The Australia-European Union Free Trade Agreement

Table of Contents

1. Frontmatter

2. Overview of the Australia–European Union Free Trade Agreement

   Marc Bungenberg, Andrew Mitchell

   Abstract

   Since 18 June 2018, ten rounds of negotiations for an Australia–European Union Free Trade Agreement (‘AEUFTA’) have been held in a constructive atmosphere, demonstrating a shared commitment between Australia, the European Union (‘EU’) and its Member states to moving forward with an ambitious and comprehensive agreement. After a lengthy and arduous process disturbed by the United Kingdom’s (‘UK’) withdrawal from the EU, the United States’ hesitations regarding the EU’s global strategy, and the arrival on global shores of the COVID-19 pandemic, the negotiations between Australia and the EU finally appear to be nearing completion. Despite challenging times, both parties have demonstrated a shared commitment to a positive trade agenda and the mutual benefits that come with boosting trade, investment, jobs, and economic growth.

3. Existing Legal and Political Relations Between the EU, Its Member States, and Australia

   Jürgen Bröhmer

   Abstract

   The relationship between Australia, the European Union and member states of the European Union have a long history based on shared values, democratic political systems, and a strong foundation in the rule of law. Historically, the ties to the United Kingdom have been and remain special, not least because Australia was and, albeit to a much lesser degree, can still be understood as a (now) fully sovereign partial reflection of the UK in the southern hemisphere, which whom it shares a language, a legal history based on the common law, a colonial past and, not least, a head of state. But there are close ties with other countries as well. France is a power with substantial interests in the greater area around Australia. France is also a close strategic security partner. The relationship with the EU has been problematic in the past because of profound differences of opinion concerning agriculture. UK membership in the EU initially jeopardized Australia’s trade relationship with the UK. Brexit is seen to create new opportunities albeit at a much smaller scale than the concerns raised by the UK’s joining the EEC/EU. Relative to Australia’s primary natural resources of iron ore and coal and relative to the growth of China as a market for Australia’s natural resources, including agricultural products, the UK, and the EU, play a significantly smaller role today. This paper attempts to present an overview of the various bi- and multilateral relationships that are the foundation for the envisaged AU-EU FTA.

4. The Framework of Bilateral Trade Agreements

   Michael Hahn

   Abstract

   Preferential trade relationships—regardless whether their legal fundament would be a Free Trade Agreement (FTA) or a Customs Union—would be incompatible with membership in the WTO, were it not for Article XXIV GATT and its sister provision in GATS. The generous exception for FTAs only came to be as a consequence of the US wanting to accommodate a close ally which would have been rendered impossible on the basis of the long-held US position. Despite the abrupt and radical change concerning the compatibility of the multilateral trading system with FTAs, the limitations established by Article XXIV GATT are more pronounced than is often appreciated. This may become particularly relevant in a new trading landscape centred around (meta-)regional hubs. Article XXIV may have a second lease of life ensuring that the trend toward regional integrations does not eliminate the floor for inter-regional cooperation that may become a central task for the WTO.

5. Services Trade Liberalisation in the Australia—EU FTA: Progress But No Quantum-Leap

   Charlotte Sieber-Gasser

   Abstract

   Australia declared services trade liberalisation in the Australia-European Union Free Trade Agreement (AUEFTA) negotiations a priority, while an impact assessment by the EU indicated no measurable impact on sectoral output for services in the AEUFTA in services. The two sides will not only have to agree on the relative importance of the services chapter, but also on the type of regulatory structure pursued. At this point, the outcome of negotiations remains unknown. While some elements of substantial liberalisation are expected in the liberalisation of trade in professional services along with temporary movement of persons, and in education services, the currently proposed regulatory structure of the AEUFTA service chapter suggests limited regulatory innovation. However, both parties have confirmed their intention to deepen liberalisation within the scope of their respective schedule of commitments beyond their Trade in Services Agreement (TiSA) offers in 2016. Given that both parties have furthermore confirmed their commitment to modernisation and deepening of international rules in services trade liberalisation in the plurilateral forum of TiSA negotiations, the AEUFTA service chapter may therefore serve also as a stepping-stone to subsequent successful conclusion of plurilateral TiSA negotiations.

6. Digital Trade in the Australia—EU FTA: A Future-Forward Perspective

   Neha Mishra

   Abstract

   This paper assesses the significance of the Digital Trade Chapter of the Australia—EU FTA and focuses on the disciplines necessary to boost digital trade. In the ongoing negotiations, the EU and Australia are likely to agree upon conventional digital trade disciplines (e.g., e-signatures, e-authentication, paperless trading, customs duties on electronic transmissions) as well as provisions on online consumer trust and spam, and more contemporary disciplines on source code disclosure and data localisation. These disciplines can undoubtedly contribute to boosting digital trade between Australia and the EU. However, data flows and data protection will remain a sticky issue in the ongoing negotiations, given the differences in data protection laws of the EU and Australia, and the EU’s exceptionally defensive approach in data protection. Instead of bypassing such issues, the FTA negotiators should view the negotiations as an opportunity to build mutual consensus and foster cooperation in formulating standards and mechanisms for data transfer. Further, the negotiations provide an opportunity for adopting deeper disciplines on digital trade facilitation that can nurture start-ups as well as experimenting with novel models for regulatory cooperation in nascent policy areas including AI ethics and open government data.

7. Investment Screening and Market Access in the AEUFTA

   Jarrod Hepburn

   Abstract

   This chapter examines issues of investment screening and investment market access in the negotiations for the Australia-European Union Free Trade Agreement (AEUFTA). It provides an overview of the general purpose of the envisaged provisions on investment screening and investment market access in the AEUFTA, as well as an assessment of the particular value of these provisions in the Australia-EU relationship. The AEUFTA could potentially address both issues, by offering enhanced market access in particular sectors and/or by offering higher screening thresholds. Nevertheless, evidence remains unclear on whether higher screening thresholds play a significant role in encouraging more investment. As well, in light of current economic and political uncertainties, the treaty partners may also be tempted to include broad negative list reservations to their market access commitments, preserving maximum flexibility to meet future policy challenges.

8. Panel Procedures Under the Proposed EU-Australia FTA

   Angshuman Hazarika

   Abstract

   State-to-state dispute settlement is a common feature in most modern trade agreements and EU Free Trade Agreements (FTAs) have been no exception with its trade agreements since the 2000s containing the possibility for state-to-state dispute settlement through panelists or arbitrators (Cornelia, Ensuring that state to state dispute settlement procedures under the EU FTAs do not end when they have just begun, 2020, p. 2.). While these provisions were largely unused for a long time, since 2018, the EU has been a part of four disputes based on dispute resolution proceedings in FTAs (Disputes against Ukraine, Southern African Customs Union, South Korea and Algeria. Progress on the proceedings can be monitored at https://ec.europa.eu/trade/policy/accessing-markets/dispute-settlement/bilateral-disputes/ (last accessed 9 September 2021).), The EU has recently received a favourable decision in the first concluded proceeding against Ukraine (Final Report of the Arbitration Panel, Restrictions applied by Ukraine on exports of certain wood products to the European Union, 11 December 2020, p. 125.), and mixed results in the second concluded proceeding against South Korea (Report of The Panel of Experts, Panel of Experts Proceeding Constituted Under Article 13.15 of the EU-Korea Free Trade Agreement, January 20, 2021, p. 77.). This line of recent disputes indicates that state-to-state dispute settlement procedures may have a significant role in the future and relevant clauses in the FTAs need to be carefully negotiated with a view to prevent procedural hurdles in future proceedings.

9. Investment Protection in the AEUFTA: Missed Opportunities or Strategic Exclusions?

   Esmé Shirlow

   Abstract

   Negotiations between Australia and the European Union (EU) for a free trade agreement (the AEUFTA) appear to be nearing completion. Based on the EU’s negotiating mandate and the official reports from the negotiations so far, it is clear that the AEUFTA’s investment-related provisions will focus exclusively on market access and investment liberalisation. The AEUFTA will thus not incorporate investment protection obligations and nor will it include an investor-State dispute settlement mechanism. Despite these omissions, the conclusion of the AEUFTA will be significant from the perspective of both negotiating States, including because it reveals the policy and legal constraints guiding the approach of each to the negotiation and conclusion of investment treaties and investment chapters in FTAs. This article first introduces the contours of the bilateral investment relationship between the EU and Australia and then examines why the FTA adopts an exclusively liberalisation-focussed approach, to address whether the exclusion of investment protection and investor-State arbitration from the scope of the FTA is a strategic omission on the part of one or both parties. To consider next whether such omission is a missed opportunity, the article examines the likely focus of the investment-related provisions of the treaty, and what impact the FTA is likely to have vis-à-vis investors and existing investment treaties.

10. The Competition Chapter in the EU-Australia FTA

    Mareike Fröhlich

    Abstract

    The chapter deals with the consideration of competition policy in the context of the EU-Australia FTA. It first gives an overview about the reasons for and possible content of competition chapters in general. In the following, the competition chapter of the EU-Australia FTA is analysed and compared with the most common competition rules in FTAs. Moreover, it is put into a broader context by analysing other agreements of the EU and Australia regarding competition issues. Here, especially agreements with the same party, like UK or Canada, are of special interest since they could serve as a model for the future chapter on competition. Finally, conclusions are drawn if the EU-Australia FTA will be another example of the European approach in competition cooperation.

11. European Trade Policy and the Regulation of Subsidies: What Can We Expect from the EU-Australia FTA?

    Philipp Reinhold

    Abstract

    Subsidies play an important role in the European Union’s trade policy. This concerns both the use of autonomous instruments and the many bilateral and multilateral trade negotiations. Currently, the creation of a new regulation is being discussed, on the basis of which the European Commission could act against foreign subsidies that distort the internal market. At the same time, the EU is trying to agree on more far-reaching subsidy rules in its bilateral trade agreements and continues to advocate a reform of subsidy rules at the WTO level. Overall, the EU’s aim is to create a level playing field for the provision of subsidies. For Australian trade policy, the regulation of subsidies has been less important so far. Nevertheless, there are reasons for including more far-reaching subsidy rules in a free trade agreement between the EU and Australia (“EU-Australia FTA”). On the one hand, they can serve as a template for further agreements and as a political signal with regard to multilateral reforms of WTO subsidy law. On the other hand, Australia can use the opportunity to negotiate provisions that make it easier for Australian companies to deal with a new EU subsidy regime.