Wednesday, 28 March, 2018
18:00 - 19:30
Policy Exchange was delighted to host the keynote valedictory speech of Hon Alexander Downer as High Commissioner of Australia. Mr Downer praised British leadership in responding to Russia, saying “Not only did the British Government react robustly to the chemical weapons attack in Salisbury but it has brought to bear the power of Britain to corral the great network of Western allies at long last to stand up to Russian intransigence”. He also reflected on the opportunities for free trade after Brexit. Mr Downer is Policy Exchange’s incoming Chairman.
My four years as Australian High Commissioner in London have been to say the least a wonderful experience. As I have so often said to others, this is not the most senior job I have ever had but in many respects it has been the best. London is not just a great city. In so many ways it remains the capital of the world: in finance, the performing arts, sport and sheer intellectual gravitas.
I would regard myself as a political junkie: as someone who loves almost any manifestation of politics and political combat. How lucky I have been during my time in the UK to have experienced two referendums and two general elections.
The chances are my successor will serve his three years without a referendum or a general election. We’ll see.
I hope you will not regard me as being too presumptuous in making a handful of observations about the UK and its politics. I wouldn’t normally do this as a diplomat, but since my time as a diplomat has just a month to run I thought I might take a bit of a risk. Some of you I know will disagree with what I have to say. But please do not retreat to a safe space, be prepared to argue with me. And please do not blame the Australian government for what I say.
Some of you may know that my father was the High Commissioner in London between 1964 and the end of 1972. For him, very much a son of the British Empire, this was a sad period. In the late 1960s, the Wilson government decided to withdraw from east of Suez. My father saw this as the ultimate statement of British decline. Britain no longer wanted to be a great global power and was retreating into a regional player.
For his generation, the decision by the British government to join the EEC was the ultimate symbol of British withdrawal from the world to Europe. At the practical level, Australian exporters suffered grievously as a result of Britain joining the European Union. But also, over the following decades, British trade progressively diverted away from markets like Australia to Europe.
And then there were visas. Gradually, the British government gave preference to European Union nationals over Australians, Canadians and New Zealanders. Given the heritage of so many Australians, I think you can imagine how people like my father felt about this.
All this was encapsulated in a remark Roy Jennings made to my father. During a heated discussion at a function at Hampton Court over Britain’s diminishing role in the world and links with its traditional family countries, Jenkins angrily shook his fist at my father and said “I have no time for kith and kin politics“.
It is an incontestable fact that over those years since the late 1960s when Britain withdrew from east of Suez and eventually joined what is now the European Union, British foreign policy focused much less on the world beyond Europe. Some in the Foreign and Commonwealth Office will disagree with this. After all, the UK was an active participant in the Iraq and Afghanistan wars.
Well, I was the foreign minister of Australia for very nearly 12 years. Never during that period did a British Foreign Secretary choose to come to Australia. And my personal observation during my time as foreign minister was that Britain seldom became engaged in major issues in East Asia and the Pacific.
So when I arrived in London as the High Commissioner, I did so with low expectations of the priority Britain would give to Australia and an Australian High Commissioner. As it turned out, I was wrong. For a start I received a very warm welcome from ministers and senior officials in London. Within two days of being in post, then Foreign Secretary William Hague called me to his office and gave me an hour of his valuable time.
But there was something else I discovered very quickly. The great mainstream of the British public had a huge affection for Australia. For all the redirection of British foreign and economic policy since the late 1960s, the public remained firmly attached to relations with countries like Australia, Canada and New Zealand. Of course they see us as sporting rivals – or something worse these days – but there is that sense of family exuded by the British public towards us that does not translate to other relationships beyond Canada and New Zealand.
I noticed this very early on in my time in the UK as I travelled around the country. For most of you, this is not a particularly important observation. But having been a politician for many years myself, it made me wonder whether there wasn’t some kind of serious disconnect between the opinions of the mainstream of British society and the elites who dominated the nation’s major institutions – the Parliament, the Civil Service, the BBC, the media, academia and even parts of the professions.
My second observation of the UK after I arrived four years ago was that the way immigration and ethnic relations had been handled grated with a substantial proportion of the population. Over quite some years, it was apparent that there had been only a very limited effort to integrate migrants into the mainstream of British society. Indeed for me as an outsider who comes from essentially a migrant country, it was quite striking to see how ethnic groups were so heavily concentrated into different suburbs and towns of the country. I visited East Birmingham with the West Midlands police and was astonished how an immigrant community had their own street and shop signs, schools, places of worship, social activities, sports teams and had barely any contact at all with mainstream British people.
These same concerns have been a major issue for Australia. We have sometimes failed to integrate migrants, particularly where those migrants have no successful command of the English language. In those circumstances, they concentrate in separate communities and struggle to advance in broader Australian society.
Successful integration of migrants is for us axiomatic. We do two things. First of all, we have a coherent immigration policy under which we decide who comes to our country and circumstances in which they come.
And secondly, we insist that migrants can speak English.
For the indigenous British, the lack of integration has been disquieting. Contrary to the views of many in the commentariat, the British are very accepting of people of all races and religions. But it is not entirely clear to me that the elite understand that in Britain there is great pride in the country’s traditions and institutions. Tolerance of course is one of the country’s core values – and it has spread that tolerance to so much of the world.
The public, however, see the separation of migrant communities as an attempt to put people into silos, not to integrate them. There is, I suspect, a lot of quiet resistance to building those social silos. There would be much broader acceptance of migrants being welcomed into society provided they were integrated and encouraged to embrace the core values and traditions of Britain.
When I was first here, I thought there was greater opposition to immigration in the UK than there is in Australia. Australia, of course, is overwhelmingly a migrant country and so is likely to be more embracing of immigration. But Australia also has within its society most of the same values as the UK. Therefore it would be surprising if people in the UK were more intolerant of immigration that in Australia.
In the end, I concluded that although there was resistance to immigration in the UK especially amongst lower socio economic groups, the reason for that opposition was this lack of effective effort to integrate migrants into British society. As a result, some indigenous Britons felt that their national identity was being threatened by migrants. Now a lot of people say all that matters in politics is economics. This is a myth as you know. People have a very strong sense of their national identity and in this country a quiet patriotism which lurks quietly beneath the surface.
What seems to have happened in Britain as in other English speaking countries is that generations of leaders have played down the country’s national identity and replaced it with a near obsession with identity politics. Instead of building on an existing national identity by working to integrate migrants into the mainstream of society, the elite have salami sliced society with an ideology of identity politics.
The great cry of Martin Luther King to judge people by the content of their character not the colour of their skin seems to have been forgotten.
In defence of the elite, their obsession with identity politics is about rectifying inequalities and disadvantage in society. That is a laudable objective. But it might have been wiser to try to achieve that in a more consensual way building on notions of egalitarianism and national identity.
So when it came to the Brexit referendum, I suspect it was, in part, this concern about disregard for national identity not just questions about wealth distribution and wages growth that in large part lead so many people to vote to leave the European Union.
In the Australian government, we thought it would be better if the UK remained in the European Union. We judged that the European Union would become less pragmatic, less economically liberal, more protectionist, less global in outlook and less transatlantic without Britain. For Australia, European Union without the UK would be a more difficult entity to deal with.
But for mainstream Australia, Britain outside of the European Union sounded an enticing proposition. For many, the idea of negotiating a free trade agreement with the UK was attractive and for older Australians it seemed that the traditional ties with Britain would be stronger with a Britain less committed to the EU.
So far, there is no doubt that officials in London have become more interested in my country and others like it since the Brexit vote. They have embraced the idea of an FTA between Australia and the UK and there is every chance that we could conclude negotiations for such an agreement before the end of the transition or implementation period in December 2020. This assumes, of course, that the UK leaves the Customs Union.
Mind you, I have been surprised that there is any debate at all about whether Britain should remain in the customs union. Imagine a great country like this having its trade policy determined by bureaucrats and politicians in Brussels without the British government or the British people having any say whatsoever in international trade policy. Imagine free trade agreements being negotiated by the EU without having any say as to the terms of those agreements yet being subjected to the terms of those agreements.
Within Britain you may describe yourselves in such circumstances as a rule taker. For us in the outside world, Britain would become at least in economic terms irrelevant to international diplomacy. All our trade negotiating would be done through Brussels and the capital cities of the major EU member states knowing that whatever we negotiated with Brussels would apply to the UK but that the opinion of the UK was irrelevant.
You would be better off remaining within the EU or being completely out of it in every way than leaving yourselves in such a position of weakness and irrelevancy. It would be humiliating for a once great country to end up by being little more than a dependency of the European Union.
So we very much hope you will not go down that path. If you did, you wouldn’t be negotiating any trade agreement with Australia. But let’s assume you do not commit such a gross active folly.
Whether it will be possible to complete a bilateral free trade agreement with Australia quickly will depend on the extent to which the UK wishes to have a free and open approach to trade. From Australia’s perspective, we would willingly give away any tariff protection and provide improved access to our services market as well as create a better investment environment for British investors.
We would expect this liberal approach would be warmly reciprocated. All sorts of questions have been raised with me about a bilateral free trade agreement. For example, people want to know whether we would demand that the British adopt all our quarantine and food standards. What we would expect is that British exports to Australia would be subjected to our standards – as they currently are. We would be quite happy for our exports to the UK to meet British standards. That is the way it is at the moment and that is the way we would expect it to continue.
The only qualification to all of this is that standards must be scientifically defensible, not used as some artificial form of replacing tariff protection.
I’m also asked whether Australia would flood the British market with agricultural products. Well, we already have huge markets in Asia which we can’t satisfy so the chances of us diverting trade to the UK for agricultural products are very low. It’s much more likely we would target specialty markets such as certain citrus fruits which would go into the UK duty-free whereas at the moment they are subjected to substantial EU tariffs.
And we could sell Australian made R M Williams boots more cheaply. Both David Cameron and Sir Mark Sedwill, the National Security Adviser, like to wear R M Williams boots so when they replace them they will be able to get them more cheaply thanks to an FTA with Australia.
And finally, some people say that a free trade agreement with Australia is not worth much because Britain doesn’t have much trade with Australia. That is true at the moment because UK trade is diverted to the EU. But if Britain can maintain free trade with the EU and build trade agreements with other parts of the world including Australia, then this has to be a win-win outcome for the UK. It will improve Britain’s market access worldwide, plug the UK into the fastest growing markets in the world and ensures that investment within the UK directs itself into the most profitable and therefore the most wealth creating of endeavours.
Our experience in Australia is that free trade agreements can be negotiated quite quickly with countries like the United States, Singapore, Chile and Peru. Negotiations with Japan and China have taken longer but now the precedent has been set, a country like the UK should be able to negotiate relatively quickly with markets of that size.
Let me make one final point about trade negotiations. Australia is the 12th biggest economy in the world but is very much smaller than the United States and China. This hasn’t been a problem for us in negotiations with those countries. Quite the contrary. Because our economy is substantially smaller than theirs, they see exports from Australia as very little threat to their substantial local industries. Now the UK is an economy twice the size of Australia’s but even so, British exports are not going to be anything like the threat to local industries in the United States and China that exports from the whole of the EU would be.
Look at the other way around, we have judged that opening our market to imports from the United States and China duty-free is to our advantage. We get goods and services cheaper and of a higher quality that might otherwise have been the case. This contributes to improving the living standards of working people in Australia. But it does much more than that. Opening markets to the outside world makes your country a very attractive place for foreign investors.
Since we concluded our free trade agreement with the United States some 12 years ago, Australia’s trade with the United States has grown by 50%. But significantly, the bilateral investment relationship has grown by 130%. So our experience is that free trade agreements are not just about building trade in goods and services. They are very substantially about encouraging investment flows and its investment which ultimately creates jobs and national wealth.
Because the UK hasn’t negotiated trade agreements for many years, there is a distinct lack of national self-confidence particularly in the media about Britain’s capacity to negotiate trade agreements. I don’t think you should be without confidence. This is something you can do and do relatively easily provided you yourselves wish to open your markets to the outside world.
You like to beat us at sport. For heaven sake, don’t let us beat you at trade negotiating!
The third observation I would make about the UK is that there is a surprising lack of debate about domestic economic reform. In my book, calling for more government expenditure funded through ever-growing debt does not really constitute an economic policy. Economics, after all, is about the allocation of scarce resources. Good economic policy is about finding the right allocation of those resources and contributing to solid economic growth which lifts living standards.
To be fair to Australia, periods of economic difficulties have led to improved public debate on economic policy. Political parties in Australia can no longer get away with promising to spend bucket loads of money to solve social problems without identifying where that money comes from. The public really care about where the money is going to come from. Claiming that a few rich people are going to provide enough money through higher taxes to finance massive infrastructure projects, a stronger health system, free university education, higher pensions and so the list goes on just wouldn’t pass muster in Australia.
There is, on the other hand, ongoing debate about how to improve the efficiency of the Australian economy. We discuss the tax system. Of course it has to be fair but on the other hand it has to be conducive to attracting investment and making sure that investment decisions are relatively neutral economically. Civil servants and politicians are hardly the best judges of where to make profitable investments. So not only is the tax system constantly debated but so is the way our labour market works. We want workers to get paid as much as it is humanly possible but on the other hand capacity to pay varies from firm to firm, industry to industry and region to region. So we constantly debate how to have a labour market which is fair to both employees and employers.
There is no point in having a labour market which makes it impossible to get rid of workers who are holding a business back there by denying employees the opportunity to employ someone else who is more productive. On the other hand, willfully dismissing people is hardly conducive to a stable and fair society. So we are always trying to get the right balance seldom succeeding but nevertheless always trying.
You have a fine goose in the city of London. You need to keep that goose laying its golden eggs so that London can remain the greatest financial centre the world has ever known. Embracing the politics of envy and overregulating and attacking the city is only going to kill the goose that keeps laying those eggs. You should be nervous about doing that because that would blow a hole in the British economy.
My last words are about Britain’s place in the world. It is my view that there is no country on Earth which has more soft power than the UK. Your media, particularly led by the BBC, is seen as a benchmark by the rest of the world. British arts, British education, the reputation of Britain’s political system and also the perception that your legal system is as good if not better than any other legal system gives Britain huge influence in the world.
Add to that the proficiency of your Armed Forces, the fact that you spend 2% of your GDP on defence and the existence of Britain’s nuclear deterrence all makes Britain an especially powerful country.
With power comes responsibility. It is the responsibility of the British Government to be one of the great leaders of the western world. This is a time when the western world needs to approach global challenges with a great deal more self-confidence than it has been showing in recent years. We should all be prepared without hesitation to stand up for our political systems and our values.
I think we have seen a magnificent demonstration of this in the last few days. Not only did the British Government react robustly to the chemical weapons attack in Salisbury but is has brought to bear the power of Britain to corral the great network of Western allies at long last to stand up to Russian intransigence. I am proud that Australia has joined with so many other like-minded allies from the great democracies of the world to expel undeclared Russian spies from Canberra. For once, Russia has learnt that the Western Alliance really does have some backbone and it is Britain, not American, which on this occasion has led that alliance. Congratulations on a job well done.
So my parting words are that after four years as the High Commissioner in the United Kingdom, this is without doubt one of the greatest countries on Earth. Its people have huge resilience and an underlying and understated patriotism which needs to be encouraged. There are many Jeremiahs in the media. People who claim Britain is past its best; people who say Britain no longer has a major role to play in the world; people who described Britain as “a middle power”. You must never allow yourselves to be dragged down by this pervasive sense of pessimism and defeatism. Don’t let control your destiny. This is a great country with a great deal to contribute in the future and as I move from the glamour of the Court of St James to the Chairmanship of Policy Exchange, I look forward to working closely with you in the years ahead.