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The UK concluded its first major post-Brexit free trade agreement (FTA) from scratch with Australia recently and hailed it as a gateway to the Indo-Pacific.
UK Prime Minister Boris Johnson and his Australian counterpart, Scott Morrison, declared this week that they had agreed a “historic” free trade agreement (FTA), which will make it cheaper for the UK to sell its cars and Scotch whisky Down Under and remove barriers for business.
The main elements of the deal were agreed by the two leaders at a meeting in London with a final “Agreement in Principle” in the works. Downing Street said the FTA eliminates tariffs on UK goods and boosts jobs and businesses, in the first major trade deal negotiated from scratch by the Johnson-led government since Britain left the European Union (EU). An FTA with Australia is also dubbed as a “gateway” into the fast-growing Indo-Pacific region, covering India.
Johnson said: “Today marks a new dawn in the UK’s relationship with Australia, underpinned by our shared history and common values.
“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.”
According to UK trade officials, the new FTA means iconic British products like cars, Scotch whisky, biscuits and ceramics will be cheaper to sell into Australia, boosting UK industries that employ 3.5 million people across the country. The UK-Australia trade relationship was worth £13.9 billion last year and is set to grow under the deal.
With reference to the farming industry, the government said that British farmers will be protected by a cap on tariff-free imports for 15 years, using tariff-rate quotas and other safeguards. Agricultural producers will also be supported to increase their exports overseas, including to new markets in the Indo-Pacific.
And, the FTA also means that Brits under the age of 35 will be able to travel and work in Australia more freely and vice versa.
UK International Trade Secretary Liz Truss said: “This deal delivers for Britain and shows what we can achieve as a sovereign trading nation. It is a fundamentally liberalising agreement that removes tariffs on all British goods, opens new opportunities for our services providers and tech firms, and makes it easier for our people to travel and work together.
“The agreement paves the way for us to join the Trans-Pacific Partnership, a £9 trillion free trade area home to some of the biggest consumer markets of the present and future. Membership will create unheralded opportunities for our farmers, makers, innovators and investors to do business in the future of engine room of the global economy.”
The UK has already made a bid to join the Comprehensive and Progressive agreement for Trans-Pacific Partnership (CPTPP) alliance of 11 Pacific nations.
Trade experts will inevitably be on the lookout for parallels this new FTA could have with India, also in line for an FTA under the Roadmap 2030 plan agreed between Boris Johnson and Indian Prime Minister Narendra Modi. The process was formally kicked off at the end of last month with the launch a 14-week consultation by the UK government before formal negotiations begin later this year.
The focus on cutting tariffs on British-made cars and Scotch whisky resonate with the Australian deal. And, equally, the concerns around competition for Welsh farmers as a result of greater Australian imports will also be among the factors for consideration in any UK-India FTA.
The focus on cutting tariffs on British-made cars and Scotch whisky resonate with the Australian deal. And, equally, the concerns around competition for Welsh farmers as a result of greater Australian imports will also be among the factors for consideration in any UK-India FTA.
The fact that negotiations between Australia and the EU over an FTA are now in their fourth year is another parallel, which no doubt strengthens the UK’s pitch of Brexit freeing it from EU shackles to negotiate its own trade deals as part of a “Global Britain” mantra.
According to official statistics, the UK was Australia’s fifth largest trading partner in 2019, with total trade between the UK and Australia was worth £13.9 billion last year. The UK was the third largest direct investor in Australia and the second largest recipient of Australian foreign direct investment (FDI) in 2020.
In its headline vision, the new free trade deal will eliminate tariffs on Australian favourites like Jacob’s Creek crackers and Hardys wines, swimwear and confectionery, boosting choice for British consumers and saving households up to £34 million a year.
The benefits to the United Kingdom have been flagged as:
· Scotland exported £126mn of beverages to Australia in 2020 – this deal will help distillers by removing tariffs of up to 5% on Scotch Whisky.
· More than 450 businesses in Wales exported to Australia last year, and life science companies and chemicals manufacturers are set to benefit in particular.
· 90 per cent of all exports from Northern Ireland to Australia are machinery and manufacturing goods – used extensively in Australia’s mining, quarrying and recycling sectors. Under the new FTA tariffs will be removed and customs procedures will be simplified.
Car manufacturers in the midlands and north of England will see tariffs of up to 5 per cent cut, boosting demand for their exports.
As the fineprint of this FTA becomes clearer before it is tabled in Parliament, there will be crucial pointers for Indian trade experts for aspects of interest related to the UK-India talks – now proceeding through a process of staggered deadlines set by the Enhanced Trade Partnership (ETP) signed off in May.