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Thursday, 19 October 2017
Page: 8089

Senator McKENZIE (Victoria) (15:37): I move:

That the Senate take note of the report.

The committee welcomed this opportunity to examine Australia's relationship with a country that is an important trading partner but also an old friend. There was a high level of interest in this inquiry, which received 72 submissions from across Australia and from the United Kingdom, Ireland, Australian businesses in France and Germany, and the academic community across the world. The committee also heard from 58 separate organisations and individuals during 13 public hearings, including diplomatic representatives from the United Kingdom and from British based witnesses appearing via videoconference.

The committee presents this interim report as a summary of its findings to date on the opportunities, barriers and challenges facing Australia's future trade and investment relationship with the United Kingdom. An obvious factor in this, which presents both opportunities and threats, will be Brexit, the UK's departure from the European Union, which will occur after a majority of British voters elected to do so in June last year. Consequently, the British government triggered article 50 of the Lisbon Treaty in March, formally opening a two-year window for negotiating Britain's exit from the EU, which expires in March 2019, now less than 18 months away. Evidence to the inquiry suggests that the outcome of negotiations between Britain and the EU over Brexit will largely determine the future parameters of Australia's trade relationship with the UK. The committee will present its final report and recommendations closer to the conclusion of those negotiations.

It does appear that the appetite for broader and more comprehensive trade links between Australia and the United Kingdom is deeply felt on both sides. In his department's submission to the inquiry, the British Secretary of State for International Trade, the Rt Hon. Liam Fox, said the UK sought 'to be a champion of free trade' and to 'share Australia's commitment to global trade liberalisation' and 'the benefits of open markets', as part of building 'a truly global Britain' that is 'a great, global, trading nation, and one of the firmest advocates for free trade in the world'.

The British High Commissioner to Australia, Her Excellency Menna Rawlings, echoed Dr Fox's sentiments, noting that, despite the huge geographical distance, 'When we arrive in each other's countries, we feel as if we're at home.' I noted that there are more expatriate Britons living in Australia than in the other 27 EU nations combined. It is indeed a significant relationship for both the UK and Australia.

The inquiry uncovered a desire for closer trade links on the part of Australian businesses and the primary-producer sector, with witnesses from a broad range of industries—including beef and sheepmeat producers, dairy producers, the wine sector, rice growers and sugar farmers—all eager to build on their existing commercial relationships in the UK and to increase their export volumes, if the changes ushered in by Brexit give them the opportunity to do so.

The committee heard that many of these industries and producers lost a lot of access to the British markets in 1973 when Britain joined what was then the EEC. Imports to Britain were subject to strictly enforced European quotas and tariffs that remain in place today. As a National Party senator, I know there has been a lot of debate over a lot of decades about the European cap when it comes to trade in agricultural products. The committee heard that beef exports have declined from 149,000 tonnes in 1959 to just 7,699 tonnes last year, out of a total export quota to the EU of a little over 20,000 tonnes. Sheepmeat exports over the same period fell from 47,000 tonnes to 12,000 tonnes last year, out of a total EU quota of roughly 16½ thousand tonnes.

Whilst the UK remains Australia's largest agricultural export market within the EU, this has declined since the UK entered the EEC in 1973 to just under one-half a per cent of all agricultural exports in 2015-16, valued at $727 million. By contrast, total Australian food and agricultural exports to the continental EU in 2015 were $2.3 billion. Exports in Australian wine, sugar, rice and dairy are also severely curtailed by EU quotas and tariffs that give preference to European suppliers. Even so, the UK today remains Australia's fifth-largest individual trading partner—two way it was $29 billion in 2016. Our current trading relationship with the UK is robust, with other key Australian exports including precious metals, stones and jewellery, and pharmaceuticals.

In 2016, a third of all Australian wine exports were sold to the UK, making it our No. 1 export destination by volume, with 236 million litres of Australian wine exported, earning $355 million. I know that Eliza Brown from All Saints Estate, in the Rutherglen area, in my home state of Victoria, held a function for women in wine at the Australian High Commission just last month, celebrating and building on the fact that this is such a significant export opportunity for not just my home state but our entire nation.

The UK was Australia's second-largest two-way services partner in 2015, accounting for $12.3 billion, or 8.6 per cent, of total services trade. In 2016, services exports to the UK were valued at nearly $5 billion.

The UK's pending departure from the EU poses uncertainty in terms of Australia's trade relationship with Britain and where potential new opportunities that Brexit may create are concerned. Submissions and evidence to the committee also suggested that the UK's standing as a trading partner may be inflated on account of businesses using the UK as a gateway to access the larger continental EU market.

Negotiating Brexit also poses challenges for Australia's trade relationships with the EU, given Australia and the EU have commenced a process to explore the negotiation of an Australia-EU free trade agreement. I know the chair of the joint committee was in the EU recently and came back very energised and excited by the potential that an EU-Australia trade agreement and the commencement of those negotiations, beginning hopefully later on this year, will provide in terms of opportunities.

The May 2019 deadline for resolving Britain's exit from the EU, according to evidence heard by the committee, may be extended as negotiations between the parties continue and possibly more than once. Australia will not know the implications until the negotiation is finalised, and whether it will be a hard or a soft Brexit will have impact on whether the UK will retain access to the EU common market or customs union.

Under provisions of article 50 of the Treaty of Lisbon, the UK is prohibited from negotiating trade deals with third-party countries such as Australia until that Brexit takes effect. Agricultural issues, particularly concerning Ireland, the largest EU supplier of beef and dairy goods in the UK, will influence the complexion of any UK-EU settlement and later trade arrangements made by the UK with third-party countries.

The committee heard that any change in Ireland's trade relationship with a post-Brexit Britain could have knock-on effects that extend well beyond questions of trade arrangements—for example, the genuine goodwill underpinning the Irish peace process after decades of sectarian violence could be severely tested or damaged if Irish interests were seen to be harmed once Britain had left the EU. Today, 67 per cent of British beef imports originate in the Republic of Ireland, which is also Britain's largest supplier of dairy products. The example illustrates the difficulty Australia will face in getting a better deal for its beef and dairy producers, even after the EU tariff and quota regime no longer applies to the UK.

Evidence to the committee suggested the UK may simply revert to World Trade Organization rules rather than negotiate specific bilateral or multilateral trade deals, raising further uncertainty over the shape of Australia's future trade dealings with the UK, particularly in these contested markets. Given Australia's pursuit of free trade agreements with major trading partners over the past decades, including the USA, China, Japan and South Korea, the exploration of free trade agreements with both the EU and a post-Brexit UK offers a consistent approach to Australian trade policy, which seeks outcomes that are mutually beneficial to all stakeholders.

From the committee's perspective, the timing of the UK's departure from the EU is entirely coincidental with the scoping work and ongoing development toward a free trade agreement between Australia and the EU. Evidence to the inquiry suggests that our negotiations with the EU are gaining momentum, and we note the developments following the minister for agriculture's visit and the completion of a scoping study. The committee is of the view that the Australian government should continue its trade negotiations with the EU as a priority, and that, while it is encouraging that Britain is signalling its willingness to enter a new partnership, we will have to wait a period of time before it is able to commence those negotiations proper.

In conclusion, the committee has heard evidence regarding a diverse range of issues. Future reports by this inquiry will consider these in more detail, as complex issues concerning the UK's withdrawal from the EU are resolved and the situation for advancing Australian trade interests become clearer. I commend the report to the Senate. I seek leave to continue my remarks later.

Leave granted; debate adjourned.