EU ties trade bow with Chile — to carmakers’ delight

It’s official: Brussels and Santiago renewed their trade vows today.

Chile and the EU sealed a revamp of their trade deal in Brussels on Friday, potentially giving Europe better access to Chile’s vast lithium and copper resources.

The updated deal — which includes both trade and political upgrades — provides the EU with key access to the world’s biggest reserves of lithium in Chile’s Atacama salt flats. Lithium is essential in producing car batteries, so the European car industry is delighted.

“This is positive news as it reinvigorates the EU’s trade agenda. It is also of particular significance to our sector as it will enhance access to the raw materials which are much needed for e-mobility,” said the European Automobile Manufacturers’ Association.

Chile’s new government, led by left-wing President Gabriel Boric, has won more “policy space” to develop its own raw materials industry, explained an EU official. Now, the deal allows Chile to sell its lithium or copper at lower prices for EU companies that use Chilean processing.

Coincidentally, later today EU negotiators are also poised to agree on the world’s most stringent standards for sustainable batteries. Brussels is also readying a Critical Raw Materials Act.

For EU trade chief Valdis Dombrovskis, locking in another trade deal is a victory. Brussels has been firing up negotiations with potential trade partners around the world to diversify away from Russia, and to a lesser extent, China — even more so since Russia’s invasion of Ukraine.

“Today’s agreement marks a real leap forward in terms of our sustainability commitments,” said Dombrovskis. “It also very much reflects our shared strategic interest in terms of cooperating in areas like clean energy and raw materials, which will be vital for our future economic resilience.”

Brussels is eyeing closer ties with Latin America and hopes to still conclude its deals with Mexico and the Mercosur bloc before the European Parliament election in 2024.

No teeth (yet) on sustainability

But the pact doesn’t allow the EU or Chile to slap sanctions if one of the parties violates its sustainability provisions, unlike Brussels’ recent trade deal with New Zealand. That’s because the deal was “technically concluded” before the EU unveiled its higher green aspirations for trade deals in June, the EU official told a background briefing.

“Every negotiation is different,” the official said, adding that both sides promise to conclude extra negotiations within one year “as soon as the agreement enters into force.” This commitment is laid out in a statement that Brussels and Santiago will publish next week, along with the full revamped agreement, they added.

“I would expect this particular conversation with Chile to be very like-minded and progressive,” the EU official said.

Today’s renewed deal does, however, include some novelties like a gender equality chapter — a first in the EU’s agreements.

“This chapter could function as a new benchmark for making trade more inclusive, with a special focus on women’s role in the global economy,” said European lawmaker Samira Rafaela of the liberal Renew group, who’s in the lead on the EU-Chile agreement.

Chile and the EU agreed to split the pact to speed up the ratification process, an EU official confirmed, meaning that the trade section will go only to the Council of the EU and the European Parliament., while the political and investment section will need to be ratified by the bloc’s national — and at times regional — parliaments.

Joshua Posaner contributed reporting.