UK/Australia Free Trade Agreement is signed

Thursday, 16 December 2021

Earlier this evening (Thursday, 16 December) the Free Trade Agreement (FTA) between the UK and Australia was formally signed. It is important that our levy payers are fully informed regarding the detail and the potential impacts of this deal, so we have previously produced a full report which can be found here.

The full text regarding the deal is now available for the first time. The key points for levy payers are as follows.

There will be Tariff Rate Quotas (TRQ’s) on beef and sheep-meat imports. These tariffs are set at 35,000t for beef and 25,000t for sheep-meat, increasing at regular annual increments over 10 years to reach 110,000t for beef and 75,000t for sheep-meat by year 10. Any product exceeding this quantity will be subject to the UK Most Favoured Nation (MFN) tariffs.

Surprisingly, pork – along with poultry and eggs – is not included in the FTA and therefore Australian pork exports will attract UK MFN tariffs. Australia is a net importer of pork and the UK can still export to Australia tariff free, as it does currently.

From years 10 to 15 there will be product-specific safeguards, which in effect increase the tariff-free beef imports incrementally to 170,000t and sheep-meat to 125,000t by Year 15, with a 20 per cent tariff on any imports that exceed this quantity.

Running in parallel to the TRQ’s will be a general bilateral safeguard. This stipulates that if a domestic industry suffers injury due to the FTA, trade can be suspended immediately for an initial period of 200 days, while the extent of injury is investigated. Agreement needs to be reached between the parties regarding the extent of injury before trade is resumed. This applies to all products covered in the FTA and remains in force for 15 years.

With regard to animal welfare, a non-regression clause has been included for the first time in a UK FTA that ensures that neither party can regress on current animal welfare standards in order to undercut the other party on price.

Rules of origin (RoO) are more flexible than in previous FTAs. This means that UK exporters will have more headroom regarding the percentage of ingredients in processed food that must be of UK origin. For instance, biscuits made from imported flour and sugar will qualify for tariff-free access under the FTA. The RoO will be more dependent on the production process – as opposed to the list of ingredients – than has previously been the case.

In addition, there is a simplified and accelerated customs process for perishable goods, ensuring they clear customs within a much shorter timeframe in order to avoid loss of value.

There is also a clear commitment to climate change within the agreement, another first for a UK FTA. Both parties are committed to climate change targets outlined in the Paris agreement and will work towards achieving these targets over the lifetime of the agreement.

The agreement creates a gateway to acceding to the Comprehensive and Progressive Trans-Pacific Partnership, (CPTPP), which would gain the UK access to a rapidly expanding middle class of consumer. By 2030, two-thirds of the middle classes will be in Asia, driving demand for high-quality products including meat and dairy in the region. This rapidly-expanding demand will dominate trade patterns and access to these markets will be crucial for the UK as it pursues its stated goal to become a great trading nation.

The agreement will not take effect overnight. The complex process that needs to take place, which will include a three-month period of public scrutiny, Trade and Agricultural Commission (TAC) scrutiny and then government and parliamentary process, means that it is unlikely to be in force before the second half of 2023.

AHDB will be following its path closely over the coming months and keeping our levy payers informed regarding its progress, and the issues that are picked up by stakeholders along the way.

In order to support our levy payers as we navigate this period of rapid change, AHDB is offering a free half-day business resilience check, funded by Defra.

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