Has Brexit given us Europhobia or is it time for some Eurovision?

While the headlines about Brexit seem pretty grim, Australian exporters see some blue sky on the horizon.

While the headlines about Brexit seem pretty grim, Australian exporters see some blue sky on the horizon.

According to the new DHL Export Barometer, close to 50% of Australian exporters seek to forge plans to enter new markets, with Europe top of the list.

Europe is the most desirable new territory for 17% of exporters, but with the UK also in the running at 11%, just behind Southeast Asia on 15%, even with Indonesia and Japan also on 11%.

As Australia has a Comprehensive Economic Partnership (like a free trade agreement) with Japan, and is about to sign one with Indonesia, there's a strong case now to complete one with the EU and the UK as well, as both are major economic partners of Australia.

It would especially be desirable for new businesses (those that have been around for less than 5 years) as 63% indicate they plan to expand internationally during the next 12 months.

This is in stark contrast to past discussions of Brexit where many European trade officials felt Australian exporters - particularly small and medium-sized enterprises - exhibited 'Channel fever', whereby they would set up in London and rarely base themselves on the European continent.

Australian Bureau of Statistics data reflects this phenomenon. According to the ABS, nearly 6000 Australian exporters sell goods to the UK (5975 companies to be precise, in 2016-17), which is almost twice those who sell to Germany on 3040, and well ahead of the next places: The Netherlands (1764), France (1581) and Italy (552).

The UK has always been in Australia's top-20 exporter destinations, which is otherwise dominated by Asia.

This is not surprising, given the strong historical ties between Australia and the UK in terms of language, legal ties and institutions. The UK was our number one trading partner until it was taken over by Japan in 1966.

Some of the historical animosity between Australia and the EU on contentious trade issues such as agricultural subsidies hasn't helped. It was once said that for the cost of the EU's Common Agricultural Policy you could send all the French cows around the world business class, twice.

In fact, one reason for the establishment of the EU Australia Leadership Forum (that I recently attended in Brussels) was to get the conversation on Europe and Australia away from those past issues that have narrowed the focus when there are many other promising examples of collaboration.

The EU wants to make Brexit hard for the UK so there is less of an incentive for others to follow

So what happens when you impose Brexit on this scenario?

Well, as Pascal Lamy, the former WTO director-general was fond of saying, Brexit is a bit like separating the yolk from the white after making an omelette.

But as the EU has stated publicly, the democratic will of the British people must be respected, even if few of them realise how high the divorce bill will be.

Indeed, recent evidence from the UK Treasury and the Bank of England has stoked fears that leaving the EU without a divorce deal could plunge Britain into its deepest recession in nearly a century.

There is a chance, as the Bank of England has warned, that the economy could shrink 8%, while unemployment and inflation could soar.

The beleaguered but dogged British Prime Minister Theresa May has negotiated a deal with the EU that she believes is 'the best deal available'.

But if the British parliament rejects her deal, Britain could be headed for an economically disruptive 'no deal' Brexit on March 29, 2019, or there could be another referendum on EU membership.

In some ways Brussels is in a dilemma. The EU wants to make Brexit hard for the UK so there is less of an incentive for others to follow. But at the same time it doesn't want to weaken the UK economy as it could have adverse effects for Europe itself, not to mention the global economy.

And then there is the Opposition. Jeremy Corbyn's Labour Party has said it will attempt to topple May and force a general election if MPs reject her deal.

That would really worry business. Companies like stability, but now everyone is staring down the barrel of a 'no deal' Brexit - and going into either a knife-edge referendum or an uncertain election looks like an economically brave decision. Some may even call it courageous.

Of course, Brexit is not the only issue for the EU to worry about. They have budget difficulties with the populist government in Italy, challenges in Hungary and Austria and even Poland. And then there's Russia.

And the world knows that the EU is still an important institution to keep stability in geopolitics given the rise of China, India, Russia, and now Trump-style economic nationalism and protectionism.

The European project originally had good intentions. It was set up to prevent France and Germany going to war again and to create peace and economic stability in Europe. This has been achieved.

But then as the project evolved it became a question of how far you take a customs union to expand to a common currency, central bank and foreign policy (and how many members you have).

Australian exporters would like a trade agreement with the EU, as they would with the UK. In recent interviews I conducted, Australian companies made it clear that they are happy to remain in the UK as an economy in its own right.

The DHL Export Barometer shows not all Australian exporters are suffering from Europhobia. And, as desired by Brussels, some may be having some Eurovision.

Tim Harcourt, aka the Airport Economist, is the J.W. Nevile fellow in economics at UNSW Business School.

The free online text fixer can convert any document to a clean HTML code.