As the world moves fitfully away from the fossil fuel-based economy, the model it replaces will generate its own new forms of international relations, alliance dynamics, and conflicts. The European Union aspires to green, digital, and social forms of growth and development. But to sustain this transformation and maintain the EU’s global influence, European diplomacy must scan the global environment to locate allies and friends to drive this transformation project forward.
Its relationship with Chile is a test case for the EU’s capacity to navigate the emerging “à la carte” multipolar order, in which countries pragmatically choose their partners depending on the issue at hand. Chile is the world’s largest producer of copper and the second largest producer of lithium, a domination that is set to last given its proven reserves of both metals. From the vantage point of Europe, Chile could provide immense assistance in powering the green transition – literally, through supplying the materials to power the batteries that Europeans are relying on to digitise and electrify their economy.
The EU already imports 80 per cent of its lithium from Chile – a crucial dependency in the rapidly evolving world economy. In part to address this, the EU and Chile have just agreed a modernised association agreement; Chile’s foreign minister visited Brussels this week to sign the accord. Its provisions include strengthened trade relations and, importantly, very high standards of environmental and labour protections, with an emphasis on sustainable development and EU investment in renewables. Alongside this, in July the EU and Chile signed a pioneering memorandum of understanding on critical materials and supply chains that aims to deepen such cooperation. They have also created a green hydrogen steering committee to channel know-how and investment.
The successful conclusion of this agreement matters for the EU’s broader efforts to shore up its economic security and pursuit of “strategic autonomy” in an increasingly unstable world. The EU this year adopted a critical raw materials act to secure its strategic supplies, and it is actively working to identify sectors and products where external dependencies and geographic concentrations leave the EU vulnerable. To tackle this, it can diversify supply (as it has done with gas following Russia’s all-out invasion of Ukraine) and establish long-term investment facilitation agreements with countries that produce strategic raw materials, batteries, and renewable hydrogen – as it is doing with Chile and other countries, such as Kazakhstan.
Chile is an attractive partner in this regard. It is a liberal democracy with a strong commitment to international law, multilateralism, and human rights. In 2002, Chile became the first country in Latin America to sign an association country with the EU; and more recently it has also shown a large degree of alignment with the EU regarding Russia’s war on Ukraine. The country possesses enormous renewable energy potential, with abundant sunshine in the north and wind in the south, making it an excellent candidate to achieve emissions neutrality and develop a green economy. Chile is also actively seeking to become an attractive investment location for European firms, some of which have already shown great interest in the country’s renewables sector. In addition, the EU recently launched a €225m green hydrogen initiative with the backing of the European Investment Bank to support the country’s energy transition. Chile is thus a potential ally when it comes to multilateral climate negotiations and cutting global carbon emissions.
However, Chile does not necessarily align with the EU on everything. President Gabriel Boric’s foreign policy doctrine is based on the concept of “political autonomy”, which envisages maintaining political and commercial interests with Europe, the United States, and China. Indeed, trade with China is a key part of Chile’s development model, and Beijing in turn plans to use Chilean resources to support its economic growth process, technological development, and local supply chains. From Chile’s point of view, China’s recent interest in increasing its investments in Chilean lithium and energy for the country represents an opportunity rather than a threat. It also shows that China’s approach to the region is stepping up a gear; EU decision-makers should not assume that they will be able to dominate investments in the renewables sector. Indeed, if they do not move quickly, China will outperform the EU in green and strategic raw material investments.
The EU’s new deal with Chile very much reflects the fraught geopolitical context. The bloc says so itself, when it describes the agreement as helping to address the “repercussions of the Russian invasion of Ukraine, including global inflation, supply chain disruptions and the energy crisis.” The EU is working to more systematically connect with states of the global south and take on Russian and Chinese influence. Latin America is a region where it is looking to revitalise relations, which have lain neglected for some time – the last summit the EU held with the region was in 2015. The revived summit in Brussels this July under the Spanish EU presidency made little progress in terms of trade agreements; and the EU-Mercosur trade agreement negotiations, which started in 2000 and concluded in 2019, remain unratified due to differences over agriculture and environmental protection. Still, while the EU-Chile agreement is smaller in scale, it will allow the EU to close 2023 on a positive note, and even create momentum towards getting the Mercosur agreement signed; the new Argentinian president, Javier Milei, is eager to ratify the deal.
European policymakers should take heart from their ability to present a more attractive offer than China – one able to address Chile’s internal preoccupations. The Chilean economy has long been marked by extractivism and the export of raw materials, which has undermined the inclusiveness and sustainability of its economic development model. The country suffers significant inequality and deep polarisation and divisions. Recent governments have recognised these drawbacks, and attempted to use resources such as copper and lithium to make an industrial leap and become a green economy, especially in the field of green hydrogen. As the Chilean government’s recent lithium, renewables and green hydrogen strategies spell out, it not only wants to attract investments in its productive-extractive sector, it also wants to import knowledge, to ensure that such investment bequeaths a legacy of know-how, innovation ecosystems, and quality jobs. The goal is to escape historical experiences based on the export of natural resources without developing an industrial capacityof one’s own. In this sense, even if Chile is pragmatic and welcomes Chinese trade and investments in its energy sector, its policy is ultimately more aligned with that of the EU when it comes to managing the environmental and social impact of these investments, reducing inequality, and making democracy work for all.
The new agreement with Chile shows that the EU is making progress in navigating the emerging à la carte multipolar world. It is able to put in place the strategies and agreements needed to create mutual benefit for partners around the world, and thereby strengthen bilateral relations. This includes countries such as Chile, which pursues non-alignment and diversification strategies to strengthen economic security and sovereignty. The EU will be able to showcase this positive contribution to a country’s growth and economic transformation strategies, and will be able to position itself well in the competitive world market of resources – and influence.
About the Author
Lucia Dammert is professor of international relations at the Universidad de Santiago de Chile.