Ian McConnell: Is Boris Johnson Australia trade deal more trouble than it is worth?

Major worries around the deal being pursued must be examined and addressed before pen is put to paper, whether or not the UK Government is in a rush to get something signed as it attempts to portray the country as a powerful trading force on the global stage in the wake of Brexit.

Passion over a trade deal with Australia is evident in the Department for International Trade’s paper on the matter, which, under the heading “an FTA with a like-minded and key ally”, declares: “With Australia, we share a language, a head of state, a common law system, and societal values as well as the many family ties, friendships, and sporting rivalries.”

That is all very nice. And we have all seen the degree to which the Commonwealth has been in focus for the Brexiters amid the UK’s lamentable exit from the European Union.

However, can you imagine a company boss trying to get a major deal rubber-stamped by the board by saying the people on the other side of the negotiating table are very nice?

Approval would, of course, come down to the cold numbers, and an analysis of the benefits relative to the disadvantages.

So what do the numbers tell us about a UK free trade agreement with Australia?

The Johnson government’s own assessment is that a free trade deal with Australia would at most, over the “long run” (a timescale of about 15 years) provide a 0.02 per cent boost to annual UK gross domestic product. This is the best-case scenario. The other scenario is estimated to provide a 0.01% boost.

To put this in context, we should look back at the Theresa May government’s estimates of the negative impact on UK GDP of Brexit, even on the basis of an average free trade deal.

READ MORE: Ian McConnell:Brexit could have taken many forms. Cheshire Cat Boris Johnson chose this one

Mr Johnson and his Government opted for a narrow free trade deal with the EU, which resulted in a hard Brexit. And the Tories did not provide an assessment of the economic effects of this deal, so it is just as well really that the May administration looked at this in detail previously. This previous extensive assessment gives us a firm idea of the impact.

So, what did the May government forecasts, published in November 2018, tell us? They showed Brexit would, with an average free trade deal with the EU, result in UK GDP in 15 years’ time being 4.9% lower than if the country had stayed in the bloc if there were no change to migration arrangements. Or 6.7% worse on the basis of zero net inflow of workers from European Economic Area countries. The Tories have since clamped down on immigration, a move celebrated by Home Secretary Priti Patel.

These figures for what will be lost with Brexit are colossal relative to the estimated 0.02% boost to GDP on a 15-year horizon from an Australian free trade deal.

We should perhaps not be surprised by the 0.02% figure, given the Conservative Government’s assessment of the free trade deal it has been trying to do with the US is that such an agreement would boost UK GDP by 0.16% at most on a 15-year horizon.

However, the UK Government really needs to think long and hard, before it is too late, about whether a 0.02% boost is worthwhile if key sectors of the economy are affected negatively by what is agreed.

The Prime Minister last year, as he trumpeted the prospect of a trade deal with Australia, asked, presumably jokingly, how long the British people could be deprived of the opportunity to have Arnott’s Tim Tam biscuits at a “reasonable price”.

However, the concerns that have been raised about a deal are no laughing matter.

Scottish Cabinet Secretary for Rural Affairs Mairi Gougeon, in an open letter to Secretary of State for International Trade Liz Truss last week, wrote: “As we have been clear since the Scottish Government’s response to your Department’s consultation on future FTAs in 2018, an FTA with Australia must not undercut Scotland’s world leading food standards or lead to a zero tariff/quota agreement. At a time when UK agri-food producers are facing significantly greater barriers to trade with Europe – the sector’s largest export market – it would be incomprehensible for the UK Government to sign up to a trade deal that would facilitate mass imports of Australian agri-food produced to a lesser standard. A trade deal that liberalises tariffs for Australian farmers, to put it bluntly, will put UK farmers out of business.”

READ MORE: If Royal Bank of Scotland owner NatWest moves head office to London, should we care?

The point about the new barriers to trade with other European countries for UK agri-food producers is a most apposite one in the context of the Australian negotiations.

Ms Gougeon noted: “Scottish Ministers have repeatedly sought reassurances as to how the UK Government will protect the agriculture and semi-processed food sectors."

And she added: “The UK Government has previously reassured the public that food standards will not be compromised, yet the UK Government disagreed to amendments to the Agriculture and Trade Bills that would have delivered reassurances to all. The UK Government must not renege on those earlier assurances, as granting unfettered access within a UK-Australia FTA will set a precedent for all future FTAs.”

Minette Batters, president of the National Farmers’ Union in England, declared last Friday that it was “incredibly disappointing” to hear news of the Johnson administration’s trade strategy from sources other than the Government itself, “especially when its reported plans will have such a massive impact on British farming”.

Calling for “urgent answers”, she added: “There remains a huge amount of unanswered questions about exactly how decisions regarding trade policy have been made, on what basis and how it will operate in the future.”

And Ms Batters warned that it was “incredibly concerning that the Government is in a sprint to sign up to a trade deal with Australia that would have serious implications for British farming and would seemingly offer incredibly little benefit to the economy”.

She added: “We continue to maintain that a tariff-free trade deal with Australia will jeopardise our own farming industry and could 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.”

There are very serious issues to be weighed here, and it certainly looks as if these will take time to resolve properly. Ms Batters’ point about major implications even if tariffs are phased out over 15 years is a very valid one. And worries have been expressed over UK farmers’ ability to compete with some very large-scale operations in Australia.

READ MORE: Ian McConnell: Scotland’s fortunes rely heavily on some UK common sense

If an agreement with Australia can eventually be concluded on acceptable terms, that is all fine and well. However, it is important to realise the benefits will be small. This is not a game-changer and to present it as such would be disingenuous.

The continuing talk from Ms Truss about a free trade agreement with Australia being a stepping stone to greater involvement in the Trans-Pacific Partnership does not move the dial on this score either. The UK Government’s seeming prioritisation of the distant TPP over its relationship with the EU, the country’s biggest export market right on its doorstep, remains baffling.

Ms Truss is unperturbed about worries raised over the potential impact on the farming sector. She has declared that farmers have “nothing to fear” and “an awful lot to gain”. However, it is easy to see why many would not share this confidence.

Given there is so little at stake in terms of economic benefit from a trade deal with Australia, it should on the basis of the numbers be easy for the UK Government to walk away if the proposed agreement could damage key sectors such as farming.

The end of the Brexit transition period should also have taught the Conservatives an immediate lesson about it being important not to disadvantage UK businesses and key sectors of the economy with short-sighted decision-making driven by political motivation.

However, the UK Government seems to be attaching an extraordinary amount of importance to securing a free trade deal with Australia, regardless of the numbers and increasingly, it appears, in spite of potential major detrimental effects in key areas. This remarkable situation will surely not have escaped the attention of the Australian Government, as it assesses the strength of its negotiating hand relative to that of a Johnson administration seemingly desperate to sign an agreement. None of this bodes at all well from a UK perspective.