A trade deal that marks a new dawn in the UK’s relationship with Australia is how the free-trade agreement is heralded.
The free trade deal will eliminate tariffs on Australian favourites like Jacob’s Creek and Hardys wines, swimwear and confectionery, boosting choice for British consumers and saving households up to £34 million a year. In 2020, the value of food and drink exports to Australia totalled £423m. In 2020, Australia was the UK’s 11th biggest export market.
On the surface such examples indicate opportunity however the deal is light on detail. Nothing will be clear until the autumn and we will have to wait until next year for the deal to take effect.
Strong sentiments have been expressed on the quality of the deal. Talking about the UK-Australia Free Trade Agreement, the Scottish Trade Minister Ivan McKee said, with no role in the negotiations, the deal “does not even remotely undo the damage to our economy caused by Brexit”.
According to the Minister, the UK Government’s own scoping assessment said a deal with Australia would only be worth a 0.02% increase in GDP over 15 years – and that agriculture and semi-processed food sectors would lose out. By comparison, the Office for Budget Responsibility estimates that a trade deal with the EU would mean the UK’s GDP would be 4% lower in the long run compared with remaining in the EU.
He is calling for a full impact assessment of this deal so that any gains must not come at the cost of domestic producers. The FDF is also calling for details to help industry prepare for the new terms of trade in terms of the removal of barriers to trade as well as an adherence to food safety and animal welfare standards.”
At this stage we should see the deal as informing others in the pipeline.
The all-important UK farmers’ concerns are touched on by Mark Lynch, Partner at corporate finance house, Oghma Partners. He said the scale advantage of Australian farms and the precedent the deal could set for other agreements with the likes of New Zealand and the US make the industry understandably nervous.
Can UK farmers compete on world market terms? “Not all farmers will end up as government employed ‘park keepers’ but some may and while, they will still be producing a social good – it is just perhaps not the one they signed up for originally,” says Lynch. He adds that the industry more widely would probably benefit from an open conversation, in light of the Australian trade deal and others in the pipeline, of what the government’s vision is for farming in 2030 and beyond.”
David Swales, head of strategic insight at AHDB, said further trade deals with the USA and New Zealand, feel inevitable. He points out that globally, demand for food is growing. Due to our strong domestic market, we’re never going to be a net exporter but there will be opportunities, he adds.
The deal is a chance post-Brexit to establish lines of communication among consumers, farmers and food retailers. This deal presents an opportunity to increase transparency for the next clutch of deals as well as build trust, but only if Britain’s standards are met and these qualities are rewarded.