Australia’s Trade and Investment Relationship with the United Kingdom

In December 2016, ABIE France was invited by the Joint Standing Committee on Foreign Affairs, Defence and Trade (JSCFADT) to contribute a submission from a European business perspective on the possible trade implications of Australia’s trade and investment relationship with Europe from the UK leaving the EU.

The Australian Minister for Trade, Tourism and Investment, the Hon Steven Ciobo MP, has referred the inquiry into Australia’s trade and investment relationship with the United Kingdom (UK) to the JSCFADT for examination and report to the Parliament of Australia.    The inquiry is being conducted by the JSCFADT’s Trade Sub-Committee.

Further details about the inquiry, are available at www.aph.gov.au/jfadt.

ABIE France’s submission has been published by Parliament and can be viewed here.

Australian Business in Europe (France) Submission to the Trade Sub-Committee of the Joint Standing Committee on Foreign Affairs, Defence and Trade, Parliament of Australia

  1. ABIE France

Australian Business in Europe, ‘ABIE’ – France is a not-for-profit business association that brings together companies and professionals who have Australian interests and connections.

With over 100 corporate, business and individual members, ABIE France helps strengthen business links between Australia and France and furthers members’ interests in France and Europe. It provides a forum for companies and individuals to engage with Australian Federal and State Government representatives and business experts and to forge business relations.

  1. Focus of submission

ABIE France wishes to alert the Parliamentary Inquiry to opportunities presented by the Brexit for enhancing trade and investment between France and Australia and to highlight some of the current barriers to greater trade and investment.

  1. The Brexit

With a population of over 430 million post-Brexit, the EU is an important partner for Australia.  The UK’s recent White Paper estimates that the Brexit negotiations will take up to two years.  Conversely Australia and Europe are preparing to negotiate an FTA this year.  The EU will be incentivised to negotiate mutually beneficial terms with Australia prior to the finalisation of Brexit.   Conversely, the UK will prioritise a tariff free FTA with the EU and will not be incentivised to provide favorable conditions for third party countries until an FTA is concluded with the EU.

Australia is well advised to pursue a comprehensive FTA with the EU as a priority.

 

  1. Developing a strong European business capability

Australian companies with subsidiaries currently headquartered in the UK will consider setting up in the EU in order to access EU business post Brexit.  ABIE France considers this an important evolution for Australian business, enabling a better understanding of European know-how, business culture and opportunities.

There is a perception held by some Australian companies that English is the only necessary business language in Europe.  This significantly limits capability.  Australian business must diversify and strengthen its European language and cultural capability in order to unlock opportunities and learning.  Australia must recognise that Europe is an important market beyond financial terms.  It is a highly sophisticated market offering an important alternative to “Anglo-Saxon” markets. Better engagement is important for the advancement of the Australia’s knowledge economy.

The Australian Government has successfully attracted French companies to establish in Australia. ABIE France sees the advantages of seeking better reciprocity to enable Australian companies to develop a strong European capability.  Australian companies and organisations perhaps underestimate the value they have to bring to the European market.

  1. Mutual development opportunities

France has advantages which are not well understood by many Australian businesses.  The perception of France as a difficult place to do business (notably due to distance, time zones and complex employment and tax laws and bureaucracy) overshadows strong reasons why Australian companies are well served to explore opportunities in France.

Australia and France have complementary needs, skills and strengths.  France is the world’s fifth largest economy.  It has excellent infrastructure and a highly skilled workforce with strong innovation, particularly R&D, capacity.  Paris remains one of the cheapest global cities.  Certain sectors have tax advantages including favourable conditions for start-ups. French start-ups are agile and creative and often looking for international partnerships in order to globalise. They are created by some of the best engineering and commerce graduates in the world. French entrepreneurs and businesses bring an intellectual and scientific rigor which Australian companies benefit from.  Australia has one of the most sophisticated regulatory systems in the world and some of the most creative start-ups. Our collaborative approach to R&D is a source of great interest internationally.  Our geographic proximity to and knowledge of Asia are attractive for French business and should be better promoted in Europe. Australia has an easy, common sense driven approach to business and a strong culture of mobility, effective people management and continuous improvement which French companies benefit from.

Australian and French businesses have much to gain from partnering with each other.  Further, a more profound understanding of European business innovation is important for Australia’s evolution from a primary resources economy to an innovation economy.

  1. Lack of visibility

ABIE has been approached by Australian companies unsure about their ability to tender for European government contracts under the various EU and WTO procurement rules.  Many companies are not well progressed in their understanding of the opportunities for Australian business in Europe.  The FTA process should work to overcome this information barrier.  It should specifically consider the case of SMEs and Australian start-ups partnering with European business.

ABIE encourages consideration of the Australian Government’s role in better facilitating Australian businesses to thrive in Europe through language and cultural exchange and visibility on business opportunities and procurement conditions – particularly for SMEs that are not well connected.

  1. Reciprocity

Stringent EU laws and bureaucracy in certain sectors (e.g. travel) make it difficult for Australian companies to establish local subsidiaries in Europe.  However,  with the Brexit and the recent DCNS submarine deal, the timing is good to push for greater advantages for Australian companies in Europe. As noted above, French infrastructure and defense companies are increasingly privileged in Australia and the Australian Government should consider how better reciprocity can work in France, country to country.

Reciprocity or mutual recognition can be much broader than currently envisaged, looking at a range of business models, as well as including reciprocity for (eg.) tertiary qualifications in sectors such as medicine, law and IT in order to facilitate the exchange of employees.

  1. Conclusion

The success of a growing number of French companies in Australia demonstrates the enormous possibilities for the Franco-Australian business relationship both at home and in Europe.  ABIE France encourages the Parliamentary Inquiry to consider ways to capitalise on the Brexit, the FTA process and the strong French interest in Australia so that Australian business, large and small, can do more in Europe.  We consider this to be important for the Australian knowledge economy as a whole.