The modernised EU-Chile Agreement enters into force

The EU-Chile Interim Trade Agreement (ITA) enters into force in February 2025. The Confederation of Industry of the Czech Republic regards such agreements as important contributions to the EU’s efforts to diversify markets for both exports and imports, mitigate risks and build more resilient value chains. This is particularly relevant in the case of critical raw materials, which are fundamental to support the green and digital transformations and European competitiveness.

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. In total, the EU-Chile trade in goods was EUR 16.9 billion in 2021 and EUR 6.7 billion in services in 2020.

With a population of 20 million, its annual output is over EUR 268 billion. EU-Chile bilateral trade grew by 142% between 2002 and 2021. EU firms exported to Chile EUR 10 billion in goods in 2021, and EUR 4.1 billion in services in 2020.

Key achievements of the modernized agreement:

The agreement will deepen EU-Chile trade and investment relations and provide new opportunities for EU businesses:

• 99.9% of EU exports will be tariff-free, which is expected to increase EU exports to Chile by up to EUR 4.5 billion.
• Greater access to raw materials and clean fuel crucial for the transition to the green economy, such as lithium, copper, and hydrogen.
• Easier for EU companies to provide their services in Chile, including in delivery, telecommunications, maritime transport and financial services.
• Same treatment for EU investors in Chile as for Chilean investors, including in the energy and raw material sector, and vice versa.
• Improved access for EU companies to Chilean government procurement contracts for goods, services, works and works concessions, and vice versa.
• A dedicated chapter on small and medium-sized enterprises to help ensure that smaller businesses fully benefit from the agreement, including by cutting red tape.

The existing EU-Chile Association Agreement has been modernised through two parallel legal instruments:
1. the Advanced Framework Agreement, that 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 Comprehensive Agreement that are of EU exclusive competence (i.e. not including the investment protection provisions), adopted through the EU-only ratification process. The ITA will expire when the Advanced Framework Agreement enters into force.

Below you may find a summary of the main aspects of the new EU-Chile agreement:

1. Trade and Investments

Trade in Goods
One of the most crucial aspects of the agreement is the elimination of tariffs on almost all EU exports to Chile. With 99.9% of EU products becoming tariff-free, the EU anticipates an increase of up to EUR 4.5 billion in exports. This means that European businesses will find it easier and more cost-effective to sell goods in Chile, enhancing trade competitiveness.
Key benefits include:
- Removal of tariffs on dairy products, food preparations, and agricultural goods, which are vital exports for the EU.
- The gradual elimination of tariff rate quotas on EU cheese, allowing unrestricted access to the Chilean market.
- Liberalization of 162 additional agricultural product tariff lines, with complete tariff removal for cereals and vegetable oils at the agreement’s entry into force.
While most agricultural products will benefit from improved market access, sensitive EU products, such as meat and certain fruits, are protected through stable and limited Tariff Rate Quotas (TRQs), ensuring that the agreement does not disrupt EU farmers’ interests.

Rules of Origin
The ITA introduces a simpler approach to establishing preferential origin. Instead of the EUR.1 movement certificate or invoice declarations, the exporters and importers can now use self-certification, based on statements on origin even for multiple shipments of identical products, or importer’s knowledge.
From 1 February 2025 the following changes apply:

• The EUR.1 movement certificates and the invoice declarations issued in accordance with the (old) EU-Chile Association Agreement will no longer be accepted as proof of preferential origin for the goods imported or released for free circulation in the European Union or Chile starting from 1 February 2025. From that date, the claims for preferential origin should be based on a statement on origin or importer’s knowledge, as appropriate.
• The claims for preferential origin for the products in transit, temporary storage, warehousing or in free zones on 1 February 2025 should be based on the statements on origin, as provided under ITA.
• The Approved Exporter numbers under the (old) Association Agreement are replaced by the REX number. Accordingly, the statements of origin for the EU originating products in consignments above 6000 Euro should contain the REX number. EU exporters requiring a REX number can find out where to apply here.

A detailed guidance on the new ITA rules on preferential origin.

Trade in Services
The agreement significantly enhances the ability of EU service providers to operate in Chile. Previously, businesses faced various market access barriers, but under the new agreement, these restrictions are reduced or eliminated.
European companies will benefit from non-discriminatory access in the following sectors:
• Telecommunications, allowing more efficient cross-border services.
• Maritime transport, facilitating smoother logistics for trade.
• Financial services, enabling banks and insurance firms to operate under more favorable conditions.
• Delivery services, improving international commerce infrastructure.
Importantly, the agreement protects public services by ensuring that neither party is forced to privatize essential services like healthcare, water, or education. EU governments retain full control over how these services are regulated and delivered.

Investment Protection and Fair Competition
The agreement introduces strong investment protection measures, ensuring that EU businesses in Chile are treated equally to Chilean investors. This means that EU firms can establish and operate their companies in Chile without discriminatory restrictions.
Key provisions include:

• An Investment Court System (ICS) to ensure transparency and fair dispute resolution.
• Commitments to sustainable investment practices, aligning with EU environmental and labor standards.
• Stronger legal protections for EU investors, reducing risks and enhancing confidence in the Chilean market.

2. Digital Trade and Innovation

Facilitating E-Commerce and Digital Transactions
As digital trade becomes increasingly vital, the agreement sets out clear rules to enhance online commerce and protect digital transactions. Businesses engaged in digital trade will benefit from:

• Elimination of data localization requirements, allowing cross-border data flows while maintaining strict EU data protection standards.
• Recognition of e-contracts and electronic authentication, providing legal certainty for online transactions.
• Prohibiting unjustified digital trade barriers, ensuring a secure and competitive online marketplace.

These provisions support EU tech companies, fintech firms, and e-commerce platforms, making it easier for them to operate in Chile while maintaining high cybersecurity and privacy standards.

3. Sustainability and Environmental Commitments

For the first time, the agreement includes a Trade and Sustainable Development Chapter, reaffirming both parties’ commitments to environmental protection, climate action, and fair labor practices.
Key sustainability commitments include:

• Full compliance with the Paris Agreement on Climate Change.
• Promotion of sustainable supply chains and responsible business conduct.
• Strengthening labour rights under International Labour Organization (ILO) standards.

These measures ensure that increased trade does not come at the expense of environmental and social responsibilities. Furthermore, the agreement asserts the right of governments to regulate on the basis of the precautionary principle. The 'precautionary principle' means that governments have a legal right to act to protect human, animal or plant health, or the environment, in the face of a perceived risk even when scientific evidence is not conclusive. This is explicitly mentioned in the chapter on trade and sustainable development.
The commitments set out in the section on Trade and Sustainable Development will be enforceable through a dispute settlement mechanism that includes an external review by an independent panel of experts; a role for civil society, including representatives of employers and trade unions, at all stages, and calling on the expertise of international bodies such as the International Labour Organization.
Securing Access to Lithium and Critical Raw Materials
Lithium is essential for battery production, particularly for electric vehicles and renewable energy storage. Chile supplies 40% of the world’s lithium, making it a strategic partner for the EU’s green transition.
Under the agreement:

• The EU secures access to Chilean lithium under fair and non-discriminatory conditions.
• Export restrictions and price manipulation are prohibited to ensure fair market competition.
• Both parties commit to sustainable mining practices to minimize environmental damage.

Hydrogen
Chile aims to become one of the world’s top three green hydrogen producers by 2040. The agreement facilitates renewable hydrogen trade by:

• Ensuring equal market access for EU energy companies.
• Strengthening cooperation on certification standards and trade barriers.
• Allowing European investors to participate in Chile’s renewable energy projects.

This positions Chile as a key partner in the EU’s clean energy transition.

4. Supporting Small Businesses and Geographical Indications

Helping SMEs Expand Internationally
Small and Medium-Sized Enterprises (SMEs) face higher trade barriers than larger corporations. The agreement includes a dedicated SME chapter to:

• Reduce administrative burdens for small exporters.
• Provide a dedicated online platform for market access information.
• Simplify customs procedures to make exporting easier and more cost-effective.

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

• EU companies will be able to participate on an equal footing with Chilean companies in bids for procurement covered by the agreement and vice versa;
• Chile will open up procurement for goods, services, works and works concessions contracts, at lowered thresholds compared to the current agreement, and;
• Finally, it will make the tendering process more transparent. Chile has agreed to publish contract notices online at a single electronic portal for procurement covered by the agreement.

Protecting EU Geographical Indications (GIs)
For the first time, 216 EU Geographical Indications (GIs) will be legally protected in Chile, including for example Parmigiano Reggiano, Bayerisches Bier, and Queso Manchego and wines and spirits such as Prosecco and Tokaji.

Impact on the agricultural sector
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 2nd 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. The existing tariff rate quotas for EU cheese will remain temporarily in place but will be finally liberalised under the new agreement.

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.

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.
The agreement has also a dedicated chapter on Trade and Gender equality, a first for an EU trade agreement.

Sources:
https://www.businesseurope.eu/publications/new-trade-deals-show-eus-commitment-africa-and-latin-america

https://policy.trade.ec.europa.eu/eu-trade-relationships-country-and-region/countries-and-regions/chile/eu-chile-agreement_en