Sustainability Impact Assessment for the Modernisation of the EU-Chile Trade Agreement

SIAs analyse the potential economic, social, human rights and environmental impact of trade agreements being negotiated by the European Union (EU). They are based on a robust analysis of the changes that are likely to be caused by the trade agreement in the EU, the partner country and developing countries. Equally important, they include wide-ranging consultations of stakeholders in the EU and the partner country. SIAs are undertaken independently by external consultants commissioned by the European Commission. SIA findings and recommendations feed into the negotiations, helping negotiators to optimise the related policy choices.

In 2003, Chile was the first South American country to have an Association Agreement with the EU. Since then, the global economy has changed profoundly, and therefore Chile and the EU have decided to modernise the existing Agreement. Negotiations on the modernisation started in November 2017. The SIA in support of the negotiations was implemented by us in cooperation with Vincular, the Center for Social Responsibility and Sustainable Development at the Catholic University of Valparaíso in Chile. Work started in April 2018 and was completed in May 2019.

The SIA, as all SIAs, consisted of two equally important and complementary components:

  • a robust analysis of the potential economic, social, human rights and environmental impact (both negative and positive) that the modernised trade Agreement under negotiation could have in Chile, the EU and in other relevant countries (notably the EU's outermost regions and least developed countries) - this section provides more details on these analysis; and
  • a continuous and wide-ranging consultation process to ensure a high degree of transparency and the engagement of all relevant stakeholders in the conduct of the SIA.

The economic impact analysis provided the starting point for the SIA, as many of the other effects are consequences of the agreement's economic effects. The economic impact analysis was not restricted to changes in Chile's and the EU's exports and imports but covered a vast range of economic factors. Among the issues that the economic analysis comprised are:

  • The impact of removing both tariffs and non-tariff barriers affecting trade in goods and services, and investment. As most tariffs have already been removed under the existing trade agreement, the focus of the analysis will be on non-tariff barriers. Also, the impact of liberalising public procurement will be assessed;
  • The impact on SMEs as well as on participation in global value chains;
  • Implementation capacity for administering rules of origin;
  • The impact of the modernised Agreement on third regions, in particular the EU outermost regions and least developed countries (LDCs);
  • Implications which the agreement might have for the promotion of good governance and fight against corruption; and
  • The links between the EU-Chile trade agreement and both parties' conclusion of trade agreements with other countries (such as the CPTPP in the case of Chile or the EU-Mercosur agreement currently being negotiated).

The starting point for the economic analysis was the CGE modelling undertaken by the Commission, complemented by additional quantitative and qualitative analysis.

The social analysis responded to the question of how a reduction of tariff and non-tariff barriers in the modernised Agreement, and the resulting changes in trade and investment flows between the EU and Chile may affect the situation on the labour market, job quality, welfare, rights of consumers, and public policies and services, such as social protection, education, and health-care in both Chile and the EU.

The human rights analysis responded to the question of how the modernised agreement may affect the human rights situation in both Chile and the EU. The assessment was carried out by taking into account the EC human rights impact assessment guidelines as well as using the Better Regulation Toolbox. It is based on the international human rights normative framework, including core UN human rights treaties and conventions, the Charter of Fundamental Rights of the European Union, the European Convention on Human Rights and other relevant regional human rights conventions, core ILO Conventions, and, where relevant, customary international law.

The environmental analysis provided a detailed assessment of the potential environmental impact, both direct and indirect, of the future modernised agreement. Although the analytical work carried out in the ex-ante study had shown that, overall, environmental impacts are likely to be limited both in Chile and the EU, recent political agreements in Chile and in the EU could have a significant impact on selected environmental matters. For example, the ratification and entry into force of the Paris Climate Agreement was expected to stimulate policies and measures to mitigate greenhouse gas (GHG) emissions and consequently impact investments and production and consumption patterns. Therefore, in line with the EU Council’s Negotiation Directives the study assessed possibilities for promoting a greater contribution of trade and investment to sustainable development as well as promotion of trade favouring low-emission, climate-resilient development. The analysis focussed mainly on GHG, use of energy, air quality, biodiversity, water resources, ecosystems services and protected areas and waste management.

The general impact analysis was complemented by assessments of selected economic sectors and thematic case studies.

Continuous and wide-ranging consultations with stakeholders both in Chile and the EU ensured a high degree of the SIA’s transparency, as well as enriched the analysis with information “from the ground”, and provided feedback on draft results. The main channels for communication and consultation – apart from this website – were:

  • Interviews and surveys, including online surveys, with key stakeholders;
  • Civil society dialogue meetings in the EU; and
  • Several stakeholder workshops in Chile.

Study outputs

All reports produced are available for download from the European Commission, including the Commission's position paper (June 2020) in response to the SIA.