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It is billed as good for British consumers and good for business, and the first of many post-Brexit trade deals. But while hailed as a “new dawn” by Boris Johnson, the prime minister’s trade treaty with Australia has few economic benefits.
Ministers hope consumers will have more choice on the supermarket shelves, a Brexit boost in the first entirely new trade deal since leaving the EU. Tariffs will be cut on Australian products such as Jacob’s Creek and Hardys wines, as well as on beef, lamb, swimwear and confectionary. However, by the government’s own admission, the savings add up to £34m a year – little more than a pound each per household.
Scotch whisky, biscuits and ceramics will be cheaper to sell into Australia, aiming to help UK industries that employ 3.5 million people. Still, the government admits that its deal will only boost UK GDP by up to 0.02% after 15 years, barely a rounding error for a £2tn economy.
It could be the case that every little helps – this much supermarkets know. But there are fears British farmers could be undercut by cheap Australian imports. Few details have yet to emerge from an initial agreement that remains to be completed, signed, and implemented.
We are told there will be no reduction in UK food standards, yet how this will work in practice is unclear, stoking worries over animal welfare and whether Australian meat pumped with hormones could be heading here.
Phasing in the new measures over 15 years is designed to help farmers adapt, but concerns remain that looser regulatory standards will prove a template for future deals with other countries, including the US. Moving away from existing standards – set in-line with EU rules over four decades of membership – would turbocharge the current brouhaha over sausage imports to Northern Ireland.
Against this backdrop, businesses warn that EU trade is worth far more to the UK, that fixing the relationship with our single biggest partner is much more important. In a case of failing to see the wood for the wattle, total UK-Australia trade is worth £14bn, compared with EU trade worth more than £660bn in imports and exports.
However, after a glossy photoshoot with the Australian prime minister, Scott Morrison, exchanging a bag of Penguin biscuits (made in Stockport but owned by a Turkish conglomerate) for some Tim Tams (an Australian favourite owned by a US private equity firm), Johnson is already looking elsewhere.
The deal might hammer home the ideological symbolism of a global, free trading Britain, entered into with an English-speaking member of the Commonwealth, led by a like-minded conservative government. But more than this, it is touted as a gateway to UK membership of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTTP).
Australia is a key member of this free trading area, one of the largest in the world, covering £9tn of GDP across 11 Pacific nations including Japan, Canada, Mexico, New Zealand and Vietnam. UK trade with the group was worth £111bn in 2019, growing by 8% a year since 2016. Importantly for Brexiters, they argue the UK would not need to cede control to join the club.
However, distance matters. Trade volumes are higher between neighbouring countries for a reason. Eliminating tariffs will only go part of the way towards cutting prices for consumers, while higher transport costs remain.
It is also increasingly incongruous to send shipments and planes full of frozen produce halfway across the world as the planet heats-up to unsustainable levels. Johnson has been reported to be considering a carbon tax in part to address such concerns. Although it would help with the prime minister’s green credentials, it would rubbish the rationale for an Australia free trade deal or CPTTP membership.
The prime minister might herald a new dawn for global Britain. But it is only the start of the post-Brexit journey. And only a small step at that.