TRADE LAW: Australia inks new FTA deal with UAE

AS MANY readers would be aware, Australia has entered into several Free Trade Agreements (FTA) whether bilateral, regional or plurilateral. Many of the FTAs have led to improvements in trade outcomes, including the recent FTAs with the United Kingdom (UK) and the first stage of the FTA with India.

Background to the current FTA negotiation agenda

The series of FTAs being successfully completed ceased when Australia could not come to terms on an FTA with the European Union (EU) as anticipated in October 2023. Reasons for that inability to reach a deal largely arose from the inability of Australia to secure improved access for certain Australian exports into the EU and the EU demands for “geographical indicators” on certain products already produced in Australia with “EU titles” which would have required re-naming of those Australian products. While discussions to complete the FTA have continued with the EU, there do not appear to be foreseeable moves towards completion of the EU FTA.

Expanding the FTA with India

However, the negotiators with the Department of Foreign Affairs and Trade (DFAT) have continued to work on finalising the existing limited FTA with India to complete the wider Australia – India Economic Cooperation Agreement (CECA). That would augment the existing Economic Cooperation and Trade Agreement (ECTA) which entered into force on 22 December 2022.

Completing FTA negotiations with the United Arab Emirates

At the same time, negotiations with the United Arab Emirates (UAE) were expedited. These had been commenced many years ago but had not advanced to completion, apparently due to the intervention of the Gulf Cooperation Council (GCC) which had expressed a preference for any FTA to cover all the countries within the GCA.

The renewed engagement with the UAE began on 13 December 2023, with Australia and the UAE announcing the commencement of negotiations for a Comprehensive Economic Partnership Agreement (CEPA) as groundwork for closer economic relationships. Subsequently, on 17 September 2024, both the UAE and Australia announced that they had successfully completed negotiations on the CEPA. Of course, this has not commenced immediately and CEPA will require several steps before entry into force including a final “legal scrub” of the text, signature of that finalised text of the CEPA and completion of domestic implementation in both countries before agreement on the date of the entry into force in both countries following exchange of “Diplomatic Letters” by both countries.

Implementation of the CEPA

Domestic implementation of the CEPA in Australia will include consideration by our Parliamentary Joint Standing Committee on Treaties (JSCOT). If the recommendation of JSCOT is positive then there will need to be limited amendments to existing legislation, predominantly to the Customs Act 1901 and the Customs Tariff Act 1995 to implement the new tariff rates and new rules of origin. There may also be some amendments to permit investment by UAE entities (including by the sovereign wealth funds established in the countries forming the UAE.)

It will be some time before the text of CEPA and associated legislation will be available. In addition to guidance material from DFAT and the Australian Border Force, the private sector will also provide information sessions on the content and terms of use of CEPA which will include the usual sessions from the International Forwarders and Customs Brokers Association of Australia (IFCBAA).

Some of the commercial outcomes of the CEPA

As the final text of the CEPA is not yet available, we are at the stage that commercial outcomes are confined to information from DFAT and from the Australian minister for trade and tourism. In a media release from the office of the minister dated 17 September 2024, the minister provided the following summary.

“We are a trading nation, and the Albanese Government is delivering on its commitment to open up new opportunities for our exporters, farmers, producers and businesses to diversify their markets.

“The UAE has some of the largest sovereign wealth funds in the world. A trade agreement with the UAE will facilitate investment, which is important to achieving the Albanese government’s ambition of becoming a renewable energy superpower.

“Under this trade agreement, Aussie exports are expected to increase by $678 million per year, but this deal means more for Australia than just numbers.

“More trade means more higher-paying jobs, more opportunities for our businesses, greater investment to build things here in Australia, and cheaper bills for Australian households.”

More substantial commentary can be found at the DFAT website which provides links to commentary on a variety of benefits to CEPA. From an industry perspective, the main interest will be around trade in goods. DFAT’s commentary is as follows.

CEPA will eliminate tariffs on over 99% of Australia’s exports to the UAE by value, with most tariffs eliminated on entry-into-force or locked in at zero and others eliminated over three or five stages. This makes CEPA the most liberalising FTA the UAE has agreed to date. Independent modelling estimates a potential annual increase in Australian exports of around $678 million per year.

Removal of the UAE’s import tariffs will create commercially significant benefits for Australian exporters. This opens opportunities for Australian exporters to diversify into this important Middle East market and provides greater certainty on the tariff treatment they will receive. Australian exporters will benefit across the board. Farmers and food and beverage producers stand to gain from preferential access to the UAE´s growing market for premium food and agricultural products, with elimination of tariffs on products such as frozen beef and sheep meat, canola seeds, dried legumes and dairy.

It will also benefit exporters of products such as alumina, automotive parts, gold, nickel, coal and diamonds. First Nations businesses will benefit from preferential market access for exports in areas of interest such as bush foods, bush skincare and fashion.

Australia has also achieved other modern, flexible and trade-facilitating outcomes on rules of origin, complemented by inclusion of commitments for customs procedures.

In terms of imports, the reduction in tariffs will only be confined to a limited number of products. Accordingly, most of the benefits will be found in enhancing Australian exports and promoting investment into Australia especially in relation to extracting primary resources and critical minerals in Australia.

Not everyone loves the CEPA

To be fair, CEPA has not met with universal approval. Other than those involved in the areas of focus of CEPA, not many others have visibility of the natural relationship with the UAE and associated benefits to Australia. However, it should be noted that it is a significant beachhead in enhancing Australian trade relations into the Middle East. It could also form a vital initiative in the development of wider trade relationships throughout the GCC.

More openly, the Australian Trade Union movement has expressed concerns about the CEPA. The Australian Council of Trade Unions has expressed real reservations about UAE labour practices and human rights issues (especially women’s rights) both in its submission to the DFAT stakeholder consultation process and after the announcement of CEPA. It will be interesting to see if the opposition to CEPA will transfer into objections in the JSCOT process. While CEPA does apparently include a “labour standards” chapter, that may well be limited to aspirational outcomes as opposed to substantive developments. Even should that be the case, the chapter itself is a positive development which may not have otherwise developed.

New Zealand also completes an FTA with the UAE

It has been a busy time for the NZ trade negotiators. While we have been in negotiation of our CEPA, our colleagues in NZ have completed another FTA. It is also known as CEPA so hopefully Australia and NZ can agree on different terminology for their FTA.

NZ also completed negotiations in what must be a record time, commencing negotiations on 7 May 2024 with announcements on completion of negotiations on 26 September 2024. Like us, the full agreement has yet to be finalised but the highlights of the outcomes can be found in comments by the NZ trade minister.

“Our Comprehensive Economic Partnership Agreement (CEPA) with the UAE will eliminate duties on 98.5% of New Zealand’s exports immediately on entry into force, rising to 99% within three years. This will create new opportunities for New Zealand businesses in the dynamic UAE market, contributing to our ambitious target of doubling exports by value in 10 years.”

There appear to be common interests in the two CEPAs, (especially in exports of dairy and agricultural exports) and no doubt Australia and NZ will work together to finalise their agreements and open wider export markets for local producers as well as attracting more investment from the UAE. It remains to be seen whether wider interests can be achieved.

As always, I will keep you apprised of developments!

This article appeared in the October | November edition of DCN Magazine