Scott Morrison has agreed in-principle to a UK free trade deal. What’s in it for Australia?
Free trade deals are always an elaborate dance. Before Scott Morrison and Boris Johnson bumped elbows and enthused about the prospect of tariff-free Tim Tams in a rose garden in London this week, both sides engaged in stagecraft.
There were reports the British trade minister, Liz Truss, planned to sit her Australian counterpart, Dan Tehan, in an uncomfortable chair “so he [had] to deal with her directly for nine hours”. The Australians briefed that Boris needed this bilateral trade deal – his first since Brexit – much more than we did, and we’d take our sweet time to sign up.
In the end, Australia and Britain this week signed up to signing up, reaching an in-principle agreement on the structure of an FTA. The denouement was so rushed that concrete details about the scope of the in-principle agreement remain scant. But let’s work through the known knowns.
What are the benefits for Australian farmers?
The Morrison government says beef and sheep meat tariffs on Australian exports to the UK will be eliminated after 10 years. Sugar tariffs will go after eight years, and dairy tariffs will go after five years. Short and medium grain milled rice will get immediate duty free access once the FTA is in place.
During the countdown to tarifffree trade, Australian producers will gain incremental access to the British market. Australian beef producers, for example, get immediate access to a duty free quota of 35,000 tonnes (rising to 110,000 tonnes per year in a decade). With sugar exports, producers have immediate access to a duty free quota of 80,000 tonnes, rising by 20,000 tonnes each year.
Blessed are the cheesemakers Australia says local dairy farmers will also have access during the transition period to a duty-free quota for cheese of 24,000 tonnes. This will rise to 48,000 tonnes by year five.
What about the British farm lobby’s objections?
During the negotiations, the National Farmers’ Union in the UK raised a number of concerns. The NFU pointed out there were different environmental and animal welfare standards in the two countries. It is not entirely clear whether the NFU’s objections have been addressed.
The NFU president, Minette Batters, has said her organisation needs to know more about any provisions on animal welfare and the environment “to ensure our high standards of production are not undermined by the terms of this deal”. Australia says if UK standards prohibit importing hormone injected meat, then we won’t export it to the British market. Tehan, Australia’s trade minister, says “our robust export controls provide the flexibility and assurance to meet a range of importing country requirements, including HGPfree when required”. HGP is hormonal growth promotants.
What does this mean for working rights?
During the trade talks, British negotiators pointed out that Australians can have a working holiday in the UK without having to work on a farm. The UK wanted reciprocal arrangements. This was a problem for Australia because farmers would lose the British backpacker workforce (numbering around 10,000). Farmers are already crying out for workers because the international border remains closed.
Under the in-principle trade agreement, working holiday makers in the UK have won expanded rights to stay in Australia for three years up until the age of 35. Australia says there will also be a separate agriculture visa established for UK visa holders. In the scramble to deal with the local shortfall of workers, the Morrison government has also unveiled a separate agriculture visa targeted at Asean nations, mirroring the seasonal worker program that already exists for the Pacific. Working rights, part two
The agreement appears to have broader labour market implications. The UK says Australia has also agreed to drop requirements that firms hire Australian nationals first. The British government says Australia has agreed to mutual recognition of qualifications (this means British lawyers would be able to practice here without re-qualifying and vice versa). Unsurprisingly, Australian unions are already on the warpath about the as yet undisclosed provisions covering people movement. How about procurement?
Another component of the in-principle agreement that is potentially interesting (and by that, read controversial) relates to government contracts. Again, the available detail is scant, but the UK is talking up an Australian concession (“the most substantial level of access Australia has ever granted in a free trade agreement”) allowing British companies to bid for government contracts.
The UK government says the FTA will create new opportunities for British firms including in transport and financial services, building on the success of companies like Leeds-headquartered Turner & Townsend, who have project managed some of Australia’s biggest public transport infrastructure programs. Presumably this cuts both ways.
Does this agreement include an investor state dispute settlement clause?
Perhaps we should start by explaining what this is. An ISDS is a mechanism in a trade deal that gives foreign investors, including Australian investors overseas, rights to access an international tribunal to resolve investment disputes. These clauses have become increasingly controversial in trade agreements, and there was speculation this agreement would contain one. But Australia says there is no such clause in this trade deal.
In case you need a wee dram to lift the spirits
British coverage of the free trade agreement has focused on cheaper Jacob’s Creek and Tim Tams for all. But Australians will have the benefit of cheaper Scottish whiskey when the 5% tariff comes off imports.
In addition to a cheaper tipple, Northern Ireland exports a number of machines and manufactured goods that are used by Australian miners. Those will enter the Australian market tariff-free.
British passenger vehicles, including SUVs, are currently hit with a 5% tariff when they are exported to Australia. That nuisance tariff will go once the agreement comes into force.
What have people said about the deal?
The deal for a deal has been broadly welcomed by stakeholders. Australia’s deputy prime minister, Michael McCormack, who is currently acting in the top job, declared “it’s 10 out of 10 for what happened at Number 10 – Downing Street that is”.
In full Empire mode, Tehan says: “This is a world-class free trade agreement. It rights a historical wrong, when the UK turned to Europe 50 years ago.”
The Queensland veteran Bob Katter is more sceptical. “We won’t have unfettered access to the UK market for our beef, lamb, dairy and sugar for five to 15 years,” the MP said. “There will be three changes of government in the UK in that time, so it doesn’t mean two bob.”