As the 31 December deadline for a Brexit trade deal with the EU looms, Boris Johnson has again warned the UK to stand by for the possibility of an “Australia-style” deal. It sounds like something two countries that rely on international trade might reasonably want to embark on, but what would it actually mean?
What has Boris Johnson said?
The UK prime minister says it is a “strong possibility” that the “Australia option”, will be where Britain ends up.
“Now is the time for the public and for businesses to get ready for January the 1st, because believe me there’s going to be change either way,” Johnson said Thursday night, UK time.
“There will be change whether it’s a Canada-style deal or an Australia-style deal, but we certainly now need to make proper preparations for that Australia solution.”
Now is the time for the public and businesses to get ready for the Australian option on January 1st. pic.twitter.com/lLJfmIy9XI
— Boris Johnson (@BorisJohnson)
In October, Johnson claimed that due to the stubborn intransigence of the EU he had to conclude that the “Canada-style” trade deal he was seeking was not going to be successfully negotiated without a “fundamental” change in Brussels’ negotiating position.
What is an ‘Australia-style’ trade deal?
Australia deals with the EU mainly under standard World Trade Organization (WTO) rules – meaning a range of tariffs, quota restrictions and customs checks are applied to many traded goods – although it has spent two years trying to negotiate a more favourable Free Trade Agreement. There are also some unique agreements in place between Australia and the EU, such as concessions on wine imports, that would not apply under a UK-EU deal without further negotiation.
Downing Street began using the “Australia-style” term at the beginning of the year as a more palatable shorthand for a no-deal Brexit.
Carl Bildt, the co-chairman of the European Council on Foreign Relations, has said on Twitter that Johnson “probably thinks it sounds better like that”.
“Someone should tell him that Australia is actually busy negotiating a trade deal with the EU.”
How is Australia’s trade relationship with Europe?
On Thursday the former Australian prime minister Malcolm Turnbull described it as unsatisfactory during an appearance on the BBC’s Question Time, citing the very large barriers for agricultural exports in particular.
“Be careful what you wish for. Australia’s relationship with the EU is not one, from a trade point of view, that Britain would want.”
— BBC Question Time (@bbcquestiontime)
“Be careful what you wish for,” Turnbull said.
“Australia’s relationship with the EU is not one from a trade point of view … that Britain would want, frankly.”
The EU is Australia’s third largest trading partner, third largest services export market and third largest source of foreign investment, but the FTA negotiations show the Australian government feels it could extract much more value from its European trade.
The “Canada-style” deal, as Johnson terms it, which would have involved reduced tariffs on imports and quotas, appears doomed judging by his most recent comments.
He now appears to have pivoted to selling the benefits of the “Australia-style” deal (or not having a deal, effectively).
“It’s now a strong possibility, strong possibility, that we will have a solution that is much more like an Australian relationship with the EU than a Canadian relationship with the EU,” he said on Thursday.
“That doesn’t mean it’s a bad thing, there are plenty of ways, as I’ve said, that we can turn that to the advantage of both sides in the conversation, there are plenty of opportunities for the UK.”
The significant difference between Australia and the UK in relation to existing trade with the EU is the volume and type of goods traded.
Australia trades about 11% of its goods into Europe, most of which are raw materials, while the UK trades in more than half of its goods, including a far wider range of items.
The impact of the relatively unfavourable terms that exist between trading partners under WTO rules will therefore have a far greater impact on the UK than they do on Australia.