The US-Chile Free Trade Agreement entered into force on 1 January 2004, and is the first comprehensive FTA signed between the USA and a South American government.

The US-Chile FTA is a groundbreaking agreement, imposing commitments which go well beyond WTO and NAFTA provisions. It aimed to add momentum to the flagging FTAA negotiations, and help US exporters gain greater access to other markets in the region.
Intellectual property provisions go even further than the WTO’s TRIPS (trade-related aspects of intellectual property rights) agreement, severely limiting the grounds for allowing the use of compulsory licensing of medicines, and effectively extending the 20-year term of drug company patent monopolies by an additional five years, threatening access to affordable medicines, not least HIV/AIDS drugs. The FTA also sets a precedent by applying the principle of “first-in-time, first-in-right“ to trademarks and geographical indications (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 indication. This precedent will be used in forums like the WTO to oppose the EU approach, which gives priority to geographical indications (e.g., parmesan, feta, roquefort, pilsner, burgundy) over existing trademarks. (TRIPS defines geographical indications as place names used to identify the origin, quality, reputation, or other characteristic of a product.)

The US-Chile FTA imposes alarming new limits on the use of capital controls. In a joint NGO declaration, the Chilean Alliance for Just and Responsible Trade (ACJR) and the Alliance for Responsible Trade (ART) state:

“Chile’s encaje, under which foreign investors deposited a portion of their investments in the Central Bank, was a key factor in protecting the Chilean economy from the fallout of the 1995 ‘peso’ crisis in Mexico. Nevertheless, at the insistence of the Bush Administration, this mechanism has been eliminated. The new bilateral agreement would prevent the Chilean government from implementing such controls except once an emergency has already begun. Even under those limited circumstances, foreign investors would have the right to sue for compensation a year after the measure’s implementation, adding additional pressure on policymakers to delay any controls on capital flight until it is much too late.“

The US successfully pressed Chile to phase out its agricultural price band system, something which Chile had been able to maintain in bilateral deals with the EU and Canada. This is designed to stabilize import costs of agricultural staples through adjustment to tariffs on such products. So, based on the international price of commodities — wheat, wheat flour, vegetable oil, and sugar — tariffs are either increased to defend a floor price or reduced to defend the ceiling price.

Argentina, backed by the US, had taken a complaint to the WTO about this system and a WTO ruling had demanded that Chile modify the system to make it consistent with its WTO obligations. The US has been gunning for Chile’s price band system for some time, claiming it to be protectionist. But it has no problem allocating huge subsidies to (mainly corporate) domestic agriculture. The phaseout pits small Chilean farmers who generate over 60% of the country’s agricultural output against a heavily subsidized US agribusiness sector.

As Chilean farmer Nicolas Garcia told the Washington Times (17/06/03), “It’s a case of the biggest and strongest eating the smallest. We just cannot compete with U.S. agricultural subsidies.“

The US-Chile FTA also locks in more radical commitments on TBT (technical barriers to trade, which covers food labelling standards) and government procurement. It contains broad “NAFTA-plus“ definitions of investment which throw the door wide open for disgruntled investors to take a case to a dispute tribunal.

In May 2011, the Chilean Senate ratified the 1991 UPOV Convention on plant variety protection as required by its FTA with the United States. This move was strongly rejected by broad sectors of Chilean society, and the student mobilisations for the defense of public education picked it up as part of their concerns.

last update: May 2012

Photo: Luigi Bosca / CC BY-SA 3.0