24 September 1997
POLICY REVIEW BODY: REVIEW OF CHILE
TPRB'S EVALUATION Back to top
The Trade Policy Review Body
of the World Trade Organization (WTO) concluded its second review of Chile's trade
policies on 23 and 24 September 1997. The text of the Chairperson's concluding remarks is
attached as a summary of the salient points which emerged during the discussion.
The review enables the TPRB
to conduct a collective examination of the full range of trade policies and practices of
each WTO member country at regular periodic intervals to monitor significant trends and
developments which may have an impact on the global trading system.
The review is based on two
reports which are prepared respectively by the WTO Secretariat and the government under
review and which cover all aspects of the country's trade policies, including: its
domestic laws and regulations; the institutional framework; bilateral, regional and other
preferential agreements; the wider economic needs and the external environment.
A record of the discussions
and the Chairperson's summing-up, together with these two reports, will be published in
due course as the complete trade policy review of Chile and will be available from the WTO
Secretariat, Centre William Rappard, 154 rue de Lausanne, 1211 Geneva 21.
Since December 1989, the
following reports have been completed: Argentina
(1992), Australia (1989 & 1994), Austria (1992), Bangladesh (1992), Benin (1997),
Bolivia (1993), Brazil (1992 & 1996), Cameroon (1995), Canada (1990, 1992, 1994 &
1996), Chile (1991 & 1997), Colombia (1990 & 1996), Costa Rica (1995), C˘te
d'Ivoire (1995), the Czech Republic (1996), Cyprus (1997), the Dominican Republic (1996),
Egypt (1992), El Salvador (1996), the European Communities (1991, 1993 & 1995), Fiji
(1997), Finland (1992), Ghana (1992), Hong Kong (1990 & 1994), Hungary (1991), Iceland
(1994), India (1993), Indonesia (1991 and 1994), Israel (1994), Japan (1990, 1992 &
1995), Kenya (1993), Korea, Rep. of (1992 & 1996), Macau (1994), Malaysia (1993),
Mauritius (1995), Mexico (1993), Morocco (1989 & 1996), New Zealand (1990 & 1996),
Nigeria (1991), Norway (1991 & 1996), Pakistan (1995), Paraguay (1997), Peru (1994),
the Philippines (1993), Poland (1993), Romania (1992), Senegal (1994), Singapore (1992
& 1996), Slovak Republic (1995), South Africa (1993), Sri Lanka (1995), Sweden (1990
& 1994), Switzerland (1991 & 1996), Thailand (1991 & 1995), Tunisia (1994),
Turkey (1994), the United States (1989, 1992, 1994 & 1996), Uganda (1995), Uruguay
(1992), Venezuela (1996), Zambia (1996) and Zimbabwe (1994).
TRADE POLICY REVIEW BODY: REVIEW OF
CONCLUDING REMARKS BY THE CHAIRPERSON Back
The second Trade Policy
Review of Chile was conducted on 23-24 September 1997. These remarks, prepared on my
own responsibility, are intended to summarize the discussion and not to be a full report:
this will be contained in the minutes of the meeting.
The discussion developed
under four main themes: macroeconomic issues; the balance in Chile's trade policies among
multilateral, regional and bilateral approaches; a discussion of specific trade-related
measures and policies; and sectoral elements of trade policies.
Some Members noted that the
focus of Chile's trade policies had moved towards regionalism in the past six years, while
maintaining a strong commitment to the multilateral system. Chile was congratulated on its
generally open and liberal system, and on the liberalization which had taken place in
services trade; however, some Members noted that there were some areas of goods trade
where few changes had occurred since the previous review.
Members commended Chile's
remarkable macroeconomic performance since 1990, which had been assisted by progressive
liberalization; the high rate of growth combined with growing social equity; and the
reduction of unemployment and inflation. One member sought clarification regarding the use
of indexation mechanisms in the economy and their relationship to inflation.
Members noted that, since
the last review, there had been some diversification in export products and markets, but
that Chile remained reliant on a small range of exports, especially copper. In this
regard, the effectiveness of the Copper Stabilization Fund as a shock-absorber was
highlighted; one member asked about the possibility of creating an offshore fund to reduce
possible negative effects on exports from real exchange rate appreciation. It was noted
that State involvement had decreased substantially throughout the economy; however, there
were no plans to privatize CODELCO.
Members welcomed Chile's
generally liberal and non-discriminatory foreign direct investment regime. Questions were
raised regarding the use of a compulsory deposit or "encaje" system for
investment funds; while some Members felt that this measure may have contributed to
monetary stability, others expressed concern about its possible restrictive effects.
In reply, the representative
of Chile noted that the authorities had put emphasis on growth with equity, as shown by an
increase in per capita incomes and a marked reduction in the number of persons below the
poverty line. However, the distribution of income was relatively unchanged; this was a
priority concern. High savings and investment had contributed largely to economic growth:
the importance of external factors had declined. While trade liberalization had
contributed to growth it did not have the same effect across the economy, hence the
importance of social programmes to spread the benefits of liberalization. Inflation had
been controlled basically through monetary policy, with overall confidence generated by
strict observance of inflation targets and by fiscal surpluses; the degree of indexation -
based on past inflation - had been reduced. The representative confirmed that the role of
the Copper Stabilization Fund was, as covered in the documentation, to be a buffer against
world price fluctuations. He explained that the "encaje" system, a central
element of monetary policy, was a reserve requirement limited to portfolio capital
inflows, and designed to minimize speculative flows; it benefited investors directly by
reducing the risk of financial fluctuations.
Multilateralism, regionalism and bilateralism
Questions were asked
regarding the balance in Chile's trade policies between multilateral, regional and
bilateral approaches, and the emphasis currently given to the conclusion of agreements
with regional entities. In this connection, specific questions were posed about Chile's
relations with NAFTA, the recently concluded Free Trade Agreement with Canada, the status
of negotiations for a framework agreement with the European Union, the network of
agreements with Latin American partners, including the consistency with LAIA provisions of
the complementarity agreements with some Members, and the new agreement with MERCOSUR.
Members questioned the effects of the wide range of agreements on the transparency and
predictability of Chile's trade policies. Chile's membership of APEC was generally
commended; in this connection, clarification was sought on Chile's definition of
A question was asked on the
extent to which Chile was facilitating imports from least developed countries.
In reply, the representative
of Chile said that multilateralism was Chile 's top priority. However, Chile saw bilateral
and regional agreements as essential to advance the opening of its own economy and new
export markets. It was also important to recall the political dimension of such agreements
in Latin America, in particular South America, and the relationship between open
economies and the development of democracy.
He emphasized that most
trade would be liberalized within 10 years, although a longer period was allowed for some
sensitive items. He noted that the agreements within South America, and that with Mexico,
were under LAIA, covered by the Enabling Clause. Tariff quotas covered imports under
preferential rates; there were no restrictions on imports under MFN rates. He noted that
there were no non-preferential rules of origin and gave details of the operation of
Specific trade-related measures and policies
In general Members commended
Chile's open trade regime, in particular, the uniform tariff. Some Members sought
clarification about the proposal to reduce the tariff by 3-4 percentage points. Noting the
gap between WTO bound rates and the MFN applied rate, several Members asked if there were
any plans to bind closer to the applied rate.
Some Members sought
clarification regarding an apparent difference between taxation of domestic and imported
spirits. Information was sought on Chile's implementation of the WTO Customs
Valuation Agreement. Some Members also inquired why Chile had not signed the Plurilateral
Agreement on Government Procurement and encouraged the authorities to do so. Members
recognized that Chile's national requirements regarding standards were generally based on
international provisions; however, some concerns were raised regarding the potential
impact of health and sanitary requirements as a barrier to trade.
Clarification was also
sought regarding the status of the Agreement on Implementation of Article VI of the GATT
1994 in Chilean law, progress with new anti-dumping legislation, and the use of
anti-dumping measures in light of provisions agreed upon in the Free Trade Agreement with
Canada. The absence of safeguard legislation was highlighted by several participants.
Members noted the existence
of certain export subsidies and sought clarification as to whether Chile had implemented
any measures to eliminate them. In addition, Members sought clarification regarding the
export promotion activities of PROCHILE, and the Agricultural Fund established in 1995 to
promote agricultural exports.
On intellectual property,
some Members sought information regarding progress in amending Chile's legislation to
bring it into compliance with the TRIPS Agreement. Members welcomed the authorities'
initiative to draft a new competition law.
In reply, the representative
of Chile said that the average bound tariff of 25 per cent for industrial products
represented a balance reached in the Uruguay Round. A draft law had been prepared to
reduce the flat applied rate from 11 to 8 per cent; the Executive believed that this
reduction would need to be offset to guarantee the continuity of social programmes.
Concerning liquor taxation, a draft law had been sent to Congress which would ensure equal
tax treatment, varying only according to the alcoholic content. Chilean customs valuation
was in accordance with the relevant WTO Agreement; variations on transaction value were in
line with the provisions of the Agreement. He explained the application of minimum customs
values; these would disappear with the full application of the WTO Agreement. The WTO
provisions were applied in Chile's agreements with Canada and MERCOSUR.
The representative confirmed
that the WTO Agreements on anti-dumping and countervailing measures had the force of law
in Chile and were the bases of procedures being applied. A draft bill had been brought to
Congress to give operational effect to certain rules. Tariff surcharges may be applied for
one year maximum within GATT bindings: they did not apply to FTA partners and were not
"safeguards" in the sense of GATT Article XIX. They had not been used since
The representative gave
details of Chilean government procurement procedures, which were based on transparency,
non-discrimination, flexibility and decentralization. The same procedures applied across
the public sector. State enterprises were required to be self financing and to operate on
a private enterprise basis. Chile regarded the application of the GPA as complex,
bureaucratic and costly; moreover, it did not guarantee MFN treatment below federal level.
Chile thus hoped that any wider agreement would include not only the principles of
transparency and non-discrimination, but also flexibility and decentralization.
The representative provided
details of the operation of Chilean standards, sanitary and phytosanitary measures in
relation to wine, beef and lamb, chicken and wheat; he gave assurance that national
treatment was applied. The only preferential sectoral regime was the automotive programme,
which was being phased out. Programmes for distant regions of the country covered
taxation, customs facilitation and investment incentives and did not discriminate against
foreigners. Exports benefited from a duty drawback system for imported inputs and a
simplified system for minor exports. The simplified system was not sector-specific; any
subsidy component was being phased out. Deferred tariffs on capital goods only involved a
subsidy in those cases where a tariff waiver was granted on condition that the capital
good was employed in the manufacture of exports; this would be reduced by the process of
liberalization. He also explained the role of PROCHILE in providing governmental services
The representative of Chile
also provided information on Chile's legislation and practices, as well as recent
advances, in the area of intellectual property. Any changes required to bring legislation
into line with the WTO TRIPS Agreement were being studied and would be completed by 1
January 2000, as required for developing countries. TRIPS cases were handled by the
ordinary courts, not by administrative processes. In the area of competition policy, Chile
had extensive jurisprudence, but was drafting a new law to modernize the institutional and
legal framework in the light of the international environment.
Some Members questioned the
price band mechanism on some import-competing agricultural goods; they noted that the
system could lead to high protection and affect resource allocation. This policy was
contrasted with Chile's generally active support for international liberalization of
agricultural trade, through the Cairns Group. Members asked whether consideration was
being given to direct income support for poor farmers.
Some delegations asked about
policies to promote the automotive industry, namely the export balancing scheme, domestic
content requirements, export subsidies and the prohibition on imports of used cars. One
member asked for details on the proposal for a royalty tax on mining. Another mentioned
concerns regarding permission for the transhipment of fish in Chilean ports.
Several Members noted that
Chile's liberalization efforts in the services sector were ahead of its WTO commitments
and asked if this would be reflected in an improvement in Chile's GATS bindings. Details
were requested on several specific aspects, for example, the elimination of horizontal
restrictions regarding commercial presence, the maritime agreement between Chile and
Brazil, the further liberalization of the telecommunications sector, Chile's involvement
in the ongoing negotiations on financial services, the removal of the additional tax
levied on insurance premia when insurance services were contracted abroad, and prudential
requirements applied to foreign and domestic re-insurers.
In reply to questions raised
regarding the price band mechanism, the representative stated that the mechanism (applying
to wheat, wheat flour, edible oils and sugar) was established to buffer domestic prices
against international price fluctuations. The representative noted that imports of goods
covered under this mechanism were considerable, amounting in the case of edible oils to 92
per cent of domestic consumption. It was unlikely that the bound rate of 31.5 per cent
could be breached by the mechanism. Regarding dairy products, the representative replied
that Chile considered the 31.5 per cent bound level (against an applied rate of 11
per cent) appropriate given the sensitivity of this sector for Chilean agriculture. He
also clarified policy regarding irrigation programmes and the Plan for the Recovery of
Soil Productivity. The purchase price of sugar beet was set by IANSA, a private
enterprise, in negotiation with producers and without government intervention.
The representative clarified
the operation of the automotive programme, dating from the 1980s. Currently, only three
enterprises benefited. He added that the programme would be phased out by the year 2000,
in accordance with Chile's commitments under the TRIMS agreement. The prohibition on
imports of used vehicles was for environmental reasons and there were no plans to lift
Regarding the services
sector, the representative mentioned that in the last seven years telecommunications,
infrastructure, transport and financial services had gone through an important process of
legal reform. In telecommunications, the privatization of the local and international
telephone companies had begun in 1985, and there was free competition in the sector. As a
result of the reform, rates had decreased by 50 per cent and the number of lines had
increased substantially. The financial sector had also been subject to important reforms,
including the recent approval of a new banking law, covering three major areas:
internationalization of the Chilean banking system, widening the scope of banking
activities, and adoption of the Basle norms. Regarding maritime transportation, the
delegate clarified that Chilean legislation was based on the principle of reciprocity.
Chile regretted that maritime transport negotiations had not been able to advance.
He added that Chile had
participated actively in the WTO services negotiations. In the 1995 financial services
negotiation, Chile submitted an improved offer, and in the context of the present
negotiation Chile was elaborating a conditional offer, which it hoped to submit in
October. Chile had assumed MFN commitments in international telephony and had reflected
its open policy in its list of commitments in this area. He emphasized that Chile was
willing to participate in any services negotiation to ensure progressive liberalization in
this sector on a multilateral, plurilateral and bilateral basis.
To conclude, I should like
to emphasize some main elements. First, Chile's focus, since 1990, on growth with equity
is an exemplary combination of economic and social policies, going now well beyond the
so-called "Washington consensus". I am sure Members will also welcome Chile's
continuing emphasis on economic stability and the success that has been achieved. I also
welcome the clear statements that have been made by Chile on the relationship between the
multilateral and regional aspects of their policies, and the detailed answers given on
specific questions, including those on government procurement, sanitary standards,
regional and export support, intellectual property, and sectoral policies. Finally, I am
sure that the discussion that we have held in the past two days will have contributed to
the important transparency obligation that I stressed in my opening statement. Back