Modernization of the Chile-EU FTA: a false promise of Equity and Development

In 2002, Chile and the European Union (EU) ratified a Free Trade Agreement (FTA), in force since 2003. This agreement was recently renegotiated with the aim of "modernizing" it, culminating in December 2022 with the signing of an Advanced Framework Agreement and an Interim Agreement, the details of which were disseminated on the EU's official networks. The approval of the FTA by the Council and the European Parliament did not meet with the approval of the European left, which voted against it. In Chile, the date for parliamentary ratification of the treaty has yet to be defined.

By Esteban Maturana - Plataforma América Latina sin TLC (Latin America without FTA)

The authorities of both Chile and the EU have been emphatic in pointing out the advantages that the "modernization" of the FTA will have for the parties, alluding to supposed improvements in trade relations, as well as advances in areas such as human rights, labor, gender and the environment. However, it is crucial to highlight that these advances are not binding, and in practice, the dead letter of the clauses limits the possibilities of an equitable trade relationship due to the notorious economic asymmetries between Chile and the EU.

The advantages and disadvantages of this treaty was the main theme of the seminar organized by PSI affiliates in Chile and the Latin America without FTA Platform at Confusam headquarters in Santiago on May 10, where more than fifty grassroots leaders attended to discuss this important treaty which, in practice, maintains the typical characteristics of these agreements which, according to studies, favor large transnational corporations and damage the sovereignty of developing countries. Disputes between investors and states are resolved in international arbitration tribunals, whose bias in favor of big capital has led countries to compensate investors with millions of dollars, sacrificing national budgets earmarked for health, education and housing.

One of the questions that arise when analyzing this so-called "modernization" is related to the urgency to carry it out, being a fact of the case that the main interested parties are the leaders of the EU. Suffice it to say that the bloc of Northern countries has considered the vital urgency of developing the energy transition in the context of the global crisis caused by climate change, being one of their immediate goals to achieve full electromobility in their countries, requiring for this purpose raw materials such as lithium, a resource they lack and which is abundant in Chile.

It is worth noting that Chile has already agreed on a strategy for the development of the lithium industry in agreement with private actors. This strategy is based on the extraction and export of lithium to the EU and other countries without added value. This means that despite the "modernization" of the Chile-EU FTA, in practice Chile will continue to be an extractivist economy, exporting raw materials with no added value and an immense environmental and human cost given the creation of more sacrifice zones that will be added to the existing ones.

It is important to mention that in this "modernization" of the agreement with the EU, new issues are incorporated, being of note the one related to public procurement and the one that commits our country to be a party in eventual conflicts with the EU. In the case of public procurement, the new version of the FTA contemplates the option for European and Chilean companies to participate in public procurement. A prior analysis of this issue requires comparing the size of the economies of the different countries, as well as the companies that could benefit. To claim that Chilean companies are in a position to compete with similar European companies for public procurement is, to say the least, a fallacy.

It is of the utmost gravity that the Chilean government has agreed to sign an agreement with the EU whereby Chile, a country located in the southernmost part of the world, would be obliged to cooperate with its European partners in conflicts in which they are involved, as is currently the case with Ukraine.

An in-depth analysis of the Chile-EU FTA reveals its profound neo-colonial character and that it is an instrument of the neo-liberal economic order that emerged in the 1980s, insofar as it aims to maintain Chile in its condition as an underdeveloped country exporting raw materials with little added value, a fact that is already serious in itself, but which, in addition, permanently limits the country's possibilities of exporting raw materials with little added value, permanently limits the country's possibilities to advance towards an economy with strong technological and industrial development, the only possible way to overcome the prevailing model to date and whose social, environmental and human consequences are suffered by millions of people, in contrast with the much higher standards of living and wealth of the so-called "partners" of the EU.