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US-Chile FTA a Test Case for Labor and Environmental Provisions President Clinton decided to forge ahead with the Singapore FTA negotiations without consulting Chile, even though the US and Chile had been pursuing talks about a prospective agreement under the aegis of their Joint Commission on Trade and Investment (JCTI) for some time. When the Jordanian FTA was signed, the Clinton administration could rationalize it to Chile as heavily political and covering a small amount of trade. In contrast, Singapore is among the top 10 US trading partners. Chile's irritation at the agreement pressured the Clinton administration to give the green light to FTA negotiations with Chile. The US-Chile FTA is in some ways quite advanced. Working groups on major issues were formed already under the JCTI. However, Chile is an important producer and exporter of agricultural products such as fruit, wine, fish and vegetables, all sensitive areas for the US market. For its part, Singapore has an open economy but its trade in services is likely to complicate its negotiations, scheduled for December 4 through 27. No definitive agreement is likely to be reached with either Chile or Singapore in the last few weeks before the new Bush administration takes office. Negotiations between the US and Chile began on December 7 with a discussion between Chile's foreign minister and the US Trade Representative office on the terms of reference for the talks. President Elect Bush will review the negotiations with Chile when he takes office, but he is unlikely to overturn them; with its open, competitive economy, Chile is a logical choice for an FTA. Both Singapore and Chile seem to have been stalling to see whether Bush would win the US elections, with the expectation that his administration would not be as committed to the inclusion of environmental and labor issues in the negotiations. Chile already has an FTA with Canada that includes both of these issues as side agreements, much like the ones used in NAFTA. In the environmental agreement, the parties agree to enhance environmental cooperation and effectively enforce environmental laws to provide a high level of environmental protection. The labor agreement binds the parties to enforce their labor laws and regulations and incorporates internationally accepted standards. Both agreements include sections on dispute resolution to be applied when persistent patterns of non-enforcement occur (Part 5 in both agreements). Annex 33 of the environmental agreement and Annex 35 of the labor agreement place a $10 million cap on monetary enforcement assessments resulting from awards under the dispute resolution mechanisms. The Clinton administration knows that legislative approval of the Chile and Singapore FTAs will not be easy, as there is no fast track authority from the US Congress to negotiate and sign these agreements. Bush will have to decide whether to ask for fast track for bilateral FTAs only, or for the FTAA as well. Besides seeking to add to his legacy, President Clinton hoped the agreements would further his conviction regarding the inclusion of labor and environmental issues in trade negotiations. These issues are already part of the Jordan agreement and are to be included in the Singapore and Chile negotiations as well. This experience will add some momentum to including them in the FTAA negotiations and will make it harder for the Bush administration to ignore them. However, the majority of the countries of the hemisphere oppose these provisions. Including them in the FTAA will require fighting a big battle which could greatly delay or doom the hemisphere-wide agreement. It is too early to say how the negotiations will turn out, but certainly the US market is very important to Chilean exporters. The Chilean government may be willing to accept an FTA that directly incorporates environmental and labor provisions in exchange for improved access, although it would clearly prefer the scant monetary assessment provisions of the side agreements as opposed to measures with more teeth. Ultimately, of course, the FTAA is more important than the Chilean FTA as it could eventually replace the multitude of bilateral trade agreements now in existence with a single set of rules, tariffs and procedures that favor competition and open economies. The US-Chile FTA could therefore both advance the FTAA by leading the way and setting a precedent, and complicate it by furthering the likelihood of introducing labor and environmental provisions into the negotiations. www.dfait-maeci.gc.ca
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