Europe is the world’s largest single trading bloc when it is considered as a single unit. Europe consists of some of the most advanced and dynamic economies, encompassing the European Union’s (EU) twenty-seven members. Europe was no exception to the global financial meltdown and was hit hard in 2009, but began a steady recovery in 2013. On November 15, 2015, the process towards the realization of a high quality and comprehensive Free Trade Agreement was agreed on by the Australian Prime Minister, the President of the European Commission, and the President of the European Council.
The EU is Australia’s second largest trading partner and the largest source of foreign investment. In the year 2014, the European Union’s Foreign Direct Investment (FDI) in Australia was valued at $169.6 billion while Australia’s FDI in the European Union was valued at $83.5 billion. Two-way goods and services trade between the EU and Australia was worth $83.9 billion. The EU forms Australia’s biggest services export market, valued at $10 billion in the financial year 2014.
Main Export Sectors
Australia’s trade policy is geared towards increasing job opportunities, getting a fair deal in the international market for an overall increase in economic activity. The EU and Australia share almost-identical goals in regards to the current international trade environment such as trade in services, liberalization of trade in green products and others. The EU and Australia run their trade and economic relations under the guidance of the October 2008 EU-Australia Partnership framework. Apart from the cooperation of trade in services, a multilateral trade system and investment issue, the framework aims to reduce barriers in order to facilitate trade.
Australia’s Exports to the UK
In Europe, the United Kingdom (UK) is Australia’s top export market as per the 2014 figures. The total exports of goods and services saw the UK as the 8th largest export market for Australia. This represented 37.4% of Australia’s total exports to the European Union. No other EU nation featured in Australia’s top fifteen export markets.
For services exports, the UK was only behind China and the USA as the third largest export market with $6.4 billion in 2014. The figure represent 46.1% of Australia’s overall exports to the EU.
For goods exports, the UK was the biggest market in the EU for Australian products with a total trade of $3.8 billion in 2014. The UK was ranked 12th largest, with the Netherlands and Germany at 18th and 19th respectively. The UK total share of Australian goods exports to the European Union was 30.4%.
Australia’s Exports to Germany
Australia’s major export products to Germany are gold coin, legal tender coins, coal, precious metals ores, oleaginous fruits and oil seeds. Major services exports are transport and personal travel. Other major exports to Germany include silver, platinum, electrical circuit equipment, medicaments, pharmaceutical products and measuring and analysis equipment.
Belgium and Luxembourg
Belgium is an important export market for Australian steel, coal, copper and other metal ores. Wool, gems, pearls, alcoholic beverages and confidential items such as diamonds are also major export items from Australia to Belgium and Luxembourg.
Australia has an abundance of natural resources. Australia is, therefore, placed to be an efficient and reliable supplier of energy to Europe for many years. A few important Australian exports to the EU are medicines and wines. Also, the European Union Services market especially in the tourism and education sector is a huge market for Australian service providers. Product niches include the beverage and food industries.
How to Export to Europe from Australia
Exporting goods and services from Australia can increase your turnover and profits as well as help you grow into new, international markets. Although there are various challenges with exports and international trade, there is plenty of information to help your expansion go smoothly.
Explore all resources available to you. There is plenty of information and downloadable content on the Austrade website to help you cover the essential areas. These include:
- Getting ready for export
- Creating an export strategy
- Carrying out market research
- Pricing your exports
- How to market while exporting
- How to handle freight and logistics
You should spend time studying the resources in detail so as to know the nuances of international trade.
There are many areas to consider when it comes to international trade, such as the regulations that must be followed and the costs that you will need to pay. Having the capacity, ability, resources, and commitment to pursue exporting outside Australia is vital to you and your business. Some areas to consider are:
- Australia’s rules and regulations of international trade
- Tariffs, taxes and the rules of imports for the market you’re exporting to
- The responsibility between you and your importers
- The costs of modifying products for the new market
Top Five Tips
Establishing Strong Foundations
Having a clear idea of what you want to achieve by exporting gives you the best chance of success. This could be raising your production volumes, accessing new markets, or gaining a competitive advantage. Visiting your proposed target is a sure way of getting first hand information on market and economic conditions, demographics, competition and business culture.
Consider your finances
Understanding the costs of exporting enables you to make informed decisions on whether your business is ready for an export project. The main challenges in Australia are:
- You need a long cash flow
- It’s difficult to collect debts as you are far away from your customers
- You are exposed to foreign exchange risks as you are paid in foreign currencies, which can impact your profit margins.
- Access to finance can be difficult because Australian banks don’t easily accept overseas assets as loan security.
- Initial costs of launching exports might take longer to recover and this might have an impact on your cash-flow and working capital.
Become an Expert
Not having the relevant knowhow is the primary reason many fail in the export business. To become an expert, you need to learn the issues such as how markets run, industrial relations practices and policies, labor regulations and tax provisions. Familiarize yourself with the standard export documents. Also, take time to understand the culture, business practices, languages, and every relevant detail about the country you’re exporting to.
Planning is Key
Always put together a strong export strategy from the market segment to the marketing and branding segment. A good plan will help you to have a good idea of cost estimates, the best and worst case scenarios and also help you control emerging financial challenges.
Understand the Value of Advice
Learn all you can from the relevant trade bodies and organizations.