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Brexit: what it means for Australia

The Australia British Chamber of Commerce have been providing regular factual insightful updates on Brexit, they also hosted this excellent event at the start of March 2019. 

You can sign up for regular updates and you don’t need to be British to join up. 

Here are my notes from the event. 

THE BACKSTOP

The biggest stumbling block to brexit is the “backstop” and how to prevent the return of a hard boarder between Northern Ireland and the Republic of Ireland. 

The completion of the European Single Market in 1992 meant that checks on goods were phased out. However, during the Troubles in Northern Ireland, there were British military checkpoints on main border crossings and UK security forces made some, although not all, of the remaining crossings impassable. In 2005, in phase with implementation of the 1998 Good Friday agreement , the last of the border checkpoints was removed.

Options to resolve the backstop issue include:

Northern Ireland to remain in the EU, however the DUP are absolutely against this.

Implement a Technological border, which is essentially a border but no checkpoints and will use technology (which hasn’t been invented yet) to remotely scan goods in transit at the border.

THE DANGERS OF NO DEAL

With campaigns to remain and to exit, there’s still a great focus on exiting with a deal, this has already resulted in Britain being granted an extension of no longer than 30 oct 2019 but sooner if a deal is in place. 

With extensions comes uncertainty The chief of the German Confederation of Industries has said “ let them crash out so they have certainty rather than the current uncertainty”. 

There are deals and agreements currently in place or in progress between the city of London and EU financial institutes because there is £41 trillion caught up in clearance houses in city of London which needs to be protected. 

There are also rumours in Brussels that a major hedge fund is betting on a certain outcome & they can cash in. we should not discount such opportunistic activity. Eg.-The Greek crisis was made worse by hedge funds betting on an outcome. 

SOCIETY

Consider the impact this has already had on UK society, it has become a major people divide and it’s felt that whether Britain stays or leaves society will remain polarised. 

If brexit occurs and the economy takes a hit as forecasted,

The remainers will say "I told you so"

The Brexiteers will say"you lot ruined it for us". 

The country is now so divided that a new referendum probably wouldn't solve it.

TRADE

There are approx 750 international trading agreements between the EU and the rest of the world, if the UK exits without a deal then these would effectively be lost, this would be like a country having to start from scratch re negotiating deals with the rest of the world. 

While UK and AUS are not able to negotiate a free trade agreement until after the exit occurs. What they are able to establish are mutual trade agreements (MRA) which essentially mean that current agreements will remain in place after the exit, they will roll over.

It must be noted that the UK has been in the EU for 40 years and has therefore been unable to negotiate it own trade agreements. Australia on the other hand has plenty of experience. The USA has very tough negotiators, this puts Australia as a likely option to negotiate with first.

The UK’s top 2 countries for exporting is the USA and China, the remaining 8 of the top 10 are in the EU however the value of these is much less in comparison. POST BREXIT TRADE 

A hard brexit will result in the most chaos. What does it mean for Australia? not much change because we have a MRA in place however border checkpoints with having to process goods under new regulations which will be unknown initially will slow things down.

EU is a trading block , and it's hard to be on the outside of a trading block therefore UK organisations need to prepare for a massive amount of process and bureaucracy, thee will be no change for Australia trading with the UK however the increase in regulations for EU goods entering the UK will create delays at customs which will have a impact on the Australian goods passing the same way.

Shipping goods from Australia to the EU will be the same, shipping to the UK will be slower until new processes are bedded down. Now that article 50 has been extended, the period in which we are unable to negotiate a trade agreement also extends .