Drivers and difficulties in the economic relationship between Australia and the European Union: from conflict to cooperation

Economic relations between Australia and the European Union (EU) have always been strong, but they have not always been easy. They have been difficult for Australia because it associated the EU with the loss of the UK preferential export market on its entry into the then European Economic Community. And because Australia associated the EU with the original Common Agricultural Policy, which combined subsidies for agricultural production and high agricultural tariffs to make Australian agricultural exports not competitive. They have been difficult for the EU also. Australia developed a biosecurity system to protect its agricultural sector: quarantine requirements and food safety standards made the importation of EU plant and animal products too costly. Yet Australia and the EU need each other. The EU, which is Australia's largest services trade and investment partner, supplies the business services that drive a knowledge economy and provides the credit to finance economic development. Correspondingly, the EU needs Australia both as a commercial base in Asia and as a reliable energy supplier. This article analyses the drivers and difficulties in the economic relationship between Australia and the EU as they start negotiations for a free trade agreement.