Summary
- Australia expects to secure a post-Brexit free trade agreement with the UK, and the deal will help nations to work closely instead of putting barriers in trade.
- Consumers are likely to benefit through relaxed visa requirements, lifting Australian exporters including small businesses that exports, subsequently, boosting services sector.
- The deal will help in securing more reliable supply chains, expand options and export opportunities.
- The initial round of negotiations among the UK and Australia would start off on 29 June 2020.
Australia is set to commence free trade talks with the UK later this month as Australia steps up to reduce its reliance on China due to coronavirus induced recession and falling exports of the country to China.
Formal negotiations for the trade deal started on 17 June, with PM Scott Morrison asserting that the trade deal would make the economic relationship between both countries even more robust. Both the UK and Australia have joined hands to lower trade tariffs and offer greater appreciation for professional norms that is due to start on 29 June.
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Australian Trade Minister, Simon Birmingham declared the beginning of formal negotiations between Canberra and London to make import and export of goods cheaper post-Brexit and make work-related travel easier between 2 countries. He asserted that growing protectionist sentiment globally needs to be changed, and economies need to be more open. Through this deal, both countries would gain confidence and set an example to not resort to protectionism.
Recently, China levied tariffs on Australian barley producers, prohibited beef exporters and encouraged its students to not study in Australia. The trade deal with the UK would be bleak if it happens, as Australian exports were worth $150 billion last year to China. However, now Brexit puts new opportunities in front of Australia.
The trade deal
Birmingham stated that Australia had always been ready to assist UK find new beginnings after Brexit and help Australian farmers, businesses, and investors, simultaneously. He also added that Australia would be eyeing improved market access for goods exports majorly in agriculture, and elevated benchmark rules for digital trade and investment to grow the already deep economic relationship.
The UK was second largest trading partner of Australia about 5 decades earlier and is presently 12th largest trading partner of Australia. In 2019, Australian exports to the UK were worth more than $15 billion due to record UK expenditure on Australian gold, in between Brexit and geographical tensions. Consumers in the UK had stopped importing Australian produce when the UK imposed high tariffs and low quotas as a result of the European Union membership.
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The UK’s departure from the European Union implies that it must close new trade deals with major economies like the US, Japan, Australia, etc.
Birmingham noted that the UK-Australia free trade agreement will help both nations to increase preferences, transfer opportunities and safeguard stronger supply chains to survive future shocks better.
Trade talks with the European Union
Australia has also been discussing a trade agreement with the EU (European Union). Birmingham described the EU as a big high-income market and is Australia’s 3rd most prominent trading associate and 3rd biggest source of foreign investment. He added that the European Union was a larger market compared to the UK, but the UK had a bigger economy.
Britain is particularly excited as the deal would help the British Prime Minister Boris Johnson in building an example in favour of the move to leave the European Union as it allowed the country to follow its economic independence.
A 2-way trade with the European Union (EU) is worth about $114 billion at $30 billion.
Boris Johnson, the UK Prime Minister, plans to wrap up trade contract with the EU before July end making way for bilateral deals with countries like Australia and New Zealand. Further, Britain plans to strike deals with Japan and the US.
Consumers to benefit from the deal
The trade deal can benefit consumers through cheaper scotch whiskey, British cars, Australian wine, and greater visa access amid the 2 countries.
The new deal can help Australian workers and travellers stay in the UK for a longer-term. The revised visa requirements will serve as a significant step in growing the services sector.
Mike Cherry, Federation of Small businesses, Chairman, UK stated that the deal was of significant importance for small businesses. Nearly 38% of the total small businesses that were exported to Australia highlights the ability to build on such existing solid trade links through these trade deals. Australia is amongst the top 10 crucial destination export markets for small firms over the next 3 years.
The deal will also help exporters of Australia to make hundreds of millions of dollars as sheep graziers, growers, winemakers and others involved in services like healthcare, finance are anticipated to benefit from the trade deal.
Liz Truss, the UK Secretary of State for International Trade stated that swinging towards Asia-Pacific would diversify trade, boost the resilience of its supply chains and ensure the UK was less susceptible to economic and political jolts in other parts of the world.
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