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Australia-EU free trade deal ‘approaching end-game’, Brussels says

The Australian Financial Review | 29 June 2023

Australia-EU free trade deal ‘approaching end-game’, Brussels says

by Hans van Leeuwen

Copenhagen | Australia’s free trade deal with the European Union is “approaching the end-game”, according to Brussels’ most senior negotiator, but it still looks touch-and-go whether the two sides can land a deal by a mid-July deadline.

Trade Minister Don Farrell is likely to visit Brussels again next month after a frustrating trip in May, as he tries to drive a better bargain for Australian farmers on access to the vast EU market.

The EU’s trade commissioner seems hopeful his side can cut through an impasse on beef quotas. Louie Douvis

But entrenched farm lobbies, particularly in France and Ireland, have stood in the way of finding a deal before the European summer, after which the EU goes into a year-long parliamentary election mode that will make closing a deal impossible.

Both sides had hoped that Prime Minister Anthony Albanese might sign a deal with European Commission President Ursula von der Leyen during his trip to Europe for the NATO leaders’ summit on July 11-12.

EU Trade Commissioner Valdis Dombrovskis told reporters in Brussels this week that he “would not exclude” the possibility of having a deal ready by the time of the summit, but “as always we emphasise substance over deadlines”.

Although he said the “end-game” of the epic five-year FTA negotiation was at hand, he gave no sign of being able to shift the more recalcitrant European capitals on the stubborn issue of beef and lamb imports.

“We are making good progress with Australia, but there is still certain ground to be covered,” he said at a short press conference to mark formal EU approval of the bloc’s FTA with New Zealand.

Carving up a deal

Mr Farrell left Brussels earlier this month saying the ball was in the EU’s court, as there was no way Australia could accept the low-ambition agricultural access offer on the table.

“At this stage we haven’t had a good enough offer from the Europeans on this,” he told The Australian Financial Review on Thursday. “I’ve been clear that Australia won’t sign a deal unless it includes meaningful commercial market access for our agricultural goods.”

The AFR understands from observers and analysts in Brussels that Australia will not countenance a lesser outcome than fellow beef exporter Canada was able to land in its FTA with the EU.

That relates not only to the annual quota that Australia can ship to the EU: Australia is also understood to be resisting EU proposals to carve up the quota into categories based on the cut of meat, reducing exporters’ flexibility.

And there may also be an EU push to limit the quota to grass-fed beef, rather than the higher-quality grain-fed beef that the EU’s 450 million consumers actually want.

Another understood sticking point is that the EU also requires Europeans to apply for an import licence, rather than the Australian farmer getting an export licence. This reduces flexibility for the exporter and is inconsistent with other Australian FTAs such as those with Britain and the US.

EU observers say it is difficult for Brussels to make an offer matching the generosity of its FTAs with Canada, New Zealand and the Mercosur group of Latin American countries, simply because of the political capital already spent on those deals.

Ireland is also understood to be wary of giving away too much after seeing the domestic political backlash from farmers in Britain against the Australia-UK FTA.

There is also speculation that Mr Dombrovskis has been unable to shift his fellow Brussels official, EU Agriculture Commissioner Janusz Wojciechowski. But other EU observers say everything is still just negotiating tactics rather than substantive blockage.

Most other parts of the FTA are understood to be almost finalised, although some wider concessions from both sides may still be part of the horse-trading over farm goods.

The other big sticking point has been over “Geographical Indications” – the protection the EU demands with increasing stringency over regional identifiers such as feta, parmesan and now prosecco.

Some observers expect the two sides to produce a last-minute workaround on this, whether through grandfathering existing Australian producers or allowing labels such as “feta-style”.

Australia does not always fill its agricultural export quotas to the EU, but producers are keen to maintain the flexibility to do so if demand and supply patterns change in ways that create an opportunity to boost exports.

Amid a global race for critical minerals to help with the transition to clean energy as well as their use in technology such as smartphones, vehicles and military systems, Australia is poised to be a major beneficiary from attempts to break China’s stranglehold on supply and processing.

 source: The Australian Financial Review