Latin America: Us And Chile Sign Bilateral Trade Agreement, South American FTA In The Works

12 December 2002

Chile and the US agreed on a comprehensive bilateral free trade agreement on Wednesday 11 December, following over ten years of negotiations. The agreement, which still has to be approved by the legislatures of the two countries, will immediately eliminate tariffs on 85 percent of goods and 75 percent of agricultural products traded between the countries. The remainder of the tariffs will be phased out in four to twelve years, with most protection granted to sensitive agricultural products. The agreement also sets some labour and environmental standards.

The pact with Chile will be the sixth bilateral free trade agreement the US signs, and the country has signalled its intention to negotiate more such deals. Having been granted 'fast track' authority by the US Congress, US President Bush is able to negotiate trade deals that can be approved or rejected, but not amended by the legislature. Some critics view the bilateral agreements as undermining the WTO, but according to US trade representative Robert Zoellick, countries will be encouraged to participate in multilateral trade agreements if their competitors adopt bilateral agreements with US, since they will want to ensure market access. Indeed, the Bush administration sees the agreement with Chile as an important step in the process towards creating a Free Trade Area of the Americas (FTAA) in 2005.

Mercosur leaders set timetable for South American FTA

Meanwhile, Mercosur leaders -- including six presidents - have announced a timetable for a free-trade agreement (FTA) covering most of South America. The deal was reached at the 23rd Mercosur economic summit, held from 5-6 December in Brasilia, Brazil. The agreement aims at integrating the Mercosur countries Brazil, Argentina, Uruguay, Paraguay, and associated countries Chile and Bolivia with the Andean Community nations Venezuela, Bolivia, Colombia, Ecuador and Peru, as well as other countries that have been invited to join. Observers noted that closer cooperation among the South American nations would give them a significantly stronger position in negotiations with the US on the FTAA, but some doubt that a final South American agreement will be in place by the end of 2003 as scheduled.

"U.S. and Chile Reach Free Trade Accord," NEW YORK TIMES, 11 December 2002; "Chile, US reach agreement on free trade pact," REUTERS, 11 December 2002."S. America Moves to Eliminate Trade Block," AP, 6 December 2002.


The European Councils of Agriculture and Environment Ministers, meeting on 28 November and 9 December respectively, reached political agreement on the European Commission's proposed labelling and traceability regulations for genetically modified organisms (GMOs), despite objections by Luxembourg, the UK, Austria and the Netherlands. Specifically, Ministers agreed on a 0.5 percent threshold for the adventitious presence of GMOs that are unauthorised but have nevertheless been assessed as risk-free. The European Commission had proposed a threshold of one percent, which was amended to 0.5 percent by the European Parliament during the regulations' first reading (see BRIDGES Trade BioRes, 11 July 2002, 11/story2.htm). In addition, Ministers agreed on a minimum threshold of 0.9 percent below which GMOs would be exempted from labelling requirements. Once the text has been finalised, a Common Position will be adopted at the forthcoming Council sessions, which will then be forwarded to the European Parliament for the second reading.

In related developments, a decision on whether to initiate a WTO challenge to the continued EU de facto moratorium on the approval of new GMOs -- in place since 1998 -- will reportedly be taken at the next US cabinet-level meeting. While some US officials believe that the Bush administration has a strong legal basis for a WTO challenge, others fear a possible consumer backlash in Europe and have expressed doubt that a ruling against the moratorium would result in a change in EU policy.

ICTSD reporting.


Meeting in Copenhagen on 9 December, EU environment ministers agreed on an EU-wide greenhouse gas emissions trading system. The system, which allows countries to comply with their commitments under the Kyoto Protocol in a cost efficient way, will be the first one operating across national borders. The scheme will be operationalised in 2005 and could eventually link in with a possible global emissions trading scheme. Traders have already begun to broker deals, running at up to five EUR per tonne of CO2. The system allocates emissions allowances to industrial plants operating in energy, steel, cement, glass, brick making, paper and cardboard. Industry sectors will be able to buy and sell credits as a block if they wish. From 2008, governments can auction off up to 10 percent of the emissions allowances, and add in new sectors under the scheme. As a concession to industry, ministers agreed to lower fines for non-compliance during the first few years of the scheme, and some companies and sectors can opt out until 2008.

In related news, on 10 December New Zealand ratified the Kyoto Protocol, while Canada's House of Commons voted in favour of ratification, thus expressing support for the government's intention to ratify by the end of the year.

"EU agrees greenhouse gas trading scheme," REUTERS, 10 December 2002; "Clark signs Kyoto Protocol," NEW ZEALAND HERALD, 10 December 2002; "Canadian Parliament Backs Kyoto Ratification Plan," REUTERS, 11 December 2002


Negotiators meeting in Rome from 25-29 November agreed to replenish the Multilateral Fund under the Montreal Protocol on Substances that Deplete the Ozone Layer by USD 573 million for 2003-2005. The funds will be used to assist developing countries in fulfilling their commitments under the Protocol, including cutting their use of CFCs and halons by 50 percent by 2005. The combined 14th Meeting of the Parties (MOP-14) to the Montreal Protocol and the sixth Conference of the Parties (COP-6) to the Vienna Convention for the Protection of the Ozone Layer also considered issues ranging from compliance and illegal trade to the transition from chlorofluorocarbons for metered-dose inhalers and interaction with the WTO.

Regarding interaction with the WTO, Colombia introduced a draft decision that sparked debate on competencies with regard to the interpretation of the Montreal Protocol's trade provisions. Delegates ended up agreeing to a US proposal that mandates the Ozone Secretariat to provide general advice to the WTO on request, while a deeper interpretation of trade-related provisions is deferred to the MOP. The final decision adopted on the issue also requests the Ozone Secretariat to report on contacts with and meetings attended at the WTO, and to inform Parties on developments at the WTO Committee on Trade and Environment. The Ozone Secretariat noted that it has yet to be approved as an observer at the WTO (see BRIDGES Weekly, 14 November 2002,

For further information on the meeting see IISD's Earth Negotiations Bulletin:

UNEP PRESS RELEASE, 29 November 2002.


Dolphins in the Pacific are not recovering as quickly as could be expected given significant reductions in reported mortality associated with yellowfish tuna fishing, according to a report prepared by the Southwest Fisheries Science Center, NOAA Fisheries and the National Oceanic and Atmospheric Administration. Three hypotheses are identified to explain this finding, i.e. environmental changes, a lag period before recovery begins, and effects of purse-seine fishery (used for catching tuna) beyond the reported bycatch. The report, dated 23 August 2002 but not officially released to the public, comes just weeks before the US Department of Commerce has to decide on whether to weaken rules for labelling "dolphin safe" tuna. In 1991, Mexico challenged US regulations related to tuna fishing as incompatible with the national treatment requirement in GATT. While the dolphin-safe label was found to be compatible with the GATT, the Mexican government has continued to lobby for changes to the labelling requirements that would give its industry better access to the US market.

The report is available at

"Tuna still deadly to dolphins, U.S. agency find," ENS, 6 December 2002.


The Geneva-based Agency for International Trade Information and Cooperation (AITIC) on 9 December was granted the official status of an intergovernmental organisation at a signing ceremony was held at the WTO. AITIC's goal is to "help less-advantaged countries to benefit from the globalisation process in general and the multilateral trading system in particular by assisting them in taking a more active part in the work of the WTO and other trade-related organisations in Geneva." AITIC supports least developed countries (LDCs) and countries with economies in transition on an individual basis, free of cost. Seven developed countries are together providing initial funding of 18 million Swiss francs that will allow AITIC to meet sharply increased demands for its services. It has obtained guaranteed financing for five years. For further information, visit the AITIC website at:

"New Body to Support Poorer Countries Efforts to Negotiate Free Trade," AFP, 10 December 2002.


This article is published under
12 December 2002
FIRST JOINT WTO/OECD REPORT ON TRADE-RELATED TECHNICAL ASSISTANCE AND CAPACITY BUILDING. Published by the WTO and the Organization for Economic Co-operation and Development, November/December 2002...
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