Beefing up partnerships: How the EU and Australia can give their trade deal strategic heft

Problem

The European Union and Australia have concluded a free trade agreement, marking the latest step in Europe’s post-Trump diversification strategy. Coming just two months after the EU’s landmark deal with India, the latest FTA underscores the EU’s urgent search for new partnerships—driven by eroding confidence in American global leadership, and fears about Chinese economic and diplomatic coercion.

Unlike the India deal, which focuses only on sectors such as industrial goods and services, the latest FTA covers agricultural products, with Australian lamb and beef exports facing sharply reduced tariffs. Australia will also become an associate member of the Horizon Europe science funding group, and both sides have adopted a bilateral security and defence partnership, following similar frameworks concluded with India, Japan and South Korea. The fact that negotiations for this concluded in under six months reflects political urgency for both the EU and Australia.

That said, the FTA merely establishes a foundation for a deeper partnership, which now requires rapid enhancement. The EU and Australia should focus on three areas for the FTA to become a genuinely strategic new relationship: critical minerals, defence cooperation and countering hybrid threats.

Solution

First, critical minerals

In her address to the Australian parliament, European Commission president Ursula von der Leyen stated that: “Our critical minerals partnership will be crucial to our success”. The deal should help secure access on favourable terms to Australian minerals like aluminium, lithium and manganese. Australia’s broader interest is in co-investment and European financing to develop the expensive infrastructure required to mine and refine critical materials at scale. The EU could direct its Global Gateway infrastructure programme to develop further joint projects.

Second, defence

Australia wants European investment in defence-industrial facilities on Australian soil and access to Europe’s new defence spending mechanisms—in particular, future iterations of the EU’s Security Action for Europe (SAFE) instrument, which pools procurement budgets to support the defence industry. Extending participation to Australia would provide industrial substance to the new security partnership and create interoperability in the Indo-Pacific.

Third, countering grey-zone and hybrid threats

Australia has spent years developing a systematic national response to Chinese economic coercion, disinformation and political interference. Europe has accumulated parallel experience countering Russian hybrid warfare, from protecting undersea infrastructure to identifying domestic political interference operations. High-level exchanges and new partnerships can turn this mutual exposure into shared capability.

Context

European deals with Australia and India follow a long-delayed agreement with Mercosur, reflecting Europe’s reorientation of its trade and foreign policy towards partners willing to enhance what remains of the rules-based international order in the face of American revisionism. Australia, India, Japan and South Korea and India should be viewed as a core group that share European concerns about coercion and bring distinct and valuable regional partnership capabilities.

China—by far Australia’s largest export market and a sustained source of strategic pressure—is increasing the pressure on both sides. But for Australia, the deal also marks a sharp change of priorities. FTA negotiations had collapsed in 2018 over unresolved concerns over beef exports; the decision to move ahead on basically the same terms reflects Australia’s concerns with the US, as well as prime minister Anthony Albanese’s desire to conclude a major trade agreement following his re-election in 2025.