Rabobank’s Senior Macro Strategist Bas van Geffen notes that, against a backdrop of geopolitical risk, the EU is pushing to diversify its economic alliances, signing a free trade agreement with Australia after deals with Mercosur, India and Indonesia. The agreement combines tariff cuts, higher quotas for agricultural products, and a security and defence partnership, with an emphasis on access to Australia’s critical raw materials.

Brussels deepens Asia-Pacific trade links

"Amidst the geopolitical risks, the EU continues to seek diversification of its economic alliances. Brussels signed a free trade agreement with Australia, following on the deals with Mercosur, India, and Indonesia. Parliament still has to approve the deal, but this should be less contested than the Mercosur agreement."

"The EU-Australia deal includes a combination of tariff cuts and higher quotas for certain dairy products, beef and sheep meat. Geographical product names are protected by the deal, to the displeasure of Australian farmers, who believe that access to the European market remains impeded."

"Trade Commissioner Sefcovic said that the deal should increase annual bilateral trade by about €20 billion over the next decade, but that’s arguably not the EU’s main motivation. "

"A security and defence partnership underscores the geopolitical motive, and improved access to Australia’s critical raw materials may be an extension of this."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)