Trade between Australia and the EU, 1990 - 2015

The geographical composition of the EU has changed dramatically since 1989 as the enlargements of 1995 (Austria, Sweden and Finland) and 2004-13 (Eastern European countries plus Cyprus and Malta) more than doubled the number of EU member countries. This paper reviews the level, direction and composition of Australian trade with EU member countries from 1990 to 2015. Australia-EU trade remains dominated by relations with the original six member countries and the UK. A striking feature has been the rapid increase in trade between Australia and the Eastern European countries that joined the EU in 2004. Analysis of the new EU members' trade with Australia highlights intra-EU regional value chains as a pathway by which the new EU members rapidly became exporters of manufactured goods such as cars. Thus, the 2004 EU enlargement benefited Australia by providing cars that fitted many Australian consumers' preferences and budgets, and rapid economic growth in the Eastern European economies provided markets for Australian exports. Part of the reason why EU countries have remained attractive trade partners is that the costs of international trade between Australia and EU countries have remained low relative to trade costs between Australia and other countries; the level and determinants of bilateral trade costs are analyzed using disaggregated ABS data.