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European Union

European Union brief

Overview

Australia and the European Union (EU) enjoy a substantial bilateral relationship built on a shared commitment to democratic values and a like-minded approach to a broad range of international issues.

Australia and the EU work together to support global efforts to promote peace, sustainable development, good governance and human rights, and to combat terrorism and the proliferation of weapons of mass destruction and conventional weapons. In 2022, Australia and the EU have worked closely to respond to Russia’s invasion of Ukraine.

Australia and the EU cooperate increasingly closely in the Indo-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 development assistance to the Pacific and South East Asia.

In 2020, the 27 members of the EU as a bloc constituted Australia's second largest trading partner and second largest source of foreign investment.

Political overview

Key EU institutions

The main institutions of the EU are the European Council, the Council of the European Union, the European Commission and the European Parliament. The European External Action Service is the EU's foreign service.

The European Council comprises the heads of state or government of the member states, the European Council President and the President of the European Commission. It does not legislate but defines the overall political direction and priorities of the EU, and  provides guidance to the Council of the European Union and the European Commission. The President of the European Council is appointed by the EU Heads of State and Government for a two-and-a-half-year term. The current European Council President is Charles Michel, former Prime Minister of Belgium (2014-2019). President Michel took office on 1 December 2019.

The Council of the European Union has both executive and legislative powers. It is composed of member state ministers meeting in ten 'configurations', based on policy areas including Environment; Transport Telecommunications and Energy, Economic and Financial Affairs, Competitiveness, and Foreign Affairs. The “General Affairs Council” configuration has a special coordination role and is responsible for institutional, administrative and horizontal matters. All configurations, except Foreign Affairs, are chaired by the Minister from the country that holds the Presidency of the Council, which rotates every six months. The Foreign Affairs Council is chaired by High Representative of the Union for Foreign Affairs and Security Policy, currently Josep Borrell.

The European Commission, comprising one Commissioner from each member state, each responsible for a policy area, and led by a President, has the sole right of initiative to propose laws (called directives) at the EU level, which, following approval by the Council of the EU and the Parliament, member states are obliged to include in their national legislation. The Commission is also the EU's executive body and public service. The current European Commission President, Ursula von der Leyen, took office on 1 December 2019 for a five-year term.

The European Commissioner for Trade is responsible for the EU's common trade policy governing international trade. The current Trade Commissioner is Valdis Dombrovskis.

The European Parliament is the only directly elected EU institution. It shares decision‑making power with the Council of the European Union on most internal market policies and has budget approval powers. The Parliament has the right to approve or reject the nomination of Commissioners. The EU last held parliamentary elections in May 2019. The next elections will be held in 2024.

Economic overview

As a bloc, based on USD current prices, the EU is equivalent to the third largest economy in the world (USD 17.1 trillion in 2021), behind the US and  China. Excluding intra-EU trade, it is the world's third largest merchandise importer, and second largest merchandise exporter. It has the largest stocks of foreign direct investment abroad and is the world's second largest host of foreign direct investment.

Member state economies operate within an EU system of 'competences' or responsibilities for policy areas. The EU (rather than individual member states) has exclusive responsibility for the EU customs union, trade and competition rules.

Since 1993, the EU 'internal' or single market has facilitated free movement of goods, capital, services and people within the EU. The internal market was intended to drive economic integration amongst member states to become a single EU wide economy.

The EU's Economic and Monetary Union (EMU) involves the coordination of economic and fiscal policies, a common monetary policy, and a common currency, the euro. Whilst all 27 EU member states take part in the economic union, nineteen member states (collectively called the Eurozone) have adopted the euro as their currency.

Bilateral relationship

Australia and the EU have a long-standing and fruitful bilateral relationship. Sir Edwin McCarthy, Australian public servant, trade negotiator and diplomat, took up his position as the first Australian Ambassador to the European Economic Community in March 1962.

On 7 August 2017, then Foreign Minister Bishop and then High Representative Mogherini signed the Framework Agreement between Australia and the EU, which builds upon the 2008 Australia-EU Partnership Framework. Once it enters into force (following ratification by all member states), the Framework Agreement will provide a platform for enhanced cooperation on a broad range of issues with the EU and/or the EU member states. These issues include economic and trade cooperation, research and innovation, counter‑terrorism, development, non-proliferation, human rights, democracy promotion, climate change and environment, education and culture, and justice. Under a provision of the agreement provisionally applied between Australia and the EU, officials from both sides meet annually in the Joint Committee Meeting to advance cooperation.

Alongside strong people-to-people links and practical collaboration in a wide range of fields, regular engagement between Australia and the EU at the leader and ministerial level continues to strengthen the relationship. The President of the European Council, Charles Michel, the President of the European Commission, Ursula von der Leyen, and the then Prime Minister of Australia, Scott Morrison, held a Leaders' Virtual Meeting on 26 November 2020, following which they issued a joint press release.

Development cooperation

The EU is an important partner for Australia in development cooperation activities, particularly in the Pacific where it is a significant donor. For further information on our work with the EU, see Australia's bilateral partnerships.

The EU in Australia

The EU has been represented in Australia since 1981 by a Delegation of the European Commission, now a Delegation of the European Union. The Delegation's role is to represent the EU, to further develop bilateral relations, to inform the EU on political, economic, trade and development matters in Australia, to promote and protect the EU's interests and values, to spread knowledge, and to raise awareness of the EU in Australia.

Bilateral trade and investment relationship

Australia and the EU have a convergence of views on many global economic issues and cooperate to promote international prosperity in the World Trade Organization, OECD and G20.

As a bloc, the EU was Australia's second largest two-way trading partner in 2020, with total two-way trade worth $73.9 billion.

The EU as a bloc was Australia's second largest source of foreign investment in 2021, worth $763.0 billion. FDI was valued at $120.5 billion. Investment is significant in all sectors, including resources and energy, agribusiness, infrastructure, advanced manufacturing, financial services, and information and communications technology.

In 2021, Australia's total stock of investment in the EU was $368.8 billion, with FDI of $57.4 billion. In 2021, the EU was the third largest market for outward Australian investment.

The EU, as a bloc, is Australia's second largest two-way trade in services partner. Australia's major services export to the EU in 2020 was professional, technical & other business services – valued at $3.6 billion. Professional, technical & other business services were also the largest single services import from the EU during the same period, with a value of $4.0 billion.

Australia and the EU launched negotiations for a free trade agreement (FTA) on 18 June 2018.

Australia is well placed to be a reliable and efficient supplier of goods and services to Europe. For information on export opportunities, see the Austrade country profiles for the various member states.

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