On 9 March, the EU and Australia will enter their tenth round of negotiations on a free trade agreement - a small milestone marking the steady progress since the formal launch of negotiations in June 2018. At the same time, the EU is also preparing for its tenth round of negotiations with New Zealand. In fact, negotiations with both countries started simultaneously on the basis of identical EU text proposals. Yet, although the EU has similar interests for, and faces some of the same challenges in, the two FTAs, the negotiations are separate, follow their own pace, and will lead to different outcomes.
The progress on these FTA negotiations is a welcome sight during times of global uncertainty and a tendency towards unilateralism. With the WTO facing a crisis in its system for resolving disputes between members, it is crucial that the EU strengthens ties with like-minded partners who are equally committed to rules-based cooperation and open markets as the foundation for economic development.
“While Australia and New Zealand are relatively small economies, the European Commission’s impact assessment has shown that there is potential for significant gains for the EU”
The EU has a trade surplus in goods and services with both countries, although the bilateral trade situation naturally varies depending on the specific good or service. Although Australia and New Zealand have low import duties, both countries impose comparatively high tariffs on some selected products, coupled with non-tariff barriers including differing rules. The negotiations, therefore, aim to reduce barriers for the trade in goods and services, investment, and procurement, for the mutual benefit of our economies and consumers. We intend to facilitate trade and investment for SMEs, while including ambitious sustainable development chapters. The agreements are expected to have positive effects on trade, wages, and employment.
These positive effects would be more than welcome in the current economic climate. It is a tough time for trade; in 2020, EU exports of goods decreased by 9.4 percent compared to the previous year, a worrying development for an export-driven economy. Meanwhile, Australia and New Zealand have both entered recession. As exports support 35 million jobs across the EU and our production relies partly on imports, trade will be crucial for the EU’s recovery after the economic downturn caused by the pandemic.
While Australia and New Zealand are relatively small economies, the European Commission’s impact assessment has shown that there is potential for significant gains for the EU. Both FTAs will be as important in geopolitical terms as in immediate economic terms. They will allow the EU to consolidate its presence in the Asia-Pacific region by being integrated into local value chains and markets. Ambitious FTAs will put EU companies on an equal footing with their competitors from other third countries who already benefit from preferential access to the Australian and New Zealand markets, such as the signatories of the Comprehensive and Progressive Agreement for Trans- Pacific Partnership and, most recently, the Regional Comprehensive Economic Partnership, which includes the ten countries of ASEAN and five Asia-Pacific countries, accounting for 30 percent of the world’s population as well as 30 percent of global GDP.
“In the aftermath of Brexit, the UK will remain the single most important European partner for both countries, but ambitious EU FTAs offer the opportunity to form deeper relationships that go beyond historical British ties”
Naturally, Brexit also has an impact on the EU’s trade relations with Australia and New Zealand. Both countries have strong historical links with the United Kingdom, which previously accounted for about 20- 30 percent of EU28 trade with both Australia and New Zealand. In the aftermath of Brexit, the UK will remain the single most important European partner for both countries, but ambitious EU FTAs offer the opportunity to form deeper relationships that go beyond historical British ties.
As with all EU FTAs, comprehensive provisions on ‘Geographical Indications’ are a key element in the negotiations, in order to protect local identities, producers and consumers alike. Australia and New Zealand are both strong exporters of agricultural products. This triggers some of the EU’s traditional agricultural sensitivities, a fact that needs to be addressed carefully and according to individual circumstances and needs. Duly noted, the EU has a long-standing trade surplus for agricultural and processed agricultural products with Australia, as well as its own offensive interests in the agricultural chapters of the negotiations with both countries. However, I am optimistic that the negotiations will lead to balanced, mutually beneficial outcomes.
Despite the necessary virtual organisation, the negotiations are progressing at a good pace. All parties would like to conclude the negotiations in a timely manner, with substance taking precedence over speed, as we are aiming for very ambitious, high-quality agreements. The conclusion of FTAs with Australia and New Zealand will lead to greater trade, stronger economic growth and more employment for all sides. Strengthening the relationships with both countries must continue to be an EU priority.