18 June 2021

In an era of growing trade barriers, the Australia deal is a beacon of hope


After an agreement in principle hashed out over dinner between prime ministers Scott Morrison and Boris Johnson, the details of the Australia UK trade deal have now been published. It paints a thoroughly optimistic picture for the future of the UK’s trade policy.

There are still a few hoops to jump through: the deal be written into formal legal text before being scrutinised by both parliaments, but it’s expected to come into law next year. Not only is it an ambitious and comprehensive effort, providing a strong template for future trade deals, but it pushes back against the idea that the UK would become ‘Little Britain’ after Brexit.

Be in no doubt that this is a truly ‘Global Britain’ agreement. It takes down barriers across goods and services and makes moving between countries easier. It recognises standards, rather than harmonising, meaning Australia and the UK maintain sovereignty over domestic policy issues. Importantly, an Australia-UK trade deal is supremely popular, as I wrote on this site recently.

So what are the important points?

First, the deal immediately removes all quotas and tariffs on goods imported into Australia. This provides big opportunities for Scotch whisky, cars made in the north-east, ceramics from Stoke, textile makers, and many other sectors. The UK will also immediately remove most quotas and tariffs. So Brits can look forward to cheaper Australian wine, swimwear, and Tim Tams. The exceptions are agriculture: beef, lamb, dairy (gone in five years), long-grain rice, pigs, poultry and eggs.

The agreed quotas, however, are quite generous. The UK will immediately accept 35,000 tonnes of Aussie beef duty-free, representing about five times more than Australia was previously allowed to send to the UK. The duty-free quota will then increase to 110,000 tonnes over the next 10 years and then to 170,000 in 15 years. There are similar arrangements for lamb (25,000 to 125,000 tonnes in 15 years) and sugar (80,000 to 220,000 tonnes in 8 years). After 15 years, the quotas drop away. Australia and the UK will recognise each other’s food, biosecurity, and animal welfare standards, rather than try to make them identical like within the European Union.

There are also strong provisions on migration that will provide big opportunities for young people. This includes the “unprecedented changes” to youth mobility visas: the age cap is increasing from 30 to 35 and length from two to three years. Brits will also no longer have to do farm work in Australia, enabling young professionals to use the visa. There will be efforts to recognise qualifications, through collaboration between accreditation and regulatory bodies, a matter immediately arranged for lawyers.

Companies sponsoring individuals from either country will no longer have to prove that they cannot hire locally, removing a substantial element of red tape. There is also a commitment to develop a new visa pathway for agriculture workers, explore further opportunities to enhance mobility and there’s a proposal for a new visa “for those involved in innovation across industry, culture and the arts”.

In services too, there are ambitious plans aimed at “going beyond” all existing arrangements. The goal is to remove barriers on financial services, including “mutual compatibility and regulatory deference”. Telecoms companies will have equal access to public infrastructure, increasing competition in the sector. UK/Australia-flagged vessels will have guaranteed market access and non-discrimination. The deal will liberalise cross-border data flows, supporting digital trade. It will also make it easier for British and Australian businesses to bid for government contracts in each other’s country, driving value-for-money for taxpayers both here and Down Under.

Investment will also be made easier. The threshold which triggers Australia’s Investment Review Board will increase from £144 million to £625 million. Nor will there be any residency requirements for investors. And there won’t be an Investor-State Dispute Settlement mechanism, which typically allows investors to sue for alleged discrimination. This is not necessary for two countries with comparable common law systems.

What’s more, the deal as it stands is not the final word. It will be a living document, with ongoing commitments to remove further barriers to trade. This is highlighted by the “world-first” innovation chapter, which provides commitments to ongoing collaboration on regulatory approaches, commercialisation of new technologies and supply chain resilience.

This is not a perfect deal. There are many details, particularly when it comes to non-tariff barriers and services as well as recognising qualifications, that will need to be addressed over the coming years. The continuing quotas in agriculture for the next 15 years will hurt consumers. The sections on the environment, labour, and gender equality are entirely superfluous for two liberal democracies with equivalent standards and values. There will also be a wholly unnecessary clause to “protect” the NHS — from what, it is entirely unclear.

Nevertheless, the agreement in principle is quite an ambitious and comprehensive effort. It was negotiated in relatively short order, showing that the UK can achieve quite a lot through an independent trade policy. In an era of growing trade barriers, this deal stands out as a shining light for liberalisation.

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Matthew Lesh is Research Director at the Adam Smith Institute.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.