Ellie Newis reviews two of the flagship free trade agreements that were supposed to reignite the UK economy

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‘Project fear’ was the pejorative directed by Brexiters at those warning about the diminished trade that would inevitably accompany our departure from the EU. With the UK economy sliding into recession and a new era of austerity set to be imposed on the country, attention is rightly turning to Brexit – and the warnings that have been proven correct.

The Economic & Social Research Institute (ESRI), for example, has recently calculated that UK exports to the EU have fallen by 16% relative to if we had remained in the bloc, while imports to the UK from the EU have fallen by 20%.

This was supposed to be counteracted by a rise in trade generated by the supposedly far-reaching deals that could be signed with countries outside the EU.

Two of the largest have been with Japan and Australia – two newly-negotiated deals that should have showed off the possibilities of a post-Brexit world.

However, when the Government’s own data is analysed on the performance of the deals, their failures become patently clear. As the Government’s former Environment Secretary has now admitted, the Australia deal in particular is “not actually very good”.

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Japan

Britain’s free trade agreement (FTA) with Japan came into effect in January 2021, representing the first new trade agreement signed following our exit from the EU. 

Labour’s Emily Thornberry, in a speech to the House of Commons in 2020, said: “Trade with Japan represented 2.21% of our global total last year and, under the best case scenario put forward by the Government, today’s agreement will see that total increase by just 0.07 percentage points each year, simply maintaining the levels of growth seen since 2015, and preserving the forecast benefits of the current EU-Japan agreement. That all compares to the 47% of our global trade that we currently have with the EU.”

And, matching Thornberry’s predictions, the new FTA hasn’t done much to balance out the fall in UK-EU trade.

Indeed, the UK-Japan agreement is underperforming compared to the EU’s own agreement with Japan. The Department for International Trade (DIT) estimated in 2018 that the EU-Japan trade deal would have added between £2.1 billion and £3 billion per annum to UK GDP after 15 years in 2017 prices, if we had remained in the EU. This sum is £1.1 billion less than the DIT’s estimate for the benefits of the UK-Japan deal.

The DIT projected that the UK-Japan deal would increase UK exports to the country by 17.2% and increase imports from Japan by almost 80%. Yet, an analysis by the UK Trade Policy Observatory (UKTPO) – a joint project of Sussex University and Chatham House – found that UK services exports to Japan decreased by 9% in 2021 compared to 2020. The figures for UK services imports from Japan show an even starker fall, of 22% from 2020 to 2021. 

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This drop has continued into 2022, with a year-on-year fall in total UK exports to Japan of 3.5% and an increase in imports from Japan of only 4.7%. These figures don’t reflect the optimism of the DIT’s initial estimates for this deal and, given that these trade terms have been in effect since the start of 2021, it has left the UK with little measurable improvement after nearly two years.

In a telling contrast, an assessment by the EU of its equivalent agreement after the first year of implementation showed that, in the first 10 months, EU exports to Japan went up 6.6%, outperforming the bilateral trade growth of previous three years (4.7%). In the same timeframe, Japan’s exports to the EU increased by 6.3%.

A report by the EU-Japan Centre for Industrial Cooperation states that EU exports to Japan actually increased 22% between 2020 and 2021, indicating that not only has the EU’s trade partnership been more successful that the UK’s FTA, but that the EU’s post-pandemic trade across the globe is recovering faster than Britain’s.


Australia

Signed in December 2021, there were concerns about the UK-Australia deal even before pen had been put to paper.

Indeed, the UK has accepted less regulation in areas such as food safety and animal welfare, in order to allow imports from Australian producers who don’t adhere to stricter domestic rules. British agriculture producers still have to operate within UK rules, however, meaning many could be undercut by cheap, less-regulated goods from Australia. 

The Environment, Food and Rural Affairs Committee estimated a £278 million loss in UK agriculture, food and drink exports from the UK-Australia FTA due to cheaper, less-regulated produce undercutting UK producers. This concern was also raised by the Department for Environment, Food and Rural Affairs (DEFRA), stating that a total tariff liberalisation with Australia would reduce the UK’s total agricultural output by 0.5%.

“This deal is clearly an asymmetrical agreement as it is more advantageous to the Australian farmers than our own,” says Conservative peer Lady McIntosh of Pickering, who formerly chaired the committee.

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The Australia trade deal has still not been formally enacted – awaiting approval from both parliaments. Environmental groups are reportedly engaging in a last-ditch attempt to block the deal, with seven such organisations filing a formal complaint alleging that the UK Government breached international law in signing the agreement. They say that the Government has breached the Aarhus convention, an international agreement, which requires public consultation on decisions by the Government or public sector that have an impact on the environment.

The Government has also faced criticism for its failure to allow proper parliamentary scrutiny of the deal, and for neglecting the concerns of devolved nations. The Welsh Government has for example pointed out that neither the deal signed with Australia nor its sister agreement with New Zealand “provides any significant opportunities for Welsh agricultural producers and that the increased market access for Australian and New Zealand producers presents a number of concerns”.

This is even a view shared by the Government’s former Environment Secretary George Eustice. “I no longer have to put such a positive gloss on what was agreed,” Eustice has told the House of Commons. “The Australia deal is not actually a very good trade deal for the UK. Overall the truth of the matter is that the UK gave away far too much for far too little in return. We did not actually need to give Australia nor New Zealand full liberalisation of beef and sheep. It was not in our economic interests to do so. And neither Australia nor New Zealand had anything to offer in return for such a grand concession.”

Regardless, for all the hype surrounding post-Brexit trade opportunities, this flagship agreement has yet to come into force – all while UK-EU trade continues to diminish.

The UKTPO has argued that the UK’s shift from EU to Asia-Pacific trade is largely political, rather than economic. Given that the Office for Budget Responsibility has estimated that Brexit will end up costing the economy twice as much as COVID, it seems difficult to draw a more optimistic conclusion.

This article was produced by the Byline Intelligence Team – a collaborative investigative project formed by Byline Times with The Citizens. If you would like to find out more about the Intelligence Team and how to fund its work, click on the button below.

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