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EU, Chile To Launch Talks On FTA Modernization

Tuesday, November 14, 2017

On November 13, the European Council approved a mandate to negotiate the modernization of the existing free trade arrangements with Chile.

Political and economic relations between the EU and Chile are governed by the association agreement signed in 2002. The agreement was provisionally applied, including the trade provisions, in 2003, and the rest of the agreement was implemented in 2005.

EU tariffs on Chilean imports were low when the deal was first negotiated –2.4 percent in 1997 - and since 1998 Chile's average effective ad valorem tariff rate on all its imports has declined from 8.4 percent to 0.9 percent in 2015. In fact, Chile has now free trade deals with 65 partner countries that cover 95 percent of Chile's foreign trade.

The EU deal had provided for the removal of the majority of the already low tariffs on bilateral trade. Under the deal trade has thrived; Chilean exports of agricultural and food products and services to the EU have nearly tripled while EU exports to Chile have doubled in most sectors.

However, according to the European Council, the existing agreement does not address some important trade and investment issues, such as specific provisions on investment, non-tariff barriers, intellectual property rights, and some geographical indications and contributions to sustainable development.

While covered trade in goods are typically subject to no tariffs at all, an EU feasibility study on a potential revision to the deal noted that about a fifth of Chilean agricultural sector imports are not covered by tariff concessions under the pact. This is particularly significant for Chile as agriculture accounts for 29.2 percent of Chilean exports to the EU.

EU Council approval enables a first round of talks to begin on November 16, 2017.