EU trade relations with Australia
02 April 2008by eub2 -- last modified 02 April 2008
The EU is Australia's main trading partner. Trade between the two continues to grow steadily. Australian exports to the EU are mainly agricultural products. Australia is the 20th largest trading partner of the EU in the world.
Advertisement
TRADE RELATIONS WITH NEIGHBOURING COUNTRIES
As a major exporter of agricultural products, Australia founded in 1986 the CAIRNS1 group of "Fair Trading Agricultural Exporters", which aims the liberalisation of agricultural trade. As the permanent chair of the Group, Australia exerts an undeniable influence on behalf of this group.
In 1989 Australia co-founded the Asia-Pacific Economic Cooperation (APEC), comprising 21 countries of the Pacific Rim and including North and South America.
A Closer Economic Relations Free Trade Agreement (CER) with New Zealand came into force in 1983. Bilateral trade agreements have also been concluded with Papua New Guinea (PATCRA II) and the South Pacific Forum (SPARTECA).
More recently, Australia has also negotiated free trade agreements with Singapore (which entered into force in July 2003), the United States and Thailand (both of which entered into force in January 2005). Negotiations are currently underway with China, Malaysia and the Association of South East Asian Nations (the latter in conjunction with New Zealand). Australia is also investigating the possibility of launching Free Trade Agreements (FTAs) with Japan (with a bilateral FTA Feasibility Study launched in 2005), Mexico and the Gulf Cooperation Council (GCC).
BILATERAL RELATIONS
The EU is Australia's main trading partner. Trade between the two continues to grow steadily. Other important trading partners are Japan, China and the USA. In the wake of the Asian economic crisis Australia had been reorienting its economic interests towards the EU and US, but more recently has returned its attention to Asia. Australia is the EU's 20th largest trading partner.
Trade in goods
The EU is Australia's 1 st trading partner, resulting in 2005 in a total trade of EUR 22,415 million (or 18% of its trade). EU exports to Australia are more than twice the amount (EUR 24,387m in 2005) of what the EU imports from Australia (in 2005 EUR 9,028m). Australian exports to the EU are mainly agricultural products (notably wine), but also mineral and energy commodities (non-monetary gold, coal, iron), and machinery and transport material, chemical products, wool and textiles. EU products exported to Australia comprise mostly medicaments, motor vehicles, machinery, telecommunication equipment, and paperboard.
Trade in services
The service sector accounts for around 70% of the Australian GDP. Total trade in services with the EU - which is the most important partner of Australia has grown on average with over 9% per year over the last decade. EU cross-border exports of services to Australia amounted to EUR 6,900m in 2004 and imports to EUR 4,996m. Total trade in services represents approximately 30% of total trade between Australia and the EU. Main items of EU services exports cover transportation and travel, but other business services, financial services and computer services exports also have increased significantly in recent years.
Australia operates a rather liberal regime with few major barriers to foreign service operators and is an active participant in WTO DDA (Doha Development Agenda) negotiations. It has opened its market for basic telecommunication services, but still maintains restrictions on foreign ownership in certain companies. In 2005, the Commission drew up a new aviation agreement detailing relations between the EU and Australia on air transport services in order to ensure that any EU air carrier can fly to Australia and not be discriminated against on the basis of its nationality. The maritime sector between the EU and Australia has been opened up and negotiations on further liberalisation continue.
Investment
Thanks to the well-founded and long-term partnership in reciprocal investment the EU is the leading foreign investor in Australia, thus contributing to Australia's growth, employment and export development. This is demonstrated by a 2006 survey of EU companies in Australia which found that there were approximately 2,300 EU companies with a presence in Australia, with a total estimated turnover of $A180bn or just over 12% of total sales in Australia. These companies directly created an estimated 400,000 jobs in Australia, and allowing for the flow-on (multiplier) effects, were responsible for generating over 1.2 million jobs or around 12% of the Australian workforce. The EU is the second main destination for Australian overseas investments.
EU-AUSTRALIA'S AGREEMENTS
Existing Agreements
EC-Australia Joint Declaration
The EU negotiated for several years a framework agreement with Australia covering trade and economic cooperation. Australia's objections to the inclusion of a standard human rights clause resulted in the proposed agreement being replaced by a lesser instrument, a Joint Declaration between EU and Australia signed on 26 June 1997. It was reviewed during the Ministerial meeting in April 2003 with an Agenda for Cooperation adopted which sets out the priorities for cooperation for the next five years. This confirms that the EU and Australia have intensified the exchanges and made progress on a diverse range of common interest, namely on trade and economic matters, strategic issues, immigration and asylum, environment policies and initiating bilateral cooperation projects in education and science and technology. Both sides confirmed their determination to build upon this partnership to meet the challenges of an increasingly interdependent world.
Coal Agreement
This agreement provides in particular for a standstill by the Community in subsidised coal production, and a commitment by Australia not to challenge the Community's coal subsidy scheme. The agreement ended in December 2002, and its continuation is currently under consideration.
Mutual Recognition Agreement (MRA)
The aim of the MRA is to facilitate trade by reducing technical barriers including assessment procedures. This covers mutual recognition of conformity assessment procedures, with the objective of reducing the costs of testing and certification of products exported to and imported from Australia. It is applies to medicinal devices, telecom terminal equipment, electrical safety, pharmaceutical GMP, machinery and pressure equipment, motor vehicles In order to adapt the agreement to changes that have taken place and making its administration easier, the MRA is currently under review.
Science and Technology Agreement (S&T)
The aim of the 1994 S&T Agreement is to encourage mutually beneficial research collaboration. It allows Australian researchers access to the EU's Framework Programmes on Research and Technological Development at their own cost; on a reciprocal basis it guarantees European researchers access to Australian programmes. 34 formal projects worth 40 million euro were launched under FP4, 49 projects worth 200 million euro under FP5, and 54 projects worth 440 million euro under FP6. A broader supporting initiative, known as the Forum for European/Australian Science and Technology cooperation (FEAST), operates with support from the Commission, Member States and Australian research agencies.
Euratom-Australia Agreement
This 1982 Agreement concerns the transfer of nuclear material from Australia to the European Atomic Energy Community (Euratom). The Agreement is intended to further the objective of non-proliferation, under which nuclear material can be transferred from Australia to the Community for peaceful purposes. The implementation of the agreement, facilitated by agreed and updated Administrative Arrangements, meets with the satisfaction of both parties. Technical meetings and consultations between the appropriate authorities of the two parties are taking place regularly.
Arrangement for information sharing on consumer policy and protection
The content of this arrangement concerns mainly the administrative cooperation and exchange of information as to the pursuit of more effective consumer protection law and policy and to avoid inconsistencies or conflicts between laws, standards and guidelines. It includes suggestions for education programs for consumer and traders as well exchange programs on staff development. Food is explicitly excluded in this agreement.
The Agreements under negotiation
Wine agreement
The Commission wants to maintain the legal framework foreseen by the 1994 Agreement, which implies full and exclusive protection for the traditional expressions, as well as for geographical indications. The Commission also seeks assurance concerning oenological practices. In June 1999 the EU and Australian negotiators came to an "ad referendum" agreement on these matters ("Perth compromise"). In May 2000 the Council unanimously gave a favourable opinion, but Australia was not in a position to accept it.
After several unsuccessful negotiations rounds a breakthrough came in November 2002 in Canberra. Since then a series of negotiations have taken place which will hopefully lead to an initialling of the Agreement by end 2006.
Veterinary agreement
Discussions on a possible agreement began seriously in 1996. Progress was halted when major deficiencies were found in the Australian hormone-free cattle program in 1998. Australia put a corrective program in place and imports have been maintained. However, past experience with other Veterinary Agreements brought into question its value. The present strategy goes more in the direction of handling these issues on a case-by-case basis. Member States see Australia as very protectionist, using risk analysis as a tool to delay opening its markets.
MAIN ISSUES IN THE EU- AUSTRALIA TRADE RELATIONS
Obstacles to Accessing the Australian Market
In spite of the successful trade relations with the EU, Australia maintains a number of obstacles to accessing its market. The following description is not exhaustive and reflects only the main problems for EU exporters.
While the EU level of tariffs for industrial products is not higher than 5%, Australia still applies tariffs of a maximum of 10% (textiles, footwear, motor vehicles and parts) and 17,5% for clothing for EU exports. However, these tariff peaks are due to reduce to 5% by 2015. The applied tax of 25 % on luxury cars from the EU is not concerned by the latter reduction.
Vis-à-vis the EU it makes use of antidumping (AD) duty to a certain degree and has currently 3 trade defence measures in force against the EU (chemicals, peaches) and one under investigation (brandy). The EU has 2 AD cases on synthetic fibres against Australia. The 1998 reform of Australian AD legislation did not lead to the expected transparency, as foreign companies are still obliged to undergo complicated and lengthy bureaucratic procedures.
Following the entry into force of the Australia-United States Free Trade Agreement (AUSFTA), Australia implemented a non-discriminatory regime for procurement at the Commonwealth level of government. However, some restrictions still exist at the state and territory level of government (for example, certain states apply surcharges for goods with imported content). Australia has not signed the WTO/Agreement on Government Procurement. Some problems exist regarding the non-respecting of intellectual property rules (mainly wine, cheese).
Australia also took special measures following the BSE crisis. It requires that beef and beef products exported from the EU must be sourced from cattle herds free from BSE. Following emergency interim measures, it has now introduced a stringent certification system based on the categorisation of the exporting country via a formal application to the responsible Australian authority.
Agricultural products: Australia's cautious approach to quarantine, sanitary and phytosanitary (SPS) regulations reflects its island geography, which has isolated it from many diseases and pests in its flora and fauna. Therefore access to the Australian market on agri-food products is particularly difficult. It involves two major obstacles: foreign products must not only satisfy Australian requirements on quarantine and inspection services but also conform to the national Food Standards Code. Australia is well known for its very restrictive imports of animal and plants products. It insists on lengthy risk assessment procedures, which may take years to complete, before changing its import rules.
Products that require an import permit include all plant and animal products likely to contain micro-organisms capable of having a detrimental effect on public health, flora or fauna. EU exports of timber (which was manufactured more than 3 months before export) and its packaging are subject to particular treatment (fumigation, immunisation) before it is allowed to enter the market.
Australia's very conservative approach to quarantine and risk assessment, acceptable within the WTO SPS rules system, continues to be a barrier to EU primary goods exports.
The obstacles to accessing the EU market
Trade relations with Australia are governed by full compliance with WTO rules, including the MFN (most favoured nation) clause, which is applied to Australia. Access for non-agricultural goods was subject to a simple average applied tariff of 4.0% in 2005.
However, the conditions for access of agricultural products are affected by the operations of the Common Agricultural Policy, where the EU maintains high levels of self-sufficiency in primary agricultural products, including meat, dairy products and wheat. Particular Australian complaints concern the extent of sheep meat, beef and dairy products access to the EU market.
WTO
Australia is an active participant in the WTO, with its position as chair of the Cairns Group enhancing its position within the Doha Round negotiations.
To date Australia has not joined the majority of OECD countries in submitting to a non-discriminatory and transparency procurement regime by participating in the WTO's plurilateral Agreement on Government Procurement. Australia did not sign the WTO Agreement on Government Procurement.
Australia has made increasing use of dispute settlement procedures, having been a party to two panels against the EC - to examine the EC export subsidies on sugar (joined by Brazil and Thailand) and against the EC protection of trademarks and geographical indications for agricultural products and foodstuffs (joined by US). As a third party Australia has been involved in panels against the EC concerning GMOs, selected Customs maters and hormones.
In 2003 the EC requested a panel against Australia concerning its quarantine regime for imports. Canada, Chile, India and the Philippines joined the initial EC request for consultations.
1 Argentina, Australia, Bolivia, Brazil, Canada, Chile, Colombia, Costa Rica, Guatemala, Indonesia, Malaysia, New Zealand, Pakistan, Paraguay, Philippines, South Africa, Thailand, Uruguay
Source: European Commission
