A lot can happen in 48 years. It’s far longer than many marriages last. So perhaps it shouldn’t come as a great surprise that 48 years since the United Kingdom joined the European Economic Community they will today leave the European Union.
Severing or radically altering a 48 year long relationship can be painful and complicated. The road to Brexit hasn’t been smooth, with much angst and many false starts. But now that Brexit is upon us the world needs to consider how to make the most of it. Fortunately for Australia we are already well advanced in doing so.
Although the UK formally leaves the EU on 31 January, transition arrangements apply for the remainder of 2020, with the UK effectively remaining inside the EU single market and customs union during that time. Come 2021 all legal trade relationships with the UK start afresh. Over the next 11 months the UK will need to decide what other nations are priorities to negotiate and settle new trade terms with.
Happily, Australia is at or near the very front of the queue. We have already settled some agreements with the UK that will come into operation on 1 January 2021. These will ensure continuity of cooperation on nuclear issues, access for Australian wines and mutual recognition of certain standards.
We are also well placed to secure a comprehensive and ambitious free trade agreement between Australia and the UK. Although the UK has legally been unable to commence formal trade negotiations while still a member of the EU, Australia innovated and established a trade working group between our nations to ensure we would be ready to start formal talks when the time came. Following Brexit, and as soon as the UK cabinet agrees on a mandate for negotiations, Australia is primed to get the ball rolling and move to settle an FTA as quickly as possible.
Given the geographical distance and dramatic changes to the global economy, especially within our region, some will ask if an FTA with the UK would be worth worrying about in 2020. History informs us of what might be possible.
Australia was a casualty of the UK’s entry into the EEC. In 1973 the UK was Australia’s third largest two way goods trading partner. Now it is our 12th. Some of that change in relativities is for good reason. We have dramatically grown our exports and trade with many other nations, especially within our own Indo Pacific region. However, much of it is because UK consumers turned away from Australian produce when high tariffs and low quotas were imposed as a result of their membership of the EU.
In many areas of agricultural trade Australia went from being a significant supplier of goods to the UK to losing virtually all of our market share. Over the last 48 years beef exports to the UK plummeted by 96 per cent, sheep meat by 70 per cent, rice by 98 per cent and wheat by 99 per cent. Exports of sugar and butter have been completely eliminated.
Percentages can be misleading. These aren’t. The crash in sales was significant in terms of the sheer volume of exports lost too: around 98,000 tonnes of beef, 18,000 tonnes of sheep meat, 24,000 tonnes of rice, 513,000 tonnes of wheat, 415,000 tonnes of sugar and 32,000 tonnes of butter. The lost trade of the last 48 years presents new opportunities for the future.
Will we return to such volumes of agricultural trade? Possibly not. The diversification of opportunities open to our farmers now means that agricultural exporters may not look to the UK market as they did previously, especially thanks to the opportunities created by other Coalition negotiated trade deals with China, Japan, Korea, Indonesia, the United States and Trans Pacific Partnership countries.
Nonetheless, having more options can only be a good thing for our primary producers. That’s why we will seek the elimination of tariffs, quotas and non-tariff barriers as widely as possible. What’s more, the success of Australian wine sales to the UK, where one in five bottles sold is Australian wine (despite facing a tariff that doesn’t currently apply to European wines), demonstrates that there remains a hunger in the UK market for safe, high quality Australian produce. The UK won’t return to being our third largest trading partner but we should aspire for it to re-enter the top 10.
Ultimately goods trade will only be one part of what makes an FTA with the UK worthwhile for both countries. Creating better opportunities for trade in services, a growing part of our economy and a central element of the UK economy, not only makes economic sense but has real potential to take off beyond its current $15 billion value. With complementarities created by a common legal system and language many services businesses, including smaller ones exploring exports for the first time, will see real opportunities in each other’s markets.
Similar opportunities already exist in investment flows. The UK remains Australia’s second largest source of foreign investment at $570 billion, but is also the second largest destination for foreign investment by Australians, valued at more than $400 billion. We will also seek to ensure a thoroughly modern agreement that maximises opportunities for e-commerce and digital trade.
The UK may well be severing some of its ties with Europe but Australia, in addition to seeking to resurrect stronger trade relations with the UK, also seeks to strengthen our ties with the EU. Our pursuit of a trade deal with the UK this year in no way diminishes the importance we place on trying to simultaneously conclude one with the EU too. After all, with or without the UK as a member, the EU bloc remains Australia’s third largest trading partner and a vast population centre of hundreds of millions of people with whom we seek to strengthen growing ties further.
With every ending there are new beginnings. While the UK has been married to EU trade policy the population of Australia has virtually doubled. We are a bigger, stronger nation who learned from our losses 48 years ago, opened ourselves up to the world and embraced the region in which we live. Now that the UK embarks on its new journey we stand ready, as old mates from Down Under, to help them find new beginnings and in doing so create even wider opportunities for businesses, farmers and people across both of our great countries.
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