Why Australia really wants a free trade deal with the EU

A free trade agreement between Australia and the European Union now looks like a viable prospect, so what's in it for both parties?

The EU bloc is already Australia's second-largest trading partner behind China with two-way trade worth more than $98 billion, but if Prime Minister Malcolm Turnbull and the European Commission has his way that figure could skyrocket.

Mr Turnbull has put a free trade agreement (FTA) with the European Union firmly back on the agenda, talking up the benefits during an important speech in Berlin this week and securing the support of German Chancellor Angela Merkel. 

Angela Merkel has backed a free trade deal between Australia and the EU.
Source: AAP

He also met with European Commission President Jean-Claude Juncker in Brussels on Tuesday with talk of member countries voting to start negotiating the FTA set to take place as early as next week. 

What's in it for Australia?

Access to Europe's 510 billion consumers via an FTA could deliver a windfall of between $4.1 and 6.4 billion in GDP for Australia by 2030 according to a European Union scoping study published last year. 

Mr Turnbull has made it clear any deal must include a reduction in tariffs on Australian exporters with the service industry and agri-food to reap the biggest benefits.

"The agreement must address the very restrictive farm tariffs and quotas that our farmers currently face," he said in a keynote address to the Konrad Adenauer Foundation this week. 

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

Citing thousands of jobs created by European companies operating in Australia, such as Aldi and Siemens, the Federal Government also hopes to attract more European businesses to set up shop here. 

The FTA could also help Australian consumers get their hands on cheap wine and discounted designer goods from Europe.  

What's in it for Europe?

Australia stands to gain more in direct financial benefit than Europe, but there are enough advantages in doing a deal to entice European leaders to the negotiating table.

Mr Turnbull is selling it as an opportunity for “European businesses to use Australia as their launch pad into Asia.”

Australia wants to increase trade with the European Union.
Source: AAP

There are also broader geopolitical interests with European countries keen to cement their unity in the face of Brexit and resist protectionism. 

Mr Turnbull seized on this sentiment in his speech.

"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."

What are the sticking points? 

European farmers, particularly in France and Italy, are anxious about losing their generous protections and allowing more Australian beef imports in.  

Economist David Treisman said there is concern that the EU will demand "geographical indicators" which would stop Australian producers using particular names. 

Mr Treisman, a lecturer at Monash Business School, told SBS News on Tuesday: "One example is Prosecco, which is actually linked to a particular region and that is something that Australian wine producers are fearful will curb their activities".  

Dairy farmers would also be banned from labelling their cheese as 'parmesan' or 'feta' and restricted from using the Italian colours of green, white and red on their packaging. 

The movement of people will also be a key aspect of the deal, but trade experts say demanding pathways to permanent residency in the EU would be a deal breaker. 

Can we get past the issues?

Australia and the EU have been seriously contemplating doing a deal since 2015, but have struggled to get negotiations going. 

Now there seems to be fresh momentum behind a potential deal, particularly as Britain's exit from the EU approaches. That will disrupt the supply chain and force more direct trade between Australia and European countries.   

"The relationship between Australia and the EU is pretty much at an all-time high, as good as it's been probably in the last 40 years," Mr Treisman said. "When you speak to the members of the negotiating teams, there is generally good will and want to find some common ground."

Australia now has a powerful free-trade ally in German Chancellor Angela Merkel and her support will help counter the opposition from countries like France and Italy. 

"Both parties are encouraging of free trade and both have strong political motives to maintain free trade worldwide. So they seem to have a good basis for a partnership," Mr Treisman said.  

Australia is ready to start negotiations, but EU leaders must vote to start negotiations. 

That could happen as early as next week after Mr Turnbull made the case to the European Commission President Jean-Claude Juncker and trade commissioner Cecilia Malmstrom in Brussels on Tuesday. 

Published 24 April 2018 at 5:16pm, updated 25 April 2018 at 11:24am
By Rosemary Bolger