LONDON (Reuters) - Britain and Australia have signed a free trade deal projected to eventually boost bilateral trade by over 10 billion pounds ($13.3 billion), eliminating tariffs, opening up sectors like agriculture and allowing freer movement for service-sector professionals.
The elimination of tariffs on Australian drinks, and a tariff-free quota for meat will help exporters hit by sanctions in China to pivot to British sales. British cars, drinks, confectionary and cosmetics will see tariffs phased out in Australia.
“This is the most comprehensive and ambitious free trade agreement that Australia has concluded, other than with New Zealand,” Australia’s Prime Minister Scott Morrison and Trade Minister Dan Tehan said in a joint statement.
China is Australia’s largest trading partner, but a diplomatic dispute led to Beijing imposing sanctions on a raft of Australian agricultural products last year. This prompted the Morrison government to urge exporters to reduce their reliance on China.
The agreement with Britain would “further strengthen the special relationship between our two countries”, Morrison said.
Treasurer Josh Frydenberg on Friday said Australia had been subjected to “economic coercion” by China, but argued the Asian giant would continue to need its iron ore, the country’s single biggest export earner.
The UK has signed a free trade deal with Australia which it says will benefit consumers and businesses.
It is described as the first post-Brexit deal negotiated from scratch and not “rolled over” from trade terms that the UK enjoyed while in the EU.
The government estimated it would unlock £10.4bn of additional trade while ending tariffs on all UK exports.
However, some UK farmers have expressed concern that they could be undercut by cheap imports.
The government said the deal was also a gateway into the fast-growing Indo-Pacific region and would boost the UK’s bid to join the Trans-Pacific Partnership, one of the largest free trade areas in the world.
Australia has also praised the deal, its second-largest trade contract with another country.
“It’s a truly historic agreement - it’s a true free-trade agreement. Everyone wins,” said Australian Trade Minister Dan Tehan.
The agreement, which was signed in a virtual ceremony by International Trade Secretary Anne-Marie Trevelyan, is due to come into force next year.
Ms Trevelyan described it as “a landmark moment in the historic and vital relationship between our two Commonwealth nations”.
It demonstrated what the UK could achieve as “an agile, independent sovereign trading nation”, she added.
In a BBC interview, she rejected suggestions the deal would harm UK farmers.
She said the deal had “very clear safeguards” and “clear tariff quotas in the first 10 years”, as well as “an overarching safeguard mechanism”.
“The reality is that Australia sends about 70% of its beef and sheep meat to the Asia-Pacific markets,” she said.
“They’re closer for them and they get great prices. So I’m not expecting there to be any dramatic surge into UK markets and I know that our citizens will continue to buy what they want, but I’m very pleased to do things that will open up consumer choice.”
For Australia, the deal eliminates tariffs from 99% of its exports and makes it easier for Australians to live and work in the UK.
It will also help boost sales of Australia’s wine, beef and sugar. These goods have been boycotted by China - Australia’s main export market - due to recent political tensions.
A free trade deal aims to encourage trade - usually in goods but occasionally in services - by making it cheaper. This is often achieved by reducing or eliminating tariffs - taxes or charges by governments for trading goods across borders.
Trade agreements also aim to remove quotas - which are limits on the amount of goods which can be traded.
Trade can also be made simpler if countries have the same rules, such as the colour of wires in plugs. The closer the rules are, the less likely that goods need to be checked.