Post-Brexit Britain: now real work starts for Boris Johnson

It took the British 10 years just to get into the European economic club and for almost five decades they have been awkward Euro­peans.

This is because British leaders have viewed the whole project in solely transactional terms, constant­ly quizzing whether they were getting less out of membership than they were putting in, rarely championing the purpose.

Boris Johnson’s resounding victory ends that unsatisfactory relationship. But jettisoning Eur­ope­ still leaves open what kind of economic and trading relationship Britain wants — and will obtain­ — as it now goes it alone.

In the short run, both a phased orderly exit or an abrupt disorderly one is predicted to be costly. On British Treasury figures­, anywhere between 3.9 per cent and 9.3 per cent of the domes­tic product is expected to be “lost” over the next 15 years.

This may be offset by possible investment surges if, for example, Britain and the US can tie up a substantial new trade deal in record­ time. The omens look good as the personal and political interests of the America First President and Brits First Prime Minister are closely aligned.

Poorer productivity is the unspoken problem that cannot be easily dodged once euphoria from election victory dies down. Why? Because the British economy is currently so heavily integrated into EU markets, and a significant fall in that trade and investment necessarily slows down comp­et­itive forces in the domestic economy.

Fortunately, the British economy is fairly diversified (with the notable exception of the financial services sector), so the effects will be widely and hopefully thinly spread. This is in sharp contrast to where Australia would find itself if there were a rupture in its trading­ relationship with China, which is large and concentrated.

Managing an advanced industrial economy is all about different ways to expand productive capacity. Both trade and investment and frictionless migration flows are significant and reliable ways to influence that capacity. Technology transfer is another. But we would be naive to write off Britain just yet, as there are at least three bright points on the horizon.

The first is exploiting the upside­ that trade and investment liberalisation can bring. A single EU trading relationship with the rest of the world hasn’t always been best for Britain’s businesses, as its specific interests have had to be absorbed into a larger assessment of EU members’ interests.

Making one’s own free-trade deals means that Britain’s comparative advantages are much better able to complement those of, say, Canada, Australia or India. Since these are well known, the task is mainly about diplomatic persuasion of these allies and friends that post-Brexit Britain is a reliable friend and partner.

Secondly, international affairs are often about using trade treaties to send signals about countries’ preferences and prejudices — India remains preoccupied with its perceived threats of RCEP, a regional Asian trade tie-up that it has not signed up to.

Meanwhile, Australia and Canada are both conscious that they will lose a sympathetic ally in their respective EU free-trade agreement ­negotiations. This is why they will not want Britain to diverge too far from EU rules.

Notwithstanding sending signals­, or possibly because of such signals, Australian officials are alive to a potentially attractive “fit” with Britain. For example, both countries boast assets in higher education and advanced technology (reflected in vibrant international student markets, sizeable research mobility investments and nationally led strategic investment funding pools).

The UK Research and Innovation agency has already reformed much of the country’s domestic research funding architecture and wired this into the operational priorities of Britain’s Department of International Trade.

A really big coup would be to figure out a way to make both Britain and Australia succeed in Asian markets beyond China. The “India is too hard” belief of some large Australian businesses holds back potential investment. This could be re-boosted by the British desire to reframe its relations with India, seeing complex­ity as an opportunity.

Australia already has a head start in Britain’s global assessment of post-Brexit trade liberalisation. The trick is for both parties to take a serious approach to the markets that lie beyond by jointly focusing on Asia.

Thirdly, despite appearances, Johnson’s government itself shouldn’t be underestimated. The self-declared gifted amateur ­politician is in reality more a tactic­al technocrat.

His two terms as London’s mayor were marked by the skilled (and expensive) team he appointed around him who successfully delivered on core issues. In scarcely six months, his No 10 team have defied the odds to get an EU withdrawal deal that will soon get parliamentary backing and decimated his political opponents electorally for a decade.

The task now is to apply his energ­y to securing fresh trade deals that complement British economic strengths, prioritising larger markets in Asia and recognising that deals are often as much about diplomatic sentiment as cold economic analysis.

Almost 60 years ago, Dean Acheson, then America’s foreign policy supremo, said Britain had “lost an empire and had not found a role”. His remarks came just as Britain had filed its application to join the then European Economic Community, motivated by an economy falling behind its competitors. The resounding mandate won by Team Boris now has the best chance in my lifetime to tackle Acheson’s challenge.

Professor Shamit Saggar is director of the University of Western Australia Public Policy Institute. He was an academic in Britain with roles in regulation and commerce, as well as a stint as an adviser to former prime minister Tony Blair.