European Union brief

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.

Australia and the EU work together to support global efforts to combat terrorism and the proliferation of nuclear and conventional weapons, and to promote peace, sustainable development, good governance and human rights.

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.

The 28 members of the EU as a bloc constitute Australia's second largest trading partner and largest source of foreign investment.

The UK voted to leave the EU on 23 June 2016. The two year process for the UK to negotiate the terms of its exit commenced when the UK Government triggered Article 50 of the Treaty of Lisbon on 29 March 2017. The UK will formally leave the EU two years from this date, on 29 March 2019. The EU and UK have made clear that a transition period will then commence whereby the UK will remain subject to EU rules and regulations. This transition period will conclude on 31 December 2020.

Political overview

Key EU institutions

The main institutions of the EU are the European Council, the Council of the European Union (informally known as the Council of Ministers), the European Commission and the European Parliament. The European External Action Service is the EU’s foreign service.

The European Council, the highest authority, is composed of the heads of state or government of the member states. It does not legislate but defines the general political direction and priorities of the EU, and to that end provides guidance to the Council of the European Union and the European Commission (the President of which is also a member of the European Council).

The Lisbon Treaty on EU reform, which entered into force on 1 December 2009, created the new position of permanent President of the European Council, appointed for a two-and-a-half-year term. The President of the European Council chairs its meetings, is the face of the EU internationally and holds discussions on its behalf with heads of state or government of third states. The President is appointed by the EU Heads of State and Government. The current European Council President is Donald Tusk, former President of Poland (2007-2014). President Tusk took office on 1 December 2014.

The Council of the European Union is the EU's pre-eminent decision-making body. It has both executive and legislative powers and meets in ten subject-based council 'configurations', including Economic and Financial Affairs (Ecofin), Competitiveness (including internal market and industry) and Foreign Affairs. 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, Federica Mogherini.

Since the Lisbon Treaty’s entry into force in 2009, the EU’s external relations are managed by the High Representative, who is also a Vice-President of the European Commission. The High Representative also exercises authority over the European External Action Service.

The European Commission, comprising one Commissioner from each member state and led by a President, has the sole right of initiative to propose laws (called directives) at the EU level, which—when approved by the Council 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, Jean-Claude Juncker, took office on 1 November 2014 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 Cecilia Malmström.

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 Parliament gained an expanded role in a number of new areas including trade, agriculture and justice and home affairs. The EU last held parliamentary elections in May 2014. The next elections will be held in May 2019.

Economic overview

As a bloc, the EU is equivalent to the second largest economy in the world (USD 19.4 trillion in 2017) behind China and ahead of the US. 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 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. There are differences in per capita income among member states and in national attitudes toward inflation, debt and foreign trade.

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 28 EU Member States take part in the economic union, nineteen member states (collectively called the Eurozone) have adopted the euro as their currency.

The most recent country to adopt the euro was Lithuania on 1 January 2015.

In 2017, approximately 20 per cent of the Reserve Bank of Australia’s international reserves are held in euros (behind only the US dollar at 55 per cent).

Bilateral relationship

Australia and the EU have a long-standing and fruitful bilateral relationship, and in 2017 celebrated 55 years of formal diplomatic relations. 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.

The Australia–EU Partnership Framework currently sets out the direction of bilateral cooperation. The Framework was launched during Australia–EU Ministerial Consultations in Paris in 2008. It outlines specific cooperative activities and is designed to be revised regularly. The first revision was done in October 2009, and 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 Indo–Pacific region
  • energy issues, climate change, fisheries and forestry
  • science, research, technology and innovation, education and culture and facilitating the movement of people.

On 7 August 2017, Foreign Minister Bishop and High Representative Mogherini signed the Framework Agreement between Australia and the EU. Once it enters into force, the Australia-EU Framework Agreement will provide an institutional framework that will elevate the bilateral relationship between Australia and the EU. It will set out a platform for 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.

The Australia-EU Crisis Management Agreement provides a legal framework to facilitate the participation of Australian civilian and military personnel in crisis management operations organised and led by the EU. EU crisis management operations can be civilian or military in nature and may focus on supporting military, police, judicial and customs reforms, peacebuilding and capacity-building in countries experiencing crisis situations. EU crisis management operations may be deployed to facilitate agreements end hostilities, ensure compliance with these agreements and help ensure the security of civilians, refugees, humanitarian workers and United Nations (UN) personnel. The crisis management agreement entered into force on 1 October 2015.

The EU-Australia Leadership Forum (EUALF) is a unique project in the EU's suite of public diplomacy actions. The Forum's overall objective is to broaden and deepen the bilateral relationship and, in so doing, help to shape the vision for the future partnership. The EUALF was officially launched by Minister Bishop and High Representative Mogherini in Brussels on 8 September 2017. Minister Bishop subsequently launched the forum at a complementary event in Australia on 19 October 2017 in Canberra. The project, funded by a EUR 2 million (close to AUD 3 million) grant from the European Commission, covers a period of three years (2016 – 2019). The core elements of the project – the first Senior Leaders’ Forum and Emerging Leaders’ Forum – were held in Sydney on 2-6 June 2017. A similar event is scheduled to be held in November 2018 in Brussels.

Regular ministerial engagement between Australia and the EU continues to strengthen the relationship.High-level visits in recent years have included the following:

  • Prime Minister, The Hon Malcolm Turnbull MP, visited Brussels in April 2018, during which he met President of the European Commission Jean-Claude Juncker to discuss our trade and security relationship, including the priority Australia attaches to negotiating a free trade agreement with the EU.
  • Foreign Minister, The Hon Julie Bishop MP, and Trade, Tourism and Investment Minister, the Hon Steven Ciobo MP, visited Brussels in September 2016, during which both addressed members of the European Parliament. Minister Bishop launched the EU-Australia Leadership Forum with High Representative Mogherini. Minister Ciobo met with Trade Commissioner Malmström, Economic and Financial Affairs Commissioner Moscovici, and advanced preparations for the Australia-EU FTA.
  • European Commissioner for Internal Market, Industry, Entrepreneurship and SMEs, Elzbieta Bienkowska, visited Australia in March 2018, and met with The Hon Craig Laundy MP and Senator the Hon Zed Seselja to discuss small business, entrepreneurship and innovation.
  • European Commission Director-General for International Cooperation and Development Manservisi visited Australia for the Australia-EU Development Dialogue in March 2017.
  • Director-General Migration and Home Affairs of the European Commission Ruete visited Australia in February 2017 to discuss issues of border protection, counter‑terrorism and migration.

The Australian Parliament has maintained 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. Reciprocal visits by parliamentary delegations are usually held each year. A delegation from the European Parliament visited Australia from 8-10 February 2016. In October 2017 an Australian Parliamentary delegation visited the European Parliament in Brussels.

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 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. Around 70 per cent of Australians have European ancestry. Almost 30,000 new European migrants arrive annually. In 2017 over 1.6 million Europeans visited Australia and over 1.7 million Australians visited Europe. Over 45,000 students from the EU studied in Australia in 2017. 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.

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 WTO and G20.

As a bloc, the EU is Australia’s second largest two-way trading partner, with total two-way goods and services trade worth $99.6 billion in 2016-17. It would still be our second-largest two-way trading partner, if the UK were excluded.

The EU is Australia’s largest two-way trade in services partner ($31.6 billion in 2016-17, with imports of $20.0 billion and exports of $11.6 billion). Total two-way merchandise trade is substantial at $68 billion (imports from the EU of $49 billion and exports to the EU of $19 billion).

The EU as a bloc is Australia’s largest source of foreign investment, worth almost $1.1 trillion in 2017. FDI was valued at $188.7 billion. Investment is significant in all sectors including resources and energy, agribusiness, infrastructure, advanced manufacturing, financial services, and information and communications technology.

In 2017, Australia’s total stock of investment in the EU was $612.1 billion, with FDI of $117.8 billion. The EU is the second largest market for outward Australian investment.

Australia’s major services export to the EU in 2016-17 was personal travel services – excluding education (mainly recreational travel) - worth $5.1 billion. Personal travel services – excluding education were also the largest single services import from the EU during the same period with a value of $8.3 billion.

The Australian Prime Minister together with the President of the European Council and the President of the European Commission agreed in a joint statement on 15 November 2015 to start the process towards a comprehensive and high-quality Free Trade Agreement (FTA). Australian and EU officials have completed a joint FTA scoping exercise setting out the scope and ambition of a future FTA. On 22 May, the Council of the EU adopted a decision recommending the opening of FTA negotiations with Australia and we expect to launch negotiations shortly. The Prime Minister and the Minister for Trade, Tourism and Investment welcomed the announcement to open negotiations for a landmark, job-creating Australia-EU FTA.

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.

Last Updated: 23 May 2018