On 11 July 2022, the House of Lords is due to consider the following motion:
Baroness Hayter of Kentish Town (Labour) to move that this House takes note of the Free Trade Agreement between the United Kingdom of Great Britain and Northern Ireland and Australia, laid before the House on 15 June.
The free trade agreement (FTA) with Australia was signed on 16 December 2021. It is the first free trade agreement that the UK has negotiated ‘from scratch’ since leaving the EU.
The House of Lords International Agreements Committee published its report on the agreement on 23 June 2022: ‘Scrutiny of international agreements: UK-Australia free trade agreement’. The committee welcomed the agreement. However, it noted that whilst both the UK and Australia had hailed the agreement, it said “it remains to be seen how exactly the agreement will affect trade flows, possibly not visible until implementation”. In this regard, the committee particularly highlighted “how the agreement will affect UK agriculture; how many businesses will make use of the trade preferences and other facilitations; and whether consumers will benefit from cheaper goods”.
The committee said it was important for the House of Lords to debate the UK-Australia free trade agreement “partly because of its own importance” but also because it was “a forerunner of future trade agreements, and to ensure that the government hears and responds to the issues raised”.
1. UK-Australia free trade agreement
The UK-Australia free trade agreement has been published by the government in six volumes. The agreement has also been published in individual chapters.
The Secretary of State for International Trade Anne-Marie Trevelyan has described the agreement as “historic”, saying it sets “new global standards in digital and services and creating new work and travel opportunities for Brits and Aussies”. A press release issued at the time the agreement was signed stated it would help create new opportunities for businesses in the UK and in Australia:
- It gives UK firms guaranteed access to bid for an additional £10bn worth of Australian public sector contracts per year.
- It will allow young people to work and travel in Australia for up to three years at a time, removing previous visa conditions.
- For the first time UK service suppliers, including architects, scientists, researchers, lawyers and accountants, will have access to visas to work in Australia without being subject to Australia’s changing skilled occupation list. This is more than Australia has ever offered any other country in a free trade agreement.
- The deal removes tariffs on all UK exports, making it cheaper to sell iconic products like cars, Scotch whisky and UK fashion to Australia, while making Australian favourites like Jacob’s Creek and Hardys wines, Tim Tams and surfboards more accessible for British consumers.
Anne-Marie Trevelyan made an oral statement on the agreement in the Commons on 5 January 2022. She described the agreement as “comprehensive” and said that it “deepens [the UK and Australia’s] bond of common values and a shared belief in the combined power of democracy, free trade and high standards”.
The UK-Australia free trade agreement includes 32 chapters covering areas such as trade in goods; trade remedies; rules of origin; customs procedures and trade facilitation; sanitary and phytosanitary measures; financial services; investment; environment; trade and gender equality; and dispute settlement. It also includes what the government’s impact assessment says is the first ever dedicated innovation chapter in any free trade agreement in the world, “this ensures that the agreement will continue to support emerging trade opportunities and innovative technologies throughout its lifetime”.
The government’s impact assessment estimates that it could increase trade between the UK and Australia by 53%:
Our analysis shows that bilateral trade between the UK and Australia could increase by the equivalent of around £10.4bn in the long run. This increase is compared to projected levels of trade in 2035 (in today’s prices) without the agreement. This is based on a central estimate of a 53% increase in trade resulting from the FTA. The increase is driven by reductions in regulatory restrictions to goods and services trade, tariff reductions, income and supply chain effects as the UK economy grows.
However, the impact on the UK’s gross domestic product (GDP) would be relatively modest, at an estimated increase of 0.08% by 2035:
This assessment […] shows that UK GDP could increase by around £2.3bn in the long run. This is when compared to projected levels of GDP in 2035 (in today’s prices) without the agreement. The estimate indicates the value of a 0.08% increase in GDP (as a central estimate) as a result of the FTA in 2035. The estimate is subject to a high degree of uncertainty.
The impact assessment notes that “these estimates are based on a set of important assumptions about the global economy and the UK-Australia relationship, and are subject to various forms of uncertainty”.
The agreement’s provisions on agriculture have attracted particular comment. The explanatory memorandum says that the treaty “features mechanisms to protect the UK’s farming industry—including through quotas, product specific safeguards and gradual tariff reductions over time for a range of goods imported from Australia”. The restrictions on imports from Australia of beef and sheepmeat would last 15 years:
[T]he treaty provides for 15 years of capped tariff free imports of beef and sheepmeat from Australia. In further detail, this includes: Quotas on duty-free imports of beef and sheepmeat from Australia for 10 years after entry into force. Tariffs outside of the quota will remain at most favoured nation rates. Product-specific safeguards for beef and sheepmeat which will apply during years 11 to 15 after entry into force of the treaty. If imports from Australia exceed a certain volume, a tariff will apply for the rest of the calendar year. Sheepmeat quota volumes will be reduced by 25% for a year if the quota volumes are filled for two consecutive years in years 1 to 10. If the product specific safeguard volume trigger for sheepmeat is hit in any of years 11 to 15, all subsequent trigger volumes are reduced by 25%.
However, the National Farmers Union (NFU) has expressed concern about the time limits of the safeguards. In written evidence to the House of Lords International Agreements Committee, the NFU said that “this means for beef and lamb there is no safeguard against a surge of Australian imports from year 16 onwards, year 14 for sugar and year 11 for dairy”. It also argued that as the meat quotas would be calculated by shipped product-weight, “more high-value cuts can be prioritised for export by Australian producers putting further pressure on market returns for British beef and lamb producers”.
Seeking to “alleviate the concerns of some colleagues” about meat imports, in her statement to the Commons, Anne-Marie Trevelyan said that beef imports account for “only a small fraction” of the UK’s overall beef imports and 0.1% of Australian beef exports went to the UK last year. She argued that it was “relatively unlikely that large volumes of beef and sheep will be diverted to the UK from lucrative markets in Asia, which are much closer to Australia”. Further discussion of the agreement’s provisions on agriculture and food can be found on pages 13 to 20 of the House of Lords International Agreements Committee’s report: ‘Scrutiny of international agreements: UK-Australia free trade agreement’, 23 June 2022.
A joint committee would be established under the agreement which would be responsible for overseeing the implementation and operation of the treaty. The explanatory memorandum states that the joint committee would have “the power to agree modifications to selected provisions of the treaty”. Six sub-committees, four working groups and two dialogues would also be established.
The House of Commons Library have published an extensive briefing on the agreement which includes further information on the other provisions of the treaty:
- House of Commons Library, ‘UK-Australia free trade agreement’, 22 June 2022
2. Parliamentary process and scrutiny
2.1 Constitutional Reform and Governance Act 2010
The negotiation and signature of international treaties is conducted by the Government under the royal prerogative. However, Parliament has a role in the ratification of treaties under the Constitutional Reform and Governance Act 2010 (CRAG Act 2010).
The UK-Australia free trade agreement was laid before Parliament on 15 June 2022 and is subject to the provisions of the CRAG Act 2010.
The CRAG Act 2010 contains requirements about what must happen in UK law before the government can ratify an international treaty. The usual process, as set out in section 20(1), is that a treaty cannot be ratified unless:
- a minister has laid a copy before Parliament;
- the treaty has been published in a way that the minister thinks appropriate; and
- a period of 21 sitting days has elapsed since the day after the treaty was laid before Parliament (called period A under the act), without either House resolving that it should not be ratified.
Should the Commons resolve against ratification, the minister may lay a statement indicating that the minister is of the opinion that the treaty should nevertheless be ratified and explaining why. A second period of 21 sitting days is then triggered, during which the Commons may resolve again against ratification. Similarly, the minister may then lay another statement. In such a way the Commons theoretically has the power to delay ratification indefinitely.
The House of Lords does not have this power. If the Lords resolves against ratification and the Commons does not resolve against ratification, then the treaty may be ratified “if a minister of the crown has laid before Parliament a statement indicating that the minister is of the opinion that the treaty should nevertheless be ratified and explaining why”.
Under section 21, a minister may extend the period set out in section 20(1)(c). The minister would have to lay a statement before Parliament:
(a) indicating that the period is to be extended, and
(b) setting out the length of the extension.
The period may be extended by up to 21 sitting days and it may be extended more than once.
The House of Commons International Trade Committee (ITC) has asked the government to extend the 21-day period to allow more time for scrutiny (see section 4 of this briefing). The House of Commons Liaison Committee has also published a letter requesting an extension, saying it supports the ITC’s request.
2.2 Section 42 of the Agriculture Act 2020
Under section 42 of the Agriculture Act 2020 (subject to certain conditions), if a free trade agreement includes measures applicable to trade in agricultural products, the secretary of state must lay a report before Parliament explaining whether the measures are consistent with UK levels of statutory protection in relation to: human, animal or plant life or health; animal welfare; and the environment. The treaty may not be laid before Parliament under the CRAG Act 2010 until the section 42 report has been laid. The Trade Act 2021 amended section 42 of the Agriculture Act 2020 to require the secretary of state to request advice from the Trade and Agriculture Commission in relation to the above matters (except human life or health) and to lay this advice before Parliament.
The Department for International Trade published the Trade and Agricultural Commission’s advice on the Australian free trade agreement on 13 April 2022. The government published its report under section 42 of the Agriculture Act 2020 on 6 June 2022.
The government’s section 42 report’s scope extended to “all measures within the FTA that are applicable to trade in agricultural products”. It included the following chapters: sanitary and phytosanitary measures; technical barriers to trade; environment; animal welfare and antimicrobial resistance; dispute settlement; and general provisions and exceptions. The government concluded that:
The chapters above identified as within scope of section 42(1), are consistent with the maintenance of UK levels of statutory protection in relation to human, animal or plant life or health, animal welfare, and the environment; no new import conditions are required through implementation and there are no changes to statutory protections in these areas.
Further, no measures change or restrict the right to regulate of the UK government and devolved administrations. The non-derogation measures in the environment and animal welfare chapters support the maintenance of statutory levels of protection in these areas.
2.3 Requirement for implementing legislation
The UK is a dualist state. This means that international treaties do not automatically become part of domestic law. In instances where agreements need to be implemented in domestic law, Parliament will need to pass legislation. Depending upon their scope, some future free trade agreements may need implementing in domestic law.
The UK-Australia free trade agreement will need implementing in UK domestic law, specifically in relation to its provisions on procurement. The Trade (Australia and New Zealand) Bill is the legislation intended to do this. It was introduced in the House of Commons on 11 May 2022 and is awaiting a second reading date. The bill is intended to provide powers to allow ministers (UK, Scottish and Welsh) or a Northern Ireland Department to make changes to domestic legislation which are required to ensure the UK’s procurement obligations arising from the two agreements can be implemented.
In future, the government intends for a power in the Procurement Bill (which is currently going through the House of Lords) to allow for implementation of the procurement provisions in international agreements. The explanatory notes to the Trade (Australia and New Zealand) Bill state that that legislation is required because the agreements need to be implemented before the Procurement Bill is likely to enter into force:
The relevant provisions of the Procurement Bill are anticipated to enter into force after this bill [the Trade (Australia and New Zealand) Bill] and after the necessary changes to domestic law have been made for entry into force of the agreements [the free trade agreements between the UK and Australia and the UK and New Zealand]. To the extent that implementation of the agreements for their entry into force is complete, the Procurement Bill is expected to repeal the Trade (Australia and New Zealand) Bill (as enacted) and save relevant statutory instruments. Ongoing implementation of the market access aspects of the agreements would be provided for by a power in the Procurement Bill.
2.4 Government to implement IAC recommendations on trade agreement scrutiny
On 19 May 2022, the government set out its commitments to parliamentary scrutiny of trade agreements in an exchange of letters with the chair of the House of Lords International Agreements Committee, Baroness Hayter (Labour). This included scrutiny during pre-negotiations, during negotiations and post signature.
For example, in the pre-negotiation stage the government said it would facilitate a debate on its negotiation objectives for new free trade agreements, subject to parliamentary time:
For new FTA negotiations the government will undertake a public consultation or call for input. This further includes a commitment to publish its response to the consultation/call for input. Similarly, the government will publish its negotiation objectives as well as a scoping assessment before the start of negotiations.
Should the International Agreements Committee, or the Commons International Trade Committee publish a report on those objectives, the government will gladly consider that report and, should it be requested, facilitate a debate on the objectives, subject to the parliamentary time available.
3. House of Lords International Agreements Committee: Report on the agreement
The House of Lords International Agreements Committee scrutinises all treaties that are laid before Parliament under the CRAG Act 2010. It also considers ongoing negotiations. The committee published its report on the UK-Australia free trade agreement on 23 June 2022.
The committee welcomed the UK-Australia free trade agreement. It described the agreement as “politically significant” because it offered an insight into the government’s vision for trade “in the absence of a published trade policy”. The committee therefore focused both on the provisions of the agreement and on “lessons for future trade negotiations”. The committee said that whilst it identified some risks, the agreement offered benefits to both the UK and Australia and it was important for the House to debate it:
While we have identified some risks flowing from the agreement that will need to be monitored—and there has been an inevitable trade-off between the desire to achieve a rapid agreement and the scope of agreement that could be reached—the FTA clearly offers benefits to both parties. It will be important for the House to debate it, partly because of its own importance, but also as a forerunner of future trade agreements, and to ensure that the government hears and responds to the issues raised.
The committee pointed to the agreement as a step towards the government’s objective of the UK acceding to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). However, the committee said that “prioritising the speed of the negotiations may have come at the expense of using the UK’s leverage to negotiate better outcomes—for example, on geographical indications (GIs) and the environment”.
The committee cited the government’s assessment that the agreement would lead to a 0.08% increase to the UK’s GDP by 2035, describing this as “a fairly limited—though welcome—impact”. The committee said other benefits may be realised over time, “particularly in services and digital trade”.
On farming, the committee said that it would take time to know if the agreement would ensure fair competition and if its provisions would be effective in responding to a possible surge in agricultural imports from Australia:
Farming organisations were concerned by the FTA and it remains to be seen whether the safeguards in the agreement will be robust enough to ensure fair competition and effectively respond to potential surges in Australian agricultural imports. We note that import volumes may be tempered by geographical distance and geopolitical issues, and the fact that Asia is likely to remain Australia’s main export market. Nevertheless, the unconditional approach to agricultural tariff elimination could set a precedent for future negotiations and the government should take full account of the potential cumulative effects of this agreement and other FTAs on UK farmers and the agricultural sector. The devolved nations are likely to be particularly affected and, therefore, future impact assessments should provide more detail on how FTAs, individually and cumulatively, will impact them.
3.1 Conclusions: The provisions of the agreement
The committee reached a number of conclusions on the agreement across its provisions on services trade, digital trade and investment; goods trade; environment and climate; intellectual property; procurement; and other chapters in the treaty.
Amongst its conclusions, the committee called on the government to provide further information on several areas. For example, the committee welcomed the agreement’s provisions that facilitated services trade “which represent a significant benefit to the UK”. It also welcomed the guarantees that UK lawyers would be able to practice “the law of the other party, other foreign law (to the extent qualified) and international law in Australia using their home qualification”. It also highlighted the establishment of a ‘professional services working group’ to facilitate further discussions on mutual recognition of other professional qualifications as a positive step. However, it asked the government to clarify if it would need to discuss mutual recognition at the sub-federal level in Australia and, if this was the case, what it was doing to engage with individual states.
The committee also welcomed the agreement’s provisions on digital trade. However, it said that the government’s impact assessment “did not quantify the potential impacts of the digital trade provisions”. The committee called on the government to “strengthen their assessments and ensure that it is included in impact assessments in future”.
On data protection, the committee said that some questions remained “given the differences between the UK and Australia’s data protection regimes”. It asked the government to set out “how it will ensure that UK citizens’ personal data exchanged under the agreement will be protected”. The committee also asked the government to “offer commitments” that the digital trade provisions in future FTAs would “not risk losing the UK’s data adequacy decision with the EU”.
The committee noted that the agreement did not include investor-state dispute settlement (ISDS). It asked the government to clarify its position on ISDS:
We call on the government to clarify its policy towards ISDS, including its position on other mechanisms for investment protection. The absence of a clear policy begs the question whether the omission of ISDS in this agreement was sought by the government, or whether it assented to an Australian request to exclude it.
On the subject of food standards, the committee welcomed the Trade and Agriculture Commission report’s findings that the UK-Australia free trade deal was unlikely to result in a substantive increase of food in the UK that had been produced to lower standards, including on animal welfare. However, the committee expressed concern that some such goods would enter the UK market, including goods produced using pesticides that were banned in the UK:
However, the report also acknowledges that some goods produced to potentially lower standards will enter the UK, including goods produced using pesticides banned in the UK and, in particular, beef that has been raised in feedlots. It is reasonable to assume that Australian producers will enjoy a production cost advantage over UK farmers in those cases. The government should continue to monitor the levels of pesticide residue on imported goods from Australia and ensure that they remain at safe levels.
The committee argued that it was “clear that the government has prioritised tariff removal over demanding certain conditions on production methods and animal welfare to be met”. It asked the government to explain this approach:
We call on the government to set out its rationale for prioritising this approach over available alternatives and to consider further the circumstances under which it may ask for such conditionality.
The committee stated that the Trade and Agriculture Commission had concluded that the UK’s “right to regulate will be unaffected in the short term, but could be constrained through decisions taken by the joint committee”. The committee said that it welcomed confirmation by the government that any equivalence decisions “or other significant amendments” that came out of discussions in the joint committee would be subject to “formal scrutiny procedures” under the CRAG Act 2010. The committee said there could be a scrutiny gap where an amendment fell short of the requirement to lay them for scrutiny under the 2010 act. Therefore, the committee called on the government to ensure it notified the committee of any significant amendments that may not engage the act.
The committee noted advice that had been provided by the FSA and FSS (Food Standards Agency and Food Standards Scotland) on food standards but said it “regretted” that the Department for International Trade had not commissioned advice on the agreement’s impact on broader human health issues. It called on the government to explain why such advice had not been commissioned.
The committee also asked the government to set out its plans for “further reducing technical barriers to trade”, arguing that “while the agreement reduces some technical barriers to trade, more needs to be done”.
On the Ireland/Northern Ireland Protocol, the committee called “on the government to ensure that the explanatory materials on future trade agreements routinely cover how trade between Northern Ireland and the other party will be impacted by the Protocol”.
The committee said there were some areas of the environment chapter it welcomed, for example commitments on controlling ozone-depleting substances and that these provisions were subject to dispute resolution. However, the committee said the government should take “disappointment from UK stakeholders about the environment chapter” seriously. The committee said it was regrettable the government had not pressed Australia on its climate change commitments:
Considering that the UK granted Australia generous agricultural market access, it is regrettable that the government did not press Australia for more ambitious commitments on climate change and that the temperature goals which are fundamental to the Paris Agreement were not explicitly referenced in the FTA.
The committee called on the government “to establish a firm baseline for future agreements which goes beyond the Australia text”. The committee also argued that the UK government should revisit the environment chapter with Australia following the recent change in the Australian government.
The committee said that the agreement’s chapter on small and medium-sized enterprises (SMEs) was welcomed but that it “remains unclear as to whether such chapters have a positive impact on SME trade engagement”. It called on the government “to monitor the levels of preference usage and provide export (and other) support for SMEs as required”.
The committee also sought clarity from the government as to why certain chapters had been chosen to be subject to dispute resolution mechanisms but not others.
3.2 Conclusions: Scrutiny
The committee said it welcomed the “collaborative and constructive engagement” it had had with officials from the Department for International Trade and with Lord Grimstone, minister for investment, during the negotiations. It particularly welcomed the consolidation of scrutiny commitments in an exchange of letters (see section 2.4 of this briefing).
However, the committee said that, whilst it was grateful for the time to scrutinise the UK-Australia free trade agreement before it was formally laid under the CRAG Act 2010, it was not able to examine the negotiating objectives:
The government commitment to facilitate a debate on the negotiating objectives if requested by the committee was made too late for this particular agreement. We reiterate the recommendation we made in our ‘Working practices: one year on’ report that it is important that consultation and dialogue with our committee starts before a mandate is established, so the final mandate can be informed by Parliament.
The committee also welcomed a commitment to monitor and evaluate the agreement. It called on the government to keep it and the Commons International Trade Committee informed on this work, and to make any reports available in the libraries of both Houses.
However, the committee said it was “regrettable” that it was not possible to place the agreement in the context of a wider trade policy:
We ask the government to publish a comprehensive trade policy before it signs another trade agreement with a major economy. This will enable trade policy to be understood in relation to other policy priorities, to see how government assesses the impacts and trade-offs of trade liberalisation, to set the negotiating objectives in context, and to inform public consultation and Parliamentary scrutiny.
For more information on the House of Lords International Agreements Committee’s report ‘Working practices: one year on’, please see the following Lords Library briefing: ‘International Agreements Committee report on improving the framework for the parliamentary scrutiny of treaties’, 16 May 2022.
The committee also made a number of comments on the involvement of the devolved administrations. It said that the government should involve them throughout the stages of negotiating a free trade agreement:
We call on the government to ensure that consultation with the devolved administrations and legislatures is comprehensive, transparent, detailed and timely, and that their views are represented throughout the negotiations, including on reserved matters that may have an impact on them.
4. House of Commons International Trade Committee
The House of Commons International Trade Committee is also scrutinising the UK-Australia free trade agreement.
However, in a report on 29 June 2022, it expressed concern about the process of parliamentary scrutiny for the UK-Australia agreement. The committee said it had limited time to report on the agreement to allow for scrutiny:
While we are making every effort to conclude our scrutiny rapidly the pre-emptive commencement of the statutory period by the government means that there will be very limited time available, before the statutory period is due to expire in the third week of July, for members to consider our full report and the many areas of the agreement in preparation for such a debate. We note that the statutory period may be extended for up to a further 21 sitting days by decision of the government, or by 21 sitting days by agreement of the House to a motion that the treaty should not be ratified, within the statutory period. Such an extension would give members more time to consider the agreement, the associated documentation, the secretary of state’s evidence and our report before a debate on the details of the agreement after the summer recess.
The committee recommended that the government use the power in section 21 of the CRAG Act 2010 to extend the 21 sitting day period:
Following the Leader of the House’s agreement that free trade agreements should receive appropriate scrutiny, we recommend that the government should exercise its powers under section 21 of the CRAG Act 2010 to extend the statutory period, providing more time for the House to examine and to debate the Australia agreement within that period, but after the summer recess. Failing this step, the government must guarantee that the debate we have requested should be scheduled between 13 and 19 July and should be on a substantive motion to resolve that the treaty should not be ratified, in accordance with section 20 of the CRAG Act 2010.
On 30 June 2022, the International Trade Committee published a statement following Secretary of State for International Trade Anne-Marie Trevelyan’s cancellation of an appearance before them on 29 June 2022:
The committee today expresses disappointment at the secretary of state’s decision to pull out of this morning’s scheduled oral evidence session. We understand there is an important statement on another matter today but, as the government has made clear, the UK’s trade agreement with Australia is of great importance too.
The committee said that Anne-Marie Trevelyan’s offer of a meeting the week of 4 July 2022 “means we cannot take into account her evidence and still publish our report before the last days of the 21-day parliamentary scrutiny period”. The secretary of state’s appearance has been rescheduled to 6 July 2022. The committee said that unless the government extended the period itself, the committee would call on MPs to vote to delay ratification in order to have enough time to scrutinise the agreement:
It is vital that the government reconsiders and reverses its rejection of our call to extend the scrutiny period. If it does not do so, we will be calling on MPs to vote to delay ratification, so the House can take back control of the time it has to scrutinise this important deal, and set a new precedent for future ones. This trade agreement is too important for parliamentary scrutiny to be elbowed aside.
On 1 July 2022, the chair of the House of Commons Liaison Committee, Sir Bernard Jenkin, wrote to Prime Minister Boris Johnson saying his committee supported the International Trade Committee’s call for an extension. He said this would provide time for “proper parliamentary scrutiny” and believed it would not delay the agreement taking effect:
The extension would provide time for proper parliamentary scrutiny and for the Government to promote the benefits it believes the deal will bring. I understand that it would not delay the treaty coming into force, as it must also be ratified in Australia and this is unlikely to happen soon given the recent elections.
5. Read more
- House of Commons Library, ‘UK-Australia Free Trade Agreement’, 22 June 2022
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