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UK-Australia: the new deal

Updated: Jun 21, 2021

Thrive’s public affairs expert, Natanael Bloch shares his insights on the new deal between Australia and the UK, why it is the “right deal” and what are some of the bigger impacts in the Pacific region

UK Prime Minister Boris Johnson and Australia Prime Minister Scott Morrison came to a deal only one year after both countries launched negotiations for a free trade agreement (FTA) on 17 June 2020. Five negotiating rounds have been held between both parties.

For Boris Johnson, this deal “marks a new dawn in the UK's relationship with Australia, underpinned by our shared history and common values”. For Scott Morrison, “this is the most comprehensive and ambitious agreement that Australia has concluded”.

Is it a good(s) deal?

The deal is mainly centred on goods. It eliminates tariffs on exports to each other’s countries over 15 years. The UK will liberalise Australian imports with 99 per cent of Australian goods, including Australian wine and short and medium grain milled rice, entering the UK duty-free when the agreement enters into force. After ten years, both beef and sheepmeat tariffs will be eliminated.

People movement is also essential as services are a crucial element for both economies. Working Holiday Visa makers in the UK will get expanded rights and will now be able to stay for three years with an increased cut off age of 35.

Professionals will benefit from provisions to support mutual recognition of qualifications and greater certainty for skilled professionals entering the UK labour market.

The Australian Minister for Trade, Tourism and Investment Dan Tehan, in a joint media release with Prime Minister Scott Morrison, highlights the comprehensive and global aspect of the deal: “The FTA is the right deal for Australia and the United Kingdom, with greater access to a range of high-quality products made in both countries as well as greater access for businesses and workers, all of which will drive economic growth and job creation in both countries.”

The UK-Australia trade relationship was worth $25.5 billion in 2020. And there is no doubt that it will grow under this new deal.

For Tim Harcourt, Industry Professor and Chief Economist at University of Technology Sydney (UTS), “The deal is as good as can be expected. Free Trade agreements are never perfect but all we can get in a second-best world”.

And in a second-best world deal, some sectors are already raising concerns. The farming industry is one of them. UK farmers fear Australian producers could now start a price war and kill off British producers. On the Australian side, the hard lobby from the UK to reduce the farm work for backpackers prompt fears of a shortfall of farmworkers.

It takes two to tango

Both the UK and Australia have changed the way they used to trade with longstanding or more recent partners.

Brexit freed the UK up and allows it now to do bilateral trade deals with partners worldwide instead of negotiating with 27 other countries via the EU. This free trade deal with Australia is the first significant agreement negotiated from scratch by the UK government since Brexit. It will set the tone for the UK’s post-Brexit economy, facing, among others, heavy scrutiny from various stakeholders, as everyone knows now the cost of leaving.

The Australia-China trade deal entered into force in late 2015 and has been unravelled by recent political tensions between the two countries. The COVID-19 pandemic has exacerbated the tensions after Australia called for an independent investigation into the origins of the novel coronavirus. These tensions happened while China is Australia's largest two-way trading partner in goods and services, accounting for 29 per cent of Australia's trade with the world.

Changing perspective

The UK-Australia trade deal can be seen as a precursor to the UK joining a broader Asia Pacific free-trade agreement: the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, signed by 11 Pacific Nations such as New Zealand, Canada, Australia, Japan, Mexico and Singapore. And at a time where the UK can’t count anymore on the EU zone to negotiate FTAs throughout the world, every step to access a new market is a win, Australia being the best gateway for the UK to access these new markets in the Indo-Pacific.

This new perspective offers UK agricultural producers the possibility to increase their exports overseas, including towards these new markets in the Indo-Pacific.

Invited as the head of a guest country at the June G7 meeting, Scott Morrison said there was increased awareness from European nations about tensions in the Indo-Pacific region. Australia had to be patient to restore its troubled relationship with China.

For Australia, as the trade conflict with China does not seem to come to an end, every single support into its “trade and diplomatic playground” in the Indo-Pacific region is a victory. At the same G7 meeting, French President Macron highlighted the so-called Indo-Pacific axis and said: "I would like to reiterate how committed France remains to defend the balance in the Indo-Pacific region and how much we consider the partnership we have with Australia is essential in the Indo-Pacific strategy." By stepping into the Pacific region, the UK commits to security, the free market and the rule of law to preserve the regional balance of power in the face of China's rise.

UK-Australia is a trade deal of a completely different magnitude. It has to be analysed through the lens of recent political and diplomatic events, from Brexit to tension with China through the relatively new interest in the Indo-Pacific region. The UK and Australia will finalise this deal at the end of 2021, and both countries will enact it by July 2022.

Natanael is a corporate, crisis communications and public affairs professional. For the past 10 years he has worked with business leaders, government and community stakeholders across Australia, France and Europe for Ministers, organisations and clients in sectors spanning health, infrastructure, energy, transport, FMCG and technology. At Thrive, Natanael is a Group Account Director in the national Brand Reputation team and is based in Melbourne.

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