INTERVIEW WITH DR MICHAEL PULCH, AMBASSADOR OF THE EUROPEAN UNION TO AUSTRALIA
“Diplomacy is a key part of finding a solution”
Dr Michael Pulch- Ambassador of the European Union to Australia (April 6th 2020 interviewed by Ryan Attard)
Although COVID-19 may have momentarily captured our attention, key industries continue to operate as normal. In the realm of diplomacy, this includes trade negotiations between countries, in particular the Australia-European Union Free Trade Agreement (AEUFTA).
Negotiations were formally launched in June 2018 and negotiations commenced the following month. The EU is a lucrative market for Australia, being Australia’s second largest trading partner (as a bloc) and having a GDP worth approximately US$18.7 trillion. Brexit does mean these statistics are in need of review (as the UK contributed around 13% to EU GDP) but it is undeniable that the EU is an important trading partner and an FTA would further solidify the relationship.
PROGRESS IN NEGOTIATIONS
In a recent interview, Dr Michael Pulch, Ambassador of the European Union to Australia, indicated the EU’s intention to continue with the current negotiation timetable, with the next round of discussions to occur in May. However, larger concerns surround the preparation before this round. Noting that we will need to adapt to the current restrictions brought by COVID-19, Dr Pulch said:
“we are trying to maintain the rhythm of negotiations”, indicating that he has “confidence” that “trade negotiators will continue in their preparations of the next round of negotiations.”
Regardless of COVID-19, the EU has become somewhat notorious for long and drawn-out negotiation processes. This can be attributed to FTAs requiring the agreement of each of the 27 member-states. The Canadian-EU Comprehensive Economic and Trade Agreement (CETA) is a prime example of this, with only 14 member-states ratifying the agreement since September 2017. Tensions were brought to a forefront when Belgium withdrew support as regional parliaments disapproved of the agreement. This withdrawal of support was only the week prior to Canadian PM Justin Trudeau signing the agreement at the European Parliament in October 2016. Although the CETA continues to be provisionally applied during the ratification process, this process continues to face various challenges with The Netherlands recently ratifying the agreement with only a one vote majority while the Agreement is still being challenged in the German Federal Constitutional Court.
In response, Dr Pulch noted that the CETA negotiations “had their own issues on both sides” and EU processes could not solely be blamed. However, the Ambassador reiterated that the Australia and New Zealand negotiations “for the first time were under a new EU fast track procedure”.
“For the first time the European Union is negotiating a free trade agreement with a partner country, this time Australia, under a new European fast track procedure, and that fast-track procedure, we call it a European agreement, means that a negotiated outcome of that agreement is only to be approved by Member-States and ratified by the European Parliament. It does not have to be ratified by every single Member-State parliament.”
This would mean that only the European Parliament, and not each legislature, would need to give approval to the FTA, ultimately making the negotiations “significantly faster”.
GEOGRAPHICAL INDICATORS
A contentious point in the AEUFTA negotiations are geographical indicators (GIs). These are names or signs used on products which are from a certain location. Foods such as feta, gorgonzola, and gruyere are among the 172 food items which the EU is seeking protection for in the FTA. There is also a request for the protection of 236 types of alcohol, including Scotch Whisky, Irish Whisky, and Grappa. The Ambassador did not believe this would be a “roadblock” to negotiations as Australia “has already accepted the notion GIs will be an essential part of this FTA”. He did concede this will be a “more sensitive part” of the talks.
“GIs are often seen as a protectionist measure for European producers. And it is up to a point. But mainly it is an instrument for rural communities all around the world to support their productions and protect their brands.”
In response to concerns, Dr Pulch noted the European requests were not unreasonable and were quite sensible. The Ambassador noted this “keeps jobs in rural communities, helps communities keep their employment where they live, and protects consumers.” He underlined also the need to protect consumers, claiming it would be deceptive to sell prosciutto di Parma that was not made in Parma. The FTA would protect consumers and encourage producers to develop their own brands, as “instead of having an imitated product, you would rather have the authentic product.”
Dr Pulch reflected on the Wine Agreement (signed in 2008) as the source of successful GIs. This is because the Agreement protects both Australian and European wines.
“When I speak to Australian wine producers, in Margaret River, Yarra Valley, Hunter Valley, or other places, they will tell me that was probably one of the best decisions that they ever made; to agree on a wine agreement with the EU, as their wine exports to Europe tripled during this period.”
This was reiterated in relation to Tasmanian Whisky, with the Ambassador stating “none of [the producers] would wish to see their product called a Scotch Whisky produced in Tasmania.”
Overall, it seems the EU wishes to avoid discussion on the difficulties that may arise for various food producers, many of which are small rural businesses. However, we need to wait on further details from the Australian Government on whether they are content with the final list of proposed GIs.
REGULATORY ALIGNMENT AND ENVIRONMENT TARGETS
In the last round of negotiations, the EU negotiators were adamant to include references to Paris Climate Agreement policies. In trade negotiations, regulatory alignment is a particularly important part, as they facilitate market access for producers.
In response, the Ambassador indicated the benefits of trade deals with a “green agenda behind them”, noting that higher standards improves overall quality in goods and services, also in relation to fuel standards, as they allow to export more energy-efficient auto motives to Australia.
After the last round of talks, Trade Minister Senator Birmingham said it was “unprecedented to see those types of provisions in the agreement”. This was followed by the Minister claiming that FTA’s were mainly commercial agreements and should only involve commercial dealings between countries. However, acceptance of these targets were not written off and the Ambassador highlighted optimism in their inclusion.
UK v EU – WHO SHOULD AUSTRALIA PRIORITISE?
The UK is currently bound to EU rules and regulations until the end of the transition period, which is currently set for December 2020. However, since they formally left the EU in January, the UK have regained the power to negotiate its own free trade agreements.
“Leaving the European Union meant that the UK is not a member of all the some 50 FTAs that the European Union has signed with over 100 different countries… and that will require the UK to actually negotiate FTAs with countries with which they already had a FTA as a member of the EU.”
When asked why Australia should prioritise the EU over the UK for an FTA, the Ambassador said it was for “every government to decide what their priorities are.” However, Dr Pulch placed an onus on the size of the EU as a market for Australia.
“What every trade negotiator tells me is one thing though – size matters… If you negotiate with the European Union you negotiate with a bloc of 27 nations… the second most important consumer market in the world.”
Referring to 2018 trade numbers, the EU is Australia’s second largest trade partner as a bloc. However, “the UK was a very important trade partner for Australia, covering roughly a quarter of EU trade with Australia and probably one-third of services trade.” Based on this logic, “the EU is three times as important” as the UK in trade figures and “twice as important as a services partner.”
However, what this logic fails to consider is that the UK as one sovereign state held such a large portion of trade and services with Australia while the remaining amounts are split among the 27 remaining member-states. This means that an FTA between Australia and the UK would still be of considerable importance. This is especially true for foreign direct investment (FDI). In the interview, the Ambassador noted that the UK only made up 45% of the EU’s FDI in Australia, meaning the EU is a “more important source”. However, such logic disregards that the UK as one member-state nearly had the same FDI as all other member-states combined. Nevertheless, the EU still is a larger market for Australia with over 450 million consumers with an FTA to only further strengthen trade relations.
THE FUTURE OF NEGOTIATIONS
If COVID-19 does not stagnate negotiations, this month we will learn more about the progress made on the FTA. While diplomats have turned their attention to dealing with the current pandemic, there is still hope that the current timetable will be followed which means a deal should be reached by late-2020 or early-2021. Yet, if past FTA negotiations have taught us anything, don’t bank on schedules.
