UK trade negotiations: Agreement with Australia – Report Summary

This is a House of Commons Committee report, with recommendations to government. The Government has two months to respond.

Author: International Trade Committee

Related inquiry: UK trade negotiations: Agreement with Australia

Date Published: 6 July 2022

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The Government triggered the statutory 21-sitting-day scrutiny period for the UK-Australia Free Trade Agreement on 15 June, despite assurances that we would be allowed sufficient time to publish our report before this occurred. On 29 June, we asked the Government to schedule a debate on the Agreement between 13 and 19 July—and to extend the statutory period or allow the House the opportunity effectively to extend it by passing a substantive motion resolving that the treaty should not be ratified. In response to the Government’s refusal to extend the scrutiny period, we reiterate our previous call to do so. If this does not happen, and a substantive motion on the Agreement is tabled, we recommend that Members vote against ratification, to allow more time for scrutiny.

The Secretary of State for International Trade failed to attend before us to answer questions on the Agreement on 29 June, despite a commitment to do so. This made it impossible for us to take into account her evidence on the new date agreed—6 July—and still publish our report before the very end of the scrutiny period. Consequently, we are obliged to publish our report now, before we have taken the Secretary of State’s evidence.

The Agreement is likely to aid the UK’s accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The UK-Australia Agreement draws widely on the CPTPP, while also going beyond it in some respects and potentially conflicting with it in others. The Government should explain this. It should also clarify how the market-access provisions under the Agreement with Australia relate to its negotiating positions for bilateral market access discussions with other CPTPP members as part of the accession process.

The Government must publish a coherent trade strategy and give a clear sense of how each set of trade agreement negotiations serves its broader strategic vision.

The Agreement does not refer explicitly to the protection of human rights. The Government must explain what its negotiating position was on this.

The Agreement with Australia is the UK’s first from-scratch trade agreement since leaving the EU. While the Government has insisted the Agreement does not set a precedent for future negotiations, it appears to contradict itself by seeing some provisions as precedent-setting.

We welcome the Agreement’s liberal product-specific rules of origin for manufactured goods, which are likely to benefit UK exporters, notably in the automotive sector. However, applying such rules to UK imports poses the risk of third countries using them to circumvent UK tariffs. The Government must scope out this risk and carefully monitor it.

The Agreement makes no provision for any sort of cumulation of origin involving a third country.

The provisions in the Agreement on technical barriers to trade do little beyond reaffirming the parties’ existing commitments. We regret that these provisions are not subject to the Agreement’s dispute settlement provisions.

We are disappointed that the cosmetics Annex in the Chapter on technical barriers to trade does not explicitly confirm the UK’s commitment to maintain its ban on animal testing.

We welcome the liberalisation of trade in processed food achieved by the Agreement. However, gains for UK exporters and consumers are likely to be modest.

The almost complete liberalisation of unprocessed agri-food trade with Australia is a significant step. The Government says other markets are more of a priority for Australian exports, and that Australian products are likely to displace imports from the EU. However, UK producers fear the UK being a potential fallback market if international trade flows change.

The Government has sought to cushion negative impacts on UK producers with long-lasting phase-in arrangements. Agri-food producers are concerned at what they see as the excessive size of the quotas that form a key part of the transitional arrangements. And UK red meat producers fear being disadvantaged by the effect of not setting quotas on a “carcase weight equivalent” basis.

Liberal product-specific rules of origin for processed food could encourage manufacturers to replace UK ingredients with imported ones. The Government must say what it has done to model such possible consequences and what it will do to monitor them.

The Agreement in Principle referred to “best endeavours” commitments to reach agreement on amending Australia’s definition of whisky and implementing in the UK Australia’s proposals under the Wine Agreement. It is disappointing that these are not present in the final Agreement. The Government must set out how, and when, it plans to address these issues.

We welcome the role of the new Trade and Agriculture Commission (TAC) in scrutinising the impact of trade agreements on UK agri-food production standards. The Government must ensure that the Commission has the time and resources necessary to fulfil its remit.

We welcome the fact that the Agreement does not change the UK’s statutory Sanitary and Phytosanitary (SPS) protections, including its ban on importing hormone-treated beef. However, we note concerns that attempts could be made to try and undermine such protections by means of the SPS Committee under the Agreement, the provisions on equivalence of standards and the Chapter on good regulatory practices. It is regrettable that the Government did not negotiate any relaxations of Australia’s strict bio-security controls, especially given the extent of UK concessions in respect of Australian agri-food exports; the Government must say whether—and, if so, how and when—it plans to address this issue under the Agreement. We welcome the Agreement’s commitments on combating antimicrobial resistance and we are reassured by the continuance of UK SPS controls on antibiotic residues in imported meat. The Government must say what it will do under the Agreement to address the high level of antibiotic use in Australian production processes.

UK agri-food producers are concerned that the Agreement increases UK market access for food produced in ways that would be illegal in the UK, making for unfair competition. TAC concluded that, while such concerns have generally been overstated, this is apparently not the case for goods produced using pesticides not permitted in the UK and canola oil produced from GM crops. We are disappointed that the Government has not acted on the suggestion that liberalising agri-food trade under UK trade agreements should be conditional on imports meeting core UK food production standards. The Government must say what it will do to monitor unfair competition for UK producers resulting from agri-food liberalisation—and how it will act to mitigate adverse consequences for UK producers’ interests, and UK consumers’ wishes and choices, from such competition. We are concerned about the potential undermining of voluntary food production standards in the UK as result of agri-food liberalisation under the Agreement. The Government must say what it will do to monitor, and potentially act on, this.

The Government has failed to secure any substantive concessions on the protection of UK Geographical Indications in Australia.

The Agreement’s provisions on customs and trade facilitation cement pre-existing commitments, which aim to ensure that paperwork is minimised and goods are released quickly.

The Agreement’s Chapter on trade remedies allows for transitional general bilateral safeguard measures, whereby the Parties can protect themselves against import surges.

The Agreement’s provisions on trade in services have the effect of locking in current levels of market access, providing welcome certainty to businesses and individuals. There are also useful provisions to facilitate the achievement of mutual recognition of professional qualifications by regulatory bodies. Mechanisms under the Agreement to deliver further regulatory alignment in respect of trade in services may not be effective enough and the Government must say what it will do to seek improvement of these.

The Government must provide details of any assessment it has made of the expected increase in flows of businesspersons resulting from the Agreement’s provisions on the mobility of persons. We welcome the planned changes to the Working Holiday Maker and Youth Mobility schemes, and the new Innovation and Early Careers Skills Exchange Pilot.

We welcome the Agreement’s provisions on digital trade, which will help to boost e-commerce and improve online consumer protection. The Government must set out how it will fulfil its commitments on cross-border transfer of data under the Agreement while also maintaining current levels of protection for UK citizens’ personal data. It must also say how its policy on granting data adequacy will interact with this and future free trade agreements—and give an unequivocal commitment that it will seek to avoid the loss of EU adequacy, which would be catastrophic for the UK.

Arrangements for a Strategic Innovation Dialogue under the Agreement may not be sufficient. The Government must set out how the Dialogue’s effectiveness will be monitored.

The Agreement’s investment provisions lock in the Parties’ existing voluntary commitments on investment liberalisation and investor protection, giving investors more certainty. The Government must explain how Investor-State Dispute Settlement came to be omitted from the Agreement and set out clearly how it intends in future trade negotiations to approach mechanisms for settling investment disputes.

The Agreement’s provisions on intellectual property appear to make relatively few changes to current arrangements in either the UK or Australia, and it is difficult to pinpoint whether the UK made gains.

The Agreement’s dedicated Chapter on the environment includes provisions on maintaining the approach to enforcement, and standard, of those laws and policies where not doing so would affect trade or investment between the Parties. While these are subject to the Agreement’s dispute-settlement procedures, raising a successful dispute would be difficult, since it would have to be shown that an action had (or was intended to have) an impact on trade or investment between the Parties.

We welcome the inclusion in the Agreement of provisions on forced labour, modern slavery and human trafficking, but note the limitations of those provisions—notably the fact that enforceable provisions do not extend to supply chains.

We welcome the Agreement’s dedicated Chapter on trade and gender equality. However, the arrangements for a Dialogue under the Agreement may not be adequate and the Government must set out how it intends to address this.

We commend the Government for taking into account potential adverse effects on developing countries from preference erosion due to the Agreement and its intention to monitor such effects. However, it must also set thresholds for taking remedial action, and say what such action would involve.

The Government has rightly highlighted the potential procurement opportunities for UK suppliers in Australia under the Agreement; it must help UK suppliers assess these opportunities. Our initial assessment of the implementing legislation in the Trade (Australia and New Zealand) Bill is that its content and provisions are necessary and proportionate.

A dedicated Chapter sets out the Parties’ intention to help small and medium-sized enterprises take advantage of the Agreement.

The Agreement includes provisions on good regulatory practices in the design and implementation of regulatory measures.

In a dedicated Chapter, the Parties commit to transparency in relation to the Agreement and to undertaking anti-corruption measures.

The Government must confirm how Parliament will be made aware of, and be engaged in, the UK’s consideration of proposed amendments to the Agreement by the Joint Committee—and say how it will engage Parliament in the wider body of work undertaken by bodies established under the Agreement. The Government must explain why there are such different approaches to the availability of dispute resolution mechanisms across the Agreement—and say how Parliament will be kept informed when a dispute resolution mechanism is triggered.

The interaction of the Agreement with the Ireland / Northern Ireland (NI) Protocol is complicated and opaque. The Government must say what it is doing to help those impacted. It must state what its understanding is regarding whether UK trade defence measures can apply in NI if there are no equivalent EU trade defence measures in place. It must also explain how it will inform and involve Parliament and the NI Executive where the Agreement operates differently in NI with regard to imports and how it will minimise resulting disruption to UK trade.

The Government should develop its capacity to collect and utilise qualitative evidence in its trade agreement Impact Assessments. For each future trade agreement, the Government must analyse the cumulative impacts of all agreements to date, across all sectors of the economy. Future Impact Assessments must also address the strategic importance of each agreement. The Government’s assessment of the environmental impacts of the Agreement is welcome but could have gone further. Future Impact Assessments must take account of changes in emissions due to deforestation or land use change, and modelling must capture environmental impacts and the effects of environmental policy instruments. The Impact Assessment does not sufficiently assess the Agreement’s impacts in the devolved nations and English regions. The Government should set out what it will do to ensure that future modelling better captures these impacts—and takes account of the specific impacts on NI arising from the interaction of agreements’ interaction with the Ireland / NI Protocol. The Government must beware of overselling trade agreements. Impact Assessments must clearly communicate a realistic assessment of potential winners and losers (across different sectors and different parts of the UK) under each agreement. The Department for International Trade (DIT) must ensure that its modelling and choice of modelling approach for Impact Assessments are more transparent. The Department should publish its detailed workings for the modelling in the Australia Impact Assessment and commit to doing the same in future Impact Assessments. It must also commit to publishing key inputs and parameters that will be used in future Impact Assessment modelling. DIT should evaluate the practicability of compiling a single dataset that allows the comparison of trade agreement impacts on a like-for-like basis and publish a detailed explanation of its conclusions.