Unnecessary business comments from a politician who should know better
ALTHOUGH I don’t want to give more publicity to George Eustice’s comments on the Australian trade deal, he seems to be looking at the deal from a very narrow perspective – his own perhaps? On whether Eustice was lying in the House yesterday – or last year when he praised Australia’s trade deal – I will leave that up to others. Instead, I would like to dispel some misconceptions that a number of blindly patriotic farmers and some blatant EU collaborators seemed to believe.
- The UK is not a big exporter of agricultural products, but we do export other goods. The UK’s top ten exports are (in order of value): Tariff code 84. Machinery; 71. Precious and semi-precious stones and metals; 87. Vehicles; 27. Mineral fuels and oils; 85. Electrical machinery; 30. Pharmaceuticals; 90. Optical equipment; 88. Aircraft and spacecraft; 39. Plastics; and 29. Organic chemicals.
- No agricultural product is among the UK’s top ten exports. Tariff Code 22: Beverages, Spirits and Vinegar(i.e. whiskey 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; pastry products (i.e. cookies) down the list in 29th place.
- Australia on the other hand, its 10 biggest imports are almost exactly the same as the largest in the UK 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 agreement, Australia granted the UK full and immediate access to its markets for all UK products except certain steel springs and certain cheeses. This means that all UK companies that manufacture the products listed in point 1. will be able to sell them to Australia, duty-free and quota-free as soon as the trade agreement is finalized.
So why is Eustice now claiming the UK-Australia deal is a failure? Especially since it hasn’t even started yet? He appears to be concerned about potential UK food imports from Australia – even if the British population depends on imported food.
In his speech to the Commons, Mr Eustice – who comes from a farming family – told MPs: “We actually didn’t need to give Australia or New Zealand the liberalization full of beef and sheep meat. It was not in our economic interest to do so. And neither Australia nor New Zealand had anything to offer in return for such a large concession.
So when it comes to Eustice, for the UK getting wider and easier access for the export of machinery, vehicles, electrical machinery, pharmaceuticals, optical equipment and plastics is worth nothing – in relation to granting advantages to the import of beef and lamb?
It is also important to point out that the UK has not fully liberalized trade in beef and mutton under the Australian or New Zealand trade agreements and that UK imports of both of these products will face high tariffs and tight quotas for up to 16 years. I’m surprised Eustice doesn’t know.
But Eustice must also understand that the real benefits of trade come from:
- import goods that your country cannot produce at all;
- import goods that your country cannot produce in sufficient quantity to meet local demand; and,
- import goods that other countries can produce more efficiently than your country
When it comes to beef, the UK is in the second group. We cannot produce enough beef to meet local demand. We do export some beef products, but it’s often cuts of meat that people in the UK don’t eat or like.
Eustice’s former department, DEFRA, publishes 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 carcass weight equivalent) of beef in 2021, of which 132,000 tonnes were exported and 321,000 tonnes were imported. So the total beef consumed in the UK in 2021 was 1,080,000 tonnes – but UK farmers only supplied 70% of that.
As for lamb and mutton, from DEFRA Agriculture in the UK 2021, Table 8.4c, the United Kingdom produced 277,000 tonnes (dressed carcass weight equivalent), exported 81,000 tonnes and imported 59,000 tonnes. Thus, of the 255,000 tonnes of lamb and mutton consumed by the British population, British farmers supplied 77%. Lamb is seasonal, so the UK imports lamb from New Zealand when UK lamb is not in season. Eustice must know that 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 which is rarely filled and has not nothing to do with the new trade agreement.
The reality is that if farmers were to worry about competition, then UK beef producers would have to worry about Irish beef producers who supply 75% of UK beef imports, UK lamb farmers should be concerned about UK chicken farmers, as chicken has largely overtaken lamb as the UK’s main source of meat, 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.
Basically, all this competition will benefit UK consumers who will be able to choose which beef, lamb or mutton they want to buy. A competitive market will give them much better choices and better prices.
George Eustice should note that the U-turn seems to be the death knell for British politicians. He should have stuck to his original position – trade with Australia will benefit UK whiskey and gin producers and UK biscuit makers, our two main agricultural exports – as well as many other non-food industries .