Australia—Free trade agreement with UK to boost export opportunities

Australia and the UK agreed in-principle to a free trade agreement that, once signed, will boost export and investment opportunities for Australian businesses. The UK is Australia’s fifth largest export partner, taking $21 billion in goods and services exports in 2019-20, about 4% of Australia’s total exports. Australian agriculture producers stand to gain the most from greater access to the UK market, having previously faced challenges from high tariffs and other trade barriers the UK imposed as a member of the EU. Tariffs on several products, including Australian meat (currently as high as 80%), dairy and sugar, will be eliminated over a period of up to ten years. This will provide a material boost to demand for meat exports to the UK, which amounted to about $82 million in 2020 (excluding beef) (Chart).

During the transition period, Australia will immediately receive duty-free quotas for several products that increase every year until tariffs are eliminated. For example, Australia will be able to export 35,000 tonnes for beef duty-free immediately once the deal is signed, rising to 110,000 tonnes in the tenth year before tariffs are eliminated. This presents a significant opportunity to increase beef exports to the UK, which reached only roughly 2,400 tonnes or $22 million in 2020.

The trade deal also enhances opportunities for Australia to grow and diversify wine exports that have suffered from Chinese trade restrictions in the past year. Australian wine and short and medium grain milled rice will enter the UK duty free when the agreement enters into force. Alcoholic beverage exports were Australia’s third largest goods export to the UK in 2020, amounting to more than $500 million.