Negotiating trade post-Brexit

Despite our long history with Britain, when it comes to trade Australia will show little nostalgia for the ‘old country’ on any post-Brexit deal

Professor Philomena Murray, University of Melbourne

Professor Philomena Murray

Published 2 July 2019

The world of cricket is one area where Australia and England share a long history. Yet the UK may well find that commonalities like cricket, or the Commonwealth, or even ideas about the Anglosphere, won’t guarantee smooth negotiations with Australia on a post-Brexit Free Trade Agreement (FTA).

Indeed the UK is likely to face a challenging time. Australia is already in FTA negotiations with the European Union (EU) and is seeking a deep and broad agreement that covers a large number of areas.

Australia doesn’t have to choose between the UK and the EU in terms of trade. Picture: Getty Images

Put simply, Australia doesn’t have to choose between the UK and the EU, it is in productive dialogues with both.

Australia then finds itself in a situation where two important trading partners are keen to clinch a deal with it. And it has a team of skilled trade negotiators whereas the UK hasn’t negotiated on trade since 1972, as this is an EU competence.

The official Australian government position before and during the Brexit referendum in June 2016 had been that it would prefer that the UK remain in the EU.

Prior to the Brexit referendum, ‘a strong UK as part of the European Union’ was, according to Australia’s former Foreign Minister, Julie Bishop, ‘in Australia’s interests’.

Since the referendum, Australia has expressed its objective to foster a closer relationship with the UK after Brexit, regardless of the final outcome.

A dissenting voice came from the former Prime Minister Tony Abbott ,who suggested that a ‘Brexit delay would keep the UK as a tethered goat’. Abbott still passionately believes in ‘the country that saw off Hitler, the Kaiser, Napoleon and the Spanish Armada’.

Yet his championing of an Anglosphere is not finding resonance in the regular meetings taking place among both ministers and officials from the UK and Australia, as they prepare for newly calibrated engagement after Brexit.

Australia’s Trade Minister Simon Birmingham will be looking at Australia’s diverse trade links. Picture: AAP

Indeed, government officials from Australia and the UK have been holding meetings of their Trade Working Group to prepare for a future trade agreement since 2016.

Yet the Australian government’s approach appears to be one of pragmatic realism. It seeks a deal with the UK that will be long on hard-nosed calculations and short on nostalgia, even if it might refer to the long history of close relations with the UK and affinity of traditions.

A shared common heritage, parliamentary traditions and the Commonwealth are important historical links. Yet, nostalgia cannot override the political and trade realities.

Commonwealth ties may help recalibrate Australia-UK relations, but this Commonwealth heritage cannot replace Australia’s diversified political and trade links, especially within its own Asia-Pacific region.

Although the UK is the largest European export market in goods, and Australia’s fifth largest two-way trade partner in goods and services, its overall share of Australia’s two-way trade only accounts for 3.5 per cent and so only represents a small overall percentage of Australia’s trade.

Australia has been working on agreements with the UK that are similar to those it already has with the EU. In 2018 they launched the Australia-UK Leadership Forum (AUKLF) to strengthen dialogue and cooperation.

More recently, Australia has negotiated bilateral agreements with the UK including a Wine Agreement and Mutual Recognition Agreement to ensure the continued flow of trade post-Brexit and ensure arrangements already in place between Australia and the EU continue to apply to the UK after Brexit.

Yet the UK is facing not only robust talking from its former colony, it also faces the need to improve its international reputation with Australia.

Theresa May’s successor as British Prime Minister will have to work to shore up trust with countries like Australia. Picture: AAP

No doubt Theresa May’s successor as Prime Minister will be committed to ‘Global Britain’, yet the government will be obliged to work hard to redress a perception of its inability to make good on an agreement it negotiated with the EU.

It could well result in states like Australia thinking carefully about negotiating with the UK, if they aren’t fully convinced that the UK will honour its commitments.

The UK government will need to shore up trust in a state that was once famous for its incremental and gradualist political culture and the stability of its institutions – themes that all students of both British and comparative politics were familiar with.

The UK negotiators should expect little nostalgia about the Anglosphere. Certainly the Commonwealth holds an attraction as a body of nations that meets to discuss common concerns.

Yet it accounts for only 9 per cent of UK trade.

Australia accounts for 1.3 per cent of UK goods trade but there is a very strong services and investment relationship, with British companies based in Australia and Australian firms in London keen to remain there if possible.

At the same time, the web of alliances that the UK and Australia have developed over several decades on security is now being strengthened, alongside functional agreements.

After Brexit there will be some continuity of bilateral arrangements that are outside the EU-Australia relationship, like the Five Eyes Intelligence Alliance, the Five Powers Defence Arrangements and the Australia-UK Ministerial Dialogue (AUKMIN).

AUKMIN has set out an agenda for closer engagement in its Action Plan, which could be a putative template for the Australia-UK bilateral relationship.

Australia no longer regards the UK as its most important trade ally. Picture: AAP

Agreed on 20 July 2018, the Action Plan – The UK and Australia: A Dynamic Partnership for the 21st Century,- seeks to enhance their strategic defence partnership; strengthen collaboration on global issues, including the international order; counter global threats; strengthen their partnership in the Pacific; enhance their strategic economic partnership and to develop closer ties between their diplomatic services.

Historical legacies will influence the future Australia-UK relationship – the countries have a shared heritage, as well as shared cultural, economic and political values.

The remnants of an alleged ‘British betrayal’ over the UK’s original accession to the EU has all but disappeared, particularly in the context of Australia’s developed trade links with its own region and the acknowledgement of its trade potential (in goods and services) with the EU.

Yet it must be borne in mind that Australia no longer regards the UK as its great and powerful friend, as its most important trade ally, or as the prism though which to work with the EU.

Rather, Australia has a different great and powerful friend in the US, a solid engagement with the EU, and a diversified trade relationship with the Asia Pacific, or as it now calls it, the Indo-Pacific.

Strong historical links will endure but will not dominate the relationship after Brexit.

A version of this article first appeared in The UK in a changing Europe, which is based at King’s College London and funded by the Economic and Social Research Council (ESRC).

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