UK-Australia agree 'proper' post-Brexit deal

The UK and Australia have agreed the broad outline of a free trade deal - the first, truly independent agreement negotiated since Brexit.

Prime Minister Boris Johnson meets with Scott Morrison

Prime Minister Boris Johnson and Australia’s Prime Minister Scott Morrison speak to members of the media in the garden of 10 Downing Street. Picture by Andrew Parsons / No 10 Downing Street https://creativecommons.org/licenses/by-nc-nd/2.0/

David Sapsted

15 June 2021

Until now, post-Brexit trade deals with the UK have been basically 'rolled over' from arrangements nations already had with the European Union. The deal with Australia, however, is the first, true tariff-free agreement, which also opens up the opportunity for Britons under 35 to work in Australia more freely than at present.

A "new dawn in the UK's relationship with Australia"

Prime Minister Boris Johnson described the deal as a "new dawn in the UK's relationship with Australia, underpinned by our shared history and common values".He added, "Our new free-trade agreement opens fantastic opportunities for British businesses and consumers, as well as young people wanting the chance to work and live on the other side of the world."This is global Britain at its best - looking outwards and striking deals that deepen our alliances and help ensure every part of the country builds back better from the pandemic."Trade between the UK and Australia was worth £13.9 billion last year, with the UK ranking as Australia's fifth largest trading partner. The new deal will result in such British products as cars, Scotch whisky, biscuits and ceramics cheaper to sell to Australia.

Opportunities for the UK services sector in Australia are unclear

The opportunities for services are, as yet, unclear but Downing Street said in a statement, "The deal’s ambitious commitments on market access for services professionals, cutting-edge digital provisions and reduced barriers to investment will benefit the UK’s service sector."The UK exported £5.4 billion worth of services, including £1.4 billion of insurance and pension services and £780 million of financial services, to Australia in 2020. Red tape and bureaucracy will be torn down for more than 13,000 small and medium sized businesses across the UK who already export goods to Australia, with quicker export times."

What about the UK and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)?

There could, however, be an even bigger prize should the deal with Australia pave the way for the UK's application to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) be a success.Eleven nations are already members of the free trade agreement - Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam - and President Joe Biden is reportedly keen for the US to rejoin after the Trump administration pulled out four years ago.Were the UK to join as well, it could be a backdoor route to a Transatlantic trade pact which, otherwise, might take years to negotiate.

15 year tariff-free cap to protect British farmers

The downside of the deal has always been the fears voiced by British agriculture that cheap imports of Australian meat could put UK farmers out of business.In a bid to allay such concerns, Downing Street said that under the deal British farmers would be protected by a cap on tariff-free imports for 15 years and promised other "safeguards" to protect the industry.

What do business leaders in the UK say about the UK-Australia trade deal?

Reacting to the deal, Mike Cherry, who chairs the Federation of Small Businesses, said, "A trade deal with Australia will come as great news for many of our members who have long been exporting there as well as those who are hoping to expand their trade ambitions."As we look beyond the pandemic and enjoy the benefits of post-Brexit growth, deals like this will reap vast rewards to small firms right across the UK. Around 40% of UK small firms who trade internationally do so already with Australia, and a trade deal that could be worth up to £900 million will only increase those numbers."The inclusion of a small business chapter in this agreement will also ensure that the needs of smaller businesses are fully catered for in the years to come."Julian David, chief executive of the techUK trade body, described Australia as a key market for the UK technology sector and an important gateway to the wider Indo-Pacific region."The free trade agreement announced today has the most advanced digital trade provisions of all the deals the UK has signed so far, opening up opportunities for our innovative businesses operating in emerging technologies, such as AI and clean tech," he said."The free flow of data provisions and the ban on data localisation will allow our SMEs in particular to explore the market without the cost of having to set up servers. We are looking forward to working with our industry and the government to make sure the sector takes full advantage of these state-of-the-art digital trade provisions."Rain Newton-Smith, chief economist at the Confederation of British Industry (CBI), said the Agreement in Principle marked "a significant milestone" towards a full trade deal with Australia." From the UK’s first ever innovation chapter to a focus on liberalising services trade, the deal is shaping up to support UK economic strengths at a time when free and fair trade is needed to drive the recovery," she said.“It is essential now that both sides finalise negotiations and ensure meaningful safeguards are put in place for industries, including agriculture and high environmental standards. Businesses must prepare to seize the moment by exploring the growing opportunities of trading with Australia.”William Bain, head of trade policy at the British Chambers of Commerce, said businesses would regard the outline agreement a positive step forward."However," he added, "there is a long way to go before the signing and implementation of a free trade deal. It should also be pointed out that trade with Australia represents only around 1.2 per cent of the UK’s total, so whilst a deal will have welcome benefits, it will not offset the ongoing issues with trade to the European Union."Today’s agreement opens the door to a free trade agreement in force next year with lower tariffs, modern rules of origin for certain manufactured goods, customs facilitation measures, mutual recognition of qualifications, a labour mobility scheme, and stronger market access for services between the UK and Australia."But, he added, businesses remained concerned about the lack of opportunities to properly scrutinise trade deals such as this one. "There needs to be more in-depth industry consultation, particularly in sectors considered sensitive, to better analyse UK’s offensive and defensive strategic interests and the impact on other agreements."