Having the Cake and Eating It Too: The Benefits of Decoupling Australia’s Trade Governance in Europe After Brexit and Beyond

Abstract

The process towards Brexit will impact on the entire global trading system and significantly influence the global value chains that rely on ease of trade and investment within a single European market. In light of this process, Australia with its high levels of international economic integration and interdependency of trade and investment to and from the European region, now faces a stark challenge in forging an economic position that best suits its national interests. This paper analyses the possible implications of Brexit on Australia’s economic governance position, with specific regard to the global value chains that rely on ease of trade and investments in the European single market. The exploration relies on empirical analysis that distinguishes between and disaggregates data on Australian trade and investment with the UK and the rest of the European Union. This analysis indicates that it is in Australia’s best interest is to prioritise a preferential partnership with the EU over a new free trade agreement with the UK. However, in order to maximise Australia’s position, the paper argues that, under the present political climate and technical difficulties, a multi-pronged and decoupled approach of concerted unilateralism with the UK and preferential bilateralism with the EU is best placed to enhance Australia’s geo-economic role in Europe in the post-Brexit era.