Is Australia-EU Trade Deal a Good Outcome for the U.K.?

Matt Bevington writes in “UK In A Changing Europe” (8 Sept 2020) that Australia has  agreements with the EU Australia has agreements with the EU related to trade, but it does not yet have a comprehensive free trade agreement in place. It has been negotiating for one with the EU since July 2018.

The bulk of EU-Australia trade is currently done according to World Trade Organisation (WTO) rules. But they do have other agreements in place, on trade and other issues:

•  Framework agreement in 2017;
•  EU crisis management operations;
•  Passenger name records in 2012;
•  Mutual recognition agreement also in 2012;
•  Classified information in 2011;
•  Wine: an agreement on trade in wine was made in 2008;
• there are also other agreements on the peaceful use of nuclear energy and scientific cooperation; and
•  Australia has many bilateral agreements with EU countries, such as on aviation, where it does not have an arrangement with the EU.

 

  Source: https://theinsiderstories.com

And yes Australia does not have a comprehensive free trade agreement with the EU, so the bulk of their trade is done according to WTO rules.

The same would be true of UK-EU trade in the event of no deal. In practice, this would mean tariffs being placed on many goods traded between the UK and the EU, alongside some quota restrictions and customs checks (Northern Ireland would be treated differently).

But the impact of no deal for the UK would not be limited to trade in goods. No deal would mean cutting all formal bilateral ties with the EU come January 2021, including in other crucial areas such as judicial and police cooperation.

By contrast, Australia has a series of agreements in place across a range of issues and is seeking a free trade agreement with the EU to improve on WTO terms.

The only bilateral agreement in place between the UK and the EU would be the Withdrawal Agreement reached by Boris Johnson in October 2019. Ultimately, without a deal the UK’s trading terms would be similar to Australia’s but the wider relationship would not.

The EU is an important trading partner for both Australia and the UK. However, their trade with the EU is not comparable either in terms of overall size or the most important goods traded. The EU comprises 11% of Australian goods trade and 19% of its services trade. Total EU-Australia trade amounted to around £111 billion in 2018/19 (at 2018 exchange rates).

For the UK, in 2018, the EU comprised 52% of its goods trade and 44% of its services trade. UK-EU trade is almost six times Australia-EU trade in terms of value, at £660 billion in 2018.

Australia’s main exports to the EU are raw materials, namely coal and gold, which make up two-fifths of its total exports to the bloc.

The UK exports a more varied range of mainly manufactured goods, such as cars, food products and pharmaceuticals. These latter are much more highly regulated industries and, although they would face tariffs in a no deal scenario, they would also encounter significant non-tariff", regulatory barriers.

Even if EU and UK negotiators manage to clinch a free trade agreement, the movement of goods and services will be subject to customs checks and added regulation, adding billions of dollars of cost to British and European businesses.

The UK government has also so far failed to replicate most of the trade deals between the EU and third countries that will no longer benefit British exporters at the end of 2020. At the same time, the United Kingdom is facing the worst coronavirus-induced slump of any major economy.

"A hard [EU] exit with few or no intermediate steps to manage the adjustment in key areas like goods trade and financial services could tip the UK back into recession in early 2021 and temporarily slow the EU recovery," Kallum Pickering, senior economist at Berenberg Bank, said in a note on Monday. "More than before, we have to watch the tail risk of a disorderly exit at the end of the year."

 

References:

1. What is an “Australian-style” deal?”, Matt Bevington, 8 Sept 2020 (https://ukandeu.ac.uk)

2. Why the Australia-EU trade model isn’t a good “good outcome” for Britain, Hanna Ziady, CNN Business, 7 Sept 2020