Brussels, 12/04/2002 (Agence Europe) - The final round of negotiations for the signature of an Association Agreement between he European Union and Chile started in Brussels on 15 April. The Commission wants the Agreement to be signed before the 17/18 May Madrid summit. It will be a political agreement in the sense that the text will not have been finalised by the summit so between now and then, although a number of chapters have already been finalised, the negotiators will have to agree on sensitive issues like fishing, wines and spirits and the system covering agricultural products, along with even more sensitive issues like financial services, rules of origin and the opening up of public tendering. According to sources close to the Commission, both sides want an extremely ambitious agreement. For the first time ever, this Association Agreement with the EU will cover not only the scrapping of customs duties on industrial and agricultural products, but also the creation of a free trade zone for services. The agreement will also cover intellectual property, the opening up of public tendering, investment, trade facilitation and e-commerce. Brussels does not attempt to hide the fact it wants an agreement for the twenty-first century and a WTO+ agreement to set a precedent for the future.
Next week, European and Chilean negotiators will not have to worry about the parts of the agreement covering intellectual property and trade facilitating since these issues were settled in the past few weeks. Competition and investment are unlikely to cause any particular problems but consensus will have to be sought in other areas, such as for fishing, where the EU (particularly Spain and Portugal) want to be able to fish in Chile's waters. At the moment, foreigners are not allowed to fish or invest in the Chilean fishing industry. The solution that seems to be emerging is for Chile to authorise EU investment in fishing which would enable the EU to fish in Chilean waters under the Chilean system. There are no problems with scrapping tariffs for industrial products, but scrapping tariffs for processed agricultural products and ordinary agricultural products is proving more difficult. Chile is making what are seen as excessive demands for its exports of processed products, with the dairy industry posing particularly problems for the EU. There is the issue of indications of origin and geographical indications for wines and spirits since Chile still allows the use of brandnames like Champagne and Cognac, which are protected in the EU. EU is calling for them to be banned but Chile has always refused this. The solution might be to have a transition period for phasing them out, unless the negotiators resort to horsetrading along the lines of withdrawing brandnames in exchange for better access for agricultural products to the EU market.
The EU side seems confident that these difficulties will be smoothed over, but are still very concerned about services, rules of origin and public tendering. Brussels feels that Chile's offer for services is insufficient but they had not received Chile's offer on financial services (expected on Sunday evening) - the EU is calling for the market to be opened further, but this is feared by Chile, which also wants to protect its pension fund system, but the EU will not demand liberalisation measures that would jeopardise pension funds. The EU is expected to listen to Chile's demands in terms of protecting its balance of payments and its central bank's freedom of action. The EU is offering access to its public tendering and wants the same from Chile, but has not yet received Chile's offer. Rules of origin are likely to problematic with Chile wanting flexibility since it has a large processing industry, but the EU fears an indirect extension of this to Association Agreements with other countries. Access to Chile's telecoms are also of concern to the EU but Chile has not yet formulated its offer here.