Truss’s naivety on trade with Australia could leave the UK exposed
If the trade secretary agrees to Canberra’s demands for no tariffs on agriculture, it sets a dangerous precedent for other, bigger deals
Farming is the tail that wags the dog in all trade talks. Agriculture might be worth less than 1% of GDP in the UK and Germany and less than 2% in France and Italy, yet the emotional connection with food makes it a critical subject when negotiators sit down to hammer out a deal.
According to the latest World Bank data, the sector contributed only 3.3% to global GDP – and in Australia, which is in controversial and secretive talks with the UK about a free trade agreement (FTA), it made up just 2.1% of GDP in 2018. But Dan Tehan, Australia’s trade minister, has placed agriculture front and centre by insisting that any deal with the UK must be covered by tariff-free and quota-free arrangements.
On Friday it appeared he had succeeded with his hard line. The Sun reported that Boris Johnson had told cabinet colleagues he needed to agree the outline of an FTA with Scott Morrison, the Australian prime minister, after inviting him to be a guest at the G7 summit in Cornwall next month.
An inner cabinet committee overseeing trade issues has offered a UK compromise that would delay the full effects of tariff- and quota-free trade in agriculture for 15 years, the Sun said. Neither No 10 nor the trade department would comment.
One of the prizes being eyed by the UK’s trade secretary, Liz Truss, is membership of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a trade deal between 11 countries around the Pacific rim, including Japan, Vietnam, Singapore, Australia, Canada and Chile.
The CPTPP text consists of 30 chapters, covering tariffs on goods and services, intellectual property rights, e-commerce rules, employment and environmental standards, dispute resolution, and many other aspects of global trade. Joining the partnership will require complex negotiations.
A deal with Australia is not significant in itself: Truss admits it would boost Britain’s economy by just £500m over 15 years, or 0.02% of GDP – figures that explain why most economists agree trade is something that happens with nations close at hand or that share strong cultural ties. Almost 50% of trade remains with the EU despite Brexit, and the US is the largest single destination for UK goods.
But what Truss wants is to develop a template in talks with Australia that can be used again with the CPTPP, South Africa, Brazil and, her main prize, the US.
It is the prospect of unfettered competition with these countries that frightens many Tory and Labour MPs, who worry that Truss will lose out in CPTPP negotiations and with every other country she approaches after conceding that no UK industry needs protection in a deal with Australia.
Not only will inefficient sheep farmers be wiped out by cheap foreign imports, but so will the steel industry and others that shelter behind protective tariffs and quotas negotiated by the EU when the UK was still a member, and rolled over in the weeks before and after Brexit.
“The worry is that Liz Truss, in her desperation to keep the Brexit flame burning and the trade narrative on track, will rush to sign a deal with Australia that gives away all the UK’s leverage in future deals with other, much more important, nations,” said one Labour MP.
The Institute for Government thinktank says the UK lacks the information needed to negotiate deals after failing to collect trade data for 40 years. It believes Truss’s team is desperately under-prepared for talks with countries that would want to see such data.
Truss argues that the UK has a tariff-free deal with the EU and this should be the template. But the UK stands on a level playing field with other EU countries after four decades of convergence. That is not the case with other countries. The Australians, like the Americans, use growth hormones on cattle that are banned in the EU and UK.
It is also not clear whether the founder members of CPTPP would allow the UK a blocking vote should it become a member. If a blocking vote is denied, then the US could join and negotiate changes that the UK is powerless to prevent. Environmental and anti-poverty campaigners fear major US corporations unencumbered by UK regulations would relish gaining access to the UK through a large back door without tariffs or quotas.
The shadow trade secretary, Labour’s Emily Thornberry, has asked the government why trade policy appears to be based around joining the CPTPP. In April, she fired more than 235 questions at Truss in a letter to find out, and urged the government to reopen a pre-Brexit public consultation on trade “so we can all have our say”.
A forthcoming “scoping document” is due to set out the terms of entry to the CPTPP. It remains to be seen whether Truss will use it to provide some answers.
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