The goods can thus be tested in-country before export, rather than being shipped first and then tested and certified at much greater cost in the receiving country.
This streamlines export processes, and prevents certification and approval processes from becoming a kind of “behind the border” non-tariff barrier.
“This agreement will help give UK and Australian businesses, exporters and consumers the certainty they need to continue trading in confidence as the UK leaves the EU,” Britain’s Trade Secretary Liam Fox said in a statement before he and Australian High Commissioner George Brandis signed the MRA in London.
The MRA covers about one-third of British goods exports to Australia, and is of particular importance in ensuring the continued smooth flow of British-made pharmaceutical and medical products into Australia.
“This demonstrates that when Brexit occurs, on whatever terms that may be, the relationship between Australia and the United Kingdom, the very strong trading relationship that already exists, will continue unaffected,” Mr Brandis said at the signing.
The agreements are significant given reports Britain has failed to finalise most trade deals needed to replace the EU’s existing agreements with 40 leading economies. According to a memo seen by the Financial Times, civil servants warned most of the deals would lapse without a transition period that keeps Britain under the EU umbrella once Brexit occurs.
The wine industry had been keenly awaiting the rollover of the EU-Australia Wine Agreement. At a parliamentary hearing on January 9, the Wine and Spirit Trade Association urged the British government to cross the finish line.
“Without rolling over that agreement, some of the wine that is exported to the UK would have to be re-labelled. And there is a bit of mutual recognition of winemaking practices, which needs to be provided for,” WSTA international affairs director Simon Stannard told the International Trade Committee. “We’re very keen for that to be rolled over and in force as soon as Britain leaves the EU.”
Moving on to an FTA
Both the wine agreement and MRA now need to be formally ratified by the British and Australian parliaments before Brexit.
The next challenge might be finding time for this in the British parliamentary schedule, given how consumed the House of Commons is by negotiations on Prime Minister Theresa May’s Brexit deal with the EU.
That Brexit debate will determine how much further Australia and Britain can go in liberalising trade on a bilateral basis.
If the parliament opts for a deal that keeps Britain in an indefinite customs union with the EU, Britain would have no scope to negotiate independent bilateral free-trade agreements (FTAs) – except perhaps in the services sector – and would have to just plug into the Australia-EU FTA discussions.
It’s a different story under Mrs May’s beleaguered deal, in which the Brexit transition period would include a temporary Britain-EU customs union. So Australia and Britain could negotiate an FTA but couldn’t sign it off until after the transition period ended.
In a no-deal Brexit scenario, bilateral FTA negotiations could start immediately, assuming the British government had the capacity to juggle a slew of major FTA discussions all at once.
Britain and Australia have been scoping an FTA ever since the 2016 Brexit referendum. At the end of last year, Britain’s Department for International Trade ran a public consultation on the proposed FTA with Australia. It was one of only four such exercises, the others being the US, New Zealand and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
“Australia is one of our most important trading partners, with total trade between our nations worth £16 billion last year. The UK will aim to establish an even closer trading relationship with Australia as we seek to encourage a global free trade agenda,” Dr Fox said in a statement on Friday.
“The UK is committed to negotiating an ambitious and comprehensive Free Trade Agreement with Australia once we leave the European Union.”
Speaking to the Australian Financial Review after the signing, he added: “It’s important that we don’t end up in a customs union with the European Union, to give us the freedom to negotiate those trade agreements.”
The British government is still considering the submissions it received to its inquiry. At the same time, the parliament’s International Trade Committee is running an inquiry into the potential gains from FTAs with Australia and New Zealand. The inquiry launched in November 2017 and holds public hearings sporadically.
Trade Minister Simon Birmingham will visit London on Monday as part of a whistle-stop European tour including Brussels and Davos. He will give a speech that may offer an update on Australia’s approach to the potential FTA with Britain.
Story updated with fresh quotes from signing ceremony; also clarifies that Dr Fox and Mr Brandis signed only the MRA and not the wine agreement, which was signed separately by officials; also clarifies how the MRA operates, and its scope, in fifth paragraph.