The UAE and Australia have recently concluded negotiations for a free trade agreement that seeks to cut over 99 percent of tariffs on Australian products entering the UAE. The Comprehensive Economic Partnership Agreement (CEPA) will save around $135 million in tariffs during only the first year and $160 million per year once the agreement is fully in place.
In a statement, Australia’s Minister for Trade and Tourism, Don Farrell, revealed that the UAE is an important partner and Australia’s largest trade and investment partner in the Middle East with bilateral trade worth $9.9 billion in 2023.
Trade opportunities and growth prospects
“This trade agreement provides a gateway for Australian exporters to diversify into the Middle East, a market of around 58 million consumers and a combined GDP of A$1.4 trillion,” added the statement.
Key Australian exports to the UAE include alumina, meat, dairy, oil seeds, seafood, steel, canola seeds, nuts, honey, coal, chickpeas, lentils, and higher education. The CEPA agreement will further support Australian farmers and food producers with tariff savings of around $50 million per year for food and agriculture exports.
“We are a trading nation, and the Albanese government is delivering on its commitment to open up new opportunities for our exporters, farmers, producers, and businesses to diversify their markets,” stated Farrell.
The agreement will also cut Australian import tariffs on the UAE’s furniture, copper wire, glass containers, and plastic imports. This will make UAE products in Australia cheaper, further lowering business costs for traders. This will save Australian households and businesses around $40 million a year, added the minister.
Bilateral non-oil trade between the two nations reached $2.3 billion in H1 2024, an increase of 10 percent from H1 2023. A CEPA with Australia will be a significant addition to the UAE’s foreign trade network, which is helping to propel non-oil foreign trade towards its target of $1.1 trillion by 2031.
CEPA implementation
In 2023, bilateral investment between Australia and the UAE reached $20.6 billion. With the CEPA now in place, investments between the two nations will increase significantly.
The package includes a framework that will encourage bilateral investment in key sectors including the energy transition and critical minerals. The Australian mining industry will also benefit from tariff cuts on exports, including alumina which reached $1 billion in 2023.
“The UAE has some of the largest sovereign wealth funds in the world. A trade agreement with the UAE will facilitate investment, which is important to achieving the Albanese government’s ambition of becoming a renewable energy superpower,” the trade minister added.
The agreement also includes commitments to promoting labor rights, protecting the environment, and sustainable development. The agreement with the UAE preserves Australia’s right to regulate for all levels of government.
The trade agreement with the UAE is Australia’s first trade agreement with a dedicated chapter covering First Nations trade. First Nations businesses seeking to export their goods to the UAE will benefit from preferential market access and rules under the agreement.
Australia and the UAE are now both working to formalize the legal treaty text in preparation for signing later this year.
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Economic impact and future prospects
The deal unlocks new business opportunities, creates greater certainty for Australian service providers in the UAE, and makes it easier for certain skilled professionals to work temporarily in the UAE.
For sectors such as education, financial services, health, and research and development services, 100 percent foreign ownership in the UAE market is guaranteed.
“Under this trade agreement, Aussie exports are expected to increase by $678 million per year, but this deal means more for Australia than just numbers. More trade means more higher-paying jobs, more opportunities for our businesses, greater investment to build things here in Australia, and cheaper bills for Australian households,” added Farrell.
UAE-Australia CEPA at a glance
Here’s a quick summary of what the UAE-Australia CEPA includes:
- Tariffs will be eliminated on over 99 per cent of Australia’s exports to the UAE by value.
- For agricultural products, tariffs will be eliminated on key Australian exports to the UAE, except for culturally and religiously sensitive goods.
- For industrial goods, there will be immediate elimination of tariffs on exports of aluminium oxide, vehicle parts, and cosmetics.
- Agreement includes commitment to allow full Australian ownership for services firms in selected sectors.
- Support for mobility of business persons between Australia and the UAE with commitments on intra-corporate transferees, contractual service suppliers and business visitors.
- A council on investment will facilitate investment for priority sectors to support Australia’s clean energy transition and Future Made in Australia agenda.
- Five investment cooperation MOUs in sectors of national priority including green and renewable energy; data centres and artificial intelligence projects; food and agriculture; minerals; and infrastructure.
- Digital trade rules cover data flows and data localization, source code and cryptography, acceptance of electronic trade documents, e-signatures, e-payments, and e-invoicing.
- A prohibition on customs duties on electronic transmissions.
- Intellectual property outcomes that encourage innovation and creativity and promote effective and balanced protection of IP rights.
- Australia’s first FTA to include a First Nations Peoples chapter, covering business networks, investment, traditional knowledge, digital trade, agriculture and environment.
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