UK-Australia Free Trade Agreement: Agreement in Principle

Please note that this paper is based on the June 2021 ‘Agreement in Principle’ rather than the agreement signed in December 2021.

For more information on the signed agreement, see Commons Library, UK-Australia Free Trade Agreement.

On 15 June 2021, the Government announced it had reached a free trade agreement with Australia. This is the first ‘new’ UK trade deal since Brexit; the UK’s other trade agreements have largely rolled-over previous EU deals.

The then International Trade Secretary Liz Truss described the deal as "historic" and said the "gold-standard agreement shows what the UK is capable of as a sovereign trading nation."

The Government also believes the agreement with Australia will help its bid to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) – a free trade agreement between 11 Pacific Rim countries, including Australia.

The Government’s estimates suggest that the overall effect of the agreement on the UK economy is likely to be very small, with a projected increase of between 0.01 and 0.02% of GDP. This is partly because Australia accounts for only 1.7% of UK exports and 0.7% of imports and because tariffs on most UK-Australia trade are already low. Individual sectors of the economy may, however, be affected much more.

What is covered by the agreement?

The agreement removes tariffs on all UK goods exported to Australia and nearly all Australian exports to the UK, subject to ‘rules of origin’ which determine where the goods are deemed to come from. According to the Government, over £4 billion of UK exports will no longer be subject to tariffs.

The agreement also includes trade in services, digital trade and intellectual property. UK citizens aged under 35 will be able to travel and work in Australia more easily.

Controversial Investor-State Dispute Settlement (ISDS) provisions, which allow foreign investors to take legal action against governments, are not included in the agreement.

Currently the deal is an ‘agreement in principle’ (AIP). Some details still need to be finalised and the AIP needs to be converted into legal text. The legal text is expected to be published by the end of the year.

How is agriculture affected?

Farming groups are concerned the deal could affect them adversely.

Under the AIP, full tariff and quota free access for imports from Australia will be phased in over a number of years.

Full access for beef and sheepmeat imports will not occur for 15 years. However, the amount of beef and sheepmeat allowed into the UK in the first year of the agreement is significantly larger than the volumes currently imported from Australia. Tariffs on dairy will be gradually removed over five years and on sugar over eight years.

Removal of all tariffs and quotas could lead to an increase in imports from Australia. Farming groups say the agreement is likely to set a precedent for future trade deals with major agricultural exporters and that the cumulative effect of these agreements could have a major impact on UK agriculture.

Farming and animal welfare groups have raised questions about how the Government will meet its manifesto commitment not to compromise on the UK’s high environmental, animal welfare and food standards while opening up the market to food produced to different standards.

How will Parliament scrutinise the agreement?

Select Committees carry out much of the detailed scrutiny. The International Trade Committee and the Environment, Food and Rural Affairs Committee in the House of Commons and the House of Lords International Agreements Committee are examining the agreement.

Parliament’s statutory role in relation to trade agreements is limited. There is no requirement for a debate or vote on the agreement.

Parliament’s role in ratifying trade agreements is set out in the Constitutional Reform and Governance Act (CRAG) 2010. Under CRAG, the Government must lay the agreement and an Explanatory Memorandum before Parliament. The Commons has the theoretical power to delay ratification indefinitely but this has never been used. Parliament has no powers to amend a signed treaty. Any changes to legislation required to implement the agreement must be passed by Parliament in the normal way.

The Government has made commitments to help parliamentary scrutiny. It will publish an independently verified impact assessment when the text of the agreement is laid before Parliament.

The Government will give the treaty text to the International Trade Committee and the International Agreements Committee confidentially before it is laid before Parliament. The Government has also said that it expects there to be a period of at least three months between publication of the treaty text and laying the treaty before Parliament under CRAG. This is to give the committees more time to publish their reports. The Government said it will seek to accommodate a request from these committees for a Parliamentary debate.

In addition, the Agriculture Act 2020 requires the Government to publish a report explaining whether certain trade agreements (including the agreement with Australia) are consistent with UK statutory protections relating to human, animal or plant life or health, animal welfare and the environment.

The Government is setting up the Trade and Agriculture Commission (TAC). When preparing the report required under the Agriculture Act, the Secretary of State must ask the TAC for advice on animal or plant life, animal welfare and the environment (ie not human life or health). The TAC was launched in October 2021 with Professor Lorand Bartels as its chair.

A separate TAC was established in 2020. Its function was to advise the government on how best to promote the interests of British farmers, food producers and consumers in future trade agreements. This earlier version of the TAC had a fixed term which ended with the publication of a report in March 2021 setting out a range of recommendations. The Government published its response to this report in October 2021.