European Commission President Ursula von der Leyen and Australian Prime Minister Anthony Albanese signed the agreement Tuesday at the Australian Parliament House after protracted negotiations that began in 2018.
The agreement will also facilitate access to jobs in Australia for EU professionals.
The breakthrough comes as both the EU and Australia seek to diversify their trading networks and reduce their economic reliance on China and exposure to uncertain U.S. tariffs.
The European Union and Australia have agreed on the final text of a free trade agreement some two years after negotiations broke down over Australian demands for more red meat market access and complaints about Australian products labeled with traditionally European names such as prosecco.
The leaders said the pact demonstrated that both sides benefitted from rules-based trade. “We are telling an important story to a world that is deeply changing. A world where great powers are using tariffs as a leverage and supply chains as vulnerabilities to be exploited,” von der Leyen told reporters.
“In our story, open rules based trade delivers positive some outcomes. Trust matters more than transactions,” she added.
Albanese said the context in which the agreement was reached was an important factor in allowing negotiations that collapsed in October 2023 to restart.
“This is both the European Union and Australia asserting that we believe in free and fair trade, that we understand that trade advances the prosperity of both trading entities who are involved, that it is in our interest to get this done,” Albanese said.
The leaders also announced a new defense partnership that will bring closer military cooperation and the start of negotiations toward Australia becoming an associate of the research and innovation funding program Horizon Europe .
Albanese said the defense partnership would provide a framework for the EU and Australia to cooperate on global challenges, marking as areas of collaboration defense industries, maritime security, cyber security, countering terrorism and combating hybrid threats such as disinformation.
“It shows our shared commitment to global peace and security, including reaffirming our steadfast support for Ukraine in the face of Russia’s illegal full-scale invasion,” Albanese said.
Albanese said the pact also removed tariffs on key Australian exports including wine, seafood and horticulture.
The EU will open two tariff rate quotas of a total of 30,600 metric tons (33,731 U.S. tons) for Australian red meat, with 55% of that duty free.
Under the trade deal, Australian producers of prosecco, traditionally a sparkling wine from northern Italy, will be banned from using the name on exports 10 years after the pact takes effect.
A start date for the pact has not been announced.
The pact will also help the EU secure supplies of critical raw materials including lithium and tungsten.
The agreement will provide European exporters with privileged access to the Australian market, including: Eliminating over 99% of tariffs on EU goods exports to Australia, resulting in a reduction of approximately €1 billion per year in taxes for companies of all sizes; Opening the Australian services market in key sectors, including financial services and telecommunications; Greater access for EU companies to Australian public procurement; Introducing ambitious data flow rules, which prohibit data localization requirements; and Securing critical raw material (CRM) supply chains by reducing import duties and creating investment opportunities.
Furthermore, to ensure that small businesses also benefit from the agreement, it contains a dedicated chapter for small and medium-sized enterprises to help them increase their exports.
The agreement will also facilitate access to jobs in Australia for EU professionals, while entry quotas for engineers and researchers will stimulate European and Australian innovation.
The EU has a positive trade balance for agri-food products with Australia, amounting to a surplus of €2.3 billion in 2024.
The agreement will eliminate customs duties on key EU exports, such as cheese, meat preparations, wine and sparkling wine, certain fruits and vegetables, including preparations, chocolate, and confectionery.
For sensitive agricultural sectors such as beef, sheep, and goat meat, sugar, certain dairy products, and rice, the agreement will allow imports from Australia at zero or reduced duty only in limited quantities, through tariff quotas.
Furthermore, the agreement includes a bilateral safeguard mechanism, allowing the EU to take measures to protect sensitive European products and their producers in the unlikely event of an increase in imports from Australia that would damage the EU market.
The bilateral safeguard mechanism will be implemented through a stand-alone EU regulation, which will allow for the rapid activation of protective measures in the unlikely event of an unexpected and damaging increase in imports or an undue decrease in prices for products.
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