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Australian Embassy, Lisbon
Press Release - 26 December 2006
Op-ed for December 26, 2006 edition of Diário Económico by Australian Ambassador Luke Williams
Australia and the EU: A dynamic trading relationship
Australia has an ambitious trade policy agenda in which the European Union (EU) plays a key part. Like other non-EU countries, Australia is keen to see movement by the EU on the Doha round of negotiations in the World Trade Organisation (WTO). Negotiations on the Round broke down earlier this year because of disagreements over agriculture. In the EU, primary producers receive 33 per cent of their income from government support. It is therefore important that the EU show leadership on this issue by undertaking further reforms of its Common Agricuture Policy (CAP). Portugal, a key member state of the EU, can be active in this regard.
The strong performance of Australia’s exports to Europe during 2006 has demonstrated the continued importance of Europe as a key trading partner of Australia. Although a majority of Australia’s exports are sold to the countries of our near neighbours in Asia, the economic links between Europe and Australia cannot be underestimated. Indeed, the EU, as a single entity, remains Australia’s largest trading partner. Australia’s merchandise trade with the EU (exports and imports) was worth A$51 billion in 2005. Merchandise exports to the EU rose by 12.6 per cent to $14.9 billion in 2005, and merchandise imports from the EU rose 7.3 per cent in 2005, to $36.1 billion.
Bilateral trade in services is also growing strongly, with the EU being Australia's largest overseas market for services exports and largest source of imported services. Services exports to the EU were valued at A$7.8 billion in 2005, with imports worth A$9.4 billion. Service exports in travel, transportation and shipment, and education have also shown strong growth over the past decade, with good potential for further growth in all of these sectors.
However, while access to the EU market is generally open for a range of manufactured goods and services, agriculture remains a glaring exception. The EU has one of the most restrictive market access regimes of any developed country, characterised by high, and often prohibitive tariffs and tariff quota arrangements for key agricultural products.
Recent reforms to the CAPwere positive steps in introducing a greater degree of market orientation into EU farm production. The decision to scale back the link between farm subsidies and production will, over time, reduce incentives for farmers to over-produce and limit the negative effect on world prices. But these reforms, welcome as they are, do not go far enough to reduce the total overall level of EU farm support or create meaningful opportunities for all products to enter the EU market, including from developing countries.
These barriers to agricultural trade are the reason why the Doha Round is Australia’s number one trade priority. To secure a Doha deal, all participants will need to show flexibility to explore possible ways forward. But it is essential that the Doha mandate is met – which includes substantial improvements in market access, substantial reductions in domestic subsidies, and the removal of export subsidies. In an effort to break the impasse, Australia recently put forward a “five and five” proposal, which would require the United States to improve, by a further US$5 billion, its offer to cut domestic support while the EU would need to cut its tariffs by 5% more than proposed by the G20.
Despite the serious challenges we face, significant progress has been made since the Round was launched in 2001 and we have a reasonably clear understanding of the key issues that need to be resolved if a deal is to be done. Australia is encouraged by the recent resumption of negotiations in Geneva and the ongoing bilateral talks between key players.
Australia encourages the EU Presidency to urge EU members to follow through on their commitment to world trade reform by showing the leadership and flexibility required to secure an ambitious Doha outcome. To lose this rare opportunity to reform the global trading environment would result in economic losses to all, and risks losing the hard won trade liberalisation offers made so far in the Doha negotiations.