United States Chile Free Trade Agreement

Bilateral negotiations have been a difficult task for both countries and, although a comprehensive agreement has been reached, some issues, as expressed in the Debate in the House of Representatives and the Senate, have been controversial. Given that several free trade agreements are now being considered, there has been concern about the potential that Chilean provisions could become a “model” for free trade agreements. In particular, immigration, investment (capital controls) and labor rules have appeared on hot topics, and many members of Congress have actually sent the message that language in the U.S.-Chile free trade agreement would not be acceptable in future trade agreements. A summary of these problems appears at the back of the report. As EsTV came into force, this is the final version of the report. Chile recognized the importance of labour and environmental provisions when it entered into the 1996 free trade agreement with Canada, while generally retaining them in THE NAFTA-type ancillary agreements. The labour and environmental provisions differ from the Jordanian model in their place in an ancillary agreement and their dependence on less stringent dispute resolution options, with a focus on monetary assessments, not trade sanctions. (23) During the negotiations, it was not clear whether Chile-Canada, the United States and Jordan or a new or hybrid model of the U.S.-Chile free trade agreement would work. U.S. negotiators sought guidance under the VPA legislation and the substantive debate, which focused on dispute resolution and enforcement mechanisms, particularly the application of trade sanctions for non-compliance.

However, Chile strongly opposed the inclusion of any language authorizing the application of trade sanctions. A major controversy was the treatment of three working provisions in the agreement. Proponents of the work have argued that they are a step backwards from the bilaterally agreed provisions in the United States and Jordan, as well as the Generalized System of Preferences and the Caribbean Basin Trade Partnership Act, which currently governs much of U.S. trade with Latin America. In particular, the provisions: 1) the effective application of national labour law, 2) the reaffirmation of obligations to the ILO`s fundamental principles and 3) will oblige the parties to strive to treat the “non-exception” of national standards differently (without weakening or reducing protection to promote trade and investment). (27) Services are an important component of U.S. exports and an important area of negotiation in trade agreements. The United States is the leading provider of financial services (insurance, banks, securities), telecommunications and business advisory services. The free trade agreement between the United States and Chile would reduce barriers and improve disciplines in the provision of these services, but would not significantly alter U.S.

imports of these services, and there would likely be no major change in the U.S. export position. First, Chile has a small presence in these services in the United States and, second, Chile is a relatively small market for the United States.

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