The AUKFTA – not a Tim Tam for Penguin biscuit exchange

This article was first published in July 2021 by DCN.

Andrew Hudson takes us on a deep dive into the Australia-UK Free Trade Agreement (AUKFTA), examining what it means for Aussie importers and exporters.

In one of the press conferences early in the negotiations for the AUKFTA, the British Prime Minister extolled its many virtues, including forming the basis for open markets for Australia’s Tim Tams in the United Kingdom (UK) and for the UK’s Penguin biscuit in Australia. No great advantage for coeliacs like myself, but it did underline the general good spirit which facilitated the relatively short span of preliminary negotiations including online exchanges starting on 17 June 2020 followed by a “sprint to the line” of negotiations in person.

Old friends

The spirit of goodwill associated with the negotiations was hardly surprising. Once Brexit was confirmed, a deal between Australia and the UK seemed an obvious outcome for the UK. It would be difficult to envisage two countries with closer historical and political links. The experience and expertise of Australian negotiators would have assisted the UK negotiators with the first Free Trade Agreement (FTA) they were called to complete that was not merely a rollover of a deal the UK already had through its membership of the European Union.

However, the AUKFTA has wider ramifications for the UK, as it will assist the country in its efforts for accession to the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) and to advance negotiations on other potential FTAs.

Some of the details of the AUKFTA were announced on 15 June 2021 by Australia and the UK through media releases. Those releases only provided the most basic of outlines regarding the deal and were discussed in my previous comments on 16 June.

New info

Subsequently, more information has been provided on the in-principle provisions of the AUKFTA, a fact sheet and a set of frequently asked questions. However, to date, the precise terms of the AUKFTA have not been finalised. There are still details to be negotiated and the draft text will need to be completed. Following that process, the final version needs to be signed, ratified by both countries and then implemented. In our context, that will include the text of the AUKFTA to go before the Joint Standing Committee of Treaties (JSCOT) to be reviewed by Parliament (and subject to comment by the public). Having secured a recommendation for adoption from JSCOT, we would need to pass enabling legislation which may be required, mainly amendments to the Customs Act 1901 and the Customs Act 1995 to include new rules of origin and other provisions in the Customs Act 1901 and the inclusion of new tariff rates for UK “originating goods”.

As expected, these additional releases provide some more detail.

While there is full liberalisation of UK originating goods entering Australia over five years, tariffs on whisky and the other main exports will immediately be eliminated upon the AUKFTA coming into effect. There will (eventually) be full liberalisation for Australian originating goods over time, as Australia has agreed to the gradual liberalisation of goods seen as having “sensitivities” in the UK such as beef, sheepmeat, sugar, dairy and different types of rice. This will be effected through various changes to duty-free quotas towards full removal of tariffs and elimination of quotas.

The two countries have agreed that neither party will seek additional access or faster tariff reductions through the UK’s accession to the CPTPP.

Both reserve the right to impose the usual “trade remedies” provisions (dumping and countervailing duties) as already in place in both countries, on the basis that they comply with the World Trade Organisation (WTO) agreements on dumping and subsidies. To the same effect, AUKFTA provides for both countries to impose safeguards to protect against unfair trading practices or unforeseen surges in imports.

The agreement includes a commitment that if Australia agrees to protect the European Union’s geographical indicators (GIs), the UK will be permitted to propose UK GIs for potential protection including Scotch whisky and West Country farmhouse cheddar. This will become of significance to those importing food and beverage goods from the UK, as they place value on those GIs in their sales. Similarly, local producers already using certain GIs for equivalent Australian-produced goods will be concerned about the effect of any such GIs as they will need to be re-positioned in the market and re-packaged.

The AUKFTA also includes a commitment to sanitary and phytosanitary (biosecurity) provisions that facilitate trade, while ensuring the protection of human, animal and plant life and health. As readers would be aware, protection of strict biosecurity provisions are vital to both countries.

The Agreement in Principle document then outlines more of the expected provisions such as a chapter on:

• Customs procedures and trade facilitation (including some guaranteed time frames to release goods, simplified paperwork requirements and time frames for advance rulings on origin);
• Mechanisms to stop or address technical barriers to trade (building on current WTO provisions);
• Services, including financial services;
• Telecommunications;
• Labour mobility;
• Investment digital trade;
• Government procurement;
• Competition; and
• Intellectual property.

According to the Agreement in Principle, the AUKFTA also includes some of the types of provisions that have more recently appeared in FTAs beyond traditional provisions such as chapters on:

• State-owned enterprises and designated monopolies;
• Labour, environment;
• Small and medium enterprises;
• Good regulatory practices;
• Trade and gender equality; and
• Transparency and anti-corruption.

Novel provisions in AUKFTA

Many of these and other announced provisions are not of real controversy and will be seen as becoming a normal practice in our other FTAs. However, there are a number of novel provisions in the AUKFTA, including the first animal welfare chapter in an Australian FTA, the first specific reference to the Paris Agreement in an Australian FTA, the first “development” chapter in a bilateral FTA between two “developed” countries and the first “innovation” chapter in an Australian FTA.

Some of the details which industry will be eager to see include those around:

• Rules of origin (including any local value requirements);
• The forms of documentation required to support a claim of preference whether a certificate of origin, a declaration of origin or other document and whether they can be issued by a party themselves or will be required to be issued by a certifying authority;
• The consignment rules set out the circumstances in which goods can move from one country to the other, through a third country. That includes whether the goods need to remain under customs control during the movement of the goods or whether some less prescriptive requirement will be adopted; and
• What is actually meant by the comments that “no party will be required to use the services of a customs broker”. Clearly, many in the Australian border clearance industry are concerned that this would allow any importer to clear their own goods which would be different to the normal arrangement that many parties use customs brokers. The response to the question has been of some assurance, namely that it only reflects the provisions of the WTO Trade Facilitation Agreement (which precludes mandatory use of customs brokers) and is in accordance with the terms of the Customs Act 1901 which allow an “owner” of goods to effect their own clearances or use the services of a licensed customs brokers. Even so, the words of the relevant chapter will require close attention especially as the UK has a perceived lack of qualified customs brokers to process imports, as now required post-Brexit.

Early indications from those who are tasked with completing the terms of the AUKFTA are that while an agreement has yet to be reached on these issues, both countries will be seeking the most liberal and practical provisions to ensure that trade is facilitated with the minimum of regulatory complexities.

A seemingly unimportant yet current consideration for those in industry is in how the acronym AUKFTA will be pronounced. Those in the trade industry rely on a bewildering range of acronyms that are used as shorthand for many of our own FTAs and many of the agencies or agreements involved in trade, some early guidance will be useful in the implementation of AUKFTA.

We look forward to the full text and the guidance materials from relevant government agencies so that we can assist with the provision of education and training for those in the private sector.