Before the UK and the European Union (EU) signed the Trade and Cooperation Agreement (TCA), Prime Minister Boris Johnson had initially told businesses to prepare for an Australian-style system of free trade. This system is based on the principles of global free trade, similar to the arrangements made between the EU and Australia. However, it is unlikely to be beneficial for British businesses.
Why a Canadian-style System Was Not Likely
At first, the Prime Minister originally wanted to strike a “Canadian-style” trade deal. The Comprehensive Economic and Trade Agreement (CETA), a current trade deal between the EU and Canada, has been the main source of inspiration for the UK. While the CETA will increase checks on imports and exports for British businesses, it would also reduce tariffs and quotas on imports, which is ideal for a country aiming for zero tariffs and a zero quota deal. Under the CETA, 98% of products can be traded without tariffs, with just a small percentage of items, mainly eggs, poultry, and meat, being liable for tariffs.
Unfortunately, it was unlikely for the UK to strike such a deal with the EU, especially after comments from Downing Street that the EU will not offer the same beneficial terms as outlined in the CETA deal. Thus, Prime Minister Boris Johnson announced afterward that he planned on pursuing a deal similar to Australia’s instead, which focuses on the principles of global free trade.
What Would an Australian-style Deal Have Looked Like?
The Australian-style deal idea emerged at the beginning of the year as a friendlier version of a no-deal Brexit. As of now, Australia has no free-trade deal with the EU, although negotiations are underway. They are currently trading under the WTO agreements, which demand high tariffs on imports and exports.
Coining the term “Australian-style” trade deal was a way of talking about a no-deal Brexit without evoking the same level of anxiety. However, some news reports have suggested that a no-deal Brexit may be more similar to an Afghanistan-EU arrangement. This is because a no-deal Brexit will result in the absence of formal cooperation in the trading relationship, whereas Australia does enjoy a few agreements with the EU.
However, such proposals have stopped after the TCA was signed in December. Regardless of what deal was signed, companies must remain up-to-date on all relevant updates and educate themselves on how certain regulations may impact them to stay in business.
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