UK: A Trade Deal with Australia, With Limited Economic Implications
The UK government has reached an agreement on the core elements of a free-trade deal with Australia. If signed, it would be the first free-trade agreement (FTA) the UK government has negotiated "from scratch" after Brexit. Moreover, it has been negotiated relatively quickly without major disagreements. DBRS Morningstar views the trade deal with Australia as broadly favourable, although with very limited economic implications for now. Australia is only the 21st largest market for the UK, behind many European and non-European countries.Key highlights include:
-- The trade deal between the UK and Australia could have benefits for some UK industries, including manufacturing, thanks to the elimination of tariffs. It could also benefit UK services exports.
-- The agreement provides protection from competition to some other industries, particularly to British farmers. And it could be favourable to British tech companies thanks to an enhanced access.
-- Nevertheless, the overall trade and economic implications for the UK seem limited for the moment. Australia accounts for just 2% of UK exports and 1%% of UK imports. Over the longer term, the trade deal could potentially offer more benefits for the UK, if trade with Australia increases.
-- The deal has provided the UK an opportunity to gain experience in negotiating trade deals, which are likely to be more difficult going forward, including the one with the US.
“The potential implications of the UK trade deal with Australia seem limited at the moment, but we expect more trade deals to come. We will continue to assess the economic impacts of the future trade deals” notes Adriana Alvarado, Vice President in the Global Sovereign Ratings Group.
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