Despite global headwinds, EU seals long-awaited free trade deal with Australia

The European Union and Australia announced on Tuesday the adoption of a groundbreaking “Security and Defence Partnership” while concluding negotiations for an ambitious and balanced free trade agreement.

They also agreed to launch formal negotiations for Australia’s association with Horizon Europe, the world’s largest funding programme for research and innovation. These developments deliver mutually beneficial outcomes and reinforce already close bilateral relations amid heightened geopolitical uncertainty, including ongoing conflicts in Ukraine and the Middle East, as well as broader concerns over supply chain vulnerabilities and shifting global alliances.

The free trade agreement’s final text was sealed during a leaders’ meeting in Canberra between European Commission President Ursula von der Leyen and Australian Prime Minister Anthony Albanese. Separately, the Security and Defence Partnership was signed virtually on 18 March 2026 by EU High Representative and Vice-President Kaja Kallas, alongside Australian Deputy Prime Minister and Minister for Defence Richard Marles, and Minister for Foreign Affairs Penny Wong. These steps reflect a deliberate effort to build lasting frameworks for cooperation in an era marked by turbulence.

Deepening strategic and economic bonds

Von der Leyen captured the spirit of the moment by noting that, despite the vast geographical distance, the EU and Australia share remarkably aligned worldviews. “With these dynamic new partnerships on security and defence, as well as trade, we are moving even closer together,” she declared. The agreements establish trust-based structures to support peace and security through strength, drive prosperity via rules-based trade, and uphold global institutions. They also commit both sides to fostering a cleaner, more digital future for citizens, workers, and businesses, sending a clear signal that friendship and cooperation remain paramount in uncertain times.

Negotiations for the free trade agreement began in July 2018. After the 15th and final formal round in April 2023, followed by extensive intersessional technical and political discussions, the deal finally reached completion. This agreement represents the latest in the EU’s series of strategic engagements in the Indo-Pacific, coming after the conclusion of free trade negotiations with Indonesia in September 2025 and India in January 2026.

For the EU, the pact is expected to boost exports to Australia, where the bloc already enjoys a significant trade surplus, by 33 percent in the coming years, while saving European businesses approximately €1 billion annually in tariffs. Over 99 percent of tariffs on EU goods exports to Australia will be removed, providing immediate and tangible benefits for exporters, producers, and farmers.

A strategic dimension

The deal addresses critical raw materials, an area of strategic importance. Australia, a major producer of lithium, rare earths, tungsten, aluminum, and manganese, offers the EU a reliable source to diversify supply chains and reduce overdependence on any single supplier, particularly in light of warnings that dependencies can be weaponized, as highlighted by recent global conflicts. Lowering tariffs on these materials, banning export monopolies and restrictions, and opening avenues for joint investment projects will enhance predictability and stability. European Commission spokesperson Olof Gill emphasized that this diversification reduces reliance on dominant players like China while securing essential inputs for artificial intelligence, green technologies, and decarbonization efforts, all while potentially lowering the EU’s overall carbon footprint through partnership with a like-minded nation.

Agricultural concerns

Agriculture has long been a sensitive chapter in trade talks, and this agreement is no exception. The European Commission has incorporated strong protections for geographical indications- EU provenance markers such as Parma ham or Feta cheese, to safeguard traditional products and address concerns from farming communities. In exchange, Australia secured concessions allowing its food producers to continue using certain generic names like “parmesan” for cheese and “kransky” for sausages, while winemakers can sell “prosecco” on local markets. Canberra has committed to protecting 165 European food products and 237 spirits, alongside a modernized bilateral wine agreement that will safeguard all 1,650 EU wine geographical indications, including 50 newly added names from 12 member states. A 10-year phase-out period applies in some cases for Australian exports using protected terms.

Australian producer groups, however, expressed disappointment over the agricultural market access gains, which they viewed as insufficient compared to expectations when talks collapsed in 2023. The National Farmers’ Federation described the outcome as falling short of “commercially meaningful” advances for sectors like beef, sheepmeat, and sugar. European farming organizations, including Copa-Cogeca, echoed concerns about balance and fairness. Copa President Massimiliano Giansanti stressed that while strategic ties with Australia hold importance, agreements must not treat agriculture as a bargaining chip. He warned that expanded access for sensitive products could undermine European farmers facing rising costs and falling revenues, potentially distorting markets and weakening commitments to high production standards and sustainable rural development. Lennart Nilsson, representing cohesion policy perspectives, added that concessions must remain strictly limited, reciprocal, and aligned with equivalent standards to protect food security and rural communities – key pillars of EU sovereignty.

Despite these reservations, the overall tone remained celebratory. In her address to Australian MPs and senators, President von der Leyen affirmed that “when it comes to trade, Europe is open for business.” She highlighted Europe’s ongoing rearmament, decarbonization, and preparation for greater independence, underscoring that “showing up matters” in building an outward-looking continent.

Geopolitical realities and future horizons

Beyond commerce, the partnership carries significant geopolitical weight. The Security and Defence Partnership provides a framework for enhanced cooperation on shared challenges, including defence industry collaboration, cyber and economic security, counterterrorism, and potential joint naval or military operations. It paves the way for Australia’s greater participation in EU civilian and military missions and offers a first step toward improved access to the EU’s SAFE programme – a €150 billion instrument supporting defence production and joint procurement. High Representative Kaja Kallas reinforced the message: “Australia and Europe may be oceans apart, but our security is inseparable. If Russia prevails in Ukraine, it will also set a dangerous precedent for the Indo-Pacific.”

These moves align with the EU’s broader strategy of strategic diversification and hedging against uncertainties, including potential strains in transatlantic relations.

The agreement complements recent EU pacts with Mercosur and India, while Kallas has also signed similar security and defence partnerships with Iceland and Ghana in recent days. Both von der Leyen and Albanese described the outcomes as a clear “win-win,” leveraging Australia’s resources and the EU’s market scale for mutual resilience.

Sources: European Commission press releases, National Farmers’ Federation releases, Politico, Guardian

Caption: Australian Prime Minister Anthony Albanese and President of the European Commission Ursula von der Leyen walk together after addressing members and senators during a joint sitting in the House of Representatives at Parliament House in Canberra, Australia, 24 March 2026. EPA/LUKAS COCH