Scrutiny of international agreements: UK-Australia free trade agreement Contents

Summary

The UK-Australia free trade agreement (FTA) is the first trade deal the UK Government has negotiated entirely from scratch after leaving the European Union and, as such, it is politically significant—offering, in the absence of a published trade policy, an insight into the UK Government’s vision for trade after Brexit. Our scrutiny of this agreement has therefore focused, not just on its provisions, but also on lessons for future trade negotiations.

The deal with Australia is significant because it helps pave the way for our entry into the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a major Government objective. We welcome the Government’s progress in signing new trade agreements and it was right to secure a trade agreement with Australia ahead of market access negotiations with CPTPP, to which Australia is a Party. However, prioritising the speed of the negotiations may have come at the expense of using the UK’s leverage to negotiate better outcomes—for example, on Geographical Indications (GIs) and the environment.

The Government believes the economic benefits of the UK-Australia FTA are likely to be positive, although its assessment of 0.08% increase of UK GDP by 2035 shows a fairly limited—though welcome—impact. However, there may well be additional positive effects over time, particularly in services and digital trade.

In fact, the evidence we received included warm endorsement of the financial and legal services provisions and digital trade, and highlighted benefits for car manufacturers, SMEs and UK professionals. However, some of these benefits should not be overstated: some are speculative (such as those that may accrue from closer regulatory co-operation) while others (such as those for the manufacturing sector) are limited by technical barriers and a luxury car tax.

Farming organisations were concerned by the FTA and it remains to be seen whether the safeguards in the agreement will be robust enough to ensure fair competition and effectively respond to potential surges in Australian agricultural imports. We note that import volumes may be tempered by geographical distance and geopolitical issues, and the fact that Asia is likely to remain Australia’s main export market. Nevertheless, the unconditional approach to agricultural tariff elimination could set a precedent for future negotiations and the Government should take full account of the potential cumulative effects of this agreement and other FTAs on UK farmers and the agricultural sector. The devolved nations are likely to be particularly affected and, therefore, future impact assessments should provide more detail on how FTAs, individually and cumulatively, will impact them.

Although we heard concerns relating to Australia’s agricultural production methods and animal welfare practices, the Trade and Agriculture Commission’s (TAC’s) findings about the impact of the agreement on UK statutory protections in relation to (a) animal or plant life or health, (b) animal welfare, and (c) environmental protection were mainly positive. It concluded that the FTA will not require the UK to change its levels of statutory protection and that the agreement actually reinforces these, going beyond WTO obligations in several areas.

It identified, however, some instances where differences in production and animal welfare standards could lead to UK farmers competing on an unlevel playing field, particularly for Australian agri-food products grown using pesticides not permitted in the UK. The TAC also found that the UK’s right to regulate could be constrained through decisions taken by the Joint Committee set up under the agreement.

Imports from Australia will lead to greater consumer choice, which is welcome. Consumers could also benefit from lower prices for imported goods, but it remains to be seen whether the agreement will lead to cheaper prices, and lower food prices in particular.

There are concerns over the lack of ambition in the environmental chapter, particularly if compared to the one included in the UK-New Zealand FTA. Given the UK’s generous tariff offer, it could have pressed for more ambitious commitments on climate change, stronger enforcement provisions, and for an explicit reference to the Paris temperature goals. A lack of tie-up of trade policy with the UK’s climate objectives is apparent. The recent change in government in Australia presents an opportunity to improve the environmental and climate change provisions in the agreement, and we urge the Government to do so through the Joint Committee.

The Government needs to do more to involve the devolved administrations from an early stage on reserved matters with a devolved impact, such as tariff liberalisation for agricultural goods. Given the importance of agriculture to Scotland, Northern Ireland and Wales, it is essential they are consulted from the outset and throughout the negotiations, and Parliament should be made aware of their views.

The agreement was hailed as a big success by both Parties, but it remains to be seen how exactly the agreement will affect trade flows, possibly not visible until implementation. In particular, how the agreement will affect UK agriculture; how many businesses will make use of the trade preferences and other facilitations; and whether consumers will benefit from cheaper goods. Continued monitoring of the agreement will be essential. The Government has committed to producing monitoring reports every two years, as well as an evaluation report after five and we are grateful to Lord Grimstone for offering to keep us informed of any significant developments.

We welcome the agreement with Australia. While we have identified some risks flowing from the agreement that will need to be monitored—and there has been an inevitable trade-off between the desire to achieve a rapid agreement and the scope of agreement that could be reached—the FTA clearly offers benefits to both Parties. It will be important for the House to debate it, partly because of its own importance, but also as a forerunner of future trade agreements, and to ensure that the Government hears and responds to the issues raised.





© Parliamentary copyright 2022