Trade triumph looms in UK free-trade deal

Prime Minister Scott Morrison meeting with British counterpart Boris Johnson at the G7 summit in France in 2019. Picture: Supplied

When Scott Morrison heads to sunny Cornwall for the G7 summit in mid-June, there will be something to sign for him and his host British Prime Minister Boris Johnson: not on climate, but free trade.

That, says Australian British Chamber of Commerce CEO David McCredie, is a no-brainer. “We are now in this five-week sprint to get that heads of agreement piece, so they are trying to knock over as much as they can, negotiating every night. There is real momentum to deliver an outcome.”

This document is a precursor to Britain’s first free trade agreement since Brexit and will cement Australia at the head of the queue.

That it is happening at all is thanks to a critical face-to-face meeting in London last month between Trade Minister Dan Tehan and his British counterpart Liz Truss, Secretary of State for International Trade, the first in their respective portfolios. Progress made was well worth Tehan’s mandatory two-week quarantine back in Australia. The pandemic had made negotiations difficult. “They were doing a month with New Zealand, a month with Australia, it was a bit disjointed,” explains McCredie. While the ministerial face-to-face gave Australia momentum, recent reports in New Zealand lament how talks with the Kiwis have fallen behind.

Australian High Commissioner to London George Brandis also played a pivotal role. “He has been working the political angle in London where up until Dan Tehan, there had not been a ministerial visit to the UK for over a year,” McCredie says.

Throughout the shutdowns, Brandis has built a strong relationship with Truss and worked with Conservative backbenchers with agricultural seats and with Ashok Sharma, Boris Johnson’s climate envoy, to help smooth the way on climate change.

The FTA talk is quite a diplomatic asset given climate tensions. British and Australian Prime Ministers spoke by phone on Friday. A statement from the British government said Boris Johnson had “encouraged Australia to commit to reaching net zero by 2050, which will deliver clean jobs and economic growth”.

Politics in Britain continues to surprise close observers. Barring any new development, Boris Johnson will be hosting the G7 on something of a high.

Thanks to an exemplary vaccine rollout, the battered British economy is opening up and bouncing back. Goldman Sachs forecasts growth of 8.1 per cent this year.

Labor’s attack on Tory sleaze — from former PM David Cameron’s lobbying effort on behalf of failed Aussie financier Lex Greensill to the Downing Street refurbishment drama and Boris Johnson’s fallout with former Adviser Dominic Cummings — has failed to land a punch.

On May 6, the Johnson government pulled off an extraordinary win in the Hartlepool by-election, a seat held by Labour for 57 years. The day before, faced with an escalating fishing row at the other end of the country, Boris Johnson had sent two British naval ships to head off a flotilla of 50 French fishing boats off the island of Jersey.

The “small Falklands” moment would not have hurt the Hartlepool poll. Seventy per cent of the electorate had voted to leave Europe.

Post-Brexit, Britain’s first free trade deal will be a big deal for Boris Johnson.

In the most recent Australia-UK trade negotiations, parties said they were 80 per cent there on the black text. As with all FTAs nothing is agreed until everything is agreed: agricultural issues are still outstanding and Australia continues to push for zero tariffs on all goods. Unlike New Zealand, Australia is not driven by its soft commodity economy.

Both Britain and Australia are now service-led economies. “Pick a sector and I’ll tell you a British company that operates in Australia and an Australian company in the UK,” says McCredie.

“Look at the Octopus investment in Australia, which did a massive deal with Origin Energy. They have built a solar farm near Wagga. It is being connected to the grid as we speak, a massive investment by a UK fund into renewable energy in Australia.

“In healthcare, look at Ramsay Health, which has hospitals in the UK. BUPA has health clinics all over the place here as well as being one of the largest health insurance companies in Australia.”

McCredie points to a leap in the US-Australia trading relationships after the 2005 FTA with service businesses like Salesforce, Google, Microsoft and IBM all dramatically upscaling operations in Australia.

The biggest issue, he says, is mobility of people with skills. “The work that (special envoy for global business and talent) Peter Verwer has been doing, which got a nod in the budget, is about ‘how do we increase the quality of people who want to work in our countries?’ ” he says.

The fillip comes from learning lessons in one geography and then employing those skills in the other country. The challenge is the “sand in the gears” for business in the immigration system but also in lack of recognition of qualifications.

It takes several weeks for an Australian business to open a bank account in Britain. That should change, and there is also talk of financial services passporting in the funds space. “The rhetoric from those involved is that we think business is going to be really pleased with the outcomes,” McCredie says.

McCredie believes trade could double or even triple and the corollary is increased investment. Pre-COVID-19, in 2019, British investment in Australia jumped from $500bn to $600bn and Australian investment to Britain also went up by $100bn, to $500bn.

The G7 meeting is another face-to-face on the FTA. Expect to see Trade Minister Dan Tehan talking up the prospects.