Prospects for future UK-Australia Services Trade
With that final agreement expected imminently, it is an ideal moment to look at one of the topics that has garnered less attention than its agricultural counterparts – trade in services. Here I assess the prospects for services trade between the countries, as well as areas of future development.
While the COVID-19 pandemic continues to disrupt global trade, prior to the pandemic the amount of services trade between the UK and Australia has been considerable, with the UK being Australia’s third largest two-way services trading partner, accounting for 7.7% of[MOU1] [GR2] Australia’s total services trade in 2019-20. For the UK, services exports to Australia had been growing steadily from £6.2bn in 2016 to £7.7bn in 2019.
In 2019, the top categories of UK services trade with Australia (excluding travel) included:
|1||Other Business Services||
|Professional & Management Consulting Services||
|Legal, Accounting & Public Relations||
|2||Trade, trade-related & other business services||
|Architectural, Engineering and Scientific Services||
|3||Insurance Pension Funds||
For services providers in Australia exporting to the UK in 2019 (excluding travel) other business services (£880m) and technical and trade-related services (£619m) were also the largest categories of Australian exports.
What will the UK-Australia FTA achieve?
The exact details of the terms of the market access granted to each party’s services providers are still being negotiated. However, initial indications suggest that Australia and the UK will commit to their most ambitious services offers to date in an FTA context.
Looking to professional services providers, the agreement in principle included detail on the ambition on both sides to establish increased mutual recognition of professional qualifications as well as specific provisions for legal services which expand the types of services which can be offered in each other’s respective jurisdictions and increase cooperation between regulators.
While professional services providers will welcome the greater certainty provided by market access granted under the FTA, the benefits of mutual recognition of professional qualifications can take time to take effect as FTA’s generally tend only to set out a framework under which each profession’s regulators can more readily negotiate individual Mutual Recognition Agreements (MRAs).
Importantly, the FTA will also incorporate many of the provisions agreed as part of the plurilateral WTO negotiations on Services Domestic Regulation, and be the first to reinforce those provisions as part of a bilateral FTA.
Focusing on Digital Trade
One area of UK-Australia services trade that will undoubtedly grow over the coming years are services related to telecommunications, computer and information services. In 2019, the UK exported £403m worth of such services to Australia.
Increasingly digital trade is at the heart of the entire economy. Services providers across the board have had to rely on Teams, Zoom or WebEx over the course of the pandemic for vital communication in lieu of in-person contact.
The digital trade chapter in the UK-Australia FTA will be at the cutting-edge of such chapters around the world and include core provisions such as preventing the localisation of data, ensuring a high standard of protection of personal data as well as specific provisions reducing barriers to digital trade.
However, the true value of the digital trade chapter will result from the regulatory dialogue that the FTA will establish between the UK and Australia. This requires both sides to stay committed to cooperating on the development of future regulations and initiatives related to emerging technologies, data innovation and cybersecurity.
Both the UK and Australia also have an opportunity to work with third countries, like Singapore with which Australia already has a Digital Economy Agreement and the UK has recently announced the commencement of negotiations towards a Digital Economy Agreement. Other regional initiatives such as the Digital Economy Partnership Agreement (DEPA) between New Zealand, Chile and Singapore, also deserve support.
Mobility Gains and Market Access for Financial Services
As the pandemic-related trade restrictions start to lift, the new FTA will remove economic needs testing for visa applications, improving mobility.
However, the majority of the mobility benefits will not take place within the FTA itself (for a variety of historical and legal reasons). Alongside the agreement will sit new initiatives which will greatly expand the respective Youth Mobility Schemes as well as exploring new mobility routes relating to innovation and early career skills exchange schemes.
As an Australian national providing services in the UK, I must declare my interests. I think that all this is a good thing.
Bilateral financial services trade, including insurance and pension-related services, is a significant part of the services trading relationship. While the FTA will break new ground in terms of new market access provisions, much of the future benefit will accrue, as for other services sectors, from ongoing regulatory cooperation between the UK and Australia.
While services trade might not get the spotlight or attention that other parts of the UK-Australia FTA will receive once the negotiations have been concluded, it is worth highlighting the real and substantial opportunity that the FTA can offer services providers.
However, if the long-term benefits of the agreement are to be achieved, both governments, regulators and services providers will need to not only put in effort into implementing the agreement but also into ensuring that the regulatory dialogues on digital trade, financial services and professional services are utilised and deliver concrete results.
George Riddell is Director of Trade Strategy at EY, London, primarily responsible for advising companies on their international trade strategy. He has a decade of experience in international trade. Prior to joining EY, he spent over six years with the UK delegation to the WTO.
The views expressed here are the author’s and may not necessarily represent the views of their employer nor the Institute for International Trade.
This work is licensed under Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
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