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Brexit: how can Australia secure the right trade deal?

14 March 2017
What will Article 50 mean for Australia?

An international trade expert has proposed a plan for Australia to secure a beneficial trade deal with the UK, as Brexit draws nearer.

British Prime Minister Theresa May is pictured speaking at a recent forum. Image: WikiMedia Commons

The UK parliament has given Britain's Prime Minister Theresa May authority to trigger Article 50. Article 50 is a condition of the EU's Lisbon Treaty that allows member states to exit the bloc. Image: WikiMedia Commons

Trade deal talks with the United Kingdom should only begin once Australia is assured of the UK’s post-Brexit trading status, says a University of Sydney expert.

In an expert submission to the Joint Standing Committee on Foreign Affairs, Defence and Trade, Associate Professor Mark Melatos suggests Australia should also wait for larger trading nations such as Canada and the US to negotiate trade deals with the UK – paving the way for Australia to build on concessions and secure better terms in a deal for itself.

A parliamentary committee is investigating Australia’s trade and investment relationship with Britain. Associate Professor Melatos’s submission addresses several matters listed in the inquiry’s terms of reference.

“Brexit makes it difficult for Australia, because we don’t yet know what the UK’s trade status will be once it makes its exit from the EU,” said Associate Professor Melatos, of the University of Sydney’s School of Economics.

The submission states the UK is likely to become a ‘distressed negotiator’ once Article 50 – which enacts the UK’s departure from the EU – is triggered.

Australia can build on gains secured by the US and Canada

“The greatest risk for Australia is not in moving late or even not at all. The risk for the nation is in not capitalising on a once-in-a-lifetime event to secure maximum trade and investment preferences from the United Kingdom,” said Associate Professor Melatos. 

Associate Professor Melatos’s analysis of national bargaining positions suggests that countries such as the United States and Canada will be better placed to exploit the UK’s weakened bargaining status.

For example, if the United States can secure substantial intellectual property concessions, and Canada substantial concessions around access to the UK’s agriculture market, Australia can then benefit by piggy-backing on their efforts to form a stronger baseline for its own deal. 

What trade deal conditions could negotiators face?

Associate Professor Melatos’s analysis also outlines two post-Brexit scenarios for their effect on Australia’s trade deal prospects.

The first, in which there is no preferential trade deal between the UK and the EU post‐Brexit, would see UK‐EU trade based on World Trade Organization rules, giving the UK complete freedom to strike a deal with Australia.

“This would allow Australia to push for the most aspirational trade agreement possible,” explains Associate Professor Melatos.

A second scenario — where the UK and EU do strike a post-Brexit trade deal — would serve to restrict the concessions that the UK could grant Australia in bilateral negotiations, most likely leading to a less positive outcome for Australia.

Luke O'Neill

Media and PR Adviser (Humanities and Social Sciences)