Sutherland hill farmers likely to be the losers in UK Government's trade deal with Australia

Opinion column by Sutherland native David Bell, Professor of Economics at Stirling University

Unlike my grandfather, I have never been good at making deals. He was a farmer here in Sutherland and spent much of his life buying and selling cattle and sheep. As an academic, I didn’t need to spend my time making deals. But I do know the basics: trade happens when both sides think they can make something from the bargain.

So the proposed trade deal with Australia has left me confused. Australia is a country of 25 million people whose main exports are metal ores, coal, education, natural gas and meat. So what does Australia sell that the UK wants? We don’t make much steel, burn coal, are trying to phase out natural gas and we’re quite good at educating ourselves. Which leaves meat - beef and lamb.

Australia has natural advantages in meat production - better climate and vast low-maintenance farms. It can produce at much lower cost. The Agriculture and Horticulture Development Board estimate that UK lamb prices were around 650p per kilogram deadweight in May. Comparable Australian prices were around 500p, while those in New Zealand were 340p.

A free trade deal would mean an end to subsidies for sheep production in the UK. Previously organised through the Common Agriculture Policy, these are now changing. And the UK Government seems desperate to ensure that the new regime for agricultural support will not hamper its free trade ambitions. So in England farmers will be paid for making environmental improvements - things which do not directly support farm incomes. So far, the Scottish Government has not shown any enthusiasm for removing the Basic Payment Scheme, which supported farm incomes under the CAP. But the Australians looking for a free trade deal may press for this support to be removed.

This means that marginal farming, such as Sutherland hill farms, face greater economic challenges than has been the case for decades. The argument that our higher animal welfare standards protects us is weak. The difference in costs is so large that Australian farmers could pay to improve their standards and still make a profit on UK sales.

The UK government estimate is that the Australia deal will be worth just 0.02 per cent of GDP. And it is likely to do significant harms to communities such as Sutherland farmers. So why go ahead? The UK Government is desperate to make a deal – any deal – to show that its post-Brexit free trading agenda is succeeding and that it can successfully leave the world’s largest market (the EU) comprising 500 million people. But you have the whip hand when the other party is desperate to make the deal. So even though it is a much larger market (65 million people), the UK is likely to accept what Australia wants and what it mainly wants is access to UK food markets.

Once one deal is signed, others will follow. Sutherland farmers may just be part of the collateral damage. We need honest answers from the UK Government about the implications of its trade deals and their proposals for how long the implementation period may be and how diversification will be supported. Being the cause of another wave of Highland Clearances would not be a good look.

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