The UK’s trade agreement with Australia and New Zealand, which will come into effect at the end May, marks the first major measure of liberalisation since the EU exit. We are sure to hear the usual complaints from Remainers.
We will be lectured for a long time about how it is unimportant, unimportant and even harmful.
Australia accounts for only 1.7pc in the global economy. This is a small fraction when compared with the EU or the United States.
It could be a great opportunity for British businesses. It is possible to significantly increase the export of services, particularly as skilled workers will be able move freely between both countries.
The area could become a launchpad for British companies to push further into the much larger Pacific free trade zone, to which both countries now belong. It will also allow UK manufacturers and distributors to import cheaper goods without tariffs, which will lower their costs.
The UK’s companies must now figure out how they can make the most of all the new opportunities that the trade agreement opens up to them. This work begins at the end this month.
It’s been a long time since we voted to leave the EU. We learned this week that the first major post Brexit trade deal will be in force on May 31, almost seven years after the vote to leave the EU.
Tariffs will end between the UK, Australia, and New Zealand at the beginning of next month. Goods and people can move freely, and service providers are able to cross borders easily.
The deal has been criticized a lot. The agricultural lobby claims that we offered our market access too cheaply, and demanded too little in exchange. Others argue that there will be little difference in terms of services or that EU with its size and negotiation skills might have been able get a better bargain.
These points are probably true, but consumers who pay sky-high prices for food might not mind if the price drops a bit. However, the French and Spanish agricultural lobby would have been horrified at the prospect of lower imports, making it impossible to ever ratify a trade agreement between the EU and Australia. We’ll see.
Even though people will continue to argue over these points (and they will), the agreement will become operational in only three weeks. Now, the important thing is to maximize its potential. Start with these three areas.
First, services exports. The UK has a strong position in the areas of high-end legal, accounting, engineering and consultancy services.
According to the Office for National Statistics (ONS), the UK is the second largest exporter of services, just behind the much larger US. Services account for 46pc, while countries like Germany and Canada only make up 18pc.
The deal will allow engineers, lawyers and accountants to compete for public contracts. It also allows firms to transfer people without having to adhere to lists of skilled occupations (important, as service exports can often involve sending someone to do something).
The UK will be able to increase its presence in the most prosperous economy of the world, particularly for smaller consultancies with two or three people that would have otherwise found the paperwork too overwhelming.
It can also serve as a launching pad for the much larger CPTPP Pacific Trade Area to which both countries belong. The Pacific Free Trade Area, which includes Canada, Japan Mexico, Malaysia, Vietnam, Singapore and other countries, is among the fastest-growing and most liberal trade areas in the world.
This could eventually include both the US and possibly even China, making it much larger than the EU or NAFTA. British companies will be able to access a vast market around the Pacific.
They will also need to establish a central hub in order to reach all of these potential customers. Australia, with the trade agreement in place, will be a natural base to serve millions of people.
It will also lower the price of raw materials. Tariffs on goods imported into the UK by Australia and New Zealand will be abolished under the agreement.
This will enable wine merchants, clothing manufacturers and food producers to find cheaper imports or materials. They can then lower their prices or open new markets.
If the supermarket chains don’t import more from these two nations, new competitors may be able do it instead.
Employers will be able to fill skills gaps, even though the UK has already seen record immigration levels.
The Australia Trade Deal is the first major agreement in the field of trade to be implemented after the UK left the EU. It’s been a long time coming.
Fairly, it will not make up for the majority of losses from leaving the closest trading bloc to the UK. Some sectors, notably agriculture, will be affected by increased competition. But this is the case with any deal that opens markets.
It still holds a lot of potential for British businesses, small business, entrepreneurs, and skilled professionals. Now the challenge is to seize this opportunity.