| Officials in Washington announced
this week that Chile and the United States have reached an accord on the
free trade. The free trade agreement is being touted as a model for U.S.-Central
American free trade talks.
Following is the summary of the U.S.-Chile agreement released by the
United States Trade Representative:
Trade in goods
All tariffs and quotas on all goods eliminated immediately or after
transition periods no exceptions.
New market access for U.S. consumer and industrial products
More than 85 percent of bilateral trade in consumer and industrial
products becomes duty-free immediately upon entry into force of the agreement,
with most remaining tariffs eliminated within four years.
Key U.S. export sectors gain immediate duty-free access to Chile,
such as agricultural and construction equipment, autos and auto parts,
computers and other information technology products, medical equipment,
and paper products.
Chile's "luxury tax" on automobiles will be phased out over 4 years.
In the meantime, the number of vehicles to which this tax applies will
be sharply reduced as soon as the Agreement takes effect.
Textiles and apparel will be duty-free immediately if they meet the
Agreement's rule of origin, promoting new opportunities for U.S. and Chilean
fiber, yarn, fabric and apparel manufacturing. A limited yearly amount
of textiles and apparel containing non-U.S. or non-Chilean yarns, fibers
or fabrics may also qualify for duty-free treatment.
New opportunities for U.S. farmers and ranchers
More than three-quarters of U.S. farm goods will enter Chile duty-free
within 4 years and all duties on U.S. products will be phased out over
12 years. Key U.S. farm products will benefit from improved market access,
including pork and pork products, beef and beef products, soybeans and
soybean meal, durum wheat, feed grains, potatoes, and processed food products
such as french fries, pasta, distilled spirits and breakfast cereals. Tariffs
on U.S. and Chilean wines will first be equalized at low U.S. rates and
then eliminated.
U.S. farmers will have access to Chile that is as good as or better
than the European Union [EU] or Canada, both of which already have FTAs
with Chile.
Chilean price bands, under which import duties on the same product
may vary according to price level, will be phased out. During the phase
out, producers of these products will be treated as good as or better than
their competitors with other countries. Elimination of price bands was
not part of the EU or Canada FTAs with Chile.
Eliminates the use of export subsidies on U.S.-Chilean farm trade,
but preserves the right to respond if third countries use export subsidies
to displace U.S. products in the Chilean market.
An agricultural safeguard provision will help protect U.S. farmers
and ranchers from sudden surges in imports from Chile.
Both sides renewed their commitment to continue the work on resolving
important sanitary and phytosanitary issues, such as meat and dairy inspection
and meat grading, that are inhibiting access to consumers in both markets.
Trade in services
The commitments in services cover both cross-border supply of services
(such as services supplied through electronic means, or through the travel
of nationals) and the right to invest and establish a local services presence.
Traditional market access to services is supplemented by strong and
detailed disciplines on regulatory transparency. Regulatory authorities
must use open and transparent administrative procedures, consult with interested
parties before issuing regulations, provide advance notice and comment
periods for proposed rules, and publish all regulations.
Broad commitments to open services markets
Chile will accord substantial market access across its entire services
regime, subject to very few exceptions, a so-called "negative list" approach.
Market access commitments apply across a range of sectors, including
but not limited to:
Computer and related services
Telecommunications services - Audiovisual services
Construction and Engineering - Tourism
Advertising - Express Delivery - Professional services (architects,
engineers, accountants, etc.)- Distribution services, such as wholesaling,
retailing and franchising- Adult education & training services- Environmental
services
The express delivery commitment includes an expansive definition of
the integrated nature of express services, and affirms existing competitive
opportunities.
New opportunities for U.S. banks, insurance, securities and related
services
The financial services chapter includes core obligations of non-discrimination,
most-favored nation treatment, and additional market access obligations.
U.S. insurance firms have full rights to establish subsidiaries or
joint ventures for all insurance sectors (life, non-life, reinsurance,
brokerage) with limited exceptions. Chile has committed to phase in insurance
branching rights.
Chile commits to modify its legislation to open cross-border supply
of key insurance sectors such as marine, aviation and transport (MAT) insurance,
insurance brokerage of reinsurance and MAT insurance, and confirms existing
rights for reinsurance.
New principle of expedited availability of insurance services means
that prior regulatory product approval is not required for insurance sold
to the business community. Expedited procedures are available in other
cases when prior product approval is necessary.
U.S. banks and securities firms may establish branches and subsidiaries
and may invest in local firms without restriction, except in very limited
circumstances. Chile's private pension system, now nearly 20 years old,
was Latin America's first. Held up as a model for other countries, it has
greatly increased savings rates. Individually owned pension accounts are
worth more than $30 billion.
U.S. financial institutions may offer financial services to citizens
participating in Chile's highly successful privatized voluntary savings
plans. U.S. firms also gain some increased ability to offer such products
through Chile's mandatory social security system.
Chile will allow U.S.-based firms to offer services cross-border to
Chileans in areas such as financial information and data processing, and
financial advisory services with a limited exception. Chilean mutual funds
may use foreign-based portfolio managers.
An open and free telecommunications market
Users of the telecom network are guaranteed reasonable and non-discriminatory
access to the network. This prevents local firms from having preferential
or "first right" of access to telecom networks.
U.S. phone companies obtain right to interconnect with networks in
Chile at non-discriminatory, cost-based rates.
U.S. firms seeking to build a physical network in Chile granted non-discriminatory
access to facilities, such as telephone switches and submarine cable landing
stations.
U.S. firms will be able to lease elements of Chilean telecom networks
on non-discriminatory terms and to re-sell telecom services of Chilean
suppliers to build a customer base.
E-Commerce
Chile and the U.S. agreed to provisions on e-commerce that reflect
the issue's importance in global trade. Each country also recognized the
importance of supplying services by electronic means as a key part of a
vibrant e-commerce environment.
Chile and the U.S. committed to non-discriminatory treatment of digital
products; agreed not to impose customs duties on such products and to cooperate
in numerous policy areas related to e-commerce.
For digital products delivered on hard media (such as a DVD or CD),
customs duties will be based on the value of the media (e.g., the disc),
not on the value of the movie, music or software contained on the disc.
The e-commerce text identifies Chile as a leader in Latin America
for the further development of electronic commerce.
New protections for U.S. investors
The agreement will establish a secure, predictable legal framework
for U.S. investors operating in Chile.
All forms of investment are protected under the agreement, such as
enterprises, debt, concessions, contracts and intellectual property.
U.S. investors enjoy in almost all circumstances the right to establish,
acquire and operate investments in Chile on an equal footing with Chilean
investors, and with investors of other countries, unless specifically stated
otherwise.
Pursuant to U.S. Trade Promotion Authority, the agreement draws from
U.S. legal principles and practices to provide U.S. investors a basic set
of substantive protections that Chilean investors currently enjoy under
the U.S. legal system.
Among the rights afforded to U.S. investors (consistent with those
found in U.S. law) are due process protections and the right to receive
a fair market value for property in the event of an expropriation.
The Agreement prohibits and removes certain restrictions on U.S. investors,
such as requirements to buy Chilean rather than U.S. inputs.
These investor rights are backed by an effective, impartial procedure
for dispute settlement that is fully transparent. Submissions to dispute
panels and panel hearings will be open to the public, and interested parties
will have the opportunity to submit their views. |
Open, transparent procedures for
settling investment disputes.
Intellectual property rights
Protection of copyrights, patents, trademarks and trade secrets is
state-of-the-art, going farther than previous free-trade agreements. Enforcement
of intellectual property rights is also enhanced under this agreement.
Non-discriminatory treatment for U.S. intellectual property transmitted
over the Internet.
Trademarks
Ensures government involvement in resolving disputes between trademarks
and Internet domain names, which is important to prevent "cyber-squatting"
of trademarked domain names.
Applies principle of "first-in-time, first-in-right" to trademarks
and geographical indicators (place-names) applied to products. This means
that the first to file for a trademark is granted the first right to use
that name, phrase or geographical place-name.
Copyrights
Ensures that only authors, composers and other copyright owners have
the right to make their works available online. Copyright owners maintain
all rights to even temporary copies of their works on computers, which
is important in protecting music, videos, software and text from widespread
unauthorized sharing via the Internet.
Copyrighted works and phonograms are protected for extended terms,
consistent with U.S. standards and international trends.
Strong anti-circumvention provisions to prohibit tampering with technologies
(like embedded codes on discs) that are designed to prevent piracy and
unauthorized distribution over the Internet.
Ensures that governments only use legitimate computer software, thus
setting a positive example for private users.
Limited liability for Internet Service Providers (ISPs), reflecting
the balance struck in the U.S. Digital Millennium Copyright Act between
legitimate ISP activity and the infringement of copyrights.
Patents and trade secrets
Patent term can be extended to compensate for up-front administrative
or regulatory delays in granting the original patent, consistent with U.S.
practice.
Grounds for revoking a patent are limited to the same grounds required
to originally refuse a patent, thus protecting against arbitrary revocation.
Test data and trade secrets submitted to a government for the purpose
of product approval will be protected against disclosure for a period of
5 years for pharmaceuticals and 10 years for agricultural chemicals. Closes
potential loopholes to these provisions.
Ensures that government marketing-approval agencies will not grant
approval to patent-violating products.
Intellectual property rights enforcement
Criminalizes end-user piracy, providing strong deterrence against
piracy and counterfeiting.
Chilean government guarantees that it has authority to seize, forfeit
and destroy counterfeit and pirated goods and the equipment used to produce
them. IPR laws will be enforced against goods-in-transit, to deter violators
from using U.S. or Chilean ports or free-trade zones to traffic in pirated
products. Ex officio action may be taken in border and criminal IPR cases,
thus providing more effective enforcement.
Mandates both statutory and actual damages under Chilean law for IPR
violations. This serves as a deterrent against piracy, and provides that
monetary damages can be awarded even if actual economic harm (retail value,
profits made by violators) cannot be determined.
Competition policy
Commits Chile to maintain a competition law that prohibit anti-competitive
business conduct, and a competition agency to enforce that law.
The Chilean law promotes economic efficiency and consumer welfare,
thus making the appropriate objective of competition law clear.
The agreement also requires that Chile control and regulate state
enterprises and officially-designated monopolies. Such firms may not abuse
their official status to harm the interests of U.S. companies, and must
not discriminate in the sale of goods or services.
Government procurement
Requires that covered Chilean ministries, regional and municipal governments
not discriminate against U.S. firms, or in favor of Chilean firms, when
making government purchases in excess of agreed monetary thresholds.
Imposes strong and transparent disciplines on procurement procedures,
such as requiring advance public notice of purchases, as well as timely
and effective bid review procedures.
Covers the purchases of most Chilean central government agencies,
13 regional governments, 11 ports and airports, and more than 350 municipalities
in Chile.
Ensures that bribery in government procurement is specified as a criminal
offense under Chilean and U.S. laws. This furthers the anti-corruption
goals set out by hemispheric leaders at the Summit of the Americas in Quebec
City in 2001.
Customs procedures
U.S.-Chile FTA is one of the first U.S. trade agreements with specific,
concrete obligations on how customs procedures are to be conducted.
Agreement requires transparency and efficiency in customs administration,
with commitments on publishing laws and regulations on the Internet, and
ensuring procedural certainty and fairness.
Both parties agree to share information to combat illegal trans-shipment
of goods. In addition, the agreement contains specific language designed
to facilitate the clearance through customs of express delivery shipments.
Strong but simple rules of origin will ensure that only U.S. and Chilean
goods benefit from the agreement. Rules are specific to individual products,
but are designed to be easier to administer than North American Free Trade
Agreement rules of origin.
Temporary entry for trained personnel
Agreement contains provisions that provide for the entry into either
party of business visitors, traders and investors, intra-company transferees,
and professionals.
In the United States, this will take the form of a special FTA professional
visa, available to a limited number of individuals holding four-year degrees.
The number of professional visas granted to Chilean citizens will be capped
annually.
Agreement preserves the ability of the U.S. Congress to amend immigration
laws, and the professional visa is the result of extensive consultations
with Congress.
U.S. professionals will be able to enter Chile without a numerical
limit.
Labor and environmental provisions
Agreement fully meets the environmental objectives set out by Congress
in TPA [trade promotion authority, otherwise known as fast track]. Environmental
obligations are part of the core text of the trade agreement.
Both parties shall ensure that their domestic environmental laws provide
for high levels of environmental protection and shall strive to continue
to improve such laws. Agreement makes clear that it is inappropriate to
weaken or reduce domestic environmental protections to encourage trade
or investment.
Agreement requires that parties shall effectively enforce their own
domestic environmental laws, and this obligation is enforceable through
the agreement's dispute settlement procedures.
Chile and the U.S. will pursue a number of cooperative projects to
promote environmental protection.
Cooperative activities to promote worker rights
Agreement fully meets the labor objectives set out by Congress in
TPA. Labor obligations are part of the core text of the trade agreement.
Both parties reaffirm their obligations as members of the International
Labor Organization, and shall strive to ensure that their domestic laws
provide for labor standards consistent with internationally recognized
labor principles. Agreement makes clear that it is inappropriate to weaken
or reduce domestic labor protections to encourage trade or investment.
Agreement requires that parties shall effectively enforce their own
domestic labor laws, and this obligation is enforceable through the agreement's
dispute settlement procedures.
Procedural guarantees in the agreement will ensure that workers and
employers will have fair, equitable and transparent access to labor tribunals/courts.
A cooperative mechanism to promote respect for the principles embodied
in the ILO Declaration on Fundamental Principles and Rights at Work, and
compliance with ILO Convention 182 on the Worst Forms of Child Labor.
Dispute settlement
All core obligations of the Agreement, including labor and environmental
provisions, are subject to the dispute settlement provisions of the Agreement.
Dispute panel procedures set high standards of openness and transparency:
Open public hearings; Public release of legal submissions by parties; Special
roster of labor or environmental experts for disputes in these areas; Rights
for interested third parties to submit views.
Emphasis is on promoting compliance through consultation, joint action
plans and trade-enhancing remedies.
An innovative enforcement mechanism includes monetary penalties to
enforce commercial, labor, and environmental obligations of the trade agreement. |
