The UK and Australia signed a major trade deal the day after consultations on developing economic cooperation in the post-Brexit period, which includes the elimination of reciprocal tariffs between the two countries. A free trade agreement on UK economy advantages, livestock and nutrition could be the first negative post-Brexit trade shock.
Ambitious British-Australian Agreement
Australian Prime Minister Scott Morrison says a free trade agreement with the UK is the most comprehensive and ambitious deal in Australian history. Morrison and British Prime Minister Boris Johnson announced the agreement on 14 June 2021 after signing an in principle agreement. Morrison said our economies would be strengthened by these agreements.
This is the most comprehensive and ambitious agreement Australia has ever signed. It will pave the way for more Australians to work and live in the UK and give Australian exporters more options. He said the changes would present “a great opportunity” for British and Australian youth to travel and work together. He added that “easy and comfortable” relations with UK economy made Australia the first country to succeed in negotiating a post-Brexit free trade agreement with that country. “This is another big chapter in the story of Australia and the UK,” Morrison said.
Does the UK economy need a free trade agreement?
UK‘s exit from the EU has put many of its industries on the verge of bankruptcy. Britain, which left the EU in early 2021, is seeking free trade agreements with the rest of the world. It has already signed a number of these with some countries, largely replicating British trade with them as part of EU trade relations. The agreement was signed as the British government seeks to expand business after leaving the EU.
The deal is expected to boost the UK economy by 0.02% over 15 years. Australia is still the 20th largest UK trading partner in the world, accounting for 1.2% of the total UK trade by 2020. Boris Johnson is trying to save the economy from rampant inflation by concluding free trade agreements.
Agreement with Australia on Tariffs
In addition to trade issues, the UK-Australia agreement oversees the development of defense, science and technology cooperation and climate change. The agreement will give food producers and other companies on both sides better access to each other’s markets and reduce import tariffs on goods such as beverages, cars and clothing.
This agreement actually means that, from now on, the goods of the two countries will be sold on each other’s markets without tariffs at lower prices. The UK was Australia’s fifth largest trading partner in 2019 and 2020. Last year, UK-Australia trade was worth £13.9 billion ($19.6 billion). Trade is expected to grow under the deal, the government said, adding that it will also offer more opportunities to young people (Brits under the age of 35 will be able to travel and work in Australia more freely following the agreement).
UK Hopes to Improve Trade Conditions
Boris Johnson described this as a “new dawn” in the UK’s relationship with Australia after the two countries struck the free trade deal. He added that the agreement provides significant opportunities for British businesses and consumers, as well as the country’s youth who want to experience the chance to live on the other side of the world. The UK government says the ability to conclude free trade agreements around the world is one of the main benefits of having a choice. Following Brexit, the country is seeking to conclude agreements with other nations, especially the United States, but negotiations are slow.
A Key Step for the UK to Join the Asia-Pacific Trade Agreement (APTA)
British experts say the agreement with Australia could be used as a stepping stone for other trade documents with other countries. It is a key step for the UK to join the larger Asia-Pacific Trade Agreement. The government said the trade deal with Australia “is also a gateway into the fast-growing Indo-Pacific region and will boost our bid to join CPTPP, one of the largest free trade areas in the world, covering £9 trillion of GDP and 11 Pacific nations from Australia to Mexico.” Prior to leaving the EU, the UK was automatically part of any agreements Brussels signed with other countries. At the time of Brexit, the union was involved in about 40 trade deals with more than 70 countries. So far, London has negotiated agreements with 66 countries.
British Livestock Farmers Worried About Agreement with Australia
However, the agreement has raised many concerns, both in the government as well as British livestock farmers. They are worried about losing out to Australian beef and lamb. The UK government hopes that this agreement with Australia will easily pave the way for the Asia-Pacific trade bloc. The Asia-Pacific trade bloc consists of 11 American and Asian countries. These countries allowed the UK to begin the process of joining this great trade agreement in early June. The UK has already reached agreements with the EU and Japan, and is in talks with the US, India and New Zealand. Talks are also planned with Canada and Mexico.
After the UK left the EU at the beginning of 2021, its trade relations and the volume of its imports and exports dropped sharply; many British factories and industries had extensive trade relations with other countries freely and without high tariffs as an EU member country. These either went bankrupt or were forced to leave and work in other EU countries.
This is why the UK government is looking for alternatives to the EU to prevent economic bankruptcy – namely alternatives that can fill the gap left in the UK by EU absence. Hence, the UK seeks to conclude trade agreements with countries with which it can establish extensive trade and economic ties. Although negotiations with many countries have not yet been concluded and are slow, the Boris Johnson government hopes that by doing so, it will be able to bring economic growth back to pre-Brexit levels.
