Critical minerals key to Australia’s free-trade deal with Europe
Australia is leveraging its abundance of critical minerals and Europe’s dependence on Chinese supply to secure a breakthrough for a free-trade deal early next year.
Australia is leveraging its abundance of critical minerals and Europe’s dependence on Chinese supply to secure a breakthrough in the latest round of high-level talks for a free-trade deal, as the Albanese government aims to clinch an agreement early next year.
In Europe to advance the negotiations that began in 2018, Trade Minister Don Farrell is telling counterparts a free-trade deal with Australia will help diversify critical mineral supply lines, reduce reliance on Beijing and assist in decarbonising the European economy.
The position is being framed as a deal sweetener given the Albanese government’s hardline stance for Australian agriculture to gain expanded access to the European market and its refusal to wind back the nearly $900m-a-year luxury car tax. Labor is also resisting pressure to rebrand domestically produced products such as prosecco, parmesan or feta cheese in line with the EU’s stance on geographic indicators.
“We think, as part of these overall discussions, the Europeans need to take into account that they don’t want to be left in a situation where the only place they can get critical minerals from is China,” Senator Farrell told The Weekend Australian.
“We have learnt the lesson of putting all your eggs in the China basket. We need to diversify our trading relationship … We’ve got a heap of these critical minerals. But they are going to be expensive to extract. Much more ... than, say, mining iron ore, which you can do for $20 or $30 a tonne.
“What that requires is investment. We want to be investment partners with the Europeans … because we are like-minded. We are both on the same side in the Ukraine/Russian fight.”
Australia’s latest pitch taps into heightened concerns in Europe over its electric vehicle industry following the passage in America of $US369bn in green tax breaks through Joe Biden’s flagship Inflation Reduction Act. Its passage has dialled up trade tensions across the Atlantic and ignited new fears of a subsidy race as Europe frets it will lose investment to America at a time when the energy crisis has already hit industry.
Speaking to The Weekend Australian in Brussels, where he met with EU Trade Commissioner Valdis Dombrovskis, Senator Farrell said the Inflation Reduction Act had allowed America to “prioritise Australian critical minerals in their supply chain” for green industries including making electric vehicles.
But he noted the EU was not a major market for Australian exporters. In 2021-22, it represented just 2 per cent of Australia’s total exports of lithium concentrates, while exports of other key minerals used in lithium-ion batteries, such as cobalt, rare earths and nickel, were nil to negligible.
Senator Farrell said Europe had committed to stop producing fossil-fuel cars by 2035 and there was now “a time frame in which they need to decarbonise”, and this brought new investment opportunities in Australia.
“Australia has the critical minerals to support the EU’s climate ambitions. If the EU wants to be a partner of choice for Australia, we need this FTA to take our trade and climate relationship to the next level,” he said.
The EU, a high-income market of about 445 million people with a GDP of about $23 trillion, is Australia’s third-largest two-way trading partner of goods and services worth $84bn.
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