What are the issues with the UK-Australia free trade deal?

The agreement is the first the UK has negotiated from scratch since leaving the EU.

Pa Reporters
Tuesday 15 June 2021 12:57
Scott Morrison
Scott Morrison

The UK and Australia have agreed in principle to a post-Brexit free trade deal amid concerns from British industry and farmers.

Details remain sketchy, with officials keen to point out that it should be seen as a stepping stone to broader global agreements.

But what is the agreement and why has it attracted criticism?

Here the PA news agency considers the key questions around the deal:

– What is a free trade deal?

It refers to an official policy allowing the unhindered trade of goods and services across borders and at a price set by the producer, without state support.

It aims to boost the flow of trade and prevent governments from discriminating against imports with tariffs or against exports by offering subsidies.

– What is the agreement with Australia?

The agreement is short on details at the moment, with ministers promising to publish the full text in the “coming days”.

What we do know is that Prime Minister Boris Johnson has offered his Australian counterpart, Scott Morrison, a zero-tariff, zero-quota trade pact.

It will save British consumers £34 million a year on Australian products.

We do not yet know when it will be implemented and over what time period, but it is thought to be on a sector-by-sector basis.

The only timescale included is a 15-year cap on tariff-free imports to the UK.

The Government has not given an up-to-date estimate on how much the UK economy will benefit from the deal.

But, in its position paper ahead of negotiations, it said an agreement could increase British exports to Australia by £900 million, with trade with the EU in 2019 worth some £668 million.

The same position paper also said a deal would see the UK’s gross domestic product (GDP) – a measure of economic growth – rise between 0.01% and 0.02%, and Australia’s by between 0.01% and 0.06%.

However, a Government review is under way into better ways of calculating financial estimates, so the figures are subject to change.

The announcement also said Britons under the age of 35 will be able to travel and work in Australia more freely – although details remain unclear.

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

Angus Brendan MacNeil, International Trade Committee

– Why is the deal so light on details?

Trade negotiations went on long into the night on Monday and typically some of the points need to be ironed out in such complex discussions.

But the speed has been noted by some, with International Trade Committee chairman Angus Brendan MacNeil warning: “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.”

– Why is there a 15-year transition for farmers?

International Trade Secretary Liz Truss has said previously the “very long transition” is intended to give UK farmers time to adjust to competition from Down Under.

The Government wants to avoid UK farmers being priced out of the market by cheaper imports from Australia – particularly meat.

The caps will ensure the country avoids pushing farmers into insolvency if they can no longer compete with excessive amounts of imports.

– What has the Government said?

The Prime Minister has sought to reassure British farmers.

Speaking to broadcasters in Portsmouth on May 21, Mr Johnson said: “I do think that free trade deals present a fantastic opportunity for our farmers, for businesses of all kinds, and for manufacturers.

“I think it is vital that, as a great historic free-trading nation that grew to prosperity thanks to free trade, and thanks indeed to the Royal Navy, that we see these new openings not as threats but as opportunities.”

He reiterated on Tuesday that farmers will benefit from the deal.

Liz Truss

– What have critics said?

UK farmers fear the deal will see them undercut by Australian rivals.

In particular, there are fears that smaller beef and lamb producers in Scotland and Wales will be unable to compete with the typically much larger Australian farms.

The Scottish Government has repeatedly raised concerns over the deal, which First Minister Nicola Sturgeon has said will be a “betrayal” of Scottish farmers if import standards do not match those on domestic production.

In Northern Ireland, DUP leader Edwin Poots, who is also Stormont’s agriculture minister, said in a letter to Environment Secretary George Eustice last month that the agreement poses a “high level of risk” to farmers across the UK.

Mr Eustice, who was engaged in a Cabinet row with Ms Truss over the matter, has suggested quotas could be used to protect British farmers.

Edwin Poots meets Micheal Martin

– Why is this deal important?

The deal is the first the UK has drawn up from scratch, rather than tweaking existing deals between the EU and other countries that had been agreed while the UK was still a member of the trading bloc.

Ministers consider it a necessary step en route to joining a larger free trade pact called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

Ms Truss said: “Membership will create unheralded opportunities for our farmers, makers, innovators and investors to do business in the future engine room of the global economy.”

On Australia, she pointed out that the UK exports £5.4 billion in services, including £1.4 billion in the insurance and pensions sector and £780 million in financial services.

– Will it lead to other deals?

That is the Government’s hope, with planned agreements sought with South Africa, Brazil and the US.

But the deal could also set a precedent for more complicated pacts in future, according to one expert.

Associate professor Mark Melatos, from the University of Sydney’s School of Economics, said any concessions the UK has granted in its agreement with Canberra “are likely to create negotiating difficulties down the track when the UK is negotiating agreements with more substantial trade partners”.

Cabinet Office Minister Michael Gove, meanwhile, has expressed concern that one result of the deal could be the fuelling of demands for Scottish and Welsh independence.

– What other trade agreements has the UK struck?

The most recent deal announced by the UK was an agreement struck with Norway, Iceland and Liechtenstein, while others with Turkey, Mexico and Japan have also been revealed since Brexit.