Australia and UK sign trade deal estimated at $13.3bn

The scrapping of tariffs on Australian wine and beef is expected to help exporters hit by Chinese trade sanctions.

A woman looks at a bottle of Australian wine at a supermarket in Hangzhou, in eastern China's Zhejiang province on November 27, 2020. (Photo by STR / AFP) / China OUT (AFP)

The United Kingdom and Australia on Thursday signed a free trade deal projected to eventually boost bilateral trade by more than 10 billion pounds ($13.3bn), eliminating tariffs, opening up sectors like agriculture and allowing freer movement for service-sector professionals.

The elimination of tariffs on Australian wine, and a tariff-free quota for beef will help exporters hit by sanctions in China to pivot to sales in the UK. British cars, whiskey, confectionery and cosmetics will see tariffs phased out in Australia.

“This is the most comprehensive and ambitious free trade agreement that Australia has concluded, other than with New Zealand,” Australia’s Prime Minister Scott Morrison and Trade Minister Dan Tehan said in a joint statement.

China is Australia’s largest trading partner, but a diplomatic dispute led to Beijing imposing sanctions on a raft of Australian agricultural products last year. This prompted the Morrison government to urge exporters to reduce their reliance on China.

The agreement with the UK would “create new opportunities for workers, young people and businesses and further strengthen the special relationship between our two countries”, Morrison said.

Tariffs will be eliminated on 99 percent of Australian goods exported to the UK, valued at 9.2 billion Australian dollars ($6.60bn), with 43 million Australian dollars ($31m) in duties removed from Australian wine.

An initial tariff-free quota for Australian beef of 35,000 tonnes will lead to the elimination of tariffs after 10 years.

UK businesses will be encouraged to invest in Australia, and a working holiday programme is to be expanded to allow Australians aged 35 years and under to work in the UK for three years.

‘Seismic opportunities’

Analysis drawn up by the UK and independently vetted said it would boost the economy by 2.3 billion pounds ($3bn) per year and unlock 10.4 billion pounds ($13.9bn) of imports and exports by 2035.

Total goods and services trade between the UK and Australia was worth 14.5 billion pounds ($19.3bn) in the year to June 2021, with Australia ranked the UK’s 21st-largest trade partner and accounting for 1.2 percent of total UK trade.

The deal adds just a small fraction to the UK’s $3 trillion economy, but it is the first trade agreement London negotiated from scratch since it left the European Union.

“This is just the start as we get on the front foot and seize the seismic opportunities that await us on the world stage,” British Trade Minister Anne-Marie Trevelyan said.

The UK sees the deal as an important step towards membership of a trans-Pacific trade bloc that would shift its economic centre away from Europe and towards growing economies with demand for professional services.

The two nations forged an Indo-Pacific security pact, AUKUS, with the United States in September to share defence technology including nuclear submarines with Australia.

When the trade agreement in principle was announced earlier this year, UK farmers complained it exposes them to competition from large-scale Australian meat producers that could squeeze out home-grown products. The UK says the deal has safeguards to protect farmers.

In addition to beef, Australian sugar and sheep meat will also benefit from initial tariff-free quotas, with all tariffs removed after eight and 10 years, respectively.

The final terms of the deal will be put before the UK parliament for scrutiny. Legislators can theoretically block a treaty indefinitely, but this power has never been tested, according to a House of Commons Library briefing.

Source: Reuters