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Cablegate: Trade Agreement Compliance and Monitoring --

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DE RUEHSG #2031 2702211
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P 272211Z SEP 06
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TO RUEHC/SECSTATE WASHDC PRIORITY 0058
INFO RUEHRC/DEPT OF AGRICULTURE WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RHMFISS/HQ USSOUTHCOM MIAMI FL PRIORITY

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STATE PLEASE PASS TO USTR

E.O. 12958: N/A
TAGS: ECON ETRD CI
SUBJECT: TRADE AGREEMENT COMPLIANCE AND MONITORING --
U.S-CHILE FTA

REF: STATE 152063

1. Per reftel, Post is providing an overview of the
U.S.-Chile Free Trade Agreement, information on compliance
and monitoring efforts and Post's POC for FTA-related issues.

2. The U.S.-Chile Free Trade Agreement came into force on
January 1, 2004. In the two and a half years since,
bilateral trade is up over 100 percent. U.S. and Chilean
exports have both enjoyed strong double digit growth. The
growth in trade has far exceeded all projections. There are
no indications that continued strong bilateral trade growth
will abate in 2006. The U.S. remains the largest single
country market for Chilean exports. In 2005, just over
seventeen percent of Chilean exports went to the U.S.

3. The strong surge in U.S. exports to Chile has not been
followed by a similar jump in U.S. investment in Chile. On
the contrary, new U.S. investment in Chile in 2005 hit a
ten-year low. The U.S. remains the largest investor in Chile
over the last twenty-five year period, but current U.S.
investment interest in Chile is low. One reason for that may
be the lack of Chilean enforcement of intellectual property
rights, the one dark lining of an otherwise highly-successful
FTA. However, beyond anectodal evidence from some U.S.
pharmaceutical companies, Post finds it difficult to draw a
direct correlation between the decline in new U.S. investment
and the lack of IPR protection.

4. The USG believes Chile is not complying with its FTA
obligations in the area of intellectual property right
protection. Chile has been on the Watch List under the
Special 301 Process since 1989. However, in recent years and
despite specific provisions in the FTA, there have been a
number of violations of pharmaceutical patents held by U.S.
companies operating in Chile. For some of these companies,
the losses have been significant. The Government of Chile
has taken some limited steps to address the problem, but
these steps have been belated and it is far from clear they
form the necessary and obligatory framework under the FTA to
protect intellectual property rights in Chile. In April
2005, the USG announced that Chile would be subject to an Out
of Cycle Review under the Special 301 process. That OCR is
ongoing and can be expected to conclude before the end of
2006.

5. On the specific issue of IPR protection, Post has an IPR
Committee that consists of the Foreign Commercial Service,
Foreign Agricultural Service, Legatt and State (the economic
and public affairs sections). That committee meets on a
regular basis to discuss compliance with the FTA and to
develop strategies, including training, to advance IPR
protection in Chilean society and government.

6. Post's main POC for periodic reporting and general
compliance issues related to the FTA is Senior Economic
Officer Michael Keller, KellerMR@state.gov. Mr. Keller's
telephone numbers are: office (56-2) 330-3425, cell (56)
9-158-4650, home (56-2) 955-0808 and fax (56-2) 330-3118.
KELLY

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