Brexit will see Australian ag re-think UK’s trade value

24 Jun, 2016 06:52 AM
Australia has maintained relatively solid trade connections with Britain because it gives our exporters an entry point into the world's second biggest economy - Europe. But that may not be so important if the UK leaves the European Union and Australia signs a free trade deal with the EU.
Australia has maintained relatively solid trade connections with Britain because it gives our exporters an entry point into the world's second biggest economy - Europe. But that may not be so important if the UK leaves the European Union and Australia signs a free trade deal with the EU.

While half of Britain is eagerly trying to break free of the European Union (EU), Australia is trying to build much stronger trade ties with the valuable European market.

The European Union’s $25 trillion annual gross domestic product makes it effectively the second largest economy in the world after the US.

At the moment Australia is actually first in line for a free trade agreement with the EU and its 500 million consumers.

“Importantly, negotiations on that potential development have already commenced,” said commercial lawyer and EU specialist, John Kettle.

Mr Kettle, who heads international practice at Queensland-based legal firm McCullough Robertson, warned a vote by Britain to leave the EU would force Australian businesses to re-think the advantages of their current UK relationships.

Australia sells about $8.5 billion in goods to Britain every year, and imports about $12.6b.

However, despite its global economic strength, the 28-member EU, including Britain, is currently only our sixth biggest market for farm sector exports.

It is worth about $2.6b a year or 6.5 per cent of our total export sales - about twice as valuable as New Zealand at 3.5pc.

One key reason Australia and Britain have continued to maintain relatively solid trade connections since the UK joined the Europe’s Common Market in 1973 is the foothold it has given our exporters in the bigger European marketplace.

Mr Kettle noted most Australian businesses engaging with the EU based their EU operations in the English-speaking UK through subsidiaries or joint ventures or via trading relationships with UK businesses.

“A UK subsidiary or a connection with a British business makes that part of your business European,” he said.

“If a Brexit goes ahead a cost benefit analysis will need to be done to examine the practical and economic effects for non-EU businesses, particularly to see whether it makes sense for companies to base alternative or additional operations elsewhere in the EU itself.”

While any transition out of the EU by Britain would take some time, he said all existing relationships in the UK would need to be reviewed, particularly if better agricultural and related trade relationships were soon to be struck with Europe.

Mr Kettle, a graduate of Trinity College, Dublin and Oxford University, has practiced corporate, commercial, competition and European Union law for 20 years, invariably crossing swords with the European Commission and courts.

He said at the moment most non-agricultural trade in goods and services to the EU actually faced few material trade barriers and tariffs.

Agriculture, however, has been a notable exception, with Australian exporters and their customers restricted by quotas, tariffs and a host of non-tariff impediments which may be dismantled if an EU free trade deal was in place.

But a new post-EU Britain, with potentially lower business taxes and costs, may also offer fresh trade opportunities for Australia.

“Boris Johnson and others within the Brexit campaign are on record as calling for a greater emphasis on Commonwealth trade in the event of Brexit,” Mr Kettle said.

“Therefore, if it occurs, expect an increased focus on Commonwealth trade which has been basically ignored since the UK joined the EU.

“This may also provide new opportunities for Australian businesses across Commonwealth but particularly in the UK market itself.

“Likewise, there may be a greater allocation of UK investment into Australia, also an influx of British goods and services directed towards the Australian market.”

Andrew Marshall

Andrew Marshall

is the national agribusiness writer for Fairfax Agricultural Media
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angry australian
24/06/2016 12:23:07 PM

If Brexit gets up, as seems possible, it's time for our government, whoever they are to get tough with the EU. Our balance of trade deficit with the EU is staggering and most of it based on dubious protectionist regulation. Our negotiators should be telling the EU that we will impose penalty tariffs on their motor vehicle exports, that alone will scare the Germans and French, to Australia unless we get unfettered access to their markets for our primary produce.
angry australian
24/06/2016 1:56:10 PM

And to all those dreamers, bureaucrats, economists, politicians and to those who believe that Hans Christian Andersen's stories were true let me tell you there is NO such thing as a free trade agreement especially with the EU look at the fuss over glyphosate, they will want our water certified as coming from sustainable areas, our power from renewable sources, all sorts of dubious "accreditation" from even more dubious organisations, and still they will invent ways to keep our primary produce off their markets. We should push for FAIR trade being X imports for Y exports!
angry australian
27/06/2016 7:38:17 AM

Actually I don't think there is anyone in Canberra smart enough to do a Free Trade deal with the EU. Our supermarkets currently have EU pork,tomatoes,spaghetti,fish even butter and yet our ag exports like lamb have quotas. Our balance of trade DEFICIT i believe is about A$33 bn a year, it's time we took off the gloves and started scrapping for Australia. We don't want free trade, we want FAIR trade where that figure narrows dramatically. Stop those German,French and Italian cars and see how quick they want to talk ag access!
John Niven
27/06/2016 5:30:41 PM

I think Hans Christian Andersens story about the Emperor having no clothes was extraordinarily visionary. The bullshit around what we want to believe has so many applications. Hope we are on the same thread. JN


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