After noting the loss of confidence in its traditional partners, the European Union does not desist in its search for new avenues that serve to diversify its alliances, as well as its areas of interest. This endeavor has led the President of the European Commission, Ursula von der Leyen, to Australia for the signing of a historic strengthening of relations between both powers.
Geographical distance does not justify strategic estrangement, they believe in Brussels. The community leader states that the alliance “drives prosperity through rules-based trade”, along with a collaboration “to defend global institutions”. “And we send a clear message to the rest of the world: friendship and cooperation are what matter most in times of uncertainty”, she declared this Tuesday when explaining that the powers are committed to building a cleaner and digital future.
A comprehensive agreement: trade, security, and research
The conclusion of the negotiations has resulted in materializing in a Free Trade Agreement, the adoption of a security and defense partnership and the start of discussions on the association of the oceanic country to Horizon Europe, the research and innovation program “largest in the world”.
The free trade agreement has the objective, as recognized in Brussels, of boosting mutual prosperity through rules-based trade and market opening. It is estimated that European Union exports to Australia could grow by up to 33% in the next decade, reaching 17.7 billion euros annually. Furthermore, the continent's investment in the region could have the potential to increase by more than 87%.
The opening of new horizons
The novelty of the announcement is the elimination of more than 99% of tariffs on European Union goods exports, which will save companies approximately 1 billion euros per year in trade barriers. However, certain steel products will be excluded from this liberalization by both parties.
Along with the commercial part, the Australian services market will open in key sectors such as financial, telecommunications, and maritime transport. Community companies will also be able to bid in public procurement contracts of the Australian Executive on equal terms with local companies.
The European Commission wants to make it easier for professionals from the bloc to work in the power of the Pacific, establishing entry quotas of more than three thousand researchers and engineers in training per year. The legal text includes a chapter dedicated exclusively to small and medium-sized enterprises to provide them with information, while export costs are reduced thanks to digitized customs procedures.
The agreement reached prohibits data localization requirements, guaranteeing an open and secure online environment, while maintaining the European Union's own personal data protection standards. However, both powers intended that this commercial opening be balanced with the protection of sensitive sectors for Europeans.
Denomination of origin
Regarding European Union exports, tariffs will be eliminated for star products such as wine from day one, cheeses within a period of three years, chocolates, sweets, and fruit and vegetable preparations. For its part, Australia will protect 165 food names and 231 EU spirit drinks, such as Manchego Cheese, Irish Whiskey, and Lübeck Marzipan. Regarding Prosecco, Australian producers must stop using this name after a transition period of a decade.
For products such as beef, lamb, sugar, rice and some dairy products, it is foreseen that tariff quotas will be applied, strictly calibrated to allow limited imports from Australia. For example, beef will have a quota of 30,600 tons that will be gradually introduced over 10 years.
The red lines
Among the non-negotiable standards, Brussels has refused to modify those related to the food safety of the European Union. All imports must comply with community rules, including those concerning pesticides. In this regard, the Commission reaffirms the precautionary principle, allowing the EU to act to protect public health even if scientific evidence is not conclusive.
Both powers recognize the role of the Pacific region as one of the great producers of essential raw materials such as lithium, magnesium, and aluminum. For this reason, the commercial alliance wants to guarantee predictable access for Europeans by prohibiting export monopolies and arbitrary restrictions.
Nevertheless, it is the first agreement signed by the European Union that includes an article dedicated to trade and gender equality. Binding and sanctionable commitments are also stipulated regarding the Paris Agreement for climate and the fundamental labor standards of the International Labour Organization. In terms of security, Europe and Australia have set the goal of establishing an institutional framework to address current geopolitical challenges. Thus, coordination will be developed in artificial intelligence, space security, non-proliferation, and disarmament.
What comes now?
As on previous occasions when similar agreements have been greenlighted, such as in the case of Mercosur or India, the texts announced this Tuesday must be adopted by the Council of the European Union, that is, the trade officials of the bloc, and receive the consent of the European Parliament before the agreement can enter into force. All this, once Australia has also ratified it.
In the European Commission's trade department, they state that the agreement comes at the opportune moment. “It is about creating business opportunities and supporting employment. Our trade already sustains 460,000 European jobs; imagine the potential, with a projected 33% growth in EU goods exports over the next decade”, highlighted Commissioner Maroš Šefčovič.
Impact in Spain: opportunities and protection
The impact of the agreement in Spain will be reflected mainly in the protection of its products. For example, the step taken for the national agri-food sector is especially relevant, as safeguards are included for the protection of intellectual property rights in the Australian market.
Aside from Manchego cheese, Jerez vinegar will also receive full protection after a brief transition period in which Australian producers who used the name in good faith must cease doing so. Australia will fully liberalize access to its market for passenger cars from day one. This favors manufacturing plants in Spain, especially in the field of electric vehicles, as 75% of them will be exempt from the Australian luxury car tax.
The agreement eliminates tariffs for certain fruits, vegetables and their preserves, as well as those industrial tariffs, which will ultimately benefit Spanish exports of chemical products and capital goods.