Trade liberalization and the spread of regulatory institutions: The case of Chile


Benedicte Bull, Centre for Development and the Environment (SUM), PB 1116 Blindern, 0317 Oslo, Norway. Email:


It is currently widely recognized that trade liberalization leads not only to deregulation but also to re-regulation. However, it is less well understood how trade agreements and trade liberalization affect domestic regulatory institutions. This article aims to contribute to such an understanding through a case study of Chile. Since 1990, Chile has pursued a strategy of economic integration through bilateral, regional, and multilateral agreements. The study shows how this strategy has led to the partial implementation of a patchwork of competing regulatory institutions, many of which can trace their roots to the domestically preferred institutions of Chile’s major trading partners.


It is currently widely recognized that trade liberalization leads not only to deregulation but also to re-regulation at the domestic level (Woll & Artigas 2007). However, it is less well understood how trade agreements and trade liberalization change domestic regulatory institutions. This paper examines four mechanisms of internationalization and transnationalization of regulation, and shows how they have changed the domestic regulatory environment in Chile.

Chile is uniquely suited as a case study for this purpose. Between 1991 and 2006 it negotiated economic agreements with 17 countries or groups of countries, seeking to deepen the trade liberalization that started unilaterally in Chile in the 1970s. The export-led development strategy has brought quite substantial benefits to Chile. Its export to gross domestic product (GDP) ratio reached 69% in 2004, and 66% of the exports were carried out through preferential agreements (Mesquita Moreira & Blyde 2006). This resulted in relatively strong economic growth at an average of 4.1% between 1991 and 2005. As a result, Chile’s unemployment is among the lowest in Latin America. However, resources are unequally distributed, and there are frequent reports of precarious working conditions in export industries (Schurman 2001; Winn 2004), as well as reports of depletion of natural resources, and environmental degradation (OECD/CEPAL 2005).

Several of the trade agreements that Chile has signed contain provisions for regulation of labor and the environment. This article shows how Chile, through the trade agreements, has become involved in four forms of international and transnational regulation of labor and the environment, as outlined in Table 1. The regulatory forms differ with respect to the regulating actors, main regulatory mode, nature of rules, and main compliance mechanism involved. First, increasing collaboration between states has led to an internationalization of regulation. This takes two main forms: supranational enforcement of national regulation, and collective national regulation. In the first case, supranational meta-organizations are established to strengthen the enforcement of formal, national laws. In the second case, states collaborate on the development of rules and standards that in turn are implemented and enforced by states at the national level, or they may agree on the parallel establishment of specific institutions at the domestic level. Whereas the national enforcement mechanisms may have elements of coercion, the international enforcement mechanisms are most often of a “soft” kind, including peer pressure and socialization.

Table 1.  International and transnational forms of regulation
Regulatory formsInternational two-level regulationTransnational regulation
DimensionsSupranational regulation enforcementCollective national regulationStandardizationNetworks
Who is regulating?Meta-organizations and statesMeta-organizations and statesStandard setters, markets, private organizations, statesDiffuse
Main regulatory modeCoerciveCoercive and peer pressureIncentivesSoft: peer pressure, learning
Nature of rulesFormalFormal and informalFormalFormal and informal
Compliance mechanismsLegalLegal and socialEconomicSocial

Second, in spite of being signed between states, trade agreements may directly or indirectly lead to new forms of transnational regulation, which is characterized by the involvement of state as well as non-state actors in more than one country. One may identify two main modes of transnational regulation: standardization and networks. Standards are rules that in principle are not necessarily supported by any organizational element, although formal standards are formulated and promoted by some kind of organization (Ahrne & Brunsson 2006). The main compliance mechanism is economic incentives; a major incentive for adopting standards is access to markets.1 The concept of transnational regulatory networks has been used in the European context to refer to experts, and representatives of national regulatory bodies, who come to agreements among themselves, guided or supported by European bodies (Eberlein & Grande 2005). Slaughter (2004) finds that networks of governmental representatives are a key feature of governance across the globe. However, networks may also be composed of experts (Stone 2004), business, social classes (Sklair 2001), or a variety of sector-specific and issue-specific stakeholders (Reinecke 1998). In such networks, regulation may occur through the exchange of knowledge and the creation of joint discourses rather than through strict compliance mechanisms. The main regulatory mechanism is social rather than legal or economic.

However, these regulatory forms have not had an equal impact on Chile. A major finding of this article is that the trade agreements have had a limited direct impact on formal, governmental regulation through supranational enforcement of national regulation and collective national regulation. The trade agreements have encouraged the creation of networks between different actors and the adoption of international standards by Chilean businesses.

The article is structured as follows. The first section is an introduction to Chile’s trade agreements and the regulatory aspects of Chile’s agreements with Organisation for Economic Co-operation and Development (OECD) countries: the US, Canada, and the European Union (EU). The second section demonstrates how the agreements have influenced regulatory institutions in Chile. I discuss the four regulatory forms, and how the different trade agreements have been more or less successful in introducing these in Chile. The findings presented in this article are based on a wide set of public documents and secondary literature, and interviews with 60 Chilean public servants, and business, labor, and non-governmental organization (NGO) representatives. Most of the interviews were conducted during the first half of 2006.2

Chile’s trade agreements and the re-regulation of domestic labor and environment standards

The roots of Chile’s export-oriented strategy go back to before the dictatorship of Augusto Pinochet (1973–1990). However, under the influence of a group of economists often called “the Chicago boys,” Pinochet introduced a drastic, unilateral reduction in tariffs. By 1979, Chile’s tariffs had been reduced to a flat 10%. After democracy was reinstalled, the first center-left coalition government continued the strategy of trade liberalization, but through bilateral and regional free trade agreements (FTAs) rather than unilateral tariff reductions (Table 2). As a result of the tariff preferences granted through trade accords, Chile’s trade-weighted effective average tariff rate was approximately 2% in 2004, as compared to a 6% general tariff.

Table 2.  Trade agreements signed by Chile
CountryYear of signingEffective
  1. The members of the Latin American Integration Association (ALADI) were at this point Argentina, Bolivia, Brazil, Chile, Colombia, Mexico, Paraguay, Peru, Uruguay, and Venezuela. European Free Trade Association (Iceland, Norway, Switzerland, and Lichtenstein). §Signed, but not yet ratified.

  2. Source: General Directorate for International Economic Affairs (DIRECON), Ministry of Foreign Affairs, Chile.

ALADI countries19831983
Mercosur countries19961996
Costa Rica19992002
El Salvador19992002
European Union countries20022003
South Korea20032004
EFTA countries20032004
P4 (Brunei, New Zealand, Singapore)20052006

However, the agreements do not involve only liberalization of trade. In particular, the FTAs and the association agreements3 involve new regulatory mechanisms in the areas of labor rights and the environment. The following discussion will focus on the agreements between Chile and the US, the EU, and Canada. The agreements with Mercosur and the Asian countries may in the future have a growing influence on regulation in Chile, but as of 2007 this has been limited.

The Chile–US FTA

Only 15.8% of Chile’s exports are destined for the US, and most of Chile’s export goods have been granted preferential access to the US market through the general system of preferences (GSP). However, from the early 1990s, Chilean businesses wanted to stabilize market access, fearing that the GSP could be withdrawn at any time and that new regulations viewed as arbitrary by the Chileans could be introduced. Thus, when George H. W. Bush in 1990 launched the “Initiative for the Americas,” Chile quickly seized the opportunity (Ramos and Urutia 2003). In 1994, President Bill Clinton formally invited Chile to join the North American Free Trade Agreement (NAFTA), but because of the failure to achieve a renewal of the trade promotion authority (TPA) from Congress, the agreement with Chile remained pending. The first George W. Bush administration continued the negotiations with Chile with a renewed TPA premised on the inclusion of labor and environmental issues. By then, the multilateral negotiations for a Free Trade Area of the Americas (FTAA) had been going on for four years. NAFTA formed the basis for these multilateral negotiations, but also for the bilateral agreements pursued by the US as an alternative route toward an FTAA.4

The North American Free Trade Agreement is characterized by minimal regional institution building. It explicitly rejects common minimum standards in the areas of labor and the environment, but recognizes the rights of each party to adopt its own legislation and standards. Beyond that, market participants are referred to existing standards set by industry associations and trade organizations. Furthermore, NAFTA is based on a dispute resolution mechanism to deal with a party’s failure to enforce its own domestic environmental or labor laws, and any citizen in any party country is empowered to bring a case before the dispute resolution mechanism. The mechanism can only be used, however, if such lax enforcement can be shown to impact on trade between the parties (Stevis & Mumme 2000). Thus, NAFTA can be said to extend to the international field the US system of “adversarial legalism” (Kagan 2006) in the sense that it empowers parties to bring cases before the dispute resolution mechanism, but does not establish a system of discretionary judgment or a bureaucratic structure.

The initial US proposal in the negotiations with Chile was modeled on NAFTA and allowed for the use of monetary and trade sanctions in any area in case of noncompliance with domestic labor or environmental law. This was strongly opposed by the Chilean government and business community who feared US accusations of social dumping.

Partly because the Bush administration did not seem particularly eager to insist on a strict interpretation of the TPA, Chile managed to influence the result significantly.5 A compromise agreement was reached that is, in principle, similar to NAFTA in that it has a conflict resolution mechanism and lacks specific standards. However, trade sanctions cannot be considered until a very complicated and time-consuming process is concluded, including the issuing of fines of up to $US15m annually. The agreement also sets up an institutional structure with a Labor Affairs Council and an Environmental Affairs Council at ministerial level, and a consultative Labor Affairs Committee and Environmental Affairs Committee with wide public participation, and it lists eight concrete collaborative projects in the areas of labor and the environment.

The Chile–Canada FTA

When it was clear that it would not become a part of NAFTA, Chile started to negotiate not only with the US, but also with the other NAFTA members: Mexico and Canada. These negotiations were largely based on the same model as NAFTA. However, the negotiations with Mexico were carried out under the framework of the Latin American Integration Association (Asociación Latinoamericana de Integración, ALADI),6 which does not provide for the discussion of environmental and labor issues.

The Chile–Canada agreement highlights the issues that had been important for Canada in NAFTA and downplays the aspects that the US had insisted on. Hockin (2004) describes the Canadian approach to international agreements as a mix of voluntarism, stemming from a deep belief in international norms, and emphasis on public participation, deliberation, and empowerment of advisory committees, stemming from domestic practices.

In general, the agreement with Canada is based on a similar obligation as in the US agreement to respect domestic legislation and promote principles of good conduct. It further sets up a similar institutional structure and lists areas for collaboration, and it stipulates a mechanism for dispute resolution. However, it is much more detailed in outlining forms and areas of collaboration, and in outlining the responsibility of the institutions set up. Furthermore, rather than referring to international standards, it outlines 11 specific principles of good conduct in labor relations that go well beyond the International Labor Organization declaration (which was not yet adopted when this agreement was signed), and a series of environmental responsibilities. Moreover, labor and environmental issues are to be solved through specific dispute resolution mechanisms, and trade sanctions cannot be used as a punishment for failing to comply with labor or environmental regulations. A final important difference is that any accusation of a party’s failure to enforce its own environmental or labor laws may be brought to the resolution mechanism, not only those accusations that impact directly on bilateral trade.

Therefore, the Canada agreement is similar to the US–Chile agreement. However, it places relatively more emphasis on collaboration and institution building than on sanctions. It is also broader in the sense that it does not limit environmental and labor regulation to trade-related issues.

The Chile–EU association agreement

The EU is Chile’s largest single market, receiving 22% of its exports; therefore, the Chileans had strong interests in securing stable market access for, among other exports, their fish and agricultural products. For the EU, social and political issues were of equal importance as market access when deciding to negotiate an agreement with Chile.

The Chileans were well informed of the European preference for including social issues in the agreement. Moreover, the Chileans were increasingly worried about the European NGOs’ linking of trade and environmental issues, and wanted to ensure that they did not campaign against a possible trade agreement (Van Klaveren 2006). Thus, the Chilean negotiators proposed strong, sanctions-backed regulations on environmental and labor rights. However, these were rejected by the European negotiators who, instead, pressured for the adoption of institutions of dialogue similar to those that had been adopted within the EU.7

The European position reflected on the one hand the EU’s long-standing strategy of rejecting a sanctions-based approach, particularly to labor standards in trade agreements. On the other hand, it reflected emerging “soft” approaches to social regulation at the EU level. The result was an agreement that is the most ambitious of the agreements discussed here when it comes to requiring institutional changes, but quite paradoxically also includes a very short formal statement about social issues. It states only that the parties should promote participation of the social interlocutors in questions related to living conditions and social integration. The agreement also stipulates a conflict resolution mechanism, but this is set up to resolve commercial disputes, and there are no provisions for bringing conflicts on social issues to the conflict resolution mechanism. A further aspect of the agreement is that it places significant emphasis on Chilean adherence to standards and recognizes Chilean certifiers as authorities in this area.

The implementation of social regulation under the trade agreements

These trade agreements have resulted in different forms of international and transnational regulation, but their indirect effects on labor and environmental regulation have often been more important than their direct or intended effects.

Supranational regulation enforcement

All of the agreements discussed above envisage some form of supranational regulation enforcement. The Chile–Canada agreement, has been in force longest. However, its supranational aspects have not had much concrete impact. Related to environmental regulation, there have been four public petitions against Chile for lack of enforcement of its environmental legislation. However, none of them has resulted in further inquiries, let alone sanctions.8 Five complaints by citizens regarding labor issues have been filed, but none has led to inquiries or sanctions.9

The Chile–US agreement places more emphasis on supranational regulation enforcement than the Chile–Canada agreement, and the possible sanctions are more severe. The short time since the Chile–US agreement went into force makes it difficult to draw conclusions about its impact. However, most interviewees predicted that the supranational mechanisms of the Chile–US agreement would have limited impact. The difficulty involved in proving that any violation of domestic labor or environmental laws directly impacts on trade between the parties, as well as the lengthy process of consultations that would have to be concluded before sanctions are instigated, were seen as prohibitive. This view is supported by the experiences with NAFTA: There have been several citizens’ submissions for violations of domestic labor or environmental laws, but none has resulted in the use of the dispute resolution mechanism (Gallagher 2004; Human Rights Watch 2001).

Ironically, the Chile–US agreement is nevertheless viewed as beneficial for Chile by many interviewees, because they feel that it boosts Chile’s image as a nation that respects labor rights and the environment. As one senior public official working on the environment stated:

Well, after all it wasn’t that bad, we can live with the agreement. Maybe it can even help a small, open economy like ours. The agreement won’t make much of a difference, but it will show the world that we respect the environment […].10

This statement suggests that the agreement may be a way for groups in the US as well as in Chile to claim to the rest of the world that Chile takes labor rights and the environment seriously, while doing nothing to improve existing practices.

Collective national regulation

In the second main form of international regulation, states collaborate on the development of rules and standards that they in turn implement and enforce at the national level. The agreements discussed here have required changes in domestic law regulating economic issues, but not environmental or labor issues. Regarding labor and the environment, they rather include general statements of intentions to strive for domestic laws that are in accordance with international agreements and conventions. However, the social parts of the agreements also establish obligations to create new institutions. The US and Canada agreements set up bilateral councils and committees, and require the creation of national secretariats and “contact points” for handling labor and environmental issues, respectively. These institutions have been established in both cases, but it is particularly in the case of the Canada agreement that they have had practical significance. The collaboration with Canada has resulted in a series of concrete improvements in the environmental area, among them the creation of a register of pollution emissions.

The agreement with the EU has primarily resulted in a dialogue about the creation of a council in Chile, with multi-stakeholder participation, modeled on the Economic and Social Committee of the EU. In contrast to the committees set up under the agreements with Canada and the US, this council would not be limited to discussing trade matters; it could discuss a wider range of issues. The establishment of such an institution has been supported by the follow-up committee on relations with Mercosur and Chile, established under the European Economic and Social Committee in 1997.

Although a proposal for its creation has been elaborated, such a committee has still not been established. The head of relations with Europe at the General Directorate for International Economic Affairs (DIRECON) of the Ministry of Foreign Affairs explains this lack of progress by pointing to the lack of collaboration between social groups in Chile, particularly employers and workers:

We have received significant cooperation from the EU in order to facilitate the establishment of such a council. But the council still does not exist because the conditions for creating it are not in place. It is not that the relations between businessmen and workers are bad, but that they don’t exist. But at one point, the conditions will be more favorable and then we will make such a council.11

In sum, the direct impact of this form of collaboration on environmental and labor regulation is quite limited, and indeed the agreement (the agreement with the EU), which is most ambitious in terms of affecting Chilean institutions, has had the most limited direct impact.

However, it has had an indirect impact on the emergence of transnational forms of regulation. As we will see in the following section, both networks and standards have emerged as a side effect of the agreements.


Several kinds of network have been created as a result of the agreements. One kind is formed between public officials in the countries. The agreement with Canada is viewed as highly valuable in terms of having created such networks; these are the result of the informal contacts that have developed through years of collaboration. They facilitate exchange of experience and expertise as well as problem solving:

For example with Canada, where we have the agreement on this topic [labor issues] that dates farthest back, we have developed a profound transparency. We have very good contact, and that helps a lot. If we have any form of difficulty, we pick up the phone or we write an e-mail and, well, then we contact the companies and we resolve the problems.12

The agreement with the US has also established links with the US Department of Labor and with environmental agencies, but these are not as intense and informal as those that have been established with Canada. The same is true of networks with European officials, due partly to geographical distance and partly to the lack of concrete proposals for collaboration.

A second kind of network is formed between civil society organizations. The formation of such networks is quite well documented in the cases of the NAFTA and FTAA negotiations (Botto 2001; Korzeniewicz & Smith 2001; Stevis & Boswell 2001); similar networks have been formed in the aftermath of the Chilean trade agreements. However, contrary to what was often the case with the civil society networks formed to coordinate opposition to NAFTA and FTAA, those formed between Chilean and foreign civil society organizations are directed toward implementing parts of the agreements.

The third kind of network is the business network. Generally, free trade negotiations have strengthened ties between Chilean and foreign business organizations and firms. Moreover, participation in international bilateral and multilateral business networks has been an advantage for Chilean businesses and negotiators in the free trade negotiations. However, such networks have generally been concerned with market access and have paid relatively little attention to environmental or labor issues.13 Perhaps the most important effect that the negotiation and implementation of trade agreements have had is the strengthening of ties between public and private Chilean actors. The close collaboration between Chilean public officials and the private sector has been key to the relative success of Chile in negotiating trade agreements (Silva 2000). Mostly the interaction has involved negotiating for market access. However, there are also spillover effects into the environmental and labor areas. According to one of the chief negotiators on labor issues:

What happens is that after the whole process, traveling together, etc. a very good relationship was developed with labor organizations and business associations. With all this we have maintained a type of agreement, a compromise. It has produced a better knowledge about the counterparts and very close relations, more personal.14

In sum, during negotiation and implementation of the trade agreements, networks between actors have been formed that play a role in the regulation of labor rights and the environment. Although it is difficult to measure the impact of such networks directly, according to the informants interviewed for this study, these networks facilitate the exchange of knowledge and experience and contribute to problem solving and consensus.

Standards and certification

The most significant innovation in the regulation of labor and the environment in the period during which Chile has negotiated trade agreements has been the introduction of new standards and voluntary schemes. Businesses representing approximately half of Chile’s GDP are now involved in voluntary environmental schemes (OECD/CEPAL 2005) that include several measures. One important measure is the Agreements for Clean Production (Acuerdos de Producción Limpia), a multi-actor initiative in which Chilean businesses enter into agreements about certain environmental standards in production that are developed and monitored jointly by public and private agencies. By 2002, 600 individual businesses had such agreements, and they are now developed for 25 product groups. All of the major export products are included here, also mining, which constitutes 42% of Chile's export value.15 The main motivation for establishing this system was to secure access for Chilean goods to OECD markets (OECD/CEPAL 2005).

Regarding standards, these are now commonly adopted, particularly in the environmental area. Among the most widely used standards in Chile is the International Organization for Standardization (ISO) 14001 standard for environmental management that is closely linked to the European Eco-Management and Audit Scheme (EMAS) (Delmas 2004). According to the 2005 ISO survey, 277 Chilean businesses were ISO 14001 certified in 2005. Included are the 14 largest mining companies, among them the world’s largest producer of copper, the state-owned Corporación Nacional del Cobre de Chile (Chilean National Copper Corporation, CODELCO).

Although the adoption of standards may result from trade integration as firms from Chile attempt to penetrate regulated markets, it is not related directly to trade agreements. However, although some of the work on standards started before the signing of the trade agreements with the US, Canada, and the EU, according to many business representatives interviewed, the agreements motivated business to plan for long-term presence in those markets and therefore also to make efforts to adhere to standards required for market access.

The agreements may also in some sense be understood as a substitute for standards. Whereas certification may give a stamp of approval to individual businesses, many businesses hoped that the trade agreements would give a stamp of approval to the country as such. This was the case for the mining sector, which was interested in the trade agreements primarily as a means to strengthen the country’s image; major mining products such as copper have faced only limited trade restrictions, but the mining sector has been accused of social dumping.16 Representatives of the agricultural and fishery sectors, in contrast, saw the agreements as important instruments for receiving information about standards adopted in key markets.17

While the agreements have been successful in making Chilean businesses adopt environmental standards, they have been less successful in making them adopt labor standards. There are several reasons for this. One is that labor issues were more politicized in Chile than environmental issues before Chile signed the trade agreements. Labor issues have been important in determining the direction of Chilean politics since the labor-backed government of Salvador Allende (1970–1973) and the explicitly antilabor dictatorship of Augusto Pinochet. The labor movement never regained its strength after democracy was reintroduced; moreover, business organizations and individual business leaders have fiercely opposed any attempts at strengthening labor rights (Silva 2002). Thus, the re-establishment of labor legislation that emphasizes decency and fairness has been a continuous struggle (Frank 2002). Environmental issues were generally ignored during the dictatorship (Silva 1996) and have never become as controversial as labor issues.

This does not mean that international standards have not had any impact on the labor practices of Chilean companies. Although the vast majority of business leaders interviewed were of the opinion that Chile already had extraordinarily high labor standards, they were concerned with achieving “stamps of approval” on their practices. Chilean businesses have therefore recently been active in various corporate social responsibility initiatives, and have participated in the development of the new ISO 26000 on social responsibility.

Another interesting development in Chile is the emulation by the public sector of the private sector’s standardization and labor certification practices. The public Chilean Labor Inspection is currently in the process of creating a system of certification modeled on the private certification procedures in order to evaluate the labor practices of Chilean businesses. This will be a voluntary scheme that will be used as an additional regulatory means to the traditional inspections and legal procedures.18


This article has aimed to show the impact of trade agreements on forms of regulation of labor and the environment in Chile. Trade agreements have not led to major changes in the formal institutions and laws that regulate labor and the environment in Chile. Environmental and labor laws have been strengthened in Chile during the period in which Chile has signed and implemented trade agreements. For example, in January 2007, the Chilean Congress approved a law establishing a Ministry of the Environment, thereby signaling the desire to increase the political importance of environmental issues. Labor regulation has furthermore been strengthened through, among other initiatives, a new law that regulates labor rights for the increasing number of subcontract workers. There have also been significant increases in the budgets for labor inspections. Yet, this has happened quite independently of the trade agreements.

However, trade agreements have had a significant indirect impact on regulation. They have promoted international standards and strengthened Chilean businesses’ incentives to adhere to them. Chilean businesses have been particularly willing to get certified on environmental standards. In spite of recent progress, they have been less eager to adopt labor standards.

The agreements have resulted in the formation of networks between both state and non-state actors. Public officials and NGO representatives emphasize the importance of networks for the exchange of knowledge and experience that in turn may have a positive impact on the adoption and enforcement of formal regulations. However, although the trade negotiations have also encouraged the formation of business networks, these have not become active promoters of environmental and labor issues.

In sum, the case of Chile shows that trade agreements have both potential and limitations as regulatory devices. The formal regulatory provisions in the agreements have so far had a quite limited impact on regulation of labor and the environment in Chile. However, the informal interaction between state and non-state actors during negotiation and implementation of the agreements, as well as the subsequent market integration, have contributed to the strengthening of labor and environmental regulation in Chile.

Several questions remain open in the case of Chile. It has been beyond the scope of this paper to investigate the impact of trade agreements on the practices of individual firms, but this should be the subject of future research. Furthermore, this paper has focused on trade agreements and trade integration with OECD countries. Future research should look into the impact of the increasing trade integration with Asian countries – particularly China – on labor and environmental regulation. This is a question of importance not only for Chile but also for the rest of Latin America.


The research for this article was carried out while the author was a visiting scholar at FLACSO, Santiago de Chile. The author is grateful to the FLACSO researchers and staff, particularly Luciano Tomassini, for providing excellent research facilities and useful input to the project. Funding for the research was provided by the Norwegian Research Council. The author would like to thank Maria Gjølberg, Desmond McNeill, and Irja Vormedal as well as four anonymous reviewers for comments on early drafts of the paper.


  • 1

    The optimism regarding the relationship between trade liberalization and environmental and labor standards is largely because of a belief in standards – that regulatory competition may lead to a “race to the top” resulting from what Vogel has called a California effect: that standards are raised overall as firms from less regulated markets attempt to penetrate relatively large, highly regulated markets in the world’s richest countries. For those firms to get access to these markets, they have to meet the latter’s relatively strict environmental and consumer standards, and they may in turn create a demand for stricter regulations at home (Vogel 2000).

  • 2

    The definition of regulation adopted in the article is “mechanisms of social control” (Baldwin et al. 1998). This definition is open to the inclusion of formal as well as informal rules, multiple regulatory actors, and national as well as international and transnational regulatory forms.

  • 3

    An FTA is characterized by a “negative list approach”: the goal is full free trade and the parties negotiate exceptions. This differs from more limited trade agreements, such as the one negotiated under the ALADI framework (see Note 6). An association agreement is more encompassing and also includes political collaboration.

  • 4

    The multilateral FTAA negotiations broke down in 2003. Since then, the US has attempted to reach the goal of an FTAA through bilateral and subregional agreements.

  • 5

    This statement is based on interviews with several of Chile’s key negotiators.

  • 6

    ALADI was established in 1980 in order to create a Latin American free trade area through periodic negotiations about reduction of tariffs, harmonization of industrial and agricultural policy, and so on. The negotiations under ALADI are based on a positive list approach, and there are no provisions for regulations of environmental and labor issues.

  • 7

    Interview, Director of Europe relations, DIRECON, Chilean Ministry of Foreign Affairs, 27 June 2006.

  • 8


  • 9

    Interview, labor expert, DIRECON, 28 February 2006.

  • 10

    Interview, Chief of International Relations Department, National Commission for the Environment (CONAMA), 3 March 2005.

  • 11

    Interview, Director of Europe relations, DIRECON, 27 June 2006.

  • 12

    Interview, labor expert, DIRECON, 28 February 2006.

  • 13

    One example of a business network is the Asia and Pacific Economic Council (APEC) Business Advisory Council (ABAC). The involvement of Chilean business in this network has been instrumental to the Chilean signing of FTAs with Asian countries. However, the ABAC has almost completely ignored environmental and labor issues.

  • 14

    Interview, former Director of the International Department, Ministry of Labor, 27 June 2006.

  • 15

    For information on what sectors this includes, see

  • 16

    Interview, Manager, National Society of Mining, 27 March 2006.

  • 17

    Interviews, general managers of industry associations within food and fruits (Chilealimentos and Fedefruta), 29 March 2006; Interview, Manager, Nacional Fisheries Society, 12 April 2006.

  • 18

    Interview, Chief of Inspection Department, Labor Office of Chile, 20 June 2006.