It’s Friday, so what could you possibly want to discuss more than a tax treaty between the United States and Chile? It’s a topic worth discussing because the U.S. Senate finally ratified the treaty on Thursday in a 96-2 roll call vote. It was the culmination of a 13-year effort that was held up primarily by Sen. Rand Paul of Kentucky. Paul and Sen. Josh Hawley of Missouri were the only dissenters on final passage. So, why did Paul object and why were his objections finally overcome now?

Ostensibly, Paul’s concern is that the treaty will give the Chilean government insights into some Americans’ taxes which is a violation of privacy. I have my doubts that this is his true objection, but after perusing several articles spanning more than a decade, I haven’t found an alternative explanation. In any case, ratification of the treaty has been a long, painful process.

On February 4, 2010, the United States and Chile signed the Convention between the Government of the United States of America and the Government of the Republic of Chile for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital (the US-Chile Treaty or the Treaty). See US Senate approves four treaty protocols for background. It was referred to the SFRC [Senate Foreign Relations Committee] on May 17, 2012 and considered at SFRC hearings and reported out favorably in 2014 and 2015 but was not voted on by the full Senate.

You can read a scholarly abstract on what the provisions of the treaty are designed to do here. It’s basically a way to make foreign direct investment in Chile more attractive and profitable for Americans, while giving the Chilean government some reason to expect that any loss of tax collection through lower rates will be made up by cracking down on tax avoidance and the generation of higher economic growth. The treaty has been a priority for the U.S. Chamber of Commerce, and you’ll note that it won the unanimous support of Democrats across the ideological spectrum from Bernie Sanders to Joe Manchin.

The reason it finally won ratification is that lithium is becoming more and more important as the country and the world move toward a clearer energy future featuring a lot less coal and gas and a lot more electric vehicles (EVs), solar cells, and wind turbines. Chile has the largest lithium reserves in the world. The largest lithium mine in the world is in Chile. It’s operated by an American company called Albemarle. But companies like Albemarle have been suffering a competitive disadvantage because Chile has already signed a tax treaty with a couple dozen countries.

Without a ratified treaty to avoid double taxation, taxes on U.S. companies with Chilean operations will climb as high as 44%. However, companies headquartered in the two dozen European, Asian, and Western Hemisphere countries with which Chile already has a tax treaty in force will benefit from a much lower tax rate and would thus secure a significant competitive advantage over their U.S. competitors.

It’s expected that foreign investment in Chile’s lithium industry will create an economic boom, and the U.S. Senate doesn’t want America to lose out, especially to competitors like China. Just as securing access to foreign oil fields has been both a profit and a national security priority, the same is true for the vital minerals of the future.

Why has Sen. Paul been standing in the way? Maybe Kentucky’s coal economy has something to do with it? Maybe it’s some Ayn Rand-related libertarian tic that makes no sense to ordinary people. Whatever the reason, his fight is over and he lost.