Home and Away
Australia’s main export to the United Kingdom used to be melodramatic soap operas like “Neighbours”. That could be about to change. Britain’s trade deal with its fellow Commonwealth member, announced in outline on Tuesday, is its first new accord since leaving the European Union. The terms give a sense of Prime Minister Boris Johnson’s priorities, and his weak negotiating position.
For Australian Prime Minister Scott Morrison, the best trade deals are those that give the country’s agricultural producers access to major developed markets without giving up too much in return. That looks to be pretty much what he’s got. After a 15-year transition the United Kingdom will no longer apply tariffs or quotas to a whole host of Australian agricultural products like beef. According to one trade expert, it’s the first time a European state has granted such terms.
Johnson can point to the deal lowering prices for British consumers while making it easier for young Britons to work Down Under. But given that the government estimates it will add just 0.02% to the country’s GDP, the main appeal is symbolic. The UK’s 12 billion pounds of exports to Australia accounted for only 1.7% of the total in 2019, while the 6 billion pounds of goods and services shipped from Down Under were less than 1% of total imports, according to Office for National Statistics data. As Australian beef prices are roughly the same as the British variety, removing tariffs is unlikely to lead to an explosion of imports.
Nevertheless, the deal frames Johnson’s negotiating position. Any future trade discussions with members of the nascent Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the United States, or with Latin American states, will start with a similar demand for zero-tariff and zero-quota access. That could be tricky: Brazilian and Argentine beef is a lot cheaper. Johnson will then have to decide whether to let British livestock farms shrink.
It might make sense to reallocate resources from farming to sectors where Britain has a greater comparative advantage. But even though Britain’s GDP is double Australia’s $1.4 trillion, Johnson looks to have made concessions without getting much in return. For example, he does not appear to have pressed his new trade partner, a climate change laggard, to cut carbon emissions. That reflects the fact that Johnson’s “Global Britain” needed a deal more than its counterpart.