Marmite for Vegemite? Australia’s trade deal with the UK really is rather small beer

If the graph does not load click here

The photo of Scott Morrison with a packet of Tim Tams next to Boris Johnson holding a packet of Penguins celebrating the agreement (in principle) to a free trade agreement between Australia and the UK nicely summed up its importance.

They stood next to baskets filled with “goods” from snacks to wine and beer, and it was apt, because the free trade agreement really is rather small beer.

It seemed less like two leaders celebrating a major agreement than two local MPs trying to hype up the prizes for a community group’s Christmas raffle.

It was leaked that the deal was done over dinner. Great men, you see, can do deals while eating – a skill so sacred we found out this week some men prefer to do it away from the prying eyes of women.

Scott Morrison has agreed in-principle to a UK free trade deal. What’s in it for Australia? Read more

And, in keeping with the gastronomic processes of the deal-making, they sold the agreement on the basis of food and drink.

Johnson declared “the broad outlines of the deal, as you can imagine, is that you give us Tim Tams, we give you Penguins, you give us Vegemite and we give you Marmite”.

In effect he boasted that both countries will try to sell the other stuff they already make and prefer.

So much for quaint economic concerns such as comparative advantage.

But what was Johnson going to say? He could hardly point out that his own government suggests the deal after 15 years will have added just 0.02% to Great Britain’s GDP.

You could call it a rounding error, but to be honest, even that is overselling it.

The UK’s annual trade with the EU is worth around £660bn – about 47 times that it has with Australia – so you can understand why it might be a struggle to explain the benefits given what it has just given up with Brexit.

For Australia the deal is probably only slightly better.

Australia Weekend sign up

But for all the talk about wine and beef and sheep exports (the latter of which has British farmers wondering how competing with a nation that has 70 farms that are larger than all but seven English counties is going to be fair) the reality is there won’t be much benefit to Australia either.

Free trade agreements are not designed to improve economies but to make people think the economy is being improved. As has been stated often by the Productivity Commission, all they do is change the destination of exports rather than increase volumes.

That not one of the seven ministers on Wednesday in parliament who boasted of the deal were even bothered to attach a figure saying how much it would improve our GDP kind of gives away how minor this deal will be.

Trade with the UK is not the pressing issue of the moment.

While we do significant trade with the UK, it is nothing compared with what we do with China – and importantly not just in goods.

Consider that in 2019 there were 164,730 Chinese students enrolled in higher education in Australia; by contrast there were just 1,365 British students.

If Morrison really wanted to help our economy he would be doing all he could to stop the complete haemorrhage of foreign student numbers that is smashing the tertiary sector.

But that would involve dealing with China, and would require more than just an announcement.

• Greg Jericho writes on economics for Guardian Australia