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23 July 2021 | Business, News

The New UK-Australia Free Trade Agreement

In June this year Prime Ministers Boris Johnson and Scott Morrison agreed a new free trade agreement between the UK and Australia.  On the surface, this deal will ease trade between the UK and Australia, and will also benefit British under-35s who would like to work in Australia without the necessity of going through a complex visa application process.

When the agreement comes into effect, products such as cars, whisky, and confectionary will be cheaper to sell into Australia due to the removal of tariffs.  In return, tariffs on Australian beef, sheep, and wine.  The threat of cheaper imported beef has raised concerns in British farming groups; initially up to 35,000 tonnes of beef will be imported tariff-free, with this limit rising to 100,000 tonnes during the next ten years.  The UK government has made assurances that after this ten year period if too much Australian beef is entering the UK market then a safeguarding duty can be applied.  However, this assurance has done little to reduce famers’ worry that the economies of scale that are possible in Australia cannot be taken advantage of in the UK.

The agreement will reduce red tape that affect around 13,000 small businesses while trading with Australia, thus allowing faster export times with less bureaucracy to manage.  The UK technology sector will also be able to take advantage of the removal of data location requirements, meaning that they may be able to test the water without having to meet the expense of create local data storage infrastructure.

The deal has importance because it is the first post-Brexit trade deal that the UK has initiated, negotiated, and completed successfully.  While the balance of power lay with the Australian government, on the whole the UK has not done badly.  While this trade agreement is a good step forward, it is hoped that it will improve the UK’s bid to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which would open the market with the one of the largest free trade regions in the world.

In a pre-COVID 2019 the UK exported around £12bn of goods and services to Australia, a value that looks set to increase as the deal comes into effect and trading becomes easier.  However, trade with the EU in the same year was worth almost £300bn to the UK, and in a post-Brexit world that trade is becoming more difficult.

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