By Catherine McBride – 4 minute read
AS MUCH AS I don’t want to give George Eustice’s comments about the Australian trade deal any more publicity, he did seem to be looking at the deal from a very narrow perspective – his own perhaps? On the question of whether Eustice was lying to the House yesterday – or last year when he praised the Australian trade agreement – I will leave that for others to decide. Instead, I would like to clear up some misconceptions that a number of blindly patriotic farmers and some blatant EU collaborators seemed to believe.
- The UK is not a large exporter of agricultural products, but we do export other goods. The UK’s top ten exports are (in order by value): Tariff code 84. Machinery; 71. Precious and semi-precious stones and metals; 87. Vehicles; 27. Mineral fuels and oils; 85. Electrical machinery; 30. Pharmaceutical products; 90. Optical equipment; 88. Aircraft and spacecraft; 39. Plastics; and 29. Organic chemicals.
- No agricultural products make it into the UK’s top ten exports. Tariff code 22: Beverages, sprits and vinegar(i.e. whisky and gin), is the UK’s 12th most valuable ‘agricultural’ export category, while the UK’s next agricultural export is tariff code 29: Preparations of cereals, flour, starch or milk; pastrycooks’ products (i.e. biscuits) way down the list at 29th place.
- Australia on the other hand, its 10 largest imports are almost exactly the same as the UK’s largest exports, (again in order by value): Tariff code 84. Machinery; 87. Vehicles; 85. Electrical machinery; 27. Mineral fuels and oils; 30. Pharmaceuticals; 90. Optical equipment; 71; Precious and semi-precious stones and metals; 39. Plastics; 73. Articles of iron and steel; and 94. Furniture.
- More importantly, in all but two of these tariff codes, Australia imports almost all of its requirements.
- In the UK Australia trade deal, Australia has granted the UK complete and immediate access to its markets for all UK products with the exception of some steel springs and some cheeses. So all UK companies that manufacture the products listed in point 1. will be able to sell them to Australia, tariff free and quota free as soon as the trade deal is finalised.
So why is Eustice now claiming the UK Australia deal is a failure? Especially considering it hasn’t even started yet? It would appear he is worried about potential UK imports of food from Australia – even though the UK population relies on imported food.
In his Commons speech, Mr Eustice – who is from a family of farmers – told MPs: “We did not actually need to give Australia nor New Zealand full liberalisation of beef and sheep. It was not in our economic interests to do so. And neither Australia nor New Zealand had anything to offer in return for such a grand concession.”
So, as far as Eustice is concerned, for the UK to gain greater and easier access for exporting machinery, vehicles, electrical machinery, pharmaceutical products, optical equipment, and plastics is worth nothing – in comparison to conceding advantages in importing beef and lamb?
It is also important to point out the UK did not fully liberalise beef and sheep trade in either the Australian or the New Zealand trade agreements and UK imports of both of these commodities will retain high tariffs and tight quotas for up to 16 years. I am surprised that Eustice doesn’t know this.
But Eustice should also understand the real benefits of trade come from:
- importing goods that your country cannot produce at all;
- importing goods that your country can’t produce in enough quantity to meet local demand; and,
- importing goods that other countries can produce more efficiently than your country
When it comes to beef – the UK falls into the second group. We cannot produce enough beef to meet local demand. We do export some beef products, but this is often the cuts of meat that the UK population doesn’t eat or doesn’t value.
Eustice’s former department, DEFRA, publishes very extensive records of UK agricultural production and trade. According to DEFRA’s Agriculture in the UK 2021, table 8.2c, the UK produced 891,000 tonnes (dressed carcase weight equivalent) of beef in 2021, of which 132,000 tonnes was exported and 321,000 tonnes was imported. So, total beef consumed in the UK in 2021 was 1,080,000 tonnes – but UK farmers supplied only 70 per cent of this.
As for lamb and mutton, from DEFRA Agriculture in the UK 2021, Table 8.4c, the UK produced 277,000 tonnes (dressed carcase weight equivalent), exported 81,000 tonnes and imported 59,000 tonnes. So, of the 255,000 tonnes of lamb and mutton the UK population consumed, UK farmers supplied 77 per cent of it. Lamb is seasonal so the UK imports lamb from New Zealand when UK lamb is out of season. Eustice should be aware the UK has been importing Lamb from New Zealand for 140 years and New Zealand lamb already has a very generous quota of over 120,000 tonnes that is rarely filled, and has nothing to do with the new trade agreement.
The reality is that if any farmers should be worried about competition, then UK beef producers should worry about Irish beef producers who provide 75 per cent of UK beef imports, UK lamb producers should worry about UK chicken producers as chicken has far surpassed lamb as the UK’s main meat source, while New Zealand lamb farmers should fear Australian lamb farmers who may try to get a small piece of New Zealand’s captive market for out of season lamb in the UK.
Crucially, all of this competition will benefit UK consumers who will get to choose whose beef, lamb or mutton they want to buy. A competitive market will give them far better choices and prices.
George Eustice should note that U-turning seems to be the death knell of UK politicians. He should have stuck to his original position – trade with Australia will benefit UK whisky and gin producers and UK biscuit manufacturers, our two main agricultural exports – as well as a whole lot of other non-food industries.
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Catherine McBride is an economist who writes about trade and agriculture. She is on the Government’s Trade and Agriculture Commission and is a fellow of the Centre for Brexit Policy.
Photo of antipodean Jersey Cow from Adobe Stock