UK signs comprehensive trade deal with Australia

UK signs comprehensive trade deal with Australia

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A ‘new dawn’ for post-Brexit Britain

In its first major trade deal negotiated from scratch post-Brexit, the UK has agreed a free trade agreement with Australia, aiming to eliminate tariffs on goods, support businesses and employment in many sectors, and increase freedom of movement between the two nations. Although a final deal is still to be signed, an ‘agreement in principle’ has been confirmed. However, there has been some speculation and criticism of the plan, including with regards to the impact it will have on the agriculture sector and on the British economy.

 

What is it?

The deal is set to eliminate export tariffs on both countries’ goods over a 15-year transition period, so we can expect to see its impact be more long-term and gradual. The main exports from the UK which will become tariff-free include cars, Scottish whisky, ceramics and biscuits, whereas the main exports from Australia include gold, wine, precious gems and lead.

With the deal, iconic British products will become cheaper to sell into Australia, boosting UK industries with 3.5 million employees nationwide. Australian favourites like Jacob’s Creek, Hardy’s wines, swimwear and confectionery will become more readily available and cheaper, thus boosting choice for British consumers. Tariffs on machinery and manufacturing goods will be removed and customs procedures will become easier. Leaders have also agreed to increase cooperation on the climate crisis, science and technology, and security. On the surface, there is plenty to be excited about, but there are certainly complexities that might prove challenging in practice and there are still many factors to be finalised on both sides of the deal.

 

Mixed opinion and concern

The government has announced that “British farmers will be protected by a cap on tariff-free imports for 15 years, using tariff rate quotas and other safeguards”, however, farmers from both countries have conflicting opinions. There is rising sentiment in British farmers that the government has been “dishonest”, as they worry that this free trade zone will flood supermarkets with cheaper Australian meats from larger agricultural companies, leaving British farmers out of business. Australian exports could surge by as much as 80%, so there could be reason for British farmers to be fearing a loss in business.

There is also concern that UK farmers will have to compete with the lower standards applied on industrial scale ranches in Australia, which can involve up to 50,000 animals. Since Australia has much more land capacity for farming than the UK does, it would be sensible to assume that it has greater sizes of cattle herds (compared to the average 27 animal herd in the UK), but it is surprising how Australia and the UK differ on so many animal welfare practices. To state an example, using antibiotics to promote growth has been banned in the UK since 2006 but is legal in Australia. UK farmers are not only worried that they could be put out of business due to lower prices in Australian produce, but also because their smaller eco-friendly farms have to compete with large, industrial cattle farms.

Australian farmers, on the other hand, are generally more optimistic about the deal, focusing on the wide range of choice it will give consumers, although there is deep concern about the agriculture visa changes that may leave Aussie farmers understaffed and unable to keep up with demand. The argument for Britain is a classic case of free trade against protectionism: whilst free trade may be better for consumers, it may not be as good for producers who could suffer with increased competition.

 

Other controversies

Other controversies include the change to work holiday visas for under 35s. Now, adults under 35 years old from both countries will be able to work in each other’s country for up to three years and extend their work holiday visa. Previously, if a backpacker under 35 had wanted to extend their work holiday visa to a second year, they would have had to work 88 days on a farm. However, many backpackers were exploited under this policy. So, as part of this deal, Australia has dropped the rule. While this is good news for many backpackers, many Australian farmers are frustrated as it will lead to an increase in farm labour shortages.

 

Is it worth it?

From the UK’s perspective, it will not only be a bragging point as the first successful trade deal post-Brexit negotiated from scratch, but may also be a pathway to join the Trans-Pacific Partnership (CPTPP), one of the largest free-trade areas in the world, covering £9 trillion of GDP and 11 Pacific nations from Australia to Mexico. The deal could add just 0.02% to UK’s income, and will only save the individual British consumer 52p a year. But it is important in its role in helping the UK become part of the wider global trade community. The Transpacific Nations account for 8% of our exports, and joining the CPTPP could encourage other notable countries to join the alliance, like the US and Korea.

PM Johnson says it shows “global Britain at its best”, and so the world will be watching how the agreement pans out in practice, how it will influence further post-Brexit trade negotiations and whether it will be a marker of success or a lesson to be learned from.

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