On 7 September 2020, Prime Minister Boris Johnson said:
“There needs to be an agreement with our European friends by the time of the European Council on 15 October … If we can’t agree by then, then I do not see that there will be a free trade agreement between us, and we should both accept that and move on. We will then have a trading arrangement with the EU like Australia’s.”
But what is the EU’s trading arrangement with Australia? And if there is no deal between the UK and the EU, would they trade on similar terms to Australia? This explainer answers these and other important questions.
Where does the idea of an ‘Australian-style’ EU relationship come from?
The notion of an ‘Australian-style’ Brexit was used in Prime Minister Boris Johnson’s speech at Greenwich in February 2020. In the speech Mr Johnson said, “The choice is emphatically not ‘deal or no-deal’ … The question is whether we agree a trading relationship with the EU comparable to Canada’s – or more like Australia’s.”
The 2019 Conservative manifesto made no mention of either a Canada- or Australia-style arrangement, but simply committed to negotiating ‘a trade agreement’.
This is not the first time politicians have looked to Australia for inspiration. The Conservatives have also used the phrase an ‘Australian-style points-based system’ to describe their new post-Brexit immigration system. This was a phrase also previously used in the 2010 Labour manifesto.
What agreements does Australia have with the EU?
Australia has agreements with the EU related to trade, but it does not yet have a comprehensive free trade agreement in place; indeed, it has been negotiating one with the EU since July 2018.
The bulk of EU-Australia trade is currently done according to World Trade Organisation (WTO) rules.
But they do have other agreements in place, on trade and other issues:
- framework agreement: in 2017, the two sides reached a so-called framework agreement (which is yet to be ratified) that establishes general principles of cooperation on a wide range of areas including trade, foreign policy and security, and development and humanitarian issues, among others;
- EU crisis management operations: in 2015, the two sides reached an agreement to allow Australia to participate in EU crisis management operations;
- passenger name records: in 2012, the two parties reached an agreement on the transfer of EU passenger-name records (PNR) to Australian border authorities to help combat crime and terrorism;
- mutual recognition agreement: also in 2012, they updated their existing mutual recognition agreement (MRA) for conformity assessments, certifications and markings;
- classified information: in 2011, an EU-Australia agreement entered into force allowing the exchange of classified information;
- wine: an agreement on trade in wine was made in 2008;
- there are also other agreements on the peaceful use of nuclear energy and scientific cooperation; and
- Australia has many bilateral agreements with EU countries, such as on aviation, where it does not have an arrangement with the EU.
In short, EU-Australia cooperation extends well beyond trade.
Is an Australian-style deal just code for no deal?
Yes. Australia does not have a comprehensive free trade agreement with the EU, so the bulk of their trade is done according to WTO rules.
The same would be true of UK-EU trade in the event of no deal. In practice, this would mean tariffs being placed on many goods traded between the UK and the EU, alongside some quota restrictions and customs checks (Northern Ireland would be treated differently).
But the impact of no deal for the UK would not be limited to trade in goods. No deal would mean cutting all formal bilateral ties with the EU come January 2021, including in other crucial areas such as judicial and police cooperation.
By contrast, as discussed above, Australia has a series of agreements in place across a range of issues and is seeking a free trade agreement with the EU to improve on WTO terms.
The only bilateral agreement in place between the UK and the EU would be the Withdrawal Agreement reached by Boris Johnson in October 2019. Ultimately, without a deal the UK’s trading terms would be similar to Australia’s but the wider relationship would not.
How does EU-Australia trade compare with UK trade with the EU?
The EU comprises 11% of Australian goods trade and 19% of its services trade. Total EU-Australia trade amounted to around £111 billion in 2018/19 (at 2018 exchange rates).
For the UK, in 2018, the EU comprised 52% of its goods trade and 44% of its services trade. UK-EU trade is almost six times Australia-EU trade in terms of value, at £660 billion in 2018.
Australia’s main exports to the EU are raw materials, namely coal and gold, which make up two-fifths of its total exports to the bloc.
The UK exports a more varied range of mainly manufactured goods, such as cars, food products and pharmaceuticals. These latter are much more highly regulated industries and, although they would face tariffs in a no deal scenario, they would also encounter significant non-tariff, regulatory barriers.
By Matt Bevington, Public policy and foreign affairs analyst, UK in a Changing Europe.