152
Financial Services and Preferential Trade Agreements
extend to measures of general application for reasons of monetary, credit, and exchange rate policies.41 Unlike in NAFTA, an additional paragraph based on GATS introduces the possibility of adopting or enforcing measures to prevent deceptive or fraudulent practices or to deal with default on financial services contracts. Transparency of regulatory changes has become a key issue in a globalized financial services industry: there is a general recognition that financial services must be subject to regulation and good supervision, but standards differ across jurisdictions. The transparency article in the ChileU.S. FTA builds on NAFTA article 1411 but goes further in imposing transparency and dialogue on the regulators. These provisions partly reflect the position of the U.S. financial services industry in the WTO negotiations. The goal of these provisions is to ensure that regulatory practices do not limit or negatively affect the rights of financial services providers. An important obligation for Chile is to respond in writing to the “substantive comments” received from interested persons in the process of developing new regulations or modifying existing ones. Chile was easily able to accept these strong obligations because domestic policy was already moving in that direction. However, some concern existed about how soon Chile’s agencies and Central Bank would be able to fully comply; the obligations required setting up special offices and training personnel, so a two-year grace period after the entry into force of the trade agreement was included. To operate in the host-country market, foreign-owned financial institutions must have access to the payments and clearing system and be allowed to participate in self-regulatory organizations in which membership is required for providing financial services. Both issues are taken into account in the agreement, based on NAFTA and the Understanding on Commitments in Financial Services. The chapter also contains an article on expedited availability of insurance products. The article has only a declaratory purpose, but it reflects the offensive interest of the U.S. insurance industry in the negotiations. Chile’s insurance law requires that insurance companies register new models of insurance policies in the Deposit of Policies of the SVS. If no objections are made, the companies can contract insurance six days after registration. However, for all MAT insurance policies and nonlife insurance policies contracted with juridical persons with annual premiums greater than approximately US$6,700, the registration requirement does not apply. The United States wanted this provision established as a precedent on how insurance regulators should expedite the approval of new products.42