What emerged from the G20 summit was the potential beginning of a new special relationship, albeit a long forgotten, long distance one, with Australia post-Brexit.
This summit was Theresa May’s first and was certainly no honeymoon. Japan was seeking reassurances that their firms would still be able to have access to the single market.
Outgoing US President, Barack Obama, reiterated his view that Britain had made a mistake in leaving the EU and that the USA would continue to prioritise a trade deal with the latter. These were cold words from our so called partners in the special relationship. Under Obama’s administration, this relationship has not been particularly special or amicable.
May and her opposite number, Malcolm Turnbull, Prime Minister of Australia, spoke of their desire to open negotiations for a free trade deal and closer co-operation on security matters. This is long overdue.
For all intent purposes, the UK and Australia are still joined at the hip. We share the same head of state; we have the same political system, language and similar legal code. That’s right, unlike our current special relationship with the USA, we have near identical models of government.
Moreover, many of us in both countries have family ties. Plus we have huge cultural exchanges between the two countries. Hundreds of thousands of British people leave to live, work and travel in Australia every year and vice versa. We play the same sports where we enjoy a fierce rivalry. We watch the same TV and are familiar with each other’s cinematic productions and actors.
We have a shared history, too. In fact, we enjoyed free trade with Australia before we joined the European Economic Community in 1973. After this, economic relations ceased overnight as painfully high tariffs were erected. This at the time for Britain seemed the right thing to do. After all, the Europe we joined then was experiencing high economic growth and the markets were more important than Australia’s. This as we know is no longer the case.
Australia is just one such country that has developed rapidly since the 1970s and is now the world’s twelfth largest economy. An economy that is larger than countries in the EU like Spain, Holland, Belgium, Sweden and Portugal. We should aim to complete a free trade deal with Australia as quickly as possible. It will open up a new substantial export market for our cars, pharmaceutical and biotech products, aeroplane and machinery equipment, beverages and professional service industries. In return, we will receive much cheaper produce from down under. This will include, but will not be limited to: wines, agricultural produce, minerals and natural gas.
The importance of tariff free access to some of these goods for our manufacturing economy cannot be understated. For a start, a free trade deal with Australia can help bring our energy bills down. Australia has enormous reserves of natural gas which it exports. It is the third largest exporter of Liquefied Natural Gas (LNG) and due to be the world’s largest exporter by 2018.
We currently import large quantities of natural gas from Qatar. Since we started importing gas from Qatar whilst we were in the EU, the cost of importing this gas will include tariffs as we do not have a free trade deal with the country. A free trade deal with Australia could allow us, should we choose it, to import much cheaper gas than we receive at the moment. Rather than decide to build a ridiculously expensive nuclear power station at Hinkley, our future energy needs could be met by cheaper LNG imported from Australia.
Europe is a resource scarce region. Apart from the UK and Norway, Europe has very little in the way of natural resources. Our single market access has not helped our industries that depend on importing natural resources for finished manufactured products, as the EU has few natural resources. However, a free trade deal with Australia would help in this regard. It is not just the import of LNG that could help both the public and industry by way of cheaper energy bills. Our car industry, one of the largest manufacturing industries in the country, depends very heavily on the import of natural resources to make cars. One metal that is used to make cars is aluminium.
Australia has an abundance of bauxite. Bauxite is the raw material aluminium is made from. Consequently, aluminium is one of Australia’s major exports and Australia is the seventh largest exporter of this metal in the world. Jaguar is one of the main car manufacturers associated with aluminium constructed cars, along with Audi. The UK has only one aluminium smelter left at Lochaber in Scotland producing just 43000 tonnes. Successive governments have allowed our aluminium industry to collapse due in part to climate change taxes.
If we were to sign a free trade deal with Australia, we could import aluminium much cheaper than at present, thus reducing the cost of the car manufacturing process, a significant shot in the arm to one of our largest industries. This would be mutually beneficial to both countries. Cheaper aluminium would help us manufacture cars at a reduced cost and the removal of tariffs on British cars would reduce their price in the Australian market. It would also help our aerospace, engineering and packaging industries as it is a key material in the manufacturing process.
These are two examples of how a free trade deal could benefit us. Australia will be eager to gain access to our professional services industry, an area which we excel in, and other manufactured goods. Our burgeoning fintech industry, which is far ahead of anything down under, our consultancy, HR and accountancy providers are all sectors that would benefit from access to a market that is underdeveloped in these areas. Beverages such as craft ales, boutique gins, Scotch and sparkling wine are sought after. Furthermore, Australia imports two thirds of its pharmaceutical products, has a large biotech sector and a large healthcare market. Needless to say Australia will like tariff free access to British exports of medical devices and products and niche pharmaceutical products.
A free trade deal will renew our ties with Australia economically. At the same time greater emphasis will be placed on improving co-operation over defence matters and our shared cultural ties. This will bring our two nations closer together as we always should be. A free trade deal will be mutually beneficial for both countries.
At the G20 summit, both May and Turnbull spoke of the need to reform and clean up capitalism. Making multinationals pay their fair share of tax was mentioned. This is something that the USA, and indeed Barack Obama, have done little about as their companies are the worst offenders. With this shared interest in the way of conducting business and all the other ties that bind us, a new special relationship with Australia could well be in the making post-Brexit.