Aftershock in Brussels post Brexit

14 October 2016

Outgoing Deputy Head of Mission to the European Union Nicola Gordon-Smith shares her experience at post in the wake of the Brexit decision

What have been the repercussions of the Brexit decision in Brussels?

The UK’s vote to leave the EU was a shock to Brussels.  There's detail now about how the process of separation will work but the sense of shock on the morning after the vote was quite palpable.

The economies of the 28 EU member states are deeply integrated.  There are 170,000 pages of ‘acquis communautaire’, that is, law which the 28 states have developed together and cover just about every aspect of government.  The UK is going to have to develop its own policies and settings for all those matters where it currently applies the collective EU policy, for example, on tariffs, competition, food standards and agricultural support.  Extracting the UK from such extensive integration is going to be complicated.  Until the withdrawal is completed there will be uncertainty.  The economy, business, investment – none of them likes uncertainty. The longer the uncertainty persists, the worse the consequences.

Do you expect Brexit to affect Australia's trade relationship with the EU?

Australia and the EU had already committed to work towards beginning negotiations for an Australia-EU FTA. In November last year, Prime Minister Malcolm Turnbull met President of the European Commission Jean-Claude Juncker and President of the European Council Donald Tusk in the margins of the G20 Leaders meeting in Antalya, Turkey.

Since the exit referendum the EU has repeatedly assured us that it is 'business as usual' in terms of the EU trade agenda. Now it's difficult to see there being no change, no impact, because of all the work that'll have to be done on Brexit but, if any of our partners are well placed to manage, competently, multiple, complex negotiations it is arguably the EU. And it is important that the EU is signalling its intention to hold to its commitment on the FTA.

What will be Australia's priorities in Europe following the decision?

We will have to work out how we're going to engage with the EU.  We have, often times, looked at the EU through a UK lens.  It has been easy and comfortable for us to do so.  But this is not going to be available to us in future. We'll have to find other ways by which to view and interpret the EU and its business, including necessarily through strengthened relationships with other member states.

The IMF is gloomy about global outlook, trimming global growth forecasts for 2017 by 0.1 per cent in the wake of Brexit. Is it all doom and gloom?

It is difficult to paint a rosy picture.  So much will depend on the detail of the agreement the EU and UK negotiate for their future relationship.  There will necessarily be changes to the EU.  The Brexit vote and the hot debate in Europe surrounding the Transatlantic Trade and Investment Partnership negotiations reflect the deep frustrations of the "losers" from free trade.  There will be elections in Germany and France next year and there's concern in Europe that those may trigger similar expressions of popular protest.  This concern has pushed inclusive growth and employment way up the EU's agenda.  I think that is an issue we are going to hear a lot more about.  Leaders will have to respond to voters’ discontent with credible, meaningful reform.  So there is opportunity at least for something other than doom and gloom.

What opportunities are there for Australian business in Europe?

The EU is a very significant trading partner for us.  You will have heard it said often, because it's important, the EU, as a bloc, is our second largest two-way trading partner in goods and services. A big chunk of that is with the UK but a far bigger chunk, by a factor of almost 3:1, is with the remaining 27 member states.  The EU, even without the UK, is a large, sophisticated market of some 440 million people which holds great opportunities, especially across the broad range of services industries.

What are the barriers to trade in the region?

Simply put, the absence of an FTA.  Almost every other country or region has, or is negotiating, an FTA or other preferential access arrangement with the EU.  Without one we're at a disadvantage.

In your time in Brussels what were the biggest trade gains or what were the noticeable shifts in trade?

It's difficult to have a clear picture on services because of the relative lack of data but anecdotally, there's a strong story there. On a couple of specific commodities, Australian almond exports have increased from $49 million in 2012 to $225 million in 2015. This growth has been achieved by the work of the industry, supported by the Department of Agriculture and Water Resources, to meet strict EU standards.  And Australian beef producers have been doing really well in valuable access for their high quality product.  The sector invested a lot in quality assurance systems in order to get that access.

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Last Updated: 14 October 2016
Nicola Gordon-Smith
Nicola Gordon-Smith, Outgoing Deputy Head of Mission to the European Union