European Union Brief

Australia's Relations with the European Union

Overview

Australia and the European Union (EU) enjoy a constructive and substantial bilateral relationship built on a shared commitment to freedom and democratic values and a like-minded approach to a broad range of international issues. In support of these shared commitments Australia and the EU work together to support global efforts to combat terrorism and the proliferation of nuclear and conventional weapons, to coordinate our efforts to respond to the challenges of climate change and the global financial crisis and to promote peace, sustainable development, good governance and human rights.

The 27 members of the EU as a bloc constitute our largest trade and investment partner. Australia and the EU cooperate increasingly closely in the Asia-Pacific region, including to enhance security, stability and good governance, and to improve the coordination of development cooperation assistance among donors to the region. The EU is a significant provider of aid to the Pacific and South East Asia. Australia has a number of formal bilateral agreements with the EU and its institutions. Some of the key recent agreements are described in this brief.

For information on Australia's bilateral relations with the individual member states of the EU, please click on to the appropriate country listed below.

Austria | Belgium | Bulgaria | Cyprus | Czech Republic | Denmark | Estonia | Finland | France | Germany | Greece | Hungary | Ireland | Italy | Latvia | Lithuania | Luxembourg | Malta | The Netherlands | Poland | Portugal | Romania| Slovakia | Slovenia | Spain | Sweden | United Kingdom

Political Overview

Key EU Institutions

The main institutions of the EU are the Council, the Presidency, the Commission and the Parliament.

The Council of Ministers is the EU’s pre-eminent decision-making body. It has both executive and legislative powers, and acts within guidelines provided by the European Council of heads of state and government. Its work is divided into a number of subject-based Councils, including Industry, Environment, Transport and Social Affairs.

The Lisbon (EU reform) Treaty, which entered into force on 1 December, created the new position of President of the European Council (appointed for a two-and-a-half-year term renewable once) who chairs the European Council and drives its work forward in cooperation with the President of the Commission and on the basis of the work of the General Affairs Council. The President of the European Council is also the face of the EU internationally. On 19 November 2009 the EU Heads of Government agreed to the appointment of Mr Herman Van Rompuy, then Prime Minister of Belgium, to the role of President of the European Council.

The European Commission (EC), comprising one Commissioner from each member state and led by a President, is the Union's executive body and public service. The current President of the European Commission, Mr Jose Manuel Barroso, was confirmed for a second five year term by a vote of the European Parliament on 16 September.

The European Parliament is the only directly elected EU institution. It shares decision-making power with the Council on most internal market policies and has budget approval powers. The Parliament has the right to approve or reject the nomination of Commissioners. With the entry into force of the Lisbon Treaty, the powers of the Parliament gain an expanded role in a number of new areas including trade, agriculture and justice and home affairs.

Under the arrangements put in place by the Lisbon Treaty, the Council and the Commission share responsibility for managing the EU's external relations. On 19 November 2009, Baroness Catherine Ashton, the European Commissioner for Trade, was appointed to the newly created position of High Representative of the Union for Foreign Affairs and Security Policy. The High Representative will also concurrently hold the office of a Vice-President of the European Commission. This effectively combines the functions of the former position of High Representative for Common Foreign and Security Policy, which represented the interests of Member States through the European Council, and the former position of European Commissioner for External Relations and European Neighbourhood Policy. The High Representative chairs the Foreign Affairs Council and will exercise authority over the newly created European External Action Service. The pre-existing EU Presidency, which is held by Member States on a six-monthly rotation basis, continues in parallel and is responsible for organising and chairing all other Councils of Ministers meetings.

The European External Action Service (EEAS) will assist the High Representative to ensure the consistency and coordination of the Union’s external action. It will prepare policy proposals and implement them after they have been approved by the Council. It will comprise officials from the Council Secretariat and the Commission as well as staff seconded from the Member States’ national diplomatic services. With the entry into force of the Lisbon Treaty, existing European Commission Delegations are renamed European Union Delegations, and will form part of the structure of the EEAS and will be staffed by relevant Commission services as well as EEAS officers.

Mr Karel De Gucht., former Belgian Minister for Foreign Affairs and Foreign Trade and European Commissioner for Aid and Humanitarian Development, was nominated by EC President Barroso as Commissioner-designate for Trade on 27 November 2009. Mr De Gucht will formally take on this role early 2010, as the European Parliament must first approve President Barroso’s nominations to the College of Commissioners, before they can take office.

Recent political developments

The Lisbon (EU reform) Treaty, which is designed to promote more streamlined EU decision-making and a more effective foreign policy, came into force on 1 December 2009.

European Parliamentary elections were held in EU Member States between 4-7 June 2009 and the new Parliament took office in mid-July. José Manuel Barroso, was appointed for second 5 year term as President of the European Commission in 2009. On November 19, Herman Van Rompuy was appointed as the President of the European Council for a two and a half year term and Baroness Catherine Ashton was appointed to the ‘double-hatted’ role of High Representative of the Union for Foreign Affairs and Security Policy and a Vice-President of the European Commission.

On 27 November 2009, European Commission President Barroso announced the proposed composition of his second College of Commissioners. The new College must receive approval from the European Parliament prior to formally taking up its duties, and all nominated Commissioners-designate will therefore attend hearings of the European Parliament in January 2010. Once the European Parliament approves the new College of Commissioners, they are expected to formally take up their roles in early February 2010.

For further information on the EU, please see the EU's information gateway or the website of the European Commission Delegation in Canberra.

Economic overview

EU member governments run their economies according to a comprehensive strategy of macroeconomic, microeconomic and employment policies called the Economic and Monetary Union (EMU). Member states draw up national reform programs within this framework, using the tax and social welfare policy mix they think best suits national circumstances.

The Stability and Growth Pact (SGP) prevents member states from taking policy measures which would unduly benefit their own economies at the expense of other EU countries. A key principle of the Pact is the rule that all member states keep their budgets close to balance or in surplus. Deficits must not exceed 3% of gross domestic product (GDP) and the debt-to-GDP ratio should not be more than 60%.

Sixteen of the 27 EU member states have taken integration a step further by adopting the same currency, the Euro: Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, Netherlands, Portugal, Slovakia, Slovenia and Spain. Denmark and the United Kingdom have so far opted to remain outside the Euro. Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, and Sweden have no target date for joining. Entry criteria for the Euro include two prior years of exchange rate stability via membership of the ‘Exchange Rate Mechanism' (ERM). Four EU members are in the ERM: Denmark, Estonia, Latvia and Lithuania. Other criteria for adopting the Euro relate to interest rates, budget deficits, the inflation rate, and the debt-to-GDP ratio.

The European Central Bank (ECB) has responsibility for monetary policy throughout the Euro area, including setting benchmark interest rates, managing the Euro area's foreign exchange reserves and ensuring payments move smoothly across EU borders.

The EU's 27 member states have a total population of half a billion people and a combined economy worth $21.9 trillion in 2008 (around 18 times the size of Australia's economy). The EU has a combined GDP greater than the United States and includes five of the world's ten largest economies (Germany, France, the UK, Italy and Spain).

The Eurozone entered recession in 2008 and the EU's autumn economic forecast for 2009-2010 (released November 2009) noted that the current recession had been “the deepest, longest and most broad-based recession in the EU’s history”.. GDP in the EU is expected to fall by 4.1% in 2009 across all EU countries. The forecast predicts that growth will turn positive in the second half of 2009, with weak growth expected in 2010 as confidence returns and the world economic outlook improves

Unemployment is expected to rise to 9.1% in 2009 with a further increase to 10.3% in 2010. Public finances will also be affected, with the headline deficit expected to more than double in the EU to 6.9% in 2009 (up from 2.3% in 2008), worsening to 7.5% in 2010.

Bilateral relationship

Australia and the EU use a Partnership Framework to shape the future direction of bilateral cooperation. The framework was launched during the Australia-EU Presidency Consultations in Paris on 29 October 2008. It is a living document which outlines specific cooperative activities and is designed to be revised regularly. The first revision of the Partnership Framework was launched during the Australia-EU Presidency Consultations in Stockholm on 8 October 2009. It provides an updated focus on practical cooperation in the following areas:

• shared foreign policy and global security interests;
  
• the multilateral rules-based trading system and the bilateral trade and investment relationship;
  
• the Asia-Pacific region;
  
• energy issues, climate change and fisheries and forestry;
  
• science, research, technology and innovation, education and culture and facilitating the movement of people.

The original framework replaced the June 1997 Australia-European Union Joint Declaration on Relations (PDF) and the subsequent March 2003-08 Agenda for Cooperation (PDF). The Partnership Framework will continue to be updated regularly to ensure its focus is practical and reflects the evolving agenda of Australia’s cooperation with the EU.

Recent Ministerial and Head of State visits

Prime Minister Rudd visited Brussels on 2 April 2008 where he had a meeting and joint press conference with EC President Manual Barroso and met with the High Representative for Common Foreign and Security Policy and Secretary-General of the Council of the EU, Javier Solana. During his visit Mr Rudd also made a speech to the European Policy Centre on EU-Australia relations. Australia and the EU hold regular Ministerial Consultations with the EU Troika (the rotating EU Presidency, the Council and the Commissioner for External Relations) which provide an important opportunity for the Australian Foreign Minister to discuss current priority issues with high-level European representatives. The most recent Australia-EU Troika Consultations took place in Stockholm on 8 October 2009 when Foreign Minister Stephen Smith met with his Swedish counterpart, Carl Bildt, European Commissioner for External Relations Benita Ferrero-Waldner and representatives of the EU Council Secretariat.

The Australian Parliament has maintained official contact with the European Parliament for many years. The European Parliament is an important conduit for advocacy of Australia's interests and has an Inter-parliamentary Delegation for Relations with Australia and New Zealand. Regular reciprocal visits by parliamentary delegations provide opportunities for round-table discussion on policy decisions of national interest. A delegation from the European Parliament last visited Australia in February 2009. Australian Parliamentary delegations visited the European Parliament in April 2006 and April 2008. An Australian Parliamentary delegation also met with members of the European Parliament during a recent visit to Brussels on 9 November 2009.

Australian and EU representatives regularly meet for discussions and consultations at Ministerial and officials level in the margins of international conferences, in addition to regular officials-level bilateral forums covering specific policy issues, such as the Trade Policy Dialogue, the Agricultural Trade and Marketing Experts' Group (ATMEG) talks and the Australia-EU Troika Talks on Asia (Co-ASI).

The EU has been represented in Australia since 1981 by a Delegation of the European Commission. The Delegation's role is to represent the Commission; to further develop bilateral relations in the political, economic, commercial, environment, social and cultural fields, including new opportunities for cooperation; to inform the Commission on political, economic, trade and development matters in both Australia and New Zealand; to promote and protect the EU's interests and values and to spread knowledge and to raise awareness of the EU in Australia and New Zealand. The Delegation is not responsible for trade promotion or consular matters, which are handled by the embassies, consulates, trade commissioners or national tourism offices of EU member states.

Community Presence in Australia

People-to-people links between Australia and Europe are deep and longstanding. Australia's cultural identity draws heavily on our predominantly European heritage. Nearly 70 per cent of Australians have European ancestry. Almost 30,000 new European migrants arrive annually and over 1.3 million Europeans visit Australia and 1 million Australians travel to Europe each year. The great sacrifices made by Australians during two world wars in Europe are an integral part of our national history and identity and represent a strong Australian contribution to Europe's evolution over the past century.

Key Areas of Cooperation

Security

Australia and the EU are cooperating to address challenges to global peace and prosperity, including terrorism, the proliferation of weapons of mass destruction, and failing states. For example, Australia and the EU have a cooperation agreement to facilitate the exchange of information between the Australian Federal Police and EUROPOL, the EU's law enforcement agency.

In our region, the EU makes an important contribution to promoting development and security outcomes for East Timor and for the countries of the Pacific region (see also Development Cooperation below). The EU provides support for the Jakarta Centre for Law Enforcement Cooperation (JCLEC), a joint Australian - Indonesian initiative to enhance the expertise of South-East Asian law enforcement agencies in combating terrorism and transnational crime, and for the Bali process on enhancing regional cooperation on people smuggling, trafficking in persons and related transnational crime. Australia has welcomed the EU's constructive role in Aceh where, along with five ASEAN countries, the EU deployed a Monitoring Mission (AMM) for the implementation of the peace agreement signed between Indonesia and the Free Aceh Movement in August 2005 in Helsinki, Finland.

Development Cooperation

The EU is an important partner for Australia in development cooperation activities in the Pacific region. It is a significant donor to the region and participated in the PIF post-Forum Dialogue in August 2009 in Cairns. The tenth European Development Fund (EDF10) will provide the Pacific with an estimated Euro500 million (approximately $800 million) in funding over the period 2007 – 2013. The EU's Pacific policies are set out in its Pacific Communication, adopted in May 2006. The Communication outlines the EU's commitment to strengthening political relations with Pacific countries; bringing greater focus and coordination to its development activities, including through more emphasis on regional cooperation; and improving the effectiveness of aid delivery, including through closer coordination with other partners, in particular Australia and New Zealand.

The European Investment Bank (EIB) - which provides development loans to African, Caribbean and Pacific (ACP) countries - opened its Pacific regional headquarters in Sydney in December 2007. The presence of the EIB office will help improve donor coordination between Australia, the EU and developing country partners and enhance overall aid effectiveness in the Pacific region.

Further information on Australia's development policies and programs can be obtained from AusAID.

Environment and Energy

Australia and the EU hold high-level consultations to strengthen cooperation in advancing environmental protection, both through policy dialogue and by facilitating joint projects to address specific environment-related issues. Australia and the EU regularly exchange views on energy security and climate change and explore complementary approaches to addressing these issues. Australia and the EU share a common concern about the importance of mitigating and adapting to climate change. The first official act of the current Australian Government was to ratify the Kyoto Protocol. Australia is a leading player in international negotiations under the United Nations Framework Convention on Climate Change. Australia joined the EU-initiated International Carbon Action Partnership (ICAP) on 7 April 2008. On 19 May in Melbourne, EU Energy Commissioner, Mr Andris Piebalgs, signed an MOU making the EC a founding member of the Global Carbon Capture and Storage Institute. As a permanent coordinator of the Umbrella Group (a grouping of the non-EU developed countries) Australia looks forward to continuing to closely engage the EU on climate change matters.

Science and Research

In 1994, Australia became the first non-EU member country to sign a Science and Technology Agreement with the EU. Since then cooperation has been active and steadily increasing in a diverse range of research areas. Australian researchers are able to join their European counterparts as full participants in research programs which are managed by the EC under the EU's Framework Program. The Agreement also encourages European participation in Australian research activities through the Joint Science and Technology Consultative Committee (JSTCC), established under the Agreement, which meets regularly to exchange information and to discuss ways to enhance research collaboration. Following its meeting in 2008, Australia and the European Commission agreed on a Roadmap to enhance Science and Research Cooperation (PDF).

Australia and the EU jointly fund the Forum for European-Australian Science and Technology cooperation (FEAST) which promotes cooperation between researchers and research stakeholders and promotes opportunities for cooperation in areas of mutual interest and benefit. In addition, the Australian Government supports research cooperation with the EU through dedicated funding streams, including the Australia-Europe Research Collaboration Fund, a component of the International Science Linkages (ISL) program; and the joint National Health and Medical Research Council (NHMRC) - European Union Collaborative Research Grants program.

In 2008 the Australian Research Council opened its fellowships to international candidates for all schemes, providing funding for eligible organisations to promote collaboration, movement and networking between Australia-based and overseas researchers.

Australia’s participation in the EU Framework Program is underpinned and reinforced by its strong bilateral research cooperation links with a number of EU Member States.

Education and Training

Bilateral cooperation in education is underpinned by the 2007 Joint Declaration on Cooperation in Education and Training. The Joint Declaration provides opportunities for tertiary student exchanges between institutions in Australia and Europe, promoting greater compatibility between respective education systems and policy dialogue and cooperative projects between higher education and vocational institutions in the EU and Australia.

Bilateral economic and trade relationship

The 27 members of the EU as a bloc constitute Australia’s largest trade and investment partner. In 2008-09 total two-way trade with the EU was valued at $90 billion, representing 16 per cent of Australia's total trade.

Total two-way merchandise trade was worth $69.4 billion in 2008-09. Australian merchandise exports to the EU were worth $24 billion in 2008-09, a 17.4 per cent increase from 2007-08. Australia's major merchandise exports to the EU include coal gold, wine and medicines. Australia's merchandise imports from the EU in 2008-09 totalled $45.4 billion, up 5 per cent from 2007-08. Australia's merchandise imports from the EU were dominated by manufactured goods, with the top categories of imports including medicines, passenger motor vehicles, gold, measuring instruments, and chemicals.

The EU is Australia’s largest two-way services trading partner, with two-way services trade in 2008-09 valued at $20.9 billion. Australia's services exports to the EU were worth $8.8 billion in 2008-09, an increase of 1.9 per cent compared to 2007-08. The largest increases were in our exports of intellectual property licensing, other business services and telecommunications, computer and information services. Australia’s services imports from the EU rose by 5.7 per cent in 2008-09 to $12.1 billion, with the largest increases being in other business services, intellectual property licensing and personal travel services. Australia and the EU are like-minded on most issues in services trade and recognise the increasing contribution to exports made by this sector.

Australia and the EU enjoy a broad-based trade relationship and on many international trade issues Australia and the EU are like-minded. Market access to the EU market is generally open, although Australia continues to encourage the EU to improve market access in the important area of agriculture. Both Australia and the EU share ambitions for a successful outcome in the WTO Doha round of multilateral trade negotiations, a position that has been reinforced by the recent global financial crisis. Australia and the EU work together, including through the G20, to respond to the global financial crisis and see trade as an important part of the response to the crisis. Providing clear multilateral rules, enhancing global trade by measures such as the abolition of export subsidies in agriculture and putting in place mechanisms which limit the ability of countries to resort to the retrograde step of protectionism will make a strong contribution to economic growth and employment. The trend towards a more market-friendly EU agriculture policy presents opportunities for more constructive bilateral engagement, as is reflected in the brochure on agricultural reform (PDF) which DFAT has produced for distribution in Europe.

Investment

At the end of 2008, EU foreign direct investment in Australia totalled $133 billion – approximately 33.9 per cent of Australia's total inwards foreign direct investment. UK companies dominate EU foreign direct investment in Australia (accounting for 45 per cent of the EU total). The Netherlands (19 per cent), Germany (10 per cent), and France (10 per cent) are also significant investors.

The EU accounted for $42.6 billion of outwards Australian direct investment as at 31 December 2008. Our largest direct investments were in the United Kingdom (54 per cent of Australian direct investment in the EU), Germany (19 per cent) and the Netherlands (13 per cent).

Export opportunities

Though the EU is already Australia's largest trade and investment partner there are opportunities to expand the trade and investment relationship, particularly in continental Europe. With its abundant natural resources, Australia is well placed to be a reliable and efficient supplier of energy to Europe for many years to come. Europe is now a major market for Australian wine and for medicines. The EU services market, particularly in the education and tourism sectors, is a major market for Australian service providers. Product niches are being found in the food and beverage industries.

For assistance with market access and trading with the EU, see the Austrade country profiles for the various member states.

Trade Successes

In 2008, Australia exported $1.2 billion worth of wine to the EU, with the United Kingdom being the dominant export market (receiving 70 per cent of total Australian wine exports to the EU). Australian wine exporters are also actively and effectively increasing their presence in the continental EU wine market. The 1994 Australia-European Community (EC) Trade in Wine Agreement has been a valuable tool in facilitating Australia access to the EU wine market. A new Australia-EC Wine Agreement was signed by the Australian Foreign Minister, Stephen Smith, and the EC Commissioner for Agriculture and Rural Development, Mariann Fischer-Boel, in Brussels on 1 December 2008. The Agreement, which will come into effect once ratified, provides additional benefits for both Australian and European wine producers.

Tradeinfo Contacts

If you would like more information on the trade and economic conditions in the EU please email the Department of Foreign Affairs and Trade: Tradeinfo@dfat.gov.au

Updated: 1 December 2009