Announcement Date
6 November 2024
Link to Announcement
$678 million boost for Australian exports to UAE | Minister for Trade and Tourism
Problem Being Addressed
Australia needs to strengthen and diversify its exports to support its prosperity and build national economic resilience. Australia also needs to attract investment in order to address key national priorities, such as the clean energy transition.
Australia and the UAE currently have a positive economic relationship. However, our competitiveness and attractiveness as a trade and investment partner will not reach its full potential, and may even erode, particularly as the UAE implements FTAs with other countries. If other countries negotiate preferential trade agreements with the UAE, particularly those countries who provide similar goods and services to Australia, it is likely that the UAE will buy the goods and services from those countries with lower tariff rates and fewer barriers.
Proposal
The Impact Analysis considers the following two options:
- Option 1: Do not sign the CEPA (status quo):
- This option would involve continuing the status quo and relying on any further trade liberalisation with the UAE to proceed under the auspices of the World Trade Organisation rules, which is slower and not guaranteed of progress. This option would also mean relying on a unilateral decision by the UAE to reform domestic regulatory settings applicable to all trading partners.
- Option 2: Sign and implement the CEPA:
- For goods, the UAE will fully eliminate tariffs on 98.2 per cent of its schedule, covering 99.9 per cent of Australia’s exports to the UAE market by value. Tariff elimination by the UAE will be either immediate on entry into force or phased over three or five stages.
- For services, the CEPA will include a comprehensive set of rules to provide Australian service suppliers with greater certainty and predictability to support their operations in the UAE. These rules will address restrictions and discrimination when accessing the UAE services market, as well as behind-the-border procedural and related domestic regulation barriers that have a negative impact on two-way trade and investment in services.
- For investment, the CEPA package will include an Investment Agreement which will include investment protections that provide certainty to Australian and UAE investors. A Council on Investment will also be established to facilitate continued political level exchanges on the investment relationship. Five Investment Cooperation Memorandum of Understandings (MOUs) will also form part of the CEPA package in sectors of national priority including Green and Renewable Energy, Data Centres and Artificial Intelligence Projects, Food and Agriculture, Minerals and Infrastructure.
- For skilled labour mobility, the CEPA will support the flow of skilled personal and business visitors. The CEPA will guarantee temporary entry for service providers, investors, and other business visitors.
- As a modern trade agreement, the CEPA includes commitments on inclusive and sustainable trade through promoting internationally recognised labour standards; supporting women’s access to the full benefits and opportunities that flow from trade and investment; and ensuring high levels of environmental protection. The CEPA will also be Australia’s first trade agreement to establish a framework for cooperation to promote First Nations trade and investment interests.
The preferred policy option is Option 2. Signing CEPA would open opportunities for trade and investment outcomes with a dynamic and growing globally focused strategic partner. The CEPA is expected to diversify trade and investment opportunities and strengthen Australia’s strategic engagement with an important partner in the Middle East Region. Estimated potential financial benefits could be as high as $678 million per year. This equates to a 16 per cent increase in annual Australian exports to the UAE. The main cost associated with the CEPA is likely to be a lowering of tariff revenue for UAE imports, estimated to be $16 million in 2025-26 and increasing to $23 million per year by 2029-30, when all tariff reductions are fully implemented. The broader economy-wide benefits of the agreement will far exceed this revenue cost
Assessed Impact Analysis Outcome
Adequate
Assessment Comments
The IA addresses the seven IA questions and follows an appropriate policy development process commensurate with the significance of the problem and magnitude of the proposed intervention. To be considered good practice as per the Australian Government Guide to Policy Impact Analysis, the IA would have benefited from further analysis of the distributional impacts as well as elaborating on the implementation and evaluation planning.
Regulatory Burden
The Department of Foreign Affairs and Trade estimates that the CEPA will not impose any regulatory burden on Australian businesses, communities or individuals.