The United States-Chile FTA eliminates tariffs and opens markets, reduces barriers for trade in services, provides protection for intellectual property, ensures regulatory transparency, guarantees nondiscrimination in the trade of digital products, commits the Parties to maintain competition laws that prohibit anticompetitive business conduct, and requires effective labor and environmental enforcement.
As of January 1, , all goods originating from the United States enter Chile duty free. New Opportunities for U. Workers and Manufacturers : All exports of consumer and industrial products can now enter Chile duty free.
Key U. Expanded Markets for U. See the RTAs gateway for explanations and background. See the PTAs gateway for explanations and background. Problems viewing this page? If so, please contact webmaster wto. View full screen. The database does not include data on current negotiations. In addition to tariff reductions, trade remedies presented negotiators with significant challenges.
In the United States, low tariffs on most products have caused domestic industries to rely on trade remedy laws to fight import competition. Perhaps the most controversial issue was the application of U.
This was not a new issue and was tackled in the Canada-Chile FTA, which provides for the "reciprocal exemption from the application of anti-dumping laws," except under "exceptional circumstances.
Chile's sensitivity to U. In recent years, antidumping investigations were concluded on Chilean salmon, mushrooms, grapes, and raspberries. The ITC ruled that there was reasonable indication that material injury was caused to U. Chile responded with concrete proposals to make this suggestion operational. Among the other issues of special interest to the United States were intellectual property rights IPR and investment provisions.
Chile is known for its transparent and high level treatment of foreign investment and has eliminated restrictions on capital inflows that existed in the s see next section. As important as these provisions are for the United States, the ITC estimates that because of Chile's historically open economy and small investment market, the FTA might foster increased U. Labor and environment provisions have become accepted as legitimate, but difficult issues to resolve in trade agreements.
At the heart of the matter is whether a difference in environmental and labor standards between developed and developing countries creates economic and social issues that should be addressed in trade agreements. This has led to a strong divergence of opinion, both among groups within the United States, and between developed and developing countries. Advocates of including labor and environment provisions in trade agreements argue that developing countries enjoy an "unfair" competitive advantage because their lower standards translate into lower costs, which in turn are reflected in lower prices for goods that compete with those produced in developed countries.
On the other hand, many studies show that these costs are usually not high enough to determine business location, where productivity remains the primary factor. Given countries' different levels of development and therefore capacities to address these issues, there is considerable disagreement over how far a trade agreement should go in engaging these domestic policy issues.
Developing countries, including Chile, have expressed two basic concerns regarding the inclusion of environmental and labor provisions in trade agreements: 1 that their sovereignty may be undermined if such agreements endorse higher standards; and 2 that such provisions may be used to justify disguised protectionism. Free trade advocates in the United States and other developed countries have expressed similar sentiments in opposition to placing environmental and labor provisions in trade agreements.
Labor and environment provisions in trade agreements have evolved over time. NAFTA's side agreements set a precedent in both labor and environment provisions that all parties: 1 not relax standards to attract investment or reduce costs of exports; 2 strive to improve standards over time, and; 3 enforce effectively their laws and regulations. It includes most key features of the NAFTA side agreements, but moved the provisions to the main body of the text, thereby placing these provisions under the dispute resolution process of the entire agreement.
Significantly, this includes language stating that an affected party may take "any appropriate and commensurate measure," including trade sanctions if the dispute remains unresolved.
Chile recognized the importance of labor and environment provisions when it included them in the FTA with Canada, but kept them equally general in NAFTA-like side agreements. The labor and environment provisions differ from the Jordan model by their placement in a side agreement and their reliance on less stringent dispute resolution options, emphasizing monetary assessments rather than trade sanctions.
Chile was on record, however, as flatly rejecting inclusion of any language that allows for the use of trade sanctions. All three have common elements, but each reflects country specific issues.
A recurring question for the U. Congress with respect to the trade negotiation process has been, to what extent does one agreement become a model for another? For example, when the U. As the th Congress considered the U. One or more of these issues were raised in hearings before the House Ways and Means and Senate Finance Committees, as well as both Judiciary Committees. This section provides a brief summary of the relevant provisions in the U. With implementation of the U.
Market access was a critical provision, with duty-free access negotiated for all goods traded between the two countries. With a few exceptions, the agreement will also increase market access for a broad range of services, with new opportunities for the financial services sector, among others. Export subsidies on agricultural products will be eliminated, but either country will be able to respond in-kind if damaged by third party export subsidies. There is also a safeguards provision to address possible surges in agricultural imports from Chile.
Other important market access gains will include phasing out the luxury tax on automobiles over four years, less restrictive treatment of textile and apparel products that meet rules of origin criteria, and reduction over time of Chilean price bands, a provision not included in either of the FTAs Chile negotiated with Canada and the European Union.
Other achievements of importance to the United States include consolidating and stabilizing rules governing openness of services trade, telecommunications, intellectual property rights IPR , e-commerce trade, and investment. These areas were of much greater interest to the United States than Chile and reflect gains for highly competitive U. There are few exceptions to the new services rules, benefitting firms working in financial, telecommunications, computer, and professional services.
Chile's approach to IPR is also adjusted to accommodate U. A new e-commerce chapter addresses the growing trade in digital products. Despite these many achievements, the th Congress raised questions on three provisions in particular that may prove even more difficult to pass in future FTAs if language is similar to that of the U.
These involve the treatment of labor and financial transfers in dispute settlement, and the temporary entry for business persons. A key controversy surrounded the treatment of three labor provisions in the agreement. Labor advocates argued that they are a step backward from the provisions agreed to in the U. Specifically, provisions: 1 requiring effective enforcement of domestic labor laws, 2 reaffirming commitments to ILO basic principles, and 3 requiring parties to strive to ensure the "non-derogation" from domestic standards not weakening or reducing protections to encourage trade and investment are treated differently.
In the first case, failure to enforce domestic labor laws can be formally challenged in the dispute resolution process as defined in the FTA Article In the case of the other two provisions, which are supported in principle, such recourse is not available. The USTR points to cooperative mechanisms for improving workers' rights in the FTA, 28 but labor advocates argue that unless all three are enforceable, the FTA provides "a meaningful trade discipline where -- and only where -- the country's labor laws are adequate.
Otherwise we would simply lock in low and unacceptable labor standards through our trade agreements. In addition, in the one case where the formal dispute resolution process may be invoked, it is differentiated from disputes related to commercial issues. Ultimately, if a commercial dispute remains unsettled, the country faces the possibility of suspension of benefits under the FTA "of equivalent effect" Article The monetary assessment would also be paid into a fund and expended for "appropriate labor initiatives.
The USTR argues that for a small country like Chile, such a fine would be significant relative to the dollar value of the trade benefits it will receive. From a congressional perspective, there is an additional question of whether differences in the treatment of the three labor provisions in some way fail to meet in full the principal negotiating objectives of Congress as outlined in TPA legislation.
Although the three provisions are not accorded the exact same treatment in the FTA, neither are they in the TPA language. Section b 11 of the Trade Act of TPA states that among the principal labor negotiation objectives is the provision " to ensure that a party to a trade agreement with the United States does not fail to effectively enforce the environmental or labor laws. There is a final point. Although the TPA provisions seem to differ with respect to treatment of these three labor provisions, under the dispute resolution provision sec.
Whereas the labor groups have argued that this is not the case with labor and commercial disputes, the USTR has responded that this standard has been met since both commercial and labor disputes are subject to monetary assessments and suspension of benefits.
The dispute settlement procedures do operate slightly differently, however, and it may be a matter of interpretation as to whether there is a problem in their meeting congressional negotiating objectives. A second controversial provision in the agreement relates to capital controls. The relevant language is set out in the dispute settlement portion of Chapter 10 -- Investment of the FTA.
During the s, Chile became famous for controlling capital inflows, a policy intended to limit the real appreciation of the Chilean peso that large capital inflows can cause. This policy, some argue, helped Chile avoid the currency overvaluation problem that contributed to multiple developing country financial crises in that decade.
Chile's main control policy on portfolio capital, known as the Ley de Encaje , was discontinued in While in force, however, it raised issues with respect to the U. The provisions at issue appear in two annexes of the investment chapter of the U. This law provides an investment option in the form of a contract with the Government of Chile that stipulates certain rights of the investor, but also requires that foreign direct investment FDI remain in country for a minimal period of one year three years at one point.
Should a dispute arise, the language in the U. It is the less controversial provision of the two. The more controversial provision relates to Chile's Ley de Encaje , which governs short-term portfolio capital flows, and the recourse that U.
This annex must be understood as part of the larger dispute settlement provisions related to foreign investment, as defined in Section B of Chapter This general rule applies to a broad range of potential investment disputes such as failure to observe national treatment or expropriation.
Annex C, the mutually-agreed compromise developed by Chilean and U. Paragraph 1 a states that claims alleging that Chile has breached an obligation under Chapter 10 from its imposition of restrictions on transfers can only be made one year after the restriction was put in place, with certain exceptions.
In general, the United States wanted to make sure that Chile did not have a general "balance of payments" exception to impose capital controls. In essence, Annex C attempts to reconcile these goals by allowing for an extension from six months to one year the life of the encaje of the "cooling off period" before a claim can be made for dispute resolution related to restrictions on transfers and payments, and by stipulating that the encaje is not an open-ended invitation to restrict may not substantially impede capital movements.
The important qualification relating to portfolio capital states that Chile will not incur any liability for damages:. There are two important thresholds that the Ley de Encaje must not exceed to avoid triggering a claim for dispute resolution. First, it cannot affect an investment for more than one year.
Historically, this has been the case. Second, the encaje cannot be considered as having "substantially impeded" capital outflows. Although in any actual arbitration a panel would be empowered to determine what constitutes "substantially impede," this language was crafted with the intent that the forfeiture of the encaje not be construed as substantially impeding capital outflows and so may be viewed as unlikely to open the door to U.
In addition, they indicate that U. Attention to the issue has grown in the aftermath of congressional approval for the U. Although in the U. Key Provisions. Chapter 14 of the U. The FTA addresses four specific categories of temporary nonimmigrant admissions currently governed by U. The FTA clearly states the desire to facilitate the temporary entry of persons fitting these categories, provided the person complies with applicable immigration measures for temporary entry e.
Chilean citizens who are business visitors, for example, would be able to enter the United States for business purposes on the basis of an oral declaration or letter from the employer specifying the principal place of business, detailing in the FTA an admissions policy not currently specified in statute.
In many ways the FTA professional worker visa requirements parallel the H-1B visa requirements, notably having similar educational requirements. The H-1B visa, however, specifies that the occupation require highly specialized knowledge, while the proposed FTA professional worker visa specifies that the occupation require only specialized knowledge. There are numerical limits of 1, new entries under the proposed FTA professional worker visa from Chile.
The legislation does not limit the number of times that an alien may renew the FTA professional worker visa on an annual basis, unlike H-1B workers who are limited to a total of 6 years. Although the foreign national holding the FTA professional worker visa would remain a temporary resident who would only be permitted to work for any employer who had met the labor attestation requirements, the foreign national with a FTA professional worker visa could legally remain in the United States indefinitely.
Members on both sides of the aisle expressed agreement with Chairman Sensenbrenner's position, with several Members going further to state that the draft language was an "insult to Congress. These recommendations are reflected in the legislation as introduced and passed. Title IV of S. Major Points of Debate. The USTR maintains that ensuring cross-border mobility of professionals and other business persons is critical for U.
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