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José Manuel Durão Barroso

President of the European Commission

Old allies, new opportunities:

EU – Australia business links towards 2020

Europe Australian Business Council Oration

Sydney, 6 September 2011

Good afternoon ladies and gentlemen, or perhaps that should be, "G'Day."1

It is a great pleasure to join you today in the magnificent city of Sydney. After enjoying the Bondi-to-Bronte walk and time on the Harbour, it is hard to admit that I have travelled from the Brussels summer to the Australian winter without noticing the difference!

That is just one small example of the regard we Europeans have for the Australian way of life. The energy and seemingly limitless future that is apparent to every visitor, symbolises why the European Union wants to strengthen its links with an essential global partner like Australia.

Given that a Sydney taxi driver recently asked Ambassador Brendan Nelson why he moved to Brussels to work with a Union (pause)… perhaps we should also step up our communications here!

In all seriousness, ladies and gentlemen, this visit reflects the European Union's wish to bring forward a new chapter in our relationship. We want to build not only on our historical ties and shared global interests, but also our economic relationship. And I recognise that the Europe Australia Business Council has played an important role in fostering business links over the past 10 years.

Reflecting on the basis of our relationship - the values that anchor our societies and tie us together - it strikes me that your sense of egalitarianism and mateship is a wonderful complement to what Europeans mean by solidarity. We are committed both to opportunity and to looking out for each other.

It further strikes me that Australia has managed to deliver something very commendable in economic and business terms: consistent reform. These reforms in recent decades have prepared Australia to meet the challenges of globalisation head-on. Yet you have done this in a way that ensures important social protections, and without carrying a heavy debt burden. I congratulate you for that, and I know that many in the room today have played leading roles in achieving these outcomes.

The European Union too is something of an economic miracle when you consider our continent's history of conflict and its division through the Cold War.

Today we constitute the world's largest market and trading bloc and we often set the global pace in a range of fields that directly affect Australia's business interests. I am thinking here of fields as diverse as competition policy, broadband, privacy regulation and industrial standards.

It is perhaps the nuances of this single market and how the European Union is responding to the ongoing crisis that are of most interest to you today.

Our governance can sometimes confuse even close partners. But as one recent American ambassador remarked, "there is not yet a single phone number, however the EU is the switchboard."

Let me use another local comparison to explain why change and decisions take time at the European Union.

Imagine that everyone at COAG – the Council of Australian Governments - spoke a different language. Imagine they came from 27 countries and hundreds of political parties (instead of 8 governments and two parties). Imagine their populations ranged from the equivalent of Alice Springs to Sydney - that is the range of differently sized countries we deal with. It would not be easy to get that group to agree on 100,000 pages of legislation. But that is what the European Union has managed to do.

Today our market has more consumers than the US, Japan and Canada combined, so its effects do tend to extend beyond our borders. Take for example a standard like the GSM standard you use on your mobile phones. This European standard is one of thousands that enable barrier-free trade and allow us to avoid regulation. These standards are often taken up globally. So it affects Australian businesses even if they are not exporting to Europe.

You can also see our interest in fully expanding our single market into areas such as energy and transport. This means barrier-free business, open to all comers. It is a set of opportunities I am keen for Australian businesses to take advantage of.

Yet while we have been able to spread rapidly the benefits of our single market – from the edges of the Arctic to the edges of Africa and Asia – problems have also spread since 2008.

Facing our challenges

The economic and financial crisis has exposed deficiencies, both at global level and in Europe. In response the European Union is tackling its challenges head-on and with honesty and is also contributing to shape a sounder international system.

We are a union of democracies, a union of democratic states, that have decided to pool their sovereignty and create common institutions. We are not a super-state, so of course change does not happen according to a market timetable. But these changes are about more than markets and they are, indeed, happening. In my view the reforms we are undertaking are considerably more ambitious than some like to portray them.

So I urge you to remember the underlying resilience of the European Union, which has been our hallmark for decades.

We have assistance packages in place for the worst-affected nations today. We have approved medium-term funding facilities to prevent future negative spirals. And over the long term we are developing the governance, including severe and enforceable penalties, to address the underlying national budget problems. Together with Australia and other nations in the G20 we are also strengthening financial regulation and banking sector resilience. This is in addition to our "Europe 2020" policy programme aimed at increasing our competitiveness.

Even so, some like to ask these days "will the Euro and the EU survive?" My plain and direct answer is "yes!" You can bet your money on that and I guarantee you don’t need to take insurance!

The Eurozone has been a force for good in Europe and the world. And the fundamental point remains that the European Union works. It has worked for sixty years as a driver of peace and prosperity and necessary compromise. If you look objectively at global trends the European Union is the most advanced and most successful experiment of dealing with global problems in a coordinated manner. No country is big enough – not even continental countries as Australia – to deal with today’s challenges on its own.

European Union investment in Australia

If we drill down to the company level, there is further encouraging news for those dealing with the European Union and its companies.

Europeans have a long history of investment in Australia. Our companies are the leading direct investors in Australia, with $A131.6bn invested. Majority EU owned-companies have directly created around 500,000 jobs. Taking into account multiplier effects, our investments support more than 1.4 million jobs. All in all, more than 2,400 EU companies have a presence in Australia – including many EABC members. That is a level of success we would love to see matched by Australian investment in the EU.

It is not just well-known names like Thales, ING, Accor, Moet Hennessy and Pernod Ricard, who make an impact. Lower profile contributors like ISS in facilities services and Acciona in clean energy and infrastructure are also making their mark.

The example of Thales is instructive about where our relationship has come from and where it is headed. Thales has been operating on this continent since the 19th century and is now one of Australia's leaders in research and development. It supplies everything from the Australian Army's main rifle and infantry vehicle through to the world-leading EUROCAT air traffic management system developed in Melbourne.

I am also pleased that alongside government, Australian and European companies are allies in the trade liberalisation cause. There will be much work required in the coming years to progress this cause.

Gone are the days of Fortress Europe and Fortress Australia, where disputes over agriculture weighed heavily on the relationship. In part this is because Australia's economy is composed very differently to the 1970s. But it is also true that well over 90% of the EU's support mechanisms are now decoupled from production and are non-trade distorting. In 2010, export subsidies accounted for less than 1 per cent of the Common Agricultural Policy budget. Today there are new trends to take account of. Australian trade with Asian countries, China in particular, is obviously growing more rapidly that with Europe. However, we do not regard Asia's success or Australia's involvement in the region as a zero-sum game. For the EU's part, despite growing competition, we expect that European companies will continue to succeed in Australia's highest added value markets, such as high technology, green technology, medical products and ICT. We certainly hope that investments in research will cross-fertilise trade in both directions in these fields.

We hope also that policies such the Australian Government's Clean Energy Plan could, for example, help reverse the decline in Australian manufacturing sales into Europe.

Climate and energy

Speaking of clean energy, let me say that our experience in Europe is that pricing carbon increases the efficiency of markets. As a market mechanism it can deliver economic, as well as environmental, benefits. In particular it can boost medium and long-term competitiveness and improve the investment mindset.

So I don’t see emissions reductions as conflicting with business success. Indeed, with The Economist reporting that 19 new coal mines are due to open in Australia, and other recent activity in the sector, I think we can also see that there remains a future for traditional energy sources in Australia. With this in mind we must deal with the scientific fact that we need to reduce emissions.

Climate action in Europe is something that transcends ideological divides. To us it is clear that all emitters need to take action. That is why we welcome Australia's efforts to price and trade carbon. It is for Australia to decide the mechanisms but the goal is fundamentally correct. And in particular we hope to develop the appropriate linkages between EU and Australian systems.

Let me also offer the perspective that systemic action to reduce emissions is not a case of Australia leaping ahead of the world. It was, after all, New South Wales that introduced the world's first carbon trading scheme in 2003: the still successful Greenhouse Gas Reduction Scheme, which set a limit on carbon emissions by electricity retailers. Going back further still to 1991, the Swedish and Danish governments imposed a carbon tax. The Finns followed with other market mechanisms. These countries are all in the list of world's top innovators, and high performing economies. Jobs were not lost, economies did not collapse.

Others from China to large parts of the United States are building momentum for carbon pricing and trading. Australia is joining this effort at the right moment.

What does the future hold?

More broadly, the European Union and Australia share an increasing range of interests in addition to our need to face global challenges together.

The next step in recognising this is the Treaty-level Framework Agreement that is supported by both the Australian Government and the European Commission.

In terms of bilateral trade, I hope to see a growing and balanced relationship.

Let me conclude by assuring you of two things. Firstly, the European Union is not going away. Every few years an event or crisis sets off claims about the EU's demise, but the cynics have never been proven right. We are here to stay as a global economic power and we are open for business. Secondly, we know that you want the European Commission to continue to help get Europe's economies back on track. We know also the importance of Europe providing a stable and coherent environment for business, and for the investments of individual Australians.

So let us now turn to the real work of opening market doors, of turning research corners, and generally unlocking the potential of our relationship.

Together the members of the EABC, the Australian Government and European Commission can unlock that potential. Let's match the huge affinity our peoples share, by delivering a new generation of opportunity and wealth for both Australia and the European Union.

1 :

This is a colloquial Australian greeting made famous by "Crocodile Dundee", short for "good day"

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