In a statement released on Tuesday 24 March, Prime Minister Anthony Albanese announced that Australia and the European Union have - after 8 years of negotiations - entered into an historic Free Trade Agreement (FTA) between the two jurisdictions.
The EU is Australia’s third-largest trading partner and, to this point, was Australia’s largest trading partner without an FTA. The formalisation of the relationship through the new FTA is the logical next step in the cooperation between the two jurisdictions, and modelling has indicated that this FTA could increase Australia’s real GDP by up to $7.8 billion by 2030.
Although negotiations have just concluded, the FTA must still undergo legal scrubbing, translation, and formal approval by both the EU Council and European Parliament, as well as the Australian parliamentary process, before it can enter into force. The Australian Trade and Investment Commission has tempered expectations somewhat, warning that it could take up to two years for the FTA to come into force.
When the FTA does enter into force, 97.8% of Australia’s goods exports will enter the EU duty-free, including complete elimination of numerous tariffs in the agriculture, manufactured goods, and critical minerals industries (among others). For some sensitive markets, access is limited through phased‑in tariff‑rate quotas rather than full liberalisation, with safeguard mechanisms allowing a response if imports rise unexpectedly and threaten domestic markets. The FTA will also confer other benefits on Australian businesses, such as streamlined procurement processes facilitating access for Australian SMEs to bid for EU government projects.
In addition to the FTA, the EU and Australia have also announced that they are strengthening cooperation through a new Security and Defence partnership. This formalised partnership is expected to increase information sharing, strengthen capacity to withstand complex security threats, deepen cooperation regarding online radicalisation and terrorist financing, and establish a new dialogue around space security. The acceleration in defence investment off the back of the FTA and this new partnership is likely to be significant.
The anticipated increase in goods and services moving between the two countries is sure to increase the regulatory obligations on companies that operate with a nexus to the EU. For example, DFAT has already flagged that the FTA will set out stringent rules regarding the cross-border flow of data and standards of data protection.
While we await the publishing of the draft agreement, companies should be taking the opportunity to review their compliance in all aspects of the regulatory interplay between the EU and Australia, including (but not limited to) broad reaching areas such as the GDPR, the Artificial Intelligence Act, the EU Data Act, EU environmental and sustainability directives and laws, and the EU Pay Transparency Objective.
