Following five years of discussions between Australian and British Governments, Australian Prime Minister Scott Morrison and UK Prime Minister Boris Johnson announced this week agreement in principle on the terms of a Free Trade Agreement (FTA) between the two nations, see here.
This Agreement is as significant for its historic symbolism as it is for its direct trade benefits, as it marks the first Agreement to have been negotiated from scratch in the post-Brexit era for the British Government and further deepens the bilateral relationship between the two nations. The UK has entered into many other Free Trade Agreements since leaving the EU legal framework, but all of them until now have been continuity agreements, mirroring to a very large extent the corresponding EU agreement with that country from which the UK had previously benefitted as an EU Member State. This Australia agreement, by contrast has no EU parallel and therefore represents a tangible post-Brexit milestone for the "global Britain" concept.
In the coming days and months, the details of the Agreement in Principle will become clearer. It is expected that the actual Agreement in Principle document will be in excess of 1200 pages, so there is clearly much detail to come. This Agreement is also an important step in clearing the way for a smooth accession by the UK to the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), one of the largest economic zones in the world, which the UK has formally requested to join and of which Australia is a key member.
The Agreement is due to come into effect in 2022. Dentons Trade and Regulatory partners in the UK and Australia have prepared a summary of what we have learnt so far and the Agreement’s key benefits to Australia and British businesses and consumers.
Drawing on UK and Australian press announcements, here’s what we know so far:
Removal of tariffs on goods
The deal will remove tariffs on £4.3 billion of British exports with all Australian tariffs eliminated within 5 years and tariffs on cars, whisky and the UK’s main exports eliminated immediately, thereby benefiting Australian consumers with cheaper products.
The deal will liberalise Australian imports into UK with 99% of Australian goods including Australian wine entering the UK duty free when the agreement enters in force.
Tariffs on Australian beef and sheep meat imports into the UK will be eliminated after ten years. During the transition period, Australian exporters will have immediate access to a duty-free UK import quota for both goods which will rise in incremental instalments to year 10. In the subsequent five years a safeguard will apply on imports to UK exceeding a further volume threshold.
UK tariffs on Australian sugar will be eliminated over eight years and Australian dairy tariffs will be eliminated over five years.
Extension of Youth Mobility Visas
British and Australian citizens under the age of 35 will be able to travel and work in the other country for up to three years. Highly skilled professionals from both nations will now be able to work in Australia and the UK temporarily.
Innovation and Digital Provisions
A world-first innovation chapter which will facilitate the free flow of data with no data localisation required. These provisions are in line with the digital economy provisions that exist in the CPTPP. Both UK and Australia intend to reduce digital trade barriers and assist Britons and Australians to engage with, and benefit from, the digital economy.
Mutual recognition of some qualifications
The deal will facilitate the mutual recognition of some professions including lawyers, engineers, architects and other professionals. This creates opportunities for British and Australian professionals to attract and retain global talent from both nations’ labour markets.
Enhanced Access to Australian Government procurement contracts
British companies will be able to bid for additional Australian Government contracts with the most substantial level of access Australia has ever granted in a free trade agreement.
Stronger cooperation on shared challenges
The UK and Australia will cooperate closely on areas like labour, animal welfare, gender equality and the environment. The deal will also foster collaboration on challenges like tackling climate change and unfair trading practices.
Supports UK’s accession to Comprehensive and Progressive Agreement for Trans-Pacific Partnership
As noted, this Free Trade Agreement paves the way for the for the UK's potential accession to the CPTPP, part of a broader geo-political move by the UK to focus on the Asia-Pacific region.
The CPTPP is a ‘deep’ trade agreement that is more about the governance arrangements for transnational trade in the region. It is a preferential trade agreement that distinguishes rules for those who are and are not members of the CPTPP. It is an important step towards rules-based regulatory control of global value chains, the importance of which continues to grow. Without the provisions of this Free Trade Agreement, however – levelling the playing field as between the UK and existing members of the CPTPP - the UK’s entry into the CPTPP would be much more difficult.
This Free Trade Agreement is therefore significant as recognising the global nature of trade and the rules that apply to that global trade.