Trade Tuesday: Australia, tick. New Zealand, tick. So, what next for trade?
This time last week the Department for Business and Trade were counting down the hours until their first “from scratch” trade deals entered into force with Australia and New Zealand. A process that was kicked off in June 2020, finally drew to a close after almost three years and launched the UK’s post-Brexit trading relationship.
While the passage has been controversial both inside and outside of Westminster, the two deals are forecast to increase bilateral trade with Australia and New Zealand by 53% and 59% respectably. In addition to opening up new markets for British producers and the possibility of cheaper imports from the two countries, the deals present a number of technical benefits. These include improved access for work visas, increased digital trade, the removal of technical barriers to trade, and substantial access to public sector contracts and investment opportunities.
The most controversial elements of the UK’s post-Brexit trade agenda continue to centre around agriculture, with the NFU and other farming organisations continuing to oppose the deals for fears that they will lead to imports of cheaper meat from abroad, undercutting British farmers. However, research from AHDB and Harper Adams University believe that the impact will be far less dramatic, with no overall increases in beef imports to the UK. Any increases in imports from Australia or New Zealand will be overset by reductions from the EU. Looking back to 2016, the ability to release the UK from the perceived monopoly of the EU food market and the Common Agricultural Policy was one of the benefits promoted for Brexit.
The modelling also highlights the lucrative markets that both countries have on their doorstep, with extensive exports into Indo-Pacific. This is a market that the UK is also looking to cash in on, as part of its entry into the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The AHDB also highlight increases in dairy and cheese exports to Australia.
Some of the more sympathetic critics of the deals have agreed that while these two agreements may not be quite so damaging as others have forecast, it does set an incredibly bad precedent for future deals. Any future trade deals with the USA, Canada, countries in South America, would all seek similar agricultural access, something that would both alienate the rural community in the UK and potentially damage the farming sector. While a deal with the USA is off the cards for the time being, it was strongly suggested that the delays in the UK’s CPTPP negotiations centred around agricultural access for Canadian meat producers. We can expect this issue to raise its head again in future negotiation rounds on the UK – Canada FTA.
With the Australia and New Zealand deals now behind us, what is next for the UK? A deal with Canada may seem like the logical next step, but the public falling out over agricultural access is likely going to continue to be an issue for the time being. A deal with India was also hotly anticipated last summer, with former PM Boris Johnson keen to have the deal in place for Diwali 2022. This date has long since passed and again progress has now stalled.
The Indian economy is rapidly expanding, and it represents the largest growing group of middle-class consumers globally. The UK Government estimated that a trade deal could increase UK GDP by around £3.3bn in 2035 but the race to access this market is hotly contested. Australia signed an interim pact last year, whilst Canada, Israel and New Zealand are some of the other major economies that are actively negotiating deals with the country.
While it is true that the UK has recently started negotiations for a fresh FTA with Switzerland, the UK’s 10th largest trading partner, and there remain a few other forks in the fire, it feels as though the momentum for the UK’s post Brexit trading revolution may have hit something of a roadblock. The FTAs with Australia and New Zealand represent a fruitful start and the CPTPP agreement looks to present some strong new opportunities as well. However, the Conservative Government are going to have to present more than just these deals to voters next year in an election if they want to credibly present this as a Brexit success story.