COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT Accompanying the document Recommendation for a Council Decision authorising the opening of negotiations for a Free Trade Agreement with Australia
Date: 2017-09-13
Institutions: Directorate-General for Trade and Economic Security, European Commission
Subjects: Australia, European Commission, free-trade agreement, negotiation of an agreement (EU), powers of the institutions (EU), trade agreement (EU)

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   EUROPEAN COMMISSION  Brussels, 13.9.2017  SWD(2017) 292 final   COMMISSION STAFF WORKING DOCUMENT  EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT  Accompanying the document Recommendation for a Council Decision authorising the opening of negotiations for a Free Trade Agreement with Australia {COM(2017) 472} {SWD(2017) 293}  
 
 
Impact Assessment on Recommendations for Council Decisions authorising the opening of 
negotiations for Free Trade Agreements with Australia and New Zealand respectively 

Executive Summary Sheet 

Why? What is the problem being addressed?  

A. Need for action 

The EU's new trade policy described in the Commission Communication 'Trade for All' sets out that the EU 
approach to trade policy will become more effective to deliver economic results, will be more transparent, 
and will not only project interests, but also values. These overarching objectives include trade and 
sustainable development and the promotion of EU values and standards (such as human rights, labour 
rights, and environmental, health and consumer protection) and facilitating trade and investment for SMEs. 
An ambitious programme of multilateral and bilateral negotiations is needed to deliver the full potential from 
trade. This anchors the initiative aiming at opening of FTAs negotiations with Australia and New Zealand 
which is included among concrete initiatives listed in 'Trade for All'. 
EU businesses face relatively less favourable conditions of access to the Australian and New Zealand 
markets compared to non-EU countries that have concluded free trade agreements (FTAs) with Australia 
and New Zealand. Even though Australia and New Zealand have a low level of applied import duties, for 
some products both countries levy comparatively high tariffs, coupled with non-tariff barriers including 
different rules. 
The limited scope of existing sectoral agreements in place, both with Australia and with New Zealand, also 
means that the EU’s overarching trade-related objectives cannot be achieved with regard to Australia and 
New Zealand because there are few relevant bilateral rules that are substantive and enforceable, and no 
general enforcement tools in the bilateral trade and investment frameworks.  

What is this initiative expected to achieve?  
Level the playing field with other countries that already have preferential treatment due to their FTAs with 
Australia and New Zealand. 
Realise the untapped potential of enhanced trade and investment flows between the EU and Australia and 
between the EU and New Zealand. This can be achieved by reducing existing barriers to trade and 
investment, taking into account the EU’s agricultural sensitivities, and by exploring forward-looking 
regulatory cooperation in selected areas as appropriate. 
Provide a new framework with comprehensive, progressive and up-to-date sets of rules for EU-Australia 
and EU-New Zealand trade and investment relationships. This is also with a view to the political framework 
agreements that were recently concluded with both Australia and New Zealand respectively. 

What is the value added of action at the EU level?  
The main objectives of policy intervention are twofold: to improve specific conditions for boosting the EU’s 
trade and investment with Australia and with New Zealand, while implementing the general EU trade policy 
objectives as set out in the 'Trade for All' Communication. Under Article 3 in conjunction with Article 207 of 
the Treaty on the Functioning of the European Union (TFEU) only the EU can negotiate trade agreements. 
Under Article 5(3) of the Treaty on European Union (TEU), the subsidiarity principle does not apply in areas 
of exclusive EU competence.  

B. Solutions 

What legislative and non-legislative policy options have been considered? Is there a preferred 
choice or not? Why?  
Three policy options were identified. 
Option A (‘baseline scenario’) means continuing with the current framework, but this could lead to a relative 
deterioration in the bilateral trade relationship while not achieving the objectives. 
Option B would include the baseline scenario and improved implementation of the existing sectoral bilateral 
agreements or further sector-specific agreements building on the existing bilateral sectoral agreements. 
Option B was not developed further because it is not politically viable for either Australia or New Zealand. 
Option C would provide for two parallel modern and comprehensive agreements — one with Australia and 
another with New Zealand. These would involve a major effort to eliminate tariff and non-tariff barriers, 
liberalisation and facilitation of services and investment, protection of investment, and provision for further 
regulatory cooperation, while taking into account existing sensitivities and exceptions. This option is divided 
into sub-options depending on the level of ambition: C1) a conservative, partial liberalisation scenario and 
C2) an increased liberalisation scenario including full liberalisation of import tariffs for goods. Option C was 
underpinned by the parallel discussions with Australia and New Zealand on defining the scope of the future 
FTAs. 
The preferred option for the EU would be option C2, modified by taking into account some notable 

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sensitivities of agricultural sub-sectors, as also demonstrated by the analysis of the impact assessment. 

Who supports which option?  
The European Commission and the Australian and New Zealand authorities respectively support option C, 
as the most beneficial for each side. The majority of business sector stakeholders are also in favour of new 
FTAs with Australia and New Zealand respectively to further enhance economic ties. The notable 
exceptions are business stakeholders of some EU agricultural sub-sectors, who are not in favour of full 
liberalisation of specific products. The non-profit sector stakeholders underlined the importance of 
maintaining high levels of standards for the social, environmental, consumer and other fields, and to 
safeguard the governments’ right to regulate. These are in line with the objectives of the EU policy for FTAs. 

C. Impacts of the preferred option 

What are the benefits of the preferred option? 
The preferred policy option has a positive overall economic impact on the EU, Australia and New Zealand. 
For the EU, this option is estimated to generate a change in real GDP of close to 0.02 %, which, given the 
size of the EU economy, is considered significant (€4.9 billion) in the long term. Economic welfare increases 
by €4.8 billion in the long term. 
For Australia, real GDP is estimated to grow by 0.20 % (€4.2 billion) and economic welfare by €1.8 billion in 
the long term. For New Zealand, real GDP is estimated to grow by 0.52 % (€1.3 billion) and economic 
welfare by €0.6 billion in the long term. 
This option would provide an overall large economic benefit, while taking into account the sensitivity of 
specific agricultural sub-sectors. 
Social impacts (notably wages and employment) are likely to be slightly positive in the EU, Australia and 
New Zealand. Overall effects on economic and social human rights (adequate standard of living, right to 
work, social protection) and other rights derived from welfare gains would be positive. 

What are the costs of the preferred option? 
As a usual consequence of a reduction in trade barriers, increased economic activity would result in slightly 
higher greenhouse gas (CO2) emissions (an increase in Australia by 0.38 % and New Zealand by 0.64 %, 
and in the EU by 0.04 %), and a decrease in the rest of the world, leading to a marginal increase globally in 
the long term. 
The EU envisages provisions in the agreement on principles of environmental protection in a trade and 
sustainable development chapter. 
Trade liberalisation could lead to some transitional unemployment (reallocation) in a few sectors. In 
particular, increased market access in primary agriculture may negatively affect the rural employment of 
small farmers in the EU. 

How will businesses, SMEs and micro-enterprises be affected?  
The preferred policy option would include comprehensive lowering of barriers to goods and services for EU 
exports and investments in Australia and New Zealand. 
Provisions that simplify customs procedures and administration benefit small exporters and so are very 
important for small and medium-sized businesses (SMEs). In addition, provisions on bilateral cooperation to 
enhance SMEs’ access to information would improve transparency.  

Will there be significant impacts on national budgets and administrations? 
No significant impacts are expected from the FTAs on national budgets and administrations. 
(The direct impact on the EU budget would be negative due to foregone tariff revenue.)  

Will there be other significant impacts?  
No. 

D. Follow up 

When will the policy be reviewed?  
After conclusion, entry into force and implementation, the new FTAs would be monitored, with the help of 
monitoring indicators. Regular consultations with stakeholders would ensure effective follow up of their 
implementation. The FTAs would be evaluated after being in force for sufficient time to ensure the 
availability of meaningful data. 

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