Politics

Why an Australian-style deal with EU may NEVER be possible

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This raises two questions. First, what exactly is the Australian model and secondly would it in fact be possible for the UK to emulate it? Australia’s economic relationship with the EU is substantial. There is very significant trade in goods between the EU and Australia and much of that trade is at very low levels of tariff protection. In terms of goods trade, the EU is Australia’s third largest trading partner whereas Australia is only the 19th largest trading partner for the EU.

There is also a very substantial services trade between Australia and the EU. Indeed, 19 per cent of Australia’s services trade is with the EU.

When commentators criticise Prime Minister for talking of an Australian style agreement with the EU, they are suggesting that this is just code for no deal. Journalists like to say it is the same as the relationship Mongolia or Afghanistan has with the EU.

This is, to be frank, a little silly. Australia has over 80 agreements with the EU including most importantly an overarching framework agreement for the political and economic relationship. Now that’s not the same thing as having a comprehensive trade agreement covering all goods and services but it doesn’t mean that Australia and the EU have no deals at all. 

Other agreements Australia has with the EU range from a wine agreement that regulates wine content as well as labeling to a nuclear safeguards agreement that provides for Australian exports of uranium to the EU. There are also agreements on important issues like a mutual recognition of professional qualifications.

And here is another thought: there are very low levels of tariff protection for most of Australia’s goods trade with the EU, At 10 per cent or less these tend not to be a significant inhibitor to trade. 

Furthermore, it is untrue to suggest that trade is made difficult because of endless form filling and bureaucracy. Australia has no single market arrangements with any country, not even New Zealand. In every case there is some limited bureaucracy. But despite that, Australia is one of the world’s major trading nations.

The greatest obstacle to trade between Australia and the EU is the passion the EU has to protect its agricultural industries. These are amongst the most protected in the world.

On the other hand, provided that it meets Australia’s stringent standards on quarantine and animal welfare, the EU is able to export agricultural products to Australia with little hindrance. For example, the value of EU exports of pork to Australia exceeds the value of all Australian agricultural exports to the EU. 

A major component of Australia’s economic relationship with the EU is investment. As with the trade in goods, in the main there are no significant obstacles to Australian investment in the EU and whilst Australia has some restrictions on inward investment they are not substantial. 

So there you have it. Australia does have a multitude of agreements with the EU and it does have significant trade and investment with the EU. 

So this leads to the second question. What would be the impact on the UK if it ended up with an Australian style agreement with the EU?

For a start, the UK under such an arrangement would be able to negotiate a whole series of specific sectoral agreements that would help overcome unintended obstacles to trade. These would be piecemeal rather than comprehensive.

Importantly though, there is the question of the Withdrawal Agreement and the Northern Ireland Protocol that currently appear to be part and parcel of any forthcoming deal. There are fierce negotiations under way about the extent to which the EU might continue to be involved in regulating trade within the UK under these agreements.

It is clear they would have a significant negative impact.

The Centre for Brexit Policyhas analysed this impact and concluded that the outcome would be a very different thing from the way Australia trades with the rest of the world. And for the UK, its trading arrangements with the EU would be in that respect markedly different from the arrangements that Australia has.

So, strictly speaking, the Withdrawal Agreement and the Northern Ireland protocol make it very difficult for the UK to have the same sort of trading arrangement with the EU as Australia has. In particular, Australia is an entirely sovereign nation and the EU has no jurisdiction over relations between, for example, Australian states.

This is in stark contrast to the implications of the Withdrawal Agreement/Northern Ireland Protocol that impinge significantly on UK sovereignty and have jurisdiction over key aspects of Northern Ireland law and relationships between Northern Ireland and Great Britain.

Alexander Downer, AC was the Australian High Commissioner to the United Kingdom from 2014 to 2018 and oversaw many trade agreements as Minister for Foreign Affairs from 1996 to 2007

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