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Murrumbateman, NSW 2582, Australia
The economic relationship between Australia and the European Union is one of significant depth and growing ambition. The EU as a bloc is among Australia’s largest sources of foreign investment, and Europe constitutes an important market for Australian exports of minerals, agricultural goods and services. In 2023, the stock of EU foreign direct investment in Australia was reported at $220.8 billion AUD while Australia’s investment stock in the EU stood at $45.3 billion. Two-way trade in goods between Australia and the EU reached approximately $88.8 billion in 2024, with the EU registering a goods trade surplus of about $50.2 billion. Services trade also plays an important role, with the EU recording services trade surplus of $32.2 billion. These headline figures reflect a relationship built on strong capital flows, complementary comparative advantages and active efforts to expand economic collaboration.
Australia and the EU are actively pursuing a Free Trade Agreement (FTA), which remains under negotiation. Australia’s objective is to secure an ambitious and comprehensive FTA that would reduce or eliminate tariffs, address non-tariff barriers, promote services access, investment liberalisation and regulatory coherence. Among the significant proposed clauses are provisions for mutual recognition of professional qualifications, commitments on telecommunications, rules to ensure the free flow of capital in relation to investment, and protection for intellectual property while safeguarding Australia’s pharmaceutical system. A contentious feature has been geographical indications (GIs), where the EU maintains strong protections for names such as “Prosecco” or “Parmesan.” Australia seeks a consultative approach that would not unduly restrict Australian producers.
In parallel, the two sides maintain a Framework Agreement signed in 2017, which provides a structure for ongoing dialogue on trade, regulatory cooperation, agricultural and sanitary standards, investment policy, and sectoral exchanges. The Framework commits Australia and the EU to exchange views on bilateral and multilateral trade developments, and to convene dialogues in areas like agriculture and standards.
On multilateral platforms, both Australia and the European Union are active members of the World Trade Organization (WTO), where they collaborate to uphold an open, rules-based global trading system. They also work closely within the Organisation for Economic Co-operation and Development (OECD), which promotes best practices in economic governance, investment policy, and trade liberalisation. Both are parties to the G20, a leading forum for global economic coordination that addresses issues from financial stability to sustainable growth
If the Australia-EU FTA is realised, it could anchor the relationship in stronger rules and give Australian exporters more predictability in accessing European markets, while encouraging deeper inbound investment and regulatory alignment.
The EU is ranked as Australia's 3rd largest trade partner, while Australia is ranked as the EU's 24th largest partner in terms of two-way trade.
On goods trade, the EU runs a substantial surplus against Australia. In 2024, EU exports to Australia amounted to about $69,572 million, while EU imports from Australia were about $19,275 million, yielding an EU goods surplus of approximately $50,252 million. That pattern has held over recent years. In services trade, the EU also records a surplus: in 2023, EU services exports to Australia exceeded imports by $32.2 billion. Overall the balance is tilted in favour of the EU, reflecting the strength of European high-value manufactured and services exports to Australia.
Australian exports to the EU are dominated by mineral products and agricultural/vegetable products. The comparative advantage of Australia in minerals (iron ore, coal, critical minerals) means that the EU sources raw and semi-processed mineral inputs from Australia. Export of agricultural goods into the EU is more constrained by stringent EU sanitary, phytosanitary, quota and GI rules. Some Australian producers find it difficult to penetrate EU markets for beef, lamb, dairy or sugar, because the EU applies high tariff barriers, quotas or GI protections. Hence, growth in agricultural exports to Europe has been limited compared to potential in other markets.
Services constitute roughly one-third of the two-way trade relationship. Australian services exporters (for example in education, professional, financial, ICT) see opportunities in Europe, subject to regulatory and mobility constraints. The FTA negotiation aims to ‘lock in’ access for Australian services, reduce behind-the-border barriers, and allow mutual recognition of professional qualifications. However, Australia faces stiff competition from EU firms and must surmount regulatory fragmentation across EU member states.
European exports to Australia comprise machinery and transport equipment, chemicals, and high-value manufactured goods. These goods benefit from advanced European engineering, technological sophistication and branding. The EU firms in many cases supply capital equipment, industrial machinery, automotive components, pharmaceuticals and specialty chemicals to the Australian market.
Australia imports a range of services from the EU, including professional services, insurance, financial services, ICT and potentially tourism and transport. The EU surplus in services trade indicates that European firms have strong competitiveness in these sectors.
Because the EU offers advanced services, Australia is accordingly a natural importer, and the negotiation of services chapters in any FTA is closely watched by Australian professional services exporters seeking fair access.
Australia and the EU maintain robust two-way investment links. In 2023 the EU FDI stock in Australia was $220.6 while the Australian investment stock in the EU was $45.3 billion. Among Australia’s outbound investments, the EU (alongside the US and UK) remains one of the dominant destinations, accounting for around 62 percent of Australian investment abroad in 2023.
On the inbound side, EU-majority owned businesses in Australia generate substantial economic activity. In 2016, EU-owned firms in Australia had sales of approximately $233 billion and employed nearly 295,000 persons. EU investors are particularly active in sectors such as renewables, infrastructure, transport, advanced manufacturing and chemicals.
Regulatory trends also matter. In 2024 the Australian Government introduced foreign investment reforms designed to streamline and improve transparency in the Foreign Investment Review Board (FIRB) process. This may help reduce friction for EU investors seeking projects in Australia. On the EU side, any FTA will aim to guarantee free flow of capital related to investment and avoid residence or citizenship requirements on senior representatives of companies established in each other’s markets.
Overall, the investment relationship is characterised by long-term institutional capital flows, stable holdings, strategic acquisitions, and the promise of further liberalisation if regulatory and treaty constraints can be managed.
The Australia–EU trade and investment relationship is substantial, intricate and evolving. The EU maintains a persistent goods and services surplus, underpinned by Europe’s strength in manufacturing, technology and services. Australia exports heavily in minerals and select agricultural goods, while its services and high-value export potential remain constrained by regulatory barriers. Investment flows are deep in both directions, with Australian institutional capital increasingly targeting European real assets and EU firms playing a key role in Australia’s infrastructure and advanced sectors.
The pending Australia-EU FTA, if successfully concluded, offers the potential to shape the future trajectory: by locking in preferential access, reducing regulatory frictions, and securing investment protections. The existing 2017 Framework Agreement already underpins cooperation in standards, trade policy dialogue and sectoral exchange.
Readers interested in diving deeper may consult the DFAT website on the Australia-EU FTA and the European Commission’s trade factsheet on Australia. For investment data, refer to Australia’s International Investment Position publications from the Australian Bureau of Statistics and foreign investment statistics by DFAT.
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