Australia trade deal will deliver minimal benefit to UK economy and poses risks for farmers, say experts

Farmers fear that deal will mean they risk being undercut by cheap imports made to lower animal welfare standards

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A trade deal between the UK and Australia will deliver minimal benefit to the UK economy while posing significant risks to UK farmers, industry leaders and trade experts have warned.

The government announced an agreement in principle on a pact with Australia on Tuesday. Boris Johnson said that the UK’s first major post-Brexit trade agreement would create “fantastic opportunities” for the UK.

However, many of the details have yet to be finalised and farmers fear that the terms mean they will be undercut by cheap imports.

Animal welfare campaigners also said the deal would allow low-welfare products such as beef treated with hormones into the UK.

The deal will also allow greater freedom for UK nationals aged under 35 to travel freely in Australia.

Impact on the economy

David Henig, UK director of European Centre For International Political Economy, said the deal might not even deliver the 0.02 per cent boost to GDP that the government has estimated and that the true impact could be closer to zero.

The government’s forecast is based on “heroic assumption” that previous trade deals have not come close to achieving, he tweeted, adding that the details announced on Tuesday contain nothing we didn’t already know.

“There had to be an announcement as the Australian PM was here. But it doesn’t feel like negotiations are in fact complete.”

He also suggested that the UK may have played its hand poorly in negotiations: “Australia got their top asks from the UK – agriculture. The UK didn’t have a top ask of Australia, hence why none is being flagged. If we find one in the future, too late, we already gave them what they wanted.”

Sam Lowe, senior research fellow at the Centre for European Reform, tweeted that “trade deals don’t do very much for aggregate GDP either positively or negatively” because the main benefits come from reducing tariffs, which are already quite low.

‘Significant harms’

Angus Brendan MacNeil, chair of the Commons International Trade Committee, expressed concerns that the government had ceded too much ground to Australia.

“In its rush to reach an initial agreement, I fear the government could sign up to something which brings significant harms as well as benefits.

“The views of the entire farming sector especially are no secret now, including those in the devolved nations, who are particularly concerned about being undercut by cheaper meat and dairy produce from ‘down under’.”

Farming

The government says British farmers will be protected by a cap on tariff-free imports for 15 years, using measures including tariff rate quotas.

National Farmers’ Union president Minette Batters called for more information about any provisions on animal welfare and the environment “to ensure our high standards of production are not undermined by the terms of this deal”.

She added: “The ultimate test of this trade deal will be whether it contributes to moving farming across the world onto a more sustainable footing, or whether it instead undermines UK farming and merely exports the environmental and animal welfare impact of the food we eat.”

Joe Spencer, partner at accountancy firm MHA MacIntyre Hudson described the deal as “unfavourable”.

“Farmers are right to be wary. Trade deals of the sort the government has negotiated with Australia offer few advantages to the sector and maybe only small benefits to consumers [in terms of lower prices],” he said.

Consumer prices

Downing Street claims the removal of tariffs under the deal will mean cheaper Australian wine, swimwear and confectionery, “boosting choice for British consumers and saving households up to £34m a year”.

Scotch whisky

The Scotch whisky industry has been touted as one that would see benefits from the trade deal because it will now have tariff-free access into the Australian market.

Kate Betts, chief executive of the Scotch Whisky Association welcomed the removal of a 5 per cent tariff.

“This will help Scotch whisky distillers continue to expand exports to Australia, which have almost doubled over the last decade, making Australia our eighth largest market by value,” Ms Bettes said.

The association is calling for “greater legal protection and tax fairness” for Scotch whisky, which it said would deliver a boost for the industry.

Wine and spirits

The Wine and Spirit Trade Association (WSTA) said removing import tariffs will save UK wine businesses £16m and support thousands of jobs.

The UK exported £27m worth of British gin to Australia last year, which was one of the few markets to continue growing during a year in which exports were heavily hit by the pandemic.

UK distillers are expecting to see those exports continue to grow, with an agreement likely to remove the 5 per cent tariff Australia levies on the spirit, WSTA said.

Parliamentary scrutiny

MPs from all major parties demanded an opportunity to properly scrutinise the deal. In a letter coordinated by campaign group Best for Britain, the MPs warn that “no one wants to see our farming communities in Wales, Scotland, England and Northern Ireland undermined for the sake of a politically expedient trade deal”.

The letter warns that “the deal must command the support of all four nations of the UK”. It also demands that detailed impact assessments are carried out looking at how the deal will affect regions and nations of the UK and sectors such as farming.