CHILEAN SCENARIO ON FREE TRADE OR ASSOCIATION AGREEMENTS 1.FTA CURRENTLY IN EFFECT: UNITED STATES OF AMERICA (negotiations began in The FTA became in full force and effect in January 1, 2004). EUROPEAN UNION (“Political and Trading Association” with the EU, effective from March 1, 2004 for the 25 countries of the EU). MEXICO (effective since 1999). CANADA (effective since 1998) SOUTH KOREA (effective since 2004) CENTRAL AMERICA (executed in October, 1999, with Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua). EFTA (“European Free Trade Association”, executed with Iceland, Liechtenstein, Norway and Switzerland). 2. FTA CURRENTLY IN PROCESS: CHINA (already executed and awaiting for ratification by Congress, expected for June/July 2006). P4 (already executed with New Zeeland, Singapore and Brunei Darussalam, and awaiting for ratification by Congress during 2006). 1

CHILEAN SCENARIO ON FREE TRADE OR ASSOCIATION AGREEMENTS (CONT) 3. MERCOSUR: Chile is an invited party to the MERCOSUR, benefiting from the provisions thereof. 4.COMPLEMENTATION AGREEMENTS: Chile also has entered into various complementation agreements with different countries comprising the Latin-American Region. 2

THE FREE TRADE AGREEMENT WITH THE UNITED STATES the 1st FTA between the US and a South American country. Purposes: Among others, (i) strengthen friendship and cooperation between the countries, (ii) increase commerce, (iii) avoid distortions in their markets, (iv) develop the agreements of the WTO, (v) incentives on innovation and promotion on trading of goods or services which are protected by intellectual property; (vi) create new business opportunities, (vii) protect the rights of the employees, and (viii) promote a permanent and viable development. Highlights: Labor and environmental chapters Clearly defined customs procedures and rules of origin Modern: Telecommunications, E-commerce Government procurement Temporary visas for Chilean professionals Effective dispute resolution Intellectual property Agreements of the WTO are confirmed by the parties Tariffs (Customs duties, ad valorem): Eliminated in a maximum period of 12 years Chile  US: tariffs on 95% of products reduced to 0% immediately US  Chile: Tariffs on 90% of products reduced to 0% immediately 3

2,5 3,5 6,0 3,4 4,6 7,9 4,7 6,2 10, Imports from USExports to USTotal Trade US$ Billions Bilateral Trade Chile/US: Before and After More than 2000 companies export to the US and 90% of them are micro, small and medium-sized enterprises. Between January and November of 2005, Chilean companies exported 2009 different products to the US. In January 2006, the shipments to the American Continent represented the 35% of the total during that month, while exports to Asia only reached 33%. Currently (beginning of 2006), the main products exported by Chile are copper, fish, molibdenum, grape and pulp. In January 2006, most goods imported by Chile came from the American Continent (53%), followed by Asia (with a 20%). 4

THE FREE TRADE/ASSOCIATION AGREEMENT WITH WITH EUROPEAN UNION Basis: Reciprocity, common interests, improvement on relationships General Purposes: Improve political dialogue and communications Improve cooperation, economical by areas of industry, cultural, social, educational, scientific, etc. Expand and increase economical and trade exchange Highlights: Labor and environmental chapters Clearly defined customs procedures and rules of origin Effective dispute resolution (Association Committee plus arbitration panel) Intellectual property rights Origin, customs rules Health provisions Technical norms Antidumping and countervailing measures Agreements of the WTO are confirmed by the parties 5

Tariff Elimination in the European Union Tariff Elimination in Chile 6

CHILEAN TRADE WITH EUROPEAN UNION AMOUNTS IN MILLIONS US DOLLARS, OF EACH YEAR 7

MOST FREQUENT CONSULTATION PRACTICAL CASES Origin of the Good. The main issues concerning trading of goods under free trade agreements with the US and European Union relate with the origin of the goods. Origin must be evidenced with the corresponding certificate of origin to benefit from the treaty. Particularly, the Agreement with the European Union, in its Annex III, Article 12, states that the agreed preferential treatment applies to the cases where the goods are transported “directly” between the Community and Chile. However, on an exceptional basis, the good may be transported through a third country (not members to the FTA) with transshipment or temporary warehousing in the territory of such third country, “if necessary”, and provided that the goods have remained under the surveillance of the customs authority of the country of transit or deposit and to the extent, further, they have not been subject to operations other than unloading, loading or any other designed to preserve them in good conditions. Similar rule applies with respect to the FTA Chile /US. The Chilean Customs Services has allowed invoicing of the sale by a third country not party to the FTA, provided that the goods are supported by the proper Certificate of Origin and a direct shipment takes place between Chile and the relevant country comprising the European Union. 8