Australia-Chile Free Trade Agreement

Summary of key obligations

Australia-Chile FTA homepage

Chapter 3: Market Access for Goods

The ACl-FTA specifies that, on entry into force, Chile will eliminate tariffs on 91.9 per cent of tariff lines covering 96.9 per cent of trade and Australia will eliminate tariffs on 90.8 per cent of lines covering 97.1 per cent of trade. All remaining tariffs on both sides will be eliminated by year six of the agreement (2015) except for one component of Chile’s sugar tariff which will remain subject to its current ‘price band’ system.

The chapter also includes commitments on national treatment (ie to treat goods of the other Party no less favourably than a Party’s own like goods), a general prohibition on import and export restrictions (with some exceptions), and agreement not to apply export taxes or agricultural export subsidies.

The agreement establishes a Committee on Trade in Goods. The Committee will meet at the request of either Party or the Joint Free Trade Agreement (FTA) Committee (see Chapter 20). The Committee’s functions include promoting trade in goods and addressing barriers to trade, especially in relation to non-tariff measures.

Chapter 4: Rules of Origin

The rules of origin (ROO) chapter and associated Schedule of Product Specific Rules (PSRs) establish the criteria for determining whether goods will qualify for preferential tariff treatment under the FTA (whether a good “originates” in Australia or Chile). The chapter also sets out the procedures for demonstrating that a good qualifies for preferential treatment and, if necessary, verifying that this is the case.

The ACl-FTA establishes a ROO based on the ‘change in tariff classification’ model preferred by Australian industry. Under ACl-FTA, exporters with the capacity to self assess will be able to issue their own certificates of origin while others can seek certificates of origin from relevant industry bodies.

Chapter 5: Customs Administration

The Customs Administration chapter establishes a modern, harmonised and simplified system of customs procedures for trade in goods. It aims to ensure that customs procedures and practices are consistent with international standards and will be administered in a uniform, impartial and reasonable manner. In addition, the customs procedures are intended to facilitate the clearance of low-risk goods and allow the customs administrations to focus on high-risk goods.

The chapter provides for ‘advance rulings’, which enable exporters to verify with the customs administration the tariff classification of their goods and whether those goods will qualify for preferential tariff treatment before the goods are exported.

The chapter includes provisions to ensure transparency and for protecting the confidentiality of information received in accordance with the chapter. Any importer unsatisfied with any determination on customs matters will have access to administrative and judicial review of the determination. Australia and Chile have also undertaken to work towards the use of paperless trading.

Chapter 6: Sanitary and Phytosanitary Measures (SPS)

The chapter acknowledges the dual objectives of facilitating bilateral trade between the Parties and protecting human, animal or plant life or health in their territory. The Parties reaffirm their commitment to the rights and obligations of the World Trade Organization (WTO) SPS Agreement and commit to cooperation both in international bodies on SPS related work and on priority proposals which can contribute to the objectives of the chapter. The chapter acknowledges the value of exchanging information on the SPS measures in place in either Party and enshrines transparency in the implementation of those measures. The text articulates the arrangements for consultation between the Parties on any SPS matter which may arise between them including the establishment of an SPS Contact Point in each administration. The provisions of the Chapter are not subject to dispute settlement under the ACl-FTA.

Chapter 7: Technical Regulations, Standards and Conformity Assessment Procedures

This chapter applies to all standards, technical regulations and conformity assessment procedures of the central government which affect trade in goods between them and includes a commitment to take reasonable steps to ensure that other bodies with shared responsibilities (regional or local government or non-government) also comply with its provisions. The Parties reaffirm their commitment to the WTO Technical Barriers to Trade (TBT) Agreement. The chapter emphasises the use of international standards to underpin technical regulations and recognises that a range of mechanisms exist to facilitate the acceptance by a Party of the conformity assessment procedures of the other Party. The Chapter establishes a TBT Committee to facilitate its implementation which will meet by mutual agreement between the Parties.

Chapter 8: Trade Remedies

This chapter protects the Parties’ rights and obligations under the WTO relating to the application of safeguards and anti-dumping and countervailing duties in the appropriate circumstances.

Chapter 9: Cross-Border Trade in Services (CBTS)

The substantive obligations of this chapter include obligations on market access, national treatment, most-favoured-nation treatment and local presence.

The market access obligation prohibits certain limitations on market access (eg limitations on the number of service suppliers or the total value of services transactions or assets). The national treatment obligation requires each Party to accord, to services and service suppliers of the other Party, treatment no less favourable than it accords to its own like services and service suppliers. Most-favoured nation requires each Party to provide no less favourable treatment than it applies to the services and service suppliers of any third country. The local presence obligation prohibits a Party from requiring that services suppliers of the other establish or maintain any form of enterprise or to be resident as a condition for the cross-border supply of a service.

Each Party has a list of non-conforming measures to the CBTS and Investment chapters (as well as the Financial Services chapter). Annex I to the FTA represents a standstill commitment, as a Party (at central and regional government level) will be able to maintain measures listed there that do not comply with these obligations, but it will not be able to increase the trade restrictiveness of those measures. In addition, if a Party unilaterally liberalises those measures, such liberalisation will be locked into the FTA automatically (a so-called “ratchet mechanism”). Annex II is a broader carve-out, as a Party would be able to both retain existing measures and introduce new, more trade restrictive measures for the sectors, subsectors and activities described there.

The CBTS chapter, like the WTO General Agreement on Trade in Services (GATS), respects the right of governments to adopt domestic regulation affecting trade in services, but requires these to be administered in a reasonable, objective and impartial manner. The chapter requires Parties to ensure that qualification and licensing requirements do not constitute unnecessary barriers to trade and strengthens the disciplines on the authorisation processes, and includes some innovative language to promote temporary licensing regimes and access to examinations.

There is an Annex on Professional Services designed to support any initiatives by professional bodies seeking to facilitate recognition of qualifications or registration/licensing of professionals in the other Party.

Chapter 10: Investment

The Investment chapter covers both the pre-establishment and post-establishment stages of investment.

The key obligations of the chapter are national treatment, most-favoured-nation treatment, performance requirements and obligations in respect of senior management and boards of directors.

The performance requirements obligation means that certain requirements cannot be imposed by the FTA Parties on investors setting up in either Australia or Chile. These include a requirement to make a given level of exports, achieve a given level of domestic content or to purchase locally produced goods. In addition, grants and subsidies to investors cannot be made conditional on an investment achieving a given level of domestic content or purchasing locally produced goods. However, there are exceptions for subsidies or grants which are conditioned on locating production in Australia or Chile, supplying services, constructing facilities, training or employment or research and development. There are also exceptions for measures necessary to protect human or plant life or health and for government procurement.

Senior management and boards of directors’ obligations provide that a Party cannot require that an enterprise that is a covered investment appoint individuals of any particular nationality to a senior management position. However, a Party may require that a majority, or less, of the board of directors be of a particular nationality or be resident in its territory, provided this requirement does not materially impair the ability of that investor to exercise control over its investment.

Parallel to the chapter on CBTS, specific non-conforming measures may be taken out to the application of these key obligations through listing of measures in Annex I of the FTA or of sectors, sub-sectors or activities in Annex II. Annex I non-conforming measures are subject to ratchet provisions. As with the CBTS chapter, States and Territories are fully covered.

The chapter also provides that a Party must permit all funds of an investor of the other Party related to an investment in its territory to be transferred freely and without undue delay. It prohibits the expropriation of an investment unless it is taken on a non-discriminatory basis, for a public purpose, in accordance with due process of law, and accompanied by prompt, adequate and effective compensation equivalent to the fair market value.

There are detailed provisions on investor-state dispute settlement which provide that where an investor alleges that a Party has breached one of its obligations under the chapter in such a way as to cause loss or damage, and it has not been possible to resolve the dispute by consultations, the dispute may be referred for dispute settlement. Investor–state dispute settlement will not apply to investment screening or admission processes.

Chapter 11: Telecommunications Services

The chapter on Telecommunications builds on the Parties’ obligations under the GATS Annex on Telecommunications and the WTO Reference Paper on Basic Telecommunications. It ensures that all service suppliers of the other Party have access to and use of any public telecommunications network or service offered in its territory or across its borders in a timely fashion, on reasonable and non-discriminatory terms and conditions.

Specifically, the chapter provides more detailed commitments on interconnection and has additional commitments in the areas of access to essential facilities and co-location, as well as resale, dialling parity, number portability, submarine cable systems and leased circuit services. The chapter contains obligations on the independence of telecommunications regulators and that decisions and the basis for such decisions, of telecommunications regulators are clear and non-discriminatory. The chapter includes procedures to resolve telecommunications disputes and is also subject to the dispute settlement procedures of the FTA.

Chapter 12: Financial services

Financial services are covered by a separate, stand alone, chapter which contains obligations on market access, national treatment, most-favoured-nation treatment, cross-border trade in financial services and senior management and boards of directors.

As per the Annexes to the CBTS and Investment chapters, specific non-conforming measures can be identified against these key obligations through listing of measures in Annex III. Section 1 of Annex III contains a standstill commitment and a ratchet mechanism. Section 2 of Annex III contains a broader carve-out.

There is also a provision on new financial services which provides that if a financial service is supplied in the territory of one Party but not the other, and the second Party would permit its own financial institutions to supply that service without additional legislative action, then it must allow financial institutions of the first Party to provide that service in its territory.

The Financial Services chapter also contains additional provisions that reflect the importance of regulation of this sector to ensure the integrity and stability of the financial system. These provisions draw on specific WTO provisions relating to financial services and recognise the right of the Parties to take measures necessary for prudential reasons while seeking to ensure that these and other regulatory actions do not become unnecessary or discriminatory barriers to trade

Chapter 13: Temporary Entry of Business Persons

The chapter sets out commitments for facilitating temporary entry for business people engaged in bilateral trade and investment. Four classes of business people are covered by the chapter: business visitors; contractual service suppliers; executives of a business headquartered in one Party establishing a branch or a subsidiary in the other Party; and intra-corporate transferees. The chapter also covers the spouses of all the categories above except for short term business visitors.

Chile’s specific commitments provide that the four categories of persons will be deemed to be engaged in activities which are in Chile’s interest and therefore issued a temporary visa with unlimited opportunities for renewal and with the right to obtain an identity card. Spouses of persons granted the right to enter for periods of longer than 12 months will automatically be granted work rights.

Australia has committed to providing short and long term temporary entry for periods consistent with the current Subclass 456 and Subclass 457 visas. Australia has also granted the spouses of long term temporary entry automatic work rights.

The Parties commit themselves to process expeditiously complete applications for immigration formalities and to provide information on temporary entry requirements to enable business persons to become acquainted with them. The Parties also agree to consult on suggestions to further facilitate temporary entry. Dispute settlement is available where there has been a refusal to grant temporary entry but only when: (a) the matter involves a pattern of practice; (b) the natural persons affected have exhausted the available domestic remedies regarding the particular matter; and (c) the Parties have undertaken consultations to resolve the issues.

Chapter 14: Competition Policy

This chapter affirms the Parties’ commitment to proscribing anti-competitive activities, with a view to preventing distortions or restrictions of competition which may affect trade in goods or services between them. The Chapter provides for each Party to maintain a robust legal framework to prohibit anti-competitive activities; imposes disciplines on state enterprises, designated monopolies and enterprises with special and exclusive rights; and allows for exchange of information and cooperation on enforcement activity. The Chapter is not subject to the Dispute Settlement provisions of the ACl-FTA.

Chapter 15: Government Procurement

The provisions of the Government Procurement Chapter ensure that the suppliers, goods and services of each Party have non-discriminatory access to the government procurement market of the other. The Chapter covers procurement above agreed value thresholds by listed central and sub-central government entities.

Chapter 16: Electronic Commerce

The key provision of the Electronic Commerce chapter is to maintain zero customs duties on electronic transmissions between Chile and Australia. The chapter also makes commitments to maintain domestic legal frameworks governing electronic commerce that minimise the regulatory burden on electronic commerce; support industry-led development of electronic commerce; and provide protection for consumers using electronic commerce that is at least equivalent to that provided for consumers of other forms of commerce. The chapter includes articles that promote the use of and trust in cross-border e-commerce, including through electronic authentication and personal data protection and an article on paperless trading committing each Party to endeavour to accept electronic versions of trade administration documents as the legal equivalent of paper documents.

Chapter 17: Intellectual Property (IP)

The IP chapter reinforces the Parties’ existing rights and obligations under the WTO Agreement on Trade Related Aspects of Intellectual Property Rights, and builds on them in a number of areas to reflect the high standards of intellectual property protection already provided in both Australia and Chile.

Chile has agreed to ratify or take reasonable steps to ratify a number of international IP agreements to which Australia is already a signatory, such as the International Convention for the Protection of New Plant Varieties (1991) and the Patent Cooperation Treaty.

Chile and Australia have also agreed to accord national treatment in respect of all intellectual property rights covered by the Chapter, so that Australian IP rights holders will be accorded the same treatment as Chilean nationals under Chilean IP laws. The same also applies to Chilean rights holders in Australia.

The Chapter contains a number of specific obligations on protection of trade marks, patents, copyright and geographical indications as well as detailed enforcement provisions.

Chapter 18: Cooperation

The chapter establishes a framework for cooperation aimed at building on existing relationships, creating new opportunities for trade and investment, promoting competitiveness, innovation and research and development and supporting the role of the private sector to encourage economic growth and development. The provisions do not commit either party to contributing significant resources.

The chapter includes an indicative list of areas where cooperation might be of mutual benefit to the Parties. The list includes science, agriculture including wine, food production and processing, mining, energy, environment, small and medium enterprises, tourism, education, labour, human capital development and cultural collaboration. Cooperation in other areas is not excluded. The chapter includes mention of labour, environment and innovation in the context of international agreements, mutual interests and strengthening of the trade relationship.

Nothing in the chapter represents a commitment to any particular initiative. Areas of cooperation will be developed through existing agreements, through implementing arrangements and will be facilitated through the designation of national contact points.

The chapter establishes a Cooperation Committee which will meet in the first year of implementation of the FTA and thereafter as required by the parties. The Committee will consider and review activities, maintain information on cooperation between the Parties and report periodically to the Joint FTA Committee (see Chapter 20).

Chapter 19: Transparency

The transparency chapter includes obligations on the Parties to ensure that all laws, regulations, procedures and administrative rulings regarding matters covered by the ACl-FTA are made publicly available and to maintain the appropriate legal systems to ensure the prompt review of any measure concerning the ACl-FTA.

Chapter 20: Institutional Arrangements

The chapter establishes a Joint FTA Committee, to be co-chaired at officials’ level, to review the operation of the ACl-FTA and to supervise the work of the subsidiary committees, working groups and contact points established under the ACl-FTA. The Joint Committee will meet in or shortly after the first year of entry into force of the FTA. The chapter reflects the need for flexible institutional arrangements to manage the FTA proportionate to the overall trade relationship between the Parties.

Chapter 21: Dispute Settlement

This chapter establishes procedures for the avoidance or settlement of disputes between the Parties in relation to the implementation, interpretation, application or operation of the FTA, unless otherwise provided. If a dispute arises under the ACl-FTA and another agreement to which the Parties are party, or the WTO, the complaining party has a choice of forum. The chapter provides procedures including timelines for consultations on measures and proposed measures, for referral of matters to the Joint FTA Committee and for the establishment, terms of reference and composition of arbitral panels and, inter alia, for their proceedings and reports. The rules established can be modified by mutual consent and the Parties can agree not to apply any provision.

As provided for in this chapter, Australia and Chile have agreed Rules of Procedure which provide for the details of the rules and procedures of arbitral panels established under Chapter 21.