This is a House of Commons Committee Special Report.
Date Published: 12 October 2022
The Government welcomes the Environment Food and Rural Affairs (EFRA) Committee’s report on the UK-Australia Free Trade Agreement (FTA).
The UK-Australia trade deal is a major partnership between two like-minded nations. It allows our businesses to trade and invest more freely, sets new global standards and creates opportunities for both countries to collaborate on shared challenges.
The UK signed the Australia Agreement in December. The UK-Australia Agreement is expected to increase trade by 53 percent, boost the economy by £2.3 billion and increase wages each year in the long-run. The Government wants UK businesses to begin benefiting and expanding their trade with Australia as soon as possible. We have completed the first stage of ratifying the trade agreement with Parliamentary scrutiny complete under the Constitutional Reform and Governance Act. The Trade (Australia and New Zealand) Bill is due for second reading on 6th September 2022.
In line with our commitment to transparency and scrutiny, the government published the full agreement text and independently scrutinised impact assessments on 16 December 2021, and ensured the Trade and Agriculture Commission—a panel of independent experts—had over three months to report on the agreements. The Trade & Agriculture Commission’s report on the UK-Australia Agreement was published on 13th April 2022. The Government is encouraged by the Committee’s support for its proposed monitoring of the impacts of the UK-Australia FTA post-implementation.
I am writing to you today to respond to the recommendations in your report.
We call on the Government to publish the tests it will use to decide whether and when the general bilateral safeguard mechanism in the UK-Australia FTA should be triggered. Ministers should also set out the policy interventions it would consider using to address any harm that was being caused to the agri-food and farming sectors. (Paragraph 22)
The UK has secured a range of measures to safeguard our farmers in the UK-Australia FTA. This includes tariff rate quotas for sensitive agricultural products, product specific safeguards for beef and sheep meat, and a general bilateral safeguard mechanism providing a temporary safety net for all products. In addition, the UK also retains options under the WTO framework to protect UK industry from serious injury caused by a surge in imports to apply global safeguards should the need arise. This will enable the Government to protect UK industry from any surge of imports into the UK.
The technical processes for how the bilateral safeguard mechanism will operate, including how investigations will be carried out and measures applied, are currently under review by Government. The Government will continue to keep Parliament updated on the outcome of the review.
The Government recognises that this is a period of major change in the UK agri-food sector both domestically through the agricultural transition, and internationally. The Government Food Strategy was published in June 2022 and sets out the support farmers will receive to help them adapt. The strategy includes measures to drive innovation and harness pioneering technology that will support our farmers by encouraging domestic production, spreading jobs and growing the economy.
In future negotiations the Government should ensure that its approach to negotiating changes to tariff free access to the UK meat market is more sophisticated than just weight of gross products and can differentiate between different cuts of meat—by using a carcass weight equivalent approach or similar—to mitigate the risk that the focus of new imports entering the UK markets is on the cuts where UK producers make the majority of their profit. (Paragraph 25)
Each Free Trade Agreement is bespoke and tailored to the countries and markets involved in order to achieve our objectives of securing access to high quality, good value food for consumers whilst managing the impact on UK business.
This potentially includes the use of equivalence approaches (such as Carcass Weight Equivalent (CWE)) or similar. Calculating quota volumes using CWE ensures a link to the real weight of produce by adjusting the volume for bone-in or boneless cuts of meat. However, there is no inherent advantage to administering volumes in carcass weight over product weight for example, with these factors needing to be considered alongside others such as quota volumes or product specific safeguard conditions.
Final FTA outcomes will depend on the context of negotiations with each trading partner. The UK-Australia trade deal includes an alternative mechanism for sheep meat to give added protections to UK producers. Under this mechanism, sheep meat quota volumes will be reduced by 25% for a year if the quota volumes are filled for two consecutive years in years 1 to 10. Additionally, if the product specific safeguard volume trigger for sheep meat is hit in any of years 11 to 15, all subsequent trigger volumes are reduced by 25%.
Given the Government estimates that the net impact of the deal across all agriculture and food related sectors is a reduction of £278m, we believe the Government should aid the sector to increase the value of UK food and drink export by at least £278m in the trade strategy being developed by the Agriculture, Food and Drink Exports Council. The Government should also produce an analysis showing what increase in trade it reasonably expects its current investment in trade promotion for agri-food role to yield. If this is less than the £278m by 2030 then the Government must commit to making further investment in this area. (Paragraph 34)
The Government is committed to supporting the agri-food sector to significantly increase the value of UK exports. The Government is embracing fast-growing markets to ensure that the UK’s food and drink producers have more opportunities to sell their produce and can grow their future exports. For example the UK is currently in the process of acceding to the CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership), which puts the UK at the heart of a dynamic group of countries, as the world economy increasingly centers on the Pacific region.
The Government wants businesses to be ambitious in their exports. The Government is challenging business in a ‘Race to a Trillion’ which is a whole-economy and whole-of-government (national and local) ambition designed to incentivise businesses to export more, and export better. This includes a wide range of support for businesses who want to start exporting or expand into new markets, including overseas missions, presence at major global trade shows and matching producers with international buyers. This will speed up the path for the UK reaching £1 trillion in exports annually by the mid-2030s.
The new Food and Drink Export Council will harness the collective capability, expertise, and resources of the UK Government, Devolved Administrations and industry in support of boosting agriculture, and food and drink exports. The Council will drive a data-led approach to UK agriculture, and food and drink exports and market prioritisation, identifying and analysing current and forecasted demand for UK products, and seeking to systematically match a UK offer to these opportunities. The Council will be set up as soon as possible.
We welcome the innovation of including an animal welfare chapter, in the UK Australia trade deal but we believe that the Government should have pushed further on improving animal welfare standards. This was a missed opportunity for the UK and Australia, together, to show moral leadership in this area. Given that it appears that few meat products from animals reared to standards not acceptable in the UK will enter the UK market in practice, it is disappointing that it was not possible to agree more ambitious language.
The Government is proud that the UK is a global leader on animal welfare, and we will continue to promote high standards, nationally and internationally. This chapter, the first standalone chapter on Animal Welfare in any signed FTA, sets down a clear marker that the UK will negotiate hard to promote animal welfare interests.
The UK-Australia FTA does not compromise the UK’s high standards in animal or plant health, animal welfare and environmental protection. Imports of pork, chicken and eggs were excluded from tariff liberalisation, reflecting concerns about animal welfare and the low volumes of trade in these products. We have agreed a non-regression and non-derogation clause on animal welfare, which is a first in any FTA and which the independent Trade and Agriculture Commission (TAC) has described as “ground-breaking among free trade agreements”. This will help to ensure that neither country lowers their animal welfare standards in a manner which impacts trade.
The UK and Australia have agreed to cooperate bilaterally and in international fora to improve animal welfare standards. This includes a joint working group to provide a forum to support cooperation on animal welfare between the UK and Australia, including promoting best practice.
As TAC stated, the deal does not require the UK to change its existing levels of statutory protection in relation to animal or plant life or health, animal welfare, and environmental protection. All agri-food products imported from Australia must continue to comply with the UK’s existing import requirements.
We call upon the UK Government to review its Maximum Residue Levels (MRLs) for pesticides and bring its import tolerances for imported products into closer alignment with domestic requirements. (Paragraph 54)
All products imported into the UK under any trade deal must comply with our import requirements. This includes maximum residue levels (MRLs) on imported food, which set out the maximum allowable concentration of a pesticide residue in or on food imports.
The UK’s pesticides regulations set a high level of protection for consumers. They are set after a comprehensive scientific assessment of the properties of the active substance and the intended uses of the pesticide.
The UK’s regime includes provision for import tolerances, which are MRLs set to take account of residues on imported produce arising from uses and authorisations in other countries. These are set using the same safety criteria as for domestically produced food. Therefore, import tolerances ensure that imported produce is safe for UK consumers to the same level of safety as MRLs applied domestically.
The Health and Safety Executive (HSE) employs a wide range of monitoring and intelligence-led enforcement activities to ensure that the supply and use of pesticides complies with legal requirements. This includes an annual pesticide residue monitoring programme which is representative of the country’s food supply.
We call on the Government to publish its plans to resource a verification system as part of its new Target Operating Model to ensure these bans are being enforced and to monitor animal welfare standards. (Paragraph 55)
The Government is reviewing how to implement remaining import controls in an improved way. The new Target Operating Model will be targeted around the items of higher risk, and will harness the power of data and technology. It will be published in the Autumn and the new controls regime will come into force at the end of 2023.
The controls introduced in January 2021 on the highest risk imports of animals, animal products, plants and plant products will continue to apply alongside the customs controls which have already been introduced.
The Government is committed to ensuring the process for importing goods remains safe, secure and efficient. This process will harness innovative new technologies to streamline future processes and reduce frictions.
We call upon the UK Government to include such provisions [environmental provisions] in future FTAs to help ensure that trade partners do not competitively undercut UK producers by deregulating environmental protections. (Paragraph 66)
The UK-Australia FTA includes commitments to ensure that neither Australia nor the UK can derogate from, waive, or fail to enforce their domestic environmental laws in order to promote trade or investment. These are enforceable commitments with recourse to dispute settlement mechanisms if needed.
The UK-Australia and UK-New Zealand free trade agreements include commitments to address climate change. The UK publishes its negotiating approach for each FTA negotiation prior to the start of talks, including on its approach on the environment.
As the UK has agreed similar provisions with New Zealand, the Government will further seek similar commitments and provisions in future FTAs.
In future deals the Government should seek to ensure environmental provisions are binding on all levels of government in the countries that the UK negotiates with—as is the case in the UK. (Paragraph 67)
The Government does not limit the applicability of provisions in the Environment chapters of FTAs that the UK negotiates to the UK’s central level of Government. Therefore, in the Environment chapter of the AUS FTA, provisions on the environment apply across the UK, including to the Devolved Administrations.
The Government recognises the importance of FTA chapter applicability being the same for the UK and our negotiating partner and this was the outcome in the agreement with New Zealand. The Government will seek similar commitments and provisions in future FTAs. The UK has published its approach to specific future FTAs, including on environment, online.
We reiterate our previous call for the Government to adopt a system of core standards, which we believe would make it easier for UK negotiators to get other countries to agree to meet equivalent standards to those in place in the UK. Core standards should be in place before any further FTAs that cover the food sector are agreed. (Paragraph 77)
The Government is committed to realising the benefits of greater trade, whilst upholding high environmental, food safety and animal welfare standards, and ensuring that its approach works for UK consumers, farmers and businesses.
All imported products need to meet the UK’s SPS import requirements. On animal welfare, we will look at all standards and the materiality of any differences given the likely volume of trade. We will make sure—by using a range of tools, including tariffs, quotas, and safeguards—that Britain’s farmers are not undercut by unfair competition from those with lower standards.
The Government must produce a clear strategy for how it will use the forums created by the UK-Australia FTA to raise standards in the future. It should also set out how it will organise and resource the work of these committees to ensure they have sufficient senior buy-in on both sides to make further progress. Finally, it should set out what provision it will make for parliamentary scrutiny of the proposals of these committees. (Paragraph 81)
The UK-AUS FTA establishes a number of institutional provisions to implement the FTA and provides the structures to continue to build on what we have agreed in the deal, to enhance the benefits for UK and Australian businesses. This includes an Environment Working Group to oversee the implementation of the Environment Chapter that will meet no later than one year after the FTA enters into force and then seek to meet at least every two years thereafter. There will also be a Joint Working Group on Animal Welfare to oversee cooperation on the improvement of animal welfare practices, information sharing and other welfare-related matters. The Government will continue to uphold our high standards and work with trade partners to raise standards internationally.
The Agreement provides the structures to continue to build on what we have agreed in the FTA. As we prepare for the entry into force of this FTA, the Government will work with all stakeholders to ensure that the implementing institutional provisions are used effectively to raise standards.
All joint committee decisions made under this Agreement will be published on the same webpage as the Agreement on gov.uk. This will ensure a complete, up-to-date and easily accessible record of the Agreement and relevant related documents. If the decision constitutes as a treaty amendment, whether subject to the Constitutional Reform and Governance Act 2010 (CRaG) or not are laid in Parliament as Command Papers and published in United Kingdom Treaty Series.
The Government’s intention is that significant amendments to FTA treaties should be subject to ratification and therefore will be submitted to parliament for scrutiny in accordance with CRaG.
Alongside the reporting outlined above, the Government also intends providing updates to the International Agreements Committee and International Trade Committee regarding the implementation, and continued operation, of this Agreement on a regular basis. The Government will continue to review and adopt best practices in this regard as the UK’s first ‘from scratch’ free trade agreements come into force, as it will with wider scrutiny arrangements.
The Government must overhaul the way it engages with the relevant sectors and the devolved administrations during negotiations to provide for meaningful two-way engagement. We ask that it reports back by September on the changes it has made to how the group [Agri-food TAG] operates. The Government should also expand the membership of the agri-food TAG to provide it with additional expertise on animal welfare, health and environmental considerations. (Paragraph 89).
Meaningful two-way engagement with industry stakeholders and the devolved administrations (DAs) is essential for delivering the UK’s trade objectives.
The Government has well established, productive stakeholder relationships across the whole EFRA portfolio with high levels of two-way cooperation and information sharing, including on trade matters that inform FTA negotiations.
Key agri-food stakeholders are also members of the agri-food TAG committee which provide additional opportunities to discuss trade matters and share more sensitive information. TAG membership is regularly reviewed according to the needs of the UK’s trade policy. The next membership review is set to take place this summer, any updates to membership will be available on gov.uk.
The UK Government fully recognises the important role the DAs have in implementing our shared international obligations. There are well-established governance mechanisms, structures and working groups designed to facilitate strong intergovernmental working between Defra, DIT and the DAs, and these are kept under continual review to identify potential areas of improvement. This ensures that DAs are consulted throughout the trade negotiation process and can contribute to shaping the Government’s trade policy agenda. We are encouraging the DAs to find ways to deepen their involvement and feed in more of their own supporting analysis.
We welcome the Government’s review of how to improve the quality of its impact assessment process and call on Ministers to take forward the improvements recommended in time to inform the impact assessments for all future FTAs. (Paragraph 92)
The Government is committed to considering new analysis, methodology and evidence on environmental, regional, demographic, animal welfare and other social impacts of trade agreements.
The published Report of the Government’s Trade Modelling Review Expert Panel () includes recommendations to improve the detail, rigour, and presentation of trade modelling. The Government accepts the recommendations and intends to implement them fully. This will lead to developments in sectoral detail, regional impacts, and adjustment pathways over time. These extensions must be implemented carefully and with due quality assurance processes, therefore changes to our Impact Assessments are likely to be incremental, but the direction of travel is clear from the Panel report.
We ask that the Government set out in its response to this Report what additional resources it has provided to the TAC. (Paragraph 96)
The Government is fully supportive of the Trade and Agriculture Commission (TAC). For the Australia and New Zealand FTAs, the Government offer of support included provision of information and timely advice from policy, legal and analyst teams across government, remuneration and expenses provided to TAC members, and a small DIT Secretariat.
The Government will continue to consider ways to further support the Commission with respect to future agreements and will continue to discuss with the TAC what appropriate level of support is required.
The Government notes the restating of the Committee’s previous recommendations on core standards, engagement with stakeholders and the devolved administrations, and tariff liberalisation. We hope that the responses provided to all recommendations above are welcomed, and I look forward to continuing our constructive work with the Committee moving forward.