- Australia and the UK launch trade talks to reach a free trade agreement to deepen their trade and investment relationship, benefiting businesses as well as consumers.
- The FTA is expected to be catalytic in expediting Australia’s post-COVID-19 economic recovery, as both the countries work towards a range of international issues.
- Australian companies with operations in the UK, businesses seeking to enter the UK market and vice versa, are expected to largely gain from the FTA.
Australia and the United Kingdom of Great Britain and Northern Ireland (UK) kickstarted expeditious negotiations on 17 June 2020 to reach an ambitious and comprehensive Foreign Trade Agreement (FTA). The two countries are already important economic partners, and the FTA is designed to allow for improved trade in goods and services, two-way investment opportunities, economic growth and job creation, as per the Department of Foreign Affairs and Trade (DFAT) in Australia.
DFAT has asked interested individuals, organisations and groups to make submissions on potential opportunities and impacts of an FTA with the UK, as they are considered to be the stakeholders reached out for further consultation and follow up.
A trade agreement signed between two or more countries is a wide-ranging taxes, tariff and trade treaty that often includes investment guarantees/opportunities and defines the trade relationship between two states (bilateral) or more than two states (multilateral).
For majority of the countries across the world, international trade is regulated by different kinds of unilateral barriers such as tariffs, non-tariff barriers, and outright prohibitions. Trade agreements provide a mutually beneficial pathway to promote international trade based on reduced barriers and tariffs, and open parties to contract to gain all the benefits of increased trade while also safeguarding their respective interests. Usually, successful trade agreements are quite complex, as different economies feature different stages of development and interests.
The UK-Australia Current Dynamics
- As per DFAT, bilateral goods and services trade between the two countries was valued at $ 30.3 billion in 2018-19, making the UK as the seventh largest trading partner of Australia.
- UK is the second largest source of foreign investment in Australia, with foreign direct investment valued at $ 127.1 billion in 2019.
- The British nation is also Australia’s third-largest services trading partner, accounting for 7.7% (~$ 15.2 billion) of its total services trade in 2018-19.
UK-Australia FTA – Key Objectives
Australia aims to deepen its trade and investment relationship with the UK to benefit the businesses including Australian multinationals with existing operations in the UK as well as consumers. The initiative will also underpin Australia’s post-COVID economic recovery, as both the countries work towards a range of international issues, basis their shared heritage, common values, historic people-to-people links and advanced, open economies.
Furthermore, the better and legalised market access for goods and services will prove to be a competitive edge for new Australian exporters planning to enter the UK market. Besides, consumers in both the countries would obviously enjoy greater options of goods to choose from and get acquainted with new technologies and innovative practices.
Thus, the UK-Australia FTA would cover everything from services, digital trade, goods, investment, to high-quality rules and standards and ease of doing business.
Many Australian businesses are expected to gain from a successful FTA between the two countries, resulting in a smooth and conducive environment to do the business. Let’s cast an eye on three ASX-listed companies that are catering to consumers in various countries including the UK with their products and services.
As an early provider of the Buy Now, Pay Later (BNPL) service, Afterpay allows merchants to enable shoppers to receive products immediately and pay for the same in four (4) simple instalments over a short period of time, thus transforming the way people shop in Australia, New Zealand, US and the UK.
In the last couple of months, Afterpay acted quickly in response to the COVID-19 situation and focussed on limiting losses, preserving margins and ensuring a strong balance sheet. Overall, the Group delivered a strong performance, registering $ 7.3 billion in underlying sales, since the beginning of the year until mid-April 2020, depicting growth of 105% when compared with the same period a year ago.
In the UK, the Group’s underlying sales amounted to $ 0.1 billion in the third quarter of FY20, while active customer base grew to 0.8 million and active merchant base totalled 0.6k, as of 31 March 2020.
The APT stock was trading at $ 57.950, up 0.19% at AEST 01:57 PM on 19 June 2020, with a market cap of $ 15.5 billion.
Amcor Plc (ASX: AMC)
Amcor Plc, headquartered in the UK with operations across the world (250 locations in over 40 countries including Australia), is a global leader in manufacturing and sale of responsible, lightweight, recyclable and reusable packaging for different products like beverage, medical, pharmaceutical, food, and home- and personal-care.
The Company generated net sales of $ 3,141.0 million in the third quarter ended 31 March 2020, which represents an increase from $ 2,309.9 million in the pcp. Gross profit for the reporting period was $ 652 million, also up from $ 419.8 million in the pcp.
Net income attributable to Amcor Plc was $ 181.5 million with diluted earnings per share increasing from $ 0.097 to $ 0.114 for the quarter.
The Company’s total cash and cash equivalents stood at $ 537.8 million as at 31 March 2020, with $ 470.3 million generated by operating activities and $ 116.4 million by investing activities undertaken during the quarter.
With a market cap of $ 23.33 billion, the AMC stock was trading at $ 14.840, at AEST 01:58 PM on 19 June 2020.
Kathmandu Holdings Limited (ASX: KMD)
Kathmandu Holdings Limited (ASX: KMD), based in Christchurch, New Zealand, along with its subsidiaries, designs, markets, and retails travel & adventure clothing and equipment in New Zealand, United Kingdom, Australia and the United States.
In early May 2020, the Group reported that for the month of April 2020, online sales were 2.5 to 3 times higher than last year, with the highest growth rates in Australia, the Group’s largest market.
Group CEO Xavier Simonet highlighted that over the past years, continued investments in digital infrastructure and supply chain have been made, which provides a strong foundation and supports the Group in ramping-up online trading capabilities and distribution capacity during unprecedented online demand, such as in the present scenario caused by COVID-19.
Customers are still looking for products to support their active outdoor lifestyles, and Kathmandu Holdings has exhibited incredible resilience and agility to support its online customers during the past few months of turbulent global landscape. The Company expects registering further growth in all key markets.
The KMD stock was trading at $ 1.140, up 3.167% on 19 June 2020 (AEST 02:09 PM), with a market cap of $ 783.45 million.
There is no investor left unperturbed with the ongoing trade conflicts between US-China and the devastating bushfire in Australia.
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