EU, Australia seek to scrap all tariffs in future trade deal

Sydney Opera House

By Joanna Sopinska. 6 April 2017.

The EU and Australia reached an agreement today on the scope of their future trade accord, bringing both sides a step closer to starting talks this year.

The deal aims at "full tariff liberalization" when it enters into force or within seven years, according to a confidential EU-Australia report obtained by MLex.

The two sides agreed to include all products in their market-opening offers. But they may eventually request special treatment for their "most sensitive products, including agricultural and processed agricultural goods," both in terms of tariff levels and phase-out periods.  

The EU and Australia agreed in November 2015 to take steps to begin talks on a commerce deal. Europe bought Australian goods worth 13.1 billion euros ($13.8 billion) last year, while Australia imported European products worth 32.4 billion euros.

Today's agreement describes the two parties' ambition in all areas of the negotiations, including trade in goods, government procurement, services, non-tariff measures, investment protection, rules of origin and intellectual property rights.

Australia is a major agricultural producer and exporter and has a competitive services market. The country's beef exporters will probably push hard for the deal, amid concerns they are hitting the ceiling of a quota for their access to the European market.

Ireland and other major beef-producing countries in Europe are expected to resist any significant increase of Australia's beef quota.  

The EU accepts 7,150 metric tons of high-quality Australian beef a year at a duty rate of 20 percent. Australia and beef exporters in Argentina, Canada, New Zealand, Uruguay and the US share a zero-tariff quota of 48,200 tons for grain-fed beef.

European carmakers such as Volkswagen and Peugeot are expected to push for better access to the Australian market. Canberra applies a 5 percent import duty on automobiles, as well as a 33 percent tax on luxury vehicles.

Services, investment

The planned accord will also aim to bring about "commercially meaningful new market access" on most services and investment. The EU is seeking to exclude audio-visual services from the talks.

The two sides intend to include "ambitious" commitments on domestic regulation covering financial, communications and transport services, as well as e-commerce.

On investment protection, they agreed that the new trade pact would replace existing bilateral accords between Australia and five EU member states: Czech Republic, Hungary, Lithuania, Poland and Romania.

Australia is willing to consider an investment court system with an appeals mechanism as part of the trade deal. The EU promotes this mechanism for settling disagreements between investors and states rather than investor-to-state dispute settlement, which the bloc sees as discriminatory and opaque.

The EU and Australia also agreed to offer each other more access to their government procurement markets at the central and sub-central government levels, including entities such as public utilities, with "limited exceptions."

Geographical indications, tomatoes

In the area of intellectual property rights, Australia conditionally accepted including provisions in the agreement on the special protection of EU local agricultural products, known as geographical indications.

Europe is seeking to ensure special treatment for several regional foods such as Feta cheese, Gorgonzola and Parmesan in all commerce deals it is negotiating.  

In addition, Italy hopes to resolve a spat with Australia about canned tomatoes during the trade negotiations, MLex has learned.

Last year, Australia imposed dumping levies on canned tomatoes exported by Italian companies including Feger di Gerardo Ferraioli and La Doria, which together account for 40 percent of the Australian canned tomato market. The two companies won an appeal in January, with duties eliminated in one case and reduced in the other. But other Italian exporters are still subject to dumping duties.
 
Furthermore, the trade deal will include a chapter on small and medium-sized enterprises and provisions on corruption and regulatory cooperation.

The European Commission plans to ask member states in June to approve a set of guidelines for negotiations with Canberra, it is understood. The greenlight from governments would probably come in the second half of the year.