Brexit seen from Australia: pragmatism should trump nostalgia

The United Kingdom’s momentous decision to leave the European Union will have long-lasting consequences for Australia’s relationship with both the EU and the UK. Will Brexit result in reinvigorated ties between Australia and the UK and the EU, or will it disrupt current and future engagement?

Brexit will cause much uncertainty in the coming years, but it also marks an opportunity for a revitalisation and recalibration of Australia’s European partnerships. Australia will need to continue to nurture and intensify its relationship with the EU, and at the same time develop a strategy to engage with the UK post-Brexit.

To avoid a reduction in the level and quality of engagement, Australia will need to take a pragmatic rather than nostalgic approach towards future relations with the UK. Australia must also avoid pursuing its relationship with the UK at the expense of its relationship with the EU, and creating a zero-sum dynamic.

The UK and Australia have a long and robust relationship: they share a common heritage, parliamentary traditions and the Commonwealth. But historical links and 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.

The UK is the world’s fifth-largest economy, Australia’s fifth-largest trading partner and leading trade partner within the EU region. It is a valuable trade interlocutor for Australia.

But within Australia’s broader trade context, the UK accounts for only 4.1% of Australia’s total two-way trade. Compare that with the combined trade share of Australia’s four leading trade partners (China, the United States, Japan and South Korea), who collectively make up 47.4% of Australia’s two-way trade (22.7% with China alone) and the UK represents a small market for Australia. Australia (and New Zealand) accounts for less than two per cent of the UK’s two-way trade.

A key challenge for Australia will be to ensure that the UK gives it priority. The successful conclusion of free trade agreements (FTAs) will be a priority for the British government in the period immediately following its formal withdrawal from the EU, so Australia will need to persuade the UK to focus on Australia at a time when British resources and capacity will be pushed to their limits dealing with a plethora of deals and negotiations.

Fortunately for Australia, it finds itself in a position of strategic advantage in strengthening its economic ties with the UK: it has two years to prepare for Australia-UK trade negotiations.

Australia is not in a position of exclusive dependence on the UK as it has other trade partnerships, particularly in Asia. When it comes to negotiation strategies and preferences, Australia has extensive trade negotiation experience in comparison to the UK, as trade negotiations have been an EU competence since 1973 when the UK joined the European Economic Community.

But the significant challenges that Brexit poses for Australia cannot be ignored. It will result in the loss of access to the UK market as part of the EU, and Australian companies have already begun reconsidering the feasibility of continuing to use the UK as a base or gateway to the EU. Brexit may also lead to possible changes, restrictions or loss of access to the UK for skilled Australian workers ‒ or amendments to the numbers to be admitted.

There is no need for Australia to make a choice between the UK and the EU-27. Australia can ill afford to shift its focus to the UK at the expense of the rest of Europe, and the Australian government must ensure that Brexit will not adversely affect the progress it has made in its relations with the EU. Australia-EU engagement is far more than an extension of Australia’s relationship with the UK, and has indeed advanced from the period of Australian critiques of the EU in the areas of agricultural trade.

After decades of tension, the relationship has immeasurably improved, to the extent that the largest agreement ever signed between Australia and the EU ‒ a Framework Agreement ‒ was successfully concluded after some years of negotiation in 2015. An FTA is set to follow this accord, and a scoping exercise has just been completed, paving the way for formal negotiations.

With Brexit, Australia will lose a like-minded state on trade and will likely face a very different EU trade negotiator. But Australia’s Trade Minister Steven Ciobo has sought to ensure that the pursuit of an Australia-UK deal will not threaten an Australia-EU trade agreement. The fact that the UK will not be able to enter into its own trade negotiations until it has left the EU should help Australia focus on an EU-Australia trade deal for the next few years, without neglecting preparations for Australia-UK negotiations.

Forging political relations with an altered EU and the UK will need to be top priority for Australia in the coming years. Australia’s relations with the EU should, as much as possible, follow a ‘business as usual’ tactic amid the unusual business of Brexit. The UK’s departure from the Union should not be allowed to negatively influence the progress made in EU-Australia relations. Holding steady will be a crucial task for the government as trade agreements with both the EU and the UK are crucial to Australia’s national interests and preferences.

Within the context of British Prime Minister Theresa May’s proclamation that “Brexit means Brexit”, Australia must now face this reality head-on by preparing how it will advance and strengthen its relations with the UK, as well as the EU.

It will need to balance ideological imperatives, which often stem from history rather than present-day truths, with practical realities, and complement values with material interests.