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EU seals Chile trade deal that will improve bloc’s access to key minerals

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The EU has concluded a trade deal with Chile that will give it easier access to lithium, copper and other minerals vital to its renewable energy industry as it pivots away from Russian gas.

Chile will drop tariffs on all imports except sugar and facilitate EU investment, the European Commission said. Brussels considers the Latin American country as a vital strategic partner as it seeks to diversify resources imports away from China.

In return, Chile will secure more favourable access for its exports, particularly food, and professional services.

“This landmark agreement is of key geopolitical importance: with the new Advanced Framework Agreement, the EU and Chile take their partnership to the next level to strengthen political dialogue, deepen co-operation and foster trade and investment opportunities,” the commission said in a statement.

The breakthrough came after France dropped its objections to an increase in tariff-free chicken imports.

That prompted Chile’s newly elected leftwing president, Gabriel Boric, to embrace the EU’s sustainable trade agenda.

The agreement includes chapters on human rights, environmental protection and gender equality.

EU demands for such commitments have stalled the conclusion of deals with Mexico and the Mercosur trade bloc in South America.

“This agreement will create new opportunities to support economic growth on both sides, underpinned by much stronger protection of the environment and climate, labour rights, gender equality and food systems,” said EU trade commissioner Valdis Dombrovskis.

The deal was concluded on Friday morning at a meeting between Dombrovskis, EU foreign policy chief Josep Borrell and Chile’s foreign minister Antonia Urrejola.

“Closer economic ties with Chile will allow the EU to diversify and strengthen its economic resilience, while increasing opportunities for EU exports and investments. Better access and sustainable investment in critical raw materials such as lithium will contribute to advancing our shared ambition for a green transition,” the commission said.

Lithium is used in batteries while copper is vital to solar, hydro and wind energy systems.

EU goods exports to Chile should grow by up to €4.5bn annually within five years of the deal’s initial approval — a 45 per cent increase. EU companies invested €53bn in Chile in 2020. Goods and services exports in 2021 were €14.1bn, against €9.4bn in imports.

The two sides have committed to abiding by International Labour Organization standards and the Paris Agreement on cutting global greenhouse gas emissions.

For the first time in an EU deal there is a dedicated trade and gender chapter, with commitments to eliminate discrimination against women.

Urrejola, who has championed a “feminist foreign policy”, said this was a “fundamental step forward” for her country. She said the deal would help fight climate change and improve labour standards.

“We also have a chapter on SMEs which is designed to help SMEs in becoming more active on the international stage,” she said.

“We hope to have an increase of 6 per cent in Chilean gross domestic product because of the removal of trade barriers.”

Without environmental and labour guarantees it is hard to get EU countries to ratify trade deals. Dombrovskis said he expected the deal to be signed in autumn 2023 after final legal checks had been completed.

It will enter interim force once both sides have then ratified it. In the EU’s case that requires approval by EU governments and the European parliament.

However, the full agreement, including protection for investors, requires the approval of all 27 EU national parliaments.

Several parliaments have yet to ratify the EU-Canada deal concluded in 2016 because of investment protection clauses which give companies the right to sue governments for damages, although the accord is in provisional effect.

The Chile deal is the EU’s second of 2022, after a similar agreement with New Zealand in June.

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