European cars to get cheaper, export barriers to be relaxed
London: Australia will slash the price of European cars and open the door to more foreign investment as part of a broad trade deal that will remove barriers to agricultural exporters in the hope of boosting $110 billion a year trade.
The federal government looks set to sign a deal with the European Union this month to bring Australia into compliance with 27 countries in a deal that counters tariffs imposed by U.S. President Donald Trump.
But the final terms depend on whether European negotiators accept calls for greater market access for Australia’s beef and lamb. This is a key factor in deciding whether EU member states can meet some of their demands.
The talks have largely resolved differences over naming rights for European products such as prosecco and feta cheese, paving the way for an outcome that will protect Australian producers using these names.
Prime Minister Anthony Albanese is expected to welcome European Commission President Ursula von der Leyen to Australia in two weeks’ time in the hope of unveiling a deal that will tighten the strategic alliance between the two sides.
But this depends on Trade Minister Don Farrell’s visit to Brussels next week to meet with his EU counterpart Maroš Šefčovič and ensure the final terms deliver as many benefits as possible for Australian farmers.
Farrell slowed down negotiations after EU officials at a meeting in Osaka, Japan, in October 2023 were confident a deal would be reached, but the Australian side believed beef and lamb quotas were not good enough.
The slowdown irritated some in the EU delegation but highlighted Australia’s concern about European rules that limit the volume of beef and lamb coming from overseas, thus protecting farmers at the expense of higher prices for consumers.
EU trade commissioner Šefčovič is scheduled to meet with Farrell next week, EU spokesman Olof Gill said. However, there is no official confirmation about von der Leyen’s visit to Australia.
“The EU is committed to strengthening relations with Australia, a strategic and like-minded partner,” Gill said. “As always, progress in the sensitive phase of negotiations will depend on the merits.”
An Australian government source said the outcome was close and did not deny von der Leyen’s visit. Others said it would happen around February 17 and last a few days. The news of his visit to Australia was reported in the online newspaper Nighty on Wednesday and in Financial Times last month.
Farrell expressed hope that the final hurdles could be overcome this month.
“We’re not that far off,” he told Sky News last week. “Some of the big issues are still unresolved, particularly the volume of Australian beef entering the EU and the circumstances surrounding that beef going to Europe. These are big issues.”
Slow progress on the EU trade deal has irritated Germany and other European countries as their cars face a 5 per cent tariff on the Australian market, while similar duties have been levied on Japanese, South Korean, Chinese, Thai, US and UK vehicles.
It seems that there are plans to remove this tariff and reduce prices for Australian consumers. The EU also wants concessions on Australia’s luxury car tax, which affects many premium European brands. The sources, who spoke on condition of anonymity so they could speak freely about the negotiations, said exemption was unlikely.
One option is to ease the luxury car tax on some electric vehicles in Europe.
The tariff reduction in Australia is also expected to reduce the cost of machinery from Europe, which is a significant cost in manufacturing and technology.
But the biggest economic gains are expected to come from changes that encourage EU member states at a disadvantage to the US, UK or Japan to invest more in Australia.
The Foreign Investment Review Board applies a standard threshold (currently $347 million) to the value of the transaction to trigger a review that could reject the deal. Under trade agreements with the US, UK, Japan and some other countries, that threshold is just under $1.5 billion.
With a trade deal, the EU will join countries with easier trade FIRB rules This could encourage foreign investment.
The European Australia Business Council, which has been advocating for the deal for many years, said the result would bring “billions of dollars in gains” to both parties.
“For business, the FTA will be transformational,” said EABC chief Jason Collins. “It provides certainty, scale and a level playing field for companies operating in both markets.”
Collins cited defence, security, clean energy, critical minerals and advanced technology research as areas that will benefit from the deal.
Final talks could see both sides agree on faster access to skilled workers, allaying concerns in Europe that visa approval could be too slow for workers coming to Australia for major projects.
But a comprehensive agreement on work visas could be challenging because it would require approval from each of the EU’s 27 member states.
On wine and food, another key issue, Albanese warned last year that he did not want to disadvantage Australian producers of prosecco, feta or other products using names the EU claims are exclusively European.
“The naming rights for these products relate to European immigrants coming to Australia and producing products which they continue to call feta or prosecco because of their heritage,” he said.
“This is something Europeans should be proud of.”
One solution to this “geographical indications” debate is for Australian producers, for example, to brand their feta cheese as Australian feta. The treatment of Prosecco could face further consideration under a long-standing wine agreement to ensure it does not jeopardize the trade agreement.
Australia’s trade with the EU is valuable $109.7 billion per year but it is expected to grow under an agreement that removes the hurdles. While goods trade is key to the talks, some of the biggest benefits are expected to come from services trade and greater investment.
European farmers have protested major trade deals in the past, and this has slowed progress on the latest EU deal with “Mercosur” countries such as Brazil, Argentina, Paraguay and Uruguay.
Unlike the Mercosur agreement, the Australia deal will not need much EU approval because Australia already has a partnership with the EU. This means the Australia trade deal requires an executive-level decision by von der Leyen and Šefčovič, followed by approval from member states’ political leaders.
This would eliminate the need for ratification by national parliaments, depending on the scope of the agreement.
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David Crowe is the European correspondent for The Sydney Morning Herald and The Age.Connect with: X or email.
