Australia and the UK have signed free trade agreements.
This is the first post-Brexit agreement that was negotiated entirely from scratch, and it does not “roll over” trade terms the UK had while being in the EU.
The government estimated it would unlock £10.4bn of additional trade while ending tariffs on all UK exports.
Some farmers in the UK have voiced concern about being undercut by low-cost imports.
According to the government, the agreement would also provide a portal into fast-growing Indo-Pacific and help the UK join Trans-Pacific Partnership (one of the most important free trade zones in the world).
Anne-Marie Trevelyan International Trade Secretary signed the agreement in a virtual ceremony. The agreement is set to go into effect next year.
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Ms Trevelyan described the event as “a significant moment in our historic and vital relationship with each other Commonwealth nations”.
This demonstrated what the UK can achieve as “an independent, sovereign trading nation agile and self-sufficient”, she said.
She rejected the idea that the agreement would cause harm to UK farmers in a BBC interview.
She stated that the deal contained “very specific safeguards”, clear tariff quotas over the first decade, and “an overall safeguard mechanism”.
“The truth is, Australia sends around 70% of its beef- and sheep-meat to Asia-Pacific,” she stated.
They’re more convenient for them, and they can get amazing prices. Although I do not expect any sudden increase in UK sales and know our citizens will still buy the things they desire, I feel it is my duty to open up choices for them.”
Free trade deals aim to promote trade, usually in goods and occasionally in services. These are often accomplished by cutting or eliminating tariffs.
Aims of trade agreements are also to abolish quotas, which restrict the number and types of goods that may be traded.
A common set of rules can simplify trade, like the color of plugs and wires. A closer set of rules means that it is easier to check goods.
Ms Trevelyan said that this agreement serves as a model for other countries who want to trade with the UK. She says they will be able to “see how vast we can go”.
British companies, who want to increase their presence in Australia and especially in service industries, welcome the move. Both countries are expected to trade more.
However, trade agreements work for both sides.
Australia was granted almost everything it needed in order to access the UK agricultural market. It will be a model for other larger economies and they will seek similar access in future.
With transitional arrangements that last up to fifteen years, the government claims British farmers’ concerns have been considered.
Additionally, the government points out a number of provisions that deal contains regarding environmental issues. These include the Paris climate agreement. However, the explicit mention of the goal to limit global temperature rises to 1.5C has been dropped. That will not impress climate NGOs.
This agreement highlights that trade agreements involve compromise. However, it must also be viewed in light of wider trade issues the UK is facing.
The Department for International Trade’s internal assessment is that the deal with Australia could increase the size of the UK economy by £2.3bn a year from 2035. This is only 0.08% GDP.
The Office for Budget Responsibility, an independent organization, estimates that GDP loss from the European Union in the long-term could amount to about 4%.
Nick Thomas-Symonds, shadow international trade secretary, said Labour supports such a deal but would carefully examine it to ensure it delivers the promised benefits.
He said that the opposition would hold the government accountable for its promises to farmers communities and food safety and quality standards.
The main points that the UK government has listed in the agreement are:
- It gives UK firms guaranteed access to bid for an additional £10bn worth of Australian public sector contracts per year
- This allows young Australians to travel and work in Australia up to 3 years, without needing to obtain a visa.
- The visa is granted to UK scientists, engineers, lawyers and accountants. It does not require them to be on Australia’s skilled occupations lists.
In 2019-20, trade in goods and services between Australia and the UK was valued at £20.1bn, and both sides are hoping to expand this amount considerably.
The trade in meat is currently very limited between the countries.
Only 0.1% of Australian beef exports are sent to the UK. Australia accounted for 14% of all sheep meat imports into the UK last year.
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