The Department for International Trade’s (DIT) impact assessment on the UK’s recently signed Free Trade Agreement (FTA) with Australia estimates financial blows for the agriculture, fishery and semi-processed food sectors.
The DIT report on the FTA, which was signed last week, stated that overall output in the UK is estimated to increase, with a predicted boost to GDP of £2.3 billion.
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).
Increase in imports
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.
“Misguided trade deal”
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.”
Following the signing last week, the FTA – which has received a mixed response from the UK food industry – has been laid in UK Parliament for a period of scrutiny.