What is an Australia style Brexit trade deal?

Brexit: Tony Abbott says there is ‘eagerness’ for Australia deal

Speaking from Downing Street, Prime Minister Boris Johnson said: “Unless there’s a fundamental change of approach, we should go for the Australia solution.” However, he insisted the UK was not completely heading away from Brexit negotiations, adding: “What we’re saying to them is come here, come to us, if there’s some fundamental change of approach.”

The news comes after EU leaders led by Emmanuel Macron were said to have “disappointed” UK negotiators by insisting Mr Johnson had to back down in a row over fishing rights in order to get a deal done.

President Macron’s warning “startled” Downing Street and was “regarded as incendiary” in Downing Street, reports the Guardian.

Mr Johnson had originally said he wanted a Canada-style Brexit deal with Europe.

But that has since changed, so what exactly is an Australia style Brexit deal and what does that mean for the UK?

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What is an Australia style Brexit deal?

After Brexit, the UK will become what is known as a ‘Third Country’, which means it is no longer a member of the EU and does not have a registered trade deal with EU countries.

According to some reports, the Prime Minister’s suggestion the UK could aim for an Australia-style deal is “another way of saying the UK will leave with no trade deal in place”.

At first glance, calling for an Australia-style deal with the EU sounds similar to demands the UK has made with other countries, mirroring trade deals struck with non-EU nations in the past.

But the difference with Australia is the country doesn’t actually have a free trade deal with the EU right now.

The EU and Australia have been in negotiations for a free trade agreement (FTA) since June 2018, but no final agreement has yet been reached.

As a bloc, the EU is Australia’s third-largest trading partner.

The Australian Government website says “a strong EU is vital to Australian interests”, adding an FTA would “set the benchmark for what can be achieved between like-minded partners”.

It argues a deal with the EU would potentially “open up a market for Australian goods and services of close to 450million people and a GDP of US$15.5trillion”. 

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So while Mr Johnson insists an Australia-style deal is likely, Australia has actually been actively working towards a deal with the EU because it believes it to be beneficial.

In reality, if the UK did not reach a trade deal with the EU and instead opted to follow in Australia’s footsteps, it would essentially have no deal and would automatically move to trade on World Trade Organisation (WTO) terms.

This would mean WTO tariffs would automatically apply on imported and exported goods.

This means consumers in the UK could face paying higher prices for some goods imported unless the UK Government decided to introduce a zero-tariff rule for all trade.

Another point worth noting is the trade done between the UK and EU is very different from imports and exports between Australia and the EU.

In total 75 percent of Australian goods exported to the EU are minerals or agriculture.

This is unlike the UK’s relationship with Europe, which includes very close supply chain links for goods and food.

Aside from tariffs, having a WTO trading relationship with the EU would also lead to “non-tariff barriers”, which are product standards or safety regulations which could lead to additional checks at borders and delays.

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