A British-Australia Free Trade Agreement? Focus on immigration

Reports suggest a formal Free Trade Agreement between a post-EU Britain and Australia is a strong priority for both countries. Despite the relatively small two-way trade between Britain and Australia (~$20 billion compared to $64 billion for the U.S. and $150 billion for China), the political logic behind a deal is easy to see.


Britain would get a ‘quick win’ in a post-EU world, in an attempt to demonstrate the cost of leaving the EU is not as bad as some are predicting. Of course, this is likely wishful thinking but Prime Minister May will take whatever is on the table. When Japan kicks off the pre-negotiation tactics with a lengthy screed about the difficulties ahead, the comfort of Commonwealth countries must seem appealing. Apparently Australian negotiators will even help out the British side given their lack of skilled trade negotiators workers. Maybe we’ll finally get a good deal?

Malcolm Turnbull would get to show how his Government has a broad trade agenda – from Europe to Asia – and is able to grasp opportunities when they come along. Think agile. Compared to Indonesia and India, actually negotiating a deal with Britain will be quick and mostly straightforward. Aware Andrew Robb under Prime Minister Abbott was able to sign three such agreements, regardless of their policy merits, Turnbull recognises action on the world stage fills a vacuum.

But if two-way trade is not a big deal, what exactly will the agreement cover? From Australia’s perspective, it is clear the top priority should be immigration.

Australians have traditionally had decent access to living and working in the United Kingdom. However since 2010, the Cameron Government, led by Theresa May as Home Secretary, made a meal of immigration policy. In an impossible attempt to limit total net migration, all sorts of new rules and caps have been imposed. This has left many Australian citizens high and dry with thousands more facing the prospect of leaving after an initial two year stay even if they meet the eligibility requirements for relevant visas.

In contrast, British people who want to live and work in Australia face few barriers. Unlike Britain, Australia does not cap the working holiday program for British nationals. Also unlike Britain, Australia does not cap the temporary skilled work visa for British nationals (or any other nationals). Australian permanent residency permits outnumber British despite a population which is three times smaller.

All of this means the Australian Government should extract as much leeway as possible to allow Australian nationals better immigration pathways to Britain. This will achieve two positive outcomes.

The first is the more obvious. Creating the possibility and option for more Australians to live and work overseas is a great thing for both Australia and the countries they migrate to. People-to-people links are an intrinsically good outcome, particularly when they can overcome bureaucratic and cultural barriers. Migration links countries together in a manner trade and capital flows cannot.

The second outcome is more important from a global perspective. While Brexit signals a United Kingdom which is less open to the world than in the past, the decisions made by the May Government in the coming years will cement the magnitude of this worldview. If Australia is amongst the first countries to sign a Free Trade Agreement, one which highlights immigration is not an option for the British but a necessity, this will lay a strong foundation for other countries to build upon. The global public good from action on immigration may end up outstripping the marginal impact of change in British trade behaviour.

Leader of the United Kingdom Independence Party Nigel Farage holds a placard as he launches his party's EU referendum tour bus in London

So what should the Turnbull Government put forward in these negotiations?

The starting point should be an exemption for Australians from the Tier 2 visa cap. This cap is an arbitrary limit imposed chasing an unrealistic policy goal. It creates chaos for Australians living in the United Kingdom because of the uncertainty. Will there be a visa available? Who knows. By directly challenging the validity of this cap, Australia can show how the ad-hoc approach to migration policy is not an option for a country wanting to keep its seat at the table.

Next on the list should be an Australian exemption or reduction from the Tier 2 visa salary floor, a sky high 35,000 pounds (~$61,200 AUD). Given lower wages in the United Kingdom, this is considerably larger than the Australian salary floor of $53,900. For example, the minimum wage is 7.20 pounds, or $12.60 AUD. A salary cap at this level imposes restrictions which go above and beyond labour market requirements. It is instead a regulation designed to limit immigration and should be called out.

And if the Turnbull Government is really feeling bold – which they should be given the British will be under immense pressure to finalise agreements – they should propose formal biennial immigration roundtables at the highest level. This would show Turnbull knows the historic approach to trade negotiations is dead given the realities of the 21st century and working out how to build institutions to better manage immigration and labour mobility is crucial for bilateral relationships.

Each of these demands in a formal trade agreement negotiation would signal to Britain immigration isn’t simply something you can turn on and off like a tap. It is fundamental to how countries engage with the rest of the world in this day and age.

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