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Australia and Brexit: What Might it Mean?

26 Feb 2016
By Dr Annmarie Elijah
EU flag. Photo source: Theophilos Papadopoulos (Flickr). Creative Commons.

In mid-February British Prime Minister David Cameron arrived at a deal with his European counterparts over the future of the UK and the European Union. On the basis of these re-negotiated terms, British voters will decide by referendum on 23 June whether to stay in or opt out. The outcome will be significant: for the UK, the EU and internationally.

British ambivalence on the EU is not new. The original accession process did not run smoothly: the first two bids failed (1961-63, 1967) and the successful 1973 bid was soon followed by a referendum not unlike the one scheduled for June. The outcome in 1975 was 2:1 in favour of staying, yet the ‘British question’ was not resolved. The possibility of a Brexit has been close to the surface of British domestic politics ever since. It fuels the imagination of Eurosceptics across Europe and invites speculation from those who would re-configure the UK’s place international politics.

What might a British exit from the EU mean for Australia? The official line – reiterated by Australian High Commissioner to the UK the Hon Alexander Downer AC FAIIA this week – is that Britain’s role in the EU is a matter for the British people to decide. Australians have been running this line since the late 1950s, usually just before weighing in with stout views. The views, however, have changed. At the outset British membership of the then EEC was regarded as a threat to Australian export markets, Commonwealth cooperation and even bilateral political ties. Since the mid-1970s (and the last referendum) it has generally been argued that Australia would not gain from a British exit, but rather benefits from active UK membership of a strong EU.

The latter argument is likely to prevail in Australia as the Brexit debate unfolds, for a number of reasons. First, the oft-peddled notion that the UK could leave the EU and return to a golden era of trade cooperation with Commonwealth countries does not stack up. Take the case of the UK-Australia Trade Agreement (UKATA), suspended when the UK acceded in January 1973. The terms of its suspension were acrimonious, certainly, but then so was much of its history. Part of the ‘imperial preference’ Ottawa Agreements of 1932, the UKATA made for bickering among the parties and objections from countries suffering from trade diversion. Officials were conceding by the mid-1950s that UKATA was no longer suited to the maturing bilateral relationship.

In 2016 the UK and Australia cannot dig the UKATA out of the bottom drawer, dust it off and carry on. A new generation comprehensive trade agreement, reflecting the current relationship, would take time. There is no reason to think that Australia would be top of the list of the UK’s prospective trade partners and the terms of the UK’s arrangements with the EU27 may not be clear for years.

The terms with the EU will be especially important. Two-way trade and investment between the UK and Australia remains significant, but from inside the EU single market. The institutional architecture matters. Australian-EU relations have at last entered a broad, cooperative phase based on a political agreement (the Framework Agreement, near to signing) and negotiations for a trade agreement. Given the size and significance of the EU in Australian trade figures, this is not a small development. Preliminary scoping for the trade agreement is proceeding on the diplomatic assumption that this relationship’s time has finally come. In this context, a British exit is at best a distraction, and at worst a serious impediment.

This is not to suggest that the UK in the EU is likely to fight Australia’s trade policy battles: it is not, and has not over many decades. The notion that continued UK membership might mean that Australia has an enhanced voice in Brussels is spurious. The question is rather whether British and Australian interests align – for example on pushing for EU reform. The answer here is untidy. For a start, it is hard to find any evidence. The idea that Australia and the UK share certain assumptions about relationships between states and markets has some validity, but it hardly results in a common approach to the complex trade policy questions governments now face. This is especially true given the lack of meaningful progress multilaterally, where the joint commitment to trade liberalisation may have resulted in some common ground. It does not hold in a context of proliferating trade agreements.

The second reason Australians might hope the UK will vote to stay (or at least leave on good terms) relates to the strength of the European project. European integration does not rise or fall with the fortunes or commitment of the UK. There are 27 other member states, and the Six were committed to integration well before UK accession in 1973. However the European project is now under serious strain and some fear a Brexit may have a domino effect. Czech Government Ministers noted this week that a Brexit made debate more likely in other member states: the term ‘Czexit’ soon followed. Eurosceptics in other EU countries – notably France – hope a Brexit might boost their political cause. What are the odds that a Brexit could be smooth, amicable and have no impact on the progress of European integration?

This is the central point. Notwithstanding the coverage it will receive in Australia, Brexit is not the only challenge on the EU horizon. In Brussels and the member states, policy makers are confronting an immigration crisis of enormous proportions, a complex strategic environment and sluggish economic growth. The way these challenges are dealt with may ultimately matter more to Australia than the British decision in the coming referendum.

In the event of a Brexit, an Australian government of either flavour will get on with the sound and close bilateral relationship with London and the improved broad-based relationship with Brussels. The practical impact may be additional (complex) trade negotiations and major trade partners which are more concerned with each other than third countries.

For Australia the main damage might be the disruption at a time when Australia-EU relations had actually improved. Under Cameron’s re-negotiated terms of membership, the UK will apparently retain special status. It will no longer have to work towards ‘ever closer union’ in the EU. As Australian policy makers well know, the challenge with countries arguing over an ‘ever closer union’ is getting their attention. When EU politics turns inwards it is rarely good news for Australia.

Dr Annmarie Elijah is Associate Director of the ANU Centre for European Studies. She has previously worked as a policy officer in the Australian Department of Prime Minister and Cabinet. Her PhD at the University of Melbourne examined the implications of British membership of the European Community for Australia. This article is published under a Creative Commons Licence and may be republished with permission.