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Australia has signed a landmark free trade agreement with the United Arab Emirates (UAE), aimed at boosting investment in critical minerals and clean energy sectors.

Trade Minister Don Farrell announced the agreement in Canberra on Tuesday, highlighting that the deal would curb tariffs on over 99% of Australian products entering the UAE, reported News.com.au.

"This is the first trade agreement with the Middle East," he said. "The UAE is not only our largest trade and investment partner in the Middle East, but it is always one of our most important strategic, diplomatic, and Defense partners in the region."

UAE's move to remove taxes on 99% of items will save Australia $160 million annually and increase exports by $700 million annually. The agreement proposes to tap into the $1.7 trillion sovereign wealth fund of the UAE to invest in vital minerals, ABC.net.au reported.

Enhancing trade cooperation and economic growth, it also lowers building costs by $40 million annually and opens up new markets for Australian enterprises, such as wine growers, universities, and other industries.

"We know how important it is to have diversified trading partners. More trade with more trading partners means more jobs for Australians... and a lower cost of living," Senator Farrell told journalists in Canberra. "This is a very good deal for Australian farmers and producers."

Australia's new trade agreement with the UAE is also anticipated to accelerate the nation's shift to net-zero energy by drawing investments in clean energy and essential minerals. The UAE's $1.5 trillion sovereign wealth fund is viewed as a major potential to support the industry, which is the focus of the Albanese government's Future Made in Australia agenda, ABC reported.

"Where there has been a free trade agreement with the UAE the sovereign wealth fund has followed," Senator Farrell said.

"There's almost an imprimatur from both governments that investment is welcome, and I'm absolutely certain, because of the interest in the critical mineral space by so many countries, including the UAE, that we'll get lots and lots of extra investment there."