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EU, Chile conclude negotiations on new trade agreement

Euractiv | 9 December 2022

EU, Chile conclude negotiations on new trade agreement

By János Allenbach-Ammann

Twenty years after their first free trade agreement concluded, the Chilean Minister of Foreign Affairs Antonia Urrejola came to Brussels on Friday (9 December) to conclude negotiations on a new, more far-reaching “Advanced Framework Agreement” that slashes most tariffs between the EU and Chile.

The agreement also encompasses new social and environmental safeguards to accompany the liberalised commerce.

“This agreement covers a number of areas, which had not been included hitherto, in order to forge alliances between Chile and the EU on the basis of shared values and principles,” Urrejola told reporters.

The Executive Vice-President of the EU Commission, Valdis Dombrovskis, welcomed the agreement as “a real leap forward in terms of our sustainability commitments” and argued that it “very much reflects our shared strategic interest […] in areas like clean energy and raw materials.”

Critical raw materials

The EU is Chile’s third largest trade partner, comprising 12% of Chile’s total trade in 2020. While the EU mostly exports machinery, chemical products, and transport equipment to Chile, according to EU trade statistics, Chile mainly exports vegetable products and raw materials.

With its large copper and lithium reserves, Chile controls some of the most important raw materials to transition towards a greener, more electrified economy. Meanwhile, the EU is desperate to secure new sources for such “critical raw materials” that it often imports from China.

China is also Chile’s most important trading partner by far, and the trade deal between the EU and Chile can be seen as an attempt to slightly decrease the dependence of both trading partners from China.

According to the EU Commission, the framework agreement should also make it easier for EU companies to access the Chilean services market and the public procurement market. Moreover, Chilean and European investors should be treated equally in Chile and in the EU.

Sustainable development and gender equality

The negotiations for this agreement had technically already concluded in October 2021. However, the Chilean elections and French hesitance to make progress on free trade agreements during the French presidential elections led to a more drawn-out process.

This is also the reason why the “Trade and Sustainable Development” (TSD) chapter of the framework agreement does not yet include the enforcement mechanisms for sustainability criteria that the EU aims to include in its free trade agreements, according to the review it presented in June 2022.

According to an EU official, however, the EU and Chile agreed to review the TSD chapter a year after it entered into force.

“We’re also enshrining in a more visible manner our common core values, which are at the heart of our cooperation, and there’s a set of new articles on issues like democratic principles, human rights, the rule of law, state modernisation, gender equality, and women empowerment,” the EU official said.

Minister Urrejola especially welcomed the chapter on gender and trade. “This is something unprecedented in EU trade agreements, and it is a fundamental step forward for Chile as well,” she said.

Easier ratification

To make it easier and faster for the trade agreement to come into force, it has been split up into two separate parts, an Interim Free Trade Agreement (iFTA) that covers only the parts of the agreement that are an exclusive EU competence and the Advanced Framework Agreement that includes the parts on politics, cooperation, and investment that needs to be ratified by all member states.

This is a reaction to the troubles in recent years to get free trade agreements ratified by all member states.

According to Dombrovskis, the same architecture was also considered by the EU for other trade agreements, like the one with Mexico.

 source: Euractiv