Preparations for EU-Australia Trade Talks in the Spotlight as Macron Visits Sydney

3 May 2018

French President Emmanuel Macron visited Sydney this week to discuss with Australian Prime Minister Malcolm Turnbull pathways to regional and bilateral cooperation on a suite of pressing policy issues, including trade, climate change, and security. 

Top on the agenda were preparations for the formal launch of negotiations for an EU-Australia Free Trade Agreement (FTA), which is currently pending until the EU completes its domestic procedures. (See Bridges Weekly, 25 January 2018

“A country at the end of the world and yet so close to us. [Malcom Turnbull], thank you for your welcome in Australia and work in this 21st century world which no longer lets itself be impressed by distance but builds the future with all those who share values,” Macron said on Twitter on Tuesday 1 May, at the same time outlining an ambition to make France one of Australia’s primary partners over the next ten years.

“We have a common history and a future to write with the entire Indo-Pacific region, where the world's balances are largely defined today,” Macron added, highlighting the region’s increasing economic gravitational pull. Australia is involved in mega-regional trade agreements in the Asia-Pacific, as a signatory to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and as one of the negotiating parties for the Regional Comprehensive Economic Partnership (RCEP).

Vision statement for the future

On Wednesday 2 May, the two leaders released a “vision statement” outlining a series of shared pledges and priorities, including on trade.

They promised, for example, to work more closely together in the WTO context, including on addressing the current challenges facing the organisation’s dispute settlement arm. The WTO’s Appellate Body is currently short three judges, after the US repeatedly blocked the start of processes to replace them.

On the proposed trade deal, “leaders agreed to work toward the swift launch of the negotiation of an Australia-EU Free Trade Agreement that would embody our commitment to open markets and a rules-based trading system with the World Trade Organization at its centre,” they said.

They also pledged to collaborate against growing protectionist pressures, as well as to hold meetings at the ministers’ level at least once a year on trade and investment. Other areas of cooperation included cybersecurity, education and culture, and defence, as well as on climate and the environment.

For example, they reaffirmed their commitment to the UN’s Paris Agreement on climate change and stressed that the upcoming Conference of the Parties (COP) of the UN Framework Convention on Climate Change (UNFCCC) in Poland this coming December will be an essential opportunity for completing the so-called Paris “rulebook” for implementing the landmark climate deal.

Building a coalition of support

The meeting comes on the heels of an April visit by Turnbull to Europe, comprising trips to Berlin, Brussels, and London, during which time the Australian Prime Minister sought to advance a possible agreement between Brussels and Canberra. Both EU and Australian officials have shown support for a potential deal, citing a context of political uncertainty as an instigator for enhanced cooperation.

“The most important thing right now, with growing protectionism in the world and uncertainties coming from traditional allies, is to expand this circle of friends,” said EU Trade Commissioner Cecilia Malmström, according to the Brisbane Times, who received Turnbull along with European Commission President Jean-Claude Juncker in Brussels on 24 April.

Speaking in Berlin, Turnbull called Germany’s support for the deal “absolutely critical.”

"To meet the challenge of our times – the threat to openness, to freedom, and to our individual humanity – democracies must rediscover their power and ­purpose," he said at the time. "As we move to negotiate a free trade agreement between Australia and Europe, we have a special opportunity to show what we stand for, as well as what we stand against.”

"Germany has always been in favour to meet Australia's wish for a free trade agreement and I think we've made significant progress on the road towards that," German Chancellor Angela Merkel told reporters.

The EU Parliament has outlined its own priorities for what type of trade deal would receive the approval of that chamber, once it is negotiated and reaches the ratification stage. The European Commission has requested that the Council approve a negotiating mandate, and a decision could potentially come either this month or next at upcoming Council meetings.

The EU Commission chief had also urged that these talks proceed rapidly in order to reach an agreement before the expiry of the current five-year mandate of the EU’s executive arm in 2019. EU officials say that the deal will be negotiated in the areas of EU exclusive competence, avoiding those of shared competence with member states to facilitate future ratification. (See Bridges Weekly, 18 May 2017)

Australia-EU economic ties, expected gains

The parties began laying the groundwork for negotiations in 2015, and have held several discussions to determine the scope of the planned trade agreement. The EU Commission published its proposed negotiating directives in September 2017, asking the European Council to approve final versions in 2018.

The EU and Australia are presently engaged in a Framework Agreement, subsuming a network of cooperation arrangements, including on sustainable development, security and foreign policy, investment, public procurement, services, competition policy, technical barriers to trade, and intellectual property.

The EU is Australia’s primary source of foreign direct investment and second-largest trading partner after China, with bilateral trade amounting to over A$98 billion (US$74 billion) in 2016, according to Australian government statistics. Australian exports to the bloc are primarily fuels, mining products and agricultural goods, while EU exports to Australia are largely manufactured goods and agricultural products.

France alone accounted for A$28 billion (US$21 billion) of direct investment in Australia in 2016, whereas Australian investment in France reached A$55 billion (US$41 billion). An estimated 300 Australian enterprises are in France, employing around 40,000 people. French exports to Australia are predominantly agricultural products, pharmaceuticals, and automobiles.

“The benefits of a free trade agreement between Australia and Europe will be very tangible for Europeans and indeed for Australians,” Turnbull said last week, addressing reporters alongside Merkel in the German capital.

However, there are areas of potential sensitivities, particularly with regard to market access for farm goods. In particular, beef imports have been raised as an area of concern, particularly for farmers in some EU member states such as France, Ireland, Italy, and Poland.

Australian officials, meanwhile, have said that any deal must ensure improved agricultural market access for its exporters.

"The agreement must address the very restrictive farm tariffs and quotas that our farmers currently face," Turnbull said last week in Germany, encouraging the EU to loosen its restrictions on imported Australian agricultural products.

"The FTA we are seeking will deliver for Australian producers and farmers as well as their European consumers,” he said. 

In addition, geographical indications have been pegged as a potentially difficult issue. The topic is a sensitive one for the EU in trade agreements, with EU negotiators pushing to secure protections for product names linked to European regions, such as Parma ham and Feta cheese.

Parallel considerations

The EU has also committed to negotiating a trade accord with New Zealand, the plans for which were announced simultaneously with the EU-Australia agreement. The leaders of France and New Zealand released a joint declaration on 16 April outlining areas for developing their bilateral relationship further, seeking to uphold a “sustainable, inclusive and progressive trade agenda” through a future EU-New Zealand FTA among other actions. (See Bridges Weekly, 19 April 2018)

As the UK gears up for its exit from the EU, it has identified the trading relationship with New Zealand and Australia as key priorities, and has already looked to informal preparations for eventually launching formal trade talks. (See Bridges Weekly, 29 March 2018)

ICTSD reporting; “France's president arrives in Sydney,” 9 NEWS NOW, 2 May 2018; “EU push for Australia trade deal vote,” 9 NEWS NOW, 25 April 2018; “Europe trade deal must be fair for farmers and 'show what we stand for', Malcolm Turnbull says,” ABC NEWS, 23 April 2018; “Macron heading to Australia to boost defense ties, raise French profile,” REUTERS, 30 April 2018; “French President Emmanuel Macron in Australia for talks on trade, climate and defence,” THE STRAITS TIMES, 1 May 2018; “The EU pursues $15b free trade talks with Australia, but there's a catch,” BRISBANE TIMES, 25 April 2018.

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