Perspectives, UK Australia & NZ

Perspectives: An early deal with the UK could prove a short-lived victory for Australia

While the debate on agriculture around a potential UK-Australia trade deal seems familiar, it may be that technology is going to change the nature of such trade fundamentally in years to come. 

Ever since the Brexit referendum of 2016 Australia has been the country keenest to be at the ‘front of the queue’ for a trade agreement with the United Kingdom.

While the country emphasises the anglosphere and a deep historic partnership as reasons for concluding a deal quickly with Britain, the underlying rationale might well be Australia’s wish to get a better market access deal. Australia currently enjoys small quotas for its beef, dairy and lamb exports. The latter quota in particular is one tenth the size of that for New Zealand.

It seems likely that Australia will achieve its aim. A UK-Australia Free Trade Agreement will almost certainly be announced at the G7 summit in the second week of June.

For the UK this will be seen as maintaining the trade policy momentum after a successful FTA ‘rollover’ programme. For Australia having obtained what appears to be full and unconditional tariff and quota-free trade after a 15 -year transition will be seen as justification for their approach.

Remaining questions over effects of a deal with Australia

Yet below the likely triumphant media headlines in UK and Australia will lie plenty of unanswered questions.

For the UK these questions will be around the impact of the agreement on the agricultural sector, the apparently limited benefits elsewhere, and the relationship to emerging issues around climate change, antimicrobial resistance, animal welfare and sustainable food systems.

The questions aren’t just for the UK though.

Those emerging issues are just as relevant if not more so for current agricultural superpowers. The prospects of a future of lab-grown meat and modern greenhouse grown vegetables produced anywhere means that a UK-Australia deal could turn out to be only a temporary success.

A claimed win for free trade might be more about headlines.

Trade returned to the UK media spotlight in the last two weeks, due to apparent government disagreements over the Australia deal. There are indications that it is the Prime Minister’s desire for an announcement at the G7 summit and an optimistic Australian ask for full agricultural tariff elimination led to those disagreements.

Those wanting the early agreement won the argument, with the justification that this was exactly the kind of free trade that ‘Global Britain’ should be targeting. This has been accompanied by talk of benefits arising from new opportunities for UK exporters and consumers from lowered tariffs.

Such claims seem overblown. The UK’s government’s largely impressive impact assessment of a deal with Australia suggested gain of only 0.01% of UK economic output, if 25% of non-tariff barriers were removed.

Most tariffs on UK and Australia goods trade are already low. Barriers to trade in services are moderate. Industrial supply chains are unlikely to be integrated given the geographical distance between the two countries. The likeliest impact of an Australia agreement on the UK economy as a whole is negligible.

Sector impacts

A small overall impact on the UK economy could however disguise sectoral impacts. The same impact assessment suggests that UK agriculture could be adversely impacted. Not surprisingly, this is leading to considerable concerns among farming communities. The suspicion that the UK is giving way to Australian demands in order to be able to announce a deal early is not helping defuse doubts.

The UK government has reasonably suggested that an Australia trade deal is a precursor to joining the Comprehensive and Progressive Transpacific Partnership – the eleven-country Asia Pacific trade agreement of which Australia is a leading member.

However the Australia pact would come after two deals with the EU where it seemed the government gave way to the EU on detail to get a deal. A similar story with Australia will start to seem like a precedent for others.

The Australia trade negotiations were one of three launched by the UK last year with major agricultural exporters, alongside New Zealand and the US. It would not be a surprise to see an agreement with New Zealand this year, but US talks are on hold pending a decision from the Biden administration about whether FTAs figure in their agenda at all.

It is reasonable to wonder what the cumulative impact of the three trade deals might be for UK agricultural producers. However, there are no publicly available forecasts from government or farmers organisations for this. Arguably UK farmers remain less protectionist than in many other countries, as demonstrated by only limited protests to date.

These protests are now growing, accompanied by concerns from the UK’s devolved governments in Wales, Scotland and Northern Ireland. For Scotland and Wales this is mostly about the risk to marginal farming communities, particularly sheep farmers. Northern Ireland has a slightly different concern, of the danger of meat production being undercut by cheaper Australian imports.

Such a question of costs lies at the heart of the UK-Australia debate. UK farmers believe that they have to meet more stringent regulations in areas like animal welfare than their Australian counterparts. Notwithstanding government denials, they believe this will get worse if there is a US deal, in which current UK bans on hormone-treated beef and chlorine washed chicken could be lifted. This debate is unlikely to go away quickly.

Technological change to alter the agriculture trade debate

The agricultural questions sitting at the heart of the debate in the UK are well within the normal pattern of trade negotiations, albeit that the UK government does seem unusually happy to settle for an unbalanced deal in return for an announcement at the time of their choosing. This could, however, be one of the last such agreements.

The diminishing returns of Free Trade Agreements are by now well recognised, particularly compared to the domestic political difficulties they often inspire.

It is, however, technology and global challenges that could usher in major change.

The production of non-animal products has already been transformed by modern agri-technology which allows huge increases in yield regardless of climate, as best seen in the rise of the Netherlands as the world’s second largest food exporter. In the coming years lab-grown meat is likely to become cheaper and more accepted, altering the international meat trade in a similar way.

As this comes alongside global concerns over antimicrobial resistance and climate change in which animal rearing plays a considerable role, we may see major changes in food trade in the future.

There are real issues at stake for the UK agricultural community arising from a potential Australia deal. But these might only be short term and minor compared to the major structural changes to the agri-food industry that are already under way and seem likely to strengthen. This could in turn change the nature of our debate on agriculture and trade, for the UK, EU and others.

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David Henig runs the column ‘Perspectives’ on the politics of global trade for Borderlex. He is also a UK director at the think tank ECIPE.

Views expressed by columnists at Borderlex are strictly their own.

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