The UK has agreed its first major trade deal since leaving the European Union. The pact with Australia will help strengthen the UK’s trade links with the dynamic Asia-Pacific region and should help its bid to the join the 11-member Comprehensive & Progressive Agreement for Trans-Pacific Partnership.

Australia will ultimately liberalise tariffs on all UK exports, including the 5 per cent duties on Scotch whisky and cars, while Britain will remove duties on 99 per cent of Australian exports, according to details so far. The agreement in principle took less than a year to negotiate and could be finalised in time to become effective in July 2022.

The deal covers tariff liberalisation, including for agricultural products, though with some protections for UK farmers. But it also covers services trade, recognising professional qualifications and enhancing mobility, while opening up financial services and investment. Besides provisions on product standards and animal welfare, the deal will include the world’s first innovation chapter, providing a mechanism for discussing its impact on trade.

Commitments to reduce red-tape and simplify customs procedures, including digitalisation, should help to expedite shipments.

The UK and Australia already maintain relatively low tariffs and non-tariff barriers on imports from each other but this deal could open up new trade opportunities, especially for smaller firms. It gives UK exporters preferential access to over 25m consumers in the world’s 13th largest economy.

UK-Australia trade currently totals around GBP14 billion a year but has been declining in relative importance. Australia contributes only 1 per cent of UK imports with just 4 per cent of Australian imports coming from Britain. The UK government estimates that exports could increase by GBP400 million to GBP900 million under the deal, while Australian exports grow by up to GBP4.2 billion, depending on the degree of liberalisation. The deal could boost UK annual GDP by 0.02 per cent in the long run while Australia’s may rise by up to 0.06 per cent.

Although the estimated economic gains are relatively small, the deal could help UK traders strengthen links with economies further afield. It will also enable businesses in both economies to diversify markets and spread risk.

The new deal should help support Britain’s ambition of joining the high-standards Comprehensive & Progressive Agreement for Trans-Pacific Partnership. Environmental and labour provisions in the new deal largely replicate the CPTPP consultation and enforcement provisions.

Australia is a member of this 11-member bloc and the UK already has rollover trade agreements with seven other members - Canada, Chile, Japan, Mexico, Peru, Singapore and Vietnam. Britain is also negotiating a deal with New Zealand and intends to upgrade its accords with Canada and Mexico this year.

The new UK-Australia deal may also provide an indication of what might be included in other British trade deals, notably a future UK-New Zealand trade pact.

First published 18th June 2021.

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