Trade with Australia – what it means for British farmers

Britain's free trade agreements with Australia and New Zealand are set to come into force at the end of this month the government has announced.

The trade agreements are expected go live from midnight on May 31, find out more.

Australia and New Zealand trade deals come into force

NFU President Minette Batters responds to the Trade and Agriculture Commission’s report into the Free Trade Agreement (FTA) between the UK and Australia.

Mrs Batters said: “As the first deal to be struck under our new independent trade policy, this FTA provided a chance to set the standard for future deals which incentivise trade in food produced to higher environmental and animal welfare standards.

“However, it is clear from this report that the UK government has missed the opportunity to reach a genuinely innovative and world-class FTA with Australia.

“While it is reassuring that this deal will not result in a change in production standards here – for instance, imports of hormone-reared beef will still be banned – the report confirms that this FTA simply opens up UK agricultural markets for Australian produce, whether or not produced to the same standards that are legally required of UK farmers.

“This deal will pave the way for others to follow and I’m increasingly concerned about the cumulative impact of the government’s FTA programme, especially as its own impact assessments anticipate a negative economic impact on UK farmers.

“It’s vital that government provides a clear programme of policies and investment to help UK farming get ‘match ready’¹ for this new, tougher trading environment. We also need to see government working with farmers to develop a set of core environmental and animal welfare standards which it can seek to safeguard through forthcoming FTAs, as well as in its general import policy under its current WTO commitments.

“I would like to thank the Trade and Agriculture Commission for producing such a detailed report which will no doubt be useful to Parliamentary select committees as they themselves scrutinise this FTA.”

The NFU gave evidence this week to the Lords’ International Agreements Committee and Commons’ Environment, Food and Rural Affairs (EFRA) Committee, for their separate inquiries into the UK-Australia trade deal negotiations and agreement.

The UK-Australia FTA (Free Trade Agreement) has to be ratified this year. Though we understand that getting MPs to vote down the deal is unlikely, this deal mustn't be a model for future FTAs.

NFU Director of Trade and Business Strategy Nick von Westenholz, was asked about the principal concerns surrounding the FTA with Australia.

He explained that the NFU has serious concerns about the agreement.

It is a highly liberalising deal with a country that is an extremely effective net exporter of agri-food, with a huge capacity for domestic production and a comparatively small population for production to service.

Deal favours Australia

Ultimately the deal is highly likely to favour Australia over the UK.

Specifically, lower production costs and weaker standards will see the introduction of more competitive Australian imports that will become completely tariff-free after 15 years. Asking UK farmers to go toe-to-toe whilst maintaining their sustainability, environmental, and animal welfare commitments significantly risks the longevity of the UK agricultural sector in the future.  

Safeguards  

The Committees requested evidence on how safeguards can mitigate the negative impact on the agricultural sector.

Nick von Westenholz explains how the UK has failed to secure the necessary safeguards to protect the industry in the event of the worst-case scenario.

He set out the three safeguarding measures that are in place within the UK-Australia FTA.

TRQs (Tariff Rate Quotas)

The initial Tariff Rate Quotas (TRQs) are introduced and expanded over 15 years, slowly increasing the amount of product Australia can export to the UK.

Although there is method within this mechanism, the first year TRQ for beef is offered at 35,000 tonnes which is already 10% of UK import requirement.

Nick added that for the fifth stage of TRQs (Year 15) for sheep meat, Australia could export 155,000 tonnes, equivalent to 150% of the UK’s total import requirement, almost half of total production, and emphasises the limitations of the TRQs effectiveness.  

Nick then outlined a secondary safeguard measure that operates similar to quotas.

Product-specific safeguards

He explained that between years 11 and 15, product-specific safeguards are brought in if harm is being shown to the red meat sectors as a direct result of the deal. 

World Trade Organisation

Nick von Westenholz emphasised that there are no quotas or technical safeguards following the 15-year period, and if needed, the only safeguards left in place will be those within World Trade Organisation (WTO) safeguards that, if implemented, will be applied across the board impacting trade with all countries.

As a result, these safeguards will be a last resort.  

Nick von Westenholz argued that the best-case scenario for UK farmers to adapt would be for volumes to increase moderately and modestly. Australian exports could then continue to service markets in the Far East. However, as he pointed out, Australia may quickly change focus to an attractive UK market with geo-political issues ongoing. 

He added that there is no explanation within the agreement to state how TRQs are to be managed, whether annually or quarterly. In particular, sheep meat TRQs are not seasonal, which risks potential surges for UK farmers.  

Standards 

Members of the Committees were keen to hear evidence on the issue and difference between UK and Australian standards and whether this impacted cost of production. The unanimous opinion was that UK farmers are required to produce food to higher environmental, climate-friendly and animal welfare standards than demanded in Australia.

Nick von Westenholz noted that the regulations to ensure our high standards do impact production costs and flagged that the broader environment, requirement for planning permission for extra premises and machinery, and limited space makes investment expensive and prevents UK farmers from achieving the economies of scale needed to compete.

In comparison, Australia has infinite space and the ideal climate to farm at scale. 

When questioned why agreements for the trade of poultry had not been achieved, he stated it was as a result of differences in standards. However, he was concerned at why this reason had not been applied to other sectors.

He explained that he was in favour of the principle of defining core standards, especially where these are transferable between countries. He noted it was important to introduce a process where critical and important standards are outlined, and the same expectations for UK production is applied to imports.

He concluded that this process should be set up and implemented within the negotiation of future FTAs.  

Industry engagement  

Both members of the International Agreements Committee and EFRA Committee queried the engagement of industry within the negotiation of the UK-Australia FTA.

Nick von Westenholz explained how contact with government departments is regular, and we have been clear with the concerns of the NFU and our members.

He also referred to the International Trade team’s involvement in the agri-food  TAG (trade advisory group) (TAG), which initially appeared to be a forum to advise government during agreement talks; though it materialised into a group that received updates on the progress of negotiations under an NDA.

Box ticking

Arguably this was seen as ticking the box of industry engagement.

Nick von Westenholz explained to the Committees that it was regularly too late for any comments or advice to be taken on board and implemented as ‘updates’ from government officials had already been agreed with their Australian counterparts.

He, along with others giving evidence, stressed that future involvement in FTA negotiation was extremely important to not repeat mistakes made within the Australia agreement. 

The government has agreed a trade deal with Australia in principle. It is the first big post-Brexit deal that is not simply rolled over existing agreements. It is possible that it may have a significant impact on British farming, especially the livestock and sugar sectors and it will, almost certainly, be a model for all future deals.

Responding to the announcement of an Agreement in Principle for a UK-Australia Free Trade Agreement, NFU President Minette Batters said:
“We have been clear about our concerns over the potential impact of trade deals that completely eliminate all tariffs on imports from the biggest agricultural exporters in the world.

“While details remain very thin on the ground, it appears that the agreement will include important safeguards that attempt to strike a balance between liberalising trade and supporting UK farm businesses, as well as a reasonable time period to allow UK farmers to adjust to the new trading environment.

“We await further details of the agreement to understand whether these safeguards are sufficient, and in particular that they can be deployed effectively should imports rise to an unmanageable level leading to significant market disruption."

“I am concerned that today’s announcement appears to have made no mention of animal welfare and environmental standards. While the government has previously been keen to highlight how our Free Trade Agreements will uphold our high standards of food production, there has always been a question mark over how this can be achieved while opening up our markets to food produced to different standards. We will need 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.

“The ultimate test of this trade deal will be whether it contributes to moving farming across the world onto a more sustainable footing, or whether it instead undermines UK farming and merely exports the environmental and animal welfare impact of the food we eat.

The government must talk to industry

“It is critical that the government now engages with industry on the details of the deal as soon as possible and that Parliament is involved much more during the final stages of the negotiations to ensure it has sufficient oversight of the agreement. This means providing both Houses with the details well in advance of ratification alongside a proper impact assessment so Parliament can ensure it is satisfied that this deal is right for all of the UK – consumers, workers, farmers and other businesses alike.

“The Trade and Agriculture Commission will have a vital role to play in assessing these aspects of the deal in the near future and it is crucial it is up and running soon so that it can provide its report to Parliament on the impact of the deal in good time ahead of ratification.

Domestic policies should support sustainable farming

“This trade deal, and those that follow it, will, I hope, provide UK farmers with opportunities to export more great British food abroad, although we should be realistic about the extent of those prospects with large net-exporters such as Australia. We should also be clear about the likelihood that these deals will mean a significant increase in competition in our domestic agricultural markets.

“The UK government must step up and work with the industry in improving its competitiveness, through domestic policies that support productivity and sustainable farming, and through export policies that upscale our ability to open and maintain overseas markets, something the UK has been poor at in recent years compared to foreign competitors.

Impact on future trade deals

Looking ahead, the NFU has said that it is vital the UK government approaches its other negotiations with countries such as New Zealand, USA, Canada and Mexico – all major agricultural producers and exporters – on its own terms and ensures that future deals balance access to UK agricultural markets with at least the same level of opportunities for British agri-food exports.

We will continue to lobby government, who must realise that the cumulative impact of these deals could have a major impact on UK farming. If handled badly it may become impossible for some farm businesses to continue to compete.

The NFU has issued a statement on UK-Australia trade negotiations after media reports suggested a 15-year transition to a zero-tariff, zero-quota trade deal will be offered. 

NFU President Minette Batters said: “It is more than disappointing to hear this news via the media – if accurate, this will have a massive impact on British farming - and we are still waiting to hear from government. 

“We continue to maintain that a tariff free trade deal with Australia will jeopardise our own farming industry and will cause the demise of many, many beef and sheep farms throughout the UK.  This is true whether tariffs are dropped immediately or in 15 years’ time. 

“We remain of the view that it is wholly irresponsible for government to sign a trade deal with no tariffs or quotas on sensitive products and which therefore undermines our own domestic economy and businesses.  

“We are now asking for an urgent clarification from government as to how this trade deal is in line with their own policy about respecting sensitive areas and about the apparent ‘safeguards’ that the media are reporting government will put in place to protect British farming.”

NFU President Minette Batters looks at the outcomes from the final negotiations on the UK's trade deal with Australia, and where we go from here.

On the face of it, there appears to be very little in here that benefits UK farmers. We will analyse the detail in full but it would seem there is much to please our Australian counterparts who have successfully negotiated huge wins for their highly proficient agri-food exporters. Unfortunately this will just heap further pressure on British farm businesses already facing serious challenges such as a squeeze on labour, the phasing out of support payments and rocketing input costs. 
In particular, it is extremely disappointing to see that the UK government has given in to Australian demands on the final outstanding areas still being negotiated, those relating to the administration of quotas and safeguards. This means, despite the UK government’s assurances on sensitive sectors, products such as beef and lamb will be completely liberalised with no safeguards after 15 years, sugar after eight years and dairy after just six. Furthermore, the quotas will be calculated on the basis of product weight, meaning more high-value cuts can be prioritised for export by Australian producers putting further pressure on market returns for British beef and lamb producers.

"Today, British farmers are being asked to go toe-to-toe with some of the most cost-effective food producers in the world. But there is scant evidence that the government has the vision to create the conditions to allow our farmers to compete."

The NFU convened a summit of all of the key players in the UK’s food supply chain to discuss the range of pressures facing farmers and food producers in the UK right now. There was widescale agreement that industry and government would need to work together as a matter of urgency to ensure food remains affordable and available, and that businesses remain viable and can invest in the future. Read more about this here: NFU leads food coalition in calls to fix supply chain
 
Unfortunately, this deal does nothing to alleviate the situation, rather it risks exacerbating it. Today, British farmers are being asked to go toe-to-toe with some of the most cost-effective food producers in the world. But there is scant evidence that the government has the vision to create the conditions to allow our farmers to compete. Instead we see labour being squeezed and are told to accept rising input costs. We see blunt, new regulations adding costs to farm businesses in areas such as water quality and animal transport. We hear warm words about new technologies to help productivity with little evidence of action. And we see almost nothing that will prevent an increase in imports of food produced well below the standards required of UK farmers, for instance on land cleared of forest for cattle production or systems that rely on the transport of live animals in ways that would be illegal in the UK.
 
Our experience of these negotiations has not lived up to the government’s ambitions for strong industry collaboration on trade deals. The NFU has consistently set out its concerns over the market access provisions in the deal, as well as the approach to the environment, animal welfare and climate change. We had hoped that we might engage with negotiators on the details of these provisions prior to agreement, as is the norm in countries like Australia. Instead, we have consistently learned of the outcome of the negotiations after the fact, sometimes from the Australian government rather than our own. It is difficult to see any value in the current stakeholder engagement structures DIT has constructed to support its negotiations.

The truth is, when it comes to agriculture, this is a one-sided deal. The Australians have achieved all they have asked for. While none of us can predict the future, the upshot is likely to mean UK farmers increasingly competing against food that is produced under a system with different rules and with significantly lower costs of production. The government should level with farmers about the commercial reality of this, dropping the trite assurances that our trade deals have British farmers’ interests at their heart and instead setting out the detailed, complementary policies that will help UK farmers compete and adjust. Implementing our three-point plan for getting farming 'match ready' would be a good start.

We have seen some welcome developments in recent weeks, including the announcement of additional agricultural attachés in our overseas embassies, and the commitment to establish a UK Export Council, but details remain sketchy and much more is needed. The Secretary of State for International Trade has said that 'promoting the interests of our farmers and food producers is a priority of our trade policy and our trade deals are delivering on this'.

I hope that MPs will now take a good, hard look at the deal – alongside the forthcoming analysis from the Trade and Agriculture Commission – to see if it really does match up to the government’s rhetoric to support our farmers’ businesses and to safeguard our high animal welfare and environmental standards. I fear they will be disappointed.