Australia, EU agree to sweeping new trade pact and stepping up defence co-operation

European Commission President Ursula von der Leyen and Australian Prime Minister Anthony Albanese exchange signed copies of the agreements during a ceremony at Parliament House in Canberra. Photo / David Gray, AFP

European Union chief Ursula von der Leyen and Australian Prime Minister Anthony Albanese struck a long-awaited free trade deal today, compromising to boost exports in the face of global uncertainty over trade.

Von der Leyen’s visit to Australia with trade commissioner Maros Sefcovic in tow comes as the 27-nation bloc and the import-reliant nation navigate renewed energy vulnerability sparked by the war in the Middle East.

The trade accord is the latest inked by Brussels in a push to diversify trade as Europe faces challenges from the United States and China.

The two sides also inked an agreement to step up defence co-operation as well as critical raw materials.

“The EU and Australia may be geographically far apart but we couldn’t be closer in terms of how we see the world,” said von der Leyen.

“We are sending a strong signal to the rest of the world that friendship and co-operation is what matters most in times of turbulence,” she added.

“This is a significant moment for our nation as we secure an agreement with the world’s second largest economy,” Albanese said.

Key sticking points on Australian use of European geographical names and access for Australian beef to Europe were overcome to reach a deal after eight years of negotiations.

A compromise will see Australian winemakers allowed to use the term prosecco domestically but stop using it for exports after 10 years.

Australia will be allowed to keep using some geographical names, such as feta and gruyere, where producers have used the name for at least five years.

European car makers will benefit from Australia raising the threshold for a luxury car tax on electric vehicles - three-quarters of EVs will now become exempt.

Under the trade deal, the EU said it expected exports to Australia to grow by a third over a decade - with dairy and car makers seeing strong growth of around 50%.

The quota of Australian beef allowed into the EU will increase more than 10 times the current level over the next decade, although that falls short of the level Australian farmers had been seeking.

EU firms exported to Australia €37 billion ($73.4b) worth of goods last year, and €31b worth of services in 2024.

Global uncertainty

Australia’s largest export market is China and the US is its largest source of investment.

But Canberra has redoubled efforts to diversify export markets for farmers since a 2020 dispute with Beijing saw agriculture exports blocked for several years, and last year’s global imposition of US trade tariffs.

Likewise, the EU is on a drive to strike new partnerships in the face of US levies and Chinese export controls.

Front and centre in meetings will also likely be the Iran war, which has sent oil prices soaring.

In Canberra, International Energy Agency chief Fatih Birol warned yesterday that the world faced an energy crisis not seen in decades if the conflict was not resolved.

And von der Leyen this month said the conflict had served as a “stark reminder” of Europe’s vulnerabilities.

Today, she called for an immediate end to hostilities in the Middle East in the face of a “critical” situation for energy supply chains globally.

Australia - which is heavily reliant on fuel from abroad - has also felt the pressure from the global energy squeeze.

-Agence France-Presse