Tuesday, 17 January 2017

May's Brexit vision depends on the goodwill of Australians

Brexit Britain will cut itself off from Europe and 'turn to the world'. But does the world want them? In Australia, feelings are ambivalent.

This morning in London, Theresa May will make what is probably the most important speech of her political career.

The British people "voted to leave the European Union and embrace the world" she will say, outlining a vision for the UK to completely cut itself off from the EU and instead focus on rebuilding a globally-focused maritime trading empire. The first focus will be on the countries which share a monarch with Britain - Australia, New Zealand and Canada. 

I've been travelling through Australia for the past two weeks as part of a month-long visit, and I've been asking Australians how they feel about being part of Britain's glorious new trading vision. The reaction has largely been bemusement. But more on that later.

Spurned by EU partners

In her speech today, May w
ill finally acknowledge that the idea of ending free movement while remaining part of the EU single market, the strategy pursued by her government over the past six months, will never be accepted by the other 26 EU countries. The UK will go for a 'hard Brexit', she will say, cutting itself off entirely from the European Union.

But May will not present this as a defeat. Instead, she will present it as her government implementing the will of the people as expressed in the 23 June referendum.

“A little over six months ago the British people voted for change," the leaked text of her speech begins. "They voted to shape a brighter future for our country. They voted to leave the European Union and embrace the world. And they did so with their eyes open: accepting that the road ahead will be uncertain at times, but believing that it leads towards a brighter future for their children – and their grandchildren too."

Whether the British people had their eyes open on 23 June is a dubious claim. During the referendum campaign, leave campaigners such as Boris Johnson and Michael Gove repeatedly asserted that the UK would continue to be able to trade unhindered with the EU after a Brexit. They held up Norway as an enticing example, pointing out that it is not in the EU but is still part of the EU single market. They apparently were unaware that in return for that single market access, Norway has to pay into the EU budget and follow almost all EU law, including allowing EU citizens to live and work in Norway.

The common refrain was that "the EU needs Britain more than Britain needs the EU", and the assumption was that Brussels would be only too willing to make exceptions for the UK (giving market access without free movement obligations) in order to have access to the booming British economy. Over the past six months, those arrogant assumptions have been proven to be very misguided.

Even Nigel Farage, the bombastic leader of the UK Independence Party, has repeatedly held up Norway and Switzerland's status as evidence that Western European countries can thrive while not being in the EU (even though they are, for all intents and purposes, pseudo-EU members). As recently as 15 June, one week before the referendum, he cited Norway's example as he joined a flotilla of fishing boats sailing down the Thames.

If British voters backed Brexit "with their eyes open", as May claims, then the government might have been expected to have an actual plan for Brexit after the vote occurred. Instead they have spent the past six months dithering in Brussels trying to "have their cake and eat it too", as EU Council President Donald Tusk put it. If UK voters made a clear choice for a clean break with the EU, why have British negotiators spent the past six months trying to retain single market access as part of a Brexit deal?

The fact is that if the British public's choice was really so clear and well-informed, May would have made this speech six months ago. That she is making it in January 2017 shows just how much nobody had any idea what Brexit meant last June, and still don't today.

"Leave the European Union, and embrace the world"

The pound fell to its lowest level in three months yesterday on the news that May would confirm a 'hard Brexit' future for Britain. But for the business community there is at least some comfort in the fact that she is finally acknowledging the 'hard Brexit or no Brexit' choice ahead. She will insist today that the UK must forge ahead and create new free trade agreements with the rest of the world. The assumption is that this should start with the commonwealth realm countries of Australia, New Zealand and Canada.

This 'trading bloc on which the sun never sets' has long been the fantasy of Farage's UK Independence Party and Eurosceptic Tories like Daniel Hannan. And over the past days, there have been some positive noises coming from Oceania that Australia and New Zealand might be up for it. 

On Friday, following a meeting with May, New Zealand Prime Minister Bill English said he hoped that his country can negotiate a "high quality" free trade agreement with the UK "as soon as possible". "We already have a strong and diversified trading relationship with the UK and a free trade agreement will build on that," he said.

Also last week, former Australian prime minister Tony Abott, who urged the UK to remain in the EU during the referendum, changed his tune and said that Australia should adopt a "one page" free trade deal with the UK that would include freedom of movement, allowing all Australians to live and work in the UK and vice-versa.

All this might seem to be encouraging news for May. But here's the rub: no such free trade negotiations can begin until the UK has completely left the EU, which will be in Spring 2019 at the earliest. English stressed that such negotiations could only take place "when the UK is in a position to do so" and "after the exit is completed". 

It remains to be seen why New Zealand would be so keen on a free trade deal with the UK in any event, aside from political pressure from London. The country is already starting negotiations for a free trade deal with the EU, a market that, post-Brexit, will be eight times the size of the British economy. Trade between the UK and the New Zealand currently amounts to €3bn per year, compared to €8bn with the EU.

As for Abbott's comments, they are more about domestic political opportunism than a serious policy proposal. Abott was unseated by the current Australian prime minister Malcolm Turnbull in 2015, and he is eager to claw back into power. It is easy for him to make grand assertions about a future trade arrangement now, because he's not in power.

The reality is that any such arrangement would be hugely complicated, not least because of the preeminent place China has taken in Australian trade. It is doubtful that China would be OK with a UK-Australian trade pact, and Australia cannot afford to upset the relationship with its most important trading partner. This is likely why Turnbull has remained relatively silent on the idea of any future trade pact with the UK.

Canadian Prime Minister Justin Trudeau has also been silent on the idea. He has just completed negotiating a free trade deal with the EU that took a painstaking seven years to achieve. Now, it looks like the UK will not be part of that pact. Does Canada really want to begin another such painstaking process with the UK? Probably not, considering its trade with the UK is peanuts compared Canada's trade with the US and EU.

Imperial nostalgia

The fact is that the idea of a UK turning its back on Europe to 'rejoin the world' is being fuelled more by emotion and nostalgia than by economic realities. For the commonwealth realm countries, as well as for the United States, the UK doesn't have a huge amount to bring to the table economically. Instead, the Brexiteers are banking on cultural ties to seal the deal.

But how much connection do people in these countries still feel with the British? In the United States the answer is fairly obvious. The term "special relationship", famous in the UK for describing a close bond between the US and UK, is unheard of in Washington. These days the UK is largely an afterthought for US trade policy. During the Obama years, the focus was much more on Germany. Obama made it quite clear where he thinks Brexit Britain will go (to the back of the queue for any free trade deal). Despite some rather empty warm words, there isn't much indicating that Donald Trump is particularly keen on a free trade deal with the UK either - especially given that his whole campaign was built on attacking free trade.

That leaves the commonwealth realms, those countries which still have (largely ceremonial) governmental connections with the UK and separated in much more recent history. Are they keen to re-establish a global commercial empire?

Britain down under

This is my first visit to Australia, and one of the things I was most curious to observe was just how much this country felt like being in the UK. I've always been a bit ambivalent about visiting here because I felt like it was a very long way to fly just to be in a culture that would feel very similar. But I decided to make the Australia part of a larger trip this year. 

I've heard Australians referred to as "British people with tans". But my Australian friends have always insisted to me that they have nothing to do with the UK.

As ever, the answer lies somewhere in between. Yes walking around in Sydney did feel a bit like I was in a British town during a heat wave. The people look similar. There are familiar British chains on the high streets - even the British health insurer BUPA which I used to have when I lived in London. The posh Australian accent is indistinguishable from a British accent to me. At night the pub culture is very familiar, including the pervasive problems with drink-fueled violence. 

The music on the radio and in clubs is distinctly British, playing songs that never came to America and some which didn't even leave the British Isles (I've heard S Club 7 a number of times). The television shows have a huge crossover with UK programming, in a much more bilateral fashion than with American programming. I do have to conclude that it feels a bit like being in a far-flung corner of the UK, cut off by miles of ocean.

But based on my conversations here, the fact is that no matter how British Australia appears to me, people here do not feel British - at all. Nobody has liked hearing my observation that being here reminds me of when I lived in the UK, indeed they have bristled at the suggestion that they are anything like British people. 

"Obviously that's where we came from so there will always be similarity there, but trust me, we don't spend a lot of time thinking about the UK," one Australian in Sydney told me. "These days we're much more focused on Asia, especially in terms of the economy."

He dismissed the idea that Australians are eager to join a free trade pact with the UK as "laughable". "I've never heard anyone complain that our trading with the UK is inhibited because of the EU," he said.

Another person I met said the idea was "typical of British arrogance".

If May's Hard Brexit vision relies on a feeling of common culture and shared destiny between the English-speaking peoples of the world, based on my conversations I think she is in trouble.

And if she can't even manage to secure quick free trade deals with the low-hanging fruit of the commonwealth realm, the British economy is really in trouble.

A successful post-Brexit Britain will rely on these old ties to stop it from becoming an isolated, struggling island. Now, after all these years, it's up to the descendants of the British Empire to determine the fate of the motherland.

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