The Australian EU Dilemma: Free trade or Farmers?
EU-Australia trade relations have had a rocky history, with conflicts over agricultural policy causing tension and preventing progress towards a more cooperative relationship. However, recent developments suggest that there may be a promising future ahead for these two trading partners.
EU-Australia trade relations have had a rocky history, with conflicts over agricultural policy causing tension and preventing progress towards a more cooperative relationship. However, recent developments suggest that there may be a promising future ahead for these two trading partners. Changing strategic trade interests and conditions that soured the relationship in the first place have opened the door to a possible Free Trade Agreement (FTA), which was unthinkable only a couple of decades ago. A free-trade agreement would enhance both Australian and the European Union’s presences in the Southeast and common agricultural markets. There has been a great deal of change since the creation of the European Union and its relationship with Australia, but for the better.
Even though one might expect a rocky relationship to begin with, in fact, Australia was very supportive of the creation of the European Union (EU). Australia’s supportive stance in the beginning was due to the prevailing belief that it was an important step towards the political and economic stabilization of western Europe after the end of World War II and on the doorstep of a cold war. However, this attitude rapidly changed when the United Kingdom joined the European Union, and the Common Agricultural Policy (CAP) went into effect which subsidized agricultural production in the common market. Australia viewed the United Kingdom's entry into the European Union as a stab in the back as a repudiation of its commitment to the Commonwealth. In addition, the CAP gave an advantage to EU farmers over Australian farmers which allowed the former to undercut the latter in European markets. Australia had to treat the European Union as an antagonist to protect its politically influential farmers due to the lack of access to the British agricultural market due to its integration into the European Union. The Australian government made it clear that the upholding of this agricultural policy was a nonstarter for the improvement of Australian-EU trade relations.
The frosty Australian-EU relations began to warm up as the European Union began to further integrate and make its internal market more attractive with landmarks such as the Single European Act coupled with the MacSharry reforms of the CAP in 1991. The pinnacle of this loosening of the CAP occurred in the Uruguay round of multilateral trade negotiations in 1994 where further concessions were given. Due to a loosening of agricultural regulations favored by EU agricultural production as well as the possibility of entering the lucrative single European market, or common market, most of the animosity caused by the CAP was effectively cooled down, which allowed for the reopening of a cooperative trade relationship. This effectively encouraged the European Union and Australian foreign policy bodies to shift their tone and reorient their foreign trade policies. It is evident in Australia that the direction has shifted since 2013 when the Department of Trade and Foreign Affairs (DFAT) shifted its focus to bilateral Free Trade Agreements (FTAs) with major trading partners, including massively bolstering trade flows with the European Union. Unfortunately, due to the transatlantic trade and investment partnerships, the European Union was suffering from trade fatigue which made it difficult to initiate talks. The interests of the EU and Australia, although no longer pitted against one another, were not yet perfectly aligned.
The European Union’s interest for a free-trade agreement with Australia was rapidly increasing as a result of the prioritization of further economic integration in southeast Asia. This prioritization suddenly aligned with Australia’s interests as the latter wanted more integration with the common market. It is important to note though that although European Union member states are more economically integrated into southeast Asia than Australia, its status as a member in the Asia-Pacific Economic Cooperation Forum (APEC), which promotes free-trade throughout the Asia-Pacific region, was vital both for the agreement for trans-Pacific partnership and the regional trade economic partnership. In other words, the European Union is interested in a free-trade agreement with Australia to use Australia’s partnerships with regional partners as a springboard into further economic integration in Southeast Asia.
The reorientation of Australian Department of Foreign Affairs and Trade’s priorities resulted in a white paper in 2017 outlining a multi-year commitment to vastly increasing trade with the European Union. Simultaneously, the European Commission’s announcements of trade partnerships further aligned Australian-EU trade interests. As such, in May 2018 the European council gave authorization to begin free-trade agreement negotiations with Australia. These negotiations are still in progress due to the disagreements on agricultural policy that can be traced back to the CAP as well as complaints about Australian quarantine periods further exacerbated by world events such as Brexit and the stalling transatlantic trade and investment partnership. Nonetheless, due to sheer strategic pressure and the good faith engagement on both sides, the ratification of a free-trade agreement seems likely although it will not be a quick process and will likely drag on for years.
If free-trade agreement talks do break down, it will most likely be because of agricultural industry protections but, the European Union and Australia will come to another sort of agreement to increase economic cooperation to bolster their respective presences in southeast Asia and the common market.
Written by Antonio Brunetti