On 17 December 2021, Australia and the United Kingdom signed a new free trade agreement. According to Australia’s Minister for Trade, the deal will make exports to the UK from Australia more affordable, increase employment and business opportunities as well as strengthen the already robust relationship between the two nations. The Agreement comes nearly two years after the United Kingdom formally withdrew from the European Union.
The Agreement is comprehensive and commercially significant, removing all tariffs on 99% of Australian goods exported to our British trading partners. The Agreement is said to create benefits for a wide range of the Australian population, from farmers and service professionals to students, tech entrepreneurs, SMEs and indigenous businesses.
Below we’ll outline the Agreement in detail, look at the proposed benefits and consider the potential impacts on Australian importers and exporters working with trading partners in the United Kingdom.
Brief background to Australia-UK Free Trade Agreement
The UK voted to leave the European Union in 2016, and then formally exited in January 2020. Negotiations began for a free trade agreement with Australia in June 2020, as both countries recognised the value of their economic relationship. The countries reached an ‘agreement in principle’ in June 2021 and finalised the deal virtually in December 2021.
The Agreement will come into force in 2022. For the deal to come into effect, it will need to go through the Australian parliamentary process, which will involve approval by the Joint Standing Committee on Treaties and the passing of domestic legislation. A similar kind of process will also need to happen in the United Kingdom.
After the Agreement comes into effect, around three-quarters of Australia’s two-way trade will be governed by free trade agreements.
Outcomes of the Agreement
The UK-Australia Free Trade Agreement covers a vast range of topics. This not only includes trade, but also rules of origin, customs procedures, sanitary measures, cross border trade in services, financial services, labour, competition policy, intellectual property, the recognition of professional qualifications and much more.
It is a massively comprehensive document, is about 1,600 pages, contains 32 chapters, four annexes and 17 side letters.
Importantly, however, the main outcomes of the Agreement include:
- Elimination of tariffs on more than 99% of Australian goods exports to the UK. This is valued at around $9.2 billion
- Access to over 65 million consumers in the UK who demand sustainably produced food and beverages (a major benefit for Australian farmers)
- Elimination of $43 million worth of yearly customs duties on Australian wine
- Elimination of tariffs on beef and sheep over the course of 10 years
- Elimination of tariffs on sugar over the course of eight years
- Elimination of tariffs on seafood over 3 years (most Australian seafood will have their tariffs eliminated immediately)
- Australian professional job seekers will have the same access to UK’s jobs market as their European competitors (except Ireland).
- Australian businesses can bid for more UK government contracts (a procurement market with an annual worth of around half a trillion dollars).
Impact on importers and exporters
The important parts for importers and exporters in this agreement is Chapter 2 (Trade in Goods), Chapter 3 (Trade Remedies), Chapter 4 (Rules of Origin and Origin Procedures) and Chapter 5 (Customs Procedures and Trade Facilitation).
Boost to Australian agricultural sector
A reduction and eventual elimination of tariffs on beef, sheep, wine and sugar are clearly significant for Australian agricultural exporters. Meat and cereals are some of our most valuable and important exports. We, therefore, expect Australian businesses will welcome the free trade agreement, as it improves their access to a market in demand for high-quality agricultural products.
Minister for Agriculture David Littleproud MP announced in a statement that the United Kingdom is a “high-value market”. The reduced barriers to trade through the elimination of tariffs, he said, “will provide more opportunity for Australia to export premium products and provide UK consumers with increased choice”.
Boost to Australian fisheries & forestry sector
Australian exporters in the fisheries and forestry sectors would also welcome the deal. Tariffs on most of the seafood sector will be eliminated immediately. This is striking when you compare this to the current 2-20% tariffs on seafood products today.
The majority of tariffs on forest products will also have their remaining tariffs removed as soon as the Agreement enters into force. This will include products like printed materials, casks and barrels. Some forest products are subject to tariffs as high as 10%.
“This is a boon for our wood and forest products industries,” according to Tasmanian senator Jonathan Duniam, “which export around $23 million worth of wood products to the UK based on 2019-20 trade volumes”. It is also significant because the total value of our exporters in fisheries and aquaculture was valued at $1.4 billion in 2019-2020.
Australian importers will also benefit, as the UK-Australia Free Trade Agreement will herald in cheaper British imports such as cars, chocolate, make-up and alcohol.
We will experience the complete elimination of tariffs on some of the UK’s most popular brands such as Cadbury, Johnnie Walker, Land Rover and Lush.
Australian Prime Minister, Scott Morrison, mentioned the Agreement would save Australian businesses and householders approximately $200 million a year.
Take advantage of the UK-Australia free trade agreement
There are a range of benefits that Australian importers and exporters can take advantage of once this agreement comes into effect.
But in order to seize these benefits, there’s a lot of work that needs to be done. This involves sourcing the correct HS Code to ensure your shipment can take advantage of any preferential clauses passed in the Agreement. It will also involve ensuring all your shipping documentation is correct so that your cargo can pass customs and quarantine without mishap.
Here at International Cargo Express, we have qualified and experienced freight forwarders and customs brokers who can help you realise the potential of the new trade deal between the United Kingdom and Australia. We’ve had decades of combined experience working with various free trade agreements to ensure our clients get the most out of the economic deals struck with other countries.
We also have partnerships across the United Kingdom to ensure your shipment can flow smoothly. We have various flights and vessels going to and from the United Kingdom on a regular basis, with a branch-based overseas close to all the important ports, airports and highways.
Get in touch with ICE today, and let’s discuss your next shipment under the up-and-coming UK-Australia Free Trade Agreement.