Australia is a huge opportunity for British business – if it takes it – The Telegraph

Credit: Original article can be found here

It is a tiny economy. It is a heck of a long way away. And anyway, they are not likely to be very interested in anything we make.

With the UK trade deal with Australia and New Zealand coming into force at the end of May, marking the first major liberalisation measure since we left the European Union, we will no doubt hear all the usual objections from hardcore Remainers.

It is irrelevant, insignificant and possibly even damaging, we will be lectured at length.

It’s true that Australia only accounts for 1.7pc of the global economy, a tiny fraction compared to the EU, or indeed the United States.

And yet it could still be a huge opportunity for British business. There is huge scope to increase our services exports, especially as skilled people will be able to move freely between the two countries.

It could be turned into a launch pad for British companies to push into the far wider Pacific free trade area to which both nations now belong. And it will allow manufacturers and distributors in the UK to source cheaper tariff-free imports, lowering their costs.

The key task now is for UK companies to figure out how to make the most of the opportunities the trade deal opens up for them – and the work on that starts at the end of this month.

It has certainly been a long wait. Almost seven years after we voted to leave the EU, the first major post-Brexit trade deal, we learned this week, will come into force on May 31.

From the start of next month, tariffs between the UK and Australia and New Zealand will be ended, goods and people will move freely between the countries, and service providers will be able to straddle the borders with ease.

True, the deal has come in for plenty of criticism. The farming lobby argues that we gave away access to our market too cheaply and asked for too little in return while others argue that it will make little difference in services, or that the EU, with its size and negotiating skill, might have been able to get a better deal eventually.

There is probably some truth in those points, although consumers paying skyrocketing amounts for food may not mind it if prices come down a little, while it is likely that the French and Spanish farm lobbies would have been so horrified by the prospect of cheaper imports it would have been impossible to ever ratify an EU-Australia trade deal. We will see.

And yet, while people can argue about those points for a long time (and almost certainly will) the agreement will be operational in just three weeks. The important task now is to make the most of it. Here are three places to start.

First, services exports. Selling high-end legal services, accountancy, engineering, and consultancy is already one of the few areas where the UK is exceptionally strong.

The UK is the second-largest exporter of services in the world, according to the Office for National Statistics, coming just behind the far larger US, and make up 46pc of the stuff Britain sells around the world, compared to 18pc for countries such as Germany or Canada.

The trade deal will significantly open up new opportunities for engineers, lawyers, accountants and consultants to compete, for example, for public contracts, while also allowing firms to move people across without being subjected to skilled occupation lists (significant, since service exports often mean sending a person to do something).

It will help the UK increase its presence in one of the world’s most prosperous economies, especially for smaller two or three-person consultancies that might otherwise have found the paperwork too daunting.

Next, it can serve as a launch pad for the far larger CPTPP Pacific trade area that both countries now belong to. Encompassing Canada, Japan, Mexico, Malaysia, Vietnam and Singapore, along with several others, the Pacific free trade area is one of the fastest growing and most liberal in the world.

It may eventually include the US as well, and perhaps even China (if the world’s two largest economies find a way of dialing down the tensions between them), making it far larger than either the EU or NAFTA. British companies will have access to a huge market surrounding the Pacific.

But they will need a hub for reaching all those potential customers. With the trade deal operational, Australia will be the natural base from which to serve hundreds of millions of people.

Finally, it will lower the cost of raw materials. Under the deal, tariffs will be scrapped on goods coming into the UK from both Australia and New Zealand.

For wine merchants, food producers and clothing manufacturers, that will allow them to source cheaper imports or raw materials, which they can then use to lower their prices, or else to open up new markets.

The supermarket chains will be able to import more stuff from two of the largest, most cost-efficient agricultural nations in the world, and if they don’t we can be certain that new competitors will be able to do so instead.

And although the UK already has record levels of immigration, employers will be able to hire freely from both countries, at least up until the age of 35, making it easier for them to plug skills gaps.

The Australia trade deal is the first major trade agreement to be implemented since the UK left the EU. It has been a long wait.

In fairness, it won’t make up for many of the losses from leaving the closest trade bloc to the UK. And a few sectors will suffer from increased competition, especially in agriculture, although that is true of any deal that opens up markets.

And yet, it still has plenty of potential for British companies, for small businesses, for entrepreneurs and for skilled professionals. The challenge now is to seize it.