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Australia-EU free trade agreement back on track with Albanese government, ambassador says | Australian foreign policy

Australia’s climate change policy and tough stance on Russia’s invasion of Ukraine are among the reasons a free trade agreement with Europe is now on track to be inked next year.

The outgoing European Union ambassador, Dr Michael Pulch, said there was a “renewed sense of urgency” to the negotiations with Europe, Australia’s second largest trading partner.

As well as climate change and Ukraine, the healed rift with France after the submarine contract was dumped and the need for more diverse trade networks mean the languishing process is now speeding up.

An FTA with the EU would give Australia a more competitive edge in a market with a GDP of more than $20tn, with reduced tariffs on goods including agricultural exports.

Talks began in 2018, but meetings were postponed last year after the former government blindsided France by cancelling the submarine contract in favour of the Aukus deal. On the same day climate change legislation passed the lower house, Pulch said the end was in sight.

“In Europe, every agreement, whether it’s political or economic or trade, needs to be a net plus on climate change,” he said.

“That would have been a bit of a challenge with the climate change policy that was in place beforehand. Now we have a new government with a more ambitious climate policy and that helps us enormously.”

Pulch also praised “Australia’s very proactive engagement with Ukraine against Russia’s military aggression”, which wasn’t necessarily expected from such a geographically remote country. The prime minister Anthony Albanese’s participation in the recent Nato summit and his visit to Kyiv were politically important, Pulch said.

“Opposing autocratic regimes imposing their will on neighbours is something everyone with our values system should stand against,” he said.

“This creates a lot of goodwill in Europe.”

The “reset” of the relationship with France also played a role, he said.

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Recent events also showed the need for both countries to diversify their trade relations, Pulch said. The pandemic showed the importance of resilient supply chains, while Australia had been hit by trade sanctions from China and Europe’s dependence on Russia for its gas supply had resulted in shortages.

The trade minister, Don Farrell, will shortly host an EU delegation in Canberra, ahead of the next round of talks in October.

“Things are back on track. The prime minister has resolved the issue with France, the Europeans appreciate our changed position on climate change and I’m extremely confident we can nail it early in the new year,” Farrell said.

“There’ll be a range of issues that’ll be difficult, but in every negotiation there’s a solution, and I can find it.”

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The EU’s carbon border adjustment mechanism, which has been referred to as an effective carbon tax, will have minimal impact on the price of Australian goods when it is gradually phased in after 2026, Pulch said.

By that time, Australia could stand to benefit from it by exporting renewable energy products such as green steel or aluminium at more competitive rates.

Sticking points in the negotiations include the EU’s push to scrap the luxury car tax, the details on access to agricultural markets, and rules on naming products.

The progress on the FTA comes as the EU is increasing its engagement and visibility in the Indo-Pacific region, both through trade and investment and a military presence.

As tensions between Taiwan and China simmer, Pulch said there was a “higher level of concern than usual”, and that the EU wanted to see a de-escalation. The renewed engagement was not aimed at China, he said, although rebalancing the relationship with a “more assertive China” was important.

There are also ongoing discussions about the EU’s protection of geographical indicators, which means place names will not be allowed to be used for products that are not actually from that place.

It is similar to the appellation rules that saw Australia stop calling fizzy wine “champagne”, and instead call it sparkling wine.

Under the EU’s rules, camembert can still be called camembert, for example, but it cannot be called camembert de Normandie unless it is actually imported from France’s Normandy province. That protects both Normandy’s brand and its industry. In return, Australian brands and industries will be protected.

Pulch said there were 400 products that would be affected but only a dozen or so were contested, and the disagreements could be solved by a compromise such as grandfathering the rule.

The FTA will act as an anchor for Europe and Australia to do more together than ever before, he said.

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