UK-Australia FTA negotiations: Agreement in principle
A joint article by Tim Scott, Ukie (UK) and Ben Au, IGEA (Australia and New Zealand)
The Australian and UK Governments have recently announced their agreement in principle to key elements of a Free Trade Agreement (FTA) between the countries.
This will be the UK’s first major FTA negotiated from scratch since leaving the EU, and one of Australia’s most ambitious FTAs ever. The details announced so far look promising, with key digital trade drivers including prohibitions against unjustified data localisation, mutual commitments regarding IP, and easier worker mobility including the mutual waiving of the requirement for labour market testing.
The FTA will also include measures to boost trade in services between the countries, a first ever innovation chapter, and liberalisation of foreign investment rules more broadly. Together with easier movement for workers between the countries, the agreement should pave the way for increased and improved opportunity for growth in the (hopefully soon) post-COVID era. When it comes into force, the FTA should combine well with the UK’s Video Games Tax Relief (VGTR) and Australia’s coming Digital Games Tax Offset (DGTO) to make our two countries amongst the best places in the world to grow successful games businesses.
Key elements of the FTA cover:
Tariff-free trade for key sectors
Our two countries have agreed to remove tariffs on billions of pounds/dollars of cross-border exports in major sectors, making it cheaper to sell proudly made UK goods into Australia like Whiskey and Mini Coopers, whilst UK citizens get to enjoy all the Tim Tams, Lamingtons and UGGs they want tariff-free. Tariffs on major agriculture and produce such as beef and lamb will be eliminated over 10 years.
Boost for Australia and the UK’s services industries
According to the Department for International Trade, the UK exported £5.4 billion worth of services to Australia in 2020, accounting for 56 per cent of its total exports to the country. Services are likewise among Australia’s most valuable exports, period. The agreement is highly liberal, with the countries mutually committing to providing Australian and UK service suppliers with full access to each other’s markets. Non-discrimination provisions mean that the UK and Australia cannot discriminate against the other country’s service businesses in favour of their own, such as in government procurement. Professional services provisions mean trade qualifications will be mutually recognised and legal services provisions guarantee that UK and Australian lawyers can advise clients and provide arbitration, mediation and conciliation services in the other country’s territory using their original qualifications and titles, helping to minimise both cost and red tape.
While it’s not exactly a surprise that partners in an FTA would want to increase investment between their countries, the provisions in this particular FTA will be some of the strongest anywhere in the world and they will definitely create opportunities for the games industry. For example, the countries will seek to liberalise their respective investment rules for each other, that might otherwise restrict or slow foreign investment. For example, UK firms investing into Australia will face less red tape due to increased thresholds for Foreign Investment Review Board screening. This will hopefully mean greater access to capital for game development studios, as well as more equity investments, acquisitions, mergers, publishing deals, and joint partnerships across our sectors. There will also be new commitments to prohibit residency and nationality requirements for senior managers and boards of directors. For example, this could make it easier for a UK game development studio to plant a subsidiary or satellite studio in Australia compared to other countries, or vice versa. There will also be provisions to protect the interests of investors, including fair treatment and protection from the expropriation of assets.
The agreement looks to maximise the opportunity for reciprocal talent arrangements. Key commitments include:
* Australian and UK companies will be able to access sponsor visas to bring in workers from each other’s country without first having to prove that a national of their home country could not be hired to do the job through the reciprocal removal of economic needs / labour testing, and
* Australia and the UK to provide balanced guarantees that are broadly reciprocal to maintain visa pathways for service suppliers for a substantial number of sectors, through the binding of these sectors in the FTA.
* We think the opportunity for collaboration between our respective video game sectors will greatly benefit from these commitments and essentially means that our respective members will be able to tap into a much wider and deeper combined Australian/UK game development workforce.
Going beyond ‘business mobility’ though, a wider range of initiatives are outlined supporting youth, including:
* the UK and Australia will make unprecedented changes to their Youth Mobility Schemes, making them available to nationals no older than 35 years old (raised from the current 30) for a total stay of up to 3 years, without having to undertake specified work, and
* through the Innovation and Early Careers Skills Exchange, the UK and Australia will jointly explore dedicated visa requirements, in line with our respective systems, to further enable workplace exchanges which facilitate early career mobility for those involved in innovation across industry, culture and the arts (there could be particularly focused opportunities for the video games industry here).
These changes will be made within five years to allow for a smooth adjustment in our respective systems.
The commitments on digital trade helpfully balance world-leading standards for personal data protection with strong rules on data flows and the prohibition of unjustifiable data localisation requirements. We think this will help to create a more certain and secure online environment and support increased growth in digital trade including for games. Importantly for software developers like games studios, there will be prohibitions against customs duties on electronic transactions, protections against the forced transfer of source codes, and a mutual commitment to digital standards. There are also commitments to support ongoing cooperation on important digital trade issues, including data innovation and emerging technologies which, again, should be a positive.
The in-principle agreement states that Australia and the UK have committed to “ambitious intellectual property (IP) provisions that support our vibrant economies through adequate, effective and balanced protection and enforcement of IP rights and that encourage innovation and creativity”. The agreement will include provisions on copyright, design rights, patents, trademarks, artists resale rights, trade secrets and test data.
The joint commitments on IP include:
* high standard provisions on copyright, designs and the enforcement of IP rights online
* provisions on patents, trade secrets and test data
* a commitment to begin a process which will result in reciprocal arrangements for artist resale royalties, to provide new income streams for our visual artists, and
* no other commitments to implement regulatory changes to IP settings for either the UK or Australia.
The competition policy and consumer protection provisions of the FTA will aim to ensure there is open and fair competition and promote cooperation between national competition authorities, while also promoting positive outcomes for consumers. Given that in both Australia and the UK competition and consumer laws and regulators seem to be evolving quickly, it will be interesting to see the final wording in the FTA. Consumer protection may be a significant policy area to watch as the UK’s Online Safety Bill develops, and the Australian bill of the same name looks to complete its journey through the Parliament.
The commitment to a world-first innovation chapter in the agreement will provide a mechanism for the UK and Australia to discuss the impact of innovation on trade, including regulatory approaches, commercialisation of new technologies, and supply chain resilience, and ensure that our FTA remains fit-for-purpose as our economies grow.
Commitments will include:
* establishment of a Strategic Innovation Dialogue as a standing institution to support trade and economic growth through collaboration between the UK and Australia on innovation and associated trade matters, including regulatory approaches, commercialisation of new technologies, and supply chain resilience
* specific co-operation to encourage the development and adoption of emerging technologies and associated trade, and
* recognition of the importance of future-proofing the UK-Australia FTA, and commitment to taking developments in innovation into account when updating the FTA.
We look forwarding to a quick resolution of the FTA, but the signs are encouraging for a broadly positive set of policies and ones which we look forward to seeing bear fruit as our two countries continue to recover from COVID and look towards new opportunities for mutual economic growth. We are particularly hopeful the FTA will deepen the links between our two country’s growing and vibrant video game sectors. We will try to do something like this again when the final text of the FTA is agreed.
For more information, please contact Tim (for UKIE members) and Ben (for IGEA members).