The United Kingdom appears anything but right now. A
Prime Minister falling on his sword, Scotland renewing calls to
leave, a united Ireland being mooted and a country divided in the
way it sees itself and the world. While many in Europe are urging a
quick divorce, others are seeking a more cautious approach, trying
to make sense of the economic, strategic and political
As the Director-General of the World Trade Organisation, Roberto
Azevędo, recently noted with respect to trade: "The UK
currently has preferential trade relationships with the EU and with
the 58 countries with which the EU currently has free trade
agreements. In the event of a British exit, all of these
relationships would need to be re-established to maintain the same
preferential access the UK currently enjoys via the EU."
Nobody quite knows how the withdrawal terms will be structured
and that amounts to one thing: continued economic uncertainty which
will last many years. Already we've seen the volatility in
off-shore indices having a large impact on Australian markets;
uncertainty increases and a 'risk-off' tendency prevails
A key driver of our recent GDP growth has been exports and a
global slowdown will hit Australia hard. One thing seems sure, the
upcoming Australia-EU Free-Trade agreement talks – due to get
underway next year – are likely to be delayed while the EU
gets its house in order.
There has been a tendency to forget just how important a role
the UK plays in Australia's trade and investment relationship
with the EU. When Australia agreed to begin negotiations on a
free-trade deal in 2015, the EU was its third largest trading
partner and a third of our total EU exports were directed to the
UK. When you consider services, more than half of our EU trade is
While, in time, there may be opportunities for increased
bilateral trade between Australia and the UK, its unlikely to take
on the same significance as the last trade agreement between the
countries. These are different times and very different
The major impact on withdrawal is likely to be felt in the area
of trade in services, given the close linkage between services and
the movement of people. This will be an area of particular concern
for Australian firms with services capabilities in Europe.
Consider, for example, the position of Australian financial
services firms that run their European operations from London. At
present, they can take advantage of EU
'passporting' arrangements allowing financial
institutions in one EU country to operate in the others, without
having to meet the requirements of all of their respective
individual regulatory regimes. These passporting rights are clearly
at risk, with implications for Australian, and indeed all,
financial services businesses based in London.
From the Reserve Bank to the Treasury, officials here are
keeping a close eye on developments. Australian business will be
minded to do the very same.
Peter Grey is former Australian Ambassador to both the EU and
WTO and Senior Adviser, International Business Engagement at Corrs
Chambers Westgarth. If you would like to discuss any of the issues
raised in this article with Peter, please do get in touch.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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