What does the Australian Free Trade Agreement mean?
UK has now agreed its first Free Trade Agreement with Australia, that was not based on previous EU. This is a first for the United Kingdom, as other free trade agreements were based on EU free trade agreements. This saw both countries delivering an ambitious and comprehensive FTA that drives increased trade in goods and services, two-way investment, economic growth and job creation.
With the commitment to open markets, free trade and the rules-based global trading system.
So how does this benefit these trade channels?
This Free Trade Agreement will create opportunities for the UK in this important region, be it by giving access to new supply chains or enabling UK businesses to use Australia as a launchpad into Asia.
The UK and Australia produce a different mix of goods and services, suggesting that there is an opportunity to for both economies by deepening these trade ties. This can be worth £500 million extra in trade for reach country.
Below are the main benefits of this free trade agreement:
§ Providing simplified access for both UK and Australian exporters
§ Reduced barriers to trade, facilitating getting products / services to market
§ Defines processes for digital trade
§ Assisting businesses that are currently exporting from the UK or Australia.
§ Reducing tariffs for the food and drinks, pharmaceuticals, financial services and machinery and transport industries
What are the pitfalls?
The most likely impact will be on farming as when the UK was part of the EU this kept Australian imports to a minimum due to taxes and quotas that were in place. This would provide impact in the short terms for UK farmers, but they would want assurances from the UK government on this matter.
In most cases, Australian exports complement UK production rather than compete. Australia’s main goods exports to the UK are gold, wine, lead, and pearls and gems. The UK’s main goods exports to Australia are cars, pharmaceuticals and Scotch whisky.
Trade Strategy
This agreement plays a critical role for the UK to trade with Asia-Pacific countries through the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). This agreement includes 11 countries and is worth £110 billion of trade figures from 2020. This is one of the largest free trade agreements in force globally, and represents over 10% of the global domestic product.
Australia is a key partner in the Asia-Pacific and with another key country Japan supporting the UK ascension to the CPTTP, the door is open for opportunities for substantial growth for the UK within Asia.
An FTA with Australia is also a logical first step towards CPTPP membership, laying the groundwork by demonstrating the UK’s commitment to high quality and modern global trading rules.
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