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Free Trade Fair Trade?

- EU and Chile Plan New Agreement -

Landau 2 January 2021.

At the end of last year, Deutsche Welle and Deutschlandfunk reported on the free trade agreement currently being negotiated between Chile and the EU. This article is a review of the two articles.

The new agreement aims to link the two economic zones more closely and further reduce trade barriers. The existing 17-year-old agreement has led to a doubling of trade. Chile exports almost exclusively raw materials such as copper, lithium, mining and agricultural products such as pulp, avocados, blueberries, wine, nuts and salmon. The EU, on the other hand, supplies processed products such as vehicles, aircraft, medicines and chemical products. European companies, which account for around a third of foreign direct investment, invest mainly in the energy, mining and infrastructure sectors.

The plans provoke contradictions on both sides. Critics point out that the agreement
1. further deepens the dependence of the Chilean economy on the export of raw materials and prevents Chile from developing its own industries, e.g., the production of lithium batteries.
2. one-sidedly exacerbates trade problems in Chile itself. For example, the water-intensive agriculture is creating dry periods, monocultures and the increasing use of pesticides endanger biodiversity, as does mining through toxic acidification.

In the planned agreement, the EU and Chile commit themselves to the Paris Agreement on Climate Change and the United Nations Sustainable Development Goals. Both parties undertake to respect the core labor standards of the International Labour Organization. This includes Convention 169 on the Protection of Indigenous and Tribal Peoples. However, no sanctions are provided for in the event of breaches of the rules. Violations are either not or hardly justiciable. Victims cannot sue. The State has to bring a lawsuit and it usually does not. That is precisely why the Mercosur Agreement, which the EU intends to conclude with Argentina, Paraguay, Uruguay and Brazil, was rejected by the European Parliament in October: toothless, non-binding commitments on sustainability, while the forests continue to burn in the Amazon.

On the other hand, corporations are to be effectively protected. They would be able to claim compensation in an investment court if profits are affected by political decisions. This would be the case, for example, if a new constitution provides better protection for workers and the environment and re-designates natural resources, such as water, as community property. Critics point to the dangerous dynamics of such a jurisdiction. Even the threat of an investor lawsuit can lead to Chile's failure to regulate workers, health and the environment. There is a risk that the state will be reshaped in favor of foreign investors. The rights of citizens whose interests differ from those of investors, would be lost.

Chile and the EU want to adopt the agreement as soon as possible in order to avoid difficulties caused by the process of the "new constitution". The 2019 protests have suggested that a majority want more social compensation and better health and environmental protection. "Entrepreneurial interests first" does not fit in with this. The European Green Deal speaks of a "sustainable economy", of "international cooperation to improve global environmental standards". These objectives do not appear to be supported by the agreement currently envisaged.

W.K.

translated by Erich Greiner

 

Notes

Sophia Boddenberg, EU and Chile - Free trade agreement with threatening consequences, Deutschlandfunk, 25-12-20

Sophia Boddenberg, Loreto Contreras and Maria Cariola, EU-Chile Free Trade Agreement: Opportunity or Obstacle?, Deutsche Welle 02-11-20

 

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