The UK’s first major Free Trade Agreement negotiated from scratch since EU Exit is expected to provide new opportunities in food and drink, machinery and car manufacturing.
The deal, agreed by Prime Minister Boris Johnson and Australia Prime Minister Scott Morrison at Downing Street on 14 June, removes tariffs on the £4.3 billion worth of exports to Australia that originate in the UK.
The UK has agreed to do the same in return for the ‘vast majority’ of goods that originate in Australia. Total trade between the two countries was worth £13.9 billion last year.
The agreement is also expected to pave the way towards the government’s intended bid for the UK to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a £9 trillion free trade area covering 11 Pacific nations.
Recent research shows that almost a quarter of British exporters forecast significant growth opportunities in Australia and New Zealand.
The agreement has been warmly received by the manufacturing industry overall, especially those expected to benefit most, which include food and drink, car, machinery and chemical manufacturers. Cars and trucks are currently the UK’s largest goods export to Australia.
However, the deal has proved controversial among some in the food and drink sector, who argue that British-grown goods could be undercut by competitors in Australia where environmental and welfare standards are less stringent. Environmental campaigners are also concerned that it could lead to UK standards being watered down in future.
Under the terms of the agreement, British farmers will be protected by a cap on tariff-free imports for a period of 15 years. The government said the deal also includes a ‘general safeguard mechanism’ which will provide a safety net for any industry that is deemed to face serious damage from increased imports.
The deal is currently an ‘Agreement in Principle’ and will now be scrutinised by Parliament.
Commenting on the announcement, Stephen Phipson, CEO of Make UK, said:
“The Agreement in Principle will provide a roadmap towards the final FTA, strengthening trade opportunities which will ensure that British manufacturing benefits from future positive flows of goods and services into the Australian market. We look forward to working with government to deliver maximum benefit from the new and closer relationship.”
Rain Newton-Smith, Chief Economist at the CBI, said:
“It is essential now that both sides finalise negotiations and ensure meaningful safeguards are put in place for industries, including agriculture and high environmental standards. Businesses must prepare to seize the moment by exploring the growing opportunities of trading with Australia.”