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Most Favoured Nation: The Everything But Rice Agreement
Australia, Australia, Australia and ... a fair bit of other stuff too
G’day! (I have been told by top Aussie trade lawyer Lorand Bartels I am now allowed to use this greeting freely.) Welcome to the eighth edition of my newsletter, Most Favoured Nation. Do let me know what you like, what you don’t like, and what you would like to see more of.
This is the fortnightly, free, edition of MFN. If you would like to receive MFN in your inbox every week, please do consider becoming a paid subscriber. It’s very reasonably priced, honest.
Deep in the pocket of Big Rice
This week has been all about (at least if you live in the UK) the UK agreeing to agree a trade deal with Australia. An agreement in principle has been agreed between the principals, which means that the trade deal is pretty much done and dusted [we hope], subject to the lawyers writing everything down in legalese.
An overview of what has been agreed (in principle) can be found here, and I can confidently say it will satisfy everyone. For opponents of Brexit, leaving the EU to strike a trade deal with a small(ish) country on the other side of the world will reaffirm all of their previously held beliefs about the futility of the Brexit project. For proponents of Brexit, leaving the EU to strike a trade agreement with a small(ish) country on the other side of the world will reaffirm all of their previously held beliefs about the desirability of the Brexit project. Win/win.
More seriously, beyond what we already knew about the deal, there are some interesting snippets. We have confirmation that (predictably) the deal will not include investor-state dispute settlement, a rather controversial provision that allows investors to sue governments in the event of direct or indirect expropriation of assets. Which removes a stick for Labour and campaigners to beat the government with. The sanitary and phytosanitary (food and plant hygiene) provisions – particular the point about possible future equivalence – might raise a few eyebrows in Brussels, as noted by Anna Isaac, but don’t in and of themselves suggest any immediate UK divergence from the existing EU-inherited rulebook. (The FT’s Alan Beattie also has a good, related, thread on differences in UK/Australia food production standards in general.)
The UK has also managed to rid Australia of its slightly odd, when you start to think about it, requirement for young Brits to work on a farm for three months if they want to extend their visa. And increased the age of a young person to 35. Great stuff.
On the agricultural liberalisation front, the UK has agreed to remove almost (I’ll get to that …) all tariffs. But it will phase in some of the tariff reductions over a number of years. Dmitry has usefully pulled together some charts to explain how this will work:
Anyway, rice. Despite the deal being pitched as removing all tariffs (eventually), this isn’t strictly true. Unless I’ve completely misread the AIP (agreement in principle), the UK is retaining a permanent 1000 tonne per-year duty free quota for imports of long-grain milled rice. This means that long-grain milled rice is the only bit of the domestic food sector that managed to convince the UK to protect it from Australia and its fearsome agriculture-industrial complex. Impressive.
In the grand scheme of things this obviously doesn’t really matter. But now I’m interested. Where everyone else failed, how did Big [long-grain milled] Rice succeed? Hostages? Kompromat? Threats? Seriously, if you know the answer please do write in to let me know. I live for this stuff.
When the long-running Boeing-Airbus dispute between the EU and US began in 2004, google tells me that Ronald Reagan died, the Passion of the Christ hit cinema screens, Martha Stewart went to jail for insider trading and I was still in secondary school.
And it is finally over! (Kinda.) To which everyone other than the trade lawyers who profited mightily from the 17 years of litigation says: thank god for that.
The EU and US have agreed to put down their hatchets, remove their respective tariffs covering around £8.2 billion of goods, and make peace … for five years (you didn’t think it was really over did you?). How was this done you might ask? Well, from a details perspective it’s not really that clear, but it seems like they just decided … to agree to agree to sort everything out via a “collaborative platform”. An agreement in principle, some might say!
If you really want more detail, the EU trade team’s (emoji-loving) twitter feed has the rundown:
On the subject of trade disputes, when the UK left the EU it rolled over most of the EU’s trade defense measures (anti-dumping duties, safeguards etc.). However, this could only ever be a temporary fix, because the EU’s trade defense measures had been justified on an all-EU basis, and might not be justifiable when solely taking into account the UK impacts.
To give a made up example: it is possible that Chinese pottery was being dumped on the EU market, leading to Spanish potters suffering material injury as a result … but at the same time there was no evidence to suggest these imports were damaging UK potters. In this scenario, anti-dumping duties could be justified on an EU-wide basis while the UK was a member, but not on a UK-only basis.
As such, the UK’s new trade remedy authority (TRA) has been reviewing the inherited trade defense measures, and is in the process of making recommendations as to which should be kept and which should be scrapped. Last week the TRA published a load of recommendations re: the UK’s inherited steel safeguards. And this is the TL;DR:
“The TRA reviewed 19 product categories, which contained 253 different product codes in total. The total number of product codes in our determinations reduced by 17 codes to 236 as a result of a scope change which combined two categories. The TRA is recommending that the measure is revoked on 130 product codes and extended on 106 product codes. This represents revocation of all codes in nine product categories and extension of the application of the measure on 10 product categories with two of those categories amended (i.e. some codes are revoked).”
Now it goes to the Secretary of State, Liz Truss, for the final decision.
After previously speculating (MFN-1) that the UK was mad-keen on joining the Agreement on Climate Change Trade and Sustainability … I now hear the UK is getting cold feet. Sort it out, chaps.
Everyone wants a deep veterinary agreement [except Lord Frost]
Did you know that
a) The UK recently concluded a new trade agreement with the EFTA/EEA states, Norway, Iceland and Liechtenstein; and
b) The agreement includes a slightly unusual ‘minimum standard of treatment’ sanitary clause that ensures that the UK treats imported products of animal origin from these countries the same as imported products of animal origin from the EU. In English this means that if the UK decides to enter into a closer veterinary arrangement with the EU, and remove a load of the checks currently hurting GB food exporters selling to the EU and Northern Ireland, the EEA/EFTA countries get to benefit too. See:
Like a G7
I have a confession to make: I’m a child of the bilaterals era. I love bilateral trade negotiations, all the politics, all the tension. But as soon as someone starts talking about WTO negotiations, or multilateral initiatives and communiqués my eyes start to glae over. They are so BORING and hardly ever go anywhere. The Uruguay round negotiations concluded when I was four and let’s be honest nothing has really happened since (yes, yes, I know a few things have in fact happened since, but still). And while bilateral negotiations can take a long time (I’m looking at you EU-Mercosur), at least things sometimes happen.
Anyway, with that off my chest. The G7 Trade Ministers joint communiqué is worth reading. There’s lots in there on modernising trade, reforming the WTO, market distorting subsidies, trade and health, trade and the environment and other important stuff.
Trade AND technology
The EU and US have been pretty busy this week. As well sorting out Boeing-Airbus, they have agreed to launch a trade and technology council. As with all of these type of initiatives (of which there have been many), I have no idea if will lead to anything substantive, but here are the objectives:
Expand and deepen bilateral trade and investment
Avoid new technical barriers to trade
Cooperate on key policies on technology, digital issues and supply chains
Support collaborative research
Cooperate on the development of compatible and international standards
Facilitate cooperation on regulatory policy and enforcement
Promote innovation and leadership by EU and US firms
Anyway, talking to each other is much better than threatening each other with tariffs. So at the very least that is nice.
As ever, do let me know if you have any questions or comments. And do join me, Dmitry and Anna on Monday at 19:30 UK time.
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