When two nations enter into a free trade agreement, both parties win. Do you know why? Because it boosts the economy of both nations, eliminates tariffs, and helps businesses expand into new markets. Such is the newly signed free trade deal between the UK and Australia.
The deal, which is projected to boost trade by more than 10 billion pounds ($13.3 billion), will reduce tariffs on UK exports to Australia and Australian exports to the UK. And it will also make it easier for workers and foreign investment to operate between the two countries.
Why the Deal Is Important
Following its exit from the European Union (EU), this deal is critical for the UK, which is looking to restore its status in the global trade network. However, it is the same for Australia, whose trading relationship with China has broken down after a diplomatic dispute led to Beijing imposing sanctions on some Australian agricultural products last year. This situation leaves both countries to find alternative trading partners to cushion the negative impact of their respective situations.
The EU has been the UK's largest trading partner for many years, making 42% of all UK exports and 50% of all UK imports in 2020. However, the share of UK exports accounted for by the EU has generally fallen over time.
This was mainly due to the coronavirus pandemic, as well as the fact that the UK is no longer a member of the EU single market and customs union. While the government is establishing new customs laws for trade with the EU, it is simultaneously negotiating free trade agreements with other countries such as Israel, and in this case, Australia.
What Is the Impact of This New Trade Deal?
This new trade deal will eliminate tariffs on Australian wine, beef, and other agricultural products to the UK, while British cars, whiskey, confectionery, and cosmetics will see tariffs phased out in Australia.
Tariffs will be eliminated on 99% of Australian goods exported to the UK, valued at 9.2 billion Australian dollars ($6.60 billion), with 43 million Australian dollars ($31 million) in duties removed from Australian wine.
According to Australia’s Prime Minister Scott Morrison, “this is the most comprehensive and ambitious free trade agreement that Australia has concluded, other than with New Zealand." He added that the agreement would “create new opportunities for workers, young people, and businesses and further strengthen the special relationship between our two countries.”
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