A significant milestone in Britain's post-Brexit future, and Australia's continuing program of free trade agreements, has been reached with the announcement on 15th June of the "Agreement in Principle" (AIP) on the terms of an Australia-UK Free Trade Agreement (FTA) – Britain's first bilateral trade deal to be negotiated from scratch since it left the European Union in 2020. This follows five years of discussion and while further negotiations are required to finalise the text of the agreement, the preliminary AIP outlines at a high level the key changes which aim to boost access for businesses and workers between both countries to drive economic growth and job creation.
In particular, the FTA is expected to deliver the following benefits for Australian businesses and consumers:
Removal of tariffs on goods resulting in cheaper export fees and British goods
In 2020, the UK was Australia's fifth largest goods trading partner with the relationship valued at A$21.9 billion. The FTA aims to improve access to goods in both countries' markets, including by gradually removing taxes on Australian exports to the UK over a transition period. The Australian Department of Foreign Affairs and Trade (DFAT) has indicated Australia’s exporters stand to benefit with 99% of Australian goods by value able to enter the UK duty-free when the FTA enters into force.
Under the deal, Australia will instantly be free from the requirement to pay any tariffs on wine and short and medium-grain milled rice. Tariffs for beef and sheep meat, on the other hand, will gradually be reduced over 10 years (a term which was subject to substantial negotiations caused by British farmers fearing the potential flood of cheaper meat exports from large Australian farms).
For example, Australia will immediately be able to export a duty-free quota of 35,000 tonnes of beef, rising in equal instalments to 110,000 tonnes in the tenth year when no tariffs will remain. In the following five years, a safeguard will apply on beef exports exceeding a further volume threshold rising in equal instalments to 170,000 tonnes, levying a tariff safeguard duty of 20% for the rest of the calendar year. Meanwhile, tariffs for sugar will be reduced within eight years, and dairy within five years. Australian consumers will also benefit from the removal of tariffs on cars, whisky and various other major exports from the UK.
Extension of Youth Mobility Schemes leading to an increased two-way labour flow
Under the FTA, Australian or British nationals up to the age of 35 (as opposed to the current threshold of 30) can work in the other country for a total of three years without needing to conduct specific work such as rural farm labour. This change will be introduced within five years to monitor any impact on Australia's agriculture sector and ensure alternative workplace opportunities are in place. Both countries have agreed to measures that should increase the mutual flow of backpackers, which is important for tourism and supporting the agricultural industry. A new agriculture visa will also be established which allows people to work on farms in either country.
Mutual recognition of professional services qualifications resulting in more job opportunities in the UK for Australians
The FTA will make it easier for professionals including lawyers, accountants, engineers and architects, to transfer and use their qualifications in the other country. Subject to relevant industry bodies, Australia and the UK will establish a best practice framework to improve the two-way movement of professionals.
One specific focus is on improving accessibility for Australian lawyers to practise foreign and international law in the UK, including in arbitration, mediation and conciliation proceedings. The FTA will include provisions for the legal regulatory bodies to collaborate to reduce barriers preventing local lawyers from practising in the other jurisdiction.
New investment rules increasing opportunities for Australian businesses entering the UK market and vice versa
In 2020, the UK was Australia's second largest source of foreign investment in terms of total stock (A$738 billion) and the third largest source of foreign direct investment (FDI) (A$123 billion). It was also the second largest destination for Australian foreign investment with total stock of A$615 billion and FDI of A$135 billion.
To further this investment relationship, the FTA will include protections for investors including guarantees of fair treatment and protection from expropriation. In addition, the FTA will cover both FDI and portfolio investment in order to benefit Australia's asset management sector, such as Australian fund managers active in the UK market supplying essential services and infrastructure.
Each country will also reduce any requirements for senior managers or directors of businesses to be residents of the other country, in order to make it easier for small and medium enterprises to be established. Similarly, both Governments are also exploring the possibility of limiting regulatory conditions on investors. The inclusion of a most-favoured nation provision also seeks to bolster Australian investors trying to access the UK market.
On the incoming investment side, Australia intends to encourage UK investment by raising the monetary threshold for UK investments that require screening by the Foreign Investment Review Board.
Intellectual property protections supporting investment in creativity and innovation
Under the FTA, Australia will make reasonable efforts to join the multilateral Hague Agreement on Industrial Designs, which allows designers to protect their original creations overseas more easily. A process that allows Australian artists to receive royalties when their original works of art are resold in the UK and vice versa is also underway. Australia has also agreed to protect European Union geographical indications (GIs) under a new Australian GIs system under the FTA, if the UK also puts forward its GIs for potential protection.
The FTA is expected to come into effect in 2022 after the parties finalise negotiations and the Australian and UK Parliaments pass the required legislation.
Individuals and groups who have comments about the proposed Australia-UK FTA can make submissions to the DFAT website here. In particular, DFAT has indicated that it welcomes commentary on the expected commercial, economic and regional impacts, as well as specific market access challenges and information on tariff and non-tariff barriers to goods and services trade and investment. Submissions can be made in several forms, from a short email through to a more comprehensive analytical paper.
Note: for the following items, transitional quotas will be single quotas with no additional conditions. Transitional quotas will be managed by the Australian Government on the same basis as Australia’s country-specific quota access under the WTO. Neither side will seek additional access or faster tariff reduction through the UK’s accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.