On 6 June 2019, Australia's Department of Foreign Affairs and Trade (DFAT) opened submissions from interested individuals and groups on the potential opportunities, and impacts, of a future Free Trade Agreement (FTA) with the United Kingdom (UK).
While FTA negotiations are in their preliminary stages, the call for submissions by DFAT is a positive indication that Australia's free trade relationship with the UK will continue post-Brexit, creating certainty for Australian businesses involved, or considering involvement, in the UK.
The Australia-UK trade relationship and why an FTA is needed
While Australia and the UK have historically had a favourable trading relationship, their commitment to a post-Brexit FTA demonstrates to Australian and UK businesses and investors that the trading relationship will be a priority for both Governments. This will generate much needed confidence and certainty in the market in the face of UK leadership changes, the slowing down of the global economy, and mounting pressure on Governments to adopt protectionist policy agendas.
The Australia-UK trading relationship is particularly important given:
- the UK is Australia’s seventh largest trading partner;
- Australian-UK two-way trade was valued at $27.8 billion in 2017-18; and
- the UK is the second-largest source of total foreign investment in Australia, valued at $481.4 billion in 2017, with Australia's investment in the UK valued at $333.1 billion in the same year.
Despite this successful trading relationship, an Australian-post-Brexit UK FTA is needed because their economies are inextricably linked by their longstanding complementary markets, and the current trade relationship between Australia and the UK is predicated on the UK being a member of the European Union (EU). The FTA will also provide both Governments with a good foundation for more complex and lucrative trade negotiations including between Australia and the EU, and between a post-Brexit UK and the US.
Australia's and the UK's commitment to an FTA post-Brexit
Although the EU rules provide that the UK may not commence FTA negotiations with third-country parties until after Brexit, both Governments are settling the parameters of negotiations in advance of Brexit so as to streamline the formal negotiations once they can be officially commenced.
In September 2016, Australia and the UK established a Joint Trade Working Group (TWG) to define the parameters of future FTA negotiations and exchange views on global trade policy issues and developments. Four formal meetings of the TWG have been held, demonstrating both Governments' ongoing commitment to ensure an expeditious transition to FTA negotiations once the UK has left the EU.
Opportunities that an FTA with post-Brexit UK presents Australia
While specific details of the TWG meetings have not been made public, a comprehensive FTA with post-Brexit UK would likely assist in ensuring that our trade and investment relationship continues to flourish by:
- removing barriers to trade in goods;
- expanding services linkages and investment ties;
- modernising the rules governing trade in goods, services and investment between Australia and the UK; and
- better facilitating trade and investment in the digital economy.
How Australian businesses should react
The Australian Government has invited stakeholders to make submissions on the potential opportunities and impacts of a future FTA with the UK. Although the consultation process has just begun and the commencement of negotiations could take some time, it is worthwhile considering how these changes might impact your business and the opportunities that will likely arise.
In particular, you should consider the commercial, economic, regional and other impacts on your business and investments that could be expected to arise from a future Australia-UK FTA to assist the Government in determining Australia's key priorities for future TWG meetings and for the formal negotiations of the FTA with the UK.