Part of the conversation Australia must have post-COVID-19 is who we want to be as a country, according to the CEO of the Australian British Chamber of Commerce, David McCredie. In the second part of our interview with David, he discusses how Australia’s future export focus may impact our global identity and how this, along with COVID-19, is shaping our trade relationship with the UK.
“I don’t think we have really asked and answered the question [who we want to be] for 20 or 30 years,” says David. “Maybe back to the reforms of the Hawke-Keating era when we floated the dollar and decided we weren’t going to be a protectionist country anymore. We were going to get out and play in the world.
“We’ve done that, and we’ve sold a lot of agricultural product to parts of the world, and we still produce three times as much food as we need in Australia. We should sell it to the rest of the world. There are plenty of places that don’t have enough food.
“Similarly, we have some of the world’s best resources in terms of iron ore and copper. When you look at the top products from Australia to the UK, lead is there, and so are gemstones and gold. But I think there’s a lot more that Australia can offer. I think the opportunity at the moment is not just about flogging the same stuff that we’ve always flogged.”
Opportunity knocks on unexpected doors
As COVID-19 continues to reshape global markets, where does David see the UK’s most exciting opportunities for Australian exporters?
“I love that question in some ways and find it challenging in others,” he says. “The great thing about the Australian-UK relationship is that over the last 200 and some years, the UK and Australia have been trading everything we can between us. But Australia is going to have to be good at other things apart from digging stuff out of the ground and agriculture, and that’s why I talk about other industries first.”
He points to the space industry as an area of mutual interest. The Australian Space Agency signed a joint statement of Intent with the United Kingdom Space Agency in September 2019. The two countries intend to strengthen their industry ties and trade opportunities by forming a Space Bridge.
David identifies financial services as another industry with great potential for Australian exporters. The UK-Australia FinTech Bridge is a bilateral agreement aimed at strengthening engagement on fintech policy and regulation, facilitating trade flows and access to capital opportunities, and addressing international growth barriers.
He says there is much happening in financial services, citing the example of, “We’re very good at wealth management in Australia: not to say that London isn’t, but there are some good opportunities around that.”
There is also potential for Australia to export engineering skills to the UK, with shared infrastructure projects such as high-speed rail, roads, and energy projects around renewable energy. Health is another growth sector: medical research, digitization of health, new products and devices are booming.
The impact of COVID-19 on Australian exporters
The tyranny of distance has taken on a whole new meaning during the pandemic. David says that not being able to jump on a plane and fly to the UK to explore or grow the market is a challenge for new and existing exporters.
“The travel pause is obviously the hardest part. You learn a lot from body language; you learn a lot from someone’s tone of voice. It’s that nuanced piece that you don’t necessarily get when all you’ve got is someone’s head on a screen.”
David gives credit to Senator Birmingham, Minister for Trade, Tourism and Investment, for swiftly implementing the International Freight Assistance Mechanism (IFAM) in 2020. This $240 million funding injection helped keep international freight routes and flights operating during the height of the pandemic.
“The biggest problem that we’ve had is a lot of freight travels to and from Australia in the belly of passenger aircraft,” says David. “And because passenger aircraft numbers have gone through the floor, the price of freight has gone up.”
He adds that the extent to which this has affected individual organisations has depended on the type of product they export, what options are available in terms of supply chain and how quickly the freight needs to be transported.
When commenting on how domestic infrastructure has been affected, David says that although there have been some challenges since the UK strain first appeared, members of the Chamber haven’t experienced many problems.
“Broadly speaking, the UK transport system is first class,” he says. “It’s not inexpensive, but it’s very good.”
Trade agreements are changing the landscape
Three trade agreements will affect Australian exports to the UK. The EU-UK Trade and Cooperation Agreement sets out how the UK and the EU will interact following Brexit.
“I think the highlight is that there are no tariffs and no quotas on trade between the UK and the EU,” says David. “There are some additional pieces of work that have to be done in terms of customs clearance and normal border issues. There are lots of things that haven’t been covered in the agreement, and the reality of the situation is it’s a starting point for the next set of conversations. The UK will be keen to trade with other places, but the EU will still be very reliant on the UK for its export markets and similarly for the UK to the EU.”
So what are the implications of the EU-UK Trade and Cooperation Agreement for Australian exporters?
“It really depends on how you ship to Europe if you’re a goods trader,” says David. “The main challenge is the additional documentation you need if you are landing your goods in the EU or the UK and then sending them to the next port. And if there is a level of added value provided in that port before it shipped across by the exporter.
“If people are using the UK as a springboard to Europe, it’s going to make that a bit more difficult. There’s more paperwork to be done.”
The second agreement that may affect trade between Australia and the UK is the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Australia is one of the founding 11 countries, and the UK has indicated for several years that it is interested in joining the CPTPP.
The CPTPP recognises the challenges facing Small and Medium-sized Enterprises (SMEs) in establishing export markets and includes outcomes to make this task easier in the CPTPP region.
“As I understand it, not all 11 countries have actually ratified [the agreement] and are full members of the CPTPP themselves yet,” says David. “I know that Australia has, New Zealand has, and I think Japan has. But all 11 countries need to do that before we’re going to start accepting any new members. The UK is an interesting proposition because it’s not really geographically coordinated with the rest.”
Why would the UK want to join the CPTPP?
“This is about getting out and being part of the world and trying to be a little more proactive on that front than the EU was as a block. The CPTPP is a well-connected group. They share a lot of similar values in terms of open free trade, and there’s a bunch of similar values resting underneath that. Britain finds it quite attractive to sign up and get access to those markets.”
The most significant agreement between the two countries will be the Australia-United Kingdom Free Trade Agreement.
When asked about the timing, David says, “That’s a good question. How long is your piece of string? My piece of string doesn’t feel like it’s very long. There’s a lot of political will to get this deal done and get it done relatively quickly. I can’t see it being a protracted four or five years that you normally might expect. New Zealand has been negotiating at the same time. Whether they’re first or we’re first, we’ll wait and see.”
David says removing tariffs is one of the most important things from an Australian point of view. He also says the FTA will accelerate Australian companies’ push into the UK’s new economy, which is exciting because this underpins the services that make up about half of the trade investment between Australia and the UK.
He adds, “And part of that will hopefully be around the movement of people between Australia and the UK, for professional services in particular. We are very hopeful of a positive outcome in terms of an easier flow of people between the two countries where people are qualified and fulfilling a particular role on a temporary basis.”
If you are considering exporting to the UK, advice and resources are available at the Australian British Chamber of Commerce.
Take a look at PART ONE of our interview with David McCredie HERE.