By Jeph Ajobaju, Chief Copy Editor
Boris Johnson achieved his lifelong ambition when he fully got the United Kingdom out of the European Union (EU) six months ago, now Brexit is struggling to deliver his vision of economic boom with its back turned against its biggest export market.
He announced on June 15 a bilateral trade deal with Australia. It is the first of its kind since the UK left the EU on January 31 after a transition period that lasted a year.
There is little in the agreement for the UK, however, which has prompted its farmers to kick against the deal in fear of being priced out by cheap agricultural imports.
And the United States and India, allies with which Johnson had hoped to sign quick trade agreements, are occupied by domestic priorities likely to linger for months.
British business moaned in April that Brexit had depressed exports to the EU to 41 per cent, falling further from 40.7 per cent in January when imports from the UK’s biggest trading partner tumbled 28.8 per cent.
When Johnson announced his Brexit trade deal on December 24, 2020, he said it would enable UK companies “to do even more business” with the EU.
Britain would be “prosperous and dynamic and contented” after completing its exit from the EU, Johnson declared, free to strike trade deals around the world while continuing to export seamlessly to the EU market of 450 million consumers.
That has not happened.
Mammoth task
CNN reports that the UK’s first new trade deal since Brexit is a sobering reminder of the mammoth task it faces as it seeks to compensate for losing the economic benefits of EU membership.
The deal announced on June 15 with Australia is the first bilateral trade agreement the UK has negotiated from scratch since it left the EU.
Britain has also struck deals with Japan and Norway, but they were based on existing agreements negotiated by the European Union.
The ability of the UK to set its own trade policy has been billed by the government as a major benefit of Brexit.
But the Australia deal is only expected to boost the size of the UK economy by 0.02 per cent over 15 years, increasing GDP by £500 million ($704 million) compared to its 2018 level, according to the Department for International Trade.
By comparison, Britain’s new trading relationship with the EU is expected to lead to a long-run loss of output of around 4 per cent compared to remaining in the bloc, according to a previous forecast by the UK Office for Budget Responsibility, which produces economic projections for the government.
The deal with Australia comes as the UK government struggles to get along with the EU, its most important trading partner.
Ongoing tensions between the two sides concerning trade with Northern Ireland escalated at the G7 meeting last week, increasing the risk of a trade spat just six months after Brexit was finalized.
The UK has unilaterally extended grace periods on some checks on goods crossing into Northern Ireland, which the EU argues contravenes the Brexit deal that came into force this year.
Experts say that if Johnson wants to deliver real trade benefits, he should focus on reducing tensions with Brussels.
“You can’t be ‘global Britain’ if you’re not managing your most important international relationship,” Simon Usherwood, a professor of politics and international studies at The Open University in England, told CNN Business.
“Other countries looking in will ask themselves, ‘Why would we want to make deals with a country that doesn’t appear to stick to the terms of deals it’s already made? Not just any deals but ones with it’s closest and biggest trading partner?’,” he added.
UK hopes for much bigger deals with countries such as the US and India have also taken a knock given the desire of US President Joe Biden to focus on domestic issues and a devastating coronavirus wave in India.
UK farmers fear cheap imports
Details of the Australia deal have yet to be announced and implementation is not expected to begin before next year, but some British businesses and trade experts are already pouring cold water on the assertion by UK trade secretary Liz Truss that the deal “delivers for Britain.”
UK farmers and other food and drink producers are anxious that the deal could allow cheap agricultural imports, including meat, and set a dangerous precedent for negotiations with other major agricultural exporters, including the US, New Zealand, Canada and Mexico.
They also say negotiations were rushed.
“The risks here are enormous for the whole food and drink supply chain and, in the absence of any formal impact assessment to suggest the contrary, we remain hugely concerned at the impact on sensitive sectors of our industry,” representatives from Scotland’s farming, supply chain and food industries said in an open letter to Truss.
The UK government said in a statement that British farmers will be “protected” because tariff-free imports will be capped for 15 years.
Yet the government has previously acknowledged that “Australia has a strong comparative advantage in its exports of livestock meat” and may be able to supply UK retailers “at lower cost than domestic producers.”
Even if imports are phased in over a longer period they could still cause the demise of “many, many beef and sheep farms throughout the UK,” according to Minette Batters, President of the National Farmers’ Union (NFU) of England and Wales.
The union is concerned that UK farmers will struggle to compete with countries that have considerably larger, more productive agricultural sectors and, in some cases, lower environmental and animal welfare standards.
“The bigger risk is the cumulative effect of all these trade deals … that is really at the heart of our concerns,” said Nick von Westenholz, NFU director of trade and business strategy.
A trade deal that puts farmers out of business would also undermine the UK government’s “leveling up” agenda to boost investment into areas outside major cities, Von Westenholz added.
Can’t replace EU trade
According to the UK government, the deal with Australia will cut tariffs on products such as cars, Scotch whisky, biscuits and ceramics, boosting a trading relationship that was worth £13.9 billion ($19.5 billion) last year.
It will also make it easier for Brits under the age of 35 to travel and work in Australia and lower the price consumers pay for goods such as Jacob’s Creek wines.
“This is global Britain at its best – looking outwards and striking deals that deepen our alliances and help ensure every part of the country builds back better from the pandemic,” Johnson said on June 15.
But British businesses were quick to point out that the deal is not nearly enough to counteract what the UK gave up when it chose to exit the EU, which accounts for 47 per cent of UK trade worth over £660 billion ($927 billion) a year.
“Trade with Australia represents only around 1.2 per cent of the UK’s total, so whilst a deal will have welcome benefits it will not offset the ongoing issues with trade to the European Union,” William Bain, head of trade policy at the British Chambers of Commerce said in a statement.
“We welcome an ambitious trade policy if it will open new opportunities for our producers,” added the representatives from Scotland’s trade bodies.
“That said, we should be under no illusion that the EU market remains the most important export market, with it being the destination of two-thirds of all food exports.
“The new trading arrangements post-Brexit with our biggest export market, on our doorstep, have made this market more costly, complex and high risk to supply to.”
Into the unknown
The UK government said the deal with Australia takes it a step closer to joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), an 11-country trade pact that includes New Zealand, Mexico, Canada and Singapore.
“Membership will create unheralded opportunities for our farmers, makers, innovators and investors to do business in the future engine room of the global economy,” Truss said.
But several trade experts have pointed out that even membership of the CPTPP won’t balance out the negative impact of leaving the EU.
The CPTPP is “nothing like the European Union, because [the EU] is an open market,” said David Henig, UK director at the European Centre for International Political Economy.
In other words, joining the pact may lead to reduced tariffs on some goods but it is not as beneficial as membership of the EU single market, which also removes other barriers to trade.
The risk is that, in its eagerness to strike new trade deals and prove that leaving the EU was worthwhile, Britain gives too much away. That already appears to be the case when it comes to the deal with Australia.
“We don’t have all the details so far but judged in terms of exports it looks to be a fantastic deal for Australia,” said Dmitry Grozoubinski, a former trade negotiator for the Australian government and director of Geneva-based trade consultancy ExplainTrade.
“The deal immediately provides significantly better access to the UK market than Australian producers of beef, lamb and dairy enjoyed in the past, and only ramps up from there,” he told CNN Business.
“We have far fewer details on what the UK managed to extract by way of concessions in exchange, however.”
