Examining the aims of the EU's FTA plans with Australia and New Zealand

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The EU has received the green light to start trade negotiations with Australia and New Zealand, with the aim of securing broad-ranging free trade agreements that could deliver significant benefits.

With the recent upswing in protectionist trade policies across many parts of the world, the European Union has emerged as a key vanguard for free trade in recent months, and continues to push for new trade deals with its key economic partners.

Having recently signed new free trade agreements (FTAs) with Mexico and Japan, the EU is now gearing up to liberalize its trade relationships with Australia and New Zealand, a move that is expected to deliver significant economic benefits both within Europe and for the two 

Oceanic nations.

Following the decision of the European Council to formally ratify the negotiating directives for these planned FTAs in May 2018, formal talks are now ready to begin, with the first round - between the EU and Australia - set to commence in July. The EU is hoping that the process will be smooth, allowing the partners to achieve mutual gains - while also demonstrating their continued commitment to free trade.

Why is the EU pursuing these agreements?

Australia and New Zealand are already seen as key EU allies and commercial partners, with trade between the EU and these two countries already at roughly the same level as Mexico or Canada, despite the significant geographic distance. EU-Australian bilateral trade is valued at €45.5 billion per year, while for New Zealand this figure stands at €8 billion - enough for the EU to rank as the third-largest trading partner for both countries.

As Australia and New Zealand both rank among the world's fastest-growing developed economies, the EU is seeking to implement preferential bilateral trade arrangements to provide its member states with more favorable market access conditions. It is estimated that this would increase EU exports to the region by a factor of one-third in the long term.

This will be achieved by reducing existing barriers to trade and investment, including tariffs, and developing a shared framework of rules that can stimulate growth and create new job opportunities, while also ensuring that potentially vulnerable sectors are provided with adequate protection.

Where will the greatest benefits be seen?

The EU predicts that its proposed deals would deliver the greatest benefits for the motor equipment, machinery, chemicals, processed foods and services sectors, as firms take advantage of the scrappage of customs duties, better public procurement access and simpler product testing procedures.

For consumers, this is expected to result in lower prices and greater choice, while still maintaining the necessary quality assurance and corporate ethical standards. Moreover, the deal will help European companies compete on an equal footing with businesses based in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership area, or other nations that already enjoy preferential trade agreements with Australia and New Zealand.

One area of potential difficulty could arise in the agricultural sector, as studies have indicated that the EU market could be sensitive to negative effects if trade in this area was fully liberalized. As such, certain products may be subject to longer tariff dismantling periods, tariff rate quotas or other arrangements to help mitigate this risk.

What happens next?

EU trade commissioner Cecilia Malmstrom has travelled to Canberra to meet with Australian trade minister Steven Ciobo this week and discuss the basics of a potential deal, with the negotiations themselves taking place in Brussels from June 2nd to 6th.

Following her visit to Australia, Ms Malmstrom will move on to Wellington, where she will launch the trade negotiations between the EU and New Zealand in the coming days. It is hoped that the existing common ground between the nations will pave the way for a smooth negotiating process.

The EU trade commissioner said: "We look forward to adding Australia and New Zealand to the EU's ever-growing circle of close trading partners. We are already close in terms of shared values and our open, global outlook.

"Together, we will now negotiate win-win trade deals that create new opportunities for our businesses, as well as safeguard high standards in key areas such as sustainable development."