Brexit And Australia

Will The E.U Allow Australia & The UK's Special Relationship To Continue?

Britain's decision to leave the European Union has opened a fundamental crack in the Western world. Australia's relationship with the United Kingdom is grounded in the UK's relationship with the EU. While the UK press reports upbeat stories like the one in the Daily Express on the 11th March 2017: Australia wants to open their doors to the UK... Says Former Australian Prime Minister Tony Abbot, where he was quoted as saying.

“...Trade in goods should be absolutely free of tariffs and quotas.”

Mr Abbott added: “There should be mutual recognition of standards and qualifications. And there should be free movement of people for work, not welfare. If a motor vehicle is fit to be sold in Britain, it should be fit to be sold in Australia. If a doctor is fit to practise in Australia, he or she should be fit to practice in Britain.”

The unfortunate truth, however, is that Mr Abbot is an after dinner speaker these days and whoever is paying for the meal will pretty much hear what they would like him to say!

The reality is very different, and while the UK and Australia are close and hold strong trading links Australia is not prepared to throw away a trade deal with 27 other countries in one bloc just because of the UK, even though the UK need trading partners right now which makes them keen, if not a little desperate, to do trade deals as soon as possible.

Given Australia's strong and enduring ties with the UK and the EU, the shockwaves from this epoch-defining event will be felt in Australia soon enough. It is in Australia's interest to minimise the impact and build relationships with either UK or the E.U. They will not be allowed to do both as the E.U will impose conditions on any potential trade agreements, this will most likely include limiting their exposure to the UK.

Most immediately, the impending Australia-EU Free-Trade Agreement becomes more complicated and at the same time less attractive now the UK is leaving.

Two butterflies with flags on wings as symbol of relations UK and Australia

What will happen to trade ties?

The importance of Australia's relationship with the EU tends to get under-reported in all the excitement about China. We might ascribe such a view to an Australian gold rush mentality.

Nevertheless, Australia's trading ties with the EU are deep and strong.

Such ties looked set to get stronger. In November 2015 an agreement to begin negotiations in 2017 on a free-trade deal was announced at the G20 summit in Turkey.

Trade Minister Steven Ciobo said in April 2016 that an Australia-EU free trade agreement "... would further fuel this important trade and investment relationship."

When considered as a bloc, the EU consistently shows up as one of Australia's main trading partners. Consider the statistics below:

  • In 2014 the EU was Australia's largest source of foreign investment and second-largest trading partner, although the European Commission placed it third after China and Japan in 2015;
  • In 2014, the EU's foreign direct investment in Australia was valued at $169.6 billion and Australian foreign direct investment in the EU was valued at $83.5 billion. Total two-way merchandise and services trade between Australia and the EU was worth $83.9 billion; and
  • The EU is Australia's largest services export market, valued at nearly $10 billion in 2014. Services account for 19.7 percent of Australia's total trade in goods, and services and will be an important component of any future free trade agreement.

This is all well and good. But when not considered as a bloc, 48 percent of Australia's exports in services to the EU were via the UK; of the $169 billion in EU foreign direct investment, 51 percent came from the UK; and of Australia's foreign direct investment into the EU, 66 percent went to the UK.

You get the picture.

The UK was Australia's eighth-largest export market for 2014; it represented 37.4 percent of Australia's total exports to the EU. As Austrade noted:

No other EU country featured in Australia's top 15 export markets.

In short, the EU is not as attractive to Australia without Britain in it.

Beyond trade numbers

But the Australia-EU-UK relationship cannot be reduced to numbers alone. It also rests on values shared between like-minded powers.

Brexit represents the further fracturing of the West at a moment when that already weakening political identity is in relative decline compared to other regions of the world, notably Asia (or more specifically China).

EU-Australia relations rest on shared concerns, such as the fight against terrorism advanced through police collaboration and the sharing of passenger name records.

The EU and Australia also collaborated to mitigate climate change at the Paris climate summit. And they work for further trade liberalisation in the World Trade Organisation — but do not mention agriculture.

Without the UK, these shared political tasks become harder.

Clearly, Australia-UK relations rest on a special historical relationship. However, it has seen efforts at reinvigoration, as British governments buckled under the pressure of the Eurosceptics among the Conservatives.

Beyond everyday trade, historical links have been reinforced through the centenary of the first world war and the UK-Australia commemorative diplomacy that has come with this four-year-long event.

Cultural ties are most regularly and publicly affirmed through sporting rivalries such as netball, rugby and most notably cricket.

Expect these ties to be reinforced as the UK seeks trade agreements and political support from its "traditional allies".

For those with British passports, there will be a two-year period of grace as the UK negotiates its exit.

After that, it will be quicker to get into the UK at Heathrow, but this might be small consolation for the loss of a major point of access to the EU.

The vote to leave is a major turning point in Europe's history. It marks a significant crack in a unified concept of "the West". It is not in Australia's interests.

It is time for Australia to make new friends in Europe or at least wait and see what offers now come their way.

What Does This Mean For Immigration

The UK and Australia trade skilled workers between each other, and some have suggested that Australia and the UK open their borders. Looking at the provisional plans being discussed currently in Australia, the evidence would suggest:

1- The age limit for Australian skilled workers will be reduced significantly, this will prevent many Brits emigrating to Australia.

2- To counter the shortfall in older skilled workers Australia are looking to increase the upper age limit for working holiday maker visas from across the E.U and therefore reduce their dependency on UK skills.

3- More E.U nationals are applying to live in Australia as trade and cultural links with the new E.U, without the UK, are nurtured and developed. We have already seen a significant rise in applications from E.U nationals living in the UK who are not prepared to return home when immigration rules change in the UK.

4- The U.S are now providing more skilled workers to Australia than ever before as the "Trump effect" kicks in. U.S residents have now absorbed the change and are taking steps to emigrate in record numbers. This is again reducing dependence on UK skilled migrants.

Our findings show even before Article 50 has been triggered, Australia has taken huge strides to protect their position in the world. Their actions are contrary to the message some of the UK press are reporting.  Australia is not looking at the UK as their closest economic partner but as the problem, which they must now protect themselves against.

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