selected
Supporting Industries in Thailand.
FY 1999/2000
1. Report
Chapter I Industrial Linkage and Direct Investment in APEC (by Satoru Okuda)
Chapter II Foreign Direct Investment, Trade, and Vietnam’s Interdependence in the APEC
Region (by Mai Fujita)
Chapter III Technical Assistance to Japanese Affiliates: The Case of the Autoparts Industry
in Thailand (by Yoshi Takahashi)
Chapter IV Russia’s Participation in APEC and Economic Development in the Far East (by
Mayumi Fukumoto)
Chapter V Macroeconomic Impacts in APEC Region: Measurement by APEC Link Model
(by Jinichi Uemura)
No. 1 Jiro Okamoto, “The Political Process of APEC Early Voluntary Sectoral Liberalisation: Setting
the Research Agenda”.
No. 2 Akiko Yanai, “APEC and the WTO: Seeking Opportunities for Cooperation”.
No. 3 Fumio Nagai, “The APEC EVSL Initiative and the Policy Making Process in Thailand”.
No. 4 Tatsushi Ogita, “Japan’s Policy Making in the APEC EVSL Consultations: Its Actors, Process
and Interpretations”.
No. 5 Yutaka Onishi, “Politics by Mass Media?: Changes in the Korean Policy toward APEC Early
Voluntary Sectoral Liberalization”.
No. 6 Satoshi Oyane, “America’s Non-“Two-Level Game” at the APEC EVSL Initiative: Structural
Change in Trade Politics”.
Michael Wesley, School of Political Science, University of New South Wales, The Politics of Early
Voluntary Sectoral Liberalisation in Australia.
Hanafi Sofyan, A. Syafi’i, Yasmi Adriansyah and Lynda Kurnia Wardhani, Institute for International
Finance and Commodities (Jakarta), The Policy Making Consultations of APEC Early
Voluntary Sectoral Liberalization: The Case of Indonesia.
FY 2000/01
1. Report
Chapter I Impact of Economic and Technical Cooperation on Northeast Asian Countries (by
Mayumi Fukumoto)
Chapter II Linking SRTA and ECOTECH—A Consideration Based on Japan-Korea FTA
(by Satoru D. Okuda)
Chapter III Macroeconomic Impacts under FTA Configuration in the APEC Region (by
Jinichi Uemura)
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Chapter IV Liberalization of Trade in Services in APEC: Assessment of IAP and the GATS
Commitments (by Mikiko Yogo)
Chapter V Regional Trade Arrangement and Strategies of Multinationals: Implications of
AFTA for Economic Integration (by Mai Fujita)
Chapter VI Expert Dispatch Program for Private Enterprises –The Case of JODC Experts in
the Thai Manufacturing Sector– (by Yoshi Takahashi)
No.1 Jiro Okamoto, “The AFTA-CER Linkage Dialogue Revisited: Its Recent Development and
Implications”.
No.2 Akiko Yanai, “Reciprocity in Trade Liberalization”.
No.3 Fumio Nagai, “Thailand’s Attitude toward Trade Liberalization: In the Context of the ASEAN
Free Trade Area (AFTA) ”.
No.4 Tatsushi Ogita, “On Principles of APEC”.
No.5 Satoshi Oyane, “‘Plurilateralism’ of the United States and its APEC Policies”.
No.6 Hanafi Sofyan, “Promoting Financial Cooperation within the ASEAN+3”.
Yoo Soo Hong, Korea Institute for International Economic Policy (KIEP), Internet Business
Cooperation in Northeast Asia and APEC.
Vladimir I. Ivanov and Hirofumi Arai, Economic Research Institute for Northeast Asia (ERINA),
Multilateral Cooperation in Northeast Asia and APEC.
http://www.ide.go.jp/English/Apec/Publish/index.html
69
IDE APEC STUDY CENTER
Working Paper Series 01/02 – No. 7
by
Mikio Kuwayama
Yusuke Kuwayama
MARCH 2002