Rekindling the flame between the UK and Australia, post-Brexit

A colo­nial UK and Aus­tralia were once firm trad­ing allies. It’s said that in the 1880s, less than 100 years after the British colonised the famed ‘land down under’, the UK was the source of 70% of Australia’s imports and the des­ti­na­tion for up to 80% of exports.

The 20th cen­tu­ry paint­ed a dif­fer­ent pic­ture. Aus­tralia, keen to prove its inde­pen­dence, began favour­ing trade deals with the US and Asia, while the UK grav­i­tat­ed towards its Euro­pean neigh­bours. 

Yet 2021 saw this part­ner­ship revived, with the new UK and Aus­tralia deal becom­ing the UK’s first offi­cial new free trade agree­ment (FTA) since exit­ing the EU. The deal, which is expect­ed to increase UK GDP by 0.08%, ush­ers Britain into a new post-Brex­it era ripe for cap­i­tal­is­ing on the south­ern continent’s rich agri­cul­tur­al, min­er­al and ener­gy resources – not to men­tion incen­tivis­ing young Aus­tralian work­ers to help plug the for­mer ‘moth­er country’s’ tal­ent gap, in a peri­od when job vacan­cies out­num­ber can­di­dates. 

It also paves the path to forge greater ties with Asia, while set­ting a prece­dent for the estab­lish­ment of more bilat­er­al agree­ments. 

But how do these new oppor­tu­ni­ties stack up?

Tar­iffs aver­aged 2.8% for UK firms import­ing from Aus­tralia and 2.4% for Aus­tralian firms import­ing from the UK before the FTA was agreed, points out Ana Boa­ta, glob­al head of macro­eco­nom­ic and sec­tor research at Allianz Trade. The FTA removes these, Boa­ta con­firms, esti­mat­ing that UK busi­ness­es can expect export gains worth up to £150 mil­lion a year.

“Those in the UK’s auto­mo­tive, machin­ery and equip­ment, and agri­food sec­tors are set to be the biggest win­ners. Mean­while, Aus­tralian exporters of pre­cious met­als and stones – as well as stan­dard met­als – are cur­rent­ly account­ing for two-thirds of the UK’s imports,” she says. 

Yet, before get­ting ahead of our­selves, Boa­ta adds that the real rewards won’t be reaped until next year, as sup­ply chain bot­tle­necks are expect­ed to pre­vail until then.

Bilat­er­al trade agree­ments can also lead to the homogeni­sa­tion of stan­dards and reg­u­la­tions that are much need­ed fol­low­ing the pan­dem­ic, says Iri­na Sur­du, asso­ciate pro­fes­sor of inter­na­tion­al busi­ness strat­e­gy at War­wick Busi­ness School. 

Many of the prob­lems and delays expe­ri­enced dur­ing the pan­dem­ic in indus­tries such as med­ical device man­u­fac­tur­ing and phar­ma­ceu­ti­cals, she adds, have been relat­ed to red tape, as well as vary­ing poli­cies and leg­is­la­tion in the med­ical sec­tor. A trade deal with Aus­tralia could also help safe­guard the UK from the ener­gy cri­sis spurred by Russ­ian sanc­tions, by tap­ping into Australia’s resources.

“So, exchange of knowl­edge, tech­nolo­gies and exper­tise is most wel­come and would reduce the costs of mov­ing for­ward in these indus­tries,” she says.

With the UK expe­ri­enc­ing labour short­ages in high­ly skilled indus­tries such as finan­cial ser­vices and tech­nol­o­gy, Aus­tralian tal­ent could more eas­i­ly plug the gap under the new FTA, Boa­ta sug­gests.

Jonathan Beech, man­ag­ing direc­tor at immi­gra­tion law firm Migrate UK, out­lines some of the new rec­i­p­ro­cal options. 

Aus­tralians on the Work­ing Hol­i­day Mak­ers pro­gramme will have expand­ed rights and will be able to stay in the UK for up to three years with an increased cut-off age of 35, and vice ver­sa for UK nation­als going to Aus­tralia.

Also on the table are more straight­for­ward spon­sor­ship require­ments, with UK com­pa­nies able to spon­sor Aus­tralian pro­fes­sion­als under cer­tain visas, with­out need­ing to prove that a UK nation­al could have been hired instead. Pro­fes­sion­al qual­i­fi­ca­tions will be bet­ter recog­nised across each mar­ket, with increased col­lab­o­ra­tion between accred­i­ta­tion and reg­u­la­to­ry bod­ies.

Mean­while, Aus­tralians inter­est­ed in under­tak­ing work in agri­cul­ture and agribusi­ness in the UK will ben­e­fit from more visa path­ways.

“With the lack of restric­tions and easy appli­ca­tion process, plus poten­tial to switch into a longer-term immi­gra­tion sta­tus, the pro­pos­als look attrac­tive,” Beech says.

Per­haps the most lucra­tive oppor­tu­ni­ty that the FTA between the two coun­tries opens is the door for the UK to join the Com­pre­hen­sive and Pro­gres­sive Agree­ment for Trans-Pacif­ic Part­ner­ship (CPTPP). Made up of Aus­tralia, Brunei, Cana­da, Chile, Japan, Malaysia, Mex­i­co, New Zealand, Peru, Sin­ga­pore and Viet­nam, it’s 10 addi­tion­al mar­kets for UK exporters to tar­get. 

The appeal is evi­dent: accord­ing to McK­in­sey, Asia as a whole is fore­cast to account for 52% of the world’s pur­chas­ing pow­er by 2040 and is eco­nom­i­cal­ly cur­rent­ly worth £8.4tn, rep­re­sent­ing more than 500 mil­lion con­sumers.

The UK gov­ern­ment has now reached the sec­ond phase of its nego­ti­a­tions to join the bloc, and, once in, with Australia’s sup­port, it means many experts to mem­ber states will become tar­iff-free – a huge boon for UK busi­ness­es, Sur­du says.

“UK busi­ness­es have tak­en a hit dur­ing the pan­dem­ic and des­per­ate­ly need to be able to find new mar­ket roots for their ser­vices. Most notably, the CPTPP has devel­oped a man­u­al for how dig­i­tal trade should work effec­tive­ly. This is an impor­tant step towards meet­ing the Glob­al Britain vision that Brex­it promised but is yet to deliv­er on,” she says.

This is tipped to lead to a £460 mil­lion uptick in annu­al export gains for British exporters, Boa­ta esti­mates, thanks to the move not only increas­ing demand for UK goods but ensur­ing UK busi­ness­es are in a bet­ter posi­tion to expand their dig­i­tal reach into CPTPP mar­kets.

Mean­while, new mem­ber­ship appli­ca­tions from Chi­na, Tai­wan and South Korea mean the CPTTP is set to “emerge as an influ­en­tial forum for the set­ting of inter­na­tion­al reg­u­la­to­ry stan­dards and rules in areas such as dig­i­tal trade and cross-bor­der data flows, that are rel­e­vant to an increas­ing amount of glob­al trade,” a state­ment from multi­na­tion­al law firm Pin­sent Masons notes.

Join­ing the CPTPP “puts the UK at the heart of a dynam­ic group of coun­tries as the world econ­o­my increas­ing­ly cen­tres on the Pacif­ic region,” a UK gov­ern­ment announce­ment also acknowl­edged. 

As indi­vid­ual post-Brex­it deals with New Zealand and Sin­ga­pore have quick­ly fol­lowed that with Aus­tralia, prece­dent is being set for more deals of this nature to be nego­ti­at­ed. 

It’s in the UK’s inter­est to do so, Sur­du says, as indus­tries such as renew­able ener­gy, mil­i­tary and civ­il tech­nol­o­gy, com­put­ing, arti­fi­cial intel­li­gence, as well as phar­ma­ceu­ti­cals and med­ical equip­ment, are see­ing a rise in ver­ti­cal inte­gra­tion (sup­ply chains becom­ing owned by one par­ent com­pa­ny) and reshoring, as nation­al secu­ri­ty require­ments have height­ened. 

“In this con­text, trade agree­ments serve as routes to avoid trade bar­ri­ers and share knowl­edge and exper­tise that may reduce the costs of doing busi­ness and grow­ing new indus­tries,” Sur­du explains. “As coun­tries seek to build coun­try-spe­cif­ic advan­tages in cer­tain relat­ed indus­tries, such as dig­i­tal, finan­cial ser­vices, more of these bilat­er­al agree­ments are expect­ed between the UK and oth­er nations.”

Whether the UK-Aus­tralia trade part­ner­ship has been renewed in light of or despite the two nations’ shared and often con­tro­ver­sial his­to­ry now seems irrel­e­vant. Both coun­tries stand to gain sig­nif­i­cant­ly from cre­at­ing space between the part­ners they came to rely on in the recent past, forg­ing a new future togeth­er.