Australia has longstanding and deep commercial relationships with the European Union and its Member States.
The EU as a whole is Australia’s second largest overall trading partner after China with a 13% share of total two-way trade in goods and services in 2014. The EU is Australia’s 5th largest merchandise export market and 2nd largest source of merchandise imports. The EU is Australia’s top export market and top important source for services.
The EU is also Australia’s largest source of foreign direct investment (FDI) with an approximately 25% share of total inward FDI, as well as Australia’s 2nd largest destination for outward FDI (by comparison, Australia is the 20th largest destination for EU outward FDI). The largest overall trade and investment partners within the EU are the United Kingdom, Germany, Italy, France and the Netherlands.
The South Australian Government is committed to maintaining and growing these established markets. While formal strategies for engagement with other partners such as China, India and South East Asia have already been developed and implemented at State level, the South Australian Government considers the time has come to focus more on future growth markets including in the European Union, especially in the lead up to negotiation of the proposed EU/Australia FTA.
To stimulate an exchange of ideas and opinions, the Department of State Development has issued a comprehensive Directions Paper and has been conducting a series of related stakeholder consultations. The EU Centre for Global Affairs is an active contributor to this discussion.
The EU Centre for Global Affairs is focusing especially on the opportunities for growth in services trade and investment.
The rise of knowledge-based activities, the growing importance of intangible assets in all economies, together with the development of the internet and the enhanced interplay between services and the manufacturing and agricultural sectors, all lead to the increasing importance of services.
Services represents roughly 1/4 of global exports as measured by the balance of payments, but nearly 1/2 of global exports in terms of value added. Even in balance of payments terms, total Australia-EU trade in services was already more than 1/3 of total two-way trade in 2012, significantly more, that is, than the global average of 1/4. Moreover Australia’s total bilateral trade in services with the EU has grown on average with over 9% p.a. over the last decade.
The positive bilateral story on services contrasts significantly with the recent evolution of bilateral merchandise trade.
Eurostat data shows that over the period 2010-2014, Australia’s merchandise exports to the EU (chiefly primary products including crude materials, inedible mineral fuels, lubricants and related materials which account for 44% of the total) fell by an average of 7% p.a.
Australia’s merchandise imports from the EU (chiefly manufactures including machinery, transport equipment, chemicals and related products which account for 65% of the total) increased by 2% over this same period.
Australia’s imports of services from the EU increased over this period by an average of 9%, but very importantly Australia’s services exports to the EU also increased by an average of 3% p.a.
According to FDI Markets data, Australia’s top 3 recipient industry sectors of inward FDI from the EU are business services, software and IT services and financial services.
The reality is that the EU is by far the biggest exporter and importer of services in the world – and the world’s biggest investor in the services sector. The proposed bilateral FTA offers a unique opportunity for Australia to leverage its own strengths in this sector, including within South Australia.
Further information is available within the Stakeholder Workshop Presentation.
Jane Drake-Brockman & Simon Zyrianov