Multilateral Economic Issues

Chile and the WTO

Within the World Trade Organisation and specifically in the Doha Development Agenda there has traditionally been a great degree of similarity between the positions of Chile and Australia. This correspondence is not only in regards to the liberalisation of world agricultural trade, where we share the objectives set down in the Cairns Group (see below), but is also visible in many other areas. It is also important to note that within the framework of the WTO Chile and Australia established the Commission for Trade and Investment (1998)

The Doha Development Agenda establishes the launch of negotiations in numerous areas with relevance to world trade. These areas include; agriculture, market access for non agricultural products, trade facilitation, rules and development. The area of greatest complexity and controversy is that of agriculture. Both Chile and Australia have a considerable interest in reducing the inequality that exists in the world market. Currently taxes and subsidies, generally enforced by developed nations, cause disparity in the market and increase the commercial opportunities of those nations. The results of the negotiations in other areas established in the Doha Mandate depend greatly on the outcomes from the negotiations on agriculture. Since the Doha Round Meeting in Qatar there have been two more meetings with the last one of those being held in Hong Kong. At this meeting the Chilean Minister for Foreign Affairs Mr Alejandro Foxley was named as one of the six “facilitators” of the round, along with representatives from Pakistan, Norway, Kenya, Guyana and Korea.

Why are the multilateral world trade negotiations important for Chile?

For a small country like Chile, whose development strategy is based, in an important part, on world trade, the multilateral system of trade established by the WTO is important for many reasons:

Firstly, it establishes a system with a set of clear rules which are obligatory for all members of the WTO. This grants a stable and predictable environment for trade which limits the discretion that can be exercised by nations in regards to their trade policies.
Secondly, because the WTO is based on a consensus all the members have the power of negotiation and a space where their opinions are taken into account. This would not be the case if the WTO didn’t exist; the smaller countries opinions would not have the same weight.
Thirdly, the WTO has a Dispute Settlement Mechanism which acts like a trade tribunal. One or more WTO members may claim against the actions of other member countries if they consider them to be discriminatory, against the agreements or rules of the WTO and they affect the claimant country’s trade. This mechanism grants protection, more than anything, to the smaller countries against the unilateral actions that other members of the WTO might adopt.

Key agreements accepted by Chile in the Round

Reduce and consolidate tariffs from 35% to 25%. A certain number of agricultural products are to have their tariffs reduced to 31.5%, these include products covered by price bands, such as wheat and wheat flour. The tariff on sugar is to be reduced to 98%. The general tariff on goods applied by Chile is 6% (except with those countries with which Chile has a free trade agreement), this was consolidated in the WTO which means that Chile cannot increase their tariffs above that level without consulting the rest of the members of the WTO.
Implementation of the rules and agreements on goods, services and intellectual property.
As part of the above Chile has, for example, implemented the agreement on “freezing” the levels of access to the Chilean market for services. In other words Chile will not raise barriers to market entry in the future and has also eliminated some of the requirements and processes for foreign investment. However in the Doha Round they are negotiating greater consolidations and accesses in this area
Finally, Chile like all the other members of the WTO is summoned periodically to an examination of their Trade Policies. This is performed by the Trade Policy Review Mechanism (TPRM) and consists of the Secretary of the WTO writing a report on the trade policies of the country under review. The Trade Policy Report on Chile is available from the WTO webpage.

Cairns Group

Chile and Australia place a high priority on the Cairns Group (A group of agriculture exporting countries) and its role as a protagonist in the negotiations on agriculture in the Doha Round of WTO negotiations. Chile endorsed the proposals presented to the WTO Committee on Agriculture by the Group in regards to their three pillars of negotiation. These are market access, domestic support, and export competition. In these they propose the elimination of subsidies and the opening of markets with better access, lower tariffs and greater quotas.

The Cairns Group has come to meet periodically in Geneva and at a ministerial level meetings were held last year in Cartagena of Indies and in Hong Kong. At the meeting in Hong Kong, the Minister of Agriculture, Mr Jaime Campos, participated on behalf of Chile, while the Australian Minister for Trade, Mr Mark Vaile, who attended on behalf of Australia, was the nominated Chair of the meeting.

The next ministerial meeting is to be held in the city of Cairns (the city from where the name of the group was derived) from the 20th to the 22nd of September 2006. Chile will be represented by the Minister for Agriculture, Dr. Alvaro Rojas Marín.

The Cairns Group is currently involved in the negotiations on Agriculture which form part of the Doha Round of the WTO which are being discussed in Geneva.

Last updated: September 11, 2006