EU Gives Green Light to Australia, New Zealand Trade Talks, Amid Packed Council Agenda

24 May 2018

Trade ministers from the EU’s 28 member states gave their backing on Tuesday 22 May for the launch of negotiations for trade accords with Australia and New Zealand, paving the way for formal talks to begin in the coming months. 

The announcement, which came following a meeting of the EU’s Foreign Affairs Council (Trade), was part of a packed agenda that also saw ministers endorse language on how to handle the negotiation of investment agreements in the future, namely whether these should be dealt with separately from trade accords and if so, how. 

Another key element of the Brussels discussions involved how to address trade tensions with the United States, particularly in light of a 1 June deadline for reaching a deal with Washington to avoid tariffs on imported steel and aluminium. (See Bridges Weekly, 9 May 2018)

Australia, New Zealand officials welcome launch plans

Now that the EU negotiating directives have been approved, EU Trade Commissioner Cecilia Malmström is due to travel to Australia and New Zealand for the formal trade talks’ launch next month, with a first negotiating round for each process set for July.

“We are already close in terms of shared values and our open, global outlook. Together, we will now negotiate win-win trade deals that create new opportunities for our businesses, as well as safeguard high standards in key areas such as sustainable development,” Malmström.

EU Commission statistics suggest that trade deals with both countries could lead to a massive increase in exports to the Oceanic nations, potentially one-third above current levels. The potential benefits for small and medium-sized enterprises are another selling point, officials say, though both the EU and its negotiating partners have acknowledged that agriculture will be especially sensitive in the talks ahead.

The Council’s decision also drew swift praise from Australian and New Zealand trade officials, who welcomed the prospect of starting talks in the near term.

“[A free trade agreement, FTA] with the EU has the potential to set the benchmark for what can be achieved between like-minded partners. Australia and the EU share a commitment to the rules-based global trading system and to open markets,” said a joint media release from Australian Prime Minister Malcolm Turnbull and Trade Minister Steven Ciobo.

New Zealand Trade Minister David Parker similarly praised the Council’s decision, noting that the planned FTA has great economic potential and is a powerful show of partnership, particularly during a period of burgeoning protectionist pressures. He also highlighted Prime Minister Jacinda Ardern’s recent meetings with EU leaders to discuss the accord. (See Bridges Weekly, 19 April 2018

“It is also an endorsement of our strong backing for the talks as the next priority on our extensive free trade agenda, that includes the CPTPP, the Pacific Alliance, and RCEP,” Parker said. 

The CPTPP refers to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), an 11-country trade deal among a group of Pacific Rim partners, currently at the ratification stage. The Pacific Alliance refers to the four-country coalition of Chile, Colombia, Mexico, and Peru, which are jointly negotiating a trade deal with four prospective associate members, including Australia and New Zealand. RCEP refers to the Regional Comprehensive Economic Partnership (RCEP), a planned trade accord between the Association of Southeast Asian Nations (ASEAN) and its six FTA partners.

Approach to future trade agreements

Another key item on the Council agenda was a decision on how to treat future EU trade negotiations, specifically on whether to treat investment as part of this process or in separate agreements.

The EU Commission has been looking for new options for moving forward, after the European Court of Justice (ECJ) issued a ruling on the EU-Singapore trade agreement in 2017 that clarified which parts of that accord fell under the EU’s exclusive competence and which were areas of shared competence with member states. “Mixed agreements” involve both. (See Bridges Weekly, 18 May 2017)

“The Council notes that in the future the Commission intends to recommend draft negotiating directives for FTAs covering exclusive EU competence on the one hand and separate mixed investment agreements on the other, with a view to strengthening the EU’s position as a negotiating partner,” the Council conclusions note.

Those conclusions clarify, however, that the final decision on whether to approve negotiations’ launch on those grounds will remain with the Council. Furthermore, it suggests that this decision should not affect existing negotiating processes, with the Council also indicating a preference for “Association Agreements” to remain “mixed.” Those association agreements include trade but also cover other areas of cooperation, often on the political, cultural, and security levels.

“Negotiating EU-only trade agreements should not lead to a loss of negotiation leverage for the EU to obtain ambitious standalone investment agreements,” the Council said. It also suggests that in cases where an investment agreement is considered “necessary,” that these should be developed in tandem with trade accords.

The Council also makes a specific reference to the EU-Australia and EU-New Zealand trade negotiations in this context, given that the Commission has only proposed negotiating mandates for trade agreements, not investment. “This should not set a precedent for the future,” the EU’s trade ministers said.

US tariffs deadline looming

The bloc’s approach to a 1 June deadline to secure an exemption from US tariffs on imported steel and aluminium was also on the agenda during a lunch meeting among ministers on Tuesday. While the Council conclusions gave limited details about those discussions, they did refer back to recent remarks by EU institutional leaders on the subject, namely European Council President Donald Tusk and European Commission President Jean-Claude Juncker.

Earlier this month, Tusk said ahead of a summit on the EU and the Western Balkans that “unity is our greatest strength” on trade.

“My objective is simple: we stick to our guns. This means a permanent exemption from US tariffs on aluminium and steel if we are to discuss possible trade liberalisation with the US,” he said.

Juncker expressed similar sentiments at the same event, suggesting that if the EU is granted a permanent exemption, then the Commission would be interested in discussing a series of topics with the US – namely, improving energy cooperation, addressing voluntary regulatory cooperation, resolving the impasse over selecting new judges for the WTO’s Appellate Body, and improving “reciprocal market access” in manufacturing and government procurement.

“These talks will be based on the principles of reciprocity and WTO compatibility. We will not negotiate with the Sword of Damocles hanging over our heads," Juncker said at the time.

The EU’s executive arm released publicly last week a list of US goods that would be subject to tariffs of either 10 or 25 percent. Those tariffs would only apply, however, if the US’ own steel and aluminium tariffs are applied.

ICTSD reporting.

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