‘Good as gold’, ‘sinking like lead’ or ‘drinking to forget’? The UK’s prospects for an FTA with Australia

The second negotiating round with Australia kicked off yesterday (21 September) while the Agriculture Bill is having a showdown in Parliament. Sabine Tyldesley outlines why they are linked. 

After Secretary of State for Trade Liz Truss hailed the success of an historic free trade agreement agreed with Japan in early September, the spotlight has now shifted to friends on the other side of the world.

The UK has strategic interests in Asia, which the UK Government are hoping can be facilitated by securing Free Trade Agreements (FTAs) with friends in the region; Japan, New Zealand, Singapore and Australia. An Australian FTA would create opportunities for the UK by giving access to new supply chains and enabling UK businesses to use Australia as a launchpad into the Asia-Pacific region.

As part of the deal , Japan is now bound to support the UK’s application to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP),  the third largest free-trade area in the world after the United States, Mexico and Canada Agreement (USMCA) and the European Single Market (read more about that here). It is therefore no surprise that the UK is prioritising a FTA with another leading member of the partnership – Australia.

Negotiating objectives for trade with Australia were published by the Department for International Trade (DIT) in June and put on paper what has anecdotally been the driver for many for exiting the EU – the desire to be closer to the Anglophone family with whom the UK shares “a head of state and a system of common law, …proud shared history, […] a common set of values”. The document goes on to explain that the “UK and Australia also have strong and enduring people-to-people links with UK nationals accounting for the greatest number of foreign-born residents in Australia.”

Sentiment aside, an FTA reduces barriers for trade in goods – mainly Australian wine for UK import and Scotch whisky for export to Australia. Besides alcohol, precious metals, pearls and gems, there is trade in aircraft, spacecraft and other mechanical parts and like many of the negotiations, trade in services offers the greatest opportunities for the UK. They account for 60% of UK’s total exports to Australia and were worth £6.9 billion in 2019 out of the total £18.1bn trade volume with Australia.

Agriculture has proved an area of disagreement in each of the UK’s bilateral negotiations so far, and negotiations with Australia are no different. The UK-Japan negotiations struggled to agree on the tariff regime for several agri-food items, most notably Stilton cheese. In the USA negotiations, campaign groups – including consumer group Which? – have been challenging market access for products with lower sanitary and phytosanitary measures (SPS) and standards for a long time now, making ‘chlorinated chicken’ and ‘hormone beef’ common phrases in Hansard.

These issues are now featuring in talks with Australia where business groups have identified SPS as a priority in consultation responses, with others highlighting a need to continue to align with the EU, challenging Australia’s regulatory approach to ‘hormone beef’ and antibiotics.

The Department for International Trade’s response to this challenge was to make headlines focus on TimTams rather than more controversial products such as meat. Further, DIT launched a new Trade and Agriculture Commission where animal welfare, consumer and environmental groups can meet with the Department. Its recommendations however are only advisory and it will be wound up in three months.

Amendments to secure Government commitments to food standards in legislation have been rejected by the Government so far but today’s (22 September) Report Stage of the Agriculture Bill in the House of Lords could see Lord Curry’s amendment succeed and cause rebellion in the Commons given its wide support with MPs.

Rules of Origin and SPS were discussed in the first round of UK-Australia talks held between 29 June and 10 July. This second round will have some ground to cover on agri-food, with Australia’s primary objective being to improve market access for its agricultural products, including beef. An FTA would restore market access to what it was before the UK joined the EU, which resulted in tariffs and quotas being applied to Australian agricultural exports destined for the UK.

Negotiations are scheduled to conclude by the end of the year but given the challenges faced in negotiations so far on food standards and the continuing coronavirus situation, there will most likely be a delay. But given Australia holds its federal elections in 2022, the clock is ticking.

Earlier this month, Liz Truss committed to seeking a ‘Gold Standard’ trade deal with Australia. While the intricacies of trade negotiations may escape the attentions of the British public, the 1.4 billion litres of Australian wine that the UK consumes each year indicate the importance of getting this right.

Photo by Thomas Schaefer on Unsplash