Modernisation of the trade pillar of the EU-Chile Association Agreement

In “A Stronger Europe in the World”

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Background and state of play

EU-Chile relations are currently governed by the 2002 EU-Chile Association Agreement (AA) which covers political dialogue, cooperation and a comprehensive free trade agreement (FTA). The AA’s trade pillar led to a significant increase in bilateral trade in goods. However, despite the AA’s successful operation, total bilateral trade in goods has declined since an all-time high in 2011 to reach €15.1 billion in 2019, with the EU27 accounting for 12.2% of Chile’s overall trade in goods and being Chile's third-largest trading partner (European Commission data as of May 2020). Over the years, the EU has lost ground to both China which ranked first (28.1%) and the USA which ranked second (16.5%) in 2019.

Since 2002 considerable trade and investment policy developments have taken place which are not reflected in the AA's trade pillar. Moreover, both the EU and Chile have meanwhile concluded or are negotiating preferential trade agreements with other trading partners that go far beyond the provisions of the AA's trade pillar. This evolution partly explains why the EU-Chile trade and investment relations have recently remained behind their potential. Against this backdrop in 2013 the EU and Chile agreed to explore the AA's modernisation to take account of state-of-the-art trade disciplines, the EU’s exclusive competence for foreign direct investment (FDI) under the 2009 Lisbon Treaty and remaining market access barriers in sectors such as agriculture, services and public procurement.

The AA's untapped potential may be unlocked by upgrading existing trade preferences and adding new disciplines to the trade pillar, including a single set of rules on investment replacing the existing bilateral investment treaties (BITs) between Chile and various EU Member States. To break new ground, cooperation could for instance be reinforced or expanded to a wide range of areas such as ocean governance, digital policy, and disaster preparedness.

On the basis of the Council mandate of 13 November 2017, which was published on 22 January 2018, the first round of negotiations took place on 16 November 2017. The second negotiation round of 15-19 January 2018 saw among others a first exchange of views on the future chapters on trade and sustainable development (TSD) and on trade and gender. On 6 February 2018, the Commission issued a first set of EU negotiating textual proposals, including on trade in goods, rules of origin, technical barriers to trade (TBT), investment and trade in services, public procurement, intellectual property rights, competition, state-owned enterprises (SOEs), small and medium-sized enterprises (SMEs), digital trade, energy and raw materials, anti-corruption, and dispute settlement. The third negotiation round took place in Brussels from 28 May to 1 June 2018. On 29 May 2018, a civil society dialogue on the modernisation of the EU-Chile AA was organised in Brussels. On 22 June 2018, the EU published three new text proposals: on sanitary and phytosanitary measures, trade and gender equality and trade and sustainable development. The parties held a 4th negotiation round in April 2019, a 5th round in July 2019, a 6th round in November 2019, the 7th round in May 2020 and the 8th round in September 2020. The 9th round took place from 11 to 22 January 2021. The 10th round took place from 19 April to 7 May 2021. In June the EU proposed text for both the General Exceptions Chapter and the Sustainable Food Systems Chapter.

Position of the European Parliament

In its resolution of September 2017 the European Parliament suggested achieving better market access in trade in goods, exploiting fully the potential of trade in services, while audio-visual services should be excluded and a provision should be included as to the right of the parties to define, regulate, provide and support public services in the public interest. It recommended to include requirements to address the enforcement of competition law, ambitious provisions on the opening of public procurement, strong and enforceable provisions on the recognition and protection of intellectual property rights (IPRs) including geographical indications (GIs) as well as provisions on tax good governance and transparency standards. Furthermore, it suggested including separate chapters in the trade pillar to cover micro as well as small and medium-sized enterprises (SMEs), energy, investment, trade and sustainable development (TSD), including the respect and the promotion of labour and environmental standards, trade and gender equality and women’s empowerment. It also advocated a commitment by all parties to prioritise recourse to competent courts and replace investor-to-state dispute settlement (ISDS) with a public investment court system (ICS) with an appeal mechanism, strict rules on conflict of interest and an enforceable code of conduct. It backed the conclusion of two separate agreements distinguishing between a  deal under the EU's exclusive competence and a second one for issues where the EU and Member States share competences in accordance with the opinion of the Court of Justice of the European Union (CJEU) on the EU-Singapore Agreement.

During the 8th legislative term Inma Rodríguez-Piñero (S&D, Spain) was the rapporteur for the modernisation of the trade pillar of the EU-Chile Association Agreement.

The Foreign Affairs Committee (AFET) of the European Parliament held an exchange of views on the state of play of EU-Latin America relations in its meeting of 4 February 2021.

References:

Further reading:

Author: Matthew Parry, Members' Research Service, legislative-train@europarl.europa.eu

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As of 20/05/2022.
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