UAE trade deal could unlock billions of investment in critical minerals

Trade Minister Don Farrell will advance negotiations with the UAE in Abu Dhabi that could unlock billions of investment in Australian critical minerals extraction and processing.

Trade Minister Don Farrell. Picture: NCA NewsWire / Martin Ollman

Trade Minister Don Farrell is aiming to tap billions of dollars of investment from some of the world’s largest sovereign wealth funds for the extraction and processing in Australia of key critical minerals by advancing a free trade deal with the United Arab Emirates.

Senator Farrell and Assistant Minister for Trade Tim Ayres will lead a delegation to the 13th World Trade Organisation Ministerial Conference in Abu Dhabi this weekend where they will seek a fix to the dispute settlement system.

At the WTO meeting, Senator Farrell will see his EU counterpart Valdis Dombrovskis for the first time since he rejected, for the second time, an unimproved offer from the EU for a free-trade agreement.

He will also next week meet with his Chinese counterpart, Wang Wentao, where removal of remaining restrictions on Australian exports of wine, lobster and meat are expected to be raised.

The Australian can reveal that in his statement to the WTO Ministerial Conference, Senator Farrell will say the global trading system faces “major challenges” while reaffirming Australia’s commitment to “an open, rules-based global trading system”.

“International rules matter,” he will say. “We live in a time of increasing geopolitical tensions threatening to undermine global prosperity, stability, and security. The conference is an opportunity to demonstrate the importance we place on those rules.

“A fully functioning system would ensure the rights and obligations of members can be enforced, providing confidence in the predictable enforcement of global trade rules.”

Senator Farrell also hopes he can finalise a new FTA with the UAE by the end of 2024, saying an agreement would “strengthen our relationship with one of our most important trading and investment partners in the Middle East”.

In December he announced that Australia would commence negotiations with the UAE on a Comprehensive Economic Partnership Agreement in 2024 and he will use the conference in Abu Dhabi from February 26 to 29 to progress discussions at a ministerial level.

Any trade deal with the UAE would involve reductions in tariffs on cosmetics, iron, steel and agricultural products such as canola seeds, lentils, frozen sheep meat and frozen beef.

The agreement is also viewed by the government as a potential vehicle to turbo-charge billions of dollars of investment in Australia’s critical minerals and rare earths industries while also helping the UAE meet climate goals.

Last week, BHP revealed it was weighing up putting its Nickel West business – which employs 3000 workers – into care and maintenance, with a massive jump in production from Indonesia having pushed down nickel prices.

The federal government has added nickel to the critical minerals list, opening up one path to funding for nickel miners, with Anthony Albanese flagging the government was working through details of an assistance package.

All of the critical minerals – including nickel – that go into electric cars are found in Australia. Under US President Joe Biden’s Inflation Reduction Act, American electric cars must source nickel from FTA partners like Australia to be eligible for financial incentives under the act.

At the COP28 summit in Dubai last year, the UAE signalled its commitment to investing in clean energy across the globe, with Senator Farrell hoping to marry this objective with preferential access to Australia’s abundant reserves of critical minerals.

The government views more free trade and increased global investment in Australia’s critical minerals, rare earths and refining and processing capacity as essential to achieving the target of net zero emissions by 2050.

The UAE is Australia’s largest trade and investment partner in the Middle East, with two-way goods and services trade valued at $9.26bn in 2022.

Australian exports attracted about $129m in duties in 2022 and we imported goods worth $1.8bn from the UAE in the same year.

Australia’s top exports to the UAE include alumina, canola seeds and sheep meat.