Australia’s Engagement with Europe
In 2002 the summit meeting between former Prime Minister John Howard at the President and Members of the European Commission agreed to a
wide-ranging framework of engagement between Australia and the European Union. A visit by the European Commissioner for External Relations,
Benita Ferrero-Waldner in June this year gave even further impetus to the relationship.
During this last visit the Joint Declaration on Relations between Australia and the European Union was significantly updated, providing a solid
framework for a wide-ranging bilateral co-operation agenda, including annual high-level ministerial and senior officials consultations.
An expanded Europe offers Australian businesses enormous trade and investment opportunities. With many long-standing and historical trade
relationships with European partners, Australia is well-positioned to take advantage of the increased consolidation of the European internal market,
and increasing liberalisation in sectors previously controlled by the public sector.
A more unified Europe is already having a noticeable impact on the processes and agenda of international diplomacy, and its strategic weight
increases steadily in international arenas.
There are approximately 2,300 EU companies with a presence in Australia which have a total estimated turnover approaching A$180bn and have
directly created an estimated 400,000 jobs in Australia. Europe remains Australia’s largest source of overseas investment, and is a preferred location
of regional headquarters for European companies trading in the wider Asia Pacific region.
Almost 90% of Australians claim European ancestry and over 40% of the 4.5 million Australians born overseas were born within the European Union.
Europe: The World’s Largest Single Market*
With a combined GDP of USD$14.527 trillion, the EU is the world’s largest single market and almost 20 times the size of the Australian economy.
In 2005, the EU had a GDP almost 8% larger that the Unites States. The EU as a whole has expected growth of around 2.8% in 2006, up from 1.8%
in 2005.
The EU has been Australia’s largest economic partner for over 20 years - in terms of two-way trade in goods and two-way trade in services, as the
largest investor in Australia, and the second largest destination for Australian investment overseas.
Since enlargement, the population of the EU has grown to 494 million (2007).
The European Union represents the second-largest financial market after the USA. The Euro is the second-most traded currency on the world’s
financial markets. Approximately 45% of the Reserve Bank of Australia’s international reserves are held in euro.
Merchandise Trade*
The EU is Australia’s largest merchandise trading partner, with two-way trade totalling A$56.7bn in 2006. The strong growth in world prices in coal
and minerals helped to increase Australia’s merchandise exports to the EU by 35.7 per cent to $20.2 billion.
Australia’s four largest export items to the EU in 2006 were:
- Coal, worth A$3.6bn;
- Non-monetary gold, worth A$2.9bn;
- Alcoholic beverages (mainly wine), worth A$1.3bn; and
- Zinc ores and concentrates, worth $912 million
Australia is now the largest exporter of wine to the EU and the EU is the single largest export market for Australian wine, worth A$1.3bn in 2006.
Australia’s total merchandise imports from the EU rose 1% in 2006 to 36.4 billion or 21% of total imports, dominated by manufactured goods.
Australia’s trade deficit with the European Union fell by nearly A$4bn to A$17.7billion in 2005-06.
Bi lateral Trade in Services*
Bilateral trade in services is growing strongly, the EU being Australia’s largest overseas market for services exports and largest source of imported
services. Services exports to the EU were valued at A$8.3 billion in 2006, with imports worth A$10 billion.
Services exports, especially travel, transportation and shipment, and education have also grown strongly over the past decade. There is good
potential for growth in all these sectors.
Diversity in Trade & Services*
Australia’s economic relationship with the EU is more diversified than its relationship with most other major trading partners. Merchandise trade
accounted for 57% of the total Balance of Payments relationship with the EU in 2004, as compared to 91% with China, 81% with Japan and 73%
with ASEAN.
The sectoral balance in the Australia-EU relationship is provided by a greater comparative importance of trade in services. Bilateral trade in services
is growing strongly. The EU is both the largest overseas market for services exports for Australia (accounting for 17% of the total in 2005-06, or
A$7.1bn) and its largest supplier of services (23% of the total, or A$9.5bn).
Investment Flows
The EU is Australia’s leading investor, with an accumulated investment of A$411bn at the end of 2005.
The EU is the second major destination for Australian foreign investment, reaching A$194bn or 30% of total investment by December 2004.
Opportunities
The increasingly integrated EU market, which will eventually allow for the free movement of goods, services and labour, has considerable potential
for Australian business. Exporters and investors already benefit from the single market as they face one set of trade and investment laws and
regulations (rather than 27).
Australia’s trade relationship with the EU continues to diversify, and there is potential for further growth in goods and services exports. The
expanded internal market has created new market opportunities in manufacturing, information technology, financial services, infrastructure,
environmental goods and services, and education sectors.
*Sources: Department of Foreign Affairs & Trade; European Commission; IMF; Economic Intelligence Unit; ABS
