UK-Australia free trade agreement to reduce the cost-of-living effect on consumers

From May 31, 2023, UK's free trade agreement with Australia came into force, making UK items duty-free in Aussie land and paving the way for better bilateral ties.

Vicki Treadell, the British high commissioner announced the completion of the deal and the commencement of the agreement on the UK's diplomatic note which makes Australian goods duty-free in the UK.

This historic UK-Australia deal, formally designated as the Australia-United Kingdom Free Trade Agreement (A-UKFTA) will be regarded as the ultimate standard for trading with Australia. This makes the country more open to competition from the UK as British businesses can now compete in the Australian market without much paperwork.

Why is it important?

Earlier this month, when the Australian Prime Minister Anthony Albanese visited the United Kingdom he announced May 31 as the date of commencement of the Australia-United Kingdom Free Trade Agreement (A-UKFTA), provided that the UK domestic processes are completed. At the same meeting, UK Prime Minister Rishi Sunak called this a big opportunity for the businesses and the people of the two countries.

Don Farrell, the UK Trade Minister stressed the need for such free trade agreements which makes the benefits accessible to everyone in society with effects felt in everyday life.

The deal has caught the imagination of major exporters of the UK who have their eyes set on it.

In 2022, the UK-Australia two-way goods trade was worth $10 billion whereas the two-way service trade in 2021-22 was worth $4.4 billion. As of 2022, Australia gains $1 trillion from foreign direct investment from the UK, the second largest FDI source for the country.

What's in it for the UK?

A press release from the UK Trade and Tourism Minister Farrell highlighted how Australian goods will become cheaper in the UK and vice versa as tariffs are removed. The most important aspect of this deal is the removal of 99 per cent tariffs on Australian goods.

Added to that the agreement concentrates on reducing input costs for British businesses and creating better export opportunities for them. Furthermore, it seeks to diversify trade with easy access to markets. This is likely to lower the cost-of-living burden of the consumers.

The UK has also removed tariffs in the manufacturing sector, making electrical equipment and auto parts made in Australia duty-free in Britain. This will reduce consumer costs of essential products in the UK. Cosmetics sales will also get a boost as the tariffs have been removed.

What's in it for Australia?

For Australian companies, this calls for better market access and opportunities in the UK. Service providers and skilled professionals can easily enter the UK labour market now as the visa procedures become easier, removing red tape. A major stress point of this free trade agreement is the people-to-people, that is, the opportunity to temporarily work and live in the UK and Australia for Aussies and Brits respectively.

More Australians can now apply for work holidays and stay for up to three years in the UK, starting from January 31.

Tim Ayres, the Australian Assistant Trade Minister underlined the importance of the deal when he said that it will boost opportunities for workers, exporters and firms. They are counting it as a step towards expanding Australian products in the global market.

He stressed the impact of the deal in the Aussie agricultural sector as showcased by many country producers of wine, beef, grains, rice, sugar, sheep meat, dairy etc. These products will get the necessary boost as they are all exempted from tariffs.

Meanwhile, whisky, biscuits, confectionery, and cosmetics entering the Australian market from the UK will become more affordable.

With this deal, both countries are entering into a new era of bilateral partnership.