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Rishi Sunak is dead wrong about UK farming and the Australian trade deal

UK farming
Written by Catherine McBride

The reality of the UK’s trade deal with Australia shows that the former Chancellor of the Exchequer has never read it, knows nothing about agriculture and is treading on shaky ground when it comes to Britain’s rural economy and efficient food production.

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During his Conservative Party leadership campaign, Rishi Sunak has made several claims about UK trade and agriculture that show that he doesn’t understand a range of relevant factors: the type and quantity of produce that can be grown in the UK; the size of UK domestic demand; how much UK food manufacturers rely on imported ingredients; nor even the point of international trade itself.

Some of Sunak’s ill-informed comments even have a whiff of communist central planning to them such as creating a new statutory duty to report on the proportion of imports or setting targets to increase self-sufficiency.

Other comments show a complete lack of knowledge of the UK climate, soil, agricultural production and consumer tastes: such as his reiteration of a pledge to boost fruit and vegetable production. The UK is unlikely to be growing bananas, oranges, mangoes or pineapples commercially nor will the UK suddenly be able to grow avocados, beans, chickpeas or summer vegetables out of season. Even with a statutory government target!

Mr Sunak also criticised the UK Australia trade deal for letting down British farmers by encouraging cheaper imports of meat and other produce also made in the UK. Here Sunak displays an alarming lack of knowledge of the point of trade, the size of the UK population and the limits of UK agricultural productivity.

UK farmers simply don’t have spare paddocks that they could bring into production at his command. 72% of UK land is already used for Agriculture and our farmers are doing the best they can under the current regulations. The UK’s Basic Payment Subsidy keeps all UK farmland in some sort of production regardless of commodity prices or profitability. Unlike in unsubsidised Australia or New Zealand where contiguous low international commodity prices would take land out of production as farmers need to make a profit to survive.

As for Sunak’s statement about ‘encouraging cheaper imports’ well that is actually the whole point of trade. The UK already imports cheaper meat from Ireland, which undercuts UK beef by about 20%. So why does Sunak believe that imported Australian meat would hurt UK farmers, but remain unconcerned about cost and choice for UK consumers? Or as a vegetarian, is he unconcerned about the price of meat, an excellent source of protein, Vitamin B12 and Omega 3 fatty acids if the animals are grass fed as they are in Australia and New Zealand.

Instead, Sunak tells us that he will make farmers a priority in trade deals. Here it becomes obvious that Sunak has never read the Australian trade deal: the only industry it protects is UK farmers. Even the hopeless ones…

Protections for farmers included in the UK Australia Trade deal.

The UK’s new Australian and New Zealand trade deals are, if anything, overly protective of UK farmers to the detriment of UK consumers.

The point of a trade deal is to liberate trade by removing tariffs, quotas and non-tariff barriers. Trade liberation for goods in the UK Australia Trade deal is covered in Chapter 2 of the FTA, and the protections (i.e. items where trade barriers have not been removed fully or even in some cases not removed at all), are listed in Annexes 2A and 2B.

Annex 2A contains Australian retained protections. It is very short, only one and a half pages. They are only lifting their 5% tariffs on various UK steel products, such as coils and pipes, over 5 years, and they will only lift their $1220 per tonne (£700/tonne) tariffs on UK cheese over 6 years, with the exception of Stilton and goat cheeses, which like all of the other products in the 280 page Schedule of Tariff Commitments will see trade protections eliminated in full. Australia has no additional quotas or product specific safeguards. This could be a bonanza for exporting UK farmers – but it won’t be as I explain below.

The UK version however, Annex 2B, runs to 14 pages and retains protections on agricultural products as follows:

UK NFM tariffs on Australian beef of 12% plus £1180 to £2530 per tonne will only be removed over 11 years and tariff free quotas and ‘safeguard’ import limits in place for 15 years. After 15 years the UK will be able to buy as much Australian beef, tariff free, as they presently import from Ireland.

UK Sheepmeat tariffs of 12% plus £750 to £2600 per tonne will only be removed over 11 years, tariff free quotas and ‘safeguard’ import limits will be in place for 15 years.

Tariffs on Australian dairy products will only be removed over 6 years and tariff free quotas will be retained for 5 years. UK MFN tariffs on dairy products are: milk tariffs £100 per tonne; cream tariffs are up to £1520 per tonne; flavoured yogurt tariffs are as high as 8% plus £1410 per tonne; powdered whey tariffs are £1390 per tonne; butter tariffs range from £1580 to £1930 per tonne; and Cheese tariffs range from £1160 to £1850 per tonne.

UK tariffs on Australian Wheat are £79 per tonne, which presently adds 33% to the price of imported wheat, and will only be reduced over 5 years with a fixed tariff free quota of 80,000 tonnes in place for 4 years. (To put this in context, the UK imported over 2 million tonnes of wheat in 2021. This continued tariff protection is going to look particularly stupid if Russia’s invasion of Ukraine continues into next year and European wheat supplies are limited by high fuel and fertiliser costs or poor weather. Sunak can’t worry about food security if he is willing to limit the countries from whom the UK can buy tariff free and quota free produce.)

UK Barley tariffs of £77 per tonne will be reduced over 5 years and a fixed tariff free quota of only 7,000 tonnes will be in place for 4 years.

UK Sugar tariffs of between £280 and £350 per tonne, which presently adds between 90% and 110% to the price of imported sugar, will be reduced over nine years and quotas will be in pace for 8 years.

There are many more protections for various vegetables and fruit whose tariffs will only be reduced over 4 or 8 years, including the tariffs on shelled dried beans that are not really grown commercially in the UK. The Australian trade deal also completely excludes pork, chicken, and eggs and all products made with them, as well as milled long grain rice – even though rice isn’t grown in the UK.

All of these tariffs protect UK farmers. But they benefit heavily subsidised EU farmers far more, because UK farmers simply cannot produce sufficient food for the population. Food has to be imported from somewhere. These very high tariffs are intended to discourage imports from countries outside the EU. Unlike Australia or New Zealand – the EU was granted completely free access to UK markets in the Trade and Cooperation Agreement: no tariffs, no quotas and no protection for UK farmers. But also, no complaints from the NFU or Mr Sunak…

It is very hard to see how Sunak could possibly view this trade deal as not protecting UK farmers. – unless of course he hasn’t read it.

Sunak’s proposed statutory duty to report on the proportion of imports and targets for becoming more self-sufficient

Self-sufficiency sounds good, but in the UK’s case it isn’t possible. The UK weather allows the UK to produce only 5 types of fruit commercially: apples both dessert and culinary, pears, raspberries and strawberries. The UK imports 85% of the fruit is consumes each year. Although this includes tropical fruit and citrus fruit, the UK also imports apples and pears – they are seasonal after all. However, despite not having a seasonal advantage and competing directly with UK farmers, the UK still imports apples from France – tariff and quota free. France is the UK’s largest apple supplier by value, while the UK’s largest supplier by volume is South Africa; but South African apples are only tariff free outside the European apple season. Similarly, many vegetables don’t grow in the UK – avocados for example, or else don’t grow all year round –asparagus, or simply can’t be grown in sufficient quantities to feed the UK population – potatoes.

Although many Brits like the image of the UK is as le roast beef, that isn’t the reality. The world’s most efficient beef and sheep producers do so at scale on massive grassy plains non-existent in the UK. UK beef producers are trying to compete internationally even though the average beef herd size in England has only 28 cows. (Beef cows produce only one calf a year, so the number of cows in a herd determine the maximum return from animal sales after 30 months of feeding them.) UK beef farmers only survive by almost doubling the price of imported beef from more efficient producers such as Argentina, Australia, Brazil, Uruguay or the US. But while this is a nice life for the UK’s 45,000 graziers, it makes life more expensive for the UK’s 67 million consumers who are subsiding graziers’ lifestyles through their taxes, then paying higher prices for meat at the supermarket.

50 years of protection under the EU did not improve the UK agricultural industry

The problem with protection is that it doesn’t encourage UK farmers to improve their productivity or concentrate on the products that they can produce most efficiently. Something that both Australian and New Zealand farmers have had to do.

After 50 years in the EU, the UK now has a generation of farmers who have only ever farmed while receiving subsidies for their production or for their land holdings, as well as protection from more efficient farmers outside of the EU’s Customs Union. This protection has done nothing for farm productivity, nor have the many EU regulations enforcing crop diversity or banning the use of technology such as gene editing.

Meanwhile the amount of farmland in the UK has not increased, in fact it has dropped from 77% in 1973 to 72%, while the population has increased from 56 million in 1973 to 67.5 million in 2021 and is increasing daily. Admittedly, this is mostly due to immigration, but still – whether imported temporary farm labourers, wealthy bankers or people arriving on rubber dinghies, they all require feeding. And many want to eat the same type of food they consumed in their country of origin. This obviously requires more imported food. Put simply, the population has outgrown the country’s ability to produce food. Protecting farmers from competition is not going to change this. It is just going to push up prices for everyone.


UK agricultural production

Defra publishes information on UK farm production, exports and imports each year. The edition for 2021 was released last week. Little has changed in terms of UK raw food production. The UK still only supplies 15% of the fruit it consumes, 73% of the potatoes, 57% of other vegetables, 66% of sugar, 76% of Milling wheat (but 89% of total wheat – we feed green wheat to animals), 70% of the pigs, 82% of the beef, 97% of the chicken and 92% of the eggs. Although we produce 105% of the dairy products we consume – in truth the UK exports milk and imports vast quantities of cheese, butter and yogurt. In sheep meat, we export more than we import – but lamb is seasonal, so our exports are countercyclical to our imports.

The main fall in output in 2021 has been in oilseed rape production, which has fallen from being an export crop pre-2018 to the UK now needing to import 48% of its consumption, while oats and barley are still small net export crops.

These are still provisional estimates, but they are mostly similar to previous years and show that UK farmers do not supply enough food to feed the nation. It is ludicrous for Sunak to suggest that with more protection (except from the EU) UK farmers could increase their pork production by 80% to supply all of the UK’s requirements, or that UK wheat farmers and sugar farmers could increase their production by a third (wheat) or by 50% (sugar), if they wanted to. UK farmers simply don’t have the extra land nor the weather to do this. Sunak’s proposed targets or trade protections won’t alter geography or the climate.

It is all very well for politicians to imagine a great future of export sales for UK farmers – but if farmers can’t supply the UK’s domestic market (67 million), they are hardly going to be able to supply growing demand from the Asian and Pacific middle classes.

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The latest Defra farm income figures are damming

And it is not just that UK farmers can’t supply enough produce to feed the population. Many of them would not be in business now without government subsidies. Another Defra publication worth reading is their latest edition of Farm business income by type of farm.

Figure 3.1 shows income sources by type of farm. It is obvious from this chart that some UK farmers, such as dairy farmers, are very efficient, well-run and make the majority of their income from agriculture. This really should be how all UK farms make their income, but it isn’t. While other farms, such as grazing – that is the production of cattle for beef and sheep for meat, lose money from agriculture.

Both lowland grazing and Less Favoured Area (LFA) grazing get most of their money from BPS income, also known as government subsidies. And 2021 was not an unusually bad year. Grazing farmers and Mixed farmers, which generally includes grazing, have lost money on their agriculture every year for the last 8 years.  Without the generous support of UK taxpayers and extortionate tariffs restricting consumer choice to domestic or EU beef, these farmers would have had to improve their productivity or go out of business – a fate that awaits all other small businesses in the UK.


Improving the productivity of UK grazing farms is not impossible. Grazing responds well to economies of scale: one herdsman can look after 56 cattle as easily as 28. However, to increase their herd size, the UK needs fewer grazing farmers each with larger farms. If the UK is to compete with Australia, the UK’s 45,000 very small grazing farms will need to consolidate: the average size of UK lowland grazing farm was only 43.1 hectares in 2021 and the average LFA grazing farm was only 96.2 hectares.

Defra’s numbers on Farm Business Income mentioned above are averages, but Table 2.1 in the same document on the distribution of Farm Business income is equally damming. Almost half (48%) of UK dairy farmers are in the top income bracket, making over £75,000 in net profits in 2020/21, but only 4% of lowland grazing farms are – even though Farm Business Income includes environmental and basic subsidy payments as well as agricultural and non-agricultural income.


How protecting non-viable farmers is hurting the UK’s capable farmers

So how could the UK Australia trade deal have let down UK farmers as Sunak claims? Well, it has prevented the UK’s efficient dairy farmers from selling their cheese into Australia tariff free for 6 years, purely as a tit-for-tat on the extensive 15 years of protections that the UK has given to its inefficient, loss-making beef and sheep producers. And the losses on agricultural income shown in the Income from Agriculture table above, were all made while the sector was protected from real international competition by the EU’s Customs Union.

It is ridiculous for Sunak, or a source close to him or the NFU president, to claim that UK farmers would go out of business because of the Australian trade deal. Meat producers in the UK have been losing money on their agriculture for at least 8 years! They are already technically ‘out of business’. They survive by non-farming income and government handouts. This parrot is dead. Sunak apparently had some experience in finance before going into politics, however his grasp of basic accounting seems to be as lacking as his knowledge of UK farm production.

Protecting a bad business model (UK grazing) to the detriment of a good business such as UK dairy farming is economic madness. Australia has a natural advantage in beef production (massive grasslands), just as the UK has a natural advantage in dairy production (steady rainfall on its grassy rolling hills).

The NFU president likes to claim that the UK food manufacturing industry is worth £140 billion – more than the car industry or the aerospace industry. What she neglects to mention is that UK agriculture only contributes £6 billion to that figure. Defra calculates the Gross Value Added of Agriculture to be £10.3 billion, but food manufacturing’s GVA is almost 3x as much at £28.8 billion. Food manufacturing, wholesaling, retailing and non-residential catering – all involve imported food products as well as home grown ones. Including agriculture, the food industry adds £115 billion (roughly 6%) to the UK’s national GVA. But agriculture is only 9% of this, or 0.54% of the UKs national GVA. So why are we agreeing to Australia only slowly lowering its tariffs on UK steel springs or UK produced cheese so we can protect the UK’s zombie beef farmers that really need to be encouraged to sell their farms to more profitable farmers?

The purpose of Free Trade

The UK used to be a master of trade – importing raw ingredients produced more efficiently elsewhere and using its technology to export manufactured goods in return. In the 1800s, UK companies realised the benefits of importing ingredients from all over the world and using them to make products that they would eventually sell internationally. My favourite example is chocolate: Cadburys multinational business was founded in the early 1800s, by making a product in the UK whose basic ingredients – coca beans and cane sugar, could not be grown in the UK. Manufacturing sugar from beets did not start in the UK until the 1920s about 100 years after Cadburys started making chocolate. The idea that UK food manufacturers only use local ingredients was false then and is still false today.

The UK economy has a lot to sell Australia and New Zealand and the other nations in the transpacific partnership: from financial services; legal, accounting and advertising services; media, film, television, and music; whisky and gin; biscuits; cars; chemicals and pharmaceuticals; raincoats and umbrellas; defence equipment; new technology such as sodium batteries; even steel coils and springs. But none of these industries are being protected in this trade deal, all their product tariffs are being eliminated in full by the UK under this trade deal – except of course for agriculture. I doubt any of the other industries asked to be protected. It is just the inefficient whingeing NFU who would prefer to block trade with a more efficient supplier and remain governed by costly EU protectionism, than improve their productivity.

The power of vested interests in the UK – who is this helping? Who is it hurting?

Trade benefits the whole economy. The point of trade is to sell what you produce efficiently and import what you can’t produce at all; or can’t produce efficiently; or can’t produce all year round; or can’t produce in large enough quantities to feed your population or meet domestic demand. The UK’s agricultural imports fall into all four of these import categories.

Australia can produce many food stuffs more efficiently that the UK, most notably beef and sheep meat, but not all of them, most notably dairy products and manufactured foods. Ideally the UK should be selling cheese to Australia and buying Australian beef. But the protectionists have preventing both from happening for many years – Australia 6, UK 15. This is how protectionism begins – with tit-for-tat trade exclusions.

As a Treasury captive, Sunak could possibly claim that the UK needs the money from the continued tariffs, but this excuse won’t fly either. The UK’s tariffs are so high that they simply prevent any products from being imported beyond the tariff-free quotas. When the UK was part of the EU, 80% of any tariffs collected had to be given to Brussels. In truth little was collected from agricultural goods because the trade barriers were so restrictive, they prevented imports outside the quota. For example, Brazil is the world’s largest sugar exporter, but the UK’s largest sugar supplier was traditionally France until the UK introduced a 260,000-tonne tariff free sugar quota last year. You will be unsurprised to learn that the UK imported 258,000 tonnes of sugar from Brazil in 2021. Ten times the amount they imported from Brazil five years ago. While the UK’s sugar imports from France in 2021 were half of the 2020 quantity and a third of 2019 imports. But as the UK’s annual sugar imports are between 700,000 and 1 million tonnes, French farmers still have a captured, if somewhat smaller, market in the UK.


If Sunak is to be an effective Prime Minister, he will have to learn to do his own homework and stand up to vested interests and lobbyists – like the NFU. Agriculture represents a tiny part of the UK economy, adding a mere half of one percent to the UK national GVA. UK beef farmers have shown no interest in improving their productivity despite years of protection from competition. While UK dairy farmers have shown no interest in exporting higher value products such as butter as Irish and Danish butter producers have done. UK farmers have relied on supplying their captive domestic market for years, without even attempting to build up an export trade as UK food and drink manufacturers have done extremely successfully and without government support. Yet now the NFU hopes to be able to sell to the Pacific nations while protecting their domestic markets from more efficient imports.

It is beyond parody that Sunak would want to be associated with such a lazy, entitled bunch as the NFU. But however this has happened, they seem to have him under control. I would urge him to read at least chapter 2 of the UK’s trade deals with Australia and New Zealand and make up his own mind about trade protectionism.

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About the author

Catherine McBride