Marmite for Vegemite, Penguins for TimTams. These are just two of the swaps that Boris Johnson alluded to as he addressed the nation regarding the completion of an “historic” trade deal between the UK and Australia.
While these may not seem like major products to drive economic recovery, and Australia may not represent what many would see as a viable replacement to the EU, the gravity of this trade deal should not be overlooked. “This trade deal can only help,” says David Strang, CEO at the sports toys manufacturer and retailer, Wicked. “It’s a huge help.”
Born in Scotland, but growing up in Australia between the ages of eight and 20, Strang’s business was born out of his personal experiences. In 1999 the entrepreneur established Wicked to pursue the market opportunity of “importing successful Australian products to the UK and distributing them throughout the UK and Europe”. Some 22 years later and the tables have turned, with Wicked now enjoying the distinction of being the “largest manufacturer and distributor of returning indoor and outdoor boomerangs in the world”.
The exported boomerangs even find themselves back in Australia, and the irony is not lost on many. The Prime Minister claimed that he was “amazed to discover” that boomerangs were made in the UK and exported back to Australia. “I don’t think they come back, but we export them to Australia,” he quipped.
It has been forecast by the UK Trade Policy Observatory (UKTPO) that the UK will only see 0.35% of sales growth as a result of the deal, in comparison to Australia’s 2.2%. However, while the boomerangs may not return as they should, the trade deal as a whole should not be viewed in the same one-sided light.
For Strang, there are two reasons for this. “The main reason is financially,” he says. “There’s now no tariffs involved, and there were tariffs.” Also manufacturing in China, as well as in the UK, Wicked knows the extent of competition UK firms face from Chinese manufacturers. “And there’s a lot of these,” adds Strang.
“We like to think of ourselves as having superior quality products, but there are some great products coming out of China, including our own,” he says. “So, the obvious thing is that it gives us a bit of a price advantage, if we don’t have that 5% tariff, that’s huge for use. [It] makes a huge difference to our distributors and retailers that sell products in Australia.”
Evidently, no matter who gains to a larger extent numerically from the deal, free trade is free trade in the eyes of Strang and Wicked. Moreover, the deal essentially “raises the profile of British products with an end home of being in Australia”. Widen the theory to the broader retail sector and beyond, and Strang argues that although “Australia is going to get a net gain in the short term”, the deal is crucial in shifting relationships so that “we can become a manufacturing nation again, and export”.
Strang’s second reason to pause the negativity surrounding the UK-Australia trade deal is that it “opens our eyes and opens the world”. Estimations may only forecast the deal to increase GDP by 0.01% – 0.02% from this particular trade deal, but the opportunities it creates seem promising.
One year on from Brexit, and talks for the UK to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) are beginning to advance. At the end of January, Johnson claimed that applying to join the trading block containing over 500 million people across 11 nations “demonstrates our ambition to do business on the best terms with our friends and partners all over the world and be an enthusiastic champion of global free trade”.
For Strang, the Australian deal may offer an unlocked gateway. “I think this is really going to open up that whole trading sector geographically for us,” he says. “It had to start somewhere and Australia is the logical place to start. I think that it is a great thing for us to look forward to.”
In the search for recouping what many have lost out on through Brexit, the Australian deal can be belittled and made to look inadequate. Strang also recognises that it’s “very hard to look for a silver lining of Brexit”. “But,” he adds, “I think if anything, maybe we’re being complacent, and maybe we’re sitting here and we’re being short sighted.
“We’re looking at our European neighbours and that’s where the logical trading was going to happen. But now that has become more difficult and more costly, with a bit more red tape, so we are forced to look elsewhere. And if it makes financial sense, then that whole Asia-Pacific region opens up a lot better, the costs are reduced, and that makes it a lot more attractive.”
As a company that already trades directly with Australia, Wicked will see the immediate benefits of the UK’s first major trade deal since leaving the EU. However, this cut in tariffs could also lead to an uptick in British manufacturers seeing Australia as a viable exporting option, despite the obvious long journeys. What is now Scotch whisky, confectionery, and cars, could in the future cover a much broader range of products and services, in turn creating more jobs and increasing incomes, thus driving the 0.02% GDP predictions higher.
To make a fair appraisal of this trade deal, one has to span out to the wider picture. Strang is “excited” for the rising trading possibilities. He claims that by no means does a deal with the CPTPP mean that Wicked would “turn our back on Europe”, but it would mean opening an eye to regions perhaps not usually considered a valid market. After all, “a trade deal is trading… it’s got to be mutually beneficial”.