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IT has been fascinating to observe the gushing nature of UK Government proclamations about trade deals in these post-Brexit days.
At times, you wonder whether ministers in the Johnson administration are trying to convince themselves or the public their actions on this front will somehow compensate for inevitably massive losses triggered by the wilful decision to exit, and abandon frictionless trade with, the world’s most powerful free trade bloc.
Obviously, the actual numbers show beyond a shadow of a doubt that the new deal landed with Australia this week will offer tiny benefits relative to what has and will be lost with the departure from the European Union. The same goes for the trade agreement being pursued with the US.
However, realisation of this depends on people negotiating their way past the bluster from Boris Johnson and his Cabinet, and analysing the cold numbers and reality.
There were a few points of particular note in the UK Government’s announcement on Tuesday of the trade deal with Australia. This deal was agreed in a meeting between Mr Johnson and Australian Prime Minister Scott Morrison in London.
The first point of note was an aside that was surely more like an admission.
In recent months, the UK Government has made a big song and dance about various trade deals with countries around the world which have, as anyone who follows this area closely knows, essentially been rollovers of arrangements Britain had previously as part of the EU.
So it was interesting that the statement on the Australia trade deal, below the heading and bullet points, began thus: “The UK has secured a trade deal with Australia eliminating tariffs on all UK goods and boosting jobs and businesses across the country, in the first major trade deal negotiated from scratch by the Government since we left the EU.”
The “negotiated from scratch” reference appears to provide important confirmation – given there could have been doubt because of the way rollover deals were presented – that Government ministers do actually know the difference between a new trade agreement and one essentially replicating what the UK had as part of the EU.
To say the announcement of the Australia deal was gushing in tone would be something of a gentle euphemism. And, of course, it included extravagant, rambunctious comments from the Prime Minister.
Mr Johnson declared: “Today marks a new dawn in the UK’s relationship with Australia, underpinned by our shared history and common values. Our new free-trade agreement opens fantastic opportunities for British businesses and consumers, as well as young people wanting the chance to work and live on the other side of the world.”
He added: “This is global Britain at its best – looking outwards and striking deals that deepen our alliances and help ensure every part of the country builds back better from the pandemic.”
The “global Britain” stuff is of course now par for the course in these post-Brexit times in which the UK often appears like someone looking insecurely over their shoulder to see if a friend they jettisoned in social-climbing efforts is watching how well they are doing (when in actual fact they are not doing well at all).
And the “new dawn” seems a little bit over the top when looked at in the context of the benefits the UK Government expects the Australia deal to deliver.
The UK Government has already published an in-depth assessment showing that a free trade deal with Australia would at most, over the “long run” (a timescale of about 15 years), provide a 0.02 per cent boost to annual UK gross domestic product.
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And it is simple to put this in context even though the Johnson administration has refused to provide an assessment of the impact of its narrow free trade deal with the EU – its hard Brexit – relative to what would have been the case had the UK remained a member of the bloc.
Forecasts from the Theresa May government, published in November 2018, showed Brexit would, with an average free trade deal with the EU, result in UK GDP in 15 years’ time being 4.9% lower than if the country had stayed in the bloc if there were no change to migration arrangements. Or 6.7% worse on the basis of zero net inflow of workers from European Economic Area countries. The Tories have, lamentably, since clamped down on immigration.
It is also worth noting the Conservative Government’s assessment of the free trade deal it has been trying to do with the US is that such an agreement would boost UK GDP by around 0.07% or 0.16% on a 15-year horizon, under two different scenarios.
So it is easy to see, bearing in mind the scale of the US and the fact that Australia is a big country, the UK would require a large number of new (not rollover) trade deals to recoup even one-tenth of what it is estimated will be lost by leaving the EU.
Of course, we should not be surprised by this given not only the previously hugely beneficial arrangements with the EU, in terms of truly frictionless trade and free movement of people, but also the fact this huge bloc is on the UK’s doorstep and not on the other side of the world.
The UK Government statement on the Australia deal, setting out one of the points highlighted by Mr Johnson, declares “Brits under the age of 35 will be able to travel and work in Australia more freely, opening exciting opportunities for young people”.
UK Government ministers should reflect in this context on the opportunities lost to the country’s citizens with the ending of the previous total freedom to live and work in any EU nation. And we should not forget the opportunities to study abroad of which students have been deprived with the UK’s withdrawal from the wonderful Erasmus scheme.
We had in the UK Government announcement on the Australia deal more talk about how it “paves the way for us to join the Trans-Pacific Partnership”. It remains astounding the degree to which the Johnson administration appears to favour this alliance, on the other side of the world, over the neighbouring EU, in its deliberations on trade.
There was, of course, a declaration by the UK Government of “benefits across the whole of the United Kingdom from the deal”.
And, not surprisingly, a reference to Scotch whisky.
The UK Government announcement declared: “Scotland exported £126m of beverages to Australia in 2020 – this deal will help distillers by removing tariffs of up to 5% on Scotch whisky. More than 450 businesses in Wales exported to Australia last year, and life science companies and chemicals manufacturers are set to benefit in particular.”
It added: “Ninety per cent of all exports from Northern Ireland to Australia are machinery and manufacturing goods – used extensively in Australia’s mining, quarrying and recycling sectors. Under the new FTA (free trade agreement) tariffs will be removed and customs procedures will be simplified.
“Car manufacturers in the Midlands and north of England will see tariffs of up to 5% cut, boosting demand for their exports.”
It is worth bearing in mind that Australia was only the eighth-largest export market for Scotch whisky last year. Scotch exports to Australia totalled £113m last year, out of a total £3.8bn. And sales of Scotch whisky to the US and France last year totalled £729m and £375m respectively. That is not to say a boost to Scotch exports to Australia would not be good for that industry – just to flag the importance of putting things in perspective in terms of scale.
It was interesting that the UK Government statement did give its view on what the deal would or would not mean for a UK farming sector rightly alarmed over the impact of an eventual surge in beef and lamb imports from Australia on the back of the deal.
The UK farming industry had anticipated that there might be a phasing in of tariff-free and quota-free access for Australian meat producers – which is the case – but it has understandably pointed out that this does not make the longer-term problem go away. This point is correct, and should be obvious to all.
It was also interesting to note figures flagged by James Withers, chief executive of Scotland Food & Drink, highlighting how tiny Scottish exports of red meat to Australia are relative to those to the EU.
Mr Withers tweeted: “We sell 612 times more red meat from Scotland to the EU than we sell to Australia.”
The UK Government statement on the Australia agreement declared: “British farmers will be protected by a cap on tariff-free imports for 15 years, using tariff rate quotas and other safeguards.”
Scotland’s farming sector was not reassured by this at all.
NFU Scotland president Martin Kennedy said: “As detail on the proposed terms of agreement around an Australian trade deal emerge, deep concerns will remain about its impact on Scotland’s farmers, crofters and our wider food and drink sector.
“Under the proposed deal, there is to be a cap on tariff-free imports from Australia for 15 years. That is merely a slow journey to the Australians getting unfettered access to UK markets and with no guarantees that the promises of other safeguards will address the fact that very different production systems are permitted in Australia compared to here in the UK. The deal has not been afforded the appropriate level of scrutiny and consultation.”
The UK Government has made much of the speed with which it has done the Australia deal. However, Mr Kennedy’s comments highlight the reality that there is a trade-off between speed and ensuring the concerns of key sectors are heard and addressed in such negotiations.
And Mr Kennedy is understandably concerned about the precedent set.
He declared: “An FTA with Australia, and the way it has been agreed without proper industry consultation or scrutiny, sets a dangerous precedent for other free trade agreements, including those with other major farming and food-producing nations such as New Zealand, Canada, Mexico and the United States.
“The cumulative impact of all such trade deals on extremely vulnerable sectors such as farming, food and drink could be hugely destructive.”
It is a sorry situation. The UK Government has subtracted hugely from the country’s long-term economic output with its hard Brexit. Following this woeful decision, it has been scrambling to make up a tiny proportion of what has been lost through trade negotiations in which it has seemed far too desperate to do a deal, regardless of the costs to some sectors and businesses.