The free trade deal between the European Union and Australia, which has been in the making since 2018, will not happen any time soon after the latest attempt to wrap things up fell apart in dramatic fashion.
Teams from the EU and Australia travelled this weekend to Osaka, Japan, to hold a new round of negotiations on the sidelines of a G7 ministerial meeting. The talks were expected to be the “endgame” following behind-the-scenes technical work, bridge the remaining gaps and reach a provisional agreement at the political level.
But before the two teams even had a chance to sit at the table, Don Farrell, Australia’s minister for trade and tourism, put forward fresh demands to further expand market access for Australian farmers, according to senior EU officials.
Farrell’s last-minute requests, communicated to Valdis Dombrovskis, the European Commission’s vice-president in charge of trade relations, were seen by the European side as a profound reversal of the progress achieved over the past weeks and triggered the abrupt cancellation of the negotiations.
The dramatic twist of events left EU officials in a state of shock and frustration, according to their own accounting, as a team of 10 people had flown to Osaka exclusively to participate in the EU-Australia talks. Janusz Wojciechowski, the European Commissioner for agriculture, had also travelled overseas for the high-stakes occasion.
“We had made good progress with our Australian counterparts in the run-up to our planned meeting in Osaka,” Dombrovskis said in a short statement.
“Unfortunately, our Australian partners were not able to engage on the basis of previously identified landing zones.”
For his part, Don Farrell said his job as trade minister was to “get the best deal that we can for our producers, our businesses, our workers, and our consumers.”
“I came to Osaka with the intention to finalise a free trade agreement with the European Union,” he said. “Unfortunately we have not been able to make progress.”
While Dombrovskis and Farrell left the door open for talks to continue some time in the future, the political cards are stacked against them: the EU will soon enter into campaign mode ahead of the June elections to the European Parliament, while Australians are scheduled to go to the polls sometime before September 2025.
A sought-after FTA
The EU and Australia often refer to each other as “like-minded partners” who share a system of liberal democracy and an open-market economy, with total trade in goods valued at €56.4 billion in 2022. Striking a free trade agreement (FTA) has long been a mutual ambition to fortify the bilateral relationship.
But since the process was formally launched in 2018, the pace of discussions has been slow and ridden with ups and downs, most notably Canberra’s decision in 2021 to scrap a €56-billion contract for submarines with France, which unleashed the fury of the Élysée and caused a prolonged breakdown in negotiations.
Russia’s war against Ukraine injected new momentum, as the two sides worked closely together to slap sanctions on the Kremlin, establish a price cap on Russian seaborne oil and diversify energy suppliers. This paved the way for a rapprochement in the field of trade, which raised hopes the long-running undertaking could conclude by year’s end.
After a failed attempt in July, technical work intensified between August and October to build a new “landing zone” that included provisions on market access, sanitary measures, critical raw materials and the 33% luxury car tax that Australia imposes on vehicles with a price tag above certain thresholds.
The “landing zone” was expected to be polished off and green-lighted during the talks between Dombrovskis and Farrell in Osaka, their fourth in-person meeting since December last year.
Although European and Australian versions differ on who is to blame, they point out the same two factors that were behind the collapse of negotiations: agricultural exports and geographical indications.
Beefing about beef
According to Dombrovskis, the proposed FTA would have granted “commercially meaningful” market access to Australian agricultural products, such as beef, sheep meat, sugar and dairy. The entry of these goods into the bloc’s single market is traditionally subject to high tariffs due to their potentially disruptive effect on European farmers, who tend to reject any sort of foreign competition.
The European Commission came up with an offer to lower these tariffs and create market access worth 1 billion in Australian dollars (about €600 million) every year, senior EU officials explained, speaking on condition of anonymity. The offer was designed to be economically and politically sustainable for both sides.
But then, EU officials said, Farrell surprised negotiators with new demands for greater market access that were fundamentally incompatible with the Commission’s proposal, particularly in regards to beef and sheep meat. Farrell’s requests were seen as excessively aligned with the ambitious interests of Australian farmers, making it impossible to find a compromise in the near term.
In an interview with Sky News following the Osaka meeting, Agriculture Minister Murray Watt challenged the European claims, saying they were “absolutely not correct.”
“The offer that Don Farrell had and put on the table is exactly what we’d been flagging to the EU over the last three months,” Watt said. “Unfortunately what’s happened here is that the EU have barely budged from a deal that three months ago wasn’t acceptable.”
“The last thing we were prepared to do is to sell out Aussie farmers just for the sake of the deal, and that’s what signing up to that deal would’ve involved,” he added.
The issue of geographical indications – a type of intellectual property rights popularised by the EU to protect unique culinary products such as Cognac, Gorgonzola, and Vinagre de Jerez – proved similarly contentious.
Inside the bloc’s market, geographical indications are strictly monitored and can only be used to advertise food and beverages made in a specific region with a specific technique. In Australia, however, the rules don’t apply and names that resemble European exports can be easily found on Australia-made products.
During negotiations, the Commission identified more than 50 conflicting names and proposed a tailor-made system that would have protected a selection of EU wines, spirits and foodstuffs inside the Australian market while allowing other Australian goods to be marketed under certain conditions.
But, according to EU officials, that offer was also struck down by Canberra, with parmesan, feta and prosecco singled out as the most prominent obstacles.
“I regret that we could not successfully conclude our negotiations,” said Commissioner Wojciechowski on social media. “To move forward, we need more realistic expectations and a balanced approach that fully respects the viability of our farmers and the sustainability of our food system.”