Australia-EU FTA talks break down - what are the sticking points?

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Why have talks on a free trade agreement between the EU and Australia broken down and what may happen next?

Talks on a proposed free trade agreement (FTA) between Australia and the EU have ended without agreement after the two sides failed to reach an accord on agricultural products.

There had been hopes that a conclusion would be reached during talks last week, but it has been reported that Brussels was unwilling to accept Australia's demands for greater access to the bloc for its farmers - in particular its beef industry.

In a statement, the European Commision said: "We regret it was not possible to conclude our talks with Australia. We made progress but more work is required to address key outstanding issues."

It added the EU has "made every effort to arrive at a balanced agreement" and stated that the "door remains open" for negotiations if Canberra is willing to adjust its position.

Some politicians are now calling for the Australian government to walk away from negotiations if progress is not made this year. So what are the issues that are blocking a deal and what are the chances they will be resolved in the next round of talks?

Agricultural issues a key area of disagreement

A major area of divergence between the two sides is tariffs and quotas on agricultural products coming from Australia to the EU. Canberra has made expanded access for its food and drink items a key priority for negotiations, including beef, lamb, dairy and wine, much of which is currently subject to tariffs and quotas.

Similar provisions were included in the FTA signed between Australia and the UK earlier this year - which have been criticized by some in Westminster for offering too many concessions. Brussels may therefore be wary of going down the same path.

Australian prime minister Anthony Albanese has signaled that access to the EU for his country's farmers is a key red line. He said: “Ultimately, our negotiations with the EU will only be concluded when we have a good deal and one that includes new market access for our agricultural products.” 

The Guardian notes that another sticking point is Canberra's reluctance to accept European rules on the use of terms such as feta and prosecco, which are reserved in the UK for products from specified origins.

Australian negotiators, on the other hand, argue it is reasonable for farmers to use the terms to represent varieties rather than European regions.

What benefits would an FTA bring?

Overall, the EU estimates that an FTA with Australia could add an extra €3.9 billion to the bloc's GDP by 2030, with machinery, metals, electronic equipment and chemical manufacturers, automakers and food and drink producers particularly benefiting.

As well as the direct economic benefits, both sides are keen to diversify their trade and reduce reliance on partners such as China for key imports. Tensions between Beijing and Canberra have been particularly high in recent years, with the Chinese government enacting new tariffs and other trade restrictions on goods such as wine, barley and coal.

Australia is also the world's largest producer of lithium and has significant reserves of other critical minerals such as cobalt, manganese and rare earth elements. These items are essential for products such as batteries that are expected to be in high demand in the EU in the coming years.

European Commission president Ursula von der Leyen said: "These are times where democracies have to stand together to deepen their friendship, their partnership, but also to strengthen their economic ties.

“It is important for us to have sound supply chains, to diversify to like-minded partners.”

What might the next steps be?

Negotiators from both sides are expected to meet for a new round of talks in August in an attempt to break the deadlock. Speaking in Brussels, Australian trade minister Don Farrell said his team would continue to push for "meaningful access" for Australian farmers and set a deadline of the end of the year for an agreement to be reached. 

However, he added: “I’m optimistic that with some goodwill, some hard work, some perseverance, we’re going to get there.”

Some industry groups and opposition politicians in Australia have also urged the government not to compromise and argued that it would be better to walk away rather than agree to a bad deal.

Chief executive of the National Farmers’ Federation Tony Mahar said trade is of critical importance to Australia's agricultural sector, adding: "It’s too important not to get it right ... we want to make sure that we get this right for Australian farmers from the first day for the decades that follow.”