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CERC Workshop on

European Union - Australia Relations

Melbourne, 9 July 2002

Speaking notes for the introductory session

“Putting the Australian- European Union Bilateral Relationship in Perspective” Piergiorgio Mazzocchi

I believe this workshop is very timely for many reasons that I will attempt to

sketch during this presentation. In addition, for me personally, it represents

a good opportunity to share with you some perceptions and impressions,

after spending 4 months, almost day-by-day, since my arrival in Australia.

Let me start by saying that my perception is that our relations are

fundamentally sound and thriving, notably at the micro level, namely at the

level of individuals and firms, but I remain puzzled by the ambiguous

relations that exist between the two parties at the aggregate/official level.

There seems to be a somewhat pervasive divide made of mistrust and

abrasiveness on one side, and of irritation and dismissiveness on the other.

This divide finds its expression in rhetorical and often preconceived

formulas that seem to concentrate mainly around our agricultural relations,

even if these only represent a relatively modest part of the overall picture.

I was told recently that the reform of the CAP and the magnitude of the

new, good stories about the European Union should be better articulated and

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explained in order to convince Australia that we are not the bad boys that

some in Australia still think we are. This is a task in which this workshop

can help us progress for the mutual benefit of the two parties. At the core of

the problem, there is, I believe, a problem of perceptions. The European

Union is still a puzzling entity that needs to be viewed through the new

prism of its emerging significance as a single actor, with its own institutions,

in a swiftly transforming world.

Let me now look at some recent developments that may be relevant for

your workshop:

Firstly, I am glad to note that there have been in recent months strong

expressions of interest and some significant events at the political level

aimed at stepping up the bilateral dialogue. These events include:

- the visit to the Commission by three senior Australian ministers -

Deputy Prime Minister Anderson, Foreign Minister Downer, and

Immigration Minister Ruddock - who went to Brussels on 18 April last

for the annual European Commission-Australia Ministerials.

- the visit of Trade Minister Mark Vaile to Commissioner Fischler, in

Brussels on 17 May.

- John Howard made his first visit to Brussels as Prime Minister to meet

with President Prodi on 10 July, the first such visit in eight years. The

last such visit was between Prime Minister Keating and president Delors

in June 1994. The meeting will be followed by a working lunch of the

PM with the whole Commission.

- Pascal Lamy, the European Commissioner for Trade, visited Australia

on 15-17 July, and met with senior Cabinet members.

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- Commissioner Neilson, the Development Commissioner, will be visiting

Australia on 8 October.

- For 2003, we know already that Commissioner Patten will come to

Australia on 16-17 April.

- And a High Level Environment meeting is also being scheduled for 2003.

These events come in addition to the regular troika meetings held under

each new Presidency of the EU.

Secondly, there have been expressions of good intention on both sides to

further improve an already healthy bilateral relationship, which was

formalised by the 1997 Joint Declaration, and at the annual Ministerials on

last 18 April, it was agreed, and I quote from the Joint Communiqué:

“… it would be useful to review progress in cooperation in light of the

objectives of the 1997 Joint Declaration and we have instructed officials to

undertake such a review as well as to identify priorities for future

cooperation.” Thus both sides look forward to receiving at next year’s

Ministerial Consultations recommendations to advance the relationship

further.

This underlines a clear need for a forward looking approach and I believe

that this workshop can provide a very relevant and timely input into the

review process and contribute towards the development of our thinking for

new areas for cooperation.

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Similarly, Foreign Minister Downer supported the need for a new

perspective on Europe in his speech to the National Press Club on 7 May,

launching the new White Paper on Australia’s external relations, when he

said, “We need to work hard on building our links not only with the

individual member states of the European Union, but also with European

institutions. We need to see Europe through a new prism, not just through

the United Kingdom and traditional bilateral relationships.”

Thirdly, there is growing perception that the EU deserves a better

recognition in Australia’s external policies and that this can be achieved

without belittling relations with EU Member States. To this purpose, the

ambassadors of the EU submitted at the end of June a note to the Minister of

Foreign Affairs to contribute to the elaboration of the new White Paper on

Australia Foreign Policy to be published later this year.

As part of a separate process, Mark Vaile, Minister for Trade, appointed

John Azarias, to report to him on ways to improve business links between

Australia and Europe. I understand Mr Azarias has presented his draft report

to government.

Moving now to the substance, I want to briefly hint to some of the reasons

why the European Union-Australia relationship is important to the two

parties:

First, in a simple economic perspective, the European Union is an

important and growing player in the global economy:

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- The European Union is a huge single market currently consisting of 381

million affluent consumers from 15 member states. With the

enlargement that is presently negotiated, the EU will expand eastwards

and to the south and is expected to incorporate up to 13 new member

states, bringing the total population to more than 500 million.

- At present, the EU is the world’s second largest single market (after the

US) and is more than 20 times the size of the Australian economy.

- The European Union is also a world-leading trader (second after the US),

accounting for $A2.9 trillion or 18% of the world total two-way trade in

2001. It is the world’s largest exporter and the second largest

importer. Its two-way trade is over double that of Japan and 14 times

that of Australia.

Our bilateral economic and trade relationship is vibrant and growing rapidly.

However, because the focus is usually on individual member states, the

importance of the EU to Australia is not generally recognised. This

point of view has been rightly echoed in recent media reports of comments

by Foreign Minister Downer. Let me give you some brief statistics:

- The EU has been Australia's largest economic partner for the past 11

years. By economic, I mean the total of all international transactions that

involve trade in goods, trade in services, investment income and transfer

payments measured on a two-way trade basis. By partner, I mean an

established single market like the EU or the ASEAN. APEC, for

example, is not yet - and probably will not be for some time - a single

market.

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- For 2000-2001 (latest available), the overall EU-Australia economic

relationship grew by 6.5%, to reach $A70.6bn and accounted for a

19.5% share of all Australian overseas transactions (the USA’s share was

17.4%, Japan 13.1% and ASEAN 12.7%);

- The EU is Australia’s largest merchandise trading partner (a status it

has held since 1995-96), with two-way trade amounting to $A39.5bn in

2000-01 or 16.6% of the total (Japan's share was 16.3%, the USA 14.3%

and ASEAN 14.0%);

- The EU remains Australia’s largest partner for trade in services, being

both the largest export market for Australia (growing by 12.8% in 2000-01 to an estimated $A6.5bn) and the largest supplier of services

(increasing by 6.9% to $A7.5bn);

- Total two-way trade in services between the EU and Australia was worth

an estimated $A13.9bn in 2000-01 or 21.5% of the total trade (the USA’s

share was 18%, ASEAN 15% and Japan 9%);

- The EU remains Australia’s leading investor, with an accumulated

investment of about $A270bn at the end of June 2001 or 33% total

foreign investment in Australia (the USA’s share was 29%, Japan 6%,

and ASEAN 4%);

- Importantly, investment by the EU has created many jobs in Australia,

estimated (in 1999) to total 350,000;

- The EU is the second major investment location for Australian funds

invested overseas reaching $A99.7bn or 24% of the total by June 2001

(the USA’s share was 43%, Japan 7% and ASEAN 5%).

Secondly, there is the political relationship. The EU, as an entity, in spite

of the fact that its construction has been underway for 50 years, is still in its

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infancy. The areas of common foreign and security policy, as well as the

cooperation in the field of justice and home affairs, have been added only in

1992 by the Maastricht Treaty.

But the EU-Australia Political dialogue that takes place every six months,

under each new Presidency, is becoming an increasingly useful mechanism

to exchange views in these areas, with Europe particularly valuing

Australia’s security perceptions from its vantage point in the Asia-Pacific region.

Thirdly, our healthy bilateral relationship reflects strong similarities between

the EU and Australia. Our societies spring from similar roots and we share

common values, we both:

- support democracy, the rule of law, and respect for human rights and

fundamental freedoms;

- support peace and promote international security in accordance with the

purposes and principles of the Charter of the United Nations;

- support international efforts in the areas of non-proliferation of nuclear,

chemical and biological weapons, the non-proliferation of missile

technology and the international transfer of conventional weapons;

- pursue policies aimed at achieving a sound world economy marked by

sustained economic growth with low inflation, a high level of

employment, environmental protection, equitable social conditions and a

stable international financial system;

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- promote free market principles, improve market access in conformity

with the WTO rules, and expand, promote and strengthen the multilateral

trade system;

- help developing countries in their pursuit of sustainable development and

their efforts towards implementing political and economic reforms by

providing development assistance, broadening market access and

encouraging the efficient use of foreign assistance and national resources.

Fourthly, in addition to these shared values, the EU is well aware of the role

Australia takes as an independent medium size economy in both its

immediate region and in international fora.

Taking into account the many reasons just mentioned to underline the

importance of our relationship, we can ask whether the cooperation is

adequate and if it can be further enhanced?

In spite of this sound picture of convergence, we mainly hear about the areas

where we disagree because it makes good headlines in the press. The main

area has been for a long time agricultural support, and climate change has

been added recently. On climate change, incidentally our disagreement is

more about process than principle.

In fact, most often the positions of Australia and the EU are quite closely

aligned and we work closely together. Good examples include trade in

services, most environmental issues, governance, etc., and since we both

follow thorough, open and transparent decision-making processes, we have

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much to learn from the experiences each other in developing new best

practice policy.

As already mentioned, we have the Joint Declaration on EU-Australia

relations signed 1997, which provides the overall framework for our formal

government-to-government relationship. (Asia Document)

I know that my predecessor has pressed hard for a fully-fledged Framework

Agreement, rather than a Joint Declaration. I now believe that while such

formal aspects were perhaps useful in the conditions prevailing in the 1990s,

we have now moved on.

And I am convinced that the Joint Declaration, as an overarching

framework, is already broad enough for us to use as a hook to hang

virtually any relevant initiative. The focus should therefore be on

making best use and improving specific existing provisions and possibly

devising new actions.

Let me now look at some of the specific areas:

Science & Technology cooperation will be an important focus of today’s

discussions. This is not surprising when one considers that collectively EU

countries constitute Australia’s premier international research partner, when

measured by joint citations in scientific papers published. An increasingly

important feature of the Australian-European research cooperation is the

EC-Australia Science & Technology Agreement, which was signed in

1994 and expanded in 1999. This facilitates mutually beneficial research

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cooperation between Australia and the EU and since 1999 has involved over

$100m of joint research across a range of topics including health, global

environment issues, transport, manufacturing, agriculture and importantly

the new economy sectors of the information society and biotechnology.

As post-industrial economies, both Australia and the EU must take full

advantage of these new technologies if we are to maintain our place in the

world and the living standards of our citizens. While our traditional

industries will remain important, we must look to the new industries for our

growth.

More broadly European science & technology is becoming increasingly

integrated, driven by the increasing cost and complexity of research. This is

reflected in the European Research Area initiative and an increased

emphasis in Europe on international collaboration. In recognition of these

developments the European Union and Australia have established the Forum

for European-Australian Science and Technology cooperation

(affectionately known as FEAST) as an information and networking tool to

facilitate further collaboration between Australia and Europe, at both an EU

and member state level.

The need and benefits for research cooperation are clearly apparent. We

have some instruments in place and we have some successes. But are we

really making the best of the opportunities and if not what can we do to

improve the situation? I hope the answer to this question will be more

articulate than the inevitable request from researchers for more money, and

will also address other issues such as better models for cooperation.

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Cooperation in Education is also of importance and perhaps as yet

underdeveloped. It is an area that is of specific interest to some here in

CERC.

There have been discussions for some time on the scope for greater

cooperation in this field, with the first concrete outcome being the

announcement this year of a joint pilot exchange programme aimed at

encouraging cooperation in higher education.

This pilot project will enable postgraduate (Masters) students from the

Member States of the European Union to study in Australia, and Australian

postgraduate students to undertake study in a minimum of two EU Member

States. The pilot project will involve between 25 and 40 students from each

side, who will undertake the exchanges for a period ranging from one

semester to one year.

Last year we provided significant EU funding to establish the National

Europe Centre. Whilst this is located at the ANU in Canberra, I have been

emphasising, whenever I have had the opportunity, that this is a

NATIONAL Centre with a clear mandate, to operate across Australia, in full

cooperation with other centres. Accordingly, I see the NEC and institutions

such as yours working hand in hand.

The NEC has three main aims: to foster improved relations between

Australia and the EU and its constituent member states, candidate countries

to the EU, as well as other countries in Europe; to serve as a platform for a

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better understanding of the EU, the constituent member states and their

institutions in Australia; and to develop as a centre of academic excellence.

I am looking forward to your input on what you would like to see from

this Centre and how you envisage your engagement with the NEC. Also

what further steps should be taken to develop further education

cooperation generally.

Looking more at the business relationship, we have the treaty covering

Mutual Recognition Agreement on Conformity Assessment, signed in

1999. This is somewhat of a clumsy title and so is normally referred to as

the MRA. In short, its purpose is to reduce technical barriers to trade and

to facilitate trade by allowing conformity assessment (testing, inspection and

certification) of products traded between Australia and the EU to be

undertaken in the exporting country rather than being carried out at

destination.

In the case of Australian exporters, this means that the compliance with the

requirements and technical norms contained in the relevant EC Directives

can be established in Australia, and the CE marking applied to the product

prior to export. In this way the product can be placed on the EU market with

no further intervention by EC authorities.

Again, I believe we should be asking ourselves whether this agreement is

working to its full potential, and if not, why not and what can be

improved. Perhaps we should also be asking ourselves the question whether

we should not be looking at more ambitious steps, such as moves to

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harmonise the standards themselves, such as has largely happened in the

area of pharmaceuticals Good Manufacturing Practice?

There is also the Wine » « Agreement signed in 1994, and still being worked

on, which assists in the development of wine trade by addressing the

necessary regulatory issues required for this product.

The growth in exports in wine is an outstanding success story for

Australia. Australia has become the number one supplier to the EU of

wine, with over $A1 billion of wine exported to the EU last year.

Importantly for Australia, the expansion of the wine industry provides

opportunities for greater employment in rural areas. Addressing rural

development and rural employment is a common challenge faced by

Australia and the EU alike and one where I believe there should be greater

cooperation and sharing of experiences. Speaking of wine I should mention

that some forward looking attention should be given to olive oil, another

Mediterranean product for which I understand there have been huge

plantations in south Australia and Queensland that will come to the market

in two years time.

Finally, from the formal Treaty level agreements point of view, there is the

1982 Agreement between the Australia and the European Atomic Energy

Community (Euratom) concerning transfers of nuclear material from

Australia to Euratom. Essentially this is a safeguards agreement, ensuring

that Australian nuclear material can only be used for peaceful purposes.

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There is also a range of lower level cooperative instruments (exchange of

letters, groups and arrangements) across a range of sectors, involving

various levels of intensity of commitments. These include: agriculture,

energy, environment, industry, development, information economy and

consumer protection.

I would be interested to hear your views on where any of these

instruments of cooperation should be intensified and the other areas

where an improved bilateral dialogue would enhance our relationship.

I would now like to conclude these considerations by briefly highlighting

some of the major developments that will impact on our future

relationship:

1. We had the successful launch of the euro in January this year. The euro

is extremely important in its own right, both as a symbol of integration and

for the tangible benefits it will bring such as reduced transaction costs and

increased transparency. Its introduction should also be viewed in the overall

context of an ongoing process of further deepening and integrating the single

European market.

2. Enlargement of the EU will bring many challenges for the European

Union and opportunities for its partners. I have already highlighted the

opportunity of a larger single market of some 500 million affluent

consumers - potentially all dealing with the same set of rules and all having

a single currency. Enlargement will also bring with it pressure for continued

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reform and evolution of EU policies and programmes, notably the CAP, to

ensure their sustainability in budgetary terms.

3. In this respect, and particularly given the Agricultural focus on

agricultural matters, the Mid Term Review report of Agenda 2000 released

on 10 July in Brussels. This, in spite of not very favourable political

conditions, included ambitious proposals for further reorientation of support

away from market support to much less trade distorting support for rural

development, food safety, environment and other social values.

4. The Doha Declaration has opened new negotiations in WTO, during

which practically all trade issues will be on the table.

5. Still linked to enlargement, is the review of EU structures and

institutions. Currently we are at the stage where a Convention formed last

December is preparing for an Intergovernmental Conference in 2004. This

IGC is expected to introduce the changes to the existing Treaties that are

considered necessary to accommodate the enlarged Union. These may

include a reorganisation and simplification of the existing texts, a new basic

treaty which would in essence be a Constitution for the EU, and make other

institutional changes, including perhaps changing the present system of a

rotating Council presidency, the number of Commissioners, and member

state voting rights.

6. Over time we can expect further developments in the second and third

pillars of the EU, namely: common foreign and security policy and home

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affairs and justice. This will mean that the European Union as an entity will

become an even more important player in addressing global strategic issues.

7. In addition to agricultural issues, let me mention another area of

potential friction that has so far been somewhat dormant. It is the

attitude towards multilateral solutions to international problems.

Australia has recently tended to side with the United States. In its position

of uncontested single major world power, the US tends to adopt a

philosophy of anti-multilateralism, objecting to international treaties,

perceived as attempts to curtail the US freedom of action. At the basis of

this approach, there is the American idea of “exceptionalism”, while Europe,

because of its very essence, places far more reliance on multilateral rules and

institutions than the US.

This is an area of possible turbulence in our relations on which some

forward-looking reflection would appear justified.

This has been a very brief review of some of the issues underpinning the

European-Australian relationship, hoping that in spite of its little analytical

content, will provide some perspective for today’s proceedings.

Let me stop here.

In conclusion, I would like to congratulate the organisers and, in particular,

Professor Philomena Murray, for picking such a relevant and timely topic

for discussion. I also wish each and every one of you that the debates during

this workshop will be very fruitful, assuring you that the points that will be

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discussed today, and your conclusions, will be carefully taken into

consideration.

Thank you.