Evolving Trade Agreements: Korea-Chile FTA Upgrade Negotiations

• Author Soo Hyun (Catherine) Oh
• Series297
• Date2024-09-03

Since its inception in 2004, the Korea-Chile Free Trade Agreement (FTA) has embarked on a journey that has led to the renewed negotiations that began in 2018. Twenty years ago, South Korea and Chile signed their pioneering FTA, marking a significant milestone as Korea’s first such agreement. This agreement laid the foundation for economic ties, facilitating a surge in bilateral trade from $1.58 billion in 2004 to $8.82 billion in 2003. Trade between the two countries saw a substantial rise, with South Korea’s imports from Chile growing dramatically from $1.06 billion in 2004 to $7.57 billion in 2023. South Korea is currently engaged in negotiations to revise its FTA with Chile, with the first round of negotiations in November 2018. This review and renegotiation of the agreement is not merely an update but a reaffirmation of a partnership poised to meet the demands of modern trade.

One of the pivotal aspects of the current renegotiations is the potential introduction of a chapter on raw materials. This chapter would facilitate the establishment of a stable supply chain for critical minerals, especially copper and lithium, of which Chile holds the world's largest reserves. This chapter is essential from the perspective of supply chain stabilization, as it aligns with global shifts towards environmentally sustainable technologies and the burgeoning electric vehicle market. Lithium is a critical raw material for electric vehicle batteries. In particular, South Korea's leading battery companies, including LG Energy Solution, Samsung SDI, and SK On, import most of their lithium carbonate from Chile.

Chile is seeking partners to attract foreign investment in mineral development, aiming to expand lithium mining and establish supply chains beyond the processing stages to generate added value. This strategy aligns well with South Korea's position in the midstream and downstream sectors of the battery supply chain, and both countries are capable of pursuing responsible sourcing, making the two countries ideal partners. Additionally, since Chile also signed an FTA with the United States in 2004, increasing the local extraction and processing ratio would still meet the critical minerals requirements of the U.S. Inflation Reduction Act (IRA). Therefore, a new chapter on raw materials in the revised FTA with Chile would provide strong potential to enhance cooperation between the two countries in the energy and minerals sectors.

Equally significant in the ongoing Korea-Chile FTA renegotiations are discussions to introduce a new chapter on gender equality. Chile is one of the leading countries in the international community that actively promotes “Trade and Gender” agenda. Over the years, Chile has presented roadmaps on women's economic empowerment through the APEC and Pacific Alliance (PA), introducing a “Trade and Gender” chapter in trade agreements signed in the late 2010s.  Additionally, Chile, along with Canada and New Zealand, spearheaded the Global Trade and Gender Arrangement (GTAGA), which was concluded in 2020. The Chilean government's leadership on trade and gender agenda is known to have been influenced by awareness of the low participation rate of women in trade  and the impact of female leadership, particularly under the presidency of Verónica Michelle Bachelet, who served as the 39th and 41st President of Chile.

Including a "Trade and Gender" chapter in the FTA would signify a commitment to integrating gender perspectives into the economic and trade sectors. When reviewing Chile's previously signed FTA provisions, this chapter would declare the importance of reducing trade and investment barriers from a gender equality standpoint and emphasize the need to provide equal opportunities. It would also outline specific cooperation activities aimed at empowering women entrepreneurs, detailing the areas of action where these activities could take place. This progressive move is part of inclusive growth, ensuring trade benefits are more equitably distributed.

As of now, the renegotiation efforts are in full swing, with the ninth round recently held in Santiago. These discussions have been comprehensive, covering various areas including digital trade, intellectual property, and environment. The ongoing dialogues underscore the mutual determination to adapt to the evolving global trade landscape, and to address new economic realities through enhanced cooperation. A key highlight of the Korea-Chile FTA upgrade is that once concluded, it will be Korea’s first FTA to include both a raw material chapter and a gender chapter.

In conclusion, the ongoing negotiation is progressing optimistically. The Korea-Chile FTA upgrade offers the potential for economic gains and strategic advantages in terms of resource security and social progress. By integrating forward-thinking provisions on raw materials and gender equality, this renewed agreement could serve as a model for future trade deals. It reflects a shared vision of harmonizing economic growth with Environmental, Social, and Governance responsibility. In this evolving narrative, the Korea-Chile FTA is a testament to the enduring power of partnership and the continuous journey toward mutual prosperity.

Soo Hyun (Catherine) Oh ✉️

Ph.D., Associate Research Fellow, New Trade Strategy Team

Department of International Trade, Investment and Economic Security

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