The EU’s Single Market allows unrestricted movement of goods, services, people, and capital among its members, making the EU Australia’s third-largest trading partner. Recent years have seen efforts to strengthen EU-Australia cooperation, however diplomatic challenges, such as the submarine debacle, demonstrate an ongoing reserve. 

In 2018, the European Union (EU) and Australia launched negotiations for a trade agreement. Described by the then Australian Trade Minister Andrew Robb as the “missing piece” in Australia’s portfolio of trade agreements, the prospect of agreement with the EU was anticipated eagerly. From the outset, negotiators from both sides were hopeful of an “ambitious* agreement.

Recognising the importance of the EU as a trading partner for Australia has been difficult because of the tendency for formal statistics to continue to separate out the EU’s Member States and to report their trade figures separately. On this basis, Germany rates as our 11th most important two-way partner for goods and services (the United Kingdom (UK), no longer a member of the EU, is 12th). The Netherlands is our 15th destination for exports, while Germany is our 6th most important source of imports, and Italy comes in at 15th for imports.

However, the EU has been developing its Single Market since the European Economic Community (EEC) was formed in 1957, providing for freedom of movement of goods, services, people, and capital within its membership confines. Goods and services exported from Australia into any one member state are entering effectively all 27 as internal movement is unrestricted. On this basis, the EU is Australia’s third-most important goods and services trading partner after China and Japan.

However, the numbers are weighted very much in favour of the EU: Australian goods and services exported to the EU amount to AUD$25.5 billion, while imports amount to AUD$80.7 billion. Much of this imbalance dates back to the entry of the UK to the EEC in 1973 when key markets for Australian agricultural products disappeared overnight. Australian producers sought and developed new and larger markets, particularly in Asia which were also much closer.

However, it remains a puzzle that Australia did not pursue a more balanced trade relationship until the mid-2010s. Over the subsequent 35 years, it was hard going in improving trade and diplomatic relations between the EU and Australia. In the 1980s, the European Community, following the World Trade Organisation (WTO) Agreement of 1984 on intellectual property (TRIPS), took umbrage at the Australian wine industry’s use of European names on wine labels and began negotiations which resulted in the Wine Agreement of 1988. While its purpose was to improve “conditions for the favourable and harmonious development of trade and the promotion of commercial cooperation in the wine sector on the basis of equality, mutual benefit and reciprocity,” its primary provisions were agreement to no longer use terms such as “burgundy” or “claret” or “sherry” and, perhaps most importantly, “champagne.” Just as significantly for the Australian industry was the agreement to establish our own system of Geographical Indications for wine, in which all Australia was described in a framework of regions and sub-regions. Despite early uncertainty, the Agreement was updated and extended in 2008.

In 1994, the EU and Australia negotiated a Science and Technology Cooperation Agreement. Regular dialogues have been conducted, often on specific topics such as green hydrogen and digital and technological cooperation. However, as yet, this level of cooperation has not led to Australia seeking association with Horizon Europe and other key EU innovation programs.

Indeed, the developing cooperation was hindered by the refusal in 1997 of a new Australian conservative government to sign the Kyoto Protocol. This was one of the earlier global initiatives to reduce global warming emissions, so Australia’s position posed a new obstacle to the development of warmer relationships. EU Member States had played a significant role in achieving both the commitment to emissions reductions, as well as the right for each national government to determine an appropriate policy mix for their setting. Australia’s refusal to engage with this commitment was seen as another significant snub to the EU.

The underlying tension in EU-Australian relations did not alter for another decade until the election of a Labor Government in Australia in 2007. Prime Minister Kevin Rudd not only oversaw agreement to sign the Kyoto Protocol, he also chose to visit Brussels, becoming the first Australian prime minister to do so since Gough Whitlam in 1974. In 2008, the EU and Australia reached agreement on the EU-Australia Framework Agreement 2008 which enhanced cooperation on counter terrorism, cyber threats, WTO rules-based global trading, security cooperation, and nuclear non-proliferation.

Since 2010, great energy has been committed to strengthening EU-Australia cooperation. Prime Minister Julia Gillard also visited Brussels that year, attending an Asia Europe Meeting of Leaders. During this visit, she called for an upgrading of the Framework Agreement to Treaty-Level status. This took a further seven years, being signed in 2017 and finally coming into force in 2022. 2017 marked the first year of a new cycle of EU-Australia bilateral Leaders’ Meetings, involving both the president of the European Commission and the president of the European Council.

So, if taking stock in 2020, the picture looks very positive: a Treaty-level Agreement has been finalised, negotiations for a trade agreement are underway, and there is an increasing program of dialogues and Leader-level interactions, suggesting that cooperation is steadily improving.

In September 2021, the EU was set to announce a new Indo-Pacific Strategy when, on the same day, the Australian Prime Minister (PM), Scott Morrison, announced AUKUS, a new commitment to purchase nuclear submarines in conjunction with the United States and the United Kingdom, thereby cancelling a contract to purchase new generation submarines from France. Not only did this spark an immediate diplomatic incident between the Australian PM and the French president, it prompted a very firm response from the EU which then suspended trade agreement negotiations.

Notwithstanding all the logic of strengthening ties between the EU and Australia, there is an underlying capacity to undermine goodwill and trip each other up. Yes, the geographic distance does not help, nor do the language issues which arise now that the UK has left. After all, Australia has found alternative markets in Asia and continues to be able to take advantage of its mineral resources. Australia clearly sees no benefit in participating in Horizon Europe, the largest publicly-funded Research and Innovation program in the world, even though Korea, Canada, and New Zealand (and of course, the UK) do so.

So what has happened with the negotiations for a trade agreement? The election of a Labor Government in May 2022 helped to diminish the AUKUS anguish and re-establish a much more positive relationship. Cooperation in support of Ukraine helped, and EU-Australia Leaders’ meetings resumed in November 2022. Great progress was made in closing chapters in a potential Agreement, not least in relation to digital commerce, to business mobility, and even considering extending Geographic Indications protection to food stuffs. In the end, market access for a small number of meat, dairy, and sugar products became the obstacle that undid a potentially significant agreement.

Of course, these were always going to be the tough issues, but in the end, neither party quite wanted the deal sufficiently strongly, and to some degree, opportunities were miscalculated: Australia misread the depth of concern about European farmers in the lead up to EU elections, and the EU did not appreciate the weight of the Australian agricultural lobby.

Was this miscalculation costly? Certainly, many involved with the services and e-commerce sectors in Australia will assert as much, and equally firmly, the EU has been quick to explore side deals around energy and critical minerals. It is hard not to conclude that an “ambitious” trade agreement would finally put 50 years of uncertain relations to one side, and together with the Framework Agreement, put in place a partnership that would be very much in the interests of both the EU and Australia. However, such a moment seems to be at least a few years further away.

Bruce Wilson is Director of the European Union Centre of Excellence at RMIT, leading research and debate on EU-Australian relations, encouraging mobility for staff and students, and building partnerships between Australian universities and organisations and their European counterparts.

Professor Bruno Mascitelli taught European Studies at Swinburne University for more than 20 years, and has published prolifically on Australian and EU relations including trade. He has been very successful in winning Jean Monnet Awards offered by the European Union, including being awarded a Jean Monnet Chair. 

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