The European Union steps on the accelerator against Trump and China with a free trade agreement with Australia

The president of the Commission, Ursula von der Leyensealed the final text during a meeting this Tuesday in Canberra with the Prime Minister of Australia, Anthony Albanese. The pact will allow community exporters to save 1,000 million a year in tariffs and facilitates access to strategic raw materials such as aluminum, lithium or manganese.

“The EU and Australia may be geographically very far apart, but we could not be closer in our way of seeing the world,” says Von der Leyen, who also underlines that the agreement “sends a clear signal to the rest of the world that friendship and cooperation are what matter most in times of turbulence.”

In an article published in EL ESPAÑOL, the president of the Commission points out that the war in Iran and the disruptions it has caused in the world economy – skyrocketing the prices of oil, gas and fertilizers – make the search for alternatives to the United States even more urgent. “In this era of growing geopolitical tension, we must reach out to partners who share our values ​​and vision for a world based on rules“.

For Von der Leyen, one of the central pillars of the trade agreement with Australia is to guarantee access to strategic raw materialsin the face of the blackmail that China exercises with these resources. “At a time when critical resources are increasingly being used as a weapon, Europe and Australia can show a different path,” he argues.

“Australia is home to almost the entire periodic table of fundamental minerals. It is the world’s largest supplier of lithium and has essential materials to drive the clean technologies of the future, from electric cars in Spain to wind turbines in the Baltic Sea,” he explained.

The trade agreement with Australia reinforces the strategic position of the EU in the increasingly relevant Indo-Pacific regionwhich will concentrate most of the world’s GDP growth in the coming decades, according to Brussels.

Cars

In 2025, European companies will export to Australia 37,000 million euros in assets and in 2024 31,000 million in services. With the new free trade agreement, EU exports are expected to grow by 33% in the next decade.

Among the sectors with the greatest potential, the dairy (with a planned increase of up to 48%), the vehicles (52%) and chemicals (20%). Furthermore, European investment in Australia could soar by more than 87%, consolidating a strategic economic link for both regions.

The pact eliminates tariffs on almost 100% of EU goods exports (with the exception of certain steel products), which will save more than €1 billion annually in import duties.

From day one, Australia will fully liberalize access to its market for all cars and vehicleswith the exception of some truck tariff lines, whose rates will be gradually eliminated over a short period.

In addition to import surcharges, Australia currently applies a luxury vehicle taxwhich taxes cars whose price exceeds a certain threshold.

As part of the free trade agreement negotiations, Canberra has agreed raise this threshold for electric vehicles up to 120,000 Australian dollars, below which the tax does not apply.

Although this commitment is general and not specific to the EU, European electric vehicles will benefit the most proportionally, with approximately 75% exempt from luxury tax.

The pact will also make it easier for EU companies to provide your services in Australiaincluding professionals, transport, telecommunications, logistics and financial services, ensuring that European investors are not discriminated against local or other foreign investors.

The agreement also includes mobility measures for innovative sectorswith annual entry fees for 3,000 researchers and engineers in training, and improves access of European companies to public procurement contracts from the Australian government for goods, services, works and concessions.

Agriculture

In the agri-food chapter, the EU maintains a trade surplus with Australia of 2.3 billion euros in 2024. The agreement will eliminate tariffs on the main European exports, including cheeses, meat preparations, wines and sparkling wines, some fruits and vegetables and their derivatives, chocolate and confectionery.

The treaty also protects the interests of European producers. For sensitive sectors such as beef, lamb and goat, sugar, certain dairy products and riceimports from Australia will be subject to zero or reduced tariff, but only in limited quantities through quotas “carefully calibrated”.

It also incorporates a bilateral safeguard mechanism which will allow the EU to take rapid measures to protect sensitive products and their producers in the event of a possible sudden increase in imports from Australia.

This mechanism will be implemented through an independent EU regulation, guaranteeing “an agile and effective response to unexpected increases in imports or unjustified falls in prices.” The pact also protects 165 geographical indications (GI) of agri-food products and 231 of spirit drinks, including some of the most recognized, such as Manchego cheese or Irish whiskey.

The free trade agreement with Australia must now be ratified by both the European governments and the European Parliament in order to come into force. If the planned deadlines are met, the tariff reductions could come into force in 2027 at the latest.

In parallel, Brussels and Canberra ratified this Tuesday an agreement to strengthen cooperation in Security and Defense.