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The UK has hailed the signing of a free trade agreement with Australia and an imminent deal with New Zealand as proof the country can make its own way in international trade after Brexit. But it appears that there will be a long wait for the country’s next free trade deal. 

Experts say the deals with both countries – an in-principle agreement with New Zealand is planned for August – have been eased by historically close ties, similar business environments and mutual interest in paring back trade barriers. Negotiations with other countries are expected to be much tougher. 

“In terms of new countries, big countries we don’t have a trade deal with, there is no other low hanging fruit,” says David Henig, director of the UK Trade Policy Project at the European Centre for International Political Economy.  

The UK had already reached a free trade agreement with Japan, based on its EU trade partnership to which the UK was formerly a party, as well as continuity agreements with almost three dozen other countries that were also built on deals those countries have with the EU. 

However, the deal with Australia is the first that has been drafted from scratch, because Australia has no deal with the EU. 

The UK said last year it was working on reaching a free trade agreement with the US and international trade minister Liz Truss said in May that the government will also work towards upgrading existing agreements with Canada and Mexico into full free trade deals. 

For British companies looking to expand into new markets, clarity over trading arrangements is crucial. Earlier this year, a survey of UK exporters found just over a third prefer trade agreements to be in place before entering a new market, while 62% said trade deals will be important for future profits. 

Other countries the UK will be eyeing agreements with, such as India and major South American economies, are far more defensive of local industries than Australia and New Zealand, Henig tells GTR. 

“There are not too many other countries – probably not any – which would fit into the same category once you’ve done Australia and New Zealand. Every other country is going to be more difficult because they’ve got more complicated issues.”

India and the UK announced an “enhanced trade partnership” in May, which the UK said would pave the way to an eventual free trade agreement.

But India’s average most favoured nation tariff rate of 13.8% – among the highest of any major economy – as well as its recent erection of trade barriers to spur domestic production in some key sectors, suggest negotiations will be slow.

On June 22 the UK announced it had formally kicked off negotiations to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), an 11-member free trade bloc of Asia Pacific countries with which the UK says it conducted £110bn-worth of trade in 2019. 

“CPTTP membership is a huge opportunity for Britain,” Truss said in a statement. “It will help shift our economic centre of gravity away from Europe towards faster-growing parts of the world, and deepen our access to massive consumer markets in the Asia Pacific.”  

The government’s CPTTP strategy document, also released on June 22, suggests joining the pact would boost the UK’s gross domestic product (GDP) by 0.08%, although it does not say over what timeframe. The deal with Australia, which is also a member of the group, is expected to lift GDP by 0.02%.  

Australia is the UK’s 20th-largest trading partner, but accounted for just over 1% of the UK’s overall goods exports in 2020, worth around £4.3bn, according to UK government figures. The UK exported £752mn-worth of goods to New Zealand during the same period. 

Henig says deals with Australia, New Zealand and CPTPP ascension may be all the current government will manage to secure during its current term. “They’d like the US to happen, but the US isn’t necessarily going to play ball.” 

Smoothing the path to greater Asia trade

These new and prospective deals also serve a purpose beyond pure trade outcomes. As part of the Johnson government’s vision of a “Global Britain” outside the EU, analysts say the UK is keen to gain clout in the Indo-Pacific region , where China, India and Japan are the dominant powers.

“The UK has demonstrated its ability to sign and negotiate free trade agreements now that it has left the EU and acted upon its strategy to exert international influence and gain greater access to Indo-Pacific markets,” says Sussex University’s UK Trade Policy Observatory director Michael Gasiorek.  

“If the question is ‘what does the UK get out of the UK-Australia trade deal?’ then on the face of it the answer is ‘in aggregate, not very much’,” he says.

But in Gasiorek’s opinion the geopolitical benefits of the Australian agreement, such as smoothing the UK’s path into the CPTPP, may be greater than its economic impact. Modelling published by the Observatory suggests the agreement, when in force, will deliver a 0.35% boost to UK exports compared to a 2.2% jump in Australian exports to the UK. 

There are some concerns about the potential impact on British agricultural producers, however.

The trade deal hit the headlines in the UK for allowing greater access to Australian agricultural products, chiefly beef, which are generally farmed at a lower cost in Australia. UK farmers warned that cheaper Australian produce could flood the market, although the changes will be phased in over 10 years.

Gasiorek says the approach “may set a precedent with regard to future agreements”. 

“It is interesting that the UK was prepared to liberalise as much as it did on agriculture. This will have interested the US who are very keen on this,” he says in comments to GTR. 

“Liberalising agriculture may set a precedent with regard to future agreements – for example with the US –  and it remains to be seen quite what has been agreed with regard to food standards,” says Gasiorek, a nod to the absence of a formal text, which is expected to take several months to finalise.   

He warns that if the agreement allows the importation of food produced under different standards to those allowed in the EU – such as those on the use of hormones in livestock – could cause difficulties with the Northern Ireland protocol. 

“If the UK-Australia deal precluded even a temporary sanitary and phytosanitary deal[EW10]  with the EU then such an agreement could reduce UK agricultural trade with the EU more than it increased it with Australia.”