Brexit: Tories' trade deals reheat baffling: Ian McConnell

You would think - given the tiny net benefits from the Australia and New Zealand trade agreements even on the UK Government’s own projections and the fact these pale into absolute insignificance relative to the huge damage to the economy from Brexit - that the Tories might be better to say less rather than more about these two deals. And all the more so given the entirely justified fears over the consequences of the deals for the likes of the farming and broader food production sectors in Scotland and elsewhere in the UK.

However, the Tories have chosen to take quite the opposite approach.

So last week we had yet another press release about the deals, trumpeting the supposed headlines as follows: “Benefits of ground-breaking free trade deals with Australia and New Zealand to be unleashed for British businesses and consumers later this month. First trade deals negotiated from scratch by the UK and tailored to our strengths as a services-led economy. Trade deals deliver on the Prime Minister’s priorities to grow the economy and drive innovation.”

This all surely amounts to some quite spectacular grandstanding.

The release continued: “Expected to increase bilateral trade with Australia by 53% and with New Zealand by 59% in the long term, the two game-changing free trade agreements are anticipated to go live across all three countries from midnight on 31 May.”

“Game-changing” seems to be pushing things way, way beyond the bounds of credibility.

And, seeing as the Tories seem to want to talk percentages in relation to the deals, we must look at the ones that actually matter, in terms of what these agreements deliver by way of a net boost to annual UK economic output and what the cost of Brexit is expected to be on the same measure.

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Forecasts drawn up by Theresa May’s government in 2018 showed Brexit would, with an average free trade deal with the European Union, 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, of course, imposed a major clampdown on immigration from the EEA.

The UK Government’s impact assessment of the Australia trade deal shows a boost to GDP from this of just 0.08% by 2035. The forecast New Zealand trade agreement benefits are even smaller than those projected from the Australia deal. The Department for International Trade has observed that, for the New Zealand deal, its “sensitivity analysis…suggests the estimated impact on long run GDP could vary between 0.02% and 0.03% (0.023% and 0.034% respectively, to three decimal places)”.

It is these percentages, for the huge Brexit loss and the tiny gains from the Australia and New Zealand deals, which tell the true story.

However, the Tories appear determined not to let numerical reality rain on their Brexit parade.

Lord Offord said last week of the New Zealand and Australia trade agreements: “Scottish businesses will benefit greatly from these two new deals. As well as opening up new markets, it will strengthen existing ones. Red tape will be lifted from the trade of items including produce and whisky, ensuring Scottish goods and services can meet the global demand.”

Given what you hear from Scottish businesses of all sizes across a raft of sectors, troubled by skills and labour shortages arising from Brexit and hampered severely by the loss of frictionless trade with the UK’s biggest export market (the EU and wider EEA), you get the impression that the tiny benefits from the Australia and New Zealand deals will be very cold comfort as opposed to something from which they will “benefit greatly”. And Lord Offord should note that Brexit has wrapped businesses in Scotland and those elsewhere in the UK up in red tape when it comes to exporting and importing to and from our major European markets, and trying to recruit or retain staff.

Lord Offord, to be fair, was not alone in banging the drum bizarrely loudly about the Australia and New Zealand trade deals.

The UK Government even managed to bring in the Coronation of King Charles III in its press release.

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It all smacked rather of a harking back to supposed glory days of Empire and Commonwealth. And it appeared most detached from any kind of economic reality. The UK Government should be prioritising the country’s biggest and nearest export market. Instead, it has favoured a headlong rush to turn its back on the EU through its hard Brexit.

The UK Government press release issued on Thursday last week noted Rishi Sunak was meeting both Australian Prime Minister Anthony Albanese and the Prime Minister of New Zealand, Chris Hipkins, the following day “for talks in Downing Street ahead of the Coronation”.

Mr Sunak seemed quite enthused by it all, declaring: “As some of our closest allies, and greatest friends, I am delighted our first built from scratch trade deals are with Australia and New Zealand.

“These landmark deals squarely deliver on my priorities to drive economic growth, boost innovation and increase highly skilled jobs across the UK, ensuring we and our closest friends continue to prosper for generations to come.”

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“Prosper” is a curious way to characterise the UK’s post-Brexit landscape.

And it is difficult to see how, if the Prime Minister’s priority is to “drive economic growth”, Mr Sunak is happy enough to endure the huge damage to UK output from Brexit, while celebrating minuscule gains from trade deals with far-off lands.

Big talk does not change the reality of the situation. Maybe the theory is that the loud noises will continue to hoodwink the Brexiters who were so important to the Conservatives’ 2019 general election victory. Who knows? It is all rather difficult to fathom.