USTR Calls Agreements with Chile and Singapore "Comprehensive"
(Official says the modern trade agreements will be catalysts)
U.S. free trade agreements with Chile and Singapore are the most comprehensive and modern trade agreements the United
States has concluded and will serve as catalysts for future free trade initiatives, says Deputy U.S. Trade
Representative Peter Allgeier.
In June 17 testimony before the Senate Finance Committee, Allgeier said that these two free trade agreements (FTAs) are
"state-of-the-art" and address the full range of U.S. interests, including the areas of agriculture, services and
investment.
Allgeier said the U.S.-Singapore FTA, the first U.S. free trade agreement with an Asian nation, will enhance an already
strong commercial relationship and can serve as foundation for other possible FTAs in Southeast Asia.
Similarly, the USTR official said that in addition to providing U.S. companies with competitive access to the Chilean
market and helping Chile continue its impressive growth and development, the U.S.-Chile FTA will also set the stage for
future trade integration in Americas. The Chile FTA, he explained, "will send a positive message throughout the world,
particularly in the Western Hemisphere, that we will work in partnership with those who are committed to free markets."
Allgeier noted that the FTAs are the first agreements that will be implemented under the Trade Act of 2002 and pointed
out that they have been negotiated in a transparent fashion in close consultation with Congress and private sector
advisors. He expressed confidence that the FTAs command the respect of the private sector and achieve the objectives
outlined by congress in the Trade Act.
Max Baucus, a Montana Democrat and ranking member of the Senate Finance Committee concurred with this assessment. "I
think these two agreements stack up fairly well against the many requirements set by Congress," he said. Baucus added, "
I want to see these two agreements pass both houses with wide, bipartisan majorities ... I see that as an entirely
achievable goal."
In a statement released at the June 17 hearing, Senate Finance Committee Chairman Chuck Grassley, an Iowa Republican,
said the two agreements "deserve the broad support of the congress." He expressed hope that the agreements would be
implemented before the August congressional recess.
Following are the text of Allgeier's statement as well as summaries of the Singapore and Chile FTAs:
(begin text)
U.S.-SINGAPORE and U.S.-CHILE FREE TRADE AGREEMENTS
Statement of Ambassador Peter F. Allgeier Deputy U.S. Trade Representative before the Committee on Finance United States
Senate Washington, D.C.
June 17, 2003
INTRODUCTION
Mr. Chairman, Mr. Baucus, and Members of the Committee, thank you for the opportunity to testify today and for your
continued guidance and support. Ambassador Zoellick and I greatly appreciate your leadership on trade issues, Mr.
Chairman and Mr. Baucus, and we value our partnership with the Congress on these important matters.
Without the help of the Members of this Committee and excellent staff, I would not have the privilege of testifying here
today on the U.S.-Singapore and U.S.-Chile Free Trade Agreements (FTAs). During the past two years, we have worked
together to reenergize the U.S. trade agenda. Passage of the Trade Act of 2002 (Trade Act), including Trade Promotion
Authority (TPA), was a major turning point in that effort, which will lead to economic benefits for all Americans and
many others around the world.
The Administration has used TPA to launch major new trade initiatives designed to expand trade and open markets
globally, regionally and bilaterally. We initiated new WTO negotiations in Doha and have since presented bold proposals
in agriculture, industrial products and services. We have FTA negotiations underway with Australia, Central America
(CAFTA), Morocco, and the South African Customs Union (SACU). We have announced our intent to begin negotiations on an
FTA with Bahrain early next year. We have also launched the President's Enterprise for ASEAN Initiative and a Middle
East trade initiative. We will not stop there.
I welcome this opportunity to review the accomplishments of the FTA and present the Administration's request for
favorable consideration of legislation needed to implement the FTA later this year. Attached to my testimony are
summaries of the main provisions of each agreement.
The U.S.-Singapore and U.S.-Chile FTAs reflect a bipartisan effort to conclude trade agreements with two important
trading partners. Both agreements were launched under the Clinton Administration -- with Singapore in November 2000 and
with Chile in December 2000 -- and concluded under the Bush Administration. President Bush and Singaporean Prime
Minister Goh signed the U.S.-Singapore FTA on May 6, 2003, at the White House. Ambassador Zoellick and Chilean Foreign
Minister Alvear signed the U.S.-Chile FTA on June 6, 2003, at the Vizcaya Mansion in Miami.
U.S.-SINGAPORE FTA
The U.S.-Singapore FTA is a solid agreement. It is the first FTA President Bush has signed with any country and our
first with an Asian nation. This Agreement provides commercial and political benefits for both the United States and
Singapore. Strengthening economic ties helps secure strong political interests.
The U.S.-Singapore FTA will enhance further an already strong and thriving commercial relationship. Singapore was our
12th largest trading partner last year. Annual two-way trade of goods and services between our nations exceeded $40
billion. Expanding this trade will benefit workers, consumers, industry and farmers. Independent analyses found
significant economic gains will result from the FTA for the United States and Singapore.
The FTA is comprehensive in scope and covers aspects of trade in goods, services, investment, government procurement,
protection of intellectual property, competition policy and the relationship between trade and labor and environment.
This FTA builds upon the basic foundation of the NAFTA and WTO agreements and improves upon them in a number of ways.
The U.S.-Singapore FTA can serve as the foundation for other possible FTAs in Southeast Asia. President Bush envisaged
this prospect when the announced his Enterprise for ASEAN Initiative (EAI) last year.
The Administration looks forward to working with Congress on the legislation needed to implement this FTA. We hope to be
in a position to submit this legislation after further work with the Congress.
U.S.-CHILE FTA
The U.S.-Chile Free Trade Agreement is a state-of-the-art agreement, setting the stage for further trade integration in
the hemisphere.
It makes sound economic sense for the United States to have a free trade agreement with Chile. Although Chile was only
our 36th largest trading partner in goods in 2002 (with $2.6 billion in exports and $3.8 billion in imports), Chile has
one of the fastest growing economies in the world. Its sound economic policies are reflected in its investment grade
capital market ratings, unique in South America. Over the past 15-20 years, Chile has established a vigorous democracy,
a thriving and open economy built on trade, and a free market society. A U.S.-Chile FTA will help Chile continue its
impressive record of growth, development and poverty alleviation. It will help spur progress in the Free Trade Area of
the Americas, and will send a positive message throughout the world, particularly in the Western Hemisphere, that we
will work in partnership with those who are committed to free markets.
Moreover, a U.S.-Chile FTA will help U.S. manufacturers, suppliers, farmers, workers, service providers, consumers and
investors achieve a level playing field. Chile already has FTAs with Mexico, Canada, Mercosur, and -- since February --
the EU. As a result, its trade with these economies is growing while American companies are being disadvantaged. Indeed,
the U.S. share of Chilean imports has dropped from 23% in 1998 to 16% in 2002. The National Association of Manufacturers
estimates the lack of a U.S.-Chile FTA causes U.S. companies to lose at least $1 billion in exports annually. The United
States needs an FTA with Chile to ensure that we enjoy market access, treatment, prices and protection at least as good
as our competitors. Consumers will benefit from lower prices and more choices.
As Ambassador Zoellick said, "The U.S.-Chile FTA is a partnership for growth, a partnership in creating economic
opportunity for the people of both countries." Chile has opened its markets and welcomed competition. As a result, it is
one of the freest economies in Latin America.
The result of Chile's openness has been the best growth record in Latin America, averaging over 6 percent per year
through the 1990's. This growth enabled Chile to cut its poverty rate in half, from 45 percent in 1987 to 22 percent in
1998. The U.S.-Chile FTA will help Chile sustain this growth and will send a strong signal to the hemisphere that the
United States wants to work in partnership to promote mutual economic growth.
FTA PROCESS
The U.S.-Singapore and U.S.-Chile FTAs are the first agreements that will be implemented under the TPA procedures set
out in the Trade Act. Even before receiving Congressional guidance under the Trade Act, the process of developing U.S.
proposals and concluding the FTA was open and transparent. USTR held public briefings, consulted frequently with
Congress and private sector advisors, and sought public comments on the negotiations as they proceeded. Proposed texts
were made available to members of Congress and advisors in advance of their presentation to our negotiating partners.
The Congress and our statutory advisors had access to the full drafts of the Singapore and Chile FTAs in December 2002.
USTR also posted summaries of the FTAs on our public web site. The full texts of each agreement were posted on the USTR
pubic website as soon as the preliminary legal review of each agreement was completed, which was March 6, 2003, for the
agreement with Singapore and April 3, 2003, for the agreement with Chile.
As with other agreements, such as NAFTA and the WTO Agreements, our private sector advisors are required to submit
reports to the President, the Congress, and the USTR providing their assessments of the extent to with the FTA achieves
the objectives, policies and priorities set out in the Trade Act. For the Singapore and Chile FTAs, only one of the
thirty-one advisory committees opposed the agreements.
SUPPORTING OUR EFFORTS TO EXPAND TRADE WORLDWIDE
Last October, President Bush announced the Enterprise for ASEAN Initiative (EAI) in recognition of this important
region. The EAI offers the prospect of FTAs with individual ASEAN nations, leading to a network of FTAs in the region.
The U.S.-Singapore FTA can serve as the foundation for these other possible FTAs. The ASEAN includes the largest Muslim
country in the world -- Indonesia -- as well as other countries with large Muslim populations, including Malaysia, the
Philippines and Brunei.
The President is committed to making progress under the EAI as a framework for deepening our trade and investment
relationship with ASEAN. The United States expects a potential FTA partner to be a member of the WTO and to have a Trade
and Investment Framework Agreement (TIFA) with the United States. Since announcement of this initiative, the United
States has signed TIFAs with Thailand and Brunei. The trade ministers of these countries, as well as Philippines and
Indonesia, with which the United States already has TIFAs, have met regularly to address specific bilateral issues and
coordinate on regional and multilateral issues.
Likewise, the conclusion and signing of the Chile FTA has provided momentum to other hemispheric and global trade
liberalization efforts by breaking ground on new issues and demonstrating what a 21st century trade agreement should be.
We continue to move forward with the centerpiece of our hemispheric integration strategy, the Free Trade Area of the
Americas (FTAA). We maintain our strong commitment to the negotiation of a broad and robust FTAA by January of 2005.
The U.S.-Chile FTA and the Central American Free Trade Agreement (CAFTA) will serve as building blocks for the FTAA.
They will give both sides greater access to each other's markets at an earlier date than is possible under the FTAA. At
the same time, these bilateral FTAs strengthen ties and integration, demonstrating the additional benefits available
through the FTAA.
CONCLUSION
The U.S.-Singapore and U.S.-Chile FTAs are the most comprehensive and up-to-date trade agreements the United States has
concluded. These FTAs command widespread support in the private sector and makes progress in achieving each of the
relevant objectives, purposes, policies and priorities that the Congress identified in the Trade Act.
With continued Congressional guidance and support, this Administration is pursuing an ambitious and comprehensive trade
policy. We will continue to move forward bilaterally, regionally, and globally. Together, we can show the world the
power of free trade to strengthen democracy and promote prosperity.
The Administration looks forward to working with this Committee and the full Congress in enacting the legislation
necessary to implement these Agreements. Thank you, Mr. Chairman. I would be pleased to respond to questions.
SUMMARY OF THE U.S.-SINGAPORE FTA
Market Access for Services
Singapore is one of the world's most sophisticated services economies, and a services hub for the fast-growing Southeast
Asian region. The U.S.-Singapore FTA will accord substantial market access to U.S. firms across the entire spectrum of
services, subject to very few exceptions. The FTA uses a so-called "negative list" approach, in which all service
sectors are liberalized unless a specific reservation is taken in the Agreement. This technique, which we successfully
used in the NAFTA, provides for maximum liberalization of services markets.
Singapore will treat U.S. services suppliers as well as its own suppliers or other foreign suppliers, and U.S. services
firms will enjoy fair and non-discriminatory treatment. Such nondiscrimination will be achieved through strong
disciplines on both cross-border supply of services (such as those delivered electronically, or through the travel of
services professionals across borders) as well as the right to invest and establish a local services presence.
Importantly, services market access is supplemented in this FTA by strong and detailed disciplines on regulatory
transparency. U.S. services suppliers have found that market access commitments may be less meaningful without parallel
commitments by trading partners to regulatory transparency. Under the FTA, Singaporean services regulators 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.
New market access commitments apply across a broad range of sectors, including, but not limited to, banking, insurance,
securities and related services; computer and related services; direct selling; 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
and training services; environmental services; and energy services. U.S. firms also have the ability to own equity
stakes in entities that may be created if Singapore chooses to privatize certain government-owned services.
Some achievements of the FTA in certain services sectors are highlighted below.
Banking: The financial services chapter includes core obligations of non-discrimination, most-favored nation treatment,
and additional market access obligations. Singapore's current ban on new licenses for full-service banks will be lifted
within 18 months, and lifted within three years for "wholesale" banks that serve only large transactions. Licensed
full-service banks will be able to offer all their services in Singapore at up to 30 locations in the first year that
the agreement is in effect, and at an unlimited number of locations within two years. Locally incorporated subsidiaries
of U.S. banks can apply for access to the local Automated Teller Machine (ATM) network within two-and-a half years, and
branches of U.S. banks get access to the ATM network in four years.
Insurance: Under the FTA, U.S. insurance firms will be able to establish subsidiaries, branches or joint ventures.
Singapore is expanding the cross-border insurance services it allows, and U.S. firms will be able to sell marine,
aviation and transport (MAT) insurance, reinsurance, to provide insurance brokerage of reinsurance and MAT insurance,
and to provide insurance auxiliary services. A new principle of expedited availability of insurance services in the FTA
means that prior regulatory product approval will not be required for all insurance products other than life insurance,
Central Provident Fund related products, and investment-linked products sold to the business community. Expedited
procedures will be available in other cases when prior product approval is necessary. The FTA specifies that U.S.
financial institutions may offer financial services to citizens participating in Singapore's privatized social security
system under more liberal requirements.
Securities and Related Financial Services: The FTA specifies that U.S. firms may provide asset/portfolio management and
securities services in Singapore through the establishment of a local office, or by acquisition of local firms. In
addition, U.S. firms may supply pension services under Singapore's privatized social security system, with liberalized
requirements regarding the number of portfolio managers that must be located in Singapore. And U.S.-based firms may sell
portfolio management services via a related institution in Singapore. Under the FTA, Singapore will treat U.S. firms the
same as local firms for the cross-border supply of financial information, advisory and data processing services.
Express Delivery Services: The FTA contains important provisions relating to express delivery services. It provides for
liberalization of express delivery services and other related services (that are part of an integrated express delivery
system) that will allow a more efficient and expedited express delivery business in Singapore. Singapore also commits
that it will not allow its postal service to cross-subsidize express letters in an anti-competitive manner with revenues
from its monopoly services.
Professional Services: The FTA specifies that Singapore will ease restrictions on U.S. firms creating joint law ventures
to practice in Singapore, and will recognize degrees earned from certain U.S. law schools for admission to the Singapore
bar. Singapore will reduce onerous requirements on the make-up of boards of directors for architectural and engineering
firms. And capital ownership requirements for land surveying services will be eliminated. In addition, the FTA
liberalizes the requirements for registration and certification of patent agents. Provisions of the FTA also call for
cooperation in developing standards and criteria for licensing and certification of other professional services
providers.
Telecommunications: The FTA contains a full range of market access commitments on telecommunications services,
consistent with the regulatory regimes of the U.S. and Singapore. For example, users of the public telecommunications
network are guaranteed reasonable and non-discriminatory access to the network. This prevents local firms from having
preferential or "first right" of access to telecommunications networks. The FTA also provides U.S. phone companies with
the right to interconnect with networks in Singapore in a timely fashion, on terms, conditions, and cost-oriented rates
that are transparent and reasonable. And the FTA grants U.S. firms seeking to build a physical network in Singapore
non-discriminatory access to buildings that contain telephone switches and submarine cable heads. U.S. firms will be
able to lease lines on nondiscriminatory terms and to re-sell telecom services of Singaporean suppliers to build a
customer base. Importantly, the FTA includes transparency requirements for the rulemaking procedures of Singapore's
telecom regulatory authority, and requires publication of inter-connections agreements and service rates. Singapore
commits that when competition emerges in a telecom sector, that area will be deregulated. The agreement also specifies
that companies, not governments, will make technology choices, particularly for mobile wireless services, thus allowing
firms to compete on the basis of technology and innovation, not on government-mandated standards.
Trade in Goods and Agriculture: Tariffs Eliminated
U.S. tariffs on 92% of Singapore's exports of goods will be eliminated immediately upon entry into force of the
Agreement, with remaining tariffs phased out over 4-10 years. Singapore guarantees zero tariffs immediately on all U.S.
products.
Textiles and apparel will be duty-free immediately if they meet the Agreement's "yarn-forward" rule of origin, which
will promote new opportunities for U.S. and Singaporean fiber, yarn, fabric and apparel manufacturing industries. A
limited yearly amount of textiles and apparel containing non-U.S. or non-Singaporean yarns, fibers or fabrics may also
qualify for duty-free treatment.
Extensive monitoring and anti-circumvention commitment -- such as reporting, licensing, and unannounced factory checks
-- will ensure that only Singaporean textiles and apparel receive tariff preferences under the Agreement.
Electronic Commerce: Free Trade in the Digital Age
No previous U.S. free trade agreement contains such cutting-edge provisions on digital trade as the proposed FTA with
Singapore. The United States and Singapore agreed to provisions on electronic commerce that reflect the issue's
importance in global trade, and the principle of avoiding barriers that impede the use of electronic commerce.
For example, the Agreement establishes explicit guarantees that the principle of nondiscrimination applies to digital
products delivered electronically, such as software, music, images, videos, or text. This will provide fair treatment
and protection to U.S. firms that deliver such digital products via the Internet. The FTA also establishes a binding
prohibition on customs duties charged on digital products delivered electronically. For digital products delivered on
hard media (such as a DVD or a CD-ROM), 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 FTA also affirms that any commitments made related to services also extend to the electronic delivery of such
services, such as financial services delivered over the Internet. This sets a very good precedent for U.S. services
liberalization efforts in the WTO and in other FTAs.
Investment: Important Protections for U.S. Investors
The Agreement will improve the bilateral investment climate and provide important protections for investors, and is also
consistent with the objectives regarding investor-state dispute settlement in the Trade Act. Given the large stock of
U.S. investment in Singapore, the protections of the FTA are extremely important and provide assurances for the future
growth of two-way investment.
The FTA will provide a secure, predictable legal framework for U.S. investors operating in Singapore. All forms of
investment are protected under the Agreement. The Agreement guarantees U.S. investors treatment no less favorable than
Singaporean investors or any other foreign investor, except in certain sectors that are specifically exempted. This
so-called "negative list" approach is the most comprehensive way to protect the interests of U.S. investors in
Singapore.
Among the rights afforded to U.S. investors under the Agreement are the right to make international transfers related to
an investment, protections related to expropriation and due process that are consistent with U.S. law, and freedom from
certain performance-related restrictions and requirements.
The investor protections are backed by an effective, impartial procedure for dispute settlement that is fully
transparent. Submissions to arbitral panels and arbitral hearings will be open to the public, and interested parties
will have the opportunity to submit their views.
Intellectual Property Rights (IPR): Setting New High Standards
The U.S.-Singapore FTA provides for a very high level of IPR protection, including state-of-the-art protections for
trademarks and digital copyrights, as well as expanded protection for patents and undisclosed information. These are
supported by tough penalties for piracy and counterfeiting, including procedures for seizure and destruction of
counterfeit products, the equipment used to produce counterfeit products, and the establishment of statutory and actual
damages for violations. Singapore will accede to international Internet treaties, extend the term of protection for
copyrighted works, and maintain criminal penalties for circumvention of technology protection measures and for trade in
counterfeit goods.
The rising global level of trade in counterfeit goods calls for strong provisions to combat such illegal trade. The FTA
gives effect to the trademark law treaty and the joint recommendation on protection of well-known marks, ensuring that
all trademarks can be registered in Singapore and that licensees will no longer have to register their trademark
licenses to assert their rights in a trademark. More specific information on the Agreement's IPR provisions is below.
Trademarks: The FTA ensures government involvement in resolving disputes between trademarks and Internet domain names,
which is important to prevent "cyber-squatting" of trademarked domain names. It applies the important 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.
Furthermore, the FTA streamlines the trademark filing process by allowing applicants to use their own national
patent/trademark offices for filing trademark applications.
Copyrights: The FTA contains provisions designed to ensure that only authors and other copyright owners have the right
the make their works available online. Copyright owners maintain rights to temporary copies of their works on computers,
which is important in protecting music, videos, software and text from widespread unauthorized sharing via the Internet.
The FTA provides that copyrighted works and phonograms are protected for extended terms, consistent with U.S. standards
and international trends. And strong anti-circumvention provisions will help to limit tampering with technologies (like
embedded codes on discs) that are designed to prevent piracy and unauthorized distribution over the Internet.
The FTA requires that governments only use legitimate computer software, thus setting a positive example for private
users. Singapore agrees to prohibit the production of optical discs (CDs, DVDs or software) without a source
identification code, unless the copyright holder authorizes (in writing) such production. And the agreement provides for
protection for encrypted program-carrying satellite signals as well as the programming, thus preventing piracy of
satellite television programming.
The FTA provides for 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 & Undisclosed Information: Under the provisions of the FTA, a patent term can be extended to compensate for up-front
administrative or regulatory delays in granting the original patent, consistent with U.S. practice. The grounds for
revoking a patent in Singapore are limited to the same grounds required to originally refuse a patent, thus protecting
against arbitrary revocation. The FTA provides new protections for patents covering biotech plants and animals, and it
protects against imports of pharmaceutical products without patent-holder's consent by allowing lawsuits when contracts
are breached. Test data and other information submitted to a government for the purpose of product approval will be
protected against disclosure or unfair commercial use for a period of 5 years for pharmaceuticals and 10 years for
agricultural chemicals. Finally, the FTA contains provisions designed to ensure that government marketing-approval
agencies will not grant approval to products that infringe patents.
IPR Enforcement: Singapore has agreed to establish criminal penalties for companies that make pirated copies from
legitimate products, and the Singaporean government guarantees in the FTA that it has authority to seize, forfeit and
destroy counterfeit and pirated goods and the equipment used to produce them. Under the FTA, IPR laws will be enforced
against traded goods, including trans-shipments, to deter violators from using U.S. or Singaporean ports or free-trade
zones to traffic in pirated products. Enforcement officials may act on their own authority in border and criminal IPR
cases without waiting for the filing of a formal complaint, thus providing more effective enforcement.
The agreement mandates both statutory and actual damages under Singaporean 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: Protection Against Anticompetitive Business Conduct, Designated Monopolies and Government
Enterprises
The FTA contains provisions to protect U.S. firms against possible anti-competitive behavior. Singapore commits to enact
laws proscribing anti-competitive conduct and to create a competition authority commission by January 2005.
Especially important in the case of Singapore is the commitment that Government-Linked-Corporations (GLC's) will operate
on a commercial and nondiscriminatory basis. As GLC's account for a significant percentage of Singapore's economic
activity, it was important for the U.S. to secure this non-discrimination commitment, and to back it up through dispute
settlement provisions. Singapore also agrees to provide annual information on government enterprises with substantial
revenues or assets.
Government Procurement: Strong Disciplines
Both Singapore and the United States are members of the WTO Agreement on Government Procurement, but the U.S.-Singapore
FTA goes beyond existing WTO obligations. For example, the FTA lowers the monetary thresholds for coverage under
government procurement commitments, thereby increasing the number of contracts on which U.S. firms may bid in a manner
that is covered by transparent procurement disciplines. In addition, under the FTA Singapore broadens its commitments to
nondiscrimination in government services procurement and reinforces its WTO commitments to strong and transparent
disciplines on procurement procedures.
As in the services and investment provisions of the Agreement, the government procurement chapter uses a "negative list"
approach in which U.S. firms gain nondiscriminatory access unless a sector is specifically excluded in the Agreement.
Customs Procedures and Rules of Origin: Ground-Breaking Provisions
The U.S.-Singapore FTA is one of the first U.S. trade agreements with specific, concrete obligations on how customs
procedures are to be applied. Specifically, the Agreement requires transparency and efficiency in customs
administration, with commitments on publishing laws and regulations on the Internet, and ensuring procedural certainty
and fairness. The Agreement also seeks to facilitate the clearance of express delivery shipments through customs.
Under the FTA, 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 Singaporean goods benefit from the Agreement.
Temporary Entry of Personnel
The Agreement contains provisions for the temporary entry of business visitors, including intra-company transferees and
professionals. The Administration believes that the temporary entry provisions strike a careful balance between the
needs of the U.S. service industry to provide competitive services while preserving the right of Congress to legislate
on immigration policy. Under these provisions, a professional visa category would be established.
Environmental Provisions: Cooperation to Protect the Environment
The FTA fully meets the environmental objectives set out by Congress in TPA. Significantly, environmental obligations
are part of the core text of the trade agreement. Both parties commit to ensure that their domestic environmental laws
provide for high levels of environmental protection and shall strive to continue to improve such laws. The agreement's
text makes clear that it is inappropriate to weaken or reduce domestic environmental protections to encourage trade or
investment. A related agreement on environmental cooperation will enhance demand for environmental goods and services.
Reflecting the bipartisan compromise struck in the Trade Act, the FTA requires that Parties shall effectively enforce
their own domestic environmental laws, and this obligation is enforceable through the Agreement's dispute settlement
procedures.
Labor Provisions: Promotion of Worker Rights
Significantly, labor obligations are part of the core text of the trade agreement. Both parties reaffirm their
obligations as members of the International Labor Organization (ILO), and shall strive to ensure that their domestic
laws provide for labor standards that are consistent with internationally recognized labor principles. The Agreement
makes clear that it is inappropriate to weaken or reduce domestic labor protections to encourage trade or investment.
Reflecting the bipartisan compromise struck in the Trade Act, the Agreement requires that Parties shall effectively
enforce their own domestic labor laws, and this obligation is enforceable through the Agreement's dispute settlement
procedures.
Dispute Settlement: Innovative New Tools
All core obligations of the Agreement, including labor and environmental provisions, are subject to the dispute
settlement provisions of the Agreement. The procedures for dispute panel procedures set new and higher standards of
openness and transparency, reflecting the guidance from the Congress in the Trade Act. For example, the Agreement
envisions that dispute settlement proceedings will be open to the public, that legal submissions by parties to a dispute
will be released to the public, and that interested third parties will have the ability to submit their views to dispute
settlement panels.
Dispute settlement procedures in the FTA promote compliance through consultation and trade-enhancing remedies, rather
than relying solely on trade sanctions. The FTA dispute settlement procedures also provide for "equivalent" remedies for
commercial and labor/environmental disputes. The FTA does this through an innovative new enforcement mechanism that
involves the use of monetary assessments to enforce commercial, labor, and environmental obligations of the trade
agreement. Suspension of preferential tariff benefits under the Agreement is also available for all disputes, but the
mechanism is designed in all cases to seek remedies that will enhance compliance with the obligations of the Agreement,
rather than restricting trade and harming "innocent bystanders."
SUMMARY OF THE U.S.-CHILE FTA
Market Access for Goods
More than 87% of U.S.-Chilean bilateral trade in consumer and industrial products would become duty-free immediately
upon entry into force of the Agreement, with most remaining tariffs eliminated within four years. Key U.S. export
sectors would 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 industries. 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.
Our key concern was to level the playing field to ensure that U.S. access to Chile would be as good as that of the EU or
Canada, both of which have FTAs with Chile. Immediately following the ratification of the EU-Chile FTA, the EU saw a 27%
increase in trade with Chile. Through the US-Chile agreement we ensure that U.S. firms will not be left behind.
Expanded Markets 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 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 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. The Agreement 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 parties to the Agreement renew 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.
Access to a Fast-Growing Chilean Services Market
The commitments of the Agreement in services cover both cross-border supply of services (such as services supplied
through electronic means, or through the travel of nationals) as well as 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.
Chile will accord substantial market access across its entire services regime, subject to very few exceptions, a
so-called "negative list" approach. This establishes market access commitments across a wide range of sectors of
interest to the United States, 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 (wholesaling, retailing and franchising); adult
education and training services; and environmental services. The express delivery commitment includes an important and
expansive definition of the integrated nature of express services, and affirms existing competitive opportunities.
Some of the key services commitments are spelled out in more detail below:
Financial Services: This chapter includes core obligations of non-discrimination, most-favored nation treatment, and
additional market access obligations. U.S. insurance firms would gain 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 further has committed to modify its legislation to allow cross-border
supply of key insurance sectors such as marine, aviation and transport (MAT) insurance, insurance brokerage of
reinsurance and MAT insurance, and has confirmed existing rights for reinsurance. A new principle of expedited
availability of insurance services means that the parties recognize the importance of developing and maintaining
regulatory procedures to expedite the offering of insurance services by licensed suppliers.
U.S. banks and securities firms may establish branches and subsidiaries and may invest in local firms without
restriction, except in very limited circumstances, and 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 also 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.
Telecommunications: Under the Agreement, users of the public telecommunications network are guaranteed reasonable and
non-discriminatory access to the network. This prevents local firms from having preferential or "first right" of access
to telecommunications networks. The FTA also provides U.S. phone companies with the right to interconnect with networks
in Chile at non-discriminatory, cost-based rates. U.S. firms seeking to build a physical network in Chile are also
granted nondiscriminatory access to facilities, such as telephone switches and submarine cable landing stations. And
U.S. firms will be able to lease lines on Chilean telecom networks on non-discriminatory terms, and to re-sell telecom
services of Chilean suppliers to build a customer base.
Electronic Commerce: Free Trade in the Digital Age
The Electronic Commerce text in the FTA identifies Chile as a leader in Latin America for the further development of
digital trade, as both countries agreed to provisions on electronic commerce that reflect the issue's importance in
global trade.
In the FTA, Chile and the United States committed to non-discriminatory treatment of digital products, agreed not to
impose customs duties on such products, and affirmed that commitments made related to services also extend to the
electronic delivery of such services. For digital products delivered on hard media (e.g., 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. Finally, both countries agreed to cooperate in numerous policy areas related to electronic commerce, including
on the maintenance of cross-border flows of information.
Investment: Important Protections for U.S. Investors
The Agreement will establish a secure, predictable legal framework for U.S. investors operating in Chile, and is
consistent with the objectives regarding investor-state dispute settlement contained in the Trade Act of 2002. All forms
of U.S. investment in Chile are protected under the Agreement, including 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. The Agreement
prohibits and removes certain restrictions on U.S. investors, such as requirements to buy Chilean rather than U.S.
inputs.
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 expropriation. 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.
Intellectual Property Rights (IPR): Expanded Protections and Enforcement
Protection of copyrights, patents, trademarks, and undisclosed trade information in the U.S.-Chile FTA is
state-of-the-art, with protections that go beyond previous U.S. free-trade agreements. Enforcement of intellectual
property rights is also enhanced under the Agreement. Some specific aspects of the Agreement's protections for IPR are
listed below.
Trademarks: The Agreement contains language to ensure that there is government involvement in resolving disputes between
trademarks and Internet domain names, which is important to prevent "cyber-squatting" of trademarked domain names. The
trademark section of the Agreement also applies the 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: The Agreement's copyright language will ensure that only authors 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. Under the Agreement, copyrighted works and phonograms are protected for extended terms, consistent with
U.S. standards and international trends. Strong anti-circumvention provisions prohibit tampering with technologies (like
embedded codes on discs) that are designed to prevent piracy and unauthorized distribution over the Internet. The FTA
also provides that governments will only use legitimate computer software, thus setting a positive example for private
users.
Patents and Trade Information: The Agreement provides that a patent term can be extended to compensate for up-front
administrative or regulatory delays in granting the original patent, consistent with U.S. practice. The FTA specifies
that grounds for revoking a patent are limited to the same grounds required to originally refuse a patent, which helps
to protect against arbitrary revocation. And test data and other information submitted to a government for the purpose
of product approval will be protected against disclosure or unfair commercial use for a period of 5 years for
pharmaceuticals and 10 years for agricultural chemicals. Finally, the IPR provisions ensure that government
marketing-approval agencies will not grant approval to products that infringe patents.
IPR Enforcement: The FTA contains commitments that party governments will criminalize end-user piracy, thus providing a
strong deterrence against piracy and counterfeiting. The Chilean government guarantees that it has authority to seize,
forfeit, and destroy counterfeit and pirated goods and the equipment used to produce them. The Agreement specifies that
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. Enforcement officials may act on their own authority in border and criminal IPR
cases without waiting for the filing of a formal complaint, thus providing more effective enforcement. Finally, the
Agreement mandates both statutory and actual damages under Chilean law for IPR -violations. This will serve as a
deterrent against piracy, and provide that monetary damages can be awarded even if actual economic harm (retail value,
profits made by violators) cannot be determined.
Competition Policy: Protections Against Anticompetitive Behavior
The U.S.-Chile FTA commits Chile to maintain competition laws that prohibit anti-competitive business conduct, and a
competition agency to enforce those laws. The Chilean laws already promote economic efficiency and consumer welfare,
making clear the appropriate objective of competition laws.
The Agreement also requires that Chile control state enterprises and officially designated monopolies so that such firms
do not abuse their official status to harm the interests of U.S. companies or discriminate in the sale of goods or
services.
Government Procurement: Setting a Precedent for the Hemisphere
The FTA requires that covered Chilean ministries, as well as 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. It furthermore imposes strong and transparent disciplines on government procurement procedures, such as
requiring advance public notice of purchases, as well as timely and effective bid review procedures.
The FTA covers the purchases of most Chilean central government agencies, and covers 13 regional governments, 10 ports
and all airports that are property of the state or dependents of the Dirección de Aeronáutica Civil, and more than 350
municipalities in Chile.
Importantly, the FTA 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.
Ground-Breaking Customs Procedures
The U.S.-Chile FTA is one of the first U.S. trade agreements with specific, concrete obligations on how customs
procedures are to be applied. The 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. The rules are
specific to individual products, but are designed to be easier to administer than NAFTA rules of origin.
Temporary Entry of Personnel
The Agreement contains provisions for the temporary entry of business visitors, including intra-company transferees and
professionals. The Administration believes that the temporary entry provisions strike a careful balance between the
needs of the U.S. service industry to provide competitive services while preserving the right of Congress to legislate
on immigration policy. Under these provisions, a professional visa category would be established.
Environmental Provisions: Cooperation to Protect the Environment
The FTA fully meets the environmental objectives set out by Congress in the Trade Act of 2002. Significantly,
environmental obligations are part of the core text of the Trade Agreement. Both parties commit to ensure that their
domestic environmental laws provide for high levels of environmental protection and shall strive to continue to improve
such laws. The Agreement's text makes clear that it is inappropriate to weaken or reduce domestic environmental
protections to encourage trade or investment.
Reflecting the bipartisan compromise struck in the Trade Act, the FTA requires that Parties shall effectively enforce
their own domestic environmental laws, and this obligation is enforceable through the Agreement's dispute settlement
procedures.
In addition, the Agreement contains an annex identifying a number of important cooperative projects that will promote
environmental protection. Projects include:
-- Building capacity for wildlife protection and resource management in Latin America through collaboration with
wildlife managers, universities, and local communities.
-- A project to develop and implement effective alternatives to methyl bromide, a chemical that Chile and the United
States have committed to phase out under international environmental agreements.
-- Development of a Pollutant Release and Transfer Register (PRTR) in Chile, similar to the successful Toxic Release
Inventory in the United States. The PRTR is a publicly available database of chemicals that have been released by
industrial facilities into the environment.
Labor Provisions: Promotion of Worker Rights
Significantly, labor obligations are part of the core text of the Trade Agreement. Both parties reaffirm their
obligations as members of the International Labor Organization (ILO), and shall strive to ensure that their domestic
laws provide for labor standards that are consistent with internationally recognized labor principles. The Agreement
makes clear that it is inappropriate to weaken or reduce domestic labor protections to encourage trade or investment.
Reflecting the bipartisan compromise struck in the Trade Act, the Agreement requires that Parties shall effectively
enforce their own domestic labor laws, and this obligation is enforceable through the Agreement's dispute settlement
procedures.
The Agreement also contains a cooperative labor 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. Cooperative activities may include:
-- Discussions of legislation, practice, and implementation of the core elements of the ILO Declaration on Fundamental
Principles and Rights at Work.
-- Improving systems for the administration and enforcement of labor laws.
Dispute Settlement: Innovative New Tools
All core obligations of the Agreement, including labor and environmental provisions, are subject to the dispute
settlement provisions of the Agreement. The procedures for dispute panel procedures set new and higher standards of
openness and transparency, reflecting the guidance from Congress in the Trade Act. For example, the Agreement provides
that dispute settlement proceedings will be open to the public, that legal submissions by parties to a dispute will be
released to the public, and that interested third parties will have an opportunity to submit their views to dispute
settlement panels.
Dispute settlement procedures in the FTA promote compliance through consultation and trade-enhancing remedies, rather
than relying solely on trade sanctions. The FTA dispute settlement procedures also provide for "equivalent" remedies for
commercial and labor/environmental disputes. The FTA achieves this through an innovative new enforcement mechanism that
involves the use of monetary assessments to enforce commercial, labor, and environmental obligations of the Trade
Agreement. Suspension of preferential tariff benefits under the Agreement is also available for all disputes, but the
mechanism is designed in all cases to seek remedies that will enhance compliance with the obligations of the Agreement,
rather than restricting trade and harming "innocent bystanders."