Cars, cows and more as Australia inches closer to mega trade win
London: Australia is closer than ever to a trade deal with Europe that would lower prices for consumers and boost sales for exporters after talks in Brussels paved the way for a deal within weeks.
Possible gains for Australian households include lower prices for European exports such as cars and trucks, leading to the removal of a 5 per cent additional duty on each vehicle.
Australian farmers are also sure to benefit from greater export opportunities in Europe, but both sides are still bickering over the scale of the increase in beef and lamb sales.
The net result will expand the two-way trade relationship with Australia, currently worth around $110 billion each year, making it the most significant deal with the European Union in more than a decade. It has always been much more than cars and cows.
There was a serious risk of failure when Trade Minister Don Farrell arrived in Brussels for two days of talks on Thursday and Friday with his EU counterpart Maroš Šefčovič. There was always the possibility that Europeans would not have adequate access to beef and lamb, in which case Farrell would simply walk away.
Therefore, the fact that the talks continued for a second day and ended with a positive statement on Friday afternoon (Brussels time) means that a deal is finally on the horizon.
There is now a stronger chance that European Commission President Ursula von der Leyen will visit Australia to sign a deal with Prime Minister Anthony Albanese. This potential trip has been in the air for at least four weeks, but now there’s a solid reason for it to go ahead.
Of course, this will only gain modest traction when it makes headlines with the expansion of the Liberal Party leadership and the rise of Angus Taylor as leader of the opposition. There is much less drama in the mundane business of government.
However, there are three important and strategic reasons why the news from Brussels should be welcomed.
First, Australia and Europe are moving closer together at a time when both are having to deal with Donald Trump’s sudden upheavals on trade and security. The US president is turning America into an unreliable ally. Australia’s rational response would be to tighten ties with other allies.
Second, Australian leaders have been saying for years that we should rely less on China for our exports. Of course, sales to Europe cannot cover the huge volume of coal, gas and iron ore trade with China. But it would be wise to diversify.
Thirdly, the trade agreement should be accompanied by a defense partnership.
This will not be an alliance like NATO or ANZUS, but an agreement to work together on exercises and supply.
It could help Australian companies sell equipment to Europe and help both sides work together on “hybrid warfare” threats such as drone strikes and cyberattacks. More clearly, relations with Russia and China will be in question.
There are also likely to be practical and fairly immediate benefits.
The first is that cars from Europe have become cheaper for households. Currently a European car costs 5 per cent more due to the Australian tariff regime.
This puts not only luxury brands, but also Volkswagen, Skoda, Fiat and other companies at a disadvantage against their competitors in China, Japan, Thailand and the USA. (All of these countries already have trade agreements with Australia.) This is a good thing for competition.
Another is that the prices of other capital goods also decrease. Although most products enter Australia without any barriers, there is still a 5 per cent duty on many products from Europe. For example, a cafe may pay more for a coffee machine. A shipping company may pay more for a European truck.
There will also be a benefit for farmers who want to export more beef and lamb but are blocked by EU quotas. In January, Europeans appeared willing to allow 24,000 tonnes of beef and 20,000 tonnes of lamb to be brought in from Australia each year. This was so low that there didn’t seem to be much point in making a deal. Farrell pressed for more.
According to Meat and Livestock Australia, Australia is currently prohibited from sending more than 3389 tonnes of beef to the EU each year. He wants to increase it to 50,000 tons, We argue that this is appropriate EU agreements with Canada and Brazil. Farm groups in Europe are lobbying to keep the number low.
Farrell spoke positively on Friday, which suggests he is making some progress. The Australian side’s “stretch” target would be anything over 40,000 tonnes.
There are other gains that will sweeten the final deal. Europe wants access to Australia’s critical minerals and there is no reason to turn it down.
There is likely to be a limited agreement to facilitate the movement of skilled workers between Australian and European employers, but it will not be an open agreement. (Any more ambitious decision on visa rules would need approval from national parliaments across Europe.)
Jason Collins, who chairs the European Australia Business Council, said finalizing a deal would be a “smart move” to increase access to 450 million consumers across the EU.
This decision to start trade talks It dates back to 2015. Progress was so slow that Farrell left two years ago because Europeans did not offer adequate access to beef and lamb. He was right to insist on a better deal.
In Brussels on Friday, the trade minister issued a brief statement: “I am confident that both Australia and the European Union will reach an agreement that will benefit both our economies.”
He didn’t say they “could” reach an agreement – he said they “will.” After more than a decade, a deal is on the horizon.
This won’t attract as much attention as the Liberal leadership spill, but it represents a quiet economic win for Labor. Household gains are real. And in the age of Trump, the strategic benefits should not be ignored.
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David Crowe is the European correspondent for The Sydney Morning Herald and The Age.Connect with: X or email.
