EU nears endgame of trade talks with Australia

Australian and European trade negotiators are meeting this week for what they hope will be the last formal negotiating round of the EU-Australia trade talks.

But don’t hold your breath for a handshake between the two top politicians just yet.

The endgame of the negotiations will be crucial for Brussels, as it set to have an impact on politically powerful groups like French farmers, German carmarkers and Italian parmesan-makers. Meanwhile, Canberra is positioning itself as more "hard to get" than its smaller neighbor New Zealand, which sealed its own trade deal with Brussels last year.

European Commission President Ursula von der Leyen has made the deal a priority for the bloc in its quest to cut the EU’s trade dependency on countries like Russia and other more autocratic regimes, while improving Europe’s competitiveness. It would be a big geopolitical win to seal such a pact with a like-minded country, even though Australia is not one of the EU’s largest trading partners. The more climate-friendly government in Canberra is also keen to seal the pact to hedge against China’s growing influence.

"We have a window of opportunity of getting this agreement done," said one EU diplomat, speaking on the condition of anonymity, adding that the negotiations were going really well.

A spokesperson for the Australian embassy in Brussels said that "while there remains a lot of work to be done, we are confident that significant progress can be made during this round."

During this 15th negotiating round, both sides hope to seal a deal on a long list of technical issues that are still open, ranging from services to government procurement. The most sensitive issues will then be transferred to chief negotiatiors and the political level. Von der Leyen has publicly indicated she wants the deal done by the summer,

Agriculture is set to the most sensitive point for the endgame. The Australians are eyeing better access to the European market for beef, lamb, rice, sugar and dairy, officials briefed on the negotiations said, while the EU wants to grant that access within limits. But Canberra already warned it would not settle for a deal like New Zealand, which limited greater agriculture access to the EU market. “New Zealand is a tiny little country. We’re a huge country,” Trade Minister Don Farrell told POLITICO last December.

’Trojan horse’

Brussels on the other hand is set on a deal on the so-called geographical indications that protect the names of distinctive European products such as parmesan or feta.

This is a sensitive point for Australia, were many businesses, often with European heritage, produce these cheeses or other agricultural products. Tony Mahar, chief of Australia’s National Farmers Association has already called geographical indications a "Trojan horse for European protectionism," while the Australian Dairy Farmers have also rung alarm bells.

"Geographical indications and agri," said a second EU diplomat when asked about the most sensitive topics. "The rest of the issues have been very well covered. Everything will be decided on these last subjects."

But there are other sensitive asks that risk popping up late in the day. European carmakers face a luxury car tax above a 5 percent tariff when importing to Australia. Brussels is pushing for better conditions for exporting its cars to Australia.

Brussels also wants Canberra to sign up to the EU’s greener ambitions on trade. The EU expects countries to adhere to the 2015 Paris Agreement, where countries agreed to limit global warming to well below 2 degrees Celsius by setting voluntary targets.

These higher ambitions also include a provision that if Australia fails to respect labor or sustainability standards enshrined in the bloc’s trade agreements, it could face sanctions. Australia is confident that a landing zone can be found, the embassy spokesperson said. "Australia is working to achieve outcomes on trade and sustainable development that are the most ambitious and progressive we have agreed to."

But the European Greens are not so sure. "We expect more climate ambition than what is currently on the table," said Green MEP Sara Matthieu. "This puts a lot of pressure on the Australian negotiators."

Camille Gijs and Sarah Anne Aarup contributed reporting.