A former UK high commissioner to Australia says it will drive a hard bargain in trade talksby Helen Liddell / June 12, 2018 / Leave a comment
“The Tyranny of Distance” is how Australian business leaders explain favouring trade with Asia compared to trade with the UK. It should serve as a warning to those who see a Free Trade Agreement with Australia as part of the post-Brexit “new dawn.” There are plenty of them: Boris Johnson, Liam Fox and co have long talked up the prospect of a revived “Anglosphere” riding to Brexit Britain’s rescue.
But the numbers tell the true story. In 2016, UK exports to Australia were worth £8.6bn, while exports to tiny Ireland, with a population of only 4.5m, were £26.7bn.
An FTA with Australia would be very welcome, but keep it in perspective, there is a population of 25m in Australia but more than 500m in the EU, a lot of trade to make up. Nostalgic views of the power of the Commonwealth must take second place to hard headed realism.
Make no mistake, there is a huge wave of goodwill towards the UK. Almost two million Australians are entitled to UK Passports. The Brits, even the Poms, come second (with the Americans) to the New Zealanders in terms of the warmth towards them. Academics do claim, however, that warmth ebbs and flows with English success on the cricket pitch. And that is not a joke!
The future will not be sealed trading Irn Bru for Sauvignon Blanc. Although gold trading is a very lucrative two-way trade. We should want an FTA with Australia, and we will get one, but the Aussies know how to strike a hard deal. The deal will be signed when it is right, not necessarily on the day after Brexit, as the media speculates.
Modern geopolitics and economics causes Australia to look towards China and the United States as critical partners. It takes 40 days, on average, for goods to travel between Australia and the UK. Notwithstanding the potential for crowded lorry parks in Dover, it takes about 40 minutes for goods to travel from Britain to continental Europe. It is against that background that an FTA has to be built.
Australia already has FTAs with countries like China, Japan, Chile, Korea, Malaysia, New Zealand, Singapore, Thailand and, of course, the US. Some big ones are in the offing, the Gulf countries, India, Hong Kong. Soon though this preponderance of deals around the near east will be challenged. Australia’s next big FTA, already under negotiation, is with… the European Union.
The Department of Foreign Affairs and Trade has stated publicly that Brexit will not affect the priority that Australia attaches to working with the EU. Already the Australian media is headlining that the EU must come first, and academics are suggesting that the FTA with the EU could form the basis of the deal with the UK.
Worries have been expressed that the EU may be offended as a result of Australian determination to seal a deal with the UK. The EU is already Australia’s second biggest trading partner, hence the pressure to get that FTA sorted first.
In evidence to hearings in the Australian Federal Parliament, trade bodies made it clear they wanted their government to drive a hard bargain with Britain. History plays into that response: there are many Australians who have never forgiven the UK for joining the Common Market, it had a devastating impact on many rural communities in the country whose exports to Britain were rendered less competitive. In foolhardy mode, I once led a delegation of 21 EU Ambassadors to Shepperton in rural Victoria, the heart of fruit growing. Ambassadors are seldom exposed to such vitriol and even the quality of the wine failed to counter the shock.
The power of the National Party, currently in ruling coalition with the Liberal Party, must not be underestimated. Make no mistake, the bottom line for them will be access for agricultural produce to the UK market. But how will Australian farmers react to new sources of cheap beef, lamb, dairy produce? Further, the reaction to the prospect of UK chlorinated chicken from the US will be replicated with an argument about hormone treated beef.
One thousand five hundred Australian businesses use the UK as a base into Europe, there used to be talk of the power of the “Anglosphere” but that is changing. As companies become more familiar with the complexity of different VAT and labour laws in Britain after exit, they will have to weigh the advantage of an expensive UK base against relocating elsewhere. That certainly seems to be where the Australian Business in Europe Council is coming from. When asked about those 1,500 businesses, one of their board members said emphatically: “That may have to change”
The other side of the coin is the attraction of the British financial services infrastructure, a true global asset. Corporate giants like MacQuarrie Bank seem relaxed about their future in the UK.
A Free Trade deal with Australia will be good for a post-Brexit UK, but it will be only a start. Across the table will be negotiators who start with the same values, legal system, even parliamentary system as the UK, but it won’t be enough.
Twenty-five million customers down, only another 425m to find.