Within the national policy of strengthening relationships with Europe, Chile signed a trade agreement with the four countries that make the European Free Trade Association, among which are Norway and Island, countries traditionally important for the development of Chilean aquaculture.

Executives and professionals linked to Chilean aquaculture are surprised and satisfied about the signing of the trade agreement between Chile and the countries that make up the European Free Trade Association, EFTA, namely, Island, Liechtenstein, Norway and Switzerland. The new alliance established by Chile will make it possible for more than 90% of Chilean exports -on average- to enter the EFTA countries tariff-free once the agreement enters into force. This figure rises to 96% if we only consider Island and Norway.

The signing of this contract is relevant for Chilean aquaculture because both countries have significant aquaculture and fishing development. In addition to exports of finished products to the European market, the agreement will clearly benefit the trade of inputs, equipment and technology for developing marine farming.

Background information of the agreement.

On June 2000, the EFTA adopted the decision to invite Chile to start negotiations to establish a free trade area. In September that same year, Chile accepted considering the potential for expanding and diversifying the country's foreign trade and for attracting investment from EFTA member states to Chile.

After six rounds of negotiations, on March 25, 2003 the closing of negotiations was reported to establish the Free Trade Agreement (FTA) between Chile and the European Free Trade Association.

The representatives of both parties met in Kristansand, Norway on June 26 to sign the agreement. After the execution of the contract, the text will be ready for legislative processing and shall enter into force on February 1, 2004, after the countries internally ratify the agreement.

In addition to other products, vessels, fish meal, carrageenin, algae and salmon fillets were the leading Chilean exports to the European conglomerate during 2002. Trade is mainly carried out with Norway and Switzerland; carrageenin, fish meal and algae are exported to Norway, and salmon and Chilean hake to Switzerland. Also, three fishing vessels made up 96% of total exports to Iceland in 2000 and the remaining 4% was made of salmon, buoys and origin denomination wines.

Principal Chilean imports from Switzerland and Norway in 2002 were made up of medicines, vaccines for veterinary use and machinery, and from Iceland, refrigeration and fish and mollusk processing technology, scales and other machinery.

In accordance with the information delivered by the Economic Authority of the Ministry of Foreign Affairs (Direcon), during the 1974-2002 period, EFTA member states -mainly Norway and Switzerland- invested US$922 million in Chile. Fishing and aquaculture was the productive sector that headed EFTA investments, accounting for 37% of the total. Norway leads investments with and aggregated amount of US$131 million equivalent to 46% of total investments made by Norway in Chile.

Significance of the agreement and antidumping

The Chile-EFTA Free Trade Agreement contemplates four areas of negotiations: trade of goods, services and investments, common commercial regulations and legal and institutional aspects.

From a tariff viewpoint, approximately 90% of Chilean exports will enter the EFTA territory free of tariffs from the first day the agreement enters into force, the remaining 10% corresponds mainly to agricultural and livestock products.

In addition, the agreement includes regulations related to the commercial area, like origin of merchandise, customs, sanitary and fitosanitary matters, technical regulations, competence, intellectual property and commercial defense. A chapter was defined for exchange of services with the corresponding regulations and opening of markets for duly specified activities; as well as an investment chapter that grants guarantees to investors to establish and develop projects in Chile.

The agreement contemplates a Controversy Solving System and the creation of a Joint Chile-EFTA Council responsible for the implementation and development of the agreement, at a Minister level.

A unique characteristic of the FTA between Chile and the EFTA states is the elimination of antidumping measures in commercial activities, at the same time that some international trade actors use those practices as a protection system.

Chile, EFTA and aquaculture

Many people think that an agreement between Chile and the EFTA states is equally or more beneficial for Chilean aquaculture that the agreements recently entered into with the European Union and the United States. The reason for this is that marine products and mining derivatives play an important role in their respective economies.

It is worth remembering that Chile and Norway produce over 70% of world farmed salmon and that EFTA member countries like Iceland and Norway have become strategic partners of Chilean aquaculture by investing and providing technology and supplying inputs for production and processing activities.

In addition to the eventual tariff elimination for agricultural products, the trade agreement recently signed by Chile establishes a favorable setting for trading inputs and equipment for marine farming activities, from and to Chile.

"An agreement of this kind was long awaited for in Chilean aquaculture. At present, imports from Norway and Iceland have a 6% tariff and its elimination will permit us to be more competitive", states Jorge Cassigoli, the general manager of Vaki Chile S.A., a subsidiary of the Icelandic firm of the same name.

Regarding this same matter, the senior executive of Den norske Bank, Hans Inge Bollingmo, agrees that tax reduction will permit goods and services to be more accessible to the final consumers, which represents a good opportunity for Chilean suppliers to export their technology for use by Norwegian salmon farmers. "Norway is an important partner for Chile, and undoubtedly Chile will continue being tremendously important for Norwegian exports, even more so than the Norwegian industry itself," he adds.