EU-Australia free trade agreement

EU-Australia free trade agreement: Boost for industry

The EU-Australia free trade agreement has been concluded after around eight years of negotiations and is intended to reduce tariffs, trade barriers, and dependencies.

Stefan Weinzierl
Stefan Weinzierl Editor-in-chief
Published Modified
Die Europäische Union und Australien haben nach rund acht Jahren die Verhandlungen über ein umfassendes Freihandelsabkommen abgeschlossen.
The European Union and Australia have concluded negotiations on a comprehensive free trade agreement after around eight years.

Summary: The EU and Australia have concluded a comprehensive free trade agreement in Canberra, as both sides announced. The agreement is intended to reduce tariffs, improve market access for industrial and agricultural products and ease access to strategic raw materials. Potential beneficiaries include mechanical engineering, chemicals, the automotive industry and agriculture, while liberalization of sensitive agricultural goods will be limited.

After around eight years, the European Union and Australia have concluded negotiations on a comprehensive free trade agreement. The agreement is intended to reduce tariffs and trade barriers, stimulate the economy, and increase prosperity on both sides, according to statements by European Commission president Ursula von der Leyen and Australian prime minister Anthony Albanese in Canberra.

For the EU, the agreement is also geopolitically significant. Von der Leyen made it clear that international trade relations are to be expanded and diversified in order to reduce risks and dependencies. This applies in particular at a time when the United States under president Donald Trump is proving to be a more difficult partner with its tariff policy, while China is acting more self-confidently.

Direct access to lithium: relevance for European battery hubs

The agreement secures the EU privileged access to Australian deposits of lithium and rare earths. This is vital news for European industrial locations (for example in Brandenburg, Sweden or northern France) that are heavily investing in battery cell production and electromobility. By removing export restrictions in Australia, European industry reduces its critical dependence on Chinese raw material supplies and strengthens the resilience of local value chains.

What the free trade agreement means for industry

According to the European Commission, mechanical engineering, chemicals, the automotive industry, and agriculture could benefit in particular from the agreement. In addition, the EU is to gain better access to strategically important raw materials such as rare earths and lithium.

Von der Leyen emphasized the political signal sent by the agreement: "We are sending a strong signal to the rest of the world that, in times of turbulence, friendship and cooperation are what matter most." The EU and Australia may be far apart geographically, but in their view of the world they are close.

Beyond trade, both sides also want to cooperate more closely on security policy. A new security and defense partnership is planned. According to the statement, it provides for closer cooperation against cyber risks, hybrid threats, as well as foreign information manipulation and interference.

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Benefits for exports, skilled workers, and investment

Prime Minister Albanese explained that the free trade agreement would benefit both sides. For Australia, the removal of tariffs on wine and seafood is particularly relevant. In addition, more agricultural products such as beef could be exported to the EU in the future.

Conversely, more than 99% of tariffs on EU exports of goods to Australia are to be eliminated. According to the EU, companies of all sizes could save around one billion euros a year in duties as a result. In addition, the agreement is intended to make it easier for EU professionals to work in Australia.

The EU expects that exports from the member states to Australia could increase by one third to as much as 17.7 billion euros per year over the next decade. The EU sees particular potential in dairy products, motor vehicles, and chemicals. In addition, EU investment in Australia could increase by more than 87%, according to the statement.

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Why agricultural products were recently contentious

Right up to the end, there was disagreement over agricultural products with names protected in Europe, such as feta, gruyère and parmesan. “Prosecco” produced in Australia was also part of the negotiations. In the end, both sides reached a compromise.

Albanese explained that Australian wine producers may continue to make prosecco and sell it under that name. However, exports under this designation are not supposed to be possible.

The EU addressed concerns from the European agricultural lobby by pointing out that tariffs on key EU exports such as cheese, prepared meat products, wine and sparkling wine, certain types of fruit and vegetables including processed products, chocolate and confectionery are to be abolished. For sensitive goods such as beef, sheep and goat meat, sugar, some dairy products and rice, only limited tariff-free or reduced-tariff imports from Australia are planned.

A strategic breakthrough for Germany’s Mittelstand

For Germany’s export-oriented industry, especially in southern and western Germany, the agreement is a decisive competitive factor. While producers from China and Japan have so far enjoyed price advantages in the Australian market thanks to existing agreements, tariffs for key German sectors such as mechanical engineering and the automotive industry will in future be abolished. These tariffs previously added up to millions of euros each year. In particular, medium-sized “hidden champions” gain planning certainty in a politically stable sales market outside the crisis-prone supply routes in Asia.

How industry is responding to the free trade agreement

Positive signals are coming from the automotive industry. The president of the German Association of the Automotive Industry, Hildegard Müller, stated in advance that the trade agreement would “open up significant opportunities” for the European automotive industry, especially for export-oriented German manufacturers. On the Australian market, they compete with suppliers from China and Japan.

The importance of the agreement for overall trade relations is also high. The EU is Australia’s third-largest trading partner after China and Japan. In trade in goods with the 27 EU member states, however, Australia ranks only 20th. For Canberra, closer cooperation with the EU is also a way to reduce its dependence on its largest trading partner, China.

It is still unclear when the free trade agreement can be signed. The text of the agreement must undergo legal review and be translated into all official EU languages. After that, approval by the member states and the consent of the European Parliament are required.

The road to the agreement was long. In 2018, the EU decided to start talks with Australia. In 2021, tensions arose when Australia negotiated a new security pact for the Indo-Pacific region with the United States and the United Kingdom, and a multibillion-euro submarine deal with France fell through. In 2023, an attempted meeting in Osaka failed due to disputes over agricultural imports, and the talks then stalled.

Only with Donald Trump’s return to the White House did the negotiations pick up speed again significantly. His new tariff decisions have changed the framework conditions for international trade. From the EU’s perspective, this underlines the importance of reliable trade relations and new free trade agreements. The report cites as further examples the recently signed agreement with four South American states in the Mercosur bloc and the newly agreed large free trade area with India.

With material from dpa

FAQ on the EU-Australia free trade agreement

• What does the EU-Australia free trade agreement regulate? - It is intended to reduce tariffs and trade barriers and improve market access for industrial and agricultural products.

• Which sectors benefit from the EU-Australia free trade agreement? - Mechanical engineering, chemicals, the automotive industry and agriculture are mentioned.

• What role do raw materials play in the EU-Australia free trade agreement? - The EU is to gain better access to strategically important raw materials such as rare earths and lithium.

• What will change for agricultural products under the EU-Australia free trade agreement? - Tariffs will be eliminated for many EU exports, while liberalization of sensitive imports from Australia will be limited.

• When will the EU-Australia free trade agreement enter into force? - A date is still unclear, as the treaty text must first be reviewed, translated and then approved.

People also ask:

1. Why did the negotiations on the free trade agreement between the EU and Australia take so long? - The negotiations dragged on for eight years because the protection of European geographical indications (such as feta or prosecco) and market access for Australian beef and lamb were particularly contentious. Geopolitical tensions, such as the collapsed submarine deal with France (AUKUS pact), also strained relations at times.

2. What advantages does the EU-Australia agreement offer German drivers and buyers? - With tariffs removed on over 99% of EU exports, the cost of exporting vehicles to Australia will fall. This strengthens the competitiveness of European manufacturers compared with Asian brands. For European consumers, the agreement could in the long term lead to more competitive prices thanks to more stable supply chains for raw materials used in electric vehicles.

3. May Australia continue to export “prosecco” to the EU? - No. Under the compromise, Australian wine producers may continue to produce wine under the name “prosecco” for their domestic market, but exports to the EU or other regions under this protected name are prohibited in order to safeguard the EU’s geographical indications.

4. How does the agreement affect dependence on China? - For both the EU and Australia, the agreement is a tool in their de-risking strategy. Australia is seeking new buyers for its agricultural products and raw materials to be less vulnerable to Chinese trade sanctions, while the EU is diversifying its sources of critical minerals in order to break China’s dominance in this sector.

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