Australia-EU free trade deal collapses with no resolution on the horizon

Australia’s lucrative free trade deal with the EU, which has been in the making since 2018, has collapsed with both sides suggesting the other was unwilling to compromise.

The Albanese government has since said that a deal is now unlikely in this term of parliament, with officials suggesting that it won’t be possible in the near future due to European parliament elections next year, followed by an Australian election the year after.

Informal discussions took place on the sidelines of the G7 trade ministers’ meeting in the Japanese city of Osaka, but neither Australia’s trade minister Don Farrell or European Union trade commissioner Valdis Dombroskis were able to agree on the terms of the deal.

Commenting on the shock collapse in an official statement, Farrell said: “I came to Osaka with the intention to finalise a free trade agreement.

“Unfortunately, we weren’t able to make progress. Negotiations will continue, and I am hopeful that one day we will sign a deal that benefits both Australia and our European friends.”

Meanwhile, a European Commission spokesperson said: “Our negotiating teams made good progress in recent weeks, including in the days leading up to the Osaka meeting. There was optimism that a deal was within reach. 

“However, ministerial discussions in Osaka did not see the same progress. The Australian side re-tabled agricultural demands that did not reflect recent negotiations and the process between senior officials.”

The spokesperson added: “The European Commission stands ready to continue negotiations.”

Negotiations had previously fallen into trouble in July when Farrell walked away from discussions in Brussels without an agreement, following a failure from the two parties to compromise on major issues.

The Australian government had demanded greater access for Australia’s agricultural exporters to sell to EU consumers, with Australia’s agriculture minister, Murray Watt, saying the EU had not offered enough access for beef, sheep, dairy and sugar exporters.

Australia was also unhappy about demands imposed from the EU which would restrict the use of terms such as ‘feta cheese’, ‘parmesan’ and ‘prosecco’, which are protected categories in the bloc.

Meanwhile, Europe wanted greater access to Australia’s critical minerals industry for the key ingredients in clean energy products, such as wind turbines and electric car batteries, with the aim of easing its reliance on Russia and China.

In recent weeks, Australian farmers had put huge pressure on Farrell to reject the deal, with former president of the National Farmers’ Federation Fiona Simson previously calling it a “dud deal” that she suggested could lead to disadvantages in the sector for decades to come. 

With no resolution in sight, this is a blow to procurement and supply chain managers on both sides. The deal would have seen significant supply chain opportunities but teams will now need to focus attention elsewhere, while battling against the challenges and pressures of economic uncertainty, supply chain disruption and geopolitical risk.