Brexit stage right: what Britain's decision to leave the EU means for Australia
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.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.
Most immediately, the impending Australia-EU Free-Trade Agreement becomes more complicated and at the same time less attractive.
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 to 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 per cent of Australia's total trade in goods and services, and will be an important component of any future free trade agreement.
You get the picture.
The UK was Australia's eighth-largest export market for 2014; it represented 37.4 per cent 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 numbersBut the Australia-EU-UK relationship cannot be reduced to numbers alone. It also rests on values shared between like-minded powers.
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.
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.