Euro-vision: Could Australia join the European Union? One key minister is open to it

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When Donald Trump announced his so-called Liberation Day tariffs on just about every country on earth, while excepting Russia, of course, I asked an eminent economist how bad the damage would be. Warwick McKibbin told me that it certainly wouldn’t be helpful because it’d increase global inflation. Which everyone except Trump seemed to understand.

European Commission President Ursula von der Leyen with Prime Minister Anthony Albanese in Canberra in March 2026.Alex EllinghausenBut it wouldn’t be calamitous for the world economy, said McKibbin, a former Reserve Bank board member and ANU professor.

Why not? Because Trump’s domineering share of global news noise is not matched by America’s material heft in the world economy. The US accounted for only 15 per cent of global trade; the other 85 per cent would simply restructure itself around the US, McKibbin predicted.

He was right. It’s happening. For example, Canada, suffering brutal trade hostility from Trump, is pressing the European Union for much deeper economic ties.

Prime Minister Mark Carney is building Canada’s post-American future. Perhaps even creating a new category of EU membership with Canada as its first “associate member”. The Europeans are open to the idea, according to a weekend report by The Wall Street Journal.

Australia concluded a hard-won trade deal with the EU just six months ago. It’s so fresh that it hasn’t yet been ratified. And might yet be struck down by the Coalition in a parliamentary vote.

The deal is not a champagne-class deal. Use of that regional name would remain restricted to French producers and not every trade barrier would be dismantled. But it is prosecco-level deal. Australian makers would become the only ones in the world outside Italy to be permitted to use the sweet sparkling name. And it would abolish tariffs on 98 per cent of categories of Australian exports to the EU. For Australian shoppers, European chocolate, wine and cars would become cheaper if the deal is ratified.

Minister for Trade Don Farrell (centre) with von der Leyen and Anthony Albanese in Canberra.Alex EllinghausenYet Canberra is following Carney’s progress closely. And is open to pursuing something similar with the EU. “We are on the same page,” Australia’s trade minister, Don Farrell, tells me. “We will take great interest in what Carney does.”

The Canadian leader “has instructed his special envoy to Europe to scope out the most ambitious possibilities short of full membership in the EU or its common market”, the WSJ reported.

“Wouldn’t it be lovely if Canada was the 28th state of the European Union rather than the 51st state of the United States?” posed Finnish President Alexander Stubb, an interlocutor of Carney’s.

The Journal reported that the Canadian-EU talks so far encompass trade, investment, defence, scientific collaboration, joint satellite networks, preferential visa-free access and new fibre-optic underwater cables to connect Canada with the EU’s 27 member nations.

Farrell says he’s open to all possibilities in potential new arrangements with the EU, with the exception of extra fibre-optic cables; it’d be a stretch.

“The world,” says Farrell, “is dividing into protectionists and free traders. It’s indisputable that Australian prosperity of the last 50 years has all been about our engagement with the world.”

Europe, like Canada, is attempting to develop greater independence from the US. Politically, militarily, economically.

Canadian Prime Minister Mark Carney is attempting to develop greater independence from the US.Justin Tang/The Canadian Press via APPoland’s prime minister, Donald Tusk, captured the EU’s vulnerability last year when he said it was an absurdity that “500 million Europeans are asking 300 million Americans to defend them against 140 million Russians”.

As a bloc, the EU’s economy is the world’s second biggest. It’s smaller than America’s but, at $US23 trillion ($32.3 trillion) annually, bigger than China’s. And about nine times the size of Russia’s.

It’s not that Trump’s tariffs have devastated Australian trade. Although the American president put 50 per cent tariffs on Australian steel and aluminium and 12.5 per cent on just about everything else, Australian exports to the US have flourished.

Farrell calls it a paradox. The value of all Australia’s exports to the US has surged by 67 per cent in the year and a half since Trump’s Liberation Day.

The paradox is explained by two factors. One is that Trump put even higher tariffs on most of Australia’s competitors in the US market. The other is that there’s been a price boom in Australia’s three most valuable exports to America – beef, copper and gold. These three enjoy tariff-free access to the US market.

Incidentally, the stated objective of Trump’s tariffs was to reduce the US trade deficit. The world has been “raping” America for decades, he thundered. The net effect so far? The US trade deficit in 2024, the year before the Trump tariffs, was $US903 billion. Last year it was $US901 billion. For all the damage he’s done to America’s alliances around the world, he’s made no meaningful difference to its trade deficit.

Ill-advised? Quixotic? Stupid? Guilty on all charges.

Nonetheless, we shouldn’t expect that the next president magically will waive the tariffs. Farrell points out that, when Trump was replaced by the Democrat Joe Biden in 2020, Biden kept the Trump tariffs in place. Governments easily become dependent on the revenue they raise for the treasury.

“I’m not confident that a Democrat president will reverse the tariffs,” Farrell says. “So we are stuck with them. And that makes the EU even more important to us.”

But before Australia can negotiate new deals with the EU, it must implement the one struck in March. The potential gain for Australian exporters would be an initial $8 billion a year, according to EU estimates. That’s forecast to rise to $30 billion a year within a decade, on the EU’s numbers.

That anticipated growth would have a lot to do with Australian critical mineral exports to Europe, says Farrell. Under the pending deal, Australian rare earths and critical minerals would enter the EU tariff-free, whereas those from China are taxed at 13 per cent.

Australian trade expert Tim Harcourt, a professor at UTS, says that Farrell has done a better job of opening markets for Australian exporters than any trade minister in decades. The Albanese government has struck new trade liberalisation deals with India, Britain and the UAE, as well.

Ratifying the EU pact would be a precondition to better Australia-Europe relations overall, he says, because it would break the 60-year-long voodoo that Europe’s farm protectionism has imposed on Australia.

Harcourt upset European officials years ago by saying that it’d be cheaper to fly all France’s cows around the world business class – not cattle class – than the cost of Europe’s lavish subsidies to unprofitable farmers.

But the Coalition, traditionally champions of free trade, are skittish. The EU deal does improve farm access to Europe, but not by as much as the Nationals were demanding. It seems that deal will be ratified by all 27 EU nations, but could still be scuttled in Canberra by the Coalition in its new identity as a right-wing populist party.

If Trump, arch protectionist, were a drinker, he’d raise a glass of champagne to that outcome.

Peter Hartcher is political and international editor. He writes on federal politics each Saturday.

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