Today the A-UKFTA is passing through parliament to become law: It is an all-encompassing trade deal that releases the Australians from some very heavy tariffs when importing into the UK particularly on agricultural products and wine.
So, let’s explore what has changed and, importantly, why cattle farmers in Australia are so happy with the new deal. As with cattle and sheep farmers around the world, Australians have suffered from a loss of sales as many people switch to diets including less red meat. These changing lifestyles are impacting in many areas but particularly for the large intensive farms across the ranges in Australia. Currently, exporting to the UK has been on what is known by the WTO as Most Favoured Nation status, or without a trade agreement in place.
For example, taking just one commodity code from the 33 commodities in this category of Meat bovine, (0201209015 selected randomly) we can calculate the approximate duty paid for a £3,000 consignment of Beef. When you add freight and insurance, assuming 3000kgs, this will be around £6,750 value CIF. According to the third country duty calculator the import duty on this is set at 12% + £221 per 100 kgs – which equals £7,440.00 – a 110% increase to get the goods into the UK. So by zeroing the duty it makes the UK a far more viable and profitable market, even though a health certificate and documents will still be needed to travel with the goods.
But the wider implications must be the precedence that is being set through this trade agreement with a relatively small country of just under 26 million people. Initially, it may seem unremarkable with OBR forecasts on the impact of the A-UKFTA to be approx. 0.08% on UK GDP by 2035. As George Eustice explained, ’We may have given away too much for too little.’
Now as we come to negotiate our membership of the newly formed Comprehensive & Progressive Agreement for Trans Pacific Partnership, a grouping represents 13% of world GDP, the numbers are getting bigger. Although we already have rollover agreements with 9 of the 11 members, it represents an opportunity to be part of a club that has rules of origin meaning the UK can be part of the 70% of components or ingredients that are exempt from tariffs. Now that could be very useful.
Only Malaysia (population 33m) and Brunei (440k) are not in rollover agreements with UK. The rest – Canada, Mexico, Peru, Chile, NZ, Australia, Singapore, Vietnam and Japan (one of our first trade deals from scratch) – have an existing relationship with the UK.
CPTPP plans to liberalise these markets but with some caveats agreed by the members, for example Canada won’t be negotiating on dairy and Japan keeps rice. But all trade deals hinge on Rules of Origin agreed for the goods at 70% originating from the trading bloc and involving easier declaration processes.
Negotiations always stick over the same issues where countries normally want to protect their home markets, such as defence, agriculture & fisheries, textiles, pharmaceuticals, chemicals and steel.
However, the A-UKFTA is having an impact on the future deal with the CPTPP who are looking at what we gave 26m people and are asking why we’re offering less to their 500m.
Remember also that a deal with the USA represents 330m which could go a long way to replace the EU 500m completely lost or reduced sales. But a deal with the USA is looking increasingly unlikely given the rise of protectionism and the UK relationship hinging on the result of re-negotiation of the Northern Irish protocol.
Market expansion has never been more important however, using Free Trade agreements are just one part of the jigsaw. Spending time on real market analysis will ensure the rest of the new market picture will be clear and you won’t waste money on the journey.
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