Australia has signed a new bilateral free trade agreement (FTA) with the United Kingdom to create more jobs and business opportunities for Australians. The UK is Australia’s third-largest services trading partner, accounting for 7.7% of total services trade in 2019-20.
The trade deal has particularly been lauded by Australia’s agriculture and meat producers — who are likely to benefit from greater access to the UK’s food market, and duty-free trade, which in return will make exporting items such as meat, wine, sugar more convenient and cheaper.
Other benefits include:
- Foreign investment from the UK can increase export opportunities for Australian businesses by helping them to diversify away from the Asian markets and venture into new ones.
- For many small and medium-sized enterprises (SMEs) in the agricultural sector, foreign investment from the UK will play a crucial role in their post-COVID-19economic recovery.
- Increased investment from the UK will also encourage businesses in Australia to innovate and bring new technology to the Australian market.
While the UK exported £5.4 billion worth of services, including £1.4bn of insurance and pension services and £780m of financial services, to Australia in 2020, the agreement can assist many more financial and professional services firms.
“Red tape and bureaucracy will be torn down for more than 13,000 UK-based SMEs who already export goods to Australia, with quicker export times,” the Institute of Export & International Trade said.
Here are the primary industries that are expected to gain from the free trade agreement:
The Australian meat industry is heavily reliant on export, with export markets earning over 70% of its total revenue. But the political tensions with China have impacted trade with its largest meat export market.
The COVID-19 pandemic has also severely crippled the meat processing industry. Several meat processing facilities in Victoria were the centre of outbreaks and were forced to shut.
Data from the meat and livestock Australia (MLA) report show that Australia had nearly 77,500 businesses operating in 2020 with market size of about $23 billion.
In 2018–19, New South Wales had 18,749 registered red meat and livestock businesses, accounting for 24% of all red meat and livestock businesses in Australia. Victoria followed with 17,802 businesses and Queensland with 16,694.
The new deal promises to eliminate tariffs on UK-bound Australian beef by 2031.
As per the FTA deal, Australia will have immediate access to a duty-free quota of 35,000 tons, which will gradually increase to 110,000 tons over the next decade.
In the next five years, beef imports exceeding a volume threshold of 175,000 tons will be subject to a tariff safeguard duty of 20% for the balance of the calendar year.
Similarly, Sheepmeat tariffs will be eliminated after ten years. Australia will have immediate access to a duty-free quota of 25,000 tons during the transition period, rising in equal instalments to 75,000 tons in year 10.
By contrast, Australia frequently uses up the tariff-free sheepmeat quota for the entire EU, which currently stands at 19,186 tons, meaning Australian exports of red meat to Britain can rise sharply.
“For Australian red meat producers, processors and exporters, this has meant working with UK importers and distributors to supply high quality Australian red meat products to meet discerning British customer demand,” said Andrew McDonald, Chair of the Australia-UK Red Meat Market Access Taskforce.
“While our ability to service the market has previously been constrained by a highly restrictive UK (and before 2021, European Union) import regime, the A-UK FTA will facilitate an easier response to British consumers seeking to buy Aussie – should they wish to do so.”
Through the FTA, Australia and the UK have agreed to include a chapter on SMEs, emphasising their importance in both nations’ economies. The chapter will commit both the UK and Australia to publishing information about the Agreement that is relevant to SMEs, as well as provisions that enable cooperation between the two countries, such as identifying ways to help SMEs.
Commitments in the SME Chapter will include:
- Establishing and maintaining a website of information for SMEs interested in trading, investing, or doing business with the other country.
- Facilitating cooperation between the UK and Australia, such as through the exchange of information on programs to assist SMEs participation in global markets.
The UK will liberalise Australian imports with 99% of Australian goods, including Australian wine and short and medium grain milled rice, entering the UK duty-free when the agreement enters into force.
According to the analysis of HMRC figures by the Food and Drink Federation (FDF), wine is Australia’s second-largest export to the UK, with 230 million bottles worth £1.5 billion sold in UK shops and supermarkets in 2020.
While speaking to the drinks business, Julian Dyer, COO for Australian Vintage Ltd, said the signing would provide huge benefits to both the Australian wine industry and the British consumer.
“The deal will allow Australian business like ours to compete and innovate more successfully, which will ultimately reduce the cost and increase the number of higher-quality wines for British drinkers,” he said.
In five years, Australian dairy exporters will be permitted to send goods to the UK duty-free, with an immediate quota of 24,000 tonnes of duty-free cheese, rising to 48,000 tonnes by 2026.
Non-cheese dairy products would also be able to export 20,000 tonnes tariff-free each year. There will be a further duty-free transitional quota for butter of 5,500 tonnes rising to 11,500 tonnes in year five.
Australia and the United Kingdom have made commitments that will increase opportunities for digital trade across all sectors of the economy, while also ensuring global standards for personal data protection and legitimate public policy objectives.
It will also include provisions to ensure the recognition of electronic contracts and signatures and legal frameworks on electronic transactions that facilitate e-commerce.
Rising service sector
Through the deal, the UK and Australia will ease rules for all services sectors, including cross border trade in services, professional services, financial services, maritime and delivery services, and telecommunications.
This will include full market access to the market for all UK and Australian service suppliers, including ensuring commitments on services extend to Australian and UK-flagged vessels, except for some specific reservations.
The UK and Australia will also commit to Maritime Transport Services and Express Delivery Annexes, while lawyers will be able to practise in the other country’s territory using their original qualifications and title.
On Telecommunications, Australia and the UK commit to access for Australian and UK service suppliers to public telecommunications networks and services in the other country on a non-discriminatory basis.