Australia-Europe Economic Relations Dialogue

On 1 October 2018 the IIT collaborated with the SAIS Europe division of the Johns Hopkins University to host an Australia-Europe Economic Relations Dialogue in Bologna.  The event was opened by Greg French, Australian Ambassador to Italy, Michael Plummer, Director of the JHU Bologna Center, and Christopher Findlay, Executive Dean, Faculty of the Professions.  It brought together policymakers, academics and private sector representatives for open and free-ranging discussion, under the Chatham House Rule.

The morning session was devoted to placing Australia-EU relations in the context of current global economic uncertainty and the fractured history of Australia-EU relations since 1972.

 With the USA disrupting the WTO, in a trade war with China, and at odds with other major trade partners, countries have to reassess their trade policy strategies. The EU, by signing trade agreements with Canada in 2017 and Japan in 2018, has signalled commitment to trade liberalization with like-minded countries. Australia's participation in CPTPP (successor to the TransPacific Partnership after the USA withdrew) and RCEP (being negotiated with the ASEAN countries, China, India, Japan South Korea and New Zealand) sends a similar message from the Asia-Pacific region.

Negotiating an Australia-EU trade agreement will not be easy.  Since 2015, when the EU adopted its Trade for All strategy, the EU has been committed to placing trade agreements in a broader context and to transparency during negotiations.  While Australia and European countries share many values and have signed on to the UN 2030 Agenda for Sustainable Development, international commitments to addressing climate change are disputed within the Australian Parliament, and Australia has a record of isolating trade negotiations from non-trade issues.

The afternoon session focussed on the Australia-EU trade agreement currently under negotiation, and included a soft launch of the book Potential Benefits of an Australia-EU Free Trade Agreement edited by Jane Drake-Brockman and Patrick Messerlin and about to be published by the University of Adelaide Press.

The most striking outcome of the Dialogue was a consensus that the current Australia-EU negotiations are timely, in the common interest of both parties, and likely to produce a good agreement.  Trade facilitation will be a central issue in the negotiations as both the EU and Australia seek to improve conditions for their firms to participate in global value chains, and both sides will be seeking to reduce restrictions on services trade.  Agriculture will be an area of hard bargaining, especially EU tariff quotas on products such as beef, sheepmeat and sugar and the EU's pursuit of recognition for geographical indicators, but EU agricultural policy has been significantly reformed since the 1990s and agriculture is of diminishing importance in Australia's trade.

Apart from participation in the Dialogue by EU policymakers and the Australian Ambassador to the EU, Justin Brown, there were participants from the OECD and from the Australian Delegation to the OECD.  Their role reflected the complexity of trade in services, of drafting mutual recognition agreements, of harmonizing regulations, and so forth.  The OECD, as the multilateral thinktank for the high-income countries, can facilitate negotiations by familiarizing negotiators with global best-practice in these areas.  For Australia, it is important that negotiations in the CPTPP, RCEP, the Australia-EU FTA and other agreements do not create a spaghetti bowl of differing regulations or a lasagne dish of differing layers of regulation that complicate rather than facilitate international trade.

The final sessions of the Dialogue focused on the FTA and third parties.  Brexit raised several issues from the specific, such as how EU28 tariff rate quotas will be divided, to the broader question of whether the UK will remain in the customs union and the implication for GVCs.  There was also discussion of whether simultaneous EU-New Zealand negotiations were helpful, given that New Zealand has a more agriculture-oriented and less services-oriented economy than Australia and hence has differing negotiating priorities.  Several participants evoked a vision of Australia as a regional hub in an integrated Eurasian economy, with cultural affinities to the EU and proximity and shared time zones with East Asia.  At the same time, improved communications technology and digitalization of many services will reduce the tyranny of distance.  The bottom line on any modern trade agreement is that it must be flexible enough to work in a future world economy that is difficult to predict in detail.