Australia-UK Free Trade Agreement: Everything You Need to Know
August 4, 2023 Uncategorized
On 17 December 2021, Australia and the United Kingdom signed a new free trade agreement following around a year of negotiations. Entering into force on 31 May 2023, it came nearly three 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 has created 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 benefits and highlight the impacts of the agreement 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.
Since the Agreement came into effect in May 2023, around three-quarters of Australia’s two-way trade has been governed by free trade agreements.
Outcomes of the Agreement
The UK-Australia Free Trade Agreement is considered a “gold standard” trade agreement. It covers a range of topics, including trade, 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. Agriculture, forestry and fisheries exports from Australia to the UK increased from $225 million in 2019-20 to an impressive $868 million in 2022-23. Australian businesses should welcome the free trade agreement, as it improves their access to a market in demand for high-quality agricultural products. Its increased market access is expected to bring the sector closer to the goal of $100 billion by 2030.
Minister for Agriculture Senator Murray Watt has heralded the deal as a “huge win for Australian farmers”. In a statement, he said the agreement “will drive increase trade and economy growth”, with Australian farmers enjoying tariff-free access to beef, wine, sugar, dairy, seafood and more.
Boost to Australian fisheries & forestry sector
Australian exporters in the fisheries and forestry sectors will welcome the deal. Tariffs on most of the seafood sector will be eliminated immediately. This is striking when you compare this to the pre-agreement 2-20% tariffs on seafood products.
The majority of tariffs on forest products also had their remaining tariffs removed as soon as the Agreement went into force. This included products like printed materials, casks and barrels.
“This is a boon for our wood and forest products industries,” according to Tasmanian senator Jonathan Duniam at the time the agreement was signed. Australia’s forestry exports are expected to rise to $2.89 billion in 2022-23. Similarly, the value of Australia’s fisheries and aquaculture is expected to rise to $1.37 billion in 2022-23 and to $1.47 billion in 2023-24.
Australian importers will also now benefit, as the UK-Australia Free Trade Agreement will herald in cheaper British imports such as cars, chocolate, make-up and alcohol.
We have now experienced the complete elimination of tariffs on some of the UK’s most popular brands such as Cadbury, Johnnie Walker, Land Rover and Lush.
Australian former Prime Minister, Scott Morrison, mentioned the Agreement would save Australian businesses and householders approximately $200 million a year.
Comprehensive and Progressive Agreement for Trans-Pacific Partnership
In July 2023, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) made the decision to admit the United Kingdom as its first new member.
The CPTPP, which contains 11 parties including Australia, creates a trade zone removing 98 per cent of tariffs (a combined GDP of $11.8 trillion).
This is a major milestone, and will further deepen the economic relationship between the UK and Australia.
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, such elimination of tariffs and import duty.
But in order to seize these benefits, the right paperwork needs to be in place. 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 having a Certificate of Origin, to prove that your goods have been manufactured in the UK (if it is an import).
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.
Get in touch with ICE today, and let’s discuss your next shipment under the UK-Australia Free Trade Agreement, now in effect.Request A Quote
or call us on 1300 227 461
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