[Global IDT Insights] EU and Australia Announced a Free Trade Agreement

Editorial Team – [2026] 185 taxmann.com 201 (Article)

Global IDT Insights provides a weekly snippet of tax news specifically related to Indirect Taxes from around the globe.

1. EU and Australia Announced a Free Trade Agreement

The EU and Australia have announced the conclusion of a Free Trade Agreement (FTA) that establishes comprehensive trade arrangements across goods and services. This agreement is the latest addition to the EU’s agreements with the strategic Indo-Pacific region, following the conclusion of FTA negotiations with Indonesia in September 2025, and India in January 2026.

This article focuses exclusively on tariff-related measures under the agreement. It outlines the elimination or reduction of customs duties, tariff rate quotas for selected products, and phased liberalisation for sensitive sectors such as meat, dairy, sugar, processed goods, and vehicles.

Key aspects of tariff measures under this agreement include:

(a) Tariff Elimination on Key EU Exports

Tariffs on most EU exports to Australia will be removed, either immediately or over a specified transition period. This includes, but is not limited to:

Cheeses (over 3 years)
Wine and sparkling wine (from day one)
Some fruit and vegetables, including preparations and fruit juices (all from day one)
Chocolate, sugar, confectionary and ice cream (all from day one)
Many processed agricultural products (all from day one)

(b) Tariff Rate Quotas

The following tariff rate quotas has been established:

Beef Meat: The agreement establishes two tariff rate quotas for EU beef, with a combined total of 30,600 tonnes. Of this total, 16,830 tonnes (55% of the quota) can enter duty free, subject to a ‘grass-fed’ production condition. The remaining 13,770 tonnes (45% of the quota) is imported at a reduced duty of 7.5%. The quotas will be phased in gradually over ten years. One third of the volumes will be available at entry into force and maintained for five years, ensuring a very gradual implementation.
Sheep and Goat Meat: Two tariff rate quotas are allocated for EU sheep and goat meat, with a total of 25,000 tonnes. Of this total, 27% is limited to frozen meat, while all volumes are duty-free and restricted to ‘grass-fed’ sheep and goat meat. The quotas will be phased over seven years, with one third of the volumes granted at entry into force.
Sugar: A duty-free tariff rate quota of 35,000 tonnes is established for raw sugar cane for refining. This represents a small share of EU sugar consumption. The import of sugar to the EU via this concession will be subject to certification by a private sustainability scheme.
Dairy Product: Modest tariff rate quotas apply to sensitive dairy products. Notably 8000 tonnes for skimmed milk powder, 5000 tonnes for butter and 2000 tonnes for whey protein concentrates.
Rice: Modest tariff rate quotas will apply to rice. A total quota of 8500 tonnes will be granted, beginning with 5000 tonnes at the entry into force of the agreement, with the remaining quota phased in over a five-year period.
Other Products: Modest tariff rate quotas at zero duty will also be granted for wheat gluten (20,000 tonnes), sweetcorn (800 tonnes), bulk rum (750 hectolitres), derivative starches (1,000 tonnes), and ethanol (10,000 tonnes).

(c) Imported Food Compliance with EU Standards

All imported food under the FTA must comply with EU standards. The agreement reaffirms the ‘precautionary principle’, allowing the EU to take measures to protect public health when scientific evidence is inconclusive. Robust checks ensure that all products sold in the EU, whether domestic or imported, meet the required safety and quality standards.

(d) Sustainability and Green Goods

The agreement includes zero tariffs on green goods and services that contribute to environmental and climate objectives. This covers goods and services that prevent, limit, or remediate environmental damage and technologies that mitigate climate change.

(e) Automotive Sector Market Access

Australia will fully liberalise access for passenger cars and other vehicles from day one. Selected truck lines will have phased tariff reductions over a short period. In addition, the luxury car tax threshold for electric vehicles is increased to AUD 120,000, allowing the majority of EU electric vehicles to enter duty-free.

(f) Critical Raw Materials Access

Australia is a major producer of raw materials, such as, aluminium, lithium, manganese, which are vital for the EU’s economic security and competitiveness. The growing global demand for critical raw materials (CRMs) is expected to rise substantially, while the EU continues to rely heavily on imports.

As per this agreement, tariffs on imports of CRMs will be lowered. In addition, the agreement prohibits export monopolies, export taxes, and other restrictions.

(g) Steel Product Exclusions

Certain steel products are excluded from preferential tariff treatment, preserving policy flexibility for both the EU and Australia.

(h) Small and Medium Sized Enterprises

To ensure that small businesses also benefit, the agreement contains a dedicated chapter on small and medium sized enterprises. It provides for a searchable database of import requirements offering clear, product-specific details on tariffs, taxes, and rules of origin.

The Agreement further promotes efficient and transparent customs procedures, including clarity on applicable laws and documentation, access to enquiry points, and prior consultation with businesses before introducing new customs measures. In addition, simplified and digitised processes, along with greater alignment in technical requirements, are intended to reduce export costs and help SMEs with lower trade volumes compete more effectively with larger firms.

(i) Bilateral Safeguard Mechanism

The agreement contains a specific Trade Remedies chapter that sets up a bilateral safeguard mechanism. Under this mechanism, both the EU and Australia can apply temporary safeguard measures during the first seven years after the Agreement comes into effect. Such measures can be taken if there is a substantial increase in preferential imports that causes, or threatens to cause, serious injury to domestic industries or serious economic deteriorations.

The FTA is expected to increase EU exports by up to 33% over the next decade, with export value projected to reach up to €17.7 billion annually. Key sectors with strong growth potential include dairy (up to 48% increase), motor vehicles (52%), and chemicals (20%).

The negotiated draft texts will be published soon. These texts will undergo the necessary internal procedures within the EU. After completing internal procedures, the texts will be presented to the Council for adoption. Once the Council adopts the texts, the EU and Australia will sign the agreement. Following the signature, the texts will be transmitted to the European Parliament for consent. After the European Parliament grants its consent, and once the Council decides to conclude the agreement and Australia has also ratified it, the agreement will enter into force.

Sources:
Press Release
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