Global Food Forum: High hopes for UK free trade agreement

Australian Trade Minister Dan Tehan is keen to liberalise agriculture. Picture: Gary Ramage

Australia has two very important trade imperatives: to bring China to heel over the punitive action it has taken across Australian agriculture and to secure a free-trade agreement with the UK that will be Britain’s first FTA since Brexit. Both countries are in a sprint for the upcoming G7 talks in Cornwall, England where Prime Ministers Boris Johnson and Scott Morrison expect to sign an agreement in principle.

The outcome of both the Chinese and British imperatives will be felt by farmers and agribusinesses right across Australia, be it upside or downside.

The government is taking China to the World Trade Organisation for its 80.5 per cent tariffs on Australian barley and is working hard to shore up international support.

In an interview for the Australian’s Global Food Forum on Tuesday, Trade and Investment Minister Dan Tehan says the support of New Zealand for Australia, given just ahead of Scott Morrison’s visit, is building momentum.

“The New Zealand Trade Minister wants to back the World Trade Organisation and the rules-based system and that is incredibly important for a nation like Australia. If the rules are governed by economic heavyweights we get in the way and we suffer damage. The WTO has suffered a bit recently and we need all countries coming together to make sure it has that paramount role when it comes to setting the world trade rules.”

Relations with our largest trading partner are precarious, with China smashing Australia’s soft commodity exports. Tehan says the government is actively considering a second WTO case over Australian wine exports, which he believes to be robust.

“We think it is a strong case but we want to make sure that we have dotted every ‘i’ and crossed every ‘t’ before we make a final decision. That decision will come in the coming weeks,” he says.

A report published last month by the South China Morning Post, backed by recent trade data, raised eyebrows. It alleged that the US, our most important security partner, was opportunistically backfilling Australia’s lost exports of wine cotton, log timber and wood. An example used was that in February, the US exported over 466,000 litres worth of wine in containers of two litres or less to China, worth about $US2.3m ($3m), compared to about $US740,000 a year ­earlier.

Asked if he has been in touch with his opposite number in the US, Dan Tehan replied that he had spoken with US Trade Representative Katherine Tai a couple of times and that this was simply a case of supply meeting demand. “What you need to understand is where they are meeting demand for China, that gives us opportunities elsewhere for our commodities and that is what is happening.”

Tehan says Australian coal exports are now going to India and Indonesia and agriculture has managed to shift in the same way.

“You look at the success of barley in being able to find new markets. We will continue to help our agriculture exports to find new markets, at the same time obviously taking that very principled position, where we think harm has been done for the wrong reasons, taking China to the WTO.”

Tehan is man with dirt on his boots, having grown up on family farm in Victoria, which he believes stands him in good stead for the trade role.

“My father put us to work very early. I remember driving a Land Rover as a four-year-old while he was on the back feeding out the sheep and cattle, and if you went over too many bumps you had a bang on the roof and he’d say ‘drive straight unless you are avoiding the bumps’.”

“Later when I became a diplomat, they were doing team exercises and took all the young graduates to a farm. They asked us to bring a mob of sheep in and all the rest of the young graduates ran all over the paddock and tried to bring them in one at a time. I was able to say, no let’s form a line. Bring them up a fence line, and put them in the gate very quickly. The team-building exercise took place in about 10 minutes when it was meant to take about an hour.”

Speed and good outcomes are now needed in Australia’s negotiations with Britain over the FTA. Agriculture is usually the last agenda item settled in trade agreements and British farmers and unions have been protesting loudly over the prospect of beef and lamb flooding in from Down Under.

Australian beef and lamb producers are keen to learn whether tariffs will be dropped in full or whether the deal will be more like that with South Korea where caps and tariffs kick in once a set export level is reached.

“We are working through that at the moment and I’m in detailed discussions with Liz Truss almost nightly,” Tehan says. “I’m very keen to make sure that ends up with full liberalisation for agricultural products for Australia. She obviously has to deal with sensitivities of her own agriculture sector, but my aim is to get an outcome which ultimately will take us back to where we were 50 years ago, when the UK turned to the European Union.”

Tehan also stressed the opportunity that an Australian FTA brings for Britain to join the CPTPP with huge potential for trade in Asia. “If they can strike a very good deal with Australia and that means that they can seek to pursue new markets, make sure that they are competitive, so I see this as a real win-win,” he says.

The googly pitched at Australia by Britain is carbon emissions, certainly high on Boris Johnson’s agenda at the G7. There is speculation Britain is pushing for lower emissions to be linked to Aussie meat imports, but details are unclear.

Tehan says he wants to work co-operatively to address emissions. “Our farmers are doing an extraordinary job when it comes to emissions reduction here in Australia and I think similarly there in the UK, so if we can find ways that we can co-operate in that areas, that would be terrific.”

Trade agreement or no, the elephant in the room is when and how Australia opens its international borders and Tehan has little to add here. He admits workforce shortages, especially in agriculture, are a real issue and increasing mobility is a goal of the FTA.

The government’s position seems to be that the trade agreement will last decades. If anything, argues Dan Tehan, Australia’s management of the pandemic is a great story to pitch to the world.