Australian and Spainish Bilateral Economic and Trade Relationship

Bilateral relations between Australia and Spain are progressively expanding. Spain offers important potential as a partner for Australia, both in the business sphere and in international relations (Smith 2010). While Spain's foreign policy has traditionally focused on the European Union (EU), the Mediterranean and Latin America, it is now broadening its diplomatic and commercial presence in the Asia-Pacific. In recent years, the Australian and Spanish Governments have reinforced growing trade and investment links by evolving policy dialogue on areas of shared interests (Downer 2009).
Australia as well makes an excellent trade and investment partner for Spain in the Asia-Pacific region. Australia is a stable parliamentary democracy. The society is open and transparent, and the rule of law, so fundamental for sound business operations, underpins the Australian political and economic arrangements. Australia offers a safe environment in which to make business. Private property rights are secure. The courts have judicial independence. The public services are effective and efficient. Strong and mature national institutions are a key factor behind the favourable business perception of Australia (A G, Department of foreign affairs and trade 2012)
The need to be a modern economy has long been recognised by Australian policy makers. Australia certainly has world famous agricultural and mining industries, but it also has a sophisticated services and manufacturing base. Indeed, services and manufactures now account for almost half the total value of the Australian exports. And it has an strong communication systems, logistics and transportation networks, as well as very high levels of computer, Internet and e-commerce usage(A G, Department of foreign affairs and trade 2012).
Australia's long history of microeconomic and trade policy reform has yielded strong benefits for it’s economy. It has contributed to growing trade activity and increasing foreign investment into the Australian economy (Dawson 2009). Total foreign investment in Australia reached $814 billion in the financial year 2010-2011, a rise of 13% over the previous financial year (ABS 2012). Australia has gone further than most countries in eliminating tariff and non-tariff barriers. Australia had recorded a trade surplus of almost 12.000 million Australian dollars during the period January to November 2011. The most recent IMF forecasts predict that Australia will be the second fastest growing developed economy in 2012, with GDP growth of 3.3% (A G, Department of foreign affairs and trade 2012).

Although the economic interests of these two countries are tied to a secure and wealthy global environment, naturally Australia and Spain have different economic exposures depending on theirs strategic and commercial links. Australia is, of course, located in the Asia-Pacific and has developed strong and constructive relationships with the region, just as Spain has done in Europe or Latin-America. Also like Spain, Australia has a long history of constructive engagement with emerging economies and, in Australia's case, especially with economies in the Asia-Pacific region (Downer 2009).
The Spanish Government's Asia Pacific Action Plan set out practical areas for increased Spanish engagement in the Asia-Pacific region. Under the plan, Spain opened a branch of the Cervantes Institute in Sydney in 2009, a development which will make a major contribution to expand knowledge in Australia of modern Spain, its language and culture (Ibergoal 2012). In June 2009, Australia and Spain signed a Joint Action Plan, which provides a framework for current and future collaboration on global, regional and bilateral issues.
In recent decades, the Spanish economy has attracted significant levels of foreign capital. While services, especially tourism, continue to play an important role in the economy, there has been strong growth in manufacturing, including textiles and apparel, motor vehicles, shipbuilding, machinery and pharmaceuticals. Spain remains a significant producer of agricultural products, including grain, poultry, olives and olive oil, grapes and wine. Fishing is the primary industry and Spain's fishing fleet is one of the largest in the world (A G, Department of foreign affairs and trade 2012).
The Spanish economy has been hit hard by the late 2007 collapse of a speculative housing boom as well as by the global financial crisis. Unemployment (a long-term challenge for Spain) has soared to nearly 26 per cent, a figure that is not expected to decrease significantly in the short term. Youth unemployment has reached 45 per cent. Spain's banking sector has however proved to be one of the more resistant sectors of the economy to date, due largely to the government's close financial regulation (Ibergoal 2012).
The outside world has watched with admiration as Spain diversified its economy during the last ten years or so, moving from a basically agricultural economy to one increasingly producing manufactures and providing services. This economic trajectory will, of course, prove valuable to Spain as the impact of enlargement shifts the European Union's income transfers away from Spain, eastwards to the accession countries. Spain is, absolutely, one of the success stories of the European Union. The story of modern Spain is one of enormously impressive progress in building up a stable democracy, and putting in place measures that have driven the rapid rise in living standards since it joined the European Union in 1986 (Downer 2009).

During 2010-11, Spain was Australia's 26th largest merchandise trading partner. Trade in 2010-11 reached around $2.56 billion. Australian merchandise exports to Spain were about $861 million (ABS 2012). Australian export successes include coal, zinc ores and concentrates, nickel and paper. Potential demand exists for Australian goods and services across a wide range of sectors. Australian imports from Spain in 2010–11 stood at around $1.7 billion, with the biggest import items being medicaments. Other Australian imports from Spain include goods vehicles, rubber tyres, treads and tubes, and vegetable oils (especially olive oil) and fats (A G, Department of foreign affairs and trade).
Spain's technology and industry achievements in renewable energies make it an attractive partner for Australia. Spanish firms have won contracts to build renewable resource infrastructure, including Natural Gas Fenosa and Acciona with investments in windfarms (Australian trade commission 2009). Spanish infrastructure companies are also significant players in a number of major projects in Australia. Sacyr Vallehermoso and Tecnicas Reunidas, in alliance with the Australian engineering company Worley Parsons, spearheaded entry into the Australian water sector in 2008 with a contract to build a desalination plant in Perth. Acciona followed with a $1.8 billion contract for a desalination plant in Adelaide. Acciona is also leading the consortium selected to build the $1.5 billion Legacy Way tunnel in Brisbane (Smith 2010).
Several Australian developers have invested in projects in Spain. The Australian geothermal company Petratherm is advancing its Madrid Geothermal District Heating plan with the Spanish and Madrid regional governments, and Berkeley Resources is proceeding with uranium exploration in Salamanca (Smith 2010). Worley Parsons is an active partner to Spanish companies in solar projects in the Iberian Peninsula and North Africa, and Bovis Lend Lease has managed major projects in Spain in partnership with Spanish infrastructure players, including construction of the Majadahonda Hospital and Barcelona's new Terminal of the airport (Australian trade commission 2009).
While the level of trade between Australia and Spain has nearly doubled in the last ten years, there is still plenty of room to improve even more. And the same applies to investment levels (Dawson 2009). Presently, Spanish foreign direct investment in Australia is concentrated in the agribusiness, hospitality and real estate sectors. The reality is that Australia and Spain have more in common than is frequently realised. Significantly, they have adopted similar economic tactics over recent years. Each of these countries has outpaced most other developed economies since the mid-1990s (Ibergoal 2012).
The Australia-Spain Business Association is headquartered in Madrid with branches in Barcelona and La Coruña (Galicia). The Spanish Government and Catalan regional Government maintain trade promotion offices in Sydney and Melbourne, where there is also an active Spanish Chamber of Commerce. Austrade has a resident Trade Commissioner in Madrid and Barcelona, and offers export assistance to Australian firms (Smith 2010).

Both Australia and Spain have sustained sound economic management and policies that help to explain why they have been doing very well. Both countries know that countries, which minimise inefficiencies and inflexibilities in their economies, stand to minimise the risks essential in their exposure to the global economy, and to maximise the benefits. Australia and Spain, in fact, have a lot in common: both are stable, constitutional democracies; they are united with their allies in the war against terrorism; they share a common understanding of the policies that are needed to be economically effective in the modern world (Australian Embassy 2012). Their people to people links are growing, and the existence of a sizeable Spanish community in Australia is a strong testimony to that.

References:
Australian Bureau of Statistics 2012, International Trade in Goods and Services, Australia, Feb 2012, viewed 24 April 2012, http://www.abs.gov.au/ausstats/abs@.nsf/mf/5368.0
Australian Government Department of Foreign Affairs and Trade 2012, Spain Country Brief, March 201, viewed 20 April 2012, http://www.dfat.gov.au/geo/spain/spain_bref.html
Australian Embassy of Spain, 2012, Relaciones de Australia e Espana, viewed 24 April 2012, http://www.spain.embassy.gov.au/madrcastellano/relations.html
Australian trade commission 2009, Australia strengthening trade and investment links with Spain, Australian government, viewed 22 April 2012, http://www.austrade.gov.au/Invest/Investor-Updates/090720-Australia-strengthening-trade-and-investment-links-with-Spain/default.aspx
Dawson, B, 2009, Spain, Australia similar King Carlos, The Sunday Morning, viewed 20 April 2012, http://news.smh.com.au/breaking-news-national/spain-australia-similar-king-carlos-20090626-cz7c.html
Downer, A, 2009, Australia and Spain: Trade and Investment, viewed 22 April 2012, http://www.foreignminister.gov.au/speeches/2002/020131_fa_madrid_tande.html
Espana Australia 2011, Fundacion Consejo, Fundation, viewed 25 April 2012, http://spain-australia.org/en/foundation
Ibergoal Ministerio de Espana e Asuntos esteriores, 2012, Australia General Information, viewed 23 April 2012, http://iberglobal.com/index.php?option=com_content&view=article&id=314&Itemid=144
Smith, S, 2010, Visit To Spain, Australian minister for foreign Affairs and trade, viewed 20 April 2012, http://www.foreignminister.gov.au/releases/2010/fa-s100217.html
World Exports and Imports 2007, Australia and Spain, viewed 25 April 2012, http://www.worldexportsimports.com/aust.html