Australia FTA impact report reveals financial blow for UK agriculture

Australia FTA impact report reveals financial blow for UK agriculture

An impact report produced by the Department for International Trade (DIT) on the UK-Australia Free Trade Agreement predicts that the British agriculture and semi-processed foods sectors will take a financial hit worth hundreds of millions of pounds.

Handshake in front of Australian flag

The DIT assessment on the FTA, which was signed last week, stated that overall output in the UK is estimated to increase, with services industries – particularly wholesale and retail, public services and business services – expected to make the largest contributions, along with the manufacture of machinery and motor vehicles.

However, the report also stated that agriculture, forestry and fishing will see a reduction in gross added value (GVA) of 0.7% (£94 million) while semi-processed foods will take a 2.65% hit worth £225 million. Other processed foods are expected to see growth of 0.14% (£12 million).

‘Reallocation of resources’

According to the DIT, the FTA will generate an estimated increase in GDP of £2.3 billion.

The report claimed: ‘It is normal for trade agreements to lead to some degree of reallocation of resources across sectors. Some sectors expand to take advantage of new opportunities for higher returns resulting from lower barriers to trade and draw in resources from other sectors in the process.’

The document continued: ‘The scale of estimated changes in the modelling leaves the sectoral composition of the economy relatively unaffected, albeit with a marginal (0.01ppt) percentage point reduction in the share of output accounted for by the agriculture and semi-processed foods sectors. This reflects an increase in imports, raising competition in these sectors; and resources moving over time to sectors in which returns are likely to be higher.’

Referring to the reduction in GVA relative to the baseline and the decrease in these sectors’ share of the UK GVA over the long run as a result of the FTA, the report stated: ‘These results are driven by increased import competition in the beef and sheepmeat sub-sectors.’

It went on to say that the modelling did not take into account factors such as future growth in other markets that could be attractive to Australian exporters, the impact of safeguards in the FTA such as the staging of tariff reductions over several years, and the appeal of ‘Buy British’ campaigns in the UK.

“Sold farmers down the river”

The government has faced criticism over the FTA from meat industry bodies such as the National Farmers’ Union and the National Sheep Association, who have accused ministers of failing to protect British farmers’ interests.

Lib Dem environment spokesperson Tim Farron said in response to the report: “This impact assessment proves what so many feared – buried in the small print is a £100 million hit to our farming and fishing sectors that will hit rural communities hardest.” He added: “Boris Johnson has sold farmers down the river to make a quick buck in a misguided trade deal with Australia. Now the reality of what’s on the table is clear, it’s vital that parliament is given a vote on the deal.”

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