It turns out that a new free trade agreement (FTA) could be a mixed bag for Australian exporters: they could enjoy a bigger slice of the European Union (EU) market, lose valuable geographical indications and even find themselves on Trump’s hit list.
On 18 June 2018, Australia and the EU launched negotiations for a FTA that is anticipated to add $15 billion to their respective economies. The negotiations coincide with an increasingly protectionist United States (US), which is demonstrating a willingness to impose tariffs on their closest trading partners such as China, Canada, Mexico and the EU.
If you are an exporter with a presence or interest in the European market, a FTA with the EU could result in significant benefits to your company if you are prepared to exploit a greater openness within the EU marketplace. However, if the negotiations are fruitful they may come at a cost to you and other Australian producers or, even worse, raise the ire of the Trump administration.
How will the Free Trade Agreement help Australian companies?
It is hoped that the proposed FTA will grant Australian exporters significantly greater access to the EU market, as well as improve their competitive edge.
The increased access that may be gained by Australian companies include:
- New opportunities within key sectors such as education, financial and professional services; and
- Removal of EU regulatory red tape and licensing requirements that currently impede Australian exporters.
Specific Australian exports will enjoy tariff relief in the following areas:
- Elimination of all EU tariffs on industrial goods such as wood, paper, minerals, metals, and chemicals; and
- Removal or partial removal of tariff quotas for agricultural goods such as sheep, sugar, cheese, beef, and rice.
What negatives should Australian companies anticipate?
The banning of geographical indications
It is speculated that the EU may push for banning certain geographical indications that Australian producers currently utilise to great benefit.
Geographical indications are signs that identify products as having a particular origin and are often used to indicate to consumers that a product is of higher quality. The banning of certain geographical indications could have significant ramifications for the branding and reputation of Australian producers who operate within the wine, cheese and meat industries.
If you are an Australian producer, you should be especially wary about any concessions made by Australia if the FTA eventuates. You may need to alter your branding plan and apply for new trade marks should your use of geographical indication be restricted.
It appears that no country is safe from the protectionism that has typified the Trump administration to date. The EU has responded to the aluminium and (threatened) motor vehicle tariffs imposed against them by vowing to retaliate with commensurable measures of their own. Should Australia continue in its willingness to negotiate a FTA with the EU, it could be pressured into joining the escalating trade war.
If your company exports to the US, you should consider diversifying your international trade if the US turns their attention to Australia.
Will the FTA occur?
You should also probably approach the renewed FTA negotiations with the EU with a healthy level of scepticism given that Australia and the EU have been toying with the idea of a FTA since 2015. Some predict that the FTA negotiations will be protracted, particularly given the strong influence of agricultural lobbyists in the EU who jealously guard their domestic industry. At the same time, it is possible that the outcry of the EU against US protectionism could spur on a much quicker consensus than would have been previously thought.
Australian exporters should keep an eye out for further negotiations between the EU and Australia, as well as any tweets from Trump that are aimed in their direction.