WORLD TRADE
ORGANIZATIONS/CSS/W/88
14 May 2001
(01-2474)
Council for Trade in Services
Special SessionOriginal:  Spanish
COMMUNICATION FROM CHILE
The Negotiations on Trade in Services
The attached communication has been received from the delegation of Chile with the request
that it be circulated to members of the Council for Trade in Services.
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I. INTRODUCTION
1. As was pointed out in the document submitted jointly with Australia and New Zealand
(WT/GC/W/204, 14 June 1999), Chile considers that "the services negotiations should improve
market access significantly for developed and developing countries.  To do so, the negotiations shouldachieve higher levels of liberalization in all serv ices sectors, including air and maritime transport,
simplification of schedules and greater transparency in commitments;  limitation of the scope and
number of MFN exemptions;  and the development of binding rules on domestic regulation".  Given
the length of time that has elapsed, Chile considers it necessary to reaffirm the validity of the main
ideas set out in that document.
2. Like other delegations, Chile considers that the launch of a new round, balanced and broad in
scope, could greatly contribute to the achievement of the goals described above.
3. With regard to the negotiations mandated under the GATS, Chile wishes to emphasize the
importance, in these negotiations, of eliminating the lack of symmetry in the commitments undertaken
by Members in respect of the different modes of supply recognized by the GATS.  We also note with
concern the point made by the delegation of India in its document S/CSS/W/12 of 24 November 2000,
to the effect that "commitments in mode 4 are primarily horizontal and these horizontal commitmentsare subject to many kinds of limitations.  Further, they are bound for only a small subset of service
personnel related to commercial presence and at higher levels and very few commitments extend to
independent movement".
II. MAIN SECTORS OF INTEREST TO CHILE
1
A. PROFESSIONAL SERVICES
4. Professional services have taken on greater importance in the area of trade in services in
recent years.  This has occurred not only because of their inherent importance as a subsector, but also
because they are a means of developing investment and other service subsectors.  In the specific case
                                                     
1 Chile reserves the right to put forward new proposals on these sectors and to add new sectors of
interest.S/CSS/W/88
Page 2
of the developing countries, professional services provide an effective way of conducting cross-border
trade in services, without necessarily being linked to commercial presence.
5. Despite its importance, this is one of the most heavily regulated sectors.  Some of these
regulations are based on the aim of guaranteeing quality of service, in order to protect consumers.
Others, however, merely reflect protectionist practices.  Examples of the latter are:  nationalityrequirements for the provision of certain professional services;  the obligation of a specified period of
residence in the country where it is wished to provide the service;  mandatory compliance with
excessive, vexatious formalities, lacking in transparency, for professional licensing purposes, etc.  In
this connection, as is stated in document WT/GC/W/204 referred to above, one area of interest could
be "a standardized minimum commitment to not apply trade-restrictive nationality or permanent
residency requirements as a condition for meeting qualification and licensing requirements for service
providers, except in exceptional cases".
6. At the same time, Chile is disheartened by the virtual failure to implement Article VII of the
GATS on "recognition".  For the sake of transparency, it is important to have agreements between
professional groups in Member countries, which could benefit other Members in accordance with the
provisions of Article VII, paragraph 2, of the GATS.  However, many of those agreements are
concluded between private associations, so that it becomes very difficult in practice to afford"adequate opportunity for other interested Members to negotiate their accession to such an agreement
or arrangement or to negotiate comparable ones with it".
7. In this connection, it would be useful to request a Secretariat report on cases where
Article VII:2 of the GATS has been applied, as well as the precise procedure required to request
"accession" to a recognition agreement between several Members.
8. Finally, Chile considers the work accomplished by the Working Party on Domestic
Regulation to be extremely important, and we think it essential to continue working towards the
achievement of strong and transparent disciplines.
B. 
CONSTRUCTION AND ENGINEERING
9. Chile is confident that the multilateral negotiations will result in new opportunities for
Chilean construction companies and associated professional services, particularly engineering
services.  It is also hoped that the negotiations w ill help to forge links between Chilean and foreign
companies in order to take advantage of business opportunities, not only in domestic markets but also
in third countries.
10. For more than 20 years, engineering and construction services in Chile have been exposed to
the rigours of an open market, with no barriers or subsidies.  In this context, Chile has developed
comparative advantages in various construction and engineering services, including in particular:engineering for mining projects;  seismic engineering;  structural engineering,  housing construction
engineering;  engineering for pulp and paper projects;  engineering for electricity generation and
transmission;  harbour project engineering.
11. Chile hopes that the negotiations will lead to the elimination, both for professionals and
engineering and construction companies, of the residence or nationality requirement for serviceprovision in the different countries;  to the prompt recognition of the possibility of temporary
professional employment in the engineering and construction fields;  to Chilean-style elimination of
the special registration requirements governing the possibility for firms to operate in individual
countries;  and to the prompt recognition of the qualifications of engineering and construction
professionals (for example through accreditation by a college of engineering or other similar body)and firms (through the Chilean Building Industry Association).S/CSS/W/88
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12. In addition, Chile will seek the elimination of quotas or numerical restrictions on professional
entitled to provide services in the different countries, and on the number of professionals from the
country of origin which a firm can employ in its subsidiary in another country, as well as elimination
of the requirement of a local partner as a general condition for the provision of engineering and/orconstruction services (this condition could be maintained on a case-by-case basis where it is justified
by the strategic importance of specific projects).
C. 
TRANSPORT SERVICES
13. Chile hopes that this negotiating round will achieve substantial progress in the liberalization
of air and maritime transport services, which have remained subject to weaker disciplines with little or
no liberalization.
(i) Maritime transport services
14. Maritime transport is of key importance for a country like Chile, which is predominantly
urban and has an extensive coastline.  More than 90 per cent of our foreign trade is carried by sea,
making it vitally important to develop maritime transport service provision and our port and port
services infrastructure in general.
15. We consider that these negotiations on services must be based on the three pillars established
during the Uruguay Round and subsequent negotiations, namely:  international maritime transport
services, auxiliary maritime services, and access to and use of port infrastructure and services.  Due
consideration should also be given to multimodal transport and its relationship with the entire chain of
supply, in order to provide efficient solutions for consumers and/or users.
16. In this connection, the liberalization of transport services is a major objective for WTO
Members during the ongoing negotiations on trade in services.
17. Chile considers that the negotiations should be informed by the intention to promote an
international maritime transport system based essentially on market competition between shipping
companies, with a minimum of interference and regulation.  The aim should be to help expand
opportunities in international maritime transport, since the provision of efficient and competitiveinternational maritime transport services increases trade, benefits consumers and promotes economic
growth.
18. Overall, we believe that WTO Members must seek a substantial reduction in trade barriers,
without this affecting quality of service and the ri ght to establish regulations for non-trade purposes,
such as safety and social cohesion.  In the particular case of safety, it is necessary to guarantee
optimum safety in international maritime transport, by ensuring that the vessels involved in providing
those service meet the highest standards.  Moreov er, we are concerned about acts or threats against
the safety of vessels, which jeopardize the safety of persons or property, thereby adversely affecting
maritime transport operations and undermining public confidence in the safety of maritime transport
services.
19. These services are already governed by fairly liberal regulations, although international
maritime transport is still clearly hampered by limits on foreign equity shares, the requirement toappoint a local representative (restrictions on the establishment of branch of offices), limitations on
government cargoes (preferential cargo allocation, discriminatory measures favouring the use of
national carriers), restrictions on consecutive cabotage, discriminatory taxation and port charges,
restricted/regulated access to ports and port services, vexatious procedures during port calls, andS/CSS/W/88
Page 4
procedures that are unnecessary or inconsistent with current market trends, implemented by customs
or other related services.
(ii) Air transport services
20. The results of the Uruguay Round provided for continued negotiations on services five years
into the transition period.  In this connection, it was also considered that the GATS Annex on AirTransport should be reviewed every five years, with a view to considering the possible further
application of the Agreement in this sector.  This is therefore a subject of major significance to the
future negotiations.
21. The review of the Air Transport Annex initiated by the Council for Trade in Services
constitutes the prelude to a process designed to achieve a definition of the treatment to be accorded to
this sector in the multilateral context.
22. With this aim in view, Chile is in favour of deepening the review process.  To that end it is
necessary to devise a blueprint directed to achieving greater liberalization of the air transport services
sector.  This must be followed by the clarification of concepts, definitions and classifications, in order
to determine uniform laws of general application to the sector.
23. Given the requirement to establish clear parameters for commercial activities relating to the
air transport sector, it is necessary to consider the inclusion – in paragraph 3 of the Annex – of allthose services which, although they are directly related to air transport, have no bearing on traffic
rights.
24. Similarly, it is necessary to classify and clarify all services related to air transport, so as to be
able to determine which of them could be included in paragraph 2 of the Annex and which could be
the subject of commitments under the GATS.
25. At the same time, it would be desirable to extend the application of the GATS to areas that
have not been included.  In particular, provisions should be adopted to promote the application of
rules such as MFN, the establishment of an expe ditious and effective dispute settlement process and
the binding of measures or commitments.
26. Developments in the air transport sector in recent years make it clear that this topic should be
tackled speedily in the WTO.  The proliferation of bilateral agreements and the gradual establishment
of plurilateral or multilateral agreements on air transport demonstrate the existence of a vacuum in
respect of comprehensive rules governing this economic and commercial sector.
D. 
TELECOMMUNICATION SERVICES
27. The growing economic and social importance of telecommunication services justifies careful
study of their regulation in the World Trade Organization, in the context of a new negotiating round.
28. A prime area for consideration is the coverage of commitments undertaken, in the light of
technological innovations and media convergence.  We support and encourage extensive liberalization
of all basic telecommunication services, based on the principle of non-discrimination.  Such
liberalization must be effected by each Member as an extension of its current commitments, within
the framework of its legal system and its institutional regulations.  In this connection, the reference
document may continue to serve as a valuable  tool to guide the liberalization process.
29. In the area of basic services, as well as value added and supplementary services, gradual
liberalization of market access may have a significant and positive impact which goes beyond theS/CSS/W/88
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sphere of trade in services.  We therefore urge Members to bear in mind the potential
interrelationships between this topic and other areas, including intellectual property, trade-related
investment measures and issues of electronic commerce.
E. DISTRIBUTION SERVICES
30. Distribution services are covered by codes 621, 622, 631, 632, 6111, 6113, 6121 and 8929 of
the United National Provisional Central Product Classification.  Distribution services are therefore
considered to include commission agents' services, wholesale trade services, retailing services,
franchising services and others.
31. Chile agrees with the point made by the Secretariat in its document S/C/W/37 of
18 June 1998, to the effect that the distribution sector is of considerable importance in the economy,
not only in terms of its direct contribution to output and employment, but also in terms of its crucial
role in domestic and international trade.  There is  evidence that international trade in distribution
services is growing from previously low levels, due to the liberalization of trade in goods and foreign
investment regimes, and the development of new technologies, especially in telecommunications.
However, there remains much scope for further liberalization and for improved commitments in
distribution services, especially with regard to the presence of natural persons.
32. At the same time, Chile considers that there are still many obstacles to the full development of
this activity.  Some of those obstacles relate to "economic needs tests" for service providers,
discriminatory tax treatment of foreign service providers, discriminatory treatment in respect of
licensing requirements for this activity, etc.
F. ENERGY SERVICES
33. Energy service have not to date played a significant role in the trade negotiations specific to
the WTO or in other free trade agreements.  In fact , there was very little reference to them in the
Uruguay Round, and then only in general terms.  This was due to the fact that, up until a few years
ago, the generation, transport and distribution of energy were in most countries controlled by
State-run, vertically integrated enterprises which in most cases acted as State monopolies and served
domestic markets exclusively, especially in the case of electricity companies.  Moreover, it had been atraditional practice in the energy sector to draw  no clear lines of distinction between goods and
services.  This was inconsistent with the rationale of the Round, which was based on the clear and
precise identification of trade-related services.
34. This situation has undergone rapid change in recent years, and will no doubt continue to do so
in the future.  From the institutional and regulatory standpoint, the current trend is towards redefining
the role of the State and the private sector in energy-related activities, and this has clear implications
for the economic and commercial workings of the sector.  Thus, in many countries the legislative andregulatory instruments governing the sector have been updated, changes have been made to legal
systems of ownership, there has been a gradual trend towards internalization of the environmental
costs of energy products, and encouragement has been given to the opening up, privatization and
internationalization of the sector, all of which has re sulted in greater competitiveness.  Overall, these
developments have been complemented by a redu ction in production costs and the gradual lowering
of prices, except in those countries where it was first necessary to eliminate existing sectoral
subsidies.  Finally, recent years have seen the launch of major international energy integration
programmes, with a trend towards more open and increasingly flexible systems, facilitating the
establishment of more robust markets than could be achieved by individual countries acting on their
own.S/CSS/W/88
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35. In our view, therefore, certain aspects will need to be highlighted in the negotiations getting
under way, such as the following:
− These negotiations should cover the full range of energy services, including services
related to the generation, transformation, transport, distribution and marketing ofelectrical energy, as well as aspects relating to hydrocarbons and their derivatives.
Some of the proposals put forward call for certain restrictions which should beconsidered with caution.
− These negotiations should be carried out in the light of trends in matters relating to
subsidies for energy-related activities.  This point, which does not appear in any ofthe proposals studied, is of vital importance since the energy sector continues to be
highly subsidized in many countries, and this sharply limits the potential for
structuring a competitive and open market.
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