The EU-Chile agreement explained

The Trade Part of the EU-Chile Advanced Framework Agreement

How big is EU-Chile trade?

Chile is Latin America’s fifth-largest economy and is the EU's third-biggest trading partner in Latin America. The EU is Chile’s second-biggest market for goods exports.

With a population of 20 million, its annual output is over €340 billion.

The EU and Chile concluded an Association Agreement in 2002, which includes a comprehensive Free Trade Agreement (FTA) that entered into force in February 2003 covering EU-Chile trade relations.

EU-Chile bilateral trade grew by 169% between 2002 and 2022.

EU firms exported to Chile:

In 2022, total EU-Chile trade in goods was €18.5 billion. In 2021, total EU-Chile trade in services was €7.2 billion.

Why has the EU negotiated an agreement with Chile?

In 2017, the EU and Chile launched negotiations to modernise the EU-Chile Association Agreement, so it can address all relevant areas of the relationship between the EU and Chile even better, in the face of political, economic and technological changes over the last 20 years.

On 9 December 2022, the European Union and Chile concluded negotiations on the modernisation of the EU-Chile Association Agreement, now named an Advanced Framework Agreement.

The trade part of the agreement will provide new opportunities for EU businesses in Chile, one of the biggest Latin American economies.

The agreement also contains major commitments on sustainable trade, notably on multilateral environmental and labour standards, climate, energy, and raw materials, as well as gender equality and sustainable food systems.

What will the agreement with Chile achieve?

The agreement will deepen EU-Chile trade and investment relations and provide new opportunities for EU businesses in Latin America’s fifth-largest economy:

The agreement will contribute to the EU and Chile’s shared ambition of developing a fruitful partnership based on sustainability and shared values, through:

What will be the legal architecture of the agreement?

The modernised EU-Chile Agreement will be composed of two parallel legal instruments:

  1. the Advanced Framework Agreement (AFA), which will include a) the Political and Cooperation pillar, and b) the Trade and Investment pillar (inclusive of investment protection provisions), subject to ratification by all Member States, and;
  2. an Interim Trade Agreement (ITA) covering only those parts of the trade and investment pillar of the AFA that are of EU exclusive competence (i.e. not including the investment protection provisions), to be adopted through the EU-only ratification process. The ITA will expire when the AFA enters into force.

What will Chile get from the deal?

It will be easier for Chile to export to the EU, while respecting the EU’s high standards. All Chile’s industrial goods exports to the EU will remain tariff-free, and its agricultural products will get better market access conditions.

The trade deal will give more opportunities for Chilean citizens to provide their services in the EU, including on a temporary basis through their physical presence in EU countries, such as contractual service suppliers or as independent professionals.

What will the agreement mean for trade in goods?

The agreement will eliminate tariffs on EU exports, which is expected to increase EU exports to Chile by up to €4.5 billion over time:

What will the agreement mean for trade in services?

The agreement will make it easier for EU firms to sell their services to Chile, including in:

The agreement will reduce and eliminate discrimination and expand opportunities for EU and Chile service providers and investors.

It guarantees the right of EU Member States' authorities to maintain public services, and it will not force governments to privatise or deregulate any public service at national or local level.

Similarly, Member States' authorities retain the right to return privately provided services to the control of the public sector. Europeans will continue to be able to decide for themselves how they want critical services such as healthcare, education and water to be delivered, for example.

What will the agreement mean for digital trade?

It will facilitate digital trade by addressing unjustified barriers and ensuring an open, secure and trustworthy online environment for businesses and consumers, along with high standards of personal data protection. It notably prohibits data localisation requirements, while preserving the EU's policy space regarding the protection of personal data. It will provide greater legal certainty for businesses engaged in digital trade through additional commitments like the validity of e-contracts and electronic authentication.

What will the agreement mean for investments?

How will the agreement help small businesses?

Trade barriers disproportionately affect smaller businesses more than large companies, because they may not have the time and resources to overcome them. The agreement includes a dedicated chapter for small and medium-sized enterprises (SMEs) to address the specific challenges of small companies in international trade and investment.

EU SMEs will gain significantly from many of the more general provisions of the trade agreement:

How will the agreement benefit the EU's farming communities?

EU farming communities stand to gain from easier access to the Chilean market, and more opportunities to sell their produce to Chile's 20 million consumers with the 2 nd highest per capita income in Latin America. The agreement will add 162 tariff lines, mainly of agricultural products, for liberalisation after a maximum staging period of seven years (for cheese, dairy, some sugar-containing products, and vegetable oils) and 34 tariff lines will already be fully liberalised at entry into force (covering notably cereals and some vegetable oils).

Chile will ultimately fully liberalise all EU dairy products and food preparations, which are important agri export categories to Chile. The existing tariff rate quotas for EU cheese will remain temporarily in place but will be finally liberalised under the new agreement. These improved market access opportunities have the potential to further allow EU farmers to increase dairy exports to Chile.

At the same time, for the first time, the 216 most relevant geographical indications of agri-food items coming from a broad variety of EU Member States to the Chilean market will be protected in Chile under the modernised agreement, thereby avoiding usurpation of iconic EU food item names such as 'Parmigiano Reggiano', 'Bayerisches Bier' or 'queso Manchego' on the Chilean market.

How will the agreement protect sensitive EU agricultural products?

The impact of the improved market access on agricultural products will be marginal, according to the ex-ante Sustainable Impact Assessment (SIA) published in May 2019 and the study on 'Cumulative economic impact of future trade agreements on EU agriculture' published in 2016.

The most sensitive agricultural goods are exempted from full liberalisation under the modernised agreement. These include meat (beef, poultry, pig and sheep meat), certain fruits and vegetables (e.g. garlic, apple juice, grape juices, etc.) as well as olive oil. Improved market access for Chile has been granted under limited and stable Tariff Rate Quotas (TRQs), which corresponds only to a tiny fraction of the EU’s internal consumption and production. Sugar is completely excluded from any liberalisation.

In the context of the Tariff Rate Quotas for meat (beef, poultry, pork and lamb), the agreement will put an end to the current automatic undetermined annual increase of the TRQs, and instead grant a reasonable top-up, which ensures that, in the long run, market concessions are more limited than under the status quo. Once the new TRQs are applied, these will remain stable and thereby provide a predictable, long-term limited additional market access for Chile.

How will the agreement protect distinctive EU products (Geographical Indications)?

The EU is a major producer of distinctive high-quality regional food and drink products.

In the EU, these products enjoy protection under a special status called 'Geographical Indications' (GIs). GIs guarantee to consumers that the produce is the genuine article from the specific locality or region concerned. They also allow European producers to earn a premium price for the quality of their unique produce.

The agreement will protect 216 names of EU Geographical Indications (GIs) for food and drinks in Chile, such as Parmigiano Reggiano, Comté or Gruyère cheeses, Istarski pršut ham, Jabłko grójeckie apples, and Pruneau d’Agen dried plums. This on the top of the existing agreement on wines and spirits, which protects 1,745 GIs for wines and 257 GIs for spirts and aromatised wines from the EU in Chile, such as Prosecco and Tokaji. The agreement allows adding new GIs under the protection of the agreement in the future.

This will make it illegal to sell imitations.

For example, no-one will be allowed to call cheese 'Comté' unless it is the genuine cheese made in Franche-Comté region, France, under specific production conditions.

How will the agreement further open Chile's government procurement market?

The agreement will make it easier for European firms to bid for government contracts in Chile. The agreement will do this in three ways:

How does the agreement help secure access to lithium in a sustainable way?

Lithium is indispensable to produce batteries for electric vehicles. It is thus essential to the green transition and to achieve the EU’s Green Deal objectives.

Demand and competition for lithium will explode globally in the next decade. Reduced access to lithium threatens the future of EU battery production and could make the EU depend on other battery producers, such as China.

Chile is one of the world’s biggest lithium suppliers (40% of global lithium supply and around 80% of all EU imports (2020)).

The EU-Chile Advanced Framework Agreement ensures that we will have access to the lithium we need, while also securing the highest sustainability standards.

It ensures non-discriminatory access by:

It ensures environmental sustainability in energy and raw materials through:

How does the agreement help secure access to hydrogen in a sustainable way?

It is an EU priority to establish hydrogen partnerships with reliable suppliers that agree not to distort trade and investments according to the 2022 EU External Energy Engagement Strategy. Chile is a prime candidate for such a partnership as:

The Agreement with Chile provides an excellent framework for trade and investment in hydrogen and renewable electricity production:

What are the key provisions on rules of origin?

Products that are wholly obtained in either party (by agriculture, mining, fishing, etc.) qualify as originating, as well as products containing foreign inputs, if they meet specific requirements for local production called product specific rules.

Materials from Chile can be counted as originating in the EU and vice versa, as well as any processing that has been done on non-originating materials in either party. This is called full bilateral cumulation.

For products not meeting the product-specific rules, there is an additional tolerance of 10% in value for all products except for textiles and clothing, which have a special tolerance.

How will the agreement protect European standards, including food safety standards?

As with all the EU's trade agreements, the agreement with Chile will not change European standards, including standards for food, agricultural and fishery products. EU standards are not negotiable and are applied equally to all products placed on the EU market.