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The U.K. and Australia struck a new free-trade agreement as British Prime Minister Boris Johnson seeks to expand commercial ties with countries around the world after Brexit.

The main elements of the pact were finalized at a dinner between Johnson and Australian Prime Minister Scott Morrison on Monday night, 10 Downing Street said in a statement. A final agreement in principle will be published in the coming days, the U.K. government said.

“Today marks a new dawn in the U.K.’s relationship with Australia,” Johnson said. “Our new free-trade agreement opens fantastic opportunities for British businesses and consumers.”

The Australia deal is expected to boost the size of the U.K. economy by 0.02% over 15 years. Its completion is a political boost to Johnson’s post-Brexit agenda, although there may be a backlash from farmers concerned over opening up access to the British market.

The agreement marks the first deal with a major ally that goes beyond rolling over a pre-existing EU trade relationship. Australia is the U.K.’s 20th-largest trading partner globally, and trade with Australia made up 1.2% of Britain’s total in 2020.

Farmer Criticism

The agreement will cut tariffs on products like Scotch whisky, clothing and cars. It will also reduce levies on agricultural products, a point of controversy that had sparked anger from Britain’s farming sector. The final text of the agreement will include detailed chapters on animal welfare and the environment, according to a person familiar with the negotiations, speaking on condition of anonymity.

British farmers have raised concerns that they would be undercut by cheap meat imports from Australia. Under the terms of the deal, tariffs on beef and sheep meat will be phased out over a 15-year period, the Australian government said in a statement.

“Australian producers and farmers will receive a significant boost by getting greater access to the U.K. market,” the statement said.

Progress with Australia is a welcome relief for Johnson amid ongoing tensions with the EU over their post-Brexit settlement, particularly concerning Northern Ireland.

Brexit Row

The U.K. has opted not to introduce some checks on goods crossing into Northern Ireland, saying the EU’s “draconian” approach to enforcing the rules is hurting local communities. The EU, which is Britain’s largest trading partner, says the U.K. is failing to implement the terms of the Brexit deal Johnson signed less than two years ago.

Britain’s next trade targets are deals with New Zealand and the U.S., though an accord with the latter in the short-term looks unlikely given President Joe Biden’s desire to focus on domestic issues. The British government also sees the Australia accord as a stepping stone to joining the CPTPP, an 11-country pact that includes the likes of Singapore, Malaysia and Japan.

The deal means the U.K. will “potentially get access to the CPTPP -- this paves the way for that accession,” Australian Trade Minister Dan Tehan said in a Bloomberg Television interview Wednesday. “There’s real substance to this agreement.”

The UK formally applied to join the CPTPP in February and the member nations started the process to consider that application earlier this month.

For Australia, the agreement would be the latest in a string of bilateral free-trade deals signed in the past decade with nations including Japan, South Korea and Indonesia, as well as with the CPTPP. It’s also in negotiations to join a pact with the EU, with Tehan saying the “end-game” for those talks should be reached by the end of the year.

Morrison has been encouraging Australian exporters to diversify into more markets after geopolitical tensions with largest-trading partner China spilled into trade reprisals, including tariffs on barley and wine, and coal shipments blocked at Chinese ports.

“Reinforcing our trade relationship is a great opportunity,” Morrison said in a speech in London on Monday.

“As the United Kingdom moves into a completely new generation of their trading relationships with the world, who better to start that journey with than Australia?” he said. “Who better understands the challenges of moving in that environment, where Australia has blazed quite a trail when it has come to securing positive effective trading relationships with so many countries?”

(Updates with Australian trade minister’s comments from 12th paragraph.)

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