The U.K. is set to announce the broad terms of a free-trade deal with Australia on Tuesday, its latest post-Brexit accord as Prime Minister Boris Johnson seeks to expand commerce beyond the European Union.
The pact was finalized at a dinner between Johnson and Australian Prime Minister Scott Morrison on Monday night, according to a person familiar with the negotiations, who asked not to be identified.
The agreement is expected to cut tariffs on products like Scotch whisky, clothing and cars. It is also due to reduce levies on agricultural products, a point of controversy that had sparked a backlash from Britain’s farming sector.
Completing the Australia deal — which is expected to boost the size of the U.K. economy by 0.02% over 15 years — is a symbolic boost to Johnson’s post-Brexit agenda, being the first agreement with a major ally that goes beyond rolling over an existing EU trade relationship. Australia is the U.K.’s 20th-largest trading partner globally, and trade with Australia made up 1.2% of Britain’s total in 2020.
The U.K.-Australia negotiations had been mired in controversy in recent weeks over concerns from British farmers that they would be undercut by cheap meat imports. The British government had hinted that tariff reductions would be phased in to protect farmers.
Progress with Australia is a welcome relief for Johnson amid ongoing tensions with the EU over their post-Brexit settlement, particularly concerning Northern Ireland.
The U.K. has opted not to introduce some checks on goods crossing into Northern Ireland, saying the EU’s “draconian” approach to enforcing the rules is hurting local communities. The EU, which is Britain’s largest trading partner, says the U.K. is failing to implement the terms of the Brexit deal Johnson signed less than two years ago.
Britain’s next trade targets are deals with New Zealand and the U.S., though an accord with the latter in the short-term looks unlikely given President Joe Biden’s desire to focus on domestic issues. The British government also sees the Australia accord as a stepping stone to joining the CPTPP, an 11-country pact that includes the likes of Singapore, Malaysia and Japan.
For Australia, the agreement would be the latest in a string of bilateral free-trade deals inked in the past decade with nations including Japan, South Korea and Indonesia, as well as with the CPTPP. It’s also in negotiations to join a pact with the EU.
Morrison has been encouraging Australian exporters to diversify into more markets after geopolitical tensions with largest-trading partner China spilled into trade reprisals, including tariffs on barley and wine, and coal shipments blocked at Chinese ports.
“Reinforcing our trade relationship is a great opportunity,” Morrison said in a speech in London on Monday.
“As the United Kingdom moves into a completely new generation of their trading relationships with the world, who better to start that journey with than Australia?” he said. “Who better understands the challenges of moving in that environment, where Australia has blazed quite a trail when it has come to securing positive effective trading relationships with so many countries?”