Points of Order
Tuesday 7th November 2017
(8 years ago)
Commons ChamberTrade Bill 2017-19 Read Hansard Text
Ian Murray (Edinburgh South) (Lab)
On a point of order, Madam Deputy Speaker. The Foreign Secretary has come to the House this afternoon to provide a statement clarifying the comments he made to the Foreign Affairs Committee last week. He said in his statement—my hon. Friend the Member for Rhondda (Chris Bryant) has already read this out: “My point was that I disagreed with the Iranian view that training journalists was a crime, not that I lent any credence to Iranian allegations that Mrs Zaghari Ratcliffe had been engaged in such activity.” The transcript from the Committee says:
“When we look at what Nazanin Zaghari-Ratcliffe was doing, she was simply teaching people journalism, as I understand it”.
Those two statements are inaccurate and contradictory.
In addition, Madam Deputy Speaker, could you give me some advice? The Foreign Secretary accused me of performing on the Foreign Affairs Committee with “glassy indifference”—I think those were the words he used. May I just say to the Foreign Secretary, if he does not like me asking questions about Iran and US sanctions, that my expression was one of incredulity at his incompetence at answering the questions and not glassy indifference?
Madam Deputy Speaker (Mrs Eleanor Laing)
I thank the hon. Gentleman for his point of order. On his first point, as the House knows, it is not for me to opine on this matter. We have had quite a considerable time this afternoon during which these questions have been put to the Foreign Secretary, and the Foreign Secretary has now answered those questions. If there is a difference of opinion, that is in the nature of political debate and not a matter for the Chair.
On the second point, the hon. Gentleman has put a description rather different from the one that the Foreign Secretary gave of him. Once again, that is a matter of opinion, and the two opinions have been expressed. It is not for me to rule which one is correct.
Stephen Gethins (North East Fife) (SNP)
On a point of order, Madam Deputy Speaker. Earlier today, during the urgent question on the Brexit sectoral analysis, the hon. Member for Edinburgh South (Ian Murray), who is aware that I was going to make this point of order, said, quite rightly, that the Secretary of State for Scotland had said at Scotland Office questions that the sectoral analysis of the impact on the economy of Scotland existed and had been shared with the Scottish Government. My colleagues in the Scottish Government had not, and have not, seen such analysis despite repeated requests. Madam Deputy Speaker, can you give us some advice on how we can correct the record?
Madam Deputy Speaker (Mrs Eleanor Laing)
I appreciate the point that the hon. Gentleman is making, but, once again, it is not a matter for the Chair. He asks for my advice on correcting the record, and I think that he has just put his issue on the record. It will be noted, and I am quite sure that those on the Treasury Bench will note it.
Bill Presented
Trade Bill
Presentation and First Reading (Standing Order No. 57)
Secretary Liam Fox, supported by the Prime Minister, Secretary Boris Johnson Secretary David Davis, Secretary David Mundell, Secretary Alun Cairns, Secretary James Brokenshire, Secretary Michael Gove, Secretary Priti Patel and Greg Hands, presented a Bill to make provision about the implementation of international trade agreements; to make provision establishing the Trade Remedies Authority and conferring functions on it; and to make provision about the collection and disclosure of information relating to trade.
Bill read the First time; to be read a Second time on Monday 13 November, and to be printed (Bill 122) with explanatory notes (Bill 122-EN).
Trade Bill (First sitting)
Tuesday 23rd January 2018
(7 years, 9 months ago)
Public Bill CommitteesTrade Bill 2017-19 Read Hansard Text Amendment Paper: Public Bill Committee Amendments as at 23 January 2018 - (23 Jan 2018)
The Chair
Before we begin, I have a few preliminary points to make. Please switch electronic devices to silent. Tea and coffee are not allowed during sittings. We will first consider the programme motion on the amendment paper. We will then consider a motion to enable the reporting of written evidence for publication and a motion to allow us to deliberate in private about our questions before the oral evidence sessions. In view of the limited time available, I hope we can take those matters without too much debate or delay. Date Time Witness Tuesday 23 January Until no later than 10.25 am Global Justice Now; Computer and Communications Industry Association; Christopher Howarth, former Senior Political Analyst, Open Europe Tuesday 23 January Until no later than 11.25 am CBI; International Chambers of Commerce UK; Unite the Union; FSB Tuesday 23 January Until no later than 2.45 pm Dr Lorands Bartels, University of Cambridge; Dr Roiger Hestermeyer, King’s College London; Hansard Society Jude Kirton Darling MEP Tuesday 23 January Until no later than 3.30 pm George Peretz QC, Monckton Chambers; Professor Alan Winters, UK Trade Policy Observatory; Law Society Scotland Tuesday 23 January Until no later than 4.15 pm British Ceramic Confederation; UK Steel Manufacturing Trade Remedies Alliance; British Chambers of Commerce Tuesday 23 January Until no later than 5.00 pm UK Finance; British Retail Consortium Standard Chartered Bank Thursday 25 January Until no later than 12.00 pm Devro plc; Scotch Whisky Association Food Standards Scotland Thursday 25 January Until no later than 1.00 pm Business for Scotland; British Furniture Association Hologic Date Time Witness Tuesday 23 January Until no later than 10.25 am Global Justice Now; Nick Ashton-Hart, Trade Policy Consultant and Associate Fellow, Geneva Centre for Security Policy; Christopher Howarth, former Senior Political Analyst, Open Europe Tuesday 23 January Until no later than 11.25 am CBI; International Chambers of Commerce UK; Unite the Union; FSB Tuesday 23 January Until no later than 2.45 pm Dr Lorands Bartels, University of Cambridge; Dr Roiger Hestermeyer, King’s College London; Hansard Society Jude Kirton Darling MEP Tuesday 23 January Until no later than 3.30 pm George Peretz QC, Monckton Chambers; Professor Alan Winters, UK Trade Policy Observatory; Law Society Scotland Tuesday 23 January Until no later than 4.15 pm British Ceramic Confederation; UK Steel Manufacturing Trade Remedies Alliance; British Chambers of Commerce Tuesday 23 January Until no later than 5.00 pm UK Finance; British Retail Consortium Standard Chartered Bank Thursday 25 January Until no later than 12.00 pm Devro plc; Scotch Whisky Association Food Standards Scotland Thursday 25 January Until no later than 1.00 pm Business for Scotland; British Furniture Association Hologic
I first call the Minister to move the programme motion, which was decided by the Programming Sub-Committee yesterday.
Motion made, and Question proposed,
That—
(1) the Committee shall (in addition to its first meeting at 9.25 am on Tuesday 23 January) meet—
(a) at 2.00 pm on Tuesday 23 January;
(b) at 11.30 am and 2.00 pm on Thursday 25 January;
(c) at 9.25 am, 2.00 pm and 5.30 pm on Tuesday 30 January;
(d) at 11.30 am on Thursday 1 February.
(2) the Committee shall hear oral evidence in accordance with the following Table:
(3) proceedings on consideration of the Bill in Committee shall be taken in the following order: Clauses 1 to 3; Schedules 1 to 3; Clauses 4 and 5; Schedule 4; Clauses 6 to 12; new Clauses; new Schedules; remaining proceedings on the Bill;
(4) the proceedings shall (so far as not previously concluded) be brought to a conclusion at 2.00 pm on Thursday 1 February. —(Greg Hands.)
Manuscript amendment made: In the table on page 2 of the amendment paper, in the first entry for Tuesday 23 January, leave out
“Computer and Communications Industry Association”
and insert
“Nick Ashton-Hart, Trade Policy Consultant and Associate Fellow, Geneva Centre for Security Policy”.—(Greg Hands.)
Main Question, as amended, put and agreed to.
Ordered,
That—
(1) the Committee shall (in addition to its first meeting at 9.25 am on Tuesday 23 January) meet—
(a) at 2.00 pm on Tuesday 23 January;
(b) at 11.30 am and 2.00 pm on Thursday 25 January;
(c) at 9.25 am, 2.00 pm and 5.30 pm on Tuesday 30 January;
(d) at 11.30 am on Thursday 1 February.
(2) the Committee shall hear oral evidence in accordance with the following Table:
(3) proceedings on consideration of the Bill in Committee shall be taken in the following order: Clauses 1 to 3; Schedules 1 to 3; Clauses 4 and 5; Schedule 4; Clauses 6 to 12; new Clauses; new Schedules; remaining proceedings on the Bill;
(4) the proceedings shall (so far as not previously concluded) be brought to a conclusion at 2.00 pm on Thursday 1 February.
Resolved,
That, subject to the discretion of the Chair, any written evidence received by the Committee shall be reported to the House for publication.—(Greg Hands.)
The Chair
Copies of written evidence that the Committee receives will be made available in the Committee Room.
Resolved,
That, at this and any subsequent meeting at which oral evidence is to be heard, the Committee shall sit in private until the witnesses are admitted.—(Greg Hands.)
The Chair
Before we start our formal session, I invite members of the Committee to declare any relevant interests.
Mr Mark Prisk (Hertford and Stortford) (Con)
I am trade envoy to the Nordic and Baltic nations, and to Brazil.
The Chair
Q
Will the witnesses please introduce themselves for the record?
Nick Dearden: I am Nick Dearden, director of Global Justice Now.
Nick Ashton-Hart: I am Nick Ashton-Hart from the Geneva Centre for Security Policy.
Christopher Howarth: I am Christopher Howarth, former senior political analyst at Open Europe, and now senior researcher in the House of Commons.
Barry Gardiner (Brent North) (Lab)
Q
Nick Ashton-Hart: Thank you for inviting me—this is a first for me. To answer the first question, it depends very much on whether it is in the interests of the counterparties to those agreements to roll them over without modification. Since those agreements were created for a number of member states other than just us, those partner countries will go through a process of evaluating the net trade benefit to them of applying those terms to us alone. Where they have an interest in changing the terms to their benefit, they will seek to do so, because that is what Trade Ministries do—they seek economic benefit for their country, and they expect you to seek it for yours. Unless the trade benefits for them are exactly the same for us alone as they are for 28 other countries, they are going to ask for changes in their interests.
If the shoe were on the other foot, I suspect we can all imagine that it would be hard for our Trade Ministry officials to come to you all and say, “Well, we have just copied an agreement with a large trading bloc for one country’s benefit because it is in a hurry.” I suspect we will find that this will take some time—trade agreements always do.
The Chair
Before anyone else answers, may I ask Members and witnesses to speak up so that we get everything on the record? That would be perfect. Sorry—the acoustics in this room are terrible.
Barry Gardiner
Q
Nick Dearden: We are really concerned about the lack of scrutiny and accountability in the Bill. Global Justice Now, and a number of other organisations, worked on the Transatlantic Trade and Investment Partnership for a long time. We had some concerns about that agreement—not with the potential tariff areas, but with the non-tariff areas. In modern trade deals, non-tariff aspects make up the bulk of the agreement. That means everything from regulation—we probably all now know more than we would like about chlorinated chickens, but that is just one symbol of the regulatory aspects of trade deals that really concern the public, and I think many parliamentarians, too. Intellectual property, which has a direct correlation to the price of medicines and the price that the NHS may bear for them, through to local government procurement and e-commerce can also be added to that.
Modern trade deals touch on huge areas of public policy, which should be within the scope of Parliament to control. We are concerned that the Bill does not allow for that scope. As Nick said, it is difficult for us to imagine that many of these deals will be a straight cut and paste. That is why the explanatory notes allow for substantial changes to be made to the deals, but without the requisite scrutiny that we believe Members deserve and require if we are to have proper control of our trade policy.
Barry Gardiner
Chair, I know that others on my side wish to come in, but those on the other side may wish to speak.
Bill Esterson (Sefton Central) (Lab)
Q
Nick Dearden: Certainly. We think there should be several stages. First, before the negotiations, Parliament or a parliamentary Committee should give consent to those negotiations and should have some role in setting out the broad framework or objectives. We also think that at that stage the Government should have a responsibility to conduct and publish impact assessments and public consultations. It is set out in great detail how those should be conducted in the European Union and the United States.
As the negotiations are proceeding, Parliament should be able to scrutinise Ministers on what they are negotiating. It should be able to see negotiating texts. We think there should be a presumption that negotiating texts should be transparent to everybody, but even if there are specific reasons why they cannot be, they should certainly be transparent to MPs. If the Government want to change their mandate, they should have to come back to Parliament or to a parliamentary Committee to ask for that.
When negotiations are finalised, there should be a guaranteed debate and, at the least, an up-or-down vote. That would make a huge difference, because at the moment at none of those stages does Parliament have any control: it is not allowed to know what is going on in the negotiations; it has no role in setting the mandate; it is not allowed to see the negotiating texts; it is not guaranteed a debate; and it cannot vote against a trade deal. We think that what I have suggested would bring us into line with other modern democracies.
I will give a very small example. CETA, which still has not had a proper debate in the House, has been discussed in detail for days by the Wallonian Assembly in Belgium. They take seriously the regulatory aspects of trade deals and we think that, post-Brexit, we need to be looking at a similar model.
Bill Esterson
Q
Nick Dearden: We know that post-Brexit we want to be doing a trade deal with the European Union and the United States, so they are good places to start. Both political entities have set out in detail a number of ways in which they negotiate and give Congress or Parliament power over trade deals. In the United States, a 700-strong citizen advisory board is allowed to see all the texts. They have to have very specific public consultations. At the very least, Congress gets an up-or-down vote at the end, and if it does not fast-track trade deals, it gets substantially more power than that.
In the European Union, the Parliament gets to feed into a mandate—the Council gets to set a mandate. Various parliamentary Committees get to look at, scrutinise and give recommendations to the Executive for how a trade deal would affect jobs, the economy, the environment, human rights, or whatever else we may be concerned about. At the end, the Parliament is given a proper debate and an up-or-down vote.
On top of that, as I have already said, many trade deals are required to go back to member Parliaments for them to have a say, too. If you look at how Denmark, Germany, the Netherlands or Finland operate, they already exercise far more scrutiny over external EU trade deals than the UK does.
Mr Prisk
Q
Nick Dearden: There are various ways in which you could do it. One of the ways is to have a Committee set up particularly to scrutinise the Government on this. When the time comes to enter negotiations on a deal, it will discuss with the Government what their priorities are and they will say, “We think this is acceptable and this is not acceptable.” It will be brought in from the very beginning.
I think that is important, because the Secretary of State has said a number of times, “I really want to avoid a TTIP-style situation, where we end up with a deal in discussion that has lost public support and lost a lot of parliamentary support.” To do that, we must have that buy-in from the very beginning, and that must require some degree of parliamentary discussion about what the objectives for this country should be in a trade deal with country X.
Mr Prisk
Q
Nick Dearden: That would probably depend on exactly when proper trade negotiation starts and we are properly discussing a trade deal.
Mr Prisk
Q
Nick Dearden: You can look at how it happens in Denmark, for example, because they do exactly that. They have a parliamentary Committee that sets a mandate at the initiation of trade talks. I understand that obviously the Government are talking to loads of different countries at any one time about possible trade, but within each of the countries they are talking to, they must have objectives. It is for Parliament to scrutinise, set and agree to those objectives.
At the moment, I do not feel that we have that ability. We are talking to a lot of countries; we have 16 trade working groups currently set up between the Secretary of State and other countries. We know, because we have read it in the media, that various negotiations are ongoing with some of those countries, but Parliament, and we as civil society, have no right to know what is being discussed, when it is being discussed and with whom. That is a profound democratic deficit. At the very least, if these are formal working groups involved in trade discussions, we should know what they are talking about, to whom and when.
Mr Prisk
Q
Nick Dearden: I would say at the very least, at this point in time, for each of the trade working groups that has been set up, there should be a mandate set by parliamentary Committees.
Mr Prisk
Q
Nick Dearden: There is something to be said for that if you look at previous trade agreements such as TTIP—how they have worked and how people have felt about them. There is a big populist backlash going on around the world at the moment, part of which is a result of people feeling there is a democratic deficit in the trade agreements being signed.
We have lots of ideas for how we could construct a trade agreement and how we would want to do it, and I should say now that we are absolutely not against trade; even with TTIP, we were not against the tariff aspects of that trade agreement. When it comes to public policy, it is different. Again, I am not against international co-operation, in trade agreements or other agreements, but there has to be a democratic basis for how those things are decided.
Mr Prisk
Q
Nick Dearden: They might be or they might not. It depends how they are done, who they are done with and what the terms are. If you have two very different types of country, in terms of wealth and power, obviously there can be a big problem because some people have a much bigger negotiating hand than others. That is what we have seen with economic partnership agreements, which is why we would prefer, for example, to give tariff-free access to goods coming from those countries rather than do a reciprocal agreement, which also puts what we believe to be unsustainable and unhelpful conditions on the African country concerned.
Mr Prisk
My concern is not with the follow-on scrutiny of events that happened, but more the idea that somehow Parliament should require our existing teams in negotiations to seek approval before they start those conversations. That is my concern, but I will not delay the Committee any longer.
Barry Gardiner
Q
Nick Ashton-Hart: I would also say on the point about when terms of reference are set and whether our ambassadors need permission before they go and talk, I worked with most of our trading partners in Geneva and dozens of other countries. There are a lot of commonalities in how legislatures interact with Trade Ministries. Generally, the Trade Ministry will say, “We want to achieve these objectives over the course of this Parliament or this year,” and that is done in consultation with the relevant parliamentary Committees.
Ambassadors explore ideas with countries all the time; they do not need a mandate to do that. When it becomes clear that there is interest in formalising something, a process goes on in the capital to say, “Okay, what is our net benefit to be achieved?” To do a deal of any configuration with country X, the economics teams in the Ministry would go away and say, “Where is the net trade-generative agreement here? What sectors would we have to include? What likely trade-offs would we have to do with the other side?”
But that process would generally be informed by a consultation with the stakeholders in the industrial sectors that have most to gain or lose, the unions in those sectors and the like, so that before you even get into a negotiation, you know where your benefits lie, you have your stakeholders signed up to what you are trying to achieve and the other side knows that you have those things.
As I pointed out in my comments, the reason why you see so many leaks in trade negotiations is that it is in the interest of one party or another to put pressure on the other in their capital. Leaks do not happen by accident; they are deliberate.
Mr Prisk
I think we are familiar with that!
Nick Ashton-Hart: You are familiar with how that dynamic works. It is no different in trade negotiations.
What I have described is pretty much a common process everywhere in the world, and it is not accidental; it is because the political economy demands that you have the backing, as a negotiator, at home when you are sitting across the table from your counterparties and that they know that you have that. They can watch your processes of consent and agreement and evaluate where your weaknesses are—where there are buttons they can push, but also where you are likely to need support. People know that you have to get to a sustainable deal also, and sometimes you have to do a concession at the right time to solve a problem in a domestic constituency for your counterparty, provided that it is in your interest to do so.
Tom Pursglove (Corby) (Con)
Q
Nick Dearden: I do not have a complete list of all of them, but I do know that we have very serious concerns about the economic partnership agreements with African countries, for example, because of some of the conditions that are placed on those countries. We have particular concerns, because we worked on it, with the CETA agreement with Canada, again related to the so-called non-tariff barriers in that agreement.
One problem is that no matter what we thought about the agreements when they were originally negotiated, they are going to look different when it comes to being translated into or replaced by a UK-Canada or UK-African country agreement; they are just going to be different deals. Given that, I think it only right that there be some degree of scrutiny. It says in the Bill, “Well, we aim for these deals to be as similar as possible.” I understand that, but it may well be that some of the deals will be more similar than others.
For the deals that are more similar, I think it would be right and proper for Parliament to say, “Okay, fine. We will wave that one through. We understand that that is continuity.” But for other deals—what a substantial amendment or change in the deal would look like is not defined—we believe that Parliament should have proper scrutiny and proper ratification powers. That is particularly important for deals that have not even been through the proper ratification process in the European Union—examples involve Singapore, Japan and Vietnam. Those deals may all be replaced by UK deals, but they have not been through the proper process as yet in the European Union, and we do not want to see a situation in which they are taken on just because we are so rushed that we do not have time to really think about the consequences of the deals.
Tom Pursglove
Q
Nick Dearden: As a campaigning organisation, we are likely to pick up only those deals—
Tom Pursglove
Q
Nick Dearden: I would say we are supportive of trade, but it depends on how it is done. Absolutely. For example, I would say that an awful lot of trade that has happened in the European Union over the last 40 years —not all of it, because some of it we would be concerned about—has raised standards. It has raised standards for producers and for consumers, and that is positive. In the European Union, there is at least a balancing of trade and economic interests with social interests and environmental interests and with democratic scrutiny and accountability, so it is possible to do that.
Judith Cummins (Bradford South) (Lab)
Q
Nick Ashton-Hart: There are so many moving parts. Assuming that there is a date, that we know it, and that all counterparties have a few years’ advance warning of it—the date that matters is a date on which existing agreements will no longer be available to us—we would have to look at their approval process and count backwards to find the date by which we would have to conclude our negotiations with them. That is the only way that you would know what your actual hard finishing date was for any of those agreements. I do not know if that analysis has been done by the Department for International Trade—I am hoping that it has done some of it, and I am guessing that it probably has. Say it takes two years, and we have two years. We are not going to finish an agreement tomorrow, so that means that that deal will not be done in time. What percentage of our GDP, and of our exports and imports, is that deal, which will not be available?
That is the first thing that you would have to do is know how much negotiating time you have, and with which parties. You would then have to prioritise deals based on their economic importance to us. I am not sure what the decision tree is within the Ministry—I am sure that there must be one—for what it prioritises. The only way that you all will have a clear picture of the deadlines is to work backwards. I have seen no discussion at all of how long it takes our counterparties to conclude approving an agreement, but it can be a considerable time, depending on the country. I imagine it would be very difficult. The short answer is that it is hard for me to imagine that there are even enough people to negotiate that many deals simultaneously with that many parties, unless you had several years to do it.
Martin Vickers (Cleethorpes) (Con)
Q
Nick Dearden: It probably is, yes, because there may be countries where, for example, the human rights situation is so bad that any trade deal that you do is effectively reinforcing and giving succour to a regime to which we would not want to give succour.
Martin Vickers
Q
Nick Dearden: For example, there are serious human rights abuses in Turkey at the moment. The Prime Minister, as many people know, was the first political leader to visit Donald Trump in the United States after he was elected. After visiting President Trump, she went to President Erdoğan of Turkey, and a trade deal was part of the negotiations there. At that time, she also sold £100 million-worth of weapons to Turkey. That was an inappropriate thing to do, and it was connected with our ability to conduct a trade deal with that country, post Brexit. You may disagree with that, of course, but at the very least, there should be parliamentary control over those kinds of actions and activities. I do not think that just because they are in the international realm, they should be negotiated under royal prerogative; they have an impact on policy here. MPs should be apprised of that and should authorise it.
Martin Vickers
Q
Nick Dearden: That is a really important point. On the public policy aspects of trade deals, traditionally we thought that we did not need to worry about whether we ratified the trade deal, because Parliament would have the power to authorise implementing legislation for the various things that we needed to do to put the trade deal into effect. There is a problem with that: once a trade deal is signed and ratified, it really makes no difference whether Parliament enacts that legislation or not—we are committed to it under international treaty. It is too late to say no. Normally, we do not intend to say no—we have done the deal—but if there was a real dispute, and Parliament said, “We have a problem with that”, we would have real difficulty in stopping it, because we had already agreed to do it.
Various things that impact on public policy are never brought forward for implementation as legislation anyway. One of the things that people were particularly concerned about with TTIP, as you probably know, was the investment protection tribunals that allow overseas companies to sue Governments for various things—for what they regard as unfair treatment, for the indirect expropriation of assets and so on. There is a lot of public concern about those bodies, because people feel that this infringes on democratic sovereignty and accountability, yet those things never need to be signed off by Parliament. They just exist in the trade deal, from day one, so Parliament does not have a say in whether things that have been proved to have tangible impacts on public policy come into effect. That is one example of why it is important for the ratification process to be seen as directly impinging on public policy, and why scrutiny and accountability are necessary.
Faisal Rashid (Warrington South) (Lab)
Q
Nick Ashton-Hart: Several. I think first for the agreements you wish to transition you would look at the net economic benefit of transitioning them. You would then have to look at what likely changes the other party would be asking for—they would be doing the same analysis—and what changes you would ask for. You have to assume the worst. You have to assume the other party is going to ask for changes, and you have to assume that you will need to ask for some also. If you get lucky and you do not have to do any of that, that is great, but you cannot do this on hope. You have to do it on the worst-case scenario.
I think at that point you would have to bring in stakeholders to help you make that analysis. The expertise to do this is not all in government. It never is. It is also in the private sector and in academia. At the point where you had that you would know the basis on which you were transitioning the arrangements. This is not a trivial undertaking. Because of the regulatory impacts that newer deals, especially, have, you would also have to look at the consequences of certain changes to other arrangements.
For example, if there are most-favoured nation clauses in a deal that you wish to transition, as there often are, and if any changes are made to that arrangement when you transition it, it can impact all the other deals that have MFN clauses. This is now being discussed publicly, related to whether the EU could do an expanded services deal with us, and who would automatically get the benefits of it. For example, a Canadian deal would provide that the EU would have to give the benefits they give us to several other parties, Japan and Canada included.
We are in the same situation because there are MFN clauses in these agreements that we wish to transition, so you have to analyse the net economic benefit to you of the deal in question, but also the consequences of any changes to other deals that you want to transition, because you can guarantee that, for any MFN clause in any other deal, the parties that you are going to negotiate with will be looking at what you are giving in these other discussions and of course expecting to receive in them also.
There is a good reason why trade arrangements are slow, and there are not many going at one time. It is because this is an enormous number of moving parts to try to manage at one go—for us but also for the other Trade Ministries, because deals with us are not the only deals that they have going or that they are working on. If I were you, I would be asking the Ministry: “Look, what is your plan for dealing with these different eventualities?”
Faisal Rashid
Q
Nick Ashton-Hart: I think it is essential, aside from the benefits in terms of being a democracy that is looked up to by others as an example, and not wanting to set an example that is far below the minimum level of accountability in any other developed economy, which is what we would be doing—we would be setting a precedent here that should concern everyone.
Secondarily, it is in our interest to do that, because there is going to be a political hue and cry about various provisions in probably all the 40-plus deals. There is going to be something that someone does not like about them. That is the nature of trade agreements. Some sectors win and some lose. Losers complain and winners keep quiet mostly, because they do not want to provoke people who won. The objective is to have a net benefit, but that does not mean that within that there are not winners and losers.
There is going to be controversy associated with these arrangements. Having effective and robust consultation now will help insulate the negotiating process and provide a rationale for all of you, the Members, to go to your constituencies and say, “Look, there is a reason why we are doing it this way. We have had an oversight process. Here is what the country will get out of this.” For those districts or constituencies that will be negatively impacted by a deal, you will be able to go to your constituents and say, “Okay, on this one we may not do so well, but we will do well on this and this and this, and the net benefit to all of us is positive.” The consultation process provides all of you with the ammunition you need to explain why at a real level—the firm level and the sectoral level—transitioning the arrangements in the way that they will be agreed is in your constituents’ interests and the national interest.
Without that dialogue, you do not have that ammunition. Every time you are hit with a news story, you will have to go and ask the Ministry concerned, “How do I counter this?” Being reactive all the time on trade policy has a very unhappy history of negative views of trade in general, and of deals in particular. Criticism does not have to be true to stick, as I am sure we are all familiar. I would say—Nick might disagree—that there was some criticism of TTIP and provisions that were alleged would be in the deal, such as things that affected NHS procurement, which were actually excluded from the negotiating mandate. The fact that those criticisms were levelled did not stop there being a political cost to the negotiation as a whole from the allegation that those provisions would be inbuilt. On a pragmatic basis, there is a very strong argument for a robust consultation process, but the negotiators themselves are going to need information that is in the private sector and in academia as part of their negotiating arguments, and without a robust consultation process they will not have access to those.
The Chair
Can I say, before I go on to the next person, that I have at least six people who still want to ask a question and we have a maximum of 23 minutes, so can people bear that mind?
Mrs Kemi Badenoch (Saffron Walden) (Con)
Q
Christopher Howarth: It is important, getting back to the Trade Bill, that it only gives a power for existing trade agreements. These trade agreements are already in force and companies already rely upon them. When we talk about impact assessments, the biggest impact assessment is that these agreements are already in force or have already gone through a scrutiny process and may come into force, such as CETA. Obviously, in leaving the European Union, we are moving to a different scrutiny system. Before, they could be decided by the Commission, the European Parliament by qualified majority voting or, in the cases of mixed agreements, you would have to get unanimity, occasionally from devolved Administrations as well. We are moving to a new system, but these agreements are already in force.
The relationship with the European Union (Withdrawal) Bill is that we are keeping retained legislation and we are keeping the EU standards, so if there are any amendments to these agreements, they have to be in line with the regulations—the food safety and environmental standards—that are being retained in UK law. The scope for actually changing things is quite narrow. These have been through a scrutiny process. They are in force. This Bill is necessary, in my opinion, so that the people who rely on these agreements can be sure that they will be transferred over in time.
Mrs Badenoch
Q
Christopher Howarth: Trade agreements do traditionally take a very long time. In this case, they are already in force and we already have texts. Small amendments may need to be made around quotas—in some of the agreements we need to agree with the European Union and the counterparty how to split the quotas up—but the texts by and large have been agreed. In the future we may wish to come back to them to improve them or to fit them more to UK interests, but these agreements do exist. Trade agreements traditionally take a long time. I refer you to Parkinson’s law: that trade agreements tend to expand to the amount of time available to negotiate them. If you give trade negotiators 10 years to negotiate an agreement, it will probably take 10 years. In this case we have a fixed deadline, and I assume both sides will want to fit the negotiations and the necessary functions to that.
Barry Gardiner
Q
Christopher Howarth: I think it is true to say that the agreements the European Union made were fitted around European Union interests and that if the UK were starting from scratch, we may have had other interests. The EU interests would protect French farmers and the French audio-visual industry. You would get a price on the other side, say with Canadian agriculture. If the UK was doing it, we might do it differently. That is probably a discussion that would take longer and we would come back to later, and these agreements would probably stay exactly as they are. On the scrutiny side, we had a sort of mirror of this debate in the European Union (Withdrawal) Bill negotiation and discussions in Parliament. There may be some—
Barry Gardiner
Q
Christopher Howarth: There may be some minor changes, potentially around the EU agreements and our relationship with the European Union. If there is an EU-agreed quota in an agreement with a third country—in terms of how we split that up, how we change that or the wording of the agreement—then there may be references that need changing in the agreements. There may be minor changes, but I imagine the substance of the agreements will stay pretty much as they are.
Barry Gardiner
Q
Christopher Howarth: Indeed, it might be an opportunity for the UK to get a better deal, because if we are a more liberal economy and we have more to offer, we may be able to get better access.
Barry Gardiner
Q
Christopher Howarth: Yes, but speed will probably be the overarching thing that dictates that they will remain as they are for the foreseeable future. We may come back to that at a later date.
Iain Stewart (Milton Keynes South) (Con)
Q
Christopher Howarth: The timeframe that we are working on at the moment is that we will leave the European Union on 29 March 2019, so that will be two years, then three years after that. That is a substantial time in which to negotiate. The United States and Australia negotiated a full agreement in roughly two years. Some countries take longer, some less, but that would be a substantial amount of time to revisit and improve agreements.
Iain Stewart
Q
Christopher Howarth: The countries that the European Union has agreements with—South Korea, South Africa, Mexico—are major trading partners. Something that has not been mentioned so far is the plurilateral World Trade Organisation government procurement agreement, which gives British businesses access to over £1 trillion of Government contracts around the world. As a liberal country that tends to accept contracts from other countries, it is important that we get reciprocal rights for British businesses to other countries. Remaining part of that plurilateral agreement, which the Bill allows, would be important for British businesses when seeking Government contracts abroad.
Nick Smith (Blaenau Gwent) (Lab)
Q
Christopher Howarth: I work for a group of mostly Conservative MPs.
Nick Smith
Q
Nick Ashton-Hart: I am not really an expert in how the Australian Government do their consultations, so I cannot describe them in detail. I can describe how the trade officials who I deal with view them. From my conversations with trade officials over the past six or seven years, most of them find the oversight process challenging. The Australians are no exception to that.
For example, in the discussions on the flow of data that have taken place at the WTO and in the trade in services agreement negotiation, of which Australia is a part and which the US and Australia created, a significant portion of all the issues that delayed all the services parts—all the digital elements—of TISA were related to the flow of data and to the Australian negotiators’ view of what they could get their oversight processes to consent to in relation to it. A comprehensive change to their data protection regulation came into force about four years ago, and its structure made it impossible to evaluate how it would work in a plurilateral context because of how it applied liability when private information was given to non-nationals. That meant that they were unable to make an offer or respond to other offers for a considerable period of time—about 18 months, I think—as a result of their oversight process at home. That was in relation to just one part of the plurilateral negotiation.
That example has held true. I have seen it happen with probably half a dozen countries on various issues over time. If there is a political problem in one area, it generally gums up everything else because it is often not convenient for you to say, “I have a problem in Parliament at home, so I cannot talk to you about x and y.” Instead, you would say, “We are still consulting on that.” Meanwhile, you will ask for something impossibly difficult, knowing that the other party will then get stuck. Once your problem goes away, you can withdraw the thing that is causing things to stick over here, because this is the political economy. You do not want to be negotiating on your weaknesses. You want to negotiate on someone else’s, so you have to create them if you have a negotiating bloc.
Alan Brown (Kilmarnock and Loudoun) (SNP)
Q
Christopher Howarth: It is probably a matter of practicalities. There are a number of these around the world and starting negotiations with all of them at the same time is probably impractical. That is not to say that these agreements were not based on EU interests; UK interests are slightly different. There are things we would have prioritised to gain access for British companies and there were some defensive interests that were not relevant to the UK. Taking an example: citrus fruit or things we do not produce in this country. There were things we would have done differently.
These are probably questions to come back to at a later date. At the moment, it is about trying to make sure these agreements still exist when we leave the European Union, so it is the practicalities of getting these agreements moved over into the UK’s name and out of the EU’s name, putting the UK’s signature on them.
Alan Brown
Q
Christopher Howarth: If one of the European Union’s agreements has a quota in it, as the UK leaves, the counterparty might wish to continue to be able to export the same amount into the European Union and the UK. So it would be a three-way negotiation, which would involve splitting the quota up, with different countries taking different views as to what the fair way to do that would be.
Alan Brown
Q
Christopher Howarth: Yes, it would need splitting up. You either do it with the counterparty via the WTO and you would need to discuss it with the European Union as well.
Alan Brown
Q
Nick Ashton-Hart: It depends very much on the nature of the deals in question and how recent they are. All the deals tend to be more focused on tariffs and the like, whereas it is somewhat simpler. Where it involves services, yes, even though these agreements are in force now, as was explained, you still have to accept that what France wanted from that deal when it was negotiated, what Germany wanted, what we wanted: these are not the same as what we and the other party want now. There are things such as protections for certain industries that we do not protect, but the other party will say, “Can we take that out?” and we might say, “Okay, but then we want this over here.”
Human nature is such that, if you are given a chance to negotiate on something and it is of serious monetary value, you are going to ask for a better deal than you got last time. If we buy cars, we do this. We don’t go and buy the car and say, “We will pay full price”—although some people might—or a house or the like. Countries do not do this. So you have to assume that normal human behaviour is not going to be thrown out of the window simply because we are in a hurry to transition our arrangements over to someone else. You have to assume that human nature will still apply and the other country is still going to behave as a rational negotiating partner, which is to seek their advantage from our need for speed.
The only way then to proceed is to say, “Okay, let’s look at these deals as they apply to us now and let’s consider: what is the other side likely to ask for? What is it in their interests to ask for and is it in our interests to agree to it, because it is expeditious, or because it is in our interests, or both?” You have to treat this as a negotiation, not as a replication.
Barry Gardiner
Q
Nick Ashton-Hart: I cannot imagine that the constituencies of this country would see it any other way. This is a substantial portion of our GDP; it is a substantial portion of our export and import. How can you say to people that you passed up an opportunity to make things better, when that was part of the premise under which we are doing this whole exercise in the first place? And our other counterparties certainly will not see our need for speed as anything other than an advantage to them, because it is. We are the ones in a hurry. Japan is 1.8% of our exports or something like that.
The Chair
May I just say that I have at least two, and possibly three people who still want to catch my eye, and we have a maximum of four minutes left? So perhaps a short question and a short answer would help.
Gillian Keegan (Chichester) (Con)
Q
Nick Ashton-Hart: If people are trading with us now under an arrangement, there is an incentive for them to see that it continues. I am not suggesting that that is not true. What I am suggesting is that it is an opportunity for the other parties to ask for things that they wanted last time and did not get, or that the passage of time of those agreements—age—means that it is appropriate to ask now. I am saying that everyone needs to bring home some benefit for something.
Gillian Keegan
Q
Nick Ashton-Hart: I am saying that I have never seen or heard of a Trade Ministry not asking for some improvement when any deal is being renegotiated, because that is how you are seen to be doing your job.
Gillian Keegan
Q
The Chair
May I move on finally to Anna McMorrin, because she has been waiting patiently, for probably the last question?
Anna McMorrin (Cardiff North) (Lab)
Q
Nick Ashton-Hart: It depends on the nature of the agreement. If it is a situation where a quota has to be split, then yes. We see this in Geneva now, where the quotas at WTO level are being split up, or even our closest trading partners are arguing over whether one plus one equals one. In other areas, it is not necessarily the case. It really depends on the way the original agreement was made, and who else might benefit from a change to it through an MFN clause, or the like.
Anna McMorrin
Q
Nick Ashton-Hart: Where there are rules that we are accepting from the EU, then of course we have less flexibility to make a change if it is asked for by the other side; that would conflict, of course.
The Chair
Order. That brings us to the end of the time allocated for the Committee to ask questions. I thank witnesses for their evidence, and I thank Nick Dearden and Nick Ashton-Hart for their written evidence; I am sure that we are all grateful for it.
Examination of Witnesses
James Ashton-Bell, Chris Southworth, Tony Burke and Martin McTague gave evidence.
The Chair
Q
For this sitting, we have until 11.25 am. Would each of the witnesses please introduce themselves for the record?
James Ashton-Bell: I am James Ashton-Bell, head of international trade and investment at the Confederation of British Industry.
Chris Southworth: Chris Southworth, secretary-general of the International Chamber of Commerce here in the UK.
Martin McTague: I am Martin McTague, national policy director for the Federation of Small Businesses.
Matt Western (Warwick and Leamington) (Lab)
Q
Chris Southworth: There are four key elements within the Bill that are broadly in the right direction of travel around setting up a trade remedies Bill, sharing data and so on, but there are missing elements—I think we agree with a much wider community of non-governmental organisations and unions—where we need a more inclusive approach to dealing with trade, more democratic oversight and more policy connectivity. We are speaking in a context of G20, where there is a very public commitment to developing a free trade model that works for everyone. That is missing in the current Trade Bill.
Matt Western
Q
James Ashton-Bell: I think we start from the place that the Bill does a lot of really important things for business, in terms of providing continuity. Continuity is absolutely key in all business leaders’ minds when it comes to our trade relationship with the EU, but also with third countries and the World Trade Organisation. The Bill goes a long way toward providing assurances with regard to the WTO on things like procurement, ensuring—as you have heard—that trade remedies are available and provisions for replication of free trade agreements that we currently enjoy through the EU.
I think business is looking for more in the longer term, and there is a broader question about whether or not this is the right vehicle to use to create the kinds of structure that they need around consultation. Any major trade country in the world has extensive and formalised ways of engaging with civil society to ensure that they get the maximum amount of input into trade policy that they need. The question of whether or not this is the right legislative vehicle to create such a structure and such a process is one that I will leave to Members, but business is looking for those kinds of structure, and if not now, when?
Matt Western
Q
James Ashton-Bell: Yes.
Matt Western
Q
Martin McTague: Our clear priority is the transition process. It is vitally important that there is no cliff edge at this very early stage. Our members, and the small business community as a whole, see this as an enabling Bill, something that will help a smooth transition, so in principle we welcome it.
Matt Western
Q
Chris Southworth: There is a general recognition across the international community since the EU referendum—of course, that was followed by Trump and further issues across the G7—that the existing models for handling trade need to change. That is because there is a disconnect within society and over wider communities and regions, particularly in the lower-skilled areas, where they have not benefited from the growth of trade.
Everybody is looking for exemplars. Some countries have more structured set-ups, such as the US and New Zealand, where it is much less around the ad hoc consultation and engagement that we have in the UK. That is one key point to make. There are definitely lessons to learn from elsewhere, including the EU, I have to say. The propositions in the Trade Bill are a lesser option than what already exists within the EU. Although the EU itself can improve, there are elements of their structures that would work well for the UK, going forward. That is a key point to make.
The Chair
May I interrupt to welcome Tony Burke, who is the assistant general secretary of Unite the Union? We are very grateful to you.
Tony Burke: Apologies for being delayed. St Pancras and King’s Cross tubes were closed. I have done some fleet footwork to get here.
Matt Western
Q
James Ashton-Bell: I support everything that Chris has just said. For us, we look at the spectrum of different formal ways of engaging civil society. At one extreme you have the United States, which has an incredibly elaborate set of technical committees, numbering several hundred different members of civil society, to provide technical assistance to officials. At the other extreme there are less formalised systems for economies that tend to be a little bit less complex and tend to be significantly smaller than ourselves.
Business would come down somewhere along the lines of being closer to the US model than something less formalised for a less complicated economy that is also quite a bit smaller. Does that mean we need everything that the US model has? No, absolutely. We need a UK-specific bespoke model but it would probably be quite elaborate, to ensure that it takes in every business and wider civil society from across every region of the UK, across every size and shape of organisation and across all the different types of technical expertise, which crosses many different policy issues—everything from intellectual property to issues of data.
Matt Western
Q
James Ashton-Bell: I struggle to understand how any Government, engaging in trade policy, be it at multilateral or bilateral level, would be able to get the best possible outcome for that negotiation unless they were using the full strength of their economy, pooling from the best minds that exist within and outside Government.
Matt Western
Q
Martin McTague: It is difficult to draw parallels with any other country withdrawing from a 40-year relationship. The view that we have taken in the past is that consultation has worked well, inasmuch as the small business community, which we think is a vital part of the economy, has been listened to, and we would hope that that would happen in future. However, there is a temptation, because the bigger corporates sometimes have more access to Government, that small business does not really get listened to. This component, we think, is absolutely vital in the development of the policy.
Mr Prisk
Q
Martin McTague: At the moment our view is that the early stages of development of TRA look encouraging, but we know they are a consultation. We know that they are looking at a variety of different options, and we are willing to wait for the consultation process before we get into a committed decision.
Chris Southworth: The principles are there in terms of setting up a trade role and it is as much to do with the speed around that. I would echo the same thoughts: there needs to be a lot more consultation around them and there needs to be clearer evidence of learning best practice from others. We are not the only country proposing a Trade Remedies Authority. I would start with the idea that having a trade remedies authority and the core concepts that exist in this Bill feel broadly right.
Mr Prisk
Q
Chris Southworth: Yes, I would have thought so. I do not think there should be any opposition to the idea that one may need to evolve in time. The UK has to re-learn how it does trade as an independent country, so we will not get it 100% right in the beginning. It should be able to evolve over time, and if there is a better way of doing it, then do it.
James Ashton-Bell: I take a slightly different view. As to what is in the Bill at present, our internal analysis of the Trade Remedies Authority is that there is a fundamental question, and we are looking for an answer to it: that question is about who makes the ultimate decisions about when to take action and when not to take action.
Having an independent organisation to advise on the data that exists—or does not exist, in many cases—is useful. The EU has found time and again that it does not have access to the kind of data information it needs to draw the kinds of concrete conclusions that it would like to draw. Given that scenario, it is useful to have an independent organisation to make those choices and to be clear about what information is and is not there.
When you have things like the economic interest test that is currently being floated as part of this authority, which in essence allows for the identification of particularly problematic trade behaviour from a third country and for it not to be actioned by the Government or authority, it means that there will be a decision at some point not to take action. If there is not enough information, then that in itself becomes a subjective decision about which parts of the economy are worth protecting using these particular tools, and it is argued that, if a subjective decision is going to be made, then it needs to most certainly be made by a Minister who is accountable for making those choices.
Tony Burke: Right from the get-go, the Manufacturing Trade Remedies Alliance, which consists of three trade unions and a number of trade associations including UK Steel, chemicals industries and ceramics among others, pressed strongly to get a trade remedies clause or a structure in there. We were able to put forward our proposals in advance of the discussions taking place at this level. One of the things that we would say from the trade union point of view is that it is absolutely essential that the TRA has a trade union voice—a worker’s voice—on it, particularly at non-executive level. We should also obviously be subject to International Labour Organisation conventions that protect workers in that remedies arrangement. We are supported by the employers on this. From our point of view, the situation in Unite is that we have many members in manufacturing who have suffered at the hands of dumping: steel, tyres, ceramic, chemicals and pharma. It is a big concern for us. We would see that we need a remedies authority that is transparent, and that has trade union and employer representation. At the end of the day, Parliament has to have consent over any decisions made.
Mr Prisk
Q
Tony Burke: As it stands, but we do not see the transparency that we would like to see, and we also have a view about what appears to be an ability for the Minister to appoint people. We believe that working people and companies should have an opportunity to have a say, and also for trade unions to bring a case. This is important. We have learned from America. We have worked closely with the steelworkers’ union in the United States. They as a trade union in America do bring cases to protect their members in steel, rubber, paper making and industries like that.
Barry Gardiner
Q
James Ashton-Bell: My organisation does not have a defined position on that blank sheet of paper you have just described, but to follow your rationale, and consistent with what I have said so far, bigger organisations do not have a monopoly on understanding how trade impacts the economy. In anything where you are making choices about trade and how it will impact the wider economy, you should have a wide and balanced group of people advising Government, or an independent authority, about how to make those choices. That means, indeed, that small business are very much equal to big business, and workers also, because workers are just as impacted as the businesses themselves.
Chris Southworth: I just want to clarify my point. It is exactly the same: the representation is a critical point. An independent body, yes, but there must be representation within that independent body to represent all the important voices, which includes all those here, but I would also include NGOs and civil society, who have equal interest in the implications of trade. They must be at the table and that has to be in everyone’s interest, including business—big, small and medium.
Martin McTague: Barry, it will not come as a massive surprise to you that, yes, I do agree that small business should be a serious voice on this. It is nice to know that James supports me. That is a welcome change. [Interruption.] It is something that we have clearly got unanimity on.
Mrs Badenoch
Q
Chris Southworth: Ultimately, it is about having a rounded decision made by an independent body. That political oversight is critical—James is completely right. Ultimately, it is going to come down to a political decision whether a decision is made one way or the other. If you operate in an organisation like the World Trade Organisation, then all these voices come into play. It is incredibly important that the decisions prior to any engagement in a global environment are made in a good way that is inclusive. The role of Parliament is critical in that too.
Mrs Badenoch
Q
Chris Southworth: Trade is slow, it is technical, and it is difficult. It involves implications for people’s lives and for businesses of all shapes and sizes in every region. There isn’t a component of public or professional life that is not impacted by trade. It is important that everyone has their say, so that when the negotiations begin, the negotiators and all the stakeholders are confident on what those positions are. It is equally important that, during the negotiation when important points come up that are difficult and tricky, which they always are at that stage, there is also an opportunity to come back and say, “What do you think? Do you agree with this, because we are going to have to make a compromise?” That could mean an implication for Welsh farmers, businesses in the midlands, or local communities in Sheffield. It could mean all of those things.
Mrs Badenoch
Q
Chris Southworth: Again, you need to come down with a political decision at some stage on whether or not it is right in terms of timing. The key point is: has there been proper consultation beforehand and has every stakeholder had the chance to voice their views in a proper structured format, not throughout the consultations, but in a proper structured way? That is the important point. Ultimately, there is always a sensibility around trade remedies, particularly if you are talking about things such as steel dumping. That has huge implications for a lot of people, particularly in geographies that tend to be vulnerable, so there is a difficult decision to be made. It is important that everyone has a chance to have their say about what that decision should be.
Mrs Badenoch
Q
Tony Burke: I think we would agree with everything that was said about the make-up of the board. It has to be wide-ranging and it has to have expertise. On the point you raised: when we put our evidence in from the Manufacturing Trade Remedies Alliance—industry and the unions—we wanted a system that worked. Don’t forget, we have not done this for a long, long time. We needed to make sure that we got it right. There were some folks’ voices saying, “Let’s have a fast-track. Look at America, it takes a long, long time”. We said, “No, if you do fast-track, you could get it wrong”. You need to have a system that works, step by step, but is widely consulted on, as has been said.
We may have problems in a particular industry, where we have to bring expertise in and we need to have people in that discussion at the remedies authority who know exactly what they are talking about and are able to demonstrate it. They can be very complex. When we look at the US system, it takes a very long time and moves very slowly. We do not want to rush it, but we need something that works and is as wide as possible. As I said earlier, I do not think impartiality comes into it, providing there was oversight from Parliament.
Faisal Rashid
Q
Martin McTague: We believe it has been taken into account at this early stage, but a lot more consultation needs to take place. We have a position and we are developing that position on exactly how this will affect smaller businesses. At this stage, it is not a developed position.
Faisal Rashid
Q
Martin McTague: It is only in conversations with officials that we believe that a lot of those consultations have been accepted, or at least understood. We are not at a position now where we are taking a firm line on this issue.
Faisal Rashid
Q
Martin McTague: I can come back to you with concrete examples, but I do not have them at my fingertips.
Chris Southworth: No, I do not think it has been satisfactory at all, certainly for the international community, which is what I represent. When I asked the question of officials, “Who have you actually consulted?” I was told, “The USA and Japan.” That is completely inadequate in terms of the countries that the UK is trading with. Their voice—they also have SMEs, also in supply chains, also funding livelihood—is equally important. This is going to affect other people’s countries and communities. So it was completely inadequate and haphazard. If you happen to name a name, that person will get consulted. If that person happens to be missed, we do not know, and they are completely missed off the consultation. That is not a way to consult on trade. It is slapdash.
Faisal Rashid
Q
Chris Southworth: As I understand it from the explanatory notes and the Secretary of State’s speech on Second Reading, there is no intention of consulting within the Bill—that all comes later, whenever that is. It was not clear in any of the communications whether that would be a further Bill or a paper. It all sounds distinctly like it will be something informal, which I would argue is completely the wrong approach. Bear in mind that the Bill is the first opportunity for Government to tell the world, not just the UK, how they will create a free trade model that works for everyone. This is the moment to set out the stall on what that structure for engagement will be. It is all missing in the Bill. There is nothing in it.
Faisal Rashid
If there is no new Trade Bill, those Henry VIII powers stay.
Chris Southworth: I go back to my point that, if I were living in Scotland, Northern Ireland, Wales, the Yorkshire Dales—where I am from—Sheffield or the north, I would be concerned about where my voice is coming into this process. We are talking about rolling over the terms of 88 countries. That is a lot of countries, and they are not all EU. It is extremely unlikely to happen. I would want to have a say in that process, not to wait.
Tony Burke: When the Manufacturing Trade Remedies Alliance put forward its document, which it had worked considerably hard to produce over a long time, we were surprised at the speed at which the whole thing moved. There were areas that we had gone through in great detail to prepare.
As I have said, there was unanimity on things such as International Labour Organisation conventions, trade union representation and industry representation, and on some of the real technical detail as well, which we could not go into today. We would be happy to revisit that document. I understand that the other folk from the MTRA are giving evidence to a different Committee today, and I think they will say very much the same thing. We have no problem in going through it again and picking out some of the key issues from the point of view not just of trade unions but of industry.
Some trade associations on that body are very concerned about what could happen to their industries. They will be putting forward those points of view today. The speed at which it was done was far too fast. The view seemed to be that that was it, even though people had spent a lot of time putting the arguments together.
Tom Pursglove
Q
Tony Burke: The big danger is that, if we do not have one that works on day one, we could be subject to what we have already seen in the past few years. Steel has been subject to the most horrendous situation for the past two or three years—lots of jobs have been lost. The industry came together to try to make sure that it holds together, but without a trade remedies structure in place, the big fear is that we would be subject to the dumping of steel again, particularly from countries such as China, although I am not singling it out. That is one of the issues.
There are other constituencies where we talk to colleagues—MPs and others—and our members. The tyres industry, for instance, is very concerned about the dumping of cheap tyres on the market, which would undermine our premium brands and well-paid skilled jobs. We need something in place. Of course, as I have said, we have not had anything for 40 years and it will take some time to work through, but it is important to have a wider group of people who can push the arguments for various industries.
My fear, and the fear of our members in steel in Corby and other steel areas, is that, if we do not have trade remedies in place, we could be faced with horrendous dumping on the basis that, in respect of what is happening and what has been said, there is massive over-capacity. Steel in particular is being sold at cheaper rates than it costs to produce.
Tom Pursglove
Q
Tony Burke: You have to have something in place. Certainly, many of our members in the steel industry have followed this and are extremely concerned about what could happen and about market economy status being granted to China. Those are the key issues, and they will expect us to keep pushing the issues wherever we can to get this right. It was said earlier on. We do not want to just harp on steel—there are lots of other industries—but it is one area where we have had a really bad time. Many of our members in the steel industry understand the arguments and would expect us to come back to the issues again whenever we could.
Tom Pursglove
Q
Tony Burke: We have not got to that situation directly in talking to our shop stewards and reps. We have been talking with our parliamentary colleagues who have steel in their constituencies, and our union reps are talking to them, so there would be concern.
Judith Cummins
Q
Tony Burke: No. We have been working with the Manufacturing Trade Remedies Alliance, which includes a number of trade associations—as I have said, steel, chemicals, fertilisers and so on—and I think there has been a coming together. We would have preferred a longer period, obviously, to go through this in detail—a longer period to argue for the things that we put forward in our document, which were generally accepted by everybody. To answer your question, the only way we are going to be able to make sure that the voice of working people is heard is to have representation on that body directly from the trade unions.
Chris Southworth: I would make an additional point. I completely support that point, but if there is one thing we have learned over the last year and a half, it is that we have to accept that there is generally a low understanding of trade, and trade itself has moved on significantly in the last 40 years; the world we live in today is not the same as it was 40 years ago, either. I think that extra diligence in relation to consultation and informing the public, and business for that matter—businesses are in the same position, surprising as that may sound—is a good idea.
Bill Esterson
Q
James Ashton-Bell: Specifically when it comes to trade remedies, I think the most important place to start is: where have mistakes been made and where have processes not delivered outcomes, either in a timely way or in terms of the right kind of outcomes for the wider economy? I know there is a lot that officials have been looking at to learn what not to do from the EU, because everyone agrees that that system is not perfect. Much of that thinking has coloured some of what has gone into this Bill. There are aspects of the US system that do not work. No one has a system that we have found you can hold up as an absolutely perfect system. There are always going to be different balances that have to be made, but the fact that officials working on this have looked at the US, Canadian, EU, Japanese and Swiss systems means that they have certainly made a good effort to try to learn from others’ mistakes, and that is an excellent place to start.
Bill Esterson
Q
James Ashton-Bell: Getting to some very technical areas that, as the Bill stands, would be covered by secondary legislation—so the devil will be in the detail—for me the central question is who ultimately makes decisions about whether to take action, where to take action and what is a proportionate action to take. The reason I say that is because taking action in a case of using trade remedies and defence is a highly political move and a highly economic move. It is never without controversy and, as I mentioned before, never with absolutely perfect information and data to make an objective decision.
Having very clear reporting structures and decision-making structures about who is the ultimate arbiter is key. Having lots of time for everyone to feed in as much information across the wider economy is key. So have as much information as you can at the beginning, but have a very clear process for using that information and have clear decision making to ensure that the outcome is someone’s responsibility and that they will be held accountable for it. It feeds into our wider industrial strategy; it is not just a trade issue.
Bill Esterson
Q
James Ashton-Bell: The mistakes are usually procedural. I am not going to pronounce on individual decisions because, as I said, they are never made without controversy, and for me to pronounce on another country’s individual trade remedy decisions would put me in a very difficult place. In terms of process, some have commented that in the American system, they can be very rushed and not all information or all stakeholders are taken into account. In other instances, such as with the EU, the process can be so long that they do not actually take action early enough to ensure that you can fix the problem when it is a problem. Procedure is absolutely core to most of the problems that occur when designing a system like this.
Chris Southworth: I have a difficult situation, which is a real one: the market status of China. That was very live last year or the year before. You have a classic situation there where we clearly want to be supportive to China as it comes on board as a global leader. China itself knows perfectly well that it wants to wind down steel production and that it is over-producing, but you cannot just wind down the Chinese economy overnight—that will take 10 years to do, as Europe did with its mountains in the past.
Where is the balance? In the meantime, the impact is on steel communities in the UK, across Europe and other parts of the world—we are not on our own—but who decides what that balance is? There is an implication either way on either the political relationship with China and supporting the Chinese economy, or local communities here in the UK. Someone has to come down and say, “Okay, this is where we are going to be.” That may potentially evolve: you may want to take several positions over a period of time so that you get to the end goal that you collectively want, but that must involve the people who will be impacted by those decisions.
Bill Esterson
Q
Chris Southworth: I have already made the point, and broadly speaking I support the comments made here that you have to have something on day one. Do not be afraid to evolve that over time, but you have to have something in place that feels broadly right. Having listened to the conversations here, I would say that the stakeholder representation needs to be looked at, but the basic structure is there to work with—get on with it.
Bill Esterson
Q
Tony Burke: I agree with some of my comrades here. Everybody has got to look around the world at different systems. In Unite, we are focusing on the US system primarily because of our relationship with the United Steelworkers union in the States, which, as I have mentioned before in other areas, almost does this for a living. It has officials on the hill working on this all the time, and at times it is very time consuming and costly. So if there are many mistakes, they can either be rushed in the States, as has been said, or be very slow and very costly. We are looking for a system that works and that can be easily understood. I do not know whether you want to extend the debate into the market economy status for China. I will resist the temptation, but I have to say that that is a major issue for us in our industries.
Martin McTague: The only thing I would add is that in the States there is a temptation—there seems to be plenty of evidence that it happens—for the bigger, more concentrated industries to get dealt with more quickly. What you have got is that the more fragmented industries that are supplied by lots of smaller companies do not get dealt with effectively.
Gillian Keegan
Q
Tony Burke: The EU system was slow. At times, when we had the situation that I mentioned—going back to steel, when we had a crisis—we were quite concerned about the glacial pace of getting the whole thing moving and recognising what was happening. We are looking for the TRA in the UK to be, as I said, one that we can move forward on, and for decisions to be made that will assist companies and industries fairly quickly, without being too rushed—you need to take opportunities to listen to what people have got to say and take the best advice and evidence.
Gillian Keegan
Q
James Ashton-Bell: My only comment would be, based on what is in the Bill, that it feels like there is a good framework to start with, and to work from that to create a better version of what the EU currently has, but much of whether or not that will be successful will be defined in secondary legislation, I believe. Based on what I have seen, we have a good starter for 10; we now need to build on it and ensure that more consultation responses on some of the more controversial issues are taken into account, and then translate that into secondary legislation.
Chris Southworth: I would support those comments. I would not be too quick to dismiss the EU; they are very difficult decisions to make across 27 countries. The decisions themselves are incredibly diverse, as well as the 27 countries being diverse. There are very difficult decisions when you are talking about these kinds of issues around trade remedies.
Gillian Keegan
Q
James Ashton-Bell: Correct.
Chris Southworth: I agree.
Martin McTague: The principle is that we want to get this thing up and running as quickly as possible—efficiently and possibly more efficiently—while taking into account some of the interests of smaller businesses. I think that that is clearly understood, and we support the points that James made earlier, but do we need it? Is it something that essentially has to be there on day one? I do not think there is any doubt.
Barry Gardiner
Q
Chris Southworth: Again, I think it all goes back to consultation and scrutiny. If people have an opportunity to look at the measures or issues properly, you are more likely to head those issues off. I agree that we do not want to become the second best option, or the optimal option for the wrong reasons, if you know what I mean. At the end of the day, these are people’s livelihoods, so it is very important, but it comes back to the same premise throughout this conversation: consultation, proper scrutiny across the stakeholders with Government and then coming to a conclusion as to what is right.
Barry Gardiner
Q
Chris Southworth: If we are going to create a free trade model that works for everyone, the answer is absolutely yes. There must be those considerations and there must be that input from the range of stakeholders. It has to be the right way forward. It is the only way forward, because what we definitely know is that what we have at the moment does not work. The backlash to that model is sufficient to make everybody sit up in their seats and say, “That doesn’t work, let’s try and be better.” The answer to your question is yes.
James Ashton-Bell: I agree with that. We do not have a defined position as an organisation on this, but I would say that we do have a defined position that trade, industrial strategy and your wider domestic agenda are inherently linked and should never be seen as running in parallel or separate. Given those concerns, we would say that you would never take a decision on anything to do with trade defences without taking into account every impact on your wider economy before making that choice.
Tony Burke: I agree. The question of taking the environment into account is important, but so is this question of social impact. When you look at what could happen with the dumping of goods and how that affects particular companies or industries that centre around certain areas, I think it is absolutely essential. As colleagues have said here, you have to take into account an industrial strategy that ensures that all regions and industries—particularly foundation industries—are protected as best as we can possibly do it. We definitely would need to include the environment, but social impact on localities and industries is very important.
Barry Gardiner
Protect Mr Pursglove’s constituents.
Martin McTague: The only thing I can add to that is that I do not see anything in the Bill that prevents you from doing that. This is something that we would support in secondary legislation.
Barry Gardiner
Q
Tony Burke: Are you referring directly to the MTRA’s evidence, Mr Gardiner?
Barry Gardiner
Well—
Tony Burke: Yes. Well, as I said earlier on, one of the issues was that we have done a tremendous amount of work on this and lots of wide consultation. We came up with our proposals and we were quite surprised that almost overnight that was what we were going to do. What was the feeling? The industries represented on there were somewhat taken aback that it was done so quickly, and concerned—as would be expected—about whether their voices would be listened to. From the union’s point of view, that was very much the same. We thought that we had done one hell of a lot and put the arguments there very clearly, and obviously some of the key issues for us, such as ILO standards and employment protections, were not there. Hopefully we can try to revisit them and get them in at some point.
Barry Gardiner
Q
Tony Burke: I believe that was the case, but then I will stand corrected. I remember it all happening.
Barry Gardiner
Q
James Ashton-Bell: The thing I can say is that the optics were not ideal.
Barry Gardiner
You should go into the diplomatic service.
James Ashton-Bell: We start from a position that much of what is in this Bill is a framework. The framework itself can be argued to a greater or lesser extent as non-controversial. The controversy starts arising when you start putting in the detail that is not currently in the Bill as it stands and, from our perspective, more importantly, what is not in the Bill at all and probably should be. Those are bigger questions.
On that basis, we know a number of conversations happened in the run-up to publishing this Bill, particularly around the issue of dumping. The elements that went into the Bill seemed to be the ones that were the least controversial and could be built around with more detail. Presentationally, was it the right thing to do? Maybe not, but I have more confidence that there is opportunity for the House to alter this legislation to fill in on the more controversial element.
Chris Southworth: My overall impression is twofold: too fast, and not enough consultation of the international business community, bearing in mind we are talking trade here. This is not public health in Yorkshire or somewhere. This is trade. We must be talking to our trading partners, who are just as perplexed and confused about what is going on over here as anybody else. I don’t think they were consulted enough, partly because of the speed and partly because there was not enough communication as to what the UK is trying to do. That would be my answer.
Martin McTague: The best way to answer this is that small business as a whole is completely split down the middle. If I speak to the average leave voter, they would say “Why don’t you get on with it?” This isn’t fast enough for them. The average remainer will consider it a recklessly rushed process. We are not reaching a conclusion—it depends on which perspective is looking at this. That is largely the view we are getting from small businesses.
Barry Gardiner
But however quickly you take the process, you would want—
Martin McTague: How quickly you take the process is either perceived as being far too fast or reckless.
The Chair
I have at least three people still seeking to catch my eye and we have a maximum of eight minutes. If we can have short questions and short answers, and if a panellist does not feel they have anything to add to someone else’s answer, perhaps we can skip on, just to try and get as many people’s questions in as possible.
Alan Brown
Q
Chris Southworth: Overall—not just the Trade Remedies Authority—I would be concerned if I were in the devolved Administrations. There is specifically no opportunity for the devolved Administrations—or the regions, I have to say—to feed into decisions on trade. I would be very concerned about that, particularly in the devolved Administrations, where there are vulnerabilities on a whole range of different industries.
Alan Brown
Q
Chris Southworth: My point is back to James. What is missing in the Bill is clear direction on what the Government are going to do to create a new, more inclusive structure to include all the stakeholders. That is the central point to all of the content of the Bill and every other Bill relating to trade, going forward. We must do things differently and it is all missing. There is not even a reference to it. There are references to things that will be very agitating, such as Henry VIII powers—the ability to overrule. That, to the outside world, will look like an aggravating factor, I would have thought, when we need to do the opposite and be more inclusive.
On the world stage, I have to say, the UK Government are exemplary on this. We are pushing out the message very publicly, as the Secretary of State was doing in Argentina just before Christmas time at the World Trade Organisation ministerial conference, around inclusive trade—the need to do trade for everyone and to make it work for everyone. It was exemplary. We were the most vocal Government around it, actually, but back home, when you look at the Bill, you think “That doesn’t make sense.” That was my reaction to it.
Alan Brown
Q
James Ashton-Bell: I agree with that.
Faisal Rashid
Q
Tony Burke: As it stands, no.
Chris Southworth: Look at what you have got today. That is what you get when you do not get proper consultation and involvement in trade. That is what we are dealing with right now: huge social division, division and disparity across the regions, industries vulnerable. You get all of that. That is what we are dealing with. That is what you have if you do not make change. That is why the Bill needs to demonstrate change.
James Ashton-Bell: The reason we have been calling for a very formalised form of consultation is twofold. One, there are many examples in history—many countries have designed very elaborate free trade agreements that businesses do not use because they were not designed with business in mind. That is a waste of everyone’s time and our negotiating effort.
The second reason is that we find in many instances, as we saw when trying to ratify CETA, through Belgium, or with TTIP, if you do not have an inclusive process that is incredibly formalised and elaborate, you actually lose public support. Having the right advocates to push the deal across the line is something that is good for the economy. It needs to be grounded in fact to ensure that it is good, and also something that has consensus and that we can actually stand behind.
Tony Burke: Again, I am in danger of agreeing with a lot of folks in what they are saying at the moment. Regarding what has just been said, if you look at CETA and TTIP, there was massive opposition from across the spectrum. It is important that we get this right, and inclusivity is the key. We had no involvement in discussions with regard to the UK in those trade agreements and I think the same thing could happen again if we are not careful. We cannot just go casting around trying to pick one off the shelf. This is going to be a very complex issue, so everybody needs to be on board.
Martin McTague: We have regarded this as an enabling piece of legislation. It is a framework. I can say that the area where TTIP really came alive for small businesses was when they introduced the small business chapter, which meant the real concerns of small businesses had a basis on which they could discuss those issues and get them properly grounded.
Matt Western
Q
James Ashton-Bell: I do not believe the Bill as a vehicle can deliver a good Brexit in any scenario. There are too many Bills and pieces of legislation that are necessary to deliver a good Brexit. This is one piece of the puzzle. There is a lot of detail that is not in here. Our position is not necessarily that that has to be in here. There are other pieces, like the consultation issue, that we believe need to be formalised in legislation. That could happen at a later date.
Our concern is that to deliver a good Brexit we are going to have so many pieces of legislation in a very truncated period of time. A lot of pressure will be put on Parliament to rush through legislation without properly scrutinising it, or legislation will not make it through. Either way, we get a bad outcome. Our question comes back to the one I started with. If there are essential elements for your trade policy, if they are not in this Bill, why not, because you have it in front of the House anyway?
The Chair
Order. That brings us to the end of our time allotted to the Committee to ask questions. I thank our witnesses on behalf of the Committee for their evidence, in particular Mr Burke, for the tortuous journey he had getting here.
Trade Bill (Second sitting)
Tuesday 23rd January 2018
(7 years, 9 months ago)
Public Bill CommitteesTrade Bill 2017-19 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 23 January 2018 - (23 Jan 2018)
The Chair
For those of you who do not know, I am James Gray. I am a stand-in for Joan Ryan, who unfortunately has, I think, a family problem of one sort or another. I shall be in the Chair for this afternoon’s proceedings. I mentioned earlier on that, contrary to normal practice, I voted on Second Reading in favour of the Bill, but I do not think that that affects my ability to be dispassionate. A Chair who had not voted on the Bill could not be found, so that is why I am in the Chair—I hope that is all right. With that, let us have the witnesses in, please.
Examination of Witnesses
Dr Lorand Bartels, Dr Holger Hestermeyer, Jude Kirton-Darling and Dr Brigid Fowler gave evidence.
The Chair
Q
Dr Fowler: I am Brigid Fowler, from the Hansard Society.
Jude Kirton-Darling: I am Jude Kirton-Darling, a Labour Member of the European Parliament for the north-east of England, and a member of the European Parliament Committee on International Trade.
Dr Hestermeyer: I am Holger Hestermeyer, the Shell reader in international dispute resolution at King’s College London.
Dr Bartels: I am Lorand Bartels, a reader in international law at the University of Cambridge, and senior counsel at Linklaters.
The Chair
I do not know whether you have a thought to do so, or would like to do so, but you would be more than welcome to make a short introductory statement if you wish. If not, we will move straight on to questions, starting with Barry Gardiner.
Barry Gardiner (Brent North) (Lab)
Q
Dr Hestermeyer: The first thing to note—in fact, it is even in the Government’s comments on the Bill—is that the deals will be technically new international agreements, so they will be technically separate. As to their content, first, there are the technical details that will need to be changed—for example, rules of origin, which define when a product benefits from a trade deal. Those are quantities, so they will say, “50% of a car has to be from the EU.” That, of course, no longer fits; it will have to be the UK, and the numbers will have to be changed too, because a UK car is substantially now 44% UK-content. We will not benefit from the deals if we do not change the numbers. Those are technical issues, but they are vital.
There are some deals that are structurally so different that, quite frankly, I wonder whether we really want to reproduce them one-on-one. For example, Norway, Iceland and Liechtenstein are in the European economic area—as was recently explained, in the sidecar to the single market. Do we really want to reproduce those deals by statutory instrument? It seems peculiar to me that we would want that. Turkey, for example, is in a customs union with the European Union. Do we want a customs union with the European Union? We might say yes or no, but I wonder whether a statutory instrument is really the way to take those decisions. Switzerland has a whole number of agreements, some of them linked by what is called a guillotine clause, free movement. Do we want that? That probably could not be reproduced even if we did want it, so that is also a no.
You might say, “All this is insignificant,” but if you add up the numbers, the EEA is 2% of UK trade, according to the Government’s assessment of the Bill; Turkey is 1.3% and Switzerland is 3.1%. That amounts to roughly half the trade we are talking about, or half the 15% that the Government assessment arrived at for those agreements. I do not think that will be rolled over, because I am not sure we would want it, quite apart from the technical issues that will arise and the question of whether other states and our partners will say, “We also want something.”
Dr Bartels: I would rather focus on the implementation aspects. Obviously, the question of which agreements the Government choose to roll over is a political decision; it depends on negotiations and so on. My reading of the Bill is that it talks about the implementation of those agreements. What is important there is to identify the scope of the agreements that can then be implemented.
One point of interest is that the Bill extends to agreements that have been signed but not ratified as of Brexit day. I think we can safely say that that is likely to be the comprehensive economic and trade agreement with Canada, the agreement with Japan and others as well; and if the EU agreement is provisionally applied at the same time, some might think that they are in force and ratified. In fact, I found the language in some of the documents around this area blurred the point a little bit, but there is a fundamental difference in international law between a signed and provisionally applied agreement and a ratified agreement. The Bill is quite extensive when it comes to signed agreements.
There are other points to do with the definition of the sorts of agreements that are covered here, such as a free trade agreement, which is here defined to include a free trade agreement and a customs union agreement by reference to World Trade Organisation definitions. Then, interestingly, we have in clause 2(2)(b),
“an international agreement that mainly relates to trade, other than a free trade agreement.”
I do not know whether you would like me to say anything about that now. It could be quite broad. I noticed one idea in some of the amendments, which was that it could be further defined as including a strategic partnership agreement, the language used for the framework agreement sitting on top of CETA, and mutual recognition agreements.
I must say that I think the amendment is very comprehensive; for a start, the strategic partnership agreement is not even tangentially about trade, so it could not really be described as an agreement about trade. The point of it is political and human rights conditionality and so on. In that sense, the definition is over-inclusive. It is also under-inclusive, in the sense that mutual recognition agreements are only one type of agreement relating to trade that one might legitimately want to include here. For instance, one would also have customs co-operation agreements as an obvious agreement that should be rolled over and implemented.
The broader point is that, despite what I said about the strategic partnership agreement, it is an outlier in this respect. A lot of agreements have to do with trade. Environmental agreements have trade aspects; the Montreal protocol on substances that deplete the ozone layer is all about banning trade in ozone-depleting substances. The convention on international trade in endangered species is all about trade in endangered species.
Therefore, I think the definition is a little bit unclear. One could say, “Well, it’s agreements that just liberalise trade,” but that is a problem too, because FTAs do not just liberalise trade. They have intellectual property provisions, which might arguably in some way promote trade, but more likely investment. Certainly, they are not the first thing that you think about when thinking about a trade liberalising agreement. There are provisions in the FTAs in addition to intellectual property: competition law, labour and environmental protection provisions are in all the modern EU agreements that we have talked about. Essentially, this gives the Government the ability to implement labour standards provisions, which include not exactly sanctions, but obligations that need to be performed. Frankly, these two Bills strike me as very old-fashioned; they do not seem up to date with the reality of modern trade agreements.
Jude Kirton-Darling: I will follow on directly from that last thought, from my experience inside the European Parliament as an MEP, scrutinising trade policy at EU level. Of course, our MEPs have done that job for the last few decades. From our perspective, what really is missing from the Bill is the parliamentary scrutiny dimension. No-one on the panel has mentioned that so far. In terms of process, compared with the parliamentary scrutiny powers that British MEPs have today in the European Parliament, the Bill is an enormous step back in democratic oversight of trade agreements.
To add to what has already been said from a legal perspective about what these trade deals are, any kind of roll-over is likely to come up against the offensive interests of our trading partners. We have already seen that what was supposed to be quite a technical question of the division of tariff-rate quotas going to the World Trade Organisation has turned into an enormous political issue, with countries who supposedly are our friends and allies defending very actively their offensive interests in relation to tariff-rate quotas.
Once we start opening trade deals up to technical tinkering, whether that is a number here or a point there, our trading counterparts will also use that opportunity to try to get a bit more leeway for their interests. It is likely that these deals will be very different at the end of the process from what we have at the beginning. That parliamentary scrutiny—the role of MPs in ensuring that there is democratic oversight—is absolutely crucial but entirely missing from the legislation.
Dr Fowler: If the question is which of these agreements will change significantly, my answer is, we do not know that. Other people who are much more expert than me in the details of trade agreements would have better sight of that, but as someone who looks at what is coming to and through the Westminster Parliament, we simply do not know at the moment. On that basis, I make two points.
First, Parliament needs to be happy that it has procedures in place to deal with agreements that might be changed significantly. Even the Government have indicated that that is a possibility—they use language about substantive change in the Bill documents. Secondly is the point about transparency and possibly some kind of reporting function, which does not have to go into the Bill; it could be done through other means. However, I feel that, given the number of these agreements that have to be dealt with in the amount of time that we are talking about, some kind of regular reporting transparency about exactly what is going on would be useful to Parliament.
The Chair
Thank you; that was very useful. It is not necessary for all four members of the panel to answer all the questions. You may want to target them, because we have half an hour left and we want to make the best use of our time.
Mr Mark Prisk (Hertford and Stortford) (Con)
Q
Dr Bartels: One of the features of the package that you have been presented with is a split between fiscal and non-fiscal measures that can be adopted. I am not entirely convinced that that is a very sensible division of tasks. For instance, because of that division, what seems to be missing is the ability to impose quotas—not tariff-rate quotas but quantity quotas—as safeguard measures, which is permissible under WTO law and is done. Because of the split, nothing on those measures is set out in this agreement, and the other agreement only deals with duties, so you are limited to tariff-rate quotas. That is one overall observation. I could say other things about the treatment of developing countries in the other Bill, which I find under-complex, to use a German term that my colleague is fond of.
More directly to your question—again, this links to what I am saying about the split—the major issue when it comes to the Trade Remedies Authority here is that we do not have it in a context that enables appeals. I know that in the other Bill there is a reference to the possibility of an appeals mechanism. The United States is very big on appeals—it is very elaborate. Of course, one can disagree with the way in which the United States conducts itself—we have all paid some attention to the Bombardier dispute and the United States’ interpretation of its WTO obligations—but at least formally speaking there is a sequence of decision making that includes a court, appeals and so on established there, and we do not have that here. It is very, let us say, basic at this point.
On the rest of it, reading this together with the other Bill, I would say in general terms it looks fairly standard. There are some choices you can make when setting up a Trade Remedies Authority, such as the duties that can be imposed and whether you go for a lesser duty rule or not—we seem to be doing that here. One can make a political choice on that, but in general terms, other than the point on appeals of decisions, and connected with that the relationship between the authority and the Secretary of State, which here is extremely close and in other systems might be a little more arm’s length, I think the detail of what the authority can do is fairly standard.
Mr Prisk
Does anyone want to add to that?
Jude Kirton-Darling: I would add one thing. I heard the evidence this morning in which there was quite a lot of discussion of the EU trade defence instruments and the EU system, and some of it was a little bit out of date. During the steel crisis, quite a number of reforms came in to modernise and speed up trade defence inside the EU, mainly led by the European Parliament. That is one of the key elements missing from the Bills: the role of Parliament in terms of oversight and scrutiny.
If I think about the role of MEPs when it comes to trade defence instrument questions, we have the right to veto proposed duties and to scrutinise all of the Commission’s proposals, we have access to all of the documents in relation to investigations, and we can demand closed-door meetings with Commission officials to really get into the detail of those investigations. It seems to me that lots of that scrutiny is missing from the proposals on the table. That scrutiny gives a quality to the process of ensuring balanced trade defence instruments that are effective.
Mr Prisk
Q
Jude Kirton-Darling: There is a clear role for stronger scrutiny. Inside the legislation, there is no obligation on the Secretary of State or the new Trade Remedies Authority to engage directly with Parliament through, for example, a specific Committee of Parliament. In future, that could be the International Trade Committee—an amendment could be tabled to ensure that link and that scrutiny—but at the moment that is not in the proposals. It is a missing link, if you think about what we already benefit from in the current system, of which we are a member.
I would hate to give the impression that what we have is perfect; that is not what I am trying to say. Today, in the European Parliament’s Committee on International Trade, MEPs have voted on a modernisation package to try to rectify some of the weaknesses in the EU’s regime. If you are thinking about what to improve on, our system is not perfect, but, at the same time, MEPs—your counterparts—have a clear role in the process, which is entirely missing from the proposals tabled.
Anna McMorrin (Cardiff North) (Lab)
Q
Dr Bartels: One can look at what is covered in modern trade agreements according to two poles, and then there is a sort of meeting in the middle. On one side, you have the pure market access issues, where you are reducing duties—you are liberalising trade—in certain economic sectors. Those sectors are going to be affected negatively and are not going to be happy about it, because there is competition that they were not used to. To do that, you need to be able to trade sectors off against one another. There is a reason for confidentiality with that traditional sort of trade negotiation. Not everybody would agree—you might say that someone whose job is at risk should get a right to know what is being negotiated—but there is at least a traditional and strong argument there for confidentiality.
On the other side, you have purely regulatory issues, such as the question of what you think in your system of the precautionary principle for health and safety. That sort of principle would normally be dealt with through the normal democratic process, and I cannot see any reason why that should be changed and negotiators should be given the ability to haggle that away, particularly if they are doing that in secret. In the middle, you have rules that are regulatory but arguably are also protectionist, so the trade negotiators would say, “We should be able to negotiate those away in secrecy.” It is hard to know where to draw the line, but it is certainly useful to conceive of what is in a trade agreement according to those two poles.
None of that means that this should be limited purely to the Executive, even when there is confidentiality on market access. Many other countries have systems where parliamentarians have some rights to see what is being negotiated and to be kept apprised of negotiations as they go. The European Union, for instance, is extremely advanced when it comes to that; there are strict limitations in terms of going into and coming out of the room, no phones are allowed, and so on. The US Congress has similar arrangements. There is a palette of options to enable parliamentary involvement, even within the framework of confidentiality. I am not sure that the Bill is the right place to address that sort of issue, but there is certainly nothing like that in the Bill.
Anna McMorrin
Q
Dr Bartels: It is true, but it is generally more true in certain sectors. It is true, for instance, in sanitary and phytosanitary standards. It is usually not the standards themselves that are protectionist. There are examples of standards, such as the beef hormone standards, that I can say are protectionist because WTO cases have said they are protectionist—I just need to cite Geneva on those—but it is often done by having overly complicated conformity assessment requirements, and so on. There is definitely room for regulations that purport to be there simply to protect the public also to be protectionist. Usually, you have both aspects in the same regulation. But even in that sort of situation, I still think that the regulatory dimension is sufficient for there to be at least some type of domestic scrutiny over haggling that away.
The Chair
Q
Dr Hestermeyer: There are certainly examples of standards being used only for protectionist purposes, but it is far more common for standards that one side sets to be perceived as protectionist by the other. Let us take hormone beef. There is real concern on the part of a lot of European consumers that hormone beef is not healthy. There is no direct scientific evidence to show that that is true, but the concern is nevertheless there. So the standard reflects the democratic choice of the populace—whether we think it is adequate or not. That is important to see. With any standard set, some sides will say, “This is protectionism,” and it is also rhetoric to attack the standard.
Jude Kirton-Darling: I guess the last point missing from that is that if we look at where trade agreements and trade policy have been controversial in recent years, it is when the perception is that standards held very dearly by the public for exactly those reasons are perceived to be negotiated away behind closed doors, with only a certain number of vested interests having access to the process. That is one more reason why having an open process, with parliamentary scrutiny and engagement, gives credibility to any final agreement, which at the end of the day has to have public support, after the negotiations. You build in societal acceptance through the process by engaging Parliament in an active way.
Dr Fowler: I would very much endorse that. If it is the case that some degree of secrecy or privacy is an advantage in one respect, there is probably a trade-off in terms of not being able to have that societal buy-in that might be wanted at the end of the process. There is a trade-off and losses if it is all done in private.
Tom Pursglove (Corby) (Con)
Q
Dr Bartels: I will kick off. Yes, I would agree with that, but I would also say that what is important about the Bill is that it gives the Government the power to change those agreements. They are, legally, new agreements, and that is recognised specifically in the Bill and in the explanatory memorandum, where no bones are made about saying that new obligations might be undertaken, so it would not be the same agreement that is subject to scrutiny. What is important here is to work out whether there are any limits on the Government’s ability to undertake new agreements—or new obligations in what are named as existing agreements—and implement those obligations, and if they do that, whether that is then sufficiently being scrutinised by Parliament.
Dr Hestermeyer: I would like to go back to my first answer and take as an example the Turkey agreement. I do not think that we would want the kind of customs union that Turkey has, but currently the Henry VIII power would allow implementation of any agreement that we then make with Turkey, even if in the end it looked completely different. That is the first problem with this scrutiny process.
The second problem, as Lorand identified at the beginning, is that some agreements have been signed but not ratified, so the scrutiny part of ratification has not yet happened. They have not been fully scrutinised.
The third element is that I do not think that the Ponsonby rule, as qualified, is sufficient because, first, it allows only delay and not a straight up-or-down vote; and secondly, it requires scheduling of an actual debate and vote. With Government control of parliamentary timetables, there is no guarantee that it cannot be indefinitely delayed. Even theoretically, therefore, that is not possible.
Jude Kirton-Darling: I fully agree with previous speakers.
The Chair
In which case, you may just nod.
Dr Fowler: I would agree with that. In terms of existing scrutiny through the European scrutiny system, one point is that it is imperfect. As we know, the European Scrutiny Committee here spends a lot of time trying to get time on the Floor of the House and trying to ensure that it sees documents in time and to arrange things so that it can have a meaningful say. Then there is the problem of the agreements that will not have been fully through the European scrutiny process before they come back again. Then there are the CRAGA problems—it seems that no one quite knows how the CRAGA provisions would work. That may be because no one in either House has ever tried to do anything under them, but it seems to me that part of this process ought to be that agreements are going to come before Parliament that it might want to do something about, and merely as a minimalist position—
The Chair
I am sorry to interrupt. May I just say that there is a gentleman in the gallery who may not take photographs? Please carry on.
Dr Fowler: If you wanted to take a minimalist view, merely as a bit of constitutional housekeeping, it seems to me that there is scope for at least clarifying how the CRAGA provisions would be used, before possibly going into strengthening the powers.
Faisal Rashid (Warrington South) (Lab)
Q
Dr Fowler: As you will know, under the negative procedure, Parliament has the power to pray against an instrument. In order to do that, first, Members need to use the early-day motion procedure, which is obscure and many Members do not even know about. Secondly, and more importantly, there is the issue of trying to get time on the Floor of the House. There have been cases where Members have wished to pray against a negative instrument and time has not been granted on the Floor of the House within the scrutiny period, so it has simply been impossible to annul a negative instrument before it came into force. That is one problem with the current system.
Faisal Rashid
Q
Dr Fowler: Inasmuch as the Trade Bill provides for use of the negative procedure, yes, that would be fair. I am sure there would not necessarily be any wish to do that on the part of any Government, but as the procedures currently stand, Back Benchers cannot be sure that they can get time on the Floor of the House if they want it.
Judith Cummins (Bradford South) (Lab)
Q
Dr Fowler: At the moment that procedure happens through the European scrutiny system because of the EU’s competence to conduct trade policy. The main instrument is the so-called scrutiny reserve, under which the Government deposits relevant documents with the European Scrutiny Committees in both Houses and they scrutinise them. The relevant Minister is not supposed to sign up to things in the EU Council if the relevant documents are still held under scrutiny. That works every time a new set of documents is tabled along the process.
The system can be quite effective but there is a difficulty about timing, and getting time on the Floor of the House. There is a difficulty if something has to move quickly at EU level, and then the Government quite often uses what is called the scrutiny override where it just says, “We had to go ahead with this.” Then there is also the difficulty about trying to schedule appropriate debates in Committee or on the Floor of the House.
Jude Kirton-Darling: My only addition would be that currently, one of our frustrations as MEPs is about what happens when some things that we have scrutinised heavily at European level, pass to the national level. We see the level of scrutiny in the German Parliament, in the Belgian Parliament, in Scandinavian Parliaments, where there are very detailed scrutiny processes—often going on at the same time as we are scrutinising at European level, so we get feedback from those Parliaments during the process—and we do not feel, in many cases, that same process from Westminster. So, regardless of what happens in terms of Brexit, it is one of the ways in which Westminster could do more to scrutinise trade in any case, and that would be a benefit for everybody.
Dr Hestermeyer: Just as a reminder, the scrutiny override was used for CETA. To compare that, under German law, for example, Parliament gets involved very early on. There was a change in the constitution and then an additional statute was passed, so Parliament gets involved very early on and can make binding statements for the Government, which will then be taken into account by the Government also in the Council. That way, there is a large impact of parliamentary statements in governmental positions, because in the end, the Government will have to defend measures in the Council.
Martin Vickers (Cleethorpes) (Con)
Q
Jude Kirton-Darling: Unfortunately, no.
Martin Vickers
I thought you might say that.
Jude Kirton-Darling: Globally, our voice will be very much reduced by Brexit. Currently, we negotiate together with our neighbouring countries and that collective weight is leveraged in negotiations with trading partners, which, unfortunately, we will lose as a result of Brexit. The benefit of that parliamentary engagement from the national level from other countries creates that societal acceptance, in many cases, of European trade deals. We saw that where there is poor parliamentary engagement, societal acceptance is called into question. The biggest example—it may be a very small region of Europe—was the case of Wallonia and the CETA negotiations, where, through the powers they have as a regional Parliament, they were able, even if they were a small region in Europe, to leverage quite significant improvements in the CETA deal to address some of the concerns they had about that deal. That is where the Parliament is working effectively to really ensure they scrutinise trade deals.
After Brexit there will be a case, if there are improved scrutiny powers included in this Bill and in the accompanying measures toward this Bill, that could mean that MPs would be able to be far more effective in terms of trade policy. My basic answer is that we will be weaker post Brexit because we lose our place and we will become, in effect, a rule-taker rather than a rule-maker when it comes to international trade negotiations.
Martin Vickers
Q
Dr Hestermeyer: On a technical-legal point on mixed trade agreements, all trade agreements except for Kosovo, if I am not mistaken, were mixed trade agreements. The Council decides by common accord, which means that the UK alone could prevent agreement.
Martin Vickers
Q
Dr Hestermeyer: There might be political pressures but I am not a politician; I am just a lawyer, so on a legal position. Obviously, that is the past; that is not the future.
Alan Brown (Kilmarnock and Loudoun) (SNP)
Q
Jude Kirton-Darling: In my experience of the European Parliament’s level of scrutiny, what we have at European level legally is quite limited. Inside the treaty we have a right to accept or veto trade deals at the end of the negotiations. That is included in the Bill, but the second element which we have which is not included in the Bill, which we use much more effectively, is that we have the right to be kept informed throughout the negotiations. That is a legal obligation inside the European treaties. That effectively then gives Members of the European Parliament a hook on which is placed the whole of parliamentary scrutiny at a European level.
You could amend the Trade Bill to include a hook in the same way, which would then allow you to develop some kind of working statute which could evolve over time. These processes evolve over time—improve, I hope, over time—with more transparency as trust is built between institutions. However, you need that legal hook at the beginning. Within the European Parliament, as a result of the hook, we have monitoring groups on every single negotiation that the EU is undertaking and established trade agreements. We have monitoring groups which meet behind closed doors on a regular basis with the chief negotiators, in which MEPs can scrutinise and ask any question. We have access to the majority of documents. During the negotiations you will have heard about the TTIP reading room. We had access to all the EU side of the negotiation documents. Crucially, in that reading room, we also had the read-outs from the European negotiating team of the process of each round of negotiations. To put it into context, you had the legal text of the EU negotiating position and, through the read-out, you could see where the room for manoeuvre was with the US side of the negotiations. Those documents give you the capacity then really to question.
The Chair
Thank you. At quarter to three, I will stop you talking, even if you are mid-sentence.
Bill Esterson (Sefton Central) (Lab)
Q
Dr Fowler: First, Parliament needs to be very clear whether it is happy that the Bill only covers the replicated agreement. You might want to decide that you are happier with these agreements and then do something stronger for the completely new agreements that the UK will be negotiating. I believe that is something that the Secretary of State has indicated he would be open to, but I suggest that Parliament might want to get that nailed down in some way at this stage.
As I have mentioned before, the main issues are the weakness of the CRAGA procedure at the moment—
Bill Esterson
Q
Dr Fowler: For example, you might simply want to have an affirmative motion, a motion for resolution, rather than the negative power that is applicable at the moment. That might be one option that the Government need to bring a motion for affirmative resolution. That is one possibility. Even more important is the preceding stage, which is processes around the signature of the new agreements, particularly where they might have been changed significantly from the existing EU ones. Again, there are things that Parliament could do about transparency, possibly having an approval motion, or recreating some kind of scrutiny reserve, possibly through a Committee. There are all sorts of institutional options, but I think the House might want to look at a set of processes around signature that the House might want to look at.
The Chair
We have a few seconds—I take the opportunity to thank our panel. You have been extremely clear and interesting and will greatly add to Members’ understanding of the Bill. Thank you very much for your evidence. Perhaps if you would like to shuffle off in one direction, the next lot will shuffle in.
Examination of Witnesses
Professor Alan Winters, Michael Clancy and George Peretz gave evidence.
The Chair
Q
Michael Clancy: Thank you, Mr Chairman. My name is Michael Clancy. I am the director of law reform at the Law Society of Scotland.
George Peretz: I am George Peretz. I am a QC practising for Monckton Chambers in London on EU and international and all sorts of other bits of law.
Professor Winters: I am Alan Winters, professor of economics at the University of Sussex and director of the UK Trade Policy Observatory.
Barry Gardiner
Q
Professor Winters: In general, they have been a pretty poor piece of policy. As far as the UK is concerned, I would suggest that we might want to consider rolling them over for two or three years, but I would hope that that two or three-year period was then used to try to devise a more satisfactory regime. They encourage distortions in the developing countries. The developing countries are put through the agony of trying to negotiate together, which is very costly and time-absorbing for them, and rather ineffective. What we need to do is to try to find a much simpler way of allowing developing countries access to the British market than the current EPAs.
Barry Gardiner
Q
Professor Winters: By and large, countries find it very difficult to resist the offer of tariff-free access to a market. If they were put in a position where they were told it was the equivalent of the EPA or nothing indefinitely, my guess is that most would shrug and accept the EPA, but given one quarter of a chance, they would want to talk to us about a more reasonable and satisfactory—and in the end more efficient—process of market access.
Mr Prisk
Q
Professor Winters: The Trade Remedies Authority is something we clearly need. Without seeing a lot more details about exactly how it operated, I would not want to say whether it is robust, but I would like to emphasise three things about it. One is, I understand, Government policy; I think the others are not.
The so-called lesser duty rule is important for safeguards and anti-dumping. That is essentially the rule that says the duty you put on goods that are allegedly dumped is the lower of the amount of dumping—the dumping or injury margin—required to make good the British industry. That is a good rule to have.
The two things I am less clear are there at the moment are, first, a very strong degree of transparency. Its operations need to be, with the exception of commercial confidence, pretty much out in the open. The second is that experience through decades in nearly every country suggests that these trade remedies are captured by producer interests. They are complex, they are triggered by the producers complaining that they cannot manage or that they are being cheated, and the whole process essentially favours them.
The really important thing is that, exactly like the House of Commons, you need an opposition. I would urge that we try to supplement the Trade Remedies Authority with an officially sanctioned and resourced group to represent the consumer interest, to do the analysis and actually have the right of audience at the TRA to make the case.
George Peretz: If I may add to that, of course the trade remedies provisions are spread across this Bill and the customs Bill. If one looks at the customs Bill to find out where the appeal mechanism is—as a barrister, my first thoughts go to what the appropriate appeal mechanism is—all you find is a power of the Secretary of State to make appropriate regulations.
It is my personal view that that is somewhat unsatisfactory. There are a number of important questions that arise about appeals, one of which is very important, and that is what the appropriate standard of review is. Is it a merits review, which enables a specialist appeal court to correct the decision maker on questions of fact as well as questions of law, or is it simply a judicial review mechanism, where all the court is doing is saying, “Is this a reasonable decision, whether it is right or wrong?”? It is a very important decision to make and it seems to me that that is one that ought to be made by Parliament in primary legislation and not by the Secretary of State or the Executive in a statutory instrument. That is a decision for you.
The appeals mechanism is important. I said slightly flippantly that it was because I am a barrister, but it is the experience of all regulatory processes that what actually happens at the regulatory stage is often very conditioned and influenced by the form of an appeal. Any sensible regulator will, during the process, have their eye on what the appeal route is, who can appeal and what the level of scrutiny of their decision is going to be.
If you have a very robust form of appeal mechanism, which is open to both parties— the complaining industry but also a range of interest groups whose interests might be affected by the imposition of duty—and if they are allowed routes to appeal that will encourage the regulator, in this case the TRA, to take robust decisions. That is robust in the sense of fully reasoned decisions that will sustain detailed scrutiny, to ensure that all parties are properly heard so that they are fully aware of where the objections to what they are proposing to do are and can properly evaluate them. You get better decision making out of all of that.
I sent the secretary to this Committee a copy of a briefing paper I did for the UK Trade Forum website, which is there if any of you want to read it. It expands a bit on that point but I would emphasise the appeal mechanism. There are other issues about the trade remedies. I have probably spoken for long enough but if people have other questions they could ask about them.
Michael Clancy: I read your blog; it is very good. The other thing that I would say is that the tenure should be made more independent by having term limits. That is quite important in reinforcing independence and impartiality. We have had experience in Scotland of the whole system of judicial appointments being reworked for temporary sheriffs because they did not have a stated term and were subject to the whim of the appointing Ministers. That would be my addition to this discussion.
George Peretz: The provisions for the appointment of members of the Trade Remedies Authority are very similar to the provisions for appointments to the Competition and Markets Authority, which as anyone who has watched the press this morning knows takes very important decisions about the economy. There is a difference with the Trade Remedies Authority, and the argument why you might need a more constraining set of rules governing whom the Secretary of State might appoint. At the moment the Secretary of State appoints the majority and the rest are staff members. There may be an argument for a more constraining set of rules, particularly if the Trade Remedies Authority is—as the customs Bill contemplates—itself given the remit of applying a wide range of economic interest tests as the trade remedies body. That means that even if the TRA accepts that there is a legal basis for opposing a trade remedy, then as a matter of economic interest to the UK it is able to say, “We are not going to do so here because, for example, the consumer interest outweighs the interest of the particular producers affected.”
That seems to me to be a political position: it is balancing the interests of jobs in a particular area of the country against the interests of consumers across the country, to put it crudely. If the TRA is, as the customs Bill contemplates, itself going to be taking that kind of decision, then there is a case for saying that its composition ought to be balanced by statute and that it ought to reflect a variety of different perspectives. In that sense its role is much more political than that of the Competition and Markets Authority.
The Chair
We have half an hour left. Incidentally, Mr Peretz’s evidence is available in written format in the Committee Room.
Anna McMorrin
Q
Professor Winters: Yes, I’m afraid that I do see complications of a technical nature and, in a sense, of a political nature as well. The technical complications concern rules of origin to begin with. Every trade agreement essentially has rules of origin that determine whether a good qualifies for zero-tariff entry. A typical rule of origin says that 50% of the value must be contributed from the country claiming the duty-free access. If we take a good that is exported to Korea that is made in the UK but with a 40% input from the EU and 30% input from the USA, it gets into Korea tariff-free because the UK plus the EU27 contribution is at 70% larger than the rule of origin requires. If we are outside and by ourselves we have only 30% of the content—the value of that good—and we would not get into Korea tariff-free if the Koreans applied the same rule.
Equally, there are cases coming the other way of goods that are exported to the EU where, for instance, Korea could export a good directly into the EU27 because it has a free trade agreement for a good produced in Korea. But if they send it into the UK and we insert it into something that we then seek to send to the EU, then it might not get in because Korean content will not count towards the UK content to meet the EU’s rule of origin.
What do you do about all this? You essentially have to do something called diagonal cumulation. Korea, the UK and the EU essentially have to agree that each of them retreat from its rule of origin the content of the other two as the defining origin. In that specific case, it would restore the status quo. That needs to be negotiated with the Koreans and the EU.
Other places where we have technical problems are in the splitting up of tariff-rate quotas. For instance, there are tariff-rate quotas in the agreement with Canada: that is an agreement to import a particular volume of goods tariff-free. This has to be settled on an EU28 basis, and now it has to be divided between the UK and the EU27. On occasions, there are clauses of these agreements that refer back to a body of law in the parties. In the financial services agreement with Korea, there is a reference to accepting goods into the Korean market that were introduced into the European market without asking any further questions as long as they are consistent with existing law and do not entail a modification of existing law. That existing law—if that clause makes any sense at all—was law when the agreement was signed; it is EU law. If we tried to introduce even an equivalent law, we would have to argue the case that it needs to be treated as such for us to get access to Korea for financial services. Those are the technical reasons why there are serious problems.
Politically, we need a deal. If the transition is handled in any way that is fairly straightforward—although George has a proposal that is complicated but perhaps gets around it—it is possible that the transition will allow Korean goods into the UK tariff-free, but not UK goods into Korea tariff-free. Therefore, we really need a deal, and if you really need a deal, that is not the time to be negotiating.
Anna McMorrin
Q
Michael Clancy: Under the Scotland Act 1998, paragraph 7 of schedule 5, international agreements, including trade agreements, are not within the competence of the Scottish Parliament. In that sense there is no formal role in agreeing international agreements. That being said, one of the things we have sought to promote throughout this process, with the European Union (Withdrawal) Bill, this Bill and associated measures, is that there should be some form of whole-of-governance conversation about getting things right. As we know, this Bill will affect the competence of Scottish Ministers and allow orders to be made that may amend, for instance, Acts of the Scottish Parliament, and measures from Wales and Northern Ireland too.
There is clearly an issue about how the Sewel convention or legislative consent convention is interpreted in respect of that. Under devolution guidance note 10, any proposals in UK Parliament legislation that seek to alter the legislative competence of the Parliament or of Scottish Ministers require the consent of the Parliament. That also applies to the National Assembly for Wales and the Northern Ireland Assembly. Therefore, there is an issue. Today in the Scottish Parliament there is a debate about legislative consent in respect of the European Union (Withdrawal) Bill, and the Finance and Constitution Committee of the Scottish Parliament is currently consulting on the legislative consent memorandum on this Bill, where the Scottish Government have indicated that they would not recommend that the Parliament pass it.
It is a matter of political debate and discussion, and something that I know both the Scottish and UK Governments have in their sights in the concordat they are thinking about. That includes a framework for dealing with trade matters. There is a role, but I do not know it yet, because neither the Scottish nor the UK Government have told us what it is.
Iain Stewart (Milton Keynes South) (Con)
Q
Professor Winters: Information is very important, not least in my trade, for analysing what goes on. The case for collecting reasonable amounts of information, as long as it is cheap to do so, is very strong indeed, subject to the standard confidentiality requirements. I confess, on reading the Bill it did not strike me that there were obvious things that were missing, but I would not want to assert that I read it sufficiently carefully to say that nothing is missing. It is important that the Government have the right to collect information, and that information should be made as widely available as possible. The Government clearly need to make policy, but there needs to be public debate, too; it is not just the Government who need to discuss policy issues. I did not interpret this as being part of the Bill, but in general, information other than private or commercially confidential information really should be made available to a wide community of people to enable them to analyse policy.
Iain Stewart
Q
Professor Winters: I am not sure that I can comment on the practicalities. They certainly want a large amount of information. My general rule would be that that needs to be information that firms collect anyway in the normal course of their business, and that it should be a simple matter to transfer it to HMRC.
Faisal Rashid
Q
Professor Winters: Yes. I gave the example of rules of origin and tariff-rate quotas. Those very clearly have to be negotiated with the EU, because the EU is intimately involved in them, and they have to be negotiated with the partner. We cannot just arrive in Korea and say, “Here it is. We don’t want to talk about it.” They very clearly have trilateral dimensions, which I guess need to be sequenced and taken seriously.
Remember that there is a further wrinkle: these are going to be new trade agreements and we are going to have to notify them to the WTO. Although the WTO procedure for reviewing regional trading arrangements does not require us to ask permission, the WTO secretariat will make a good deal of information available to members, and other members may wish to clarify things to discuss and even, ultimately, to dispute. It is actually somewhat broader than trilateral, but you cannot avoid a tripartite discussion on quite a lot of aspects.
Faisal Rashid
Q
Professor Winters: I would not hold myself up as an authority on exactly what was promised, but it does not deliver a satisfactory framework for negotiating new trade agreements. There are many different models, but experience from around the world suggests that one needs a good deal of consultation, input and legislative oversight of trade agreements. You cannot have a position where Parliament can unpick a trade agreement that has been concluded. If Parliament claimed that right, no one would negotiate with us. That means that Parliament and the devolved Administrations need to have an important role in setting mandates, and there need to be consultation and information during the process. Civil society would certainly claim that it, too, ought to be consulted, and I would advocate that, to the extent that one can generate one, there should be a discussion publicly.
Trade policy comes along in treaties. It is intrusive. It affects people’s livelihoods. It is a very good thing that we are talking about trade policy now in a way that we have not for decades—since before the EU existed, in fact.
George Peretz: I would add as a footnote that one of the best short things I have seen written about this is a piece by Stephen Harper, the former Prime Minister of Canada. He is not generally known as a politician who always wanted to do everything by consensus, but it is simply an explanation of how the Canadian side prepared itself for the CETA negotiations. It very much emphasises the need to consult with everybody in Canada, to bring the provinces together as well as all industry, trade unions, all the political parties and other actors to try to get as much consensus as possible on what Canada was trying to achieve at the outset of the process, before it started. It is a very good piece from somebody whose perspective on it is interesting.
Barry Gardiner
Q
Michael Clancy: That is a very difficult question to answer without getting into uncomfortably hot waters.
Barry Gardiner
You could write to the Committee.
Michael Clancy: Let’s give it a shot, shall we? The important thing is that the UK Government are the negotiator of these international agreements. Parliament is the body that then ratifies agreements made by the sovereign power, exercised by Government. Therefore, in that sense, it is quite difficult to see how the devolved Parliaments would be able to exercise any form of consent reserve in respect of the making of an agreement and the ratification of an agreement.
The issue is that the parliamentary oversight of the agreement is deficient in this place and it is even more restrained when it comes to the devolved legislatures. That is the issue I would like people to focus on. Clearly something needs to be done to enhance oversight here. Earlier, we heard Brigid Fowler explain that the Constitutional Reform and Governance Act 2010 provisions are inadequate. Why are they inadequate? Because they have only got this perpetualisation of the 21-day period, and this Bill does not allow for any form of implementation order other than a negative procedure order. Therefore, there is an issue about that.
The read across to the European Union (Withdrawal) Bill and the sifting procedure that the Procedure Committee advanced and had accepted into the Bill—Mr Walker’s amendment last week or the week before—raises issues about what the relationship is between orders under this Bill and those under the EUWB. Why does this Bill amend the EUWB? Why not have amendments brought forward for that Bill, reflecting this Bill? I am sure that parliamentary draftspeople have an amour propre in respect of such things, but an ordinary individual—a rather rustic lawyer like myself—is not going to catch it immediately. These are the issues we ought to look at: parliamentary oversight, extending across these islands, and how we write something that attains the intention of Parliament.
If I might just cross over, I do not think the Bill is meant to implement new agreements; it is meant to transpose existing agreements. That is quite an important facet to dwell on. Although, if one scoots to the explanatory notes, one sees in paragraph 44 that there may be
“technical changes to the agreement”
and in paragraph 53 it says:
“It may also be necessary to substantively amend the text”
of the provisions. The question, therefore, is what is an existing agreement and how far does it have to be changed for it to change from being an existing agreement to a different agreement. That is a question that I do not care to essay on at the moment.
Mrs Kemi Badenoch (Saffron Walden) (Con)
Q
George Peretz: If I might go first, one can see the difficulty. It is a commonplace of the legislation on Brexit generally that there is a lot to do in a very short space of time. There is certainly a case for doing things by statutory instrument that ordinarily one might be very reluctant to see done in that way, simply because of the process of time and the time it takes to get primary legislation through.
We were discussing a few minutes ago general policy in relation to how Parliament should scrutinise future trade negotiations. It is entirely a fair point to say that the Bill is not about that. There may well be a case for the Government to produce a Bill about that, but that is a different question. This Bill is not about that, but about the roll-over.
We have touched on the difficulties. You have a number of difficulties in scope: what an international trade agreement is goes beyond trade and customs agreements. As I think Holger Hestermeyer pointed out, technically the definition includes the EEA agreement and the Turkey customs union agreement. If you think the Government have rather wide powers to implement the EEA agreement—one assumes the Government have no intention of using it that way—it is quite a wide power to give them.
There are questions about scope and about whether negative procedure is right, and there is the question Michael touched on about what is an existing agreement. The cynic in me as a lawyer tends to say from general experience that if you go to the other party to a contract and say, “I need to change this contract,” the normal response of a well-informed and well-advised counterparty is, “Well, yes, but let’s take the opportunity to get some other things in it.” So things are often not that simple. You may have quite wide and important changes being made, but I do not think there is a right legal answer. It is a question for you to think about as to whether this is an appropriate power to give the Government, given the need to do things quickly.
Mrs Badenoch
Q
Michael Clancy: We do not have enough time—there are 430-odd days between now and 29 March 2019. Trying to get through primary legislation, if we were to scrap this and go for another Bill, would be problematic to say the least. The intergovernmental conference in October is really the defining factor that we have to aim at. Then there are all these orders, which are going to be put through. If one waits until this Bill gets the Royal Assent before the orders start to be consulted on, there are difficulties about that. I am afraid that I would be for looking to keep this Bill and to move it along and see what improvements can be made to it to make it a much better and more robust piece of legislation.
Professor Winters: May I comment? In principle—I am not a lawyer and cannot really comment on how one can do this—essentially there is the very short-term, immediate problem of all these things that have to be done, but we do not want that to define the long-term by default. I think we need to have a very clear understanding from the body politic in general. The trade policy is an important instrument for a sovereign country to operate. It can be done well or it can be done badly, and we do need to continue to review it and go back to some of these things, so that even if we have to patch something up in the near future, which as near as dammit is the status quo, that should not say it is therefore closed forever. We need to go with our partners and say, “We need to reopen this.”
Bill Esterson
Q
George Peretz: Not all WTO law is clear, but what is pretty clear is that we could not simply automatically carry over existing trade remedies imposed by the EU and say, “These remedies will apply to the UK now that it is a separate WTO jurisdiction”—if I can use that term loosely. We cannot do that for one very simply reason: it is a condition of all trade remedies that there is a domestic injury. A domestic injury is defined, and the UK is obviously not the same as the EU. It is potentially an issue that applies the other way around, incidentally, but that it a problem for the EU rather than for us.
As far as I understand it, the Department for International Trade is feeling its way to dealing with this problem. As a first step, it is asking industries that benefit from an existing trade remedy to set out why they think it should continue and to explain what the domestic injury is. There is probably also a need for the UK to discuss with the European Commission what the position is. After all, in its investigation of all these remedies, the Commission will have built up a case file that will include quite a lot of information about what the injury is, some of which will be pinned down geographically. It will be able to say that that is evidence of an injury in the UK. Perhaps that could be used to justify carrying on the remedy after we have left the EU, but it would have to be the judgment of the new Trade Remedies Authority whether that evidence was good enough to withstand domestic scrutiny and appeals and, ultimately, a possible WTO challenge. There is a very difficult set of issues there, which will be a challenge for DIT and the TRA.
Craig Whittaker (Calder Valley) (Con)
Q
George Peretz: I do not claim to be a great expert in parliamentary procedure, and I am not sure that I can add very much to what Brigid Fowler said about that—she is an expert on parliamentary procedure.
Plainly, there is an opportunity to challenge a statutory instrument that uses the negative resolution procedure, but clearly it is less likely to be challenged—just look at the statistics—than a piece of primary legislation, because one fundamental point about any statutory instrument is that the vote is simply an all-or-nothing vote on the instrument. There is no ability to have the primary legislation to say, “We agree with most of this clause but we don’t like clause 5, therefore we would like to amend that.” It is take-it-or-leave-it. The problem with a lot of this is that you will be told that the clock is running and you need to decide very quickly what to do.
Professor Winters: There is very little time, so be realistic about what the cost of a challenge would be and the pressures that that would generate.
Michael Clancy: It is the balance between speed and scrutiny—that is the whole point. To get that right is quite difficult with a negative or indeed an affirmative resolution procedure. Although theoretically each of these could be debated, I think it would be very difficult to get each of these debated. There simply is not enough time to do that—we are told that there are between 800 and 1,000 orders in relation to the EUWB. I do not know how many of them might be here—63 existing trade treaties, maybe more, and other things as well. That is the difficulty.
What are the defects? The defects are that we have an alternative procedure of super-affirmative if we need extra time to look at something—that is where the sift comes in. If the sift identifies a particular order as being important, it might then get better scrutiny, and better scrutiny might mean the affirmative resolution procedure on a super-affirmative basis. We do not know that the sift applies to these orders because the sift is not mentioned in this Bill. Will it be? Are you going to propose amendments? Is the Government going to take that forward to this Bill? That is another story for another day perhaps.
Then there is the issue—I think it is in one of the Hansard Society papers—of the difficulty, in fact the incapability, of amending these orders. They have to be taken back by the Minister and re-presented. That induces time and delay, and we are running out time and inducing delay.
Craig Whittaker
Q
Michael Clancy: That is true, but the ultimate test is overturning the order. We saw that the last time an order was overturned in the other place—it resulted in the Strathclyde review because it was such an outrage, so we have to be careful about that, because it may have more political impact than we would imagine.
The Chair
We are having trouble with time and scrutiny as well. We have only two minutes left for Matt Western.
Matt Western (Warwick and Leamington) (Lab)
Q
Professor Winters: Because the roll-over is not straightforward. Maybe you can say that this is an implicit recognition that it is not entirely straightforward and that there will have to be changes. Some might be purely technical, but some are clearly going to be substantive.
It is precisely because it is difficult, contentious and requires negotiations, that the Henry VIII powers are so important, because it is the Minister, their designated authority or delegate who will make those decisions.
Matt Western
Q
Professor Winters: The division of tariff-rate quota on cheese into Canada, or which bit of law financial services access to Korea will refer to. There are, I have no doubt, plenty of others.
Matt Western
Q
George Peretz: I am not sure I have much to add to that very complete answer to the question.
Does it require Henry VIII powers? It probably does require them because you have to amend primary legislation. The questions about the degree of scrutiny and so on, are, I think, questions for you, but the need for a pretty fast procedure to amend our law to deal with what will quite often be technical points that involve changes seems fairly clear.
Alan Brown
Q
Michael Clancy: When I get elected?
The Chair
With that, can I thank all three of our witnesses for their extremely interesting evidence? You have covered a lot of ground in a short space of time. We are most grateful to you all for that.
Examination of Witnesses
Tom Reynolds, Gareth Stace and Cliff Stevenson gave evidence.
The Chair
I have a couple of quick admin points. I understand that there may be a Division in the House at 3.45 pm. If there is, I will suspend the Committee for 15 minutes until 4 o’clock and we will add an extra 15 minutes at the end to make up for it.
Mr Stace, I gather that you have to give evidence to the Taxation (Cross-border Trade) Bill Committee and you may therefore have to leave this session early. Is that right?
Gareth Stace: That is correct. If that were possible, I would be grateful.
The Chair
It is possible. Just tip us a wink when you have to go and we will say goodbye.
Gareth Stace: I think one of your Clerks is going to escort me.
The Chair
Perfect. I call Barry Gardiner. [Interruption.] Well, failing that, I call Mark Prisk.
The Chair
No, the Opposition failed, so we will give the Government a try. I call Mark Prisk.
Mr Prisk
Q
Gareth Stace: Let me start with what would need to change in the Bill. We would like to see more detail in the Bill. The Bill sets out powers to create an independent arm’s length authority—the Trade Remedies Authority—to advise the Secretary of State, but there is no detail. There is little detail of the powers that it might have or of the scope of its remit. I am sure that will come in secondary legislation or after that, but as you quite rightly said, industries that are or have been subject to dumping and unfair trade practices are quite nervous about what is going to happen in the UK, and the more detail we have, the better. That is why at this stage we are quite nervous about what might or might not come out down the line.
Mr Prisk
Q
Gareth Stace: Yes, an appeals process—there is no detail in the Bill—is not even set out as: “The appeals process will be this, this and this.” We do not even know what the basis of appeals might be, because we do not know how the TRA will define subsidy, injury and dumping. We do not even have something to base that on.
Tom Reynolds: It is clear that we need a TRA, and it is certainly welcome that the Bill establishes one. I want to rebut a point made by an earlier witness, who said that trade remedies are invariably captured by producer interests. That certainly has not been the experience in the European system. I am sure that Gareth agrees that that was apparent in the steel crisis—the trade remedy system was slow to react to the producer interest.
We have to read the Bill alongside the Taxation (Cross-border Trade) Bill. My feeling is that the rules for the TRA, which are set out in that other Bill, tip the balance the other way, against the producer interest. There are areas where that Bill and the way that it works with this Bill can be improved, which I would be happy to explore with the Committee.
Mr Prisk
Q
Tom Reynolds: There are really four points. The public interest test and the economic interest test is of concern because, as Gareth has already pointed out, the lack of detail means it could operate in any number of ways. Our fear is that it might include an over-simplistic cost-benefit analysis that appears very seductive in its indication that the benefit for producers may be outweighed by the damage to the consumers, when it does not show the full story and perhaps the long-term impact to the consumer that removal of a competitive environment for domestic producers creates if the trade remedies are insufficient to keep production here in the UK.
A big concern for ceramics—the country of concern that is dumping into the European Union at the moment is China—is how you calculate the dumping margin in instances where the domestic price cannot be used because it is subject to such state distortion. That detail is crucial to the effectiveness of the trade remedies system.
There are other issues, such as the lesser duty rule—it was touched on earlier. For the proper operation of the lesser duty rule, we would need to see the detail and how you calculate injury. That is crucial. Pushing all of this into the long grass just adds a lot of uncertainty and concern for producers.
Cliff Stevenson: Because the Bill is simply setting up a framework for the TRA and not really having anything more substantive than that, there are only small points that you might look at, but there are some important points. For example, the composition of the members of the TRA is critical because trade remedies is a highly political area of policy where there are very different views. Some see trade remedies as purely protectionist and would abolish them completely, and some see trade remedies as an essential competition policy-type tool to correct multilateral distortions.
I am in the second group. I believe that, in the absence of multilateral competition rules, trade remedies are the only thing we have that allows state distortions and other unfair practices to be addressed. Within the EU, we do not need anti-dumping or anti-subsidies law because we have really good competition and state aid law.
What we want from this legislation—you have to see the two Bills together—is a coherent, robust system that could redress those problems. In terms of this Bill, the composition of the members is very important to look at because, if all the members thought trade remedies were protectionist, we would never get any trade remedies through—or all members might believe that trade remedies were essential. You would want to ensure that there is some balance in there.
There are some other smaller issues that could be significant. For example, regarding the provision that the TRA should report to Parliament annually, I think there could be a little bit more detail on what it might report on, so that, if the TRA was being biased one way or the other, by being obliged to provide certain statistics, such as number of cases opened, measures adopted and so on, it could be assessed.
Barry Gardiner
Q
Cliff Stevenson: Yes, what would definitely be of importance is to have a substantial report submitted to Parliament on an annual basis. In the Taxation (Cross-border Trade) Bill, there is a provision on reporting. There is already a proposal for there to be an annual report. The EU anti-dumping regulation is quite specific about what the European Commission must report to the European Parliament in terms of the statistics it must provide. A little more detail ensuring that certain things were provided in this report would be useful.
Tom Reynolds: The question about Parliament’s ongoing role with the Trade Remedies Authority is an interesting one, but so is Parliament’s role in setting up the rules for the system. The point made by Jude Kirton-Darling earlier on about the level of involvement of MEPs in scrutinising and offering amendments on, for instance, the new anti-dumping methodology and the TDI modernisation, which was mentioned, has been integral in improving that legislation from the Commission’s original proposals. I would be more comfortable if there was a more rigorous approach for parliamentarians to get involved in the setting of the rules for the system as well.
Bill Esterson
Q
Gareth Stace: Do you mean the board?
Bill Esterson
Yes.
Gareth Stace: The board needs to represent interests. From my point of view, I would like to see someone from industry and someone from the trade unions on that board to provide that balance, clarity and expertise as well. That could be set out in primary legislation. It is not there now.
Tom Reynolds: One of the most successful acts of Parliament in setting up a non-departmental public body over the years has been the Health and Safety at Work etc. Act 1974, which stipulates that the Secretary of State, in making appointments to the commission—now the HSE board—must consult with organisations for three of the members. There could be representatives of the employers, and three of the representatives could be from the trade unions. That sort of model might lend itself well to the establishment of the Trade Remedies Authority and the appointments made to the non-exec board.
Gareth Stace: However, we would not want anything that you would add to it that would then create more work and delay measures in place or delay the investigations that would take place by the authority.
Bill Esterson
Q
Gareth Stace: There is a whole range of “if we don’t get this right”. If we get this very wrong, we become the dumping ground—not just in Europe, but for the rest of the world. Think of the steel sector, which thrives on free, liberalised trade. That is what we are. Over a third of all steel produced travels across borders globally.
Also, something crucial, in particular for the steel sector, is that in 1994 we agreed as a sector with Governments to abolish all customs tariffs for steel for developed countries. There are no tariffs. So when you think about us coming out of the EU, whatever agreement or not is put in place, we as steel will not be subject to customs tariffs. That is not an issue for us—non-tariff barriers are an issue for us, but not tariff barriers. That enabled us to be even more liberalised in terms of trade. What supports that? Trade remedies support that: they are the safety valve that enables free trade to take place. Sometimes the debate turns the other way round, as if trade remedies were there to provide protectionism. We would say that if there were not a strong trade remedies regime in the UK or anywhere else in the world then you would see a rise in protectionism, with weak trade remedies.
There is a whole range of things that could go wrong. When the investigations take place in the end, will they find that there is no injury or dumping for whatever reason, even if there is? If they do find that there has been injury or dumping, what are the tariff levels that are set? Are they high enough to stop the illegal trade in the UK—the dumped steel that is against WTO rules? If the endgame is not that those tariffs are high enough, then we have a problem.
Bill Esterson
Q
Tom Reynolds: We have a very similar experience. We are a sector that thrives on international trade: we export over half a billion pounds’ worth of products each year. We are not protectionist. However, as the Government have rightly pointed out, free trade does not mean trade without rules, and unfortunately some of our trading partners do not play by those rules. Examples from our sector include cases involving tiles and tableware. In the case of tiles, imports rose from a fairly stable level of around £4 million worth of tiles a year from China up to 2004, and rocketed in less than a decade to over £30 million worth of imports from China. If you were to look at volume, it was an even sharper rise.
The European Union introduced anti-dumping measures in 2011, which were not enormous—they are not the 230% tariffs that the United States has looked at. They were between 13% for co-operating companies in China, up to just short of 70% for non-co-operating companies. The introduction of those measures allowed our UK industry to stabilise and invest. As a result, employment has gone up by 40% in the sector, with even further boosts to the supply chain as well. All that could be at risk if we get things wrong.
It is worth noting that in 2011 the UK Government voted against the tiles measures in Council. That was understandable because the UK’s role within the European Union was as a liberal counterweight across the 28 member states. As we forge an independent trade policy we have a different role, but some of the most experienced civil servants and experts are steeped in that heritage of the UK being the liberal counterweight within the European Union. That is why we come back to this point about a non-exec board being a watchdog, ensuring a balanced system in the UK. It is an integral part of getting things right.
Bill Esterson
Q
Tom Reynolds: It is not something that the BCC or the Manufacturing Trade Remedies Alliance has made a submission on; it is something that we would have to consider, and maybe we can write to the Committee.
Faisal Rashid
Q
Cliff Stevenson: Obviously, the wording is not effective at the moment in terms of ensuring that there is a balanced composition of those members. If you look elsewhere and compare, the closest major trade remedy regime to the UK’s proposed system is Australia’s. It has a separate anti-dumping commission that works in a similar way to how the Trade Remedies Authority would work, but there is a big difference in the sense that it is headed up by one person, an anti-dumping commissioner: there is not a committee or a group of members in the way that is proposed for the UK.
One concern I slightly have with this is that it is an extra level of decision making. There is no detail on how the members might make a decision—whether they would vote if they disagreed—and that could hold up investigations, which are always subject to very severe time limits given the amount of work that has to be done.
In the US and Canada, for example, there are examples of independent bodies such as the United States International Trade Commission, which does the injury determination for the cases. It is a completely independent body that has six commissioners who vote at the end of the investigation. If there is a positive finding of injury and three out of six vote in favour, it will be an affirmative determination. In that case, where there is a quasi-judicial system where it is completely separate and not under any political control, there are these commissioners taking a vote on the basis of the technical information.
Gareth Stace: You have to look at what the TRA and the whole system is trying to achieve. Why is it being set up? It is being set up because we are leaving the EU. Is that an opportunity to have a system that is fleet of foot, quite simple and employs fewer people than the European Commission does?
That is why a year ago we, as UK Steel, said that actually what this arm’s-length, independent body could be doing is just looking at the dumping margin, because that is a really simple, straightforward—almost—calculation. It is what they do in the US, which is seen as a champion of free trade, and we want to create strong links with the US going forward. There was that opportunity to do that, and so the make-up of the TRA and the committee would not be as important as if it was then doing the injury calculation—that is much more of a black box. You stick a load of numbers in, and you hope that something will come out. You twiddle some dials as well, and the tariffs come out of that. So you probably do then need some independent committee to look at it, but how much are they going to influence—[Interruption.]
The Chair
Order. There is a Division in the House, so I suspend the Committee until 10 minutes past 4.
The Chair
Welcome back. We are going to change the order of questioning slightly, because Mr Stace has to go and give evidence to our sister Bill Committee.
Barry Gardiner
Q
Gareth Stace: I think it would. You are not going to say to the USA, “Hey look, can we do a really great free trade agreement with you? Look, our trade remedies is really weak and yours is really strong so can you weaken yours and then we will do a great deal?” They will not do that. They will keep their regime and hope that ours is weak, and they will then see more trade coming from them to us.
It is the same when we think about the zero tariff for steel with developed countries. When India exports steel to the UK, it is at zero tariff; when we supply steel to India a tariff is applied. So when we say to India, “Can we do a free trade agreement with you? Hey, you know, we could do zero tariff”, India will say, “We already have zero tariff, so why would we want to do anything else?” What would add something would be having a strong trade remedies regime in place.
If we had a weak regime, what would that mean? We talked about that before. It would mean a loss of jobs, and in the steel sector I do not want to talk about loss of jobs, because we saw a lot of that in 2015-16. But we would also see a rapid rise in imports. In rebar—reinforcing bar that goes into construction—in one year China had zero per cent. of the UK market. It did not import anything, and within four years, because there were no duties in place, China had 43% of the UK market. Then, once duties came in, the percentage went back to zero.
I know I have to go, but I want to make just one point about the lesser duty rule, which I am sure will be raised later. I know it is not in the Bill but it is very important, in that there is talk that if we did not have a lesser duty rule prices would rise and the consumer would be disadvantaged. Let me put that into context. In the hot-rolled flat case we had recently, the injury margin was 17.5% and the dumping margin was 29%. There is a difference there of 11%. If we think of a luxury car priced at €45,000, not applying the lesser duty rule in that case would increase the price of that car by a whopping €16.50. Everyone is saying that if we did not apply it in the UK it would be dreadful—consumer prices would rise and it would be awful—but €16 is all it would increase the price of a €45,000 car by.
The Chair
Mr Stace, thank you very much indeed for doing two Committees in one afternoon. That is very noble work. Thank you for your evidence to us. I think someone is going to escort you off to the other Committee.
Judith Cummins
Q
Cliff Stevenson: In principle, I think it is not necessarily a bad idea—that if you have an organisation full of trade expertise, you might use it for other purposes as well. I mentioned Canada earlier. The Canadian international trade tribunal, the independent entity that makes determinations on injury, can also be given other tasks and produce expert reports. So I do not think it is a bad idea in principle that the TRA may do other things. The concern would be about resourcing.
Trade remedy investigations are highly resource-intensive. They are incredibly detailed. Gareth mentioned earlier about the dumping calculation being easy. In a sense, what he was saying is that it is straightforward, the steps are very clear—but it is a massive calculation with thousands of data entries on a spreadsheet or in a model. To the extent that there would be a concern, it would be to ensure that there was sufficient capacity ring-fenced for the different functions. Principally, it seems to me that the Trade Remedies Authority’s purpose is the administration of the trade remedy regime. That would be the only issue I would raise.
Matt Western
Q
Tom Reynolds: One example I can give you is from MTRA partner sectors, the chemicals fertiliser sector, around the long-term implications for the consumer if adequate trade remedies are not installed. In Ireland, for instance, the domestic manufacturing industry for fertilisers sadly went by the wayside, because the anti-dumping measures were not introduced in time to provide a defence for their industry. As it became a less attractive market because of less competition, the prices started to rise for all the previously dumped exports, so the lack of competitive environment in Ireland ended up costing farmers more for their fertilisers.
Cliff Stevenson: Obviously, it depends on the product, because when you are talking about products used in another industry, such as in the case of steel, even a fairly substantial anti-dumping duty, if you work it through to the final price to the retailer of the downstream product, is going to have a much smaller effect. Obviously, in the case of a consumer product, where the product goes directly to the consumer, the impact of the duty would be exactly at the level of the duty, so that is certainly true.
It is important always to consider what the purpose of trade remedies is. They are about remedying a distortion, an anti-competitive situation or a subsidy. In that way, any time you increase a duty the users, the importers, or the consumers of that product are going to face the negative impact of the increase in duty. What is really important to remember about trade remedies is that they are not about protecting domestic industry, I do not believe. They are about restoring effective competition. That is a key point. Even if a consumer product does increase in price, in the long term the consumer is better off if effective competition is maintained.
The Chair
Are there any questions? No. May I thank you both very much for your very useful evidence? I am sorry that a Division disturbed the middle of your session—these things happen in Parliament. It was very kind of you to come, so thank you very much. If the next witnesses are here, perhaps they would like to take the stand.
Examination of Witnesses
Anastassia Beliakova, Stephen Jones, William Bain and Edward Bowles gave evidence.
The Chair
Q
Edward Bowles: I am Edward Bowles, managing director at Standard Chartered Bank.
Stephen Jones: I am Stephen Jones, chief executive of UK Finance.
Anastassia Beliakova: I am Anastassia Beliakova, head of trade policy at the British Chambers of Commerce.
William Bain: I am William Bain, international trade and Europe policy adviser for the British Retail Consortium.
Barry Gardiner
Perhaps I can kick off with—sorry, is it Mr Jones who is from Standard Chartered?
Barry Gardiner
Mr Bowles is from Standard Chartered and Mr Jones from UK Finance. Is that right?
Edward Bowles: Correct.
Barry Gardiner
Q
The BRC has identified, among others, the agreements involving Norway and Turkey as the most significant of our EU FTAs. Of course, the Government have already indicated that there will be an end to free movement, which rules out simply replicating the Norway model, and that we will leave the customs union, which rules out simply rolling over the Turkish model, so what elements of the agreements—not just those two, but the others—do you consider it most important to replicate on substantially the same terms?
William Bain: The key provisions are those on tariffs, because if the UK leaves the European Union, it is not part of the EU’s common external tariff system, and we could then face higher tariffs on imported goods. A great deal depends on the kind of transitional arrangements that are adopted, but the kind of additional MFN tariffs that would apply would be 12% in relation to clothing from Turkey, 13% in relation to soft fruit from Chile and Peru and 27% on imported processed canned tuna from the Seychelles. Those would, I think, lead retailers and consumers to face considerable price pressures, so the main element that we would want to see is replication of the zero-tariff or low-tariff provisions on imports.
The other key areas that are very difficult in terms of replication and, we believe, may require a degree of assistance from the European Union are in relation to rules of origin. For example, with the Canada trade agreement, there is a complex rule of origin. The same is true in relation to South Korea. I think that diagonal cumulation is involved in the rules of origin in respect of the CARIFORUM trade agreements.
These are areas where it seems that time is running out, the clock is ticking, and a solution needs to be found if British business and British consumers are not to face a large cliff edge in March 2019.
Anastassia Beliakova: Absolutely. Rules of origin are a headache for businesses, and if we consider that there is the likelihood, in the roll-over of existing trade agreements, that they may have to comply with tougher rules of origin or that some of the benefits that they currently get by counting both EU and UK origin as single origin might be lost, that is very concerning. For about one in seven of our members, the existence of a free trade agreement is the determining factor in whether they export to or import from a country. I urge the Government to give stronger assurances for those agreements, as Mr Bain has mentioned, that already provide for, or have clauses mentioning, diagonal cumulation, but also to look at all the EU trade agreements and particularly those that have the greatest economic significance for the UK, and open up those discussions to provide for that as they are rolled over into UK-third country FTAs.
Iain Stewart
Q
Anastassia Beliakova: Not at first glance. However, the wider picture around trade data is that trade data is imperfect. It is particularly lacking when it comes to services, of course, and when it comes to intra-EU trading data. That is where we currently have significant gaps. If, in the future, there can be a more robust collection of data and stronger assessments of UK-third country trade, that would be helpful.
Stephen Jones: I have nothing to add.
Edward Bowles: Obviously, the collection of data is largely in respect of goods that cross borders. It is very difficult to do that for services, so I would have thought that a way of more robustly measuring cross-border flows of services would be quite an important thing to look at, so that you can get a better grip on revenue as much as anything else. Largely, it is more on the goods side than it is on the services side.
Faisal Rashid
Q
Edward Bowles: The great thing about having economists is that they are independent of those of us who do jobs outside of research. Razia is an expert in her own right and would be the best placed person to speak to those issues.
In fact, they are not really trade agreements; they are economic partnership agreements that the EU has with most African, sub-Saharan and, indeed, subcontinent markets. It is certainly true that they have undergone a high degree of revision under the current Commission’s administration. I am not aware, frankly, of any overwhelming dissatisfaction. I attended a recent meeting only two months ago between quite a lot of these markets and Cecilia Malmström, so things do seem to be moving in a good direction. The question is what the UK’s approach would be to that and how much it might be minded to depart, if at all, from the approach. The starting point must be simply to mirror the current arrangements, as was said on Second Reading and in the Government’s response to the consultation on the Trade Bill.
Faisal Rashid
Mr Jones, would you like to add anything?
Stephen Jones: No, I have nothing specific to add in relation to Africa in general.
On a more generic point in relation to the Trade Bill, it is obviously focused on existing trade agreements and economic partnership agreements. From a services perspective, we need to look beyond that and reflect on arrangements that exist beyond that, which are critical to the cross-border flow of trade in services, because there are very few provisions and services agreements in trade treaties that relate to services. There are lots of mutual recognitions and memorandums of understanding that relate to infrastructure, to recognition and co-operation between supervisors, to the flow of data and to the recognition of exchanges, but which do not exist within the context of a trade agreement. They nevertheless facilitate cross-border trade in services that already exists between the EU—including the UK—and other jurisdictions. It is very important that we do not lose sight of those specific provisions, but seek to mirror them so far as the financial services industry is concerned, simply because the existing trade treaty provision is so poor in services.
Bill Esterson
Stephen Jones, you are the UK Finance representative. Sorry, it has been a long day. Can I ask about the written evidence you gave to the Procedure Committee, where you indicated the benefits of a triage or sifting process and stated how you might apply those when looking at new trade agreements? For the purposes of the phrase “new trade agreements”, given some of the evidence we have heard today, can we include anything that changes the agreements that are part of this Bill? Can you explain what you think the merit of such an approach would be, how you might apply it, and the importance of such a sifting process?
Stephen Jones: Given the time available in the context of Brexit, from the perspective of the financial services industry, clearly continuity, speed and the correct process and scrutiny to transpose the existing trade arrangements that the EU has with the rest of the world to the UK are incredibly important for continuity. That does not directly benefit the financial services industry. It benefits mostly the customers of the financial services industry, but in that context it is very important.
To the extent that your question relates to prioritising whether one should seek to amend the agreements in order to ensure more robust coverage of services within the context of those agreements, I think that in the first phase that is unrealistic. There is not enough time. What we need is as much certainty as we can get. Business in general needs as much certainty as it can get in terms of the transposition of the existing EU arrangements.
In terms of the ongoing amendment of those treaties to seek to extend them and prioritise what should be done—the sifting process, if you like, for services—we can develop a modus operandi in terms of markets that are important. However, as I say, there are significant factors beyond trade agreements that influence the ability to conduct cross-border business between the UK and the rest of the world. Those are a susceptibility to inward investment; strong regulatory and supervisory co-operation; aspects of data protection and the willingness to mutually recognise the cross-border sharing of data; and infrastructure, with the recognition on a cross-border basis of critical market infrastructure in each jurisdiction, such that member firms in each place are able to access and utilise the infrastructure in the other country. To the extent that that can be captured within a trade agreement, that is great.
To date, that has failed and our focus very much is on an ambition for the UK with the EU to seek to build an ambitious free trade agreement that has not been attempted in services anywhere else in the world. But we believe it should be attempted in the current context, simply because of the importance of the cross-dependencies that already exist and the fact that we are starting with a fully converged rulebook, which is extremely unusual in a trade negotiation context. So we believe that there is the prospect of an ambitious mutual recognition-based trade agreement in services between the UK and the EU and that potentially should be the first focus, to the extent that we are talking about prioritisation of negotiation of trade agreements.
Bill Esterson
Q
Stephen Jones: I think we are talking about beyond transition. From a transition perspective, the only realistic thing that we believe can be achieved is a prolongation of the acquis, which is a full adoption of the existing rule book lock, stock and barrel. The chances of seeking to amend or renegotiate that in the time that is available are wholly unrealistic, and what is far more important is certainty through the transition period. The only way you can deliver that certainty is simply to take forward the existing rule book.
Bill Esterson
Q
Stephen Jones: In terms of the prolongation of the acquis—that is, the adoption of rules on day one—in a sense those rules are already on for the purposes of transition. Those rules have already been adopted by the UK. I recognise the sovereignty of Parliament and the importance of scrutiny, but to the extent that the rules are not being changed we are simply extending arrangements that continue to exist. The Bill’s provisions relating to Ministers’ 10-year power to use secondary legislation to renegotiate those rules strike me as pretty broad-brush, and they potentially should benefit from greater parliamentary scrutiny than is currently contemplated.
Bill Esterson
Q
Stephen Jones: Broadly, I do not think it is realistic to expect changes. In that context, the secondary legislation ministerial power provisions are broadly acceptable, but beyond that, to the extent that arrangements are adapted to the UK as an independent country with its own trade policy, I would suggest that they merit parliamentary scrutiny.
Bill Esterson
Q
William Bain: The nature of the transition impinges on terms in the Bill, and the retail industry is keen to have a standstill transition in all elements—in terms of the current customs rules, the current tariff rules and the current SPS rules—but it also applies to the trade facilitation that we get from the bilateral trade agreements, which fit into part 1 of the Bill. I cannot stress how important it is to the retail sector, which imports products from countries like Chile, Peru, South Africa and Turkey, that we do not have a discontinuity in our trading arrangements at any stage after 29 March 2019. There are some connections and points of commonality with the kind of transitional deal that is done, but in a sense this is a slightly separate question. It really demands clear attention from the Government in order to get the job done by 29 March next year.
Barry Gardiner
Q
We are talking about 100 separate agreements between the EU and Switzerland alone, some of which include free movement of people. There are going to be some major changes, such as those we talked about with Turkey and the customs union, and with Norway, free movement of people and the four freedoms. Do you not think, given that you have already recommended a sift Committee in one form, that a similar sort of mechanism for trying to distinguish between what is and what is not vital, and what should have parliamentary scrutiny, is a sensible way to proceed?
Stephen Jones: Yes, sorry; forgive me for the lack of clarity. My reference was really to the existing provisions between the UK and the EU in relation to financial services. In my assessment, for the purposes of transition and of business services in financial services, the chances of change, and therefore of the need for sift, are zero. There just is not the time. In the context of other areas, where there is an assessment that change is possible, the sift Committee strikes me as a very sensible mechanism to prioritise and assess those changes and the degree of scrutiny that is required.
Mr Prisk
Q
Anastassia Beliakova: It is absolutely critical. Our members are operating on the assumption that during a transition period there will be continuity in our trading arrangements not just with the EU but with all the other markets with which we have a trade agreement of some sort. The working assumption is that they should not be making any changes currently or planning for significant changes in trading conditions in March 2019. Of course we are still waiting for greater clarity from the EU on this over the coming months, but I cannot stress enough that in the immediate future the continuity in our trading relationship with the EU during transition is critical. Our continuity, looking further ahead, with the other markets, is also something that our members want to count on.
Mr Prisk
Q
Stephen Jones: Continuity is very important, particularly through the transition period and on an ongoing basis. We believe that there is an opportunity for a free trade agreement in services between the UK and the EU that prolongs many of the existing arrangements, which are beneficial on a cross-border basis, particularly in markets for wholesale financial services and markets affecting professional counterparties and market-based counterparties, where cross-border provision, passporting and mutual recognition are important to the efficient working of trade not just in financial services but in goods—not just in the UK but in the EU as well.
The economic case for maintaining much of the existing arrangement is significant, but we are, as you know, working with a negotiation envelope as far as the EU is concerned that appears to require change—to require the UK to have less access than previously, in a visible sense. So we need to be seen, I guess, within the context of that envelope, to prioritise what is important for both sides in financial services. In our assessment it is more of the capital, derivative, centralised clearing and—outside my remit but clearly very important—insurance and reinsurance markets, which are professional-to-professional markets operating on a seamless and cross-border basis across Europe, the disruption of which would be quite significant. In those circumstances maintaining as much as we can of the existing establishment regulatory supervisory arrangements around those business activities will be important for the UK economy, but equally for the continental European economy as well.
Mr Prisk
Mr Bowles, is that your take as well?
Edward Bowles: There are two things I want to say. One is that the lead time involved for change for a regulated industry—and it is not just financial services but, my guess is, pharmaceuticals and manufacturing, among others—is so long that, to give you an idea, to create a subsidiary where you do not have one, even in a market where you may have a branch, is a minimum 18-month project plan timeframe from beginning to end, and in some cases longer depending on the breadth of products you are dealing with and the number of regulatory approvals involved. Therefore, a degree of clarity around the future timeframe and the continuity in that timeframe is critical. Otherwise you end up creating a high degree of uncertainty, not just for the regulated entities but for all their clients—thousands of clients who would be forced, with scrambling and redocumentation, to look to a different legal entity and to price and measure risk in a different way from the way they are used to doing it with the current entity.
Continuity is key, but the working assumption, as Stephen said, is that there will be change. The question is when that change will come, and whether it will be in one step or more than one step. Will we have sufficient clarity that when we deliver the end state it will be the final end state? That is why the transitional period is critical to get us to the point where the framework gives us a high degree of visibility over what the end state might be.
Mr Prisk
Q
Stephen Jones: I defer to Mr Bowles on this—given his experience with TTIP and equivalent regimes.
Edward Bowles: Obviously a high degree of dialogue is done regulator to regulator, so we are a supervised entity not merely in the home state where we may have our domicile and headquarters but in all markets where we have operation. In fact, your first point of call would be the nature of the relationship in terms of supervisory co-operation between those two entities, and what it is that you are permitted to do, and where any disputes may arise about what you are doing in those markets. In fact, the TRA is probably much less relevant to a highly regulated and supervised industry like financial services than to some others, in which there are fewer regulator-to-regulator forums that would determine the methods and modes of operation.
Stephen Jones: I would just add that the concept of dumping in financial services is, therefore, not strictly relevant.
Nick Smith (Blaenau Gwent) (Lab)
Q
Edward Bowles: Thank you for the question. Standard Chartered has been UK-headquartered for the last 155 years, but 85% of our revenues are from Asia, Africa and the middle east. In respect of most of those countries, there are no FTAs, either with the UK or, indeed, with almost any other markets. I was quite involved in my 10 years at Standard Chartered with the negotiations between the EU and Korea, the EU and Singapore and the EU and Vietnam and, most latterly, with those on TTIP, and on India in between times—that has been a slightly less successful product in negotiating terms. The fact is that we have FTAs with some of those markets and some of them are incredibly advanced. Korea and Singapore are incredibly advanced markets. You are dealing with very sophisticated regulators, politicians and others. They completely understand what the UK would be seeking to achieve in any renegotiation post the roll-over of the current FTAs.
There is certainly scope, I think, in some of those FTAs for tweaking, shall we say, and data offshoring would be one of the issues that I am sure the UK would want to look at. The negotiations take a long time. Korea was seven years. Singapore is not yet in force but we have just had a European Court of Justice ruling in relation to one aspect of it that will enable it to come into force soon, but it has been eight years overall. We can cut and paste them, but then the question is, “What are the incentives on each side—which will probably be asymmetric in terms of interests—for tweaking, and what will be the appetite and the timeframe over which you could do it?” My guess is that you would want to do it expeditiously, but the degree of consultation and engagement with other interested industries, politicians, civic sectors and so on, would inevitably build in a longer time.
For other markets that are rather less developed perhaps than Singapore and Korea, it would take longer, because if there is no existing FTA you are looking at a degree of transparency around their regulatory framework and around the concessions they inevitably will be asked to make, and the question is: “What is the quid pro quo for them?” India is a classic example. You have visas, and immigration is one of their core demands. It has always been one of the core issues that has bedevilled the EU-India FTA negotiations and that will be no less the case, I am sure, with the UK than it is with India.
Judith Cummins
Q
William Bain: Indeed. There is a good quantity of imported fish, from Norway and Iceland, that UK consumers buy. In particular, there is South Africa in terms of products like wine and some citrus, Chile and Peru in terms of soft fruits, and Morocco in terms of fruit, vegetables and some clothing. And there is principally Turkey in terms of clothing. There are many members of the BRC that source clothing in Turkey, which can be given to consumers for sale in this country on good terms. One of the fundamental issues is that, at the moment, that is under a customs union: is there going to be a functioning customs union between the UK and Turkey on 30 March 2019? I think that speaks to some of the process issues that come up in part 1 of the Bill. We know that there will be an interaction between the CRAG process of bringing a concluded treaty before this House, then interacting with the processes that have to be gone through in part 1 of the Bill.
Unless we have things like letters of intent ready to be signed at 11.1 pm on 29 March 2019, and unless we have the EU involved—what seems on the face of it to be bilateral is, in many cases, a trilateral negotiation—we will have a gap. That gap will cause uncertainty for business. Ultimately, it could cause gaps on the shelves and a lack of choice and availability. It is a serious issue for investment and for consumers.
Barry Gardiner
Q
At the moment, we may not be in control of that process. We know that we would like it to be very simple, but it may not be. Given that, should the scrutiny not be in place for Parliament either to assist procedure or, using some other mechanism, to say, “Yes, this is important, and we need to make sure that we, as Parliament, deal with it in the appropriate democratic way”?
Edward Bowles: I would say be careful what you wish for, and I do not say that completely comedically. It would very much depend upon the scale of the market that you are interacting with, and the significance of it. The experience that I had of TTIP was one where the lack of initial transparency, of engagement with civic sector societies, and of disclosure of the mandate for the first 15 months of the negotiations very much allowed the debate to be run by outside interests that felt disenfranchised. Effectively, that stymied the political will to take the negotiation further forward even before the new President was elected.
It was absolutely clear that there are lessons to be learned from a negotiation of that scale, ambition and impact for the UK’s economy, to make sure that you have the right level of engagement, transparency, scrutiny and so on in an ongoing manner. For a much smaller market, I dare say that, given the time involved, it may not necessarily warrant a full-scale similar application of scrutiny because, frankly, the relative impact for the UK economy, and therefore for consumers, healthcare and so on, would be much less. Judge each of them on their merits.
Anastassia Beliakova: To follow up on what Mr Bowles said, the TTIP example certainly shows us how critical it is to have appropriate stakeholder engagement mechanisms. At the moment, the Bill is meant to deal just with continuity of existing agreements that have already had the relevant scrutiny from the European Parliament and have passed through the European Scrutiny Committee here. However, if there are very substantial changes or if we are talking about completely new agreements, provisions certainly need to be made for appropriate scrutiny in Parliament, and for stakeholder engagement for business, civil society and non-governmental organisations. It might make sense for that to have some form of statutory underpinning so that there is input that is not contingent on the political environment, which may change. As has been said, negotiations take a long time, sometimes even up to a decade, and during those negotiations you still need to be able to test both the public views and the impacts. I would urge for these kinds of mechanisms to be put in place where new agreements are implemented.
Faisal Rashid
Q
Anastassia Beliakova: Consultation is absolutely critical. If there are changes through these agreements that would alter the benefits that businesses currently see, our members would want to be consulted. At the moment, there is a question as to how the UK will set out on having an independent trade policy. We are conducting a study with the London School of Economics on that topic, which I would be happy to share once it is published.
There is a balance of interests between continuation—ensuring that there is no gap between the current benefits and some new measures that will be implemented—and appropriate scrutiny. That has to be considered on a case-by-case basis when it comes to the existing agreements. For any new negotiations, however, there needs to be a more clearly set out process.
William Bain: There are two important points to make. First, if we look at the guidelines adopted by the European Council on 15 December and the drafts that are circulating in Brussels for the draft directive to be adopted next Monday, it is very doubtful that the EU will permit the UK to vary these agreements at all. It will basically be small changes that will require the UK to still be subject to its current obligations under these agreements. That is all that the EU will be prepared to accept.
Another important point is that if the mechanism for the transition is that the UK is under the common commercial policy and the EU common external tariff, the UK will be applying all the EU’s external tariffs vis-à-vis third countries. That means that Canada and South Korea will get the advantage of relatively low-tariff trade into the UK market, but unless we get the EU on board to help us with the transitioning process, we will not get the advantages of access to the Canadian and South Korean markets. That is the absolute imperative of why this task has to be completed—so that we can have certainty and continuity for business.
The Chair
The imminence of another Division tempts me to think that we ought to finish, unless it is a very short question.
Faisal Rashid
Q
Stephen Jones: It is a rhetorical question, I think.
The Chair
A rhetorical question that Hansard will have noted. I thank our four witnesses very much for your evidence. You were very good value for money considering you were not paid to be here. Thank you for taking time out—it was most useful for the Committee.
Ordered, That further consideration be now adjourned. —(Craig Whittaker.)
Trade Bill (Third sitting)
Thursday 25th January 2018
(7 years, 9 months ago)
Public Bill CommitteesTrade Bill 2017-19 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 25 January 2018 - (25 Jan 2018)
The Chair
I welcome our witnesses. Before calling the first Member to ask a question, I remind all Members that questions should be limited to matters within the scope of the Bill, and that we must stick to the timings in the programme order. We therefore have until 12.15 pm for this session. Will the witnesses please introduce themselves for the record?
Gary Stephenson: I am Gary Stephenson. I am the global regulatory affairs director for Devro, which is a collagen casing manufacturing company based in Scotland that exports to more than 100 markets. I am also chair of the Food and Drink Federation Scotland, which is a member-funded organisation that looks after manufacturers in Scotland. Its main focus is EU and UK regulatory influencing.
Sarah Dickson: I am Sarah Dickson. I am the international director at the Scotch Whisky Association. We represent 68 Scotch whisky manufacturers, producers and bottlers. Whisky is the UK’s largest food and drink export: whisky exports were worth £4 billion in 2016, and Her Majesty’s Revenue and Customs figures coming out soon should show an increase in that. We export to 180 different markets, and have done so for the past 150 years.
The Chair
We only need brief introductions. We do not need the full life story of every company.
Elspeth Macdonald: I am Elspeth Macdonald. I am the deputy chief executive of Food Standards Scotland.
Barry Gardiner (Brent North) (Lab)
Thank you, Mr Davies. May I wish everyone a very happy Burns day? So that our Welsh colleagues do not feel left out, I understand that it is also St Dwynwen’s day—I hope I pronounced that correctly—so let me say a very happy St Dwynwen’s day, too.
Barry Gardiner
Q
Sarah Dickson: For us, transparent and participative trade policy is really important. As an exporting organisation, we have been dealing with trade policy decisions in countries around the world for many years. We find that the best way to make trade policy is to involve people, consult them in that process and gather views, because you will find that some people will do better out of an agreement than others, and decisions will need to be made. Only by having a wide consultation on that and involving people in the process do you really get to a good outcome that it is then possible to implement and pass.
The Trade Bill as written at the moment—we do not know if there is more legislation to come—does not really cover that point in a statutory way. Of course, you do not have to consult and use statute to do that, but it concerns us that trade policy has been with the EU for many years and the UK has not done it. When it comes to having confidence—it is about confidence, rather than trust—in what the process is and when you would get input into that to have your say, we would be encouraged if we had more detail in a statutory instrument.
Barry Gardiner
Q
Sarah Dickson: Not at the moment.
Gary Stephenson: I see the Bill as a sort of framework for future implementation of more specific regulations. I think the challenge is in the detail. If we look at key sectors such as animal-derived products, which represent 70% of the food exports from Scotland, there are some specifics there that will be required, on, say, animal health, protection and regulations in regard to which countries are permitted to export to different markets. There is registration for different markets. There are export health certificates and border inspection posts for imports of those materials. All that is fairly complex and detailed. We would hope that we would be consulted on any more specific legislation. It is difficult at this stage to say whether it is heading in the right direction or not. It depends on that ability to consult. There will need to be consultation in the devolved Governments, as well as with the UK.
Barry Gardiner
Q
Gary Stephenson: I am an optimist, so I would like to think that I have confidence that we would be engaged in consultation, yes.
Elspeth Macdonald: From Food Standards Scotland’s perspective, the part of the Bill that engages most with us relates to implementation of trade agreements going forward. If current trade agreements between the EU and third countries are carried over in their current form, that may not change matters significantly. If those trade agreements down the road start to change, or there is a desire or a wish to start to change them, the transparency on how that would happen is not yet evident. Overriding all of that, of course, in the devolved context, is the issue about the constraints in competence that the Bill would bring on Scottish Ministers and the Scottish Parliament, and therefore on ourselves, to be able to provide assurances to consumers in Scotland about standards, and assurance in relation to international trade.
Craig Whittaker (Calder Valley) (Con)
Q
Gary Stephenson: It is difficult to tell with the Bill as it stands, because the devil is in the detail. There are 40-plus EU free trade agreements. Some are very small—economically they are not too important—but there are some very big free trade agreements within those. Clearly, we cannot do them all at once, and the key bit will be whether there is some sort of Government prioritisation of those agreements, perhaps from the standpoint of size of markets. There are some very big ones in there: Japan, Mexico, South Africa, South Korea, Ukraine, Turkey and Egypt are very large markets that are certainly important for UK-Scottish producers.
Craig Whittaker
Q
Gary Stephenson: There is uncertainty, because of the transitional phase within those discussions. If we are in a transitional phase, we are out of the EU but we are still controlled by the customs requirements. It very much depends. If there is good will on both sides, then things should progress acceptably. If any of these markets want to change the agreement with the UK, that puts us in a difficult position, because we have certainly got a fairly weak position during the transition period, where we are bound not to agree any future agreement but are still tied to the European requirements, though we are outside the EU. I am not sure how that will be resolved, and it is not detailed in the legislation.
Sarah Dickson: We are probably in a slightly different position, in that we think this Bill has the basics that you would need to carry over existing agreements. Also, because of the time pressure, we could understand that with existing agreements there may not be time for the sort of consultation and other discussion that you would want with new agreements, or if these agreements were to be changed. For an existing agreement, where the terms are to all intents and purposes similar, we can see that this Bill has the basics to do that.
For new agreements, or agreements that were changing, as Gary has mentioned, you would need a much more detailed consultation process, with scrutiny, and that is probably the bit of the legislation that it feels like the Trade Bill is missing. What happens with future deals or if deals change? How would that process work?
Craig Whittaker
Q
Elspeth Macdonald: No. As I understand it, this Bill provides for the carry-over of those existing trade deals between the EU and other countries. I think there is also—
The Chair
Could you speak up, please?
Elspeth Macdonald: Yes. This Bill provides for carry-over from existing trade agreements between the EU and third countries. I think that the European Union (Withdrawal) Bill has some influence on this process, too.
Bill Esterson
Q
“the proposed new international trading arrangements…may be on disadvantageous terms compared to the current conditions.”
Could you say what your concerns are about the trade agreements covered in this Bill, and where you see the possibility of them being included on disadvantageous terms?
Gary Stephenson: I assume that refers more to the EU situation, in that in Scotland, a large proportion of our exports are to the EU, and we are clearly looking potentially at more challenging conditions from the standpoint of, “Will the UK be added to the EU list of approved countries?”, and registration of approved establishments. At the moment, it is probably the sheer volume of materials having to pass through customs and border inspection posts and so on that is likely to cause increased trading challenges, unless we get that right, and that is a critical piece.
Bill Esterson
Q
Gary Stephenson: For the EU free trade agreements, I do not necessarily see them being as challenging. The only issue would be—take Korea. We used to export to Korea before the free trade agreement. The free trade agreement came in and basically removed the tariff, so the only difference, hopefully, would be that we are back to a tariff situation, which we did not have during the free trade agreement.
Bill Esterson
Q
Gary Stephenson: I think the issue here is that the EU will still have a say in this. To what extent do we want to negotiate bilateral agreements with these free trade association countries? Or do we want a trilateral-type agreement, which would be a sort of joint EU-UK-third country negotiation?
Bill Esterson
Q
Gary Stephenson: My view would be that a trilateral would be a better option, because you are not looking at changing anything.
Bill Esterson
Q
Elspeth Macdonald: Certainly, in relation to regulatory standards—technical standards—for food, industry and consumers are generally fairly confident and satisfied with the standards in the current EU regulatory framework. Certainly, when we talk to businesses and the public about the regulatory standards governing the food that they eat, and the food that they buy and use in their businesses, in Scotland, there is a generally high degree of satisfaction with EU standards. Any changes in future that began to change those regulatory standards away from those that currently provide a high degree of public health protection and consumer protection would be of some concern.
Bill Esterson
Q
Elspeth Macdonald: My organisation’s perspective on this is probably more around the non-tariff side. Certainly, businesses that we regulate in Scotland will be concerned to ensure that they have as little disruption as possible to their access to markets.
Bill Esterson
Q
Gary Stephenson: That is probably more in the food manufacturers’ area, because how the tariff rate quota is divided up is obviously for negotiation between the UK and the EU. I know that the World Trade Organisation has some influence on how it is divided up. This is where the specific industry sector should be consulted on what it believes would be the fair quota. Any of us is probably not in a position to set out a position on any specific quota. Take lamb as an example: what is a suitable quota that the UK would take back from the EU? It is a complex area, and I think it is best to ask that question of the sector responsible.
Hannah Bardell (Livingston) (SNP)
Q
Gary Stephenson: Wow, that is a big one. There are a number of elements to this. My company is in a fairly unique position in the food industry, in that we already import product into the EU, so we understand the complexities of that process. It is about whether the region you are from is authorised on the EU legislation side. Is your business registered within the EU as a registered business to produce that product? Other countries have similar issues. The US has similar legislation, which requires overseas suppliers to be registered with the Food and Drug Administration.
There is an additional piece: the export health certificates, which are not needed for the EU at present, but will be. Each one of those costs the business. It is not just the cost of the certificates—the vet must come to inspect. Have we got enough vets in the UK to provide that service? That is an additional challenge.
Hannah Bardell
Q
Gary Stephenson: Yes. Every single shipment requires a certificate, which we get from Carlisle, from the Animal and Plant Health Agency. You would have an official vet come in to sign that certificate. For example, in our case, if we need four times more certificates after Brexit than we are currently using, that is four times the cost. I am not saying that the vet would come four times more often, but he would certainly be in there twice as often, so you would be looking at twice the cost. Some businesses have not yet been exporting and will need an export health certificate. All this is going to be new for them. They are going to need a new certificate, and they are going to need to pay the vet to come and sign that certificate.
The additional piece involves shipping agents and border inspection posts. If you are using a shipping agent to export your product, in order to get all the paperwork right and so on, that is going to cost you. As you mentioned, most businesses have not exported in a way that requires customs declarations and so on, so that is an additional cost to businesses that they are probably not very aware of. I cannot give an exact figure for how much more, but it is an extra cost.
Hannah Bardell
Q
The Chair
I remind witnesses to speak up. Some of those at the back are finding it difficult to hear. Please speak up as best you can.
Elspeth Macdonald: Gary makes some really valid points about the increased burdens and bureaucracy for business, but it is also important to be reminded that the additional level of checking and assurance that may be required in future is also likely to have a significant impact on local authorities, for example. They have an important function in providing assurance about standards and compliance with legislation in food businesses that export to other countries. There is absolutely the potential for a significant impact of a new requirement for veterinary checks and so on, but also, should more checks be needed in future than now, there could be significant impacts on local authorities.
Sarah Dickson: From a Scotch whisky perspective, we may not need the vets, but we benefit from the tariff reductions, the intellectual property protection and the non-tariff barriers given to us by the agreements. About 10% of our exports go to a country covered by an EU free trade agreement. One thing that we have been talking to Department for International Trade officials about is how business can help. We would be more than happy to see if there is any contribution we can make to make sure these agreements are carried over.
Gary Stephenson: There is an additional piece from Elspeth’s comments. Currently, importing countries’ manufacturing sites are visited by an EU vet to assess their suitability and whether they are meeting European standards. When we are outside the EU, that will become a UK responsibility. We do not have the resources available today to conduct those checks.
Hannah Bardell
Q
Sarah Dickson: I am working on the basis that, because we will have the carrying over of all EU legislation into the UK, we will not lose the GI and an intellectual property system will be there to protect protected names such as Scotch whisky. We use it in all markets all over the world to make sure that people do not copy our product and produce lookey-likey fakes and that kind of thing. That is very important to our industry. We are working on the basis that that comes across lock, stock and barrel.
The Chair
We have a maximum of 20 minutes left and at least six people still wanting to ask questions. If we have short questions and concise answers, we can get as many people in to ask a question as is possible.
Iain Stewart (Milton Keynes South) (Con)
Before I ask my question, can I just point out an important error in some of the official documents? Whisky is spelled with an “e” on some of the documents, and that is a very different product from Scotch whisky. On Burns night, I thought it was appropriate to point that out.
Iain Stewart
Q
Sarah Dickson: For us, 10% of our exports go to those countries and benefit from them. I cannot give you an overall figure, but obviously, if you are not paying the tariff, you are not paying the tariff and you do not have that cost. It would make a difference to about 10% of our exports, and our exports were £4 billion in 2016.
Elspeth Macdonald: I do not have figures in front of me, but I think the document the Scottish Government published recently, “Scotland’s Place in Europe”, about business, jobs and the economy, touched on exactly those issues and put some economic analysis around some of that in terms of trade.
Gary Stephenson: All I can say is that I think about 37% of exports of food from Scotland are to non-EU countries, but we have not quantified exactly what the impact would be and how much of that is going to countries with a free trade agreement. I cannot give an exact answer, but it will have an impact.
Matt Western (Warwick and Leamington) (Lab)
Q
Gary Stephenson: There has to be deep consultation. The people with the expertise are the ones shipping the products, so they need to be consulted in detail on those provisions, which are very specific. You mentioned phytosanitary; obviously seed potatoes are a big product for Scotland, and they are highly dependent on phytosanitary requirements.
Matt Western
Potatoes are?
Gary Stephenson: Yes.
Sarah Dickson: Our experience is that we are often the ones working with the EU to draft the provisions on whatever it might be—labelling, or other requirements that would be needed for a mutual recognition—so we currently work closely with the EU negotiators to provide them with the advice and support that they need.
Elspeth Macdonald: There is a more fundamental issue from my perspective. There are specific exemptions from reservation through the Scotland Act that make it a devolved function for technical standards to be set in relation to food. There is a fundamental question above: it is about not just the Government, but Governments having those discussions with businesses.
Alan Brown (Kilmarnock and Loudoun) (SNP)
Q
Gary Stephenson: I think it is critical, particularly looking at some sectors, that the devolved Governments consult with sectors, and that there is a unified approach. This is too important to get parochial about. It is an important issue for the whole UK, but there is a higher impact in some sectors, particularly in Scotland and Wales; I am thinking of hill farming products and that type of thing.
Alan Brown
Q
Gary Stephenson: It would help.
Alan Brown
Q
Elspeth Macdonald: The principal issue with the Bill that causes us great difficulties is the way in which it constrains the ability of the Scottish Parliament and Scottish Ministers, and consequently our ability, to act and regulate in ways that are considered appropriate for businesses and the public in Scotland. The fundamental issue is essentially the same as in the case of the constraints imposed through the European Union (Withdrawal) Bill; it is a similar matter of high principle that overarches the Bills.
Anna McMorrin (Cardiff North) (Lab)
Q
Sarah Dickson: When the EU negotiates a trade agreement, it always looks to protect geographical indications. It does that in different ways. Not every agreement has exactly the same provisions, but it is always what they call an offensive interest of the EU to make sure that geographical names are protected. Where we think that an agreement with that intellectual property protection—that is basically what a geographical indication gives us—does not exist anymore, we will have to find other means, which means spending time and resources trying to work the country’s system. All countries, via their TRIPS—trade-related aspects of intellectual property rights—agreement, should have intellectual property; it is just that the easiest, clearest way to do this is through a free trade agreement.
We have already started work, in countries where there is an EU trade agreement, on making sure that we double up, so to speak, and work through the Government system to try to make sure that there is no intellectual property gap.
Anna McMorrin
Q
Sarah Dickson: Looking at future trade agreements, I would hope not, because I would assume that the UK Government would give the same priority to protecting its geographical indications, like Scotch whisky.
Faisal Rashid (Warrington South) (Lab)
Q
Sarah Dickson: I think the engagement with the UK Government is the missing piece of the puzzle, but we assume that it will happen at some point, and that we will have more detail on it. The market access advisory committee is a great way for us, the industry, to feed in our views formally to all the member states. We regularly attend it. It has a spirit-specific working group that we are able to contribute to. It feels very much like a partnership. We explain the problems we face in markets around the world and the EU then works out how it can respond to that. It has to prioritise, but because you have all the sectors contributing in that way and it is quite an open, transparent process, you know that you are at least being listened to and included in its strategies.
Faisal Rashid
Q
Sarah Dickson: We would feel more confident at the moment to have that laid out formally by the Government, in terms of what they are planning to do and how it will work. Ad hoc can work where you have developed personal relationships. We used to know everybody who did trade policy in the British Government, but that is not true anymore. Now there are 500, 600 or 700 people across Government doing it. When there used to be 40, it was much easier. As that grows and changes, having a very clear structure, so we know how to feed in and when and how, would be very helpful for us.
Faisal Rashid
Q
Elspeth Macdonald: I do not think I am equipped to answer that question. It is almost more of a legal question, in terms of how the Bill would apply.
Faisal Rashid
Q
Elspeth Macdonald: Certainly, in terms of being able to provide the public with assurances that the trading relationships that the UK will have in future when it leaves the EU will provide the same degree of public confidence and public health protection, scrutiny is critically important.
Faisal Rashid
Mr Stephenson, can you comment on that?
Gary Stephenson: I was going to jump in there anyway. It is an optimistic view that it is just a lift and shift. If you go for trilateralism, you are more likely to get there; if you go for bilateral agreements, you are more likely to get some differences.
Judith Cummins (Bradford South) (Lab)
Q
Sarah Dickson: It would be very similar to what the US does. It has cleared advisers. When you are into a negotiation, I know one thing that this House has talked about before is how you talk about a negotiation while it is ongoing and how you consult on those provisions without revealing what is a moving target. What the US does is to have cleared advisors in statute; they are people it is able to talk to to work out how to make a success of a provision within a negotiation. We can see that there might be a role for legislation in this area, where you want to be able to talk to people on a formal basis about what is essentially a Government-to-Government discussion.
Judith Cummins
Q
Sarah Dickson: We believe that the more open and transparent trade policy is, the better. That means wide consultation. So we are not just talking about business in this—you need a wide range of stakeholders involved. We think you will need to define what that looks like, because there are going to be time limits and speed limits in doing the negotiations when you are trying to get something achieved. The wider and more comprehensive you can make that, the easier it will then be to pass and implement afterwards. We think it is very important that those principles are part of UK trade policy going forward.
Judith Cummins
Q
Elspeth Macdonald: Our interests in terms of geographical indications are that consumers know what they are buying and that, whatever system is in place—the Government’s stated intention is that things will be the same after exit—people can have confidence that products are not being misdescribed in terms of their geographic origin. There is confidence in the current system because it is a robust and well-regulated system that is set out in statute. Our particular interests are ensuring that, when businesses trade and when people buy products that are advertised and described in a particular way, those claims, whether they are about origin or anything else, are accurate.
Barry Gardiner
Q
I want to marry that up with what you said, Ms Dickson, about the roll-over of terms. When you were asked about South Korea, you did not actually narrate the history of your association’s difficulty with South Korea, which of course was very resistant to the geographical indicator when you presented it on behalf of the Scotch Whisky Association. Do you think there is a possibility that South Korea might use this opportunity to reverse the progress that was made? There is one question for each of you.
Sarah Dickson: I would love to be in the head of the South Korean Government and to know quite where they will take this process. The conversation between the EU, the UK and the South Korean Government will have to be for them. Is it impossible that third countries might try to use this opportunity to reopen agreements? It is not impossible, but I hope that is not the case. When the UK has left the EU and is having its own bilateral trade policy conversations with third countries, we will undoubtedly get into these conversations about what they might want to change.
Barry Gardiner
Q
Sarah Dickson: The flipside is what South Korean businesses are saying to them about the benefits they gain from the trade deal. That is the judgment in all trade deals: who is benefiting, how much they are benefiting, and whether the things they do not benefit from outweigh the benefits they get. As I said, that is really a judgment for the South Korean Government. That is partly why we are trying to protect our GIs as best we can in addition to agreements.
Gary Stephenson: I will build on that. You are exactly right: there is an opportunity for them to renegotiate, and the UK, given the set-up it will be in, will be in a weaker position to defend against that. It would be ideal if the transition were just an extension of article 50, but we know it will not be. We will be out of the EU and trying to negotiate in a transitional period in which we are not supposed to be negotiating and are not supposed to have a final agreement, we want to get things delivered on time, and we do not have all the necessary resources. How do we prioritise everything? I think there are a lot of things rolled into your scepticism, but I share that scepticism.
The Chair
Order. That brings us to the end of the time for questions. May I thank the witnesses, on behalf of the Committee, for your evidence? We are very grateful.
Examination of Witnesses
Gordon MacIntyre-Kemp, Jonathan Hindle and David Scott gave evidence.
The Chair
I remind everyone that we have until 1 o’clock at the latest for this session.
Mike Wood (Dudley South) (Con)
I declare an interest as a vice-chair of the all-party parliamentary furniture industry group, for which the British Furniture Confederation provides the secretariat.
The Chair
Thank you. Would the witnesses introduce themselves for the record, starting from our left?
David Scott: I am David Scott, senior director of Tepnel Pharma Services.
Jonathan Hindle: I am Jonathan Hindle, chairman of the British Furniture Confederation—coming from the industry.
Gordon MacIntyre-Kemp: I am Gordon MacIntyre-Kemp, chief executive of Business for Scotland.
The Chair
Can I also ask the witnesses to speak up? We seem a long way away back here. I invite Barry Gardiner to begin.
Barry Gardiner
Q
Jonathan Hindle: I certainly do not feel qualified to be commenting on devolved Administrations—it is not part of my remit or where our industry is particularly clustered, so I do not feel qualified to answer that. I defer to the two gentlemen beside me, who probably know more.
David Scott: I am not convinced I am able to answer either, but the consultation is definitely a good thing. There is a voice that needs to be heard and various parties look for representation, not necessarily to veto anything, but certainly to ensure that the best interests of all parts of the UK are represented.
Gordon MacIntyre-Kemp: Business for Scotland was founded in 1996 to campaign for devolution and to set up the Scottish Parliament, so protecting the powers of devolution is one of our key remits. It is an area we have been investigating. This is one part of the whole Brexit process. The European Union (Withdrawal) Bill centralises about 100 Europe-influenced powers in Whitehall after Brexit, even though many of those cross over with the responsibilities of the devolved Parliaments and Assemblies. The deadline to amend clause 11 of the withdrawal Bill was missed, and that means we are sitting here without proper protections in place. The Trade Bill seems to suggest that it puts the power to act almost unilaterally in the hands of a single Minister—a single Minister who has what has been labelled a “hard Brexit agenda”—without clear protections on the public right to consult, scrutinise or stop trade deals.
At best, that means that a great deal of confusion remains over how trade negotiations will be handled where they overlap with the devolved Assemblies and Parliaments, and that is damaging to business. At worst, it looks like a deliberate attempt to delay the transfer of EU-held powers in particular to the devolved Parliaments until after the UK Government has had free rein to agree deals that you could say run roughshod over the devolution agreements that currently exist in these islands.
To give a key example, if we are going to do an instant trade deal, which we want to do with the Americans and which has to be the highest priority, the Transatlantic Trade and Investment Partnership is a great guide to what we can do with them. It is quite progressed; the key reason that TTIP did not make progress in the EU was that the EU wanted to put in protections to allow Governments to maintain public services such as the NHS, and our NHS is something that the United States is very likely to want to have access to.
I do not know much about trade negotiations, but I was trained in negotiation by a FTSE 100 company and by an American top 500 company, and the very first rule of negotiation is, “Make sure the person you’re negotiating with has the ability to say yes to the deal you’re presenting.” If we have devolved Parliaments who have control over the NHS, the Americans will look at that and say, “Well, you don’t have the ability to agree a trade deal with us,” so devolution is ipso facto incompatible with rapid trade deals, especially done under a World Trade Organisation agreement. I see that as being a problem and potentially creating constitutional issues not just in Scotland, but particularly in Northern Ireland.
Barry Gardiner
Thank you. That was an extremely interesting response, and I am sure one that will help our deliberations this afternoon, when we come to the first set of amendments. You have raised a number of very serious constitutional questions. It may be that the Minister has clear answers to them, but I think we will all be keen to hear what they are.
Martin Vickers (Cleethorpes) (Con)
Q
“the government is committed to maintaining the existing trade relationships, effectively preserving the status quo.”
You go on to say:
“It therefore seems that there is the potential to spend a significant amount of time, effort and expense to deconstruct the current processes”
and introduce a new process to bring us back to the same place. The way I read them, those two statements are somewhat contradictory. Surely what we are looking at in the Bill is the provision to ease that transition to provide the status quo?
David Scott: From my perspective—I speak for my company, which has 60 individuals in Scotland working in the pharma services sector—there are established regulations and ways in which we currently work with the European Union and with global pharmaceutical companies. The Bill would suggest that, while we seek to maintain those, we reserve the right to deconstruct them and come back to the same position. That is how I read it; I may be wrong, and I do apologise if I have misconstrued that. It is important, from my business perspective, that we maintain our relationship as it currently is, because that is a major way in which we trade with European countries on behalf of the pharmaceutical industry.
Martin Vickers
Q
David Scott: I appreciate that, but I do not believe that we can. I think the current system works in the best interests of the UK. The Medicines and Healthcare Products Regulatory Agency is regarded as a powerhouse within the regulatory sphere. If we tried to set up a secondary or different regulatory system, it would not be to the benefit of the UK in terms of how we operate in the global marketplace for some pharma services.
Bill Esterson
Q
Gordon MacIntyre-Kemp: Yes, and I think there is a great deal of confusion around it. I do not believe that there is sufficient clarity in the Bill about what is defined as a free trade agreement, for instance. If you do a deal with a nation that has multiple elements including an element of free trade, does that mean that the Minister would have full powers to do a deal that runs contrary to or overruns devolved powers? What is a specific trade deal? That needs to be defined, so as to limit the scope of the regulatory powers being granted by the Bill. A lot more clarity needs to come through in terms of the legal writing of it.
Bill Esterson
Q
David Scott: From my perspective, it would be good to engage with Life Sciences Scotland, the industry leadership group there, to understand the concerns and any wishes likely to be put forward. There is also the Scottish Lifesciences Association. There are a number of bodies in Scotland that should be spoken to and asked to come provide evidence from that perspective, so you can get a wider perspective on how Scotland’s life sciences community feels, not just in pharma and chemical but in animal health and across the broad remit of research and all these sorts of things, and get some information from the whole body of Scotland that is representative of the wishes of industry and business from that perspective.
Jonathan Hindle: I do not have a particular Scottish perspective on this. Generally speaking, the furnishing and furniture industry is keen to achieve what I am hearing from a lot of other industries: stability and consistency, equivalence and mutual recognition across the process. We are keen to advocate dialogue wherever we can have it to achieve that transition as smoothly as possible.
Bill Esterson
Q
Jonathan Hindle: I cannot say that our industry is concerned at the moment that there will not be consistency; in everything that we are reading, we are told that attempts are being made to make that transition as smooth as possible. We do not currently endure any significant issues. There are some issues with policing and surveillance of some of the standards that we have mutually agreed; that is a current scenario and a problem now. I am hoping that the formation of the Trade Remedies Authority will allow for some more robust investment in policing and surveillance of the standards where we currently endure problems, but I would not say that we are suffering from dumping in the fullest sense of its description in this context, although we are a very substantial net importer. There is a big trade gap that we as a nation endure in our industry.
Gordon MacIntyre-Kemp: You have raised an important point. Business for Scotland represents mainly small and medium-sized enterprises in Scotland. We surveyed 758 businesses and asked for their opinions on how the trade deals in Brexit have been processed and handled. There were 199,000 employees, half of the companies exported, and 41% had at least one non-UK-born EU national on their staff. We found that only 8% of Scottish business owners trusted the UK Government to deliver a deal that works best for Scottish business. Interestingly enough, 76.81% to 77% thought that calling a halt to Brexit would be beneficial to the Scottish economy. I think you have got an issue there: business does not really understand what is going on and there is a great deal of uncertainty. There is more uncertainty and more negativity towards Brexit in Scotland because Scotland voted to remain, and therefore there is less confidence in business as a direct result of that; so you will see that follow through.
I think the period between the point where we are still talking about deals and the point where we can actually start looking at trade deals has to be used for a massive consultation exercise with all the sorts of bodies that David mentioned before, but right across the UK. If we are going to do that we need to be preparing for it now. We need to be talking about it now. We need to be saying, “How are we actually going to deliver this?” Business for Scotland will be able to help, from a Scottish perspective, as much as we possibly can.
Bill Esterson
Q
Gordon MacIntyre-Kemp: Yes.
David Scott: Can I echo that? I think uncertainty is a killer at this point, specifically for my customers, whom I trade with on a global basis. They have a global supply chain and have to make contingency plans to ensure that whatever medicines they make are available to patients. Those contingency plans cannot wait until the eleventh hour or the last minute of any negotiations of any sort. I can tell you that they are starting to put those contingency plans in place now, and that they will have a massive effect on companies such as mine, and companies across the UK that support pharmaceutical R&D and the development and release of products on to the European market.
Hannah Bardell
Q
Perhaps I can start with you, David, and pick up on what has been said about confusion. The way I read your comments was that you were talking about concerns about legislative change under the Bill, and the ability to make changes in primary legislation. As we know, the Law Society of Scotland has raised issues concerning the timescale that that might mean for your organisation and sector. Could you talk about that a bit? Also, I notice from your photograph that you are MHRA and Food and Drug Administration approved. On the impact of leaving, and potential disjoint—we have already lost the European Medicines Agency to Amsterdam—can you talk about the impact on your sector and company?
David Scott: Yes, the potential impact is massive. The whole of the medicines regulation is about harmonisation and working under one single set of standards, which are beneficial and mean that the speed to market of life-saving medicines is reduced. If we try to come up with a different set of regulations or way of working, and have duplication of effort, which is what would happen under the current proposal if we became a third country outside the EEA, pharma will look at us and think, “Is the market big enough?”
We are now a net exporter of pharmaceuticals into the European Union and have a trade surplus. We want to avoid anything that puts us into a deficit. If we cannot get some harmonisation and cannot stick with the current harmonisation, I am concerned that we will lose our reputation—or not our reputation, because the MHRA is one of the best in the world, as far as I am concerned, but the ability to get joined-up connectedness. That would have a massive impact on my industry and my company, without question. I would then be forced, contingency-wise, to say “What do I do? I can’t serve some of my customers’ needs in a different regulatory system.” It is a massive thing for us.
Hannah Bardell
Q
Gordon MacIntyre-Kemp: For sure. In the survey we did, we did not just want to survey our members; we surveyed companies across Scotland. The feedback was surprising to us as an organisation. We had sensed that Scottish business was not happy with how this was being handled, but we have some quotes from non-members of Business for Scotland. A director of a FTSE 100 company said:
“When the virtually inevitable car crash happens the Scottish end of the business will most probably be moved to Europe which is a crying shame as the expertise at home is unsurpassed in our market segment. However with no likelihood of stability it will be a logical step to move.”
A director of a New York stock exchange limited company with 800 employees in Scotland said:
“Stop now and ask the people, do they want to continue with this process, knowing what they know now?”
A director of a UK bank left a pithy statement. He just said: “Absolute bloody shambles.” That was the sort of feedback we were getting. Some 79% want a second EU referendum after the deal is done.
In terms of the Trade Bill itself, what I am finding is that Scottish business is not engaging with the detail of Bills such as this. The information they are being asked to understand is so confusing that the only answer they have psychologically is to keep their heads down and hope that it will all be okay. That is why I suggested that through the whole process there has to be a lot more consultation.
In terms of fisheries, food standards and health, which I mentioned before, there are lots of areas where promises have been made. There are issues around tariffs and protections. For instance, I was told during one debate that it is far better to do a trade deal with India because it is so big and so on, but the wages in manufacturing in India are about 79p an hour, and we are approaching £8 an hour here. If a trade deal is done that opens up markets without the right level of consent from devolved Parliaments and industry groups, that will not be a trade deal but a bonfire of manufacturing in the United Kingdom. There have to be checks and balances in that. Multiple sectors will have to feed that in, because if we do not know that, we are going to be signing trade deals that will have unforeseen consequences, and I think that will be very damaging to the UK economy.
Hannah Bardell
Q
Jonathan Hindle: We have made recommendations to the Department for Business, Energy and Industrial Strategy for some updating of and amendments to the flammability regulations in particular. On a more broad basis, I understand that the British Standards Institution is looking to remain a member of the European Committee for Standardisation and the European Committee for Electrotechnical Standardisation, for example, to keep that continuity. That is what the industry is looking for. By and large, those standards, if they remain in place, are adequate. It is our ability to police, surveil and properly address transgressions that has much more been the issue for the industry. A plethora of products are making their way into the country that do not meet our stringent standards.
Hannah Bardell
Q
Jonathan Hindle: That would be a big concern for the industry. It already is under the current regime, and we are looking for improvements.
David Scott: To Gordon’s point specifically, there is a complexity here that we do not really understand. As you said, my company knew nothing about the Trade Bill or these sorts of things until we were asked to look into this. We focus on our bits. I think that Gordon is absolutely right: if we put in a trade Bill, there will be unforeseen consequences for certain sectors that you cannot foresee at this point in time.
Part of that is the safety element. Regulated drugs are there for a reason. If we start to loosen those regulations to make trade easier, then we open ourselves up to all sorts of problems, in terms of the fitness for purpose of the products that are brought into this country for use by patients.
Craig Whittaker
Q
David Scott: We would always want to comply with the highest standards of good manufacturing practices—GMP—for the pharmaceutical industry. What we do not want is to see any easing-up of the requirements of that to make trade easier with other parties. That is what I was trying to say. We need to be part of a harmonised system that works on a global basis, because if we have our own system then it becomes much more—not difficult to trade with us or to get things regulated, but we would set up an extra set of barriers. Currently, 60% of all medicines that are used in Europe are released from the UK.
Craig Whittaker
Q
David Scott: No, absolutely—it is not a trade issue. We would continue to work to the highest standards, but I would be concerned that things being imported into the UK might not meet the same standards as we would look to use ourselves.
Craig Whittaker
Q
Gordon MacIntyre-Kemp: The Bill itself does not supply sufficient detail to be safe to pass, in my view. The evidence that I am offering is not based on any nationalistic principles; in fact, I think Brexit is also a nationalistic principle, but that is not what we are here to talk about, as you say.
There is one particular thing about standards, in that it is not really defined which ethics and standards will constrain trade Bills. You talked about pharmacy. I worked for Scottish Enterprise for many years and led a mission out to the States to look at poultry processing over there, and chlorine-washed chicken is one of the issues. Everyone was focusing on the fact that there was going to be chlorine-washed chicken as though that is a bad thing. Actually, it is not that bad a thing; it is just that their process is completely different.
If you wash chicken at the end of the process with chlorine, then you do not actually have to have all the high standards in every single process right through, until you get to the point that you have finished. You have then got a product that is a lot less expensive to create. If that is allowed to be imported into the United Kingdom, it will destroy poultry jobs, and therefore we have to think about this question: “Does this Bill actually have sufficient protections to mean that the unforeseen consequences will stop the loss of jobs in the UK as a result of the free hand that has been given?” I do not think it will.
Craig Whittaker
Q
Gordon MacIntyre-Kemp: Except the wording of one of the points—I am sorry, but I do not have it in front of me—is that the Minister and the devolved Administrations will have the ability to act, where appropriate. That gives a huge free hand without the right level of scrutiny and professional input. That in itself is the danger of the Bill. That is very specific to this Bill, and the point is about what it allows and how it can be read.
Craig Whittaker
Q
Gordon MacIntyre-Kemp: I understand that this is largely about rewriting—or, if you like, cutting and pasting—from European rules into British law, but elements of the Bill are ill-defined and could, like the Henry VIII powers, direct too much power—
Craig Whittaker
Q
Gordon MacIntyre-Kemp: Inasmuch as I have read about them and have written newspaper articles about them, but I am not a lawyer, if that is what you are getting at. Am I able to give you a complete legal run-down of them? No, but I do not think you would have the time if I were able to.
Craig Whittaker
Q
Gordon MacIntyre-Kemp: Yes, I do.
Faisal Rashid
Q
Jonathan Hindle: A very quick answer from the furniture industry point of view is that we would want to see as much scrutiny as possible. You referred to parliamentary scrutiny; whether that is the most effective form of scrutiny is another matter. We would certainly want the TRA to be made up of appropriate individuals to provide good-quality scrutiny.
Faisal Rashid
Q
David Scott: As I said at the start, consultation is absolutely essential. You have to start with the industries and then bring it to yourselves from that point of view. If it being in the Bill would force that to happen, I would certainly say that that is a good thing from my perspective. I guess that what we do not want is one or two people making a decision for the populous.
Gordon MacIntyre-Kemp: Very quickly, that was my point in response to Mr Esterson’s question. Yes, it should be in the Bill.
Faisal Rashid
Q
Gordon MacIntyre-Kemp: I am not an expert on other nations. For almost all my life, we have been in the EU. We did not need to study what other people did. We are just making it hard for ourselves now.
Mike Wood
Q
Gordon MacIntyre-Kemp: You are talking specifically about it not allowing anyone to do a deal to do with chicken, but I was using that as an example to point out that the actual wording of the Bill seems to allow a significant amount of power in one particular place and to not have sufficient levels of consultation. Basically, afterwards, it would indeed be applicable across many different sectors, food being one of them.
Mike Wood
Q
Gordon MacIntyre-Kemp: In my opinion, what it allows is too free a hand post-Brexit to do deals without the right level of consultation. Sorry if that has not been clear, but I have said it four or five times.
Mike Wood
Q
Gordon MacIntyre-Kemp: Right. I understand what you mean now.
Alan Brown
Q
David Scott: Absolutely. I would refer you to the Industry Leadership Group position paper written by Dave Tudor, the chair of the Industry Leadership Group for Life Sciences Scotland. There are four key points. One is regulation, which we have talked about already: maintenance of regulation on a harmonised basis. There is trade and supply, which we are obviously talking about today. Access to talent is a key thing. In Scotland, we are a diverse community. Research and development are best done using a diverse set of people, so that freedom of movement and the ability to attract people not just into Scotland but into the UK is fundamental for us. That is not to downplay our abilities, but a mix of different people helps us bring the best ideas to the table.
Again, from a Scottish point of view, we have a heritage of innovation in the medical sciences that we are very proud of, and we want to continue to use our talent base and other talent to help us achieve that.
Alan Brown
Q
David Scott: In my opinion, we are too late. People are starting to put processes in place and to make contingencies. We need some clarity on the issue as soon as possible.
Alan Brown
Q
David Scott: Again, as much clarity as possible on that is good. I have some European nationals who work for me. They are concerned about their position and whether or not they will continue to work for me as we go forward. As soon as we can get clarity on that, an agreement would be fantastic. If that were within the powers of the Scottish Government, I would welcome it, but it is about understanding as quickly as possible how to get clarity so that we can allay the fears of our own people and go out to our customer base to allay their fears and stop any potential actions before they happen.
Alan Brown
Does anyone else want to add to that?
Jonathan Hindle: The furniture industry has a similar exposure to migrant workers. We have a high degree of Polish migrant workers in the industry, particularly with sewing and upholstery skills. The unknown quantities about all of this have meant that some of them are leaving, so there is concern in the industry to provide some clarity, once again, about how we would deal with migrant issues for industry.
Gordon MacIntyre-Kemp: Again, some of our members have expressed concerns. In particular, highland hotels are saying that 65% to 70% of their staff during the summer are EU nationals and so on. There are significant issues in Scotland. I think that this shows, in terms of the overall remain vote, that immigration is seen radically differently in Scotland in terms of an opportunity to engineer the age of our society and bring skills to Scotland.
Matt Western
Q
“Make provision about the implementation of international trade agreements”.
To elaborate on the point you were making earlier, what do you understand that to mean?
Gordon MacIntyre-Kemp: What do I understand the “international trade agreements” to be?
Matt Western
Q
Gordon MacIntyre-Kemp: Sorry. What do I understand “international trade agreements” to mean? They are basically agreements between countries that facilitate trade, such as TTIP and CETA and so on, and they have significant impacts on the different sectors, in terms of what sectors are opened up to particular trade deals. Now, regarding the EU, it already has trade deals with South Korea, Canada and so on. I think that is kind of basic.
However, there could be difficulties if there is not an exact definition in the Bill of what a trade deal is; I refer to evidence from legal experts on this issue, as well. It could mean that deals that are not specifically seen as trade deals can come under the remit of the Bill.
Matt Western
Q
Gordon MacIntyre-Kemp: More open than it possibly should be; not as restrictive as it—
Matt Western
It could be open?
Gordon MacIntyre-Kemp: Yes. It could be seen that way. I am just asking for it to be tightened up a little bit.
Matt Western
Q
Jonathan Hindle: Fairly limited, inasmuch as when most people look for certificates of origin in tendering processes and evidence of supply chain in that regard, they ask for either an EU reference or a UK reference. If we were to devolve to a UK reference as a source of origin, it would carry equal weight in the minds of those in the particular markets that I am familiar with who often require that evidence.
Regarding the quantities coming out of the EU versus the UK, normally we are asked to make a judgment on a split and err towards the country of origin being where the majority of the material originates or where the bulk of the manufacture occurs. There are some guidelines that we tend to follow, along those lines. I am not hearing any concerns from our industry that that will present any problems. We continue to adhere to the current remit for declaring origin.
Matt Western
Q
Jonathan Hindle: Offhand, I cannot see it impacting the ability to trade effectively, or our competitiveness, or how we are perceived in any way; no, I cannot see that and I am not getting anything from our industry, as we poll it, to suggest any specific concerns on that particular point.
Of course, we have all the problems that we have had with a weak currency and all the inflationary impact that that has had, because most of our industry relies for a large part of its materials on continental Europe and elsewhere in the world. Weak sterling has had an impact and countered, if you like, the benefits that we might otherwise have enjoyed as an exporter from having a weaker currency on the other hand. It has been a double-edged sword in that regard.
Matt Western
Q
Jonathan Hindle: Very much so, yes. We would certainly welcome having someone on that TRA that understands our sector and all the nuances and complexities that have been alluded to—absolutely.
Barry Gardiner
Q
Gordon MacIntyre-Kemp: Yes, exactly, and as food safety is a devolved issue in Scotland—
The Chair
Order. I apologise to the hon. Member, but we have come to the end of the time allotted to the Committee for questions. May I thank the witnesses on behalf of the Committee for your evidence today? The Committee will meet again at 2 o’clock this afternoon in Committee Room 12.
Ordered, That further consideration be now adjourned. —(Craig Whittaker.)
Trade Bill (Fourth sitting)
Thursday 25th January 2018
(7 years, 9 months ago)
Public Bill CommitteesTrade Bill 2017-19 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 25 January 2018 - (25 Jan 2018)
The Committee divided: - Ayes: 2 / Noes: 9 - Question accordingly negatived.
The Chair
We now begin line-by-line consideration of the Bill. The selection list for today’s sitting, which is available in the room, shows how the selected amendments have been grouped for debate. Grouped amendments generally deal with the same or similar issues. Please note that decisions on amendments take place not in the order they are debated, but in the order they appear on the amendment paper. The selection list shows the order of debate; decisions will be taken when we come to the clause an amendment affects.
I will use my discretion to decide whether to allow a separate stand part debate on individual clauses and schedules following debates on relevant amendments, but it will certainly help if right hon. and hon. Members, including Ministers and shadow Ministers, stand if they wish to speak on clause stand part.
Clause 1
Implementation of the Agreement on Government Procurement
Hannah Bardell (Livingston) (SNP)
I beg to move amendment 33, in clause 1, page 1, line 15, at end insert—
“(1A) No regulations may be made under subsection (1) by a Minister of the Crown, so far as they contain provision which would be within the devolved competence of the Scottish Ministers (within the meaning given in paragraph 7 of Schedule 1), unless the Scottish Ministers consent.
(1B) No regulations may be made under subsection (1) by a Minister of the Crown, so far as they contain provision which would be within the devolved competence of the Welsh Ministers (within the meaning given in paragraph 8 of Schedule 1), unless the Welsh Ministers consent.”
This amendment would ensure that the consent of the Scottish Ministers or Welsh Ministers is required for any regulations that deal with matters within the competence of devolved authorities in Scotland and Wales.
The Chair
With this it will be convenient to discuss the following:
Amendment 34, in clause 2, page 2, line 40, at end insert—
“(7A) No regulations may be made under subsection (1) by a Minister of the Crown, so far as they contain provision which would be within the devolved competence of the Scottish Ministers (within the meaning given in paragraph 7 of Schedule 1), unless the Scottish Ministers consent.
(7B) No regulations may be made under subsection (1) by a Minister of the Crown, so far as they contain provision which would be within the devolved competence of the Welsh Ministers (within the meaning given in paragraph 8 of Schedule 1), unless the Welsh Ministers consent.”
This amendment would ensure that the consent of the Scottish Ministers or Welsh Ministers is required for any regulations that deal with matters within the competence of devolved authorities in Scotland and Wales.
Amendment 36, in schedule 1, page 7, line 24, at end insert—
“(4) This paragraph does not apply to regulations made under section 1(1) or 2(1) by the Scottish Ministers or the Welsh Ministers.”
This amendment would give the Scottish and Welsh Ministers power, by regulation, to amend direct EU legislation that forms part of domestic law on and after exit day in devolved areas.
Amendment 37, in schedule 1, page 8, line 5, at end insert—
“(4) This paragraph does not apply to regulations made under section 1(1) or 2(1) by the Scottish Ministers or the Welsh Ministers.
Requirement for consultation in certain circumstances
3A (1) No regulations may be made by the Scottish Ministers or the Welsh Ministers acting alone under section 1(1) or 2(1) so far as the regulations are to come into force before exit day unless the regulations are, to that extent, made after consulting with a Minister of the Crown.
(2) No regulations may be made by the Scottish Ministers or the Welsh Ministers acting alone under section 2(1) so far as the regulations make provision about any quota arrangements or are incompatible with any such arrangements unless the regulations are, to that extent, made after consulting with a Minister of the Crown.
(3) In sub-paragraph (2) ‘quota arrangements’ has the same meaning as in paragraph 3.”
This amendment would replace the requirement for the Scottish and Welsh Ministers to obtain the consent of the UK Government when acting alone under section 1(1) or 2(1) with the need to consult before making such regulations.
Hannah Bardell
It is a pleasure to kick off what I think we all agree is a hugely important debate. We are pleased that the amendments were selected.
It is important to say at the outset that our amendments to clauses 1 and 2 would ensure that the principles of devolution are safeguarded in the Bill as the UK leaves the EU. Just over 20 years have passed since devolution, and it is important to pause for thought. There has been a lot of discussion—on Second Reading and in the public discourse—about how the cross-party agreement that brought us devolution and the Parliaments and Assemblies of the devolved nations of the UK all those years ago is threatened. Much in the Bill drives a coach and horses through the cross-party agreements that brought huge changes to the devolved nations of the UK. I say to fervent defenders of the United Kingdom that by threatening devolution and devolved powers—the Scottish National party has set out 111 areas in which they are under threat—the Bill threatens to undermine the Union.
We agree with the provision in clause 1 that aims to ensure continued access to Government procurement markets after the UK leaves the EU, but we believe that UK Ministers should have to seek consent, not just to consult. During our debates on the European Union (Withdrawal) Bill, the Prime Minister promised that the devolved nations of the UK would be consulted. As we know, it has not been possible to seek proper consultation in Northern Ireland because of the situation there; we look forward to seeing what happens in Northern Ireland and what threat that poses. However, I think it is fair to say that the devolved nations do not really feel that consultation has happened. For us, consultation and consent are absolutely the bottom line.
Amendment 33 would ensure that the consent of the Scottish Ministers or the Welsh Ministers is required for any regulations made under clause 1 that deal with matters within the competence of devolved authorities in Scotland or Wales. The Library briefing for the Bill states:
“If responsibilities for much of procurement law move from the EU to the UK with Brexit, there are questions about who takes on these responsibilities. At present, responsibilities for procurement are generally either devolved or set at the EU level.”
The devolved legislatures in Scotland and Wales implement EU directives directly.
Let me draw on a specific example. Procurement is probably quite a dry and technical subject to many people, but it is very important. Back in 2008, we had a big challenge with superbugs and sickness in hospitals in Scotland, as did much of the UK. Through Government procurement measures, we were able to take contracts with private firms back under Government control. That was absolutely vital. If our amendments are not agreed to and we are unable to guarantee our procurement rights, there is a risk that they will be lost in the 111 areas I mentioned.
My Labour colleagues should think very carefully, given that it was their party that was instrumental in devolution. Labour should be congratulated on that. Labour Members must reflect on the impact of the Bill and the opportunity presented by the amendments, which have been laid with a degree of cross-party consensus and support. If we choose to push the amendment to a vote—obviously we will listen to the full debate—it would be excellent to have their support, and perhaps that of some Government Members. They might deem the promises made to Scotland in the past to lead not leave the UK, to be an equal partner—all those words and rhetoric—to be not rhetoric, but something that Members actually stand by.
On amendment 34, we agree with the provision in clause 2 that aims to provide continuity to existing trade deals that the UK is part of by virtue of its EU membership. There are about 40 trade deals, with more than 60 countries. We have heard a huge amount of evidence from a number of different organisations, including today from Devro, a company that makes sausage skins—we might argue that there will be no breakfast after Brexit if Devro is not able to produce the skins for sausages. We also heard from Hologic, a company I visited some time ago that operates in my Livingston constituency. Its representative spoke about the importance of consultation and consent and the involvement of the devolved nations.
We believe that UK Ministers ought to seek the consent of devolved Ministers when amending the law in devolved areas. The amendment would assure that the consent of Scottish or Welsh Ministers is required for any regulations made under the provisions of clause 2 that deal with matters within the competence of devolved authorities in Scotland and Wales.
I ask colleagues on both sides of the Committee to think about when trade deals are being negotiated. I know the Bill is about transferring current deals across, but it is also about what happens beyond that; it is about the framework that is put in place and ensuring that that framework is good and robust for everybody in the UK, wherever their business is and wherever they live. It is incredible to think that we would not get support, particularly from our Labour colleagues, on ensuring that the devolved Administration in Wales, whoever that may be, would have a say and would be able to give consent on the decisions that are made for those businesses.
Mr Mark Prisk (Hertford and Stortford) (Con)
Let us say a major treaty was going forward that was in the interests of Scottish whisky, for example. Is it the hon. Lady’s position that Welsh Ministers should be able to veto that?
Hannah Bardell
Those are things that can be discussed. I am not going to draw on particular areas—if it were Welsh lamb, for example, should we have a veto?—and say that we should be interfering. I would like to think that if it came to that situation, the Welsh Government—whoever was in power in Wales—would take a sensible approach and realise it was the right thing that the Government in Scotland, whichever colour they may be, should be able to consent and be consulted on the products of their nation. We should have an even hand across the UK.
Mr Prisk
I note that the hon. Lady said no to that. In other words, as it stands, what she is saying about consent means that the treaty in question could not go forward. I put the question to her again: what if there was a major interest in Scotland that, under her amendment, was vetoed by Welsh Ministers? Is that what she intends?
Hannah Bardell
No, that absolutely is not the intention. We all live in a world at the moment where we can put scenarios forward and say this or that might happen.
Hannah Bardell
And the point of the amendments is that in relation to goods coming from whichever part of the UK, we do not create a democratic deficit. That is what the Bill creates. The amendment rectifies that.
Bill Esterson (Sefton Central) (Lab)
I am proud of the Labour Government’s role in delivering devolution to Scotland and Wales, and I appreciate the hon. Lady mentioning that role. Can she set out when she sees there is a need for the consent of the devolved Administrations and when there is a need to consult them? Perhaps she could give some examples to demonstrate the difference.
Hannah Bardell
To be honest, the point is that we have the powers and we can have that discussion on an issue-by-issue basis. We have many examples of where we have worked well with the UK Government on trade and on rights, but we can consider other things—workers’ rights, for example. I know that when the Bill that became the Trade Union Act 2016 came to Parliament, many Members in the hon. Gentleman’s party and in other parties had huge problems with it, and it was hotly debated and discussed. Unfortunately, what we have seen is a rolling-back, despite the fact that there was opposition.
If we turn that on its head and say, “Could there be vetoes from other parts of the UK?” or, “Could we be in a position where one country is blocking a trade deal on a particular product over another within the United Kingdom?”, I would like to think that people will not use those powers in the way that the UK Government have often used their powers to impose legislation on devolved nations against their will. The whole point is that the rights, protections and opportunities, the access to and membership of the single market and the customs union are so vital to Wales, Scotland and the rest of the UK that we must not row back on those things and not give the devolved nations the opportunity to consent and be consulted. We could pick any particular issue and we could all have a discussion about whether there should be consent or consultation. The point is that we have the powers and they are powers for a purpose, and we should not have powers taken away.
Amendment 36 would amend schedule 1, which provides that Scottish and Welsh Ministers have
“No power to modify retained direct EU legislation etc.”,
such as EU regulations, or to make regulations that would create inconsistencies with any modifications to retained law that the UK Government have made, even in devolved areas. However, those restrictions are not being placed on UK Ministers. We believe that, as a matter of principle, devolved Ministers should have the same power in respect of matters falling within devolved competence as UK Ministers are being given. That is not is an unreasonable request. We are in a Union and we have devolved powers and devolved Governments; Ministers in each of those countries should have the same power as any UK Minister. Amendment 36 would remove the restrictions placed on the Scottish and Welsh Ministers’ ability to amend directly applicable EU law incorporated into UK law, bringing the powers into line with those being given to UK Ministers.
Amendment 37 would replace requirements imposed on Scottish and Welsh Ministers to seek UK Ministers’ consent when
“acting alone under section 1(1) or 2(1)”
with a requirement to consult UK Ministers before making those provisions. We have heard from stakeholders on this matter. I am sorry I was not here at the earlier evidence sessions; I was at the Council of Europe, but I have watched and read the contributions that were made. As we know, stakeholders were invited to give evidence and discuss their concerns. Chris Southworth from the International Chamber of Commerce UK said,
“Overall...I would be concerned if I were in the devolved Administrations. There is specifically no opportunity for the devolved Administrations—or the regions, I have to say—to feed into decisions on trade. I would be very concerned about that, particularly in the devolved Administrations, where there are vulnerabilities on a whole range of different industries.”––[Official Report, Trade Public Bill Committee, 23 January 2018; c. 35, Q80.]
That is not SNP Members or Members of other parties just making political points; it is what we have heard in the Committee.
Today, we heard Elspeth Macdonald from Food Standards Scotland say that one of the reasons her organisation is supporting the Scottish Government on withholding a legislative consent motion is that it feels there could be a lowering of food and drink standards. Given that Scotland’s food and drink industry has grown at twice the rate of that of the rest of the UK and is a leading light of our exports, that is something.
Alan Brown (Kilmarnock and Loudoun) (SNP)
It is a pleasure to serve under your chairmanship, Mr Davies. I will make a few remarks on the principle of devolution and the amendment that has been tabled.
During one of the evidence sessions the hon. Member for Corby threw out the proposition that Opposition Members should not have voted against Second Reading of the Bill, even though we believed it to be flawed. He suggested that we should have voted for it and tabled amendments in Committee. Well, the proof will be in the pudding now. How many amendments will the Government back? Will we be back at square one and left with a flawed Bill?
The blunt reality is that both the Welsh and Scottish Governments have said they will withhold their legislative consent motions if the Bill remains as it stands, so it certainly needs amending if it is to get buy-in from the Scottish and Welsh Governments. Our amendments were drafted in agreement with the two devolved Administrations. That is why, as my hon. Friend the Member for Livingston said, it is slightly disappointing that Labour MPs have not backed an amendment that was drafted by the Welsh Government.
We also heard in the evidence sessions a number of witnesses agree that the Bill in its current format excludes input from the devolved Administrations. As a result, agreements could be forced on devolved Administrations. The UK Government can legislate and make regulations that affect devolved competences. During the witness sessions we heard about tariff rates and quotas, which could be an issue; the subdivision of quotas within the UK will need to be considered, as will rules on origin. That is why it is critical, in the spirit of co-operation, that the devolved Administrations have to give consent to agreements or regulations that the UK Government put forward.
We are constantly told that the Scottish Parliament is the most powerful devolved Parliament in the world, but that is incorrect. We heard during our evidence sessions about the devolved Government of Wallonia in Belgium, which was able to veto the entire comprehensive economic and trade agreement with Canada. That is a devolved Parliament with real power. It is vital that we hold on to and do not allow any erosion of the powers of the Scottish Parliament and the Welsh Assembly.
We were promised that clause 11 of the European Union (Withdrawal) Bill would be amended to protect the devolved nations. That did not happen. That is why we need to amend this Bill and to get agreement from the UK Government that they are willing to work with the Scottish Parliament and the Welsh Assembly. It is essential that their competences are protected.
I think that is all I need to say in support of the amendments. I am interested to hear what the Minister has to say.
Barry Gardiner (Brent North) (Lab)
It is good to have you back in the Chair, Mr Davies. I look forward to the Committee making progress under your guidance.
The Labour party brought forward and delivered the devolution settlements when it was in government, so we absolutely support the rights and powers that are conferred on the devolved Administrations by their respective devolution settlements. Matters of devolved competence must not be subject to overreach by Ministers of the Crown who seek to amend or overrule the will of the people, as expressed through their devolved Governments. For Labour, that is absolutely the starting point of this debate. We believe that the powers of those devolved Governments must be enforced and, indeed, reinforced where appropriate.
That said, we have real concerns about some of the implications of this group of amendments in the context of implementing our legally binding obligations under international law. The amendments might, in effect, create a veto power, which in turn might result in the UK failing to deliver on its binding obligations under a treaty. We have a conundrum. Often in Committees like this we have what are, in effect, set-piece debates, but this is a real debate about a profoundly complex constitutional issue, which I do not think will be easily resolved. Let me try to set out what I think is at the heart of it.
I pay tribute to the hon. Member for Hertford and Stortford, whose question went to the heart of the matter. Interestingly, the spokesperson for the SNP, the hon. Member for Livingston, used the words consult and consent in the same sentence as if they were interchangeable. The difficulty is that, in law and in effect, they are not.
Barry Gardiner
I will happily give way after I have made a little more progress. I do not seek a point-scoring debate, because we have to get to the heart of some extremely technical and complicated issues, but I will of course give way in due course if the hon. Lady wishes me to.
In respect of the devolution settlements, trade agreements and the negotiation thereof remain exclusively reserved to the UK Government. International treaties are also the exclusive reserve of the UK Government. I have no doubt that the devolved Governments recognise that and supported that approach when the relevant devolution Acts were passed. Our membership of the European Union has meant that the competence for trade has been exercised by the EU under the common commercial policy—in effect, it has been taken up a level from the UK Government to the EU. That relationship has meant that no devolved Government—nor, indeed, the national UK Government—has been able to legislate in any way that contravenes EU law. In respect of trade agreements, that has meant that we have amended our domestic legislation where required to align it with the terms of agreements concluded on our behalf by the European Union. No devolved Government therefore has any effective veto on the implementation of those agreements, nor have they ever had such a veto.
Of course, the Bill prepares us for life outside the European Union, when that common commercial policy will no longer apply and the competence for trade will be returned to the United Kingdom. Similarly, the obligation on the devolved authorities to ensure compliance with EU law may also no longer apply. That, in effect is the crux of the issue.
The amendments would, in some respects, extend upwards powers of devolved Governments that they might not currently have in respect of international trade agreements. It was telling to hear from the gentleman from Business for Scotland this morning—I am delighted that you managed to squeeze me in to ask my question at the last minute, Mr Davies. In his response to whether the Scottish Government or a devolved Assembly should, in effect, have the right to consent regarding the content of the trade agreement, with reference to his chlorine-washed chicken example, he said that, yes, he thought there should be a consent power at that level.
Whether the Bill is about an agreement with America is completely by the bye. That was a thought experiment to show the sort of situation that could arise. If we want to bring it slightly closer to home, we could talk specifically about one of the agreements the Minister proposes to have a corresponding agreement with through the good offices of the Bill: CETA. Of course, one of Canada’s main objectives when negotiating with the European Union was to be able to get chlorine-washed beef and chicken into the European market. It failed in that endeavour, because that was not agreed to by the European Union in the eventual treaty. However, it is not beyond the wit of any of us—we heard this on many occasions from our witnesses—to construct a situation in which Canada might do what other countries at such a juncture might do, which is seek to reopen the negotiations in a particular way to its advantage, to try specifically to achieve with the European Union that which previously it had not been able to.
That brings the example much closer to home, and to the Bill in particular. The key point is that, as was said by Business for Scotland’s witness, the Scottish Government’s view is that they should have the power of consent to the substantive measures of the international treaty. We recognise that there are clear implications for what might be set out in the international trade agreements on matters of devolved competence. Agricultural policy, food safety, fisheries, the environment and so on are all areas that are touched upon by modern trade agreements. They are all areas where trade agreements will of course have an impact.
Hannah Bardell
I take on board the hon. Gentleman’s point. The notion of consent is an interesting one. Let me just expand a little on my take on it. The idea of consent—not just consultation—for us is that we cannot have certain aspects of our regulatory framework, or deals done, that go against the principle of devolution.
The memorandum of understanding concordat from devolution was binding
“in law, but promises cooperation on exchanging information, formulating UK foreign policy, negotiating treaties and implementing treaty obligations.”
In our view, the Bill goes across that.
For the sake of argument, say that Scotland or Wales could not give consent to a trade agreement. That would force the UK Government to go back and look at why consent could not be given, and hopefully bring something forward. If we only have the power of consultation—we could argue that consultation is not really a power—we are at the mercy of whatever the UK Government of the day do. It could be argued that the power of consent is absolutely vital in negotiating trade deals.
Barry Gardiner
It is not that I do not understand the force of the position the hon. Lady is taking and the way in which she is trying to express it, but of course those powers are powers that the devolved Administrations do not currently possess vis-à-vis the European Union. That is why, as I said, the levels at which we consider this, and the change in those levels, are absolutely material to the discussion we have today.
The hon. Lady is absolutely right to say that if the substance of a trade agreement or any of the corresponding agreements that the Minister is seeking to roll over from our existing EU trade agreement is substantively changed, it may well have an impact on areas that are devolved competences. But that is the substance of what is agreed at the international level. Trade is a reserved matter. Treaties are a reserved matter. Therefore, the question of the implementation comes in two ways. I do not want to depart from my notes too much, but I am seeking to respond to the hon. Lady’s intervention in the spirit in which she made it.
The difficulty is that our legislative language is poor. We talk about implementing an international agreement in UK law and we also talk about implementing the terms of the agreement within the devolved competence. It is very easy to have a confusion about which implementation we are talking about. I will progress the argument, because it seems to me that it is not cut and dried. There are serious issues here that we need to consider as a Committee.
I cannot say that I normally say this, but I very much look forward to listening to what the Minister says on this occasion, because I trust he has had the benefit not only of parliamentary counsel, but of constitutional legislators, who will have looked at the matter very carefully when they saw the amendments. I look to what the Minister is going to say in the Committee to guide us on these matters.
Picking up from where I left off talking about the substantive changes, new institutions may be required—institutions that might otherwise be within the devolved competence of the Scottish and Welsh Governments. That simply arises from the changes that will be made to the free trade agreements, because they might specify the European Food Safety Authority and that would need to be changed. New institutions may have to be established to fulfil the competences that the European Food Safety Authority or any other such agency had, and they would have to be designated in the roll-over Bill.
Of course, it may be that the Minister specifies the Food Standards Agency in England as the body that will now make the specifications. It might be better to use Food Standards Scotland, which we heard from earlier today. It is absolutely right that there is a process of consultation between the devolved Administrations and the Minister at that point to say, “You’re proposing to specify that body, but actually there are far more relevant skills in this other body.” Consultation is absolutely essential to try to ensure that they get this right.
Barry Gardiner
In one moment. I hope the hon. Lady will intervene in a moment, because this is the question I think she may wish to respond to. Imagine a situation where Wales said, “We believe our agency should be the certification body,” Scotland said, “No, it should be our agency,” and because both had the power of consent and not simply the right to consultation, the Minister and the UK were unable to fulfil our international obligations under an international treaty.
The hon. Lady may say, “Surely no devolved Ministers would be so pig-headed as to say, ‘It’s got to be ours.’” The Westminster Minister may well be the one who is being pig-headed—who knows? However, I cannot imagine that it is right for the Committee to pass an amendment that could give rise to a situation in which we were unable to fulfil our international treaty obligations.
Hannah Bardell
I guess the simple answer is that they would have to consult each other. I argue that what is proposed drives a coach and horses through many aspects of devolution, and others also have serious concerns. If the hon. Gentleman believes that there is an overreach in the amendments, what answers does he propose? Given the supposed “consultation” that was part of the European Union (Withdrawal) Bill process, does he really have faith in that aspect of today’s legislation? I know that I do not.
Barry Gardiner
I said at the beginning that I was not going to engage in point scoring, so I will not take up the hon. Lady’s invitation to beat the Minister over the head about the lack of consultation. The witnesses have amply displayed their dissatisfaction with the consultation process, but she has, in effect, made my point for me. She said, “Well, they would have to consult.” Of course they would; that is why I believe that it is vital that consultation with the devolved Administrations is statutorily required, in a way that is not transparent on the face of the Bill. Consent, however, which could bring about the sort of impasse I referred to, should not be built into the legislation.
It is one thing to imagine legislation working in a benign, perfect scenario where people have good will, are engaging with each other and want to come to an agreement. Sadly, that is not always the case, and we must make our legislation such that it survives not only when things go right, but when things go wrong and a way through an impasse is necessary. The danger in the amendments is the reaching upwards into what would currently be seen as the competence and the rights of the European Union to negotiate the substance of those trade agreements. That is why I am fearful of the route down which the amendments would take us.
Alan Brown
Has the hon. Gentleman discussed this with the Welsh Government, and explained that his concerns about the devolved Administrations “reaching upwards”, in his description, outweigh his concerns about the UK Government being able to impose regulations on them?
Barry Gardiner
Yes, of course I have. I went down to Cardiff just last Friday to meet the Minister there and some political advisers. We talked through precisely these issues, and I have done the same with Welsh colleagues here. On Monday, I even met the special adviser from the Scottish National party group here. I have also spoken with my own Scots colleagues. I think that there is a recognition that we are dealing with genuinely difficult constitutional matters. That is why we have a difficult job as a Committee.
Barry Gardiner
I will give both scenarios, and then the hon. Lady can choose.
Our fictional country, Xanadu, has very relaxed laws about the rearing and sale of chicken for consumption. In Xanadu, chickens may be hormone-fed, genetically modified or chlorine-washed prior to slaughter for consumption. In the UK, one of the devolved Governments may have a particularly robust animal framework code, coupled with robust agriculture and food standards regulations, which would not allow for the production or consumption of such chickens. What happens if the UK agrees terms with this country that ultimately liberalise trade in chickens between our nations, such that hormone-fed, genetically modified, chlorine-washed chicken is allowed to be imported into the UK and sold on the shelves of our supermarkets for consumption by British citizens?
The devolved Government would argue, “These are matters of devolved competence, and we have right of consent regarding the implementation of the agreement, especially as it conflicts greatly with our standards.” They might also think, “There is no way we are allowing these products on to our shelves, and we will not give our consent.” In that example, I would probably be cheering and saying, “Good for them. We don’t want those chickens on our supermarket shelves.” However, the point is that if the agreement had been made, we would be bound by the obligations under it, whichever way they went—whichever example we use.
Failure to implement would result in remedial action being pursued by Xanadu. Indeed, many such countries might not even come to the negotiating table if they had significant concerns about potential consent reserve functions distorting their access to the market on terms that had been agreed at state-to-state level. When we heard from the witnesses this morning, the example of Canada was used. We have already seen that the provinces in Canada are brought in at the beginning of the process precisely to get round countries’ reluctance to engage in trade agreement negotiations without certainty that devolved Administrations cannot veto what is agreed.
The hon. Member for Livingston asked me whether I had spoken to my Welsh counterparts and I explained that I had, as well as to two of my Scottish counterparts. We have also spoken with the House of Commons constitutional law experts. They explained to us that they cannot answer the question. They do not know. They have recognised that this is a problem, and that neither the Bill nor the amendment address the issue in a way that would prevent our reaching the situation that I have tried to articulate.
We have spoken with House of Commons trade experts, and have similarly drawn a blank. They advised us that the matter has not been considered because it was not an issue before. They said they had just not come across it. What everyone has recognised is that there must absolutely be consultation in advance, to ensure that no trade agreements come unstuck if a veto is exercisable at a later stage. Also, how will the UK Government ensure that the provisions of a concluded trade agreement are implemented across the United Kingdom, as they are bound to by their obligations under international treaties?
The Bill fails to set out how the Government intend to resolve the issues. It does not define what implementation frameworks will be constructed to mitigate the extent of conflicts between the powers of the UK Government and the devolved competence of the devolved authorities. It does not differentiate between the incorporation of the terms of the agreement into UK law and how that might be considered to be separate from implementation at a devolved level. It does not set out what consultation processes will be instituted to address those issues early on, and to ensure that the interests and experience of the devolved Administrations are represented at the negotiation stage to avoid any conflict at implementation stage.
Of course the devolved Governments must have a say in the process. They must have the capacity to scrutinise it to ensure that it is compatible. The Government’s approach to consultation has not been what it should. Ad-hoc meetings between the Secretary of State and representatives of the devolved Governments cannot be considered a formal consultation process, even if the Secretary of State donned his President of the Board of Trade hat for them.
It is our view that a formal consultation role must be established for each of the devolved authorities and, indeed, for a much wider group of stakeholders with an interest in the outcomes of any trade agreement. Their views are essential in ensuring not only that any future implementation issues are addressed up front, but that their constituent interests, be they commercial or public, are properly considered before negotiations begin and as negotiations progress. It is our view that the Government must be obliged formally to consider and respond to representations made through that stakeholder engagement process, whatever those might look like.
The Minister for Trade Policy (Greg Hands)
Let me start by saying what a pleasure it is to serve under your chairmanship, Mr Davies.
The UK Government have made clear their commitment to working closely with the devolved Administrations to deliver an approach to future trade agreements that works for the whole UK and reflects the needs and individual circumstances of England, Scotland, Wales and Northern Ireland. We have been clear that we will continue to engage with the devolved Administrations as we transition our current agreements, and that we will work together to prevent disruption to UK business and consumers. The Department for International Trade engages regularly with the devolved Administrations: DIT Ministers and senior officials visit the devolved nations frequently and engage devolved Governments and stakeholders right across the UK.
Let me turn to amendments 33 and 34. The concurrent powers in the Bill that allow either devolved Administrations or the UK Government to implement in areas of devolved competence will ensure that, where it makes practical sense, it is possible for regulations to be made once for the whole UK.
Judith Cummins (Bradford South) (Lab)
What does the Minister think are the best examples of things under the government procurement agreement that would be matters of devolved competence?
Greg Hands
If I understand the hon. Lady correctly, she asks about signing up to the GPA and the schedules to the GPA. I might add that, contrary to what the hon. Member for Brent North said, the UK’s joining the GPA will actually be subject to a separate process in Parliament. There might be a question about which authority within these islands has a right to administer a particular part of the GPA. For example, the relevant Scottish body might be the right body in Scotland, the relevant UK body in England, the relevant Welsh body in Wales, and so on.
The approach I described is essential for providing continuity to UK businesses, workers and consumers. As set out in our recent trade White Paper—this is the nub of the argument—we will not normally use these powers to amend legislation in devolved areas without the consent of the relevant devolved Administration, and we will certainly never do so without first consulting them. It is crucial to understand that.
Bill Esterson
My hon. Friend the shadow Secretary of State made the point that there is nothing in the Bill about a formal consultation. Does the Minister accept that point, and does he accept the need for such a formal process in the Bill?
Greg Hands
It is crucial to draw out what we are talking about. This is about transitioning existing agreements that are already in effect right across the United Kingdom. As I have already laid out, the Secretary of State and I have met the devolved Administrations in different capacities and in different ways. Our officials have certainly exchanged a lot of views on that.
I will come on to where we are with future trade agreements in a moment. Our intention is to involve fully devolved Administrations, devolved Parliaments and so on in that process.
Bill Esterson
On Second Reading, the Minister acknowledged that there may well be changes to those existing agreements. In the case of Norway and Turkey, can he confirm that that would almost certainly have to happen? Otherwise, they would cross the Government’s red lines. What consultation does he anticipate in those situations?
Greg Hands
As you know, Mr Davies, perhaps better than anyone, it certainly it is not for me to suggest what may or may not happen as part of the ongoing negotiations with the European Union. Clearly, aspects of the European economic area agreement will be dependent on those. It is our intention for there to be no substantive changes in those agreements as we go forward and transition. It is very important to understand that.
Hannah Bardell
Is that not at the heart of the issue? The Minister does not know what may happen in the future, or what may have to be traded off so that we can tread water and stay where we are. The power of consent is, in some ways, a negative power and a threat, but it means that a negotiation and an agreement have to be reached by all the devolved Administrations. Until now, consultation has not been a very positive experience for Scotland and the other devolved Administrations.
Greg Hands
We made a commitment in the trade White Paper to not normally use these powers in areas of devolved competence without consultation. I repeat that commitment to continuing that consultative process as we go forward. That commitment can be heard loud and clear.
Hannah Bardell
I try to speak on behalf of my constituents and others in Scotland. “Not normally” is, quite frankly, not good enough. The Minister might be as good as his word, but what about future Governments and future Ministers?
Greg Hands
I know that the hon. Lady takes up issues for her constituents—she and I have meetings about particular issues in her constituency. I repeat that we would not normally use these powers, and we would never do so without consultation. I will refer to some of the other reasons, which have been alluded to by my hon. Friend the Member for Hertford and Stortford, and by the hon. Member for Brent North, why we will not go down the road of requiring consent. We would not normally use the powers, but it is very important that we do not require consent to use them. That is a very serious commitment, which should offer the hon. Lady reassurance.
Amendment 36 seeks to remove the restriction on devolved Administrations amending direct retained EU law. Some EU law applies directly and uniformly across all EU member states without needing to be implemented in domestic legislation. On the day that we exit the EU, that type of EU law will be converted into what will be called retained direct EU law.
As the Government’s guiding principle is that no new barriers to living and doing business in our own Union should be created on exiting the EU, it is right that there should be only a co-ordinated set of changes made to that type of law, in order to maximise continuity and certainty for businesses and consumers. We are committed to consulting the devolved Administrations on the most appropriate way to legislate in areas of retained direct EU law that have effect in otherwise devolved areas.
Regarding amendment 37, we also consider it right that where measures affect the whole UK, such as quota arrangements or the use of powers in clauses 1 and 2, before we exit the EU, decisions are taken at UK level before the devolved Administration can take the measures.
Let me turn to some of the individual points raised. The hon. Member for Livingston asked whether a proper consultation could not be sought in Northern Ireland. It is important to recognise that, for reasons of arithmetic, there is not a Northern Irish Member on the Committee, but I will try to answer her point. We are working hard, as she will know—I think she will agree—to restore devolved Government in Northern Ireland as soon as possible. We are committed to working to ensure that Northern Ireland’s interests are represented in the meantime. The Department for International Trade engages with officials in Northern Ireland on a regular basis.
The hon. Lady also asked whether the GPA allows Governments to nationalise or privatise anything, whether for procurement or any other purposes. The UK Government will be bound to open up procurement markets only to the extent they have committed to do so in the new schedule to the government procurement agreement as lodged with the WTO. That will preserve the present position in relation to procurement in areas such as the NHS.
I think the hon. Lady asserted that procurement is devolved. This is a complicated area. The UK Government accept that some procurement is devolved, and the Scottish Government have made some regulations about procurement. However, the UK Government’s position is that procurement is an activity for devolution purposes rather than a subject matter. In other words, whether a procurement is devolved or reserved depends on the functions of the public body carrying it out. I think the saying is that if the public body answers to part of the Scottish Government, it might be devolved, but if it is a UK body of Her Majesty’s Government that operates in Scotland, it is likely not to be devolved.
The hon. Member for Kilmarnock and Loudoun referenced the power that Wallonia has. I am familiar with such arguments: I think the hon. Member for Brent North debated that at some length in relation to CETA in February last year. To be clear, I expect he knows that the UK and Belgium have very different constitutional arrangements. Foreign relations are the responsibility of the UK Government under each of the devolution settlements.
The hon. Member for Brent North made some interesting points. For the first third or so of his speech, I thought I was coming close to being in complete agreement with him—at least in his thrust that the proposal in the amendment to have in effect a veto power for the devolved Administrations would make the whole endeavour unworkable. He is right. He made reference, as I will, to the short, succinct intervention by my hon. Friend the Member for Hertford and Stortford about the potential for a Welsh Government veto over something that was felt to be particularly important in Scotland. That, or vice versa, is a very real example. Our approach is best: not normally to use the powers to amend legislation in devolved areas without consent, and never without consultation with the devolved Administration.
I was surprised by the approach taken by the hon. Member for Brent North. It was my impression that the amendments were drafted by the Scottish and Welsh Governments together. Therefore, much as I welcome him saying that he will not vote for the amendment, it surprised me a little that he seems to be at odds with the Welsh Government viewpoint. Anyway, I am glad that he may be joining us on this occasion.
In terms of the GPA and rolling over the existing schedule, yes, that is the intention, but—I repeat—the terms on which the UK enters the GPA in our own right will be subject to a separate vote in Parliament. The Constitutional Reform and Governance Act 2010 applies to the terms of the UK’s new membership of the GPA —in other words, it is possible to bring a vote in Parliament on the terms under which the UK will join the GPA.
Barry Gardiner
The Minister just assured the Committee that there will be a vote on accession to the GPA. I am surprised that he says he can assure the Committee of that, because the procedure of the Constitutional Reform and Governance Act 2010 does not ensure that there will be a vote at all. CRAGA procedure is precisely the statutory instantiation of the Ponsonby rule of 1924, which means that all the Government need to do is lay the text of the agreement before Parliament for 21 days. Unless Her Majesty’s official Opposition, or any of the Opposition parties, raise that as an objection in an Opposition day debate, it goes through—that is if they are granted an Opposition day motion within that 21 sitting days, which is by no means guaranteed. You will recall, Mr Davies, that between 27 January and September 2017, the Government did not grant the Opposition a single Opposition day debate. Even if they were to object through an Opposition day, the Minister would simply have to acknowledge it, re-table the text, and it would lie on the Table for another 21 days. Unless we went through the same process, there is no process for the Opposition to amend or vote unless we are given an Opposition day debate.
Greg Hands
I know the hon. Gentleman has a particular fascination with the Ponsonby rule of 1924, but I remind him that that rule was made otiose by his own party’s legislation—the Constitutional Reform and Governance Act. I went back and checked. Mr Davies, you and I were in Parliament at that time as Members of the Opposition—
Greg Hands
In 2010. The hon. Gentleman supported that Act. That is why I was careful to clarify that it is possible to bring forward a vote on the UK’s terms of entry into the GPA. For all those reasons, I ask the hon. Member for Livingston to withdraw her amendment.
Anna McMorrin (Cardiff North) (Lab)
The UK Government must have meaningful engagement with devolved Administrations about the shape of the UK’s future customs and tariff regime post-Brexit. That has not been the case so far. Just like the EU (Withdrawal) Bill, the Trade Bill puts restrictions on the Executive capacity of the Scottish and Welsh Governments, while placing no restrictions on the capacity of the UK Government.
Essentially, under the Bill, UK Ministers will be able to legislate in devolved areas without consent from Welsh or Scottish Ministers. That is an overt power grab and a rolling back of devolution. I am proud to have played a part in bringing devolution about in Wales 20 years ago. It is vital that we maintain what devolution was set up to deliver: a proud and confident nation.
It is also disappointing that there is no provision for the Trade Remedies Authority to have any input from devolved nations. It is important for it to be an independent and impartial body, separate from the Government, but it must also represent all parts of the UK, including Wales and Scotland.
It is important to remember that in the trade White Paper, the UK Government stated that the Bill would have provisions for UK Ministers to seek consent from Welsh and Scottish Ministers when making secondary legislation under the Bill, but that has now disappeared.
In 2016, First Minister Carwyn Jones told the Welsh Assembly’s External Affairs and Additional Legislation Committee that it was “hugely important” for devolved Administrations and legislatures to have a say in the negotiation of future agreements that would have an impact on Wales. He gave the specific example of a free trade agreement with New Zealand:
“The impact of that might be to remove the current controls that exist on the import of New Zealand lamb. If they were to go, that would clearly be a great difficulty for Welsh lamb producers. That issue might not be as apparent in Whitehall as it is in Wales, and that’s one example there of why it’s important that the views of the devolved Governments are understood and the interests of the devolved nations are respected.”
It is not new. We are not advocating new devolved powers. It is not even about extending devolution. It is about preserving devolution. It is important to remember that there are restrictions on competence. The devolved settlements of both Wales and Scotland ensure that both Welsh and Scottish Ministers cannot legislate in ways that interfere with UK international obligations. That comes under the Government of Wales Act 2006, specifically sections 82 and 114. It simply cannot legislate to interfere.
Hannah Bardell
The hon. Lady is making an excellent speech and highlighting the importance of the devolution journey we have travelled. Particularly on the devolution settlement, does she agree that there might be challenges if this amendment passes—it is about consent? As she says, it is written into the devolution settlements and that agreement would have to be reached to ensure that that legislation is passed. Does she agree that it would be absolutely in the interests of devolution, and in the interests of Scotland, Wales and Northern Ireland, that those amendments pass today?
Anna McMorrin
It is absolutely about consent, agreement and consultation. Essentially it is about not rolling back on the devolution settlement. Amending the Bill to explicitly ask for the consent of devolved Administrations for secondary legislation under the Bill would therefore not interfere with that, nor would it amount to a veto power.
As I already said, what was already drafted in the UK Government’s White Paper should be in the Bill. Consent and consultation are at the very heart of devolution. If there is secondary legislation being made within an area that is currently within devolved competence, the devolved Administrations and Welsh Ministers must give consent and ensure the democratically elected Welsh Assembly or Scottish Parliament is able to debate it. That is why I agree with the principle underlying the amendments, as agreed by both the Welsh and Scottish Governments.
Professor Jones, a Welsh political expert, told the Select Committee on Public Administration and Constitutional Affairs:
“We see the UK Government in effect reintroducing a kind of conferred powers model where it will decide which bits of the powers returning from Brussels will be conferred on the Welsh Government… That—in the context of this constant churn and change—looks one-sided and objectionable.”
The most disappointing aspect of this Bill’s disregard for devolution is that the UK Government know it is completely unacceptable.
Mr Prisk
It is excellent to have a Member from Wales speaking. Naturally we have heard from the hon. Member for Livingston, the Scottish Member who is moving this amendment. Do I take it from what the hon. Member for Cardiff North is saying that she supports the principle and therefore will be supporting the hon. Lady’s amendment?
Anna McMorrin
As I said, I absolutely support this principle, which has been agreed jointly with the Welsh Government and the Scottish Government.
Ministers, Conservative MPs and civil servants privately acknowledge how extremely ill-advised it is to remove the power of devolved Governments over devolved areas. Clearly the issue is one of trust: trust to exercise devolved powers responsibly; trust to carry out measures that represent the people of Wales and Scotland; and trust to provide meaningful scrutiny of legislation. As it stands, under this Bill, and after Brexit, the devolved Governments will be at the mercy of Whitehall, which will have complete control of all areas, including those which are currently devolved. That is called rolling back devolution. As set out in the Government’s White Paper, devolved Governments must have the right to give consent to secondary legislation in areas of devolved competence.
Hannah Bardell
I have listened carefully to hon. Members. I am not saying that there are not areas of concern, and I understand that we are in unchartered territory. I am sure when we look back, when the history books are written, how we have handled this matter will probably not reflect well on politicians, but we have had a good and detailed discussion.
I pay tribute to the hon. Member for Cardiff North. She has been extremely brave in standing up to say what she has said. She has stood up for her country and for the devolution settlement and the devolved nations. I commend her for that, and for her point about conferred powers and the evidence given in the Brexit Committee. That is really about protecting and preserving devolution.
I understand that the UK Government might have concerns about losing their grip on power, but they have to understand that for generations the people of Scotland, Wales and Northern Ireland have had power wielded over them at times by the UK Government, and devolution sought to move forward from that to create a more consensual approach across the UK. That has been absolutely vital in the development of our society and of how we see ourselves as nations and as the UK. As a result, internationally, we have been looked on as a world-leading model for how different nations in a union can share power.
I believe in Scottish independence and that we could sort all this out if Scotland had all the powers of a fully devolved nation. I appreciate that that is not necessarily going to happen straightaway. However, if the UK Government and the Conservatives continue on this road by stopping and encroaching on the devolved powers of Scotland and the other nations, Scottish independence is increasingly likely. They should bear in mind as we leave the EU the creation of a situation in which consent is required.
I understand the point made by the Labour spokes- person, the hon. Member for Brent North, about Xanadu, chickens and so on. I would make a point in return that UK Ministers will have power that Scottish Ministers and those from other devolved Administrations do not. Why should they be allowed to wield those powers and encroach on the powers of devolution? If we have the power of consent and there is a concern that something may not be agreed to, surely instead of being concerned about not adhering to our international obligations, it would not be beyond the wit of those Ministers and that Government to go back to the devolved nations to ask, “What will it take for you to give your consent and reach an agreement?” I am sure that that is entirely plausible.
I appreciate that we are in uncharted territory, but unfortunately those in government have got too used to having power over the other nations. If they are not willing to listen to and concede the points being made not just by us politicians but by people outside—organisations, trade bodies, law societies—who say that that is encroaching on the powers of devolution, that will be at their peril. That is absolutely something that will befall them. I will not withdraw my amendment and will press it to a vote.
Barry Gardiner
I beg to move amendment 4, in clause 2, page 2, line 7, leave out “subsections (3) to (5)” and insert “subsections (2A) and (5).”
This is consequential upon Amendment 3.
The Chair
With this, it will be convenient to discuss the following:
Amendment 3, in clause 2, page 2, line 12, at end insert—
“(2A) Regulations under subsection (1) to make provision for the purpose of implementing an international trade agreement may only be made if—
(a) the provisions of section [Parliamentary scrutiny of free trade agreements before signature] were complied with before the United Kingdom had ratified the agreement;
(b) the requirements under subsection (3) and under paragraph 2A of Schedule 2 have been met;
(c) the requirements under subsection (4) have been met; or
(d) the requirements under subparagraph 2(1A) of Schedule 2 have been met.”
This would expand Clause 2 to include international trade agreements that do not correspond to a prior or existing EU trade agreement. Sub-paragraph (d) would link to Amendment 20.
New clause 4—Parliamentary scrutiny of free trade agreements before signature—
“(1) The United Kingdom may not become a signatory to a free trade agreement which does not meet the criteria under section 2(3) unless—
(a) before entering negotiations on the proposed agreement, the Secretary of State has laid before Parliament a sustainability impact assessment carried out following consultation as prescribed by section [Sustainability impact assessments];
(b) both Houses of Parliament have passed a resolution authorising the Secretary of State to enter negotiations on the proposed agreement as prescribed by section [Parliamentary consent to launch of trade negotiations];
(c) during the course of negotiations, the text of the agreement as so far agreed or consolidated has been made available as prescribed by section [Availability of agreement texts];
(d) the Secretary of State has, within ten sitting days of the close of each round of negotiations on the proposed agreement, laid before Parliament a statement detailing the progress made in each area of the negotiations and the obstacles still remaining at the close of that round;
(e) the text of the agreement in the form to which it is proposed that the United Kingdom should become a signatory has been made available to Parliament for a period of 21 sitting days; and
(f) a resolution has been passed by the House of Commons approving the Secretary of State’s intention to sign the agreement.”
This would establish a procedure for parliamentary scrutiny before signature of free trade agreements that do not correspond to a prior or existing EU free trade agreement.
New clause 5—Sustainability impact assessments—
“(1) A sustainability impact assessment laid before Parliament under section [Parliamentary scrutiny of free trade agreements before signature](1)(a) shall be carried out following consultation.
(2) A consultation under subsection (1) shall—
(a) be carried out in line with any guidance or code of practice on consultations issued by Her Majesty’s Government, and
(b) actively seek the views of—
(i) Scottish Ministers,
(ii) Welsh Ministers,
(iii) a Northern Ireland devolved authority,
(iv) representatives of businesses and trade unions in sectors which, in the opinion of the Secretary of State, are likely to be affected by the proposed international trade agreement, and
(v) any other person or organisation which appears to the Secretary of State to be representative of interests affected by the proposed international trade agreement.
(3) The Secretary of State shall ensure that public bodies, non-governmental organisations and the public may be made aware of the consultation by circulating and publishing details of it prominently on relevant government websites.
(4) A sustainability impact assessment under subsection (1) shall be conducted by a credible body independent of government and shall include both qualitative and quantitative assessments of the potential impacts of the proposed trade agreement, including as a minimum—
(a) the economic impacts on individual sectors of the economy, including, but not restricted to—
(i) the impacts on the quantity and quality of employment,
(ii) the various regional impacts across the different parts of the UK,
(iii) the impacts on small and medium-sized enterprises, and
(iv) the impacts on vulnerable economic groups;
(b) the social impacts, including but not restricted to—
(i) the impacts on public services, wages, labour standards, social dialogue, health and safety at work, public health, food safety, social protection, consumer protection and information, and
(ii) the government’s duties under the Equality Act 2010;
(c) the impacts on human rights, including but not restricted to—
(i) workers’ rights,
(ii) women’s rights,
(iii) cultural rights and
(iv) all UK obligations under international human rights law;
(d) the impacts on the environment, including but not restricted to—
(i) the need to protect and preserve the oceans,
(ii) biodiversity,
(iii) the rural environment and air quality, and
(iv) the need to meet the UK’s international obligations to combat climate change;
(e) the impacts on animal welfare, including but not restricted to the impacts on animal welfare in food production, both as it relates to food produced in the UK and as it relates to food imported into the UK from other countries; and
(f) the economic, social, cultural, food security and environmental interests of those countries considered to be developing countries for the purposes of clause 10 of the Taxation (Cross-border Trade) Act 2018, as defined in Schedule 3 to that Act and as amended by regulations.
(5) The elements of the sustainability impact assessment to be undertaken under (4)(f) must be sufficiently disaggregated so as to capture the full range of impacts on different groups of developing countries, and must include both direct and indirect impacts, such as loss of market share through trade diversion or preference erosion.
(6) A sustainability impact assessment under subsection (1) shall include recommendations for possible action to maximise any positive impacts and to prevent or offset any negative impacts foreseen, including the possible limitation of the negotiating mandate so as to exclude those sectors most at risk from the proposed trade agreement.”
This would establish the process of consultation for, and the required content of, sustainability impact assessments for free trade agreements that do not correspond to a prior or existing EU free trade agreement.
New clause 6—Parliamentary consent to launch of trade negotiations—
“(1) The Secretary of State shall not commence negotiations relating to a free trade agreement which does not meet the criteria under section 2(3) unless all provisions of this section have been satisfied.
(2) A Minister of the Crown shall lay before Parliament a draft of a negotiating mandate relating to the proposed international trade agreement.
(3) The draft mandate under subsection (2) shall set out—
(a) all fields and sectors to be included in the proposed negotiations;
(b) the principles to underpin the proposed negotiations;
(c) any limits on the proposed negotiations, including sectors to be excluded from the proposed negotiations; and
(d) the desired outcomes from the proposed negotiations.
(4) No sooner than 21 sitting days after the draft of the negotiating mandate has been laid under subsection (2), the Secretary of State shall make a motion for a resolution in the House of Commons in respect of the draft, setting out the elements listed in subsection (3).
(5) A motion for a resolution under subsection (4) shall be made in such a way as to permit amendment of any of the elements prescribed under subsection (3).
(6) A motion to enable consideration of the negotiating mandate shall be laid before the House of Lords.
(7) The terms of any negotiating mandate authorised by a resolution under subsection (4) shall be binding upon the Secretary of State and anyone acting on his or her behalf in the course of negotiation.”
This would establish the procedure by which Parliament would agree a negotiating mandate for free trade agreements that do not correspond to a prior or existing EU free trade agreement.
New clause 7—Availability of agreement texts—
“(1) The text of any proposed international trade agreement which is being negotiated shall, so far as it is agreed or consolidated, be made publicly available within ten days of the close of each round of negotiations.
(2) Every—
(a) document submitted formally by the United Kingdom government to the negotiations, and
(b) agenda for each new round of negotiations
shall be made publicly available by the Secretary of State.
(3) All other documents relating to the negotiations and not falling within the descriptions provided in subsections (1) and (2) shall be made publicly available by the Secretary of State, subject to subsection (4).
(4) The Secretary of State may withhold from publication any document of a kind falling within the description in subsection (3) but must publish a statement of the reasons for doing so.
(5) In the case of any document withheld under subsection (4), the Secretary of State shall provide full and unfettered access to that document to—
(a) any select committee of either House of Parliament to which, in the opinion of the Secretary of State, the proposed agreement is relevant, and
(b) any other person or body which the Secretary of State may authorise.
(6) In the case of a document to which access is provided under subsection (5), the Secretary of State may specify conditions under which the text shall be made available.
(7) The Secretary of State shall maintain an online public register of all documents published under subsections (1), (2) and (3) or withheld under subsection (4).”
This would establish the procedure by which the agreed or consolidated texts of, and other documents relating to, international trade agreements would be made available during the process of negotiation.
Barry Gardiner
Earlier today, Members of the Committee may have tapped into their emails. If they are like me, they would have received 1,700 emails in less than 24 hours, because we are members of this Bill Committee.
The email was clearly a standard email. The subject heading was, “Amend the Trade Bill to protect democracy”, and it began, “Dear Trade Bill Committee Member…”, which is why I assume that most hon. Members in the Committee have received it. It has probably taken us all a great deal of time to sift through, perhaps from some of the child protection cases that have been brought before us and need urgent attention. That in itself is a concern. However, the fact that 1,700 people have emailed each one of us about this Bill shows the level of public concern that exists about its failings.
The Member’s explanatory statements make clear that these two amendments together have the effect of expanding the remit of clause 2, to include those international trade agreements that do not correspond to a prior or existing EU trade agreement. That means that they would have the effect of expanding the remit of the Bill itself, to include all the trade agreements that the UK will negotiate with its trading partners or, as we would see it, they would have the effect of restoring the Bill to its proper proportions.
On Second Reading, I mentioned that we believe the Bill to be highly negligent in restricting its focus only to those future UK international trade agreements where a corresponding EU trade agreement already exists. The Government repeatedly told us that the Bill would provide the basis for this country’s future trade policy once we had left the EU. The background notes to the Queen’s Speech of last June were unequivocal in stating:
“The Bill will put in place the essential and necessary legislative framework to allow the UK to operate its own independent trade policy upon exit from the European Union.”
Matt Western (Warwick and Leamington) (Lab)
Does my hon. Friend agree that this is a key piece of legislation? As he has been articulating, the amount of public interest in it—not just simply through the democratic process—shows that the public are seeking far greater scrutiny and visibility of the trading negotiations and legislation to be formulated and widened through the Bill. There is an expectation that it should be, and there is a void in the Bill. As was mentioned by the witness from the CBI, this is such an important opportunity and there is an expectation that scrutiny and consultation should be included.
Barry Gardiner
Yes, I absolutely concur with my hon. Friend. That is precisely what those of our constituents who wrote to us earlier today were getting at. The gentleman from the CBI who gave evidence only two days ago posed a very pertinent question to the Minister on two occasions—at the beginning and the very end of his remarks. He pointed out that the Minister and the Government have said repeatedly that they will bring forward legislation in the future to put in place what we now think should be here. They give no assurances of that though. What the CBI, supported by the International Chambers of Commerce, said was: if not now, then when?
The Minister is keen to suggest the importance of passing this Bill is that we are pressed for time, and we are. But if we are pressed for time on the need to have trade agreements that correspond to existing agreements in place by the time we leave the European Union, surely we are also pressed for time if we are to have, as the Government have suggested they could have on day one, new trade agreements in place ready to go. Where is the legislation to facilitate that? This should be that legislation and it is not.
By choosing to focus solely on providing continuity with pre-existing EU trade agreements, the Bill has gone back on the promise that the Government made in the Queen’s Speech, and in other places on other occasions. The opening words of the Bill identify its scope perfectly clearly:
“A Bill to make provision about the implementation of international trade agreements”.
My hon. Friend the Member for Sefton Central tried to elicit comment on that point from the witnesses this morning. The Bill bears no qualification to suggest that we should be focusing only on a subset of the broader whole. The issue before us is explicitly the implementation of the UK’s future international trade agreements, which is why we consider the two amendments to be essential to restoring the Bill to its correct proportions right from the outset.
It was highly revealing that several witnesses from the business community voiced their concern at the failure of the Bill to address so many essential aspects of our future trade policy, which are precisely the aspects on which their members desperately want clarity, so that they can start making the necessary investments and operational decisions on how to take on board the new realities. Was it not depressing to hear business leader after business leader in our witness sessions saying that, because there is not that clarity, businesses are now having to execute their plan B? They are being precipitated into taking decisions to make investments abroad in order to safeguard their trading future. That is not good for this country, yet in this Bill we could set out clearly how we will achieve that.
I was concerned and taken aback to hear how angry some businesses are about the Government’s mishandling of the whole process of informing them what the Bill is about and the Government’s abject failure to take on board any of the business community’s input into the official consultation. It came up time and again. It is hardly surprising when we consider that the Bill was already printed before the consultation on the White Paper informing it had run its course. The consultation closed on 6 November, and when we went into the Table Office on the morning of 7 November, copies of the Bill were available.
Hannah Bardell
I absolutely agree with what the hon. Gentleman is saying. Does he share my concern that when it comes to involving businesses, trade bodies and organisations in trade agreements, the Government have huge lessons to learn from the mishandling of the process and the anger? The British Retail Consortium was absolutely infuriated by how the process had been done. Businesses, individuals and trade bodies had been asked to spend staff time, effort and money feeding into a consultation, but there was no space. As he said, the Bill was printed before the consultation had even finished. That is an appalling way to treat businesses and trade bodies, and an appalling way to govern.
Barry Gardiner
I absolutely agree. It was shameful. The Cabinet Office circulates principles of Government consultation that make it clear that, when they consult, they should take notice of the responses. Nobody can persuade me that between 12 midnight on 6 November last year and 8 o’clock the following morning, all the consultation responses had been sifted, considered, documented and incorporated into the ministerial view that emerged in the Bill as printed. That is not consultation.
In that regard, we should all commend the representative of the CBI who spoke to us and gave the understatement of the year in his answer to my question during the second witness session on the Government’s mishandling of the consultation process. When he ventured his verdict, he said after much thought and deliberation that
“the optics were not ideal.”––[Official Report, Trade Public Bill Committee, 23 January 2018; c. 34, Q79.]
They really were not.
I confess that I was not prepared for the level of anger from business in our oral evidence sessions, as industry representatives lined up alongside trade unions, civil society, legislators and academics to announce—to denounce, actually—the Government’s failure on every aspect of this Bill.
Matt Western
Does my hon. Friend agree that it is not simply the failure to consult that has frustrated and angered so many in the business community? As we heard earlier, many businesses are so worried and uncertain about the future that they are having to take out extensive warehousing facilities. We have seen that across the southern part of the UK, where warehousing is now at a super-premium because they do not know what is happening, what is going on or what is around the corner. That is coming at a great cost to UK businesses.
Barry Gardiner
Of course, my hon. Friend is absolutely right. As was stressed this morning in our latest evidence session, in what I think were the witness’s words, businesses say, “We want clarity.” At every turn, that is what the Government have denied them. We see the reports that businesses, industry and sectoral organisations are producing. We have read of the disconnect between the Administration and the business community. Many individuals have made the same point to me in private meetings, but it was quite remarkable to hear in this public forum just how deeply business feels betrayed as a result of the Government’s determination to do it their way and go it alone.
Government Ministers have promised, in the least convincing way, that the UK’s future trade agreements will remain to be talked about at some unspecified point in the future. I think the Scotch Whisky Association said that the “missing piece of the puzzle” was when that would happen. It was instructive to hear the evidence from the representative of the International Chamber of Commerce UK, who pointed out just how inadequate the Government’s commitments in that regard have been. He noted that the Government have given no indication of whether this mythical debate over our future trade policy will be a random chat, a formal consultation or a second piece of legislation. We do not know what it will be, and we do not know when—or if—it will be.
Given the Government’s record leading up to the publication of this Bill, it is small wonder that no one is prepared to give Ministers the benefit of the doubt. Since the consultation here was so bad, why should people trust that the Minister will do what he has suggested—I would not say promised—he will do? That is why we need to talk about the implementation of all the UK’s international trade agreements now, when we have the Trade Bill in front of us, not in some future world that the Secretary of State might imagine—
Barry Gardiner
I will give way to the Minister if he can give a promise or commitment from the Government to this Committee, and a date by which such legislation will be introduced.
Greg Hands
I understand the thrust of the hon. Gentleman’s argument, but does he not agree that if we were to agree to these amendments and new clauses today, we would be effectively pre-empting the ongoing consultation on what Britain will do on future trade agreements? That is the key thing to understand. On future trade agreements, we would wish to consult further; passing these new clauses and amendments today would be cutting that process short.
Barry Gardiner
Mr Davies, I have long admired this Minister’s chutzpah. The chutzpah of somebody to say, “Although I, as the Government, have completely abrogated my responsibility to get this Bill right, and you the Opposition have decided to fulfil my role for me, to try to put it right and get the stuff in place, if we passed your amendments we would not have consulted on them”! What complete, spurious nonsense. Let us have a grown-up debate, because that is not one; it really is not. It trivialises the work of this Committee and the important work that Government must do in scrutinising our future framework for trade negotiations. Mr Davies, I will calm down and try to get back to the essence of what we are doing here.
Barry Gardiner
I am grateful to the hon. Gentleman for giving me the opportunity to lower my blood pressure after the Minister’s intervention.
Mr Prisk
I will do my best, but he may not take that view when he calms down and the blood pressure starts to ebb. My understanding on Second Reading and in earlier debates was that the crux of Labour Members’ worries—on this Committee and in the House generally—was that the Bill’s problem is that it reaches far too wide. Why, then, propose amendments that extend its remit even further? Do the Opposition want a narrow or a wide Bill, and if it is too wide, why extend it?
Barry Gardiner
A plausible case. Elements of the Bill go far too wide, including the Henry VIII powers, which we will come on to later. We believe that the way in which the Government have sought to use Henry VIII powers in this legislation is too wide and unacceptable. The hon. Gentleman is right: that was one of the subjects of debate in our Second Reading deliberations. One other key criticism made by many Labour Members in that debate was that the Bill not only did the few things that it did badly, but failed entirely to do the one thing that it should have done properly. That is, to quote the Queen’s Speech policy paper, to
“put in place the essential and necessary legislative framework to allow the UK to operate its own independent trade policy upon exit from the European Union.”
There are many deficiencies in the Bill. Some relate to the widening of powers that it gives to Government, whereas others relate to the narrowness of the Bill.
Matt Western
Are we not simply taking the opportunity to ensure that this important legislation is comprehensive? It is about widening the remit of the Bill as regards the coverage of trade agreements without widening the powers of a select few.
Barry Gardiner
I am very grateful to my hon. Friend for saying incisively what I was trying to convey to the hon. Member for Hertford and Stortford. My hon. Friend is entirely right. We want a comprehensive Bill that is fit for purpose and does the job that business expects it to do. This Bill does not do that. We want it to do what the Queen’s Speech promised it would, but we do not want the Government to use the Bill to abuse their powers and widen the powers available to them.
Let me speak first to amendment 3, so that what we seek to achieve through it is clear. The amendment expands the Bill through paragraphs (a) to (d) to include new trade agreements that do not correspond to any prior or existing EU agreement. Paragraph (a) relates to free trade agreements as defined in the Bill under clause 2(7): namely, agreements that are notifiable under the relevant articles of the principal WTO goods and services agreements—that is, article XXIV of the general agreement on tariffs and trade and article V of the general agreement on trade in services. Paragraph (d) relates to international trade agreements that the Bill leaves undefined as being
“other than a free trade agreement.”
Dr Lorand Bartels, a witness on the first day of the Committee, noted in his oral evidence the Bill’s failure to define that second category. We will certainly endeavour to address that failure through a subsequent amendment to the Bill. For both categories of trade agreement, our amendments point ahead to the requirements of parliamentary scrutiny that will pertain to them. Let me say at this juncture that we consider the two types of trade agreement to be materially different in that regard.
As we heard from numerous witnesses, the modern generation of free trade agreements are comprehensive in scope. They range far beyond the narrow focus on mutual tariff reduction that characterised the multilateral trade agreements negotiated under the auspices of GATT in the 40 years after the second world war. They reach behind the border to address regulatory issues at the heart of our society, including issues of public health, social standards, labour rights and environmental standards, among many others. Those were precisely the reasons why we had such a comprehensive debate on the amendments proposed by the hon. Member for Livingston.
These are international treaties that introduce binding obligations on future generations and thus cannot be repealed as domestic legislation can be repealed. That is why in all our interventions we have proceeded according to the principle that there must be maximum parliamentary scrutiny and democratic oversight of free trade agreements to ensure that we get them right, rather than storing up the prospect of irreparable harm at a later date.
The other international trade agreements covered by the Bill, to use its phrase—that is, the ones that are not free trade agreements—include such ancillary agreements as mutual recognition agreements, according to the explanatory notes. There are many more such agreements, and they tend to be far more narrowly focused than free trade agreements, so we have proceeded on the assumption that they will not require the same level of parliamentary scrutiny. That is a deliberately pragmatic approach I have adopted to ensure that future Administrations can make progress in agreeing such deals where necessary, but we will ensure that there is sufficient potential for scrutiny in all cases to guard against any potential harm from those other agreements.
As well as drawing in the new UK trade agreements that do not correspond to a prior or existing EU trade agreement, amendment 3 speaks to the new UK trade agreements that correspond to a prior or existing EU trade agreement—that is, the ones that the Government would like to restrict us to in this Bill. Again, let us agree from the outset that they will be new trade agreements, even if they correspond to agreements that the EU had previously negotiated with the third country in question. Ministers have done their level best to suggest that the new UK agreements will just be rolled over or grandfathered from the pre-existing EU deals. The delegated powers memorandum issued alongside the Bill by the Department for International Trade is unequivocal: these will be new agreements, on two counts. First, the agreements will be legally distinct from any pre-existing trade deals the EU may have negotiated—that was underlined by witnesses to the Committee, such as Dr Holger Hestermeyer—and secondly, and even more important, these new trade agreements may include
“substantial amendments, including new obligations.”
It is vital to read the Bill on this point. To qualify for the waiving of scrutiny foreseen in the Bill, a UK trade agreement need bear no resemblance whatever to the EU agreement it seeks to replace. Do I think the Government are likely to waive that scrutiny? No. Is the legislation effective in allowing the Government to do that? Yes. Under clause 2(3) and (4), there is no requirement for the UK agreement to match or mirror the EU’s existing agreement in any way, shape or form. It can be a wholly new departure with wholly new obligations, since all the Bill requires is that the other signatory and the European Union were signatories to a free trade agreement—not a corresponding one or a similar one, but “a free trade agreement”—before Brexit takes effect.
Matt Western
If I recall correctly, Dr Holger Hestermeyer talked about not only scrutiny, but the importance of having impact assessments alongside the consultation, as these are, as my hon. Friend was explaining, essentially new agreements being put in place.
Barry Gardiner
Again, my hon. Friend makes a very important point. We heard from our witnesses about the importance of understanding what we are doing before we rush out and do it. My remarks on this afternoon’s legislation have been extremely cautious in many respects, because I think that legislation is important. It is particularly important in this area, because we are talking about internationally binding obligations that are extremely difficult for us, as a country, to reverse. That is precisely why my hon. Friend’s point is so essential. We need proper impact assessments before we have our mandates established and before negotiations are concluded.
We heard in the first evidence session that there is every likelihood that the UK’s trading partners will regard the negotiation of new trade agreements as an opportunity to re-open the provisions that they had previously negotiated with the EU. Those agreements were designed to meet the interests of all 28 member states of the European Union, and the relative weight of the EU in the negotiations that informed them means that the third country in question would have been pressed into making sacrifices that it might not choose to make when acting alone in forming a bilateral relationship with the UK.
Discussions on those countries’ new agreements with the UK are taking place now. I know that the Government are respectful of the EU treaties and are not trying to negotiate at the moment, but they are having fairly detailed discussions. The Minister, in his sedentary position, remains immobile but a smirk is creeping across his face. Those discussions are taking place behind closed doors, so we do not know what the Government have already said, and what they have said they would be prepared to trade away. Make no mistake: the Government are keen to ensure that they get deals done. This whole endeavour is a different way of approaching our trading future, and the credibility of the Government’s position politically relies on being able to conclude deals swiftly. We must be very wary of negotiations done in secret in order to achieve quick results for political convenience to save the Government’s blushes.
We know that we are talking about new agreements, which could well include substantial new obligations on the part of the UK. That is why the Government’s suggestion that they should be granted the powers to smuggle the implementing regulations past Parliament with no provision for scrutiny is so outrageous. The need for a proper parliamentary oversight process for such agreements was alluded to by our witnesses, Jude Kirton-Darling, the rapporteur on the EU Trade Committee, and Dr Brigid Fowler from the Hansard Society. They stressed that point repeatedly in their oral evidence to the Committee, as did so many other witnesses. To that end, paragraph (b) in amendment 3 looks ahead to the enhanced scrutiny procedures that we will propose under schedule 2 to replace the negative resolution procedure envisaged by the Bill as it currently stands.
Amendment 4 is consequential on amendment 3 and would require any regulations made under clause 2(1) of the Bill to be subject to the provisions not of subsections (3) to (5), as at present, but of subsection (2A), which would be introduced via amendment 3, and subsection (5), which speaks across to the Treasury’s powers to set tariffs under the Taxation (Cross-border Trade) Bill currently going through Committee in parallel with this Bill.
Together with amendments 3 and 4, I would like to speak to the four new clauses that they bring into play, namely new clauses 4 to 7. New clause 4 is the top-line clause, because it outlines the stages of what we consider to be a proper parliamentary procedure for scrutiny and oversight of free trade agreements before signature. Once again, let me underline that the procedure is designed to apply to free trade agreements, not to other international trade agreements referred to in the Bill under clause 2(2)(b).
Equally, let me emphasise the importance of the words “before signature” in the title of the new clause. We have deliberately designed a procedure so that Parliament has the opportunity to debate and direct trade negotiations in the early stages, rather than protesting once it is too late. We will surely be supported by the Government in that, given how publicly the Secretary of State has rued the loss of legitimacy that led to the failure of the TTIP negotiations between the EU and the USA. Nick Dearden from Global Justice Now touched on exactly that point in our first evidence session.
Our aim in bringing forward the maximum possible scrutiny and oversight before signing is to ensure that Parliament can amend and improve free trade agreements where they are found to be wanting. That is infinitely preferable to a system whereby Members are presented with negotiated agreements on a “take it or leave it” basis, thus risking the loss of an entire agreement and all the vital export opportunities that go with it simply because there was no possibility of excising or amending one or two of the offending provisions.
In oral evidence, Dr Hestermeyer referred to the system in Germany, where Parliament is involved early on in the proceedings precisely so that it can direct the federal Government in respect of trade negotiations, even though their negotiations are carried out by the European Commission. We want a constructive procedure that focuses on the best possible outcomes for our future trade agreements, not one where the whole ship is spoiled for a ha’p’orth of tar.
I will run through, in plain English, the six stages we have set out and then expand on them as necessary as they have been placed in the amendments, as subsequent new clauses hang off the overview clause. The first is the need for a sustainability impact assessment before the launch of negotiations towards a free trade agreement. The second is the need for Parliament to be involved in setting the mandate for the objectives of the negotiations. The third is the need for transparency—and, in particular, access to negotiating texts—while the negotiations are being conducted. The fourth is the need for regular progress reports to Parliament after each round of negotiations. The fifth is the submission to Parliament of the full text of the agreement as negotiated before its signing. The sixth is a resolution from the House of Commons to give the Secretary of State the green light to sign the agreement.
The first step in any proper procedure towards negotiating a free trade agreement is to undertake a sustainability impact assessment to identify the opportunities and risks that the agreement might present. Nick Ashton-Hart spoke of the importance of that in his oral evidence to the Committee. Carrying out a sustainability impact assessment is already a standard requirement for every new set of EU trade negotiations, and the methodology for conducting such assessments has been developed considerably over the years. Our new clause 5 provides basic instructions as to what a sustainability impact assessment should include at a minimum. For those who want to take the methodological issue further, the European Commission published in 2016 the second edition of its “Handbook for trade sustainability impact assessment”, which I refer the Minister to and is freely available online.
Crucially, our blueprint for what a sustainability impact assessment should include relates not only to the content of the assessment, but to the process that lies behind it. Any impact assessment must incorporate consultation with the devolved Administrations and with representatives of all those businesses and trade unions that are likely to be affected, as well as offering the opportunity for all other bodies to contribute to it.
We have also written into the new clause that the consultation must be in line with the existing code of practice for Whitehall consultations—something that we might usually consider unnecessary to include in legislation. Given the extraordinary mishandling of the consultation prior to this Bill, there obviously needs to be a reminder that every consultation should follow the rules.
The assessment needs to cover the economic impacts of any trade agreement, and importantly those impacts need to be disaggregated both geographically and by sector. The consequences for jobs, small and medium-sized enterprises and vulnerable economic groups are particularly significant, as free trade agreements have sometimes been to the disadvantage of all but the most powerful economic actors.
Alan Brown
Apologies, but I just want to take the hon. Gentleman back slightly. I agree with his suggestion that sustainability impact assessments should be carried out and should seek the views of the devolved Governments. What does he suggest happens if a sustainability impact assessment shows a negative impact on one of the devolved Administrations? Given that there is no requirement for consent, how would that be resolved?
Barry Gardiner
I am very happy to take that comment on board, but I do not want to get sucked back into our previous debate—I know that you would not let me anyway, Mr Davies.
That is precisely what an economic impact assessment is there to do: to show up those areas of the economy that might benefit and those that might be losers from an international trade agreement. It is then a matter for the Government, and a responsible Government should be trying to balance the interests around all of the United Kingdom to spread wealth and prosperity throughout all of the parts of these islands.
The other day, I was deeply affected to see a graph that I had not seen before and is specifically relevant to the hon. Gentleman’s point. In the top right-hand quadrant were those countries where both GDP and average income are growing. In the bottom left-hand quadrant were those countries where both GDP and average income are declining. In the top left-hand quadrant were those countries where GDP is declining but average income is growing. In the bottom right-hand quadrant were those countries where GDP is increasing but average income is declining. There was only one country in that bottom right-hand quadrant: the United Kingdom. That is a disgrace. That is a shame. It shows precisely why we need economic impact assessments. As many trade agreements have shown over the years, it is possible to increase the GDP of a country through a trade agreement while the people of the country become poorer. That is why we must take these deliberations so seriously. That is why putting these strictures in place is a vital part of what a responsible Government must do in relation to our future trade policy.
Greg Hands
I think that the hon. Gentleman is saying that he is very satisfied with the current system of EU scrutiny in relation to EU trade agreements.
Barry Gardiner
I am pointing out to the Minister, in response to his earlier remarks, the reason I voted for CRAGA then. I think I am right in saying that while his party voted against CRAGA, which it is now relying upon so heavily—there is an irony there—he did not turn up for the vote. I turned up for the vote and I voted for it, but because it was subject to all the scrutiny procedures that were already in place from the EU. The situation has changed.
Mr Prisk
I have listened very carefully to the six stages of assessment. I do not have a problem with the principle that there should be a thorough process, but the amendments and new clauses ignore one tiny detail: next March, we leave the European Union. All business representatives, particularly of businesses in my constituency, have said that they need to know what happens on 1 April. How will it be possible for any of these existing trade agreements, which is what the Bill is about, to be transferred across under his proposal? How many years will businesses have to wait?
Barry Gardiner
In fact, they would not have to wait. I have great respect for the hon. Gentleman and I know he speaks with real experience in these matters, having been a trade Minister. I ask him to look at what we have proposed: we have tried to introduce the bifurcation at a high level in the legislation. We have put the proposals in at that point. Of course, they would have an impact on all the new free trade agreements. We are trying to ensure that for new free trade agreements, this is the proper process of scrutiny that will come into place. On the corresponding agreements—where the EU already has an agreement—there will be a streamlined procedure, but one that is still subject to appropriate parliamentary scrutiny, particularly where those agreements have been substantially amended.
Let me conclude this section of my remarks by repeating that we have tabled the amendments and new clauses to establish a procedure for new free trade agreements that do not correspond to any prior EU agreement—that is the point I just made to the hon. Member for Hertford and Stortford. I was struck by how forcefully the representatives of business made the case to the Committee in our final oral evidence session on 23 January that there needs to be substantially greater consultation on the new trade agreements that the Government are negotiating, which correspond to prior EU agreements. Wherever those EU agreements are modified to incorporate new obligations, those obligations must be highlighted and presented to Parliament, to business and to the country as a whole, for proper debate, proper scrutiny and proper accountability. We will precisely return to the issue of scrutiny for these new replacement UK agreements as we go through the rest of the Bill.
Greg Hands
The Government have been clear that we do not seek to renegotiate existing trade agreements. In leaving the EU, we seek to maintain continuity in our existing trade and investment relationships. As such, we seek no change in the effects of our existing agreements as we leave the European Union. Therefore, special review procedures, as proposed in new clause 8, for example, are unnecessary.
The powers in the Bill will be used only to transition the existing trade agreements that the EU has signed up to prior to exit day. The Bill does not relate to the negotiation, signature or implementation of future free trade agreements. We have taken that approach for a specific reason: we want Parliament to play a vital role in the scrutiny of future trade agreements, as it always has done. In the trade White Paper, we made it clear that our future trade policy must be transparent and inclusive, and that Parliament will be engaged throughout the process. We will continue to respect the role of Parliament when agreeing the terms of future trade agreements.
Bill Esterson
Is the Minister giving us an undertaking that there will be an affirmative or super-affirmative scrutiny process in Parliament on the new trade agreements?
Greg Hands
All that will be considered in due course. We will bring forward proposals in the coming months on how Parliament will interact with future trade agreements.
Hannah Bardell
Will the Minister give a definition of “due course” and say what his vision is? Many external organisations and hon. Members have expressed about the structures in this place and Delegated Legislation Committees. I have sat on those Committees and I know they are not sufficient to allow proper scrutiny of the thousands of statutory instruments and regulations that will have to be dealt with, or to allow Parliament and its Members to have a say on them and be confident that they will be able to scrutinise what has been decided.
Greg Hands
We want a clear and significant role for Parliament in the scrutiny of future trade agreements. Returning to my intervention on the hon. Member for Brent North, the amendments and new clauses would pre-empt those arrangements before we have been able to consider properly what we are doing and to consult on that.
On 5 January, the Government published a response to the trade White Paper, which covered a number of things—of course, not everything that was in the White Paper is in the Bill. We will consider the views expressed in that consultation as we develop proposals regarding the role of Parliament in respect of future trade negotiations.
Hannah Bardell
A number of deficiencies have been highlighted. Does the Minister think that some of the deficiencies in the Bill, and the fact that he is having to tell us that some things will come later—I appreciate that he has great integrity and the best intentions—relate to the fact that the Bill was published before the consultation period ended? Is that the reason why some aspects of the Bill are so deficient?
Greg Hands
As I have stressed, consultation on future trade policy is ongoing. It is not dependent solely on the trade White Paper. We are consulting by speaking with partners, businesses, the devolved Administrations and other stakeholders constantly as we seek to bring forward proposals on our future trade policy. However, as I have explained, we consciously decided to make this Bill about our current trading arrangements and ensuring that they can be transitioned properly into UK law.
Therefore, these amendments pre-empt the full consideration of the 7,429 responses received during that consultation and of the views expressed inside and outside the House. It is right that we take the appropriate amount of time to develop a range of proposals that ensures that Parliament, the devolved Administrations, devolved legislatures and a wide range of stakeholders, including business and civil society, are engaged throughout the negotiating process.
The hon. Member for Brent North made a fascinating speech on what the UK’s future trade policy might look like, but that is not what we are deciding today. He said that Government can smuggle new trade agreements through Parliament without a vote. No. The implementation powers in clause 2 are exercisable by negative procedure statutory instruments. These are subject to a vote in either House of Parliament, if the regulations are objected to by parliamentarians. Parliament has the right to vote on the implementation of transitionally adopted trade agreements, if it so desires.
Barry Gardiner
The Minister must be more straight- forward with the Committee. We have already been over this ground. He knows that the negative procedure does not make provision for anything but the grace and favour of the Government in giving Her Majesty’s Opposition an opportunity to object. There is no necessity at all for a debate or vote on the Floor of the House. He must be straightforward about that.
Greg Hands
Again, I stress that Parliament has the right to vote on the implementation, but we also must remember that these will be agreements that are substantively the same as the current agreements. The reason I intervened on the hon. Gentleman—when I think he confirmed he was quite content with the existing EU scrutiny procedures—is that of course all of those agreements have been through the existing EU scrutiny procedures. I was not necessarily with him in the Chamber or upstairs each time one of those EU trade agreements went through, I think he was satisfied with those procedures at the time.
Bill Esterson
Is the Minister categorically saying that there will be no changes to the agreements that we are describing as corresponding agreements before they come through?
Greg Hands
I refer the hon. Gentleman to the evidence of the International Trade Committee, if that is in order. We had a good round about this at the Select Committee yesterday—some of the members of the Select Committee are here or are at least members of the Bill Committee—and we are quite clear that 70-plus partners have been engaged in this process. All 70-plus have agreed in principle; none has raised objections in principle to doing this. There is no reason that they necessarily would want to change the substance. They need continuity in their trading arrangements in the same way that we do.
The hon. Member for Brent North claimed that a wide range of stakeholders provided oral evidence calling for greater scrutiny mechanisms for future approved trade agreements. I think that was a fair comment. There were a number of views on how our future scrutiny arrangements might be, but I think the evidence session showed just how varied and complex the views on this matter are. It is right that we take the time to think through our options carefully. Let us not rush ahead and put in place arrangements that may not be fit for purpose. That is why we will be returning to future trade agreements in the future.
We will return to Parliament with proposals on future free trade agreements, on which we will seek views in due course. Accepting these amendments and new clauses would frustrate our ability to fully consider all of the issues and options in the round. I therefore ask the hon. Member for Brent North to withdraw the amendment.
Barry Gardiner
I will try to extract the crumbs of comfort from the Minister’s remarks. He has said that he recognises that there is a role for greater parliamentary scrutiny of our trade arrangements and that these are matters to which we should return in due course. He has also suggested that we should be able to have a proper consultation on the future trading arrangements. Those are things that I take as good will on the part of the Minister.
I propose not to press these amendments, but I make it clear to the Minister that, at a later stage in the passage of this legislation, he should table his own amendments to do what the Bill says it is about and what Her Majesty in the Gracious Speech to Parliament said it was going to be about. If he does that, I will be very happy. I will see him as a man of his word, and will be looking forward to going through what I assume will be a very similar text to the one I have tried to present to the Committee today.
I will not press these amendments today, but I put the Government on notice that it is time for them to act and to come forward with their own proposals. If they do not, these Opposition measures will return at a later stage. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Ordered, That further consideration be now adjourned. —(Craig Whittaker.)
Trade Bill (Fifth sitting)
Tuesday 30th January 2018
(7 years, 9 months ago)
Public Bill CommitteesTrade Bill 2017-19 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 30 January 2018 - (30 Jan 2018)
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
Barry Gardiner (Brent North) (Lab)
I beg to move amendment 5, in clause 2, page 2, line 13, leave out subsections (3) and (4) and insert—
“(3) Regulations under subsection (1) may make provision for the purpose of implementing a free trade agreement only if—
(a) the other signatory (or each other signatory) and the European Union had ratified a free trade agreement with each other immediately before exit day, or
(b) where the regulations are made before exit day, the other signatory (or each other signatory) and the European Union have ratified a free trade agreement with each other on the day the regulations are made.
(4) Regulations under subsection (1) may make provision for the purpose of implementing an international trade agreement other than a free trade agreement only if—
(a) the other signatory (or each other signatory) and the European Union had ratified an international trade agreement with each other immediately before exit day, or
(b) where the regulations are made before exit day, the other signatory (or each other signatory) and the European Union have ratified an international trade agreement with each other on the day the regulations are made.”
This excludes from the scope of section 2(1) those international trade agreements agreed between the UK and a third country where the corresponding agreement between the European Union and that third country has been signed but not ratified.
The Chair
With this it will be convenient to discuss the following:
Amendment 9, in clause 2, page 2, leave out line 33.
This would remove the Henry VIII power allowing for the modification of primary legislation that is retained EU law.
Amendment 10, in clause 2, page 2, line 40, at end insert—
“(7A) An ‘international agreement that mainly relates to trade, other than a free trade agreement’ means a strategic partnership agreement or mutual recognition agreement that is ancillary to a free trade agreement as defined in subsection (7).”.
This would define international trade agreements that do not fall within the category of a “free trade agreement” as defined under subsection (7).
Barry Gardiner
I am delighted to see you in the Chair, Ms Ryan. I look forward to the Committee proceeding at a rapid pace under your guidance. I am tabling amendments 5, 9 and 10, in my and my colleagues’ names, as on the amendment paper.
We are now talking about the implementation of the new international trade agreements to be negotiated between the UK and those third countries that already have an agreement with the European Union. The Government are seeking to appropriate to themselves the power to make regulations to implement those new agreements without any scrutiny by Parliament. I cannot state it better than the House of Commons Library briefing paper, which states that the Bill
“seeks to minimise Parliament’s role”
in this regard, in that it will make all secondary legislation under clause 2(1) subject to a negative resolution procedure only.
The rationale behind this attempt to sidestep due democratic process is that the trade agreements that the EU had previously negotiated with the third country in question had already undergone scrutiny when they were prepared for ratification—that is the argument the Minister used last week when we debated this. By the Government’s sleight of hand, he would say there needs to be no parliamentary scrutiny of any new UK trade agreement because that job will already have been done on the earlier agreement negotiated by the EU.
The Minister was particularly keen to point out that we were suggesting that all the levels of scrutiny that took place at the EU would be done away with. I think he thought he was trapping us when he asked us to agree that a good level of scrutiny had taken place, and that we should allow these measures to go through on the nod because that scrutiny had already happened. We reject that argument, and we were pleased to register that business representatives who gave oral evidence to the Committee agreed with us. The Committee will recall that.
The new trade agreements are not only legally distinct, as the Government have admitted, but may well include substantial new obligations, which will have been through no process of scrutiny whatever. That is why we demand a new approach to these agreements in subsequent amendments to schedule 2, where scrutiny is addressed. However, the provisions of clause 2(3) and (4) go even further, in that they allow the Government to sidestep scrutiny of not only those new UK agreements that are set to replace existing ones, which have been through the full scrutiny process prior to ratification, but UK trade deals that replace EU agreements, which have not even been through the process of ratification. Our amendment speaks to that extraordinary attempt to undermine democracy still further, the significance of which might be demonstrated if I give the Committee an example.
The economic partnership agreement between the EU and Japan was finalised last month. Negotiations were concluded on 7 December last year, and the text of the agreement is currently undergoing the double process of what is called legal scrubbing and translation into the official languages of the EU, so that it can proceed to signing in 2018. The agreement will subsequently undergo the due process of ratification by Japan and within the EU, including parliamentary scrutiny by the European Parliament. However, that process will not be completed until later in 2019, if experience is any guide, and therefore after the point at which the UK is no longer a member of the EU.
Japan is also one of the countries with which the Government have established a trade and investment working group. That working group held its first meeting in Tokyo during November of last year, and is tasked with advancing the trade and investment relationship of the two countries, with the eventual aim of signing a UK-Japan trade agreement at some point in the coming years.
According to the Bill, any future UK trade deal with Japan will be counted as a roll-over agreement, and will therefore escape parliamentary scrutiny altogether, because the EU and Japan will have signed a trade agreement during 2018—that is, before the UK leaves the EU. Note that that will be the case even if the future UK-Japan deal bears no resemblance to the EU-Japan economic partnership agreement. As stated earlier, the Bill makes no requirement for the future UK deal to match the EU’s agreement in any way, shape or form; the Bill requires only that the other country and the European Union were signatories to a free trade agreement before Brexit takes effect. The regulations to implement those new obligations will be subject to a negative resolution procedure, which is the effective negation of parliamentary scrutiny, as the Government would have us consider the new UK-Japan deal simply to be a roll-over or a grandfathered agreement.
I would like to draw attention to the oral evidence provided last Tuesday by Dr Lorand Bartels of the University of Cambridge, who spoke to exactly that issue. Dr Bartels drew particular attention to the forthcoming trade agreement with Japan, and pointed out that
“there is a fundamental difference in international law between a signed and provisionally applied agreement and a ratified agreement.”—[Official Report, Trade Public Bill Committee, 23 January 2018; c. 42.]
The Government would do well to heed that distinction. I hope that the Minister might accept our amendment and that he will see it, in a friendly spirit, as one that might improve the Bill.
Without the amendment, we are in danger of effectively granting the Government carte blanche to do what they like to secure a new UK-Japan deal. That would be a major concern to businesses and workers up and down the UK. Japan is a major player on the world stage, and Japanese companies are important investors in our economy, so the obligations that we, as a nation, undertake in relation to those companies are critical to the future of some of our most dynamic industries. Are the Government really telling us that we, as parliamentarians, should have no right to scrutinise those obligations?
Faisal Rashid (Warrington South) (Lab)
Despite the fact that the Government have continued to argue that there is no need for parliamentary scrutiny in the Bill because existing deals have been subject to sufficient scrutiny in the European Union, does my hon. Friend agree that that is not the case here and therefore that it is vital in the interests of the British people that we secure such an amendment?
Barry Gardiner
I am grateful to my hon. Friend for his intervention because he reinforces the very point that I am trying to establish. Despite the processes that are currently in place for scrutiny of trade deals as they proceed through Europe, and ultimately through the European Scrutiny Committee and through the House under the Constitutional Reform and Governance Act 2010 procedure, we have here a situation in which a deal that was going to be concluded between the EU and another country can proceed to be signed, but not implemented. Then, in the lacuna—that is, the space between that signature and our leaving the EU—we could be confronted by the Government with a completely different set of trade relations. The trade agreement could be totally different, yet, under the Bill, the Government would have the power to sign and implement it simply because they had already signed a previous agreement before we had left the EU. That cannot be the right procedure for what could be completely new issues under that future agreement.
In one sense, the amendment is a modest one, given the seriousness of the issue it addresses. It merely seeks to exclude from the antidemocratic provisions of the Bill any regulations stemming from treaties such as a future UK-Japan trade agreement, where the correspondent EU agreement will have been signed but not yet ratified, along with all the scrutiny that ratification requires.
Other EU trade agreements could fall into this same category: the EU-Vietnam free trade agreement, the text of which is also being prepared for signing at some point this year; the EU-Singapore free trade agreement which has been initialled but held up by internal EU discussions as to whether it is a mixed agreement or exclusive EU competence, leading to the European Court of Justice ruling on this issue in May last year; and, potentially, some of the economic partnership agreements still to be finalised between the EU and different groupings of African, Caribbean and Pacific states, which were criticised so trenchantly by Professor Alan Winters of the UK Trade Policy Observatory in his oral evidence to the Committee last week. Also in this category is CETA, the comprehensive economic and trade agreement between the EU and Canada, which has been signed but not yet fully ratified, as it is a mixed agreement requiring ratification in each of the EU member states, in addition to the centralised EU institutions of the Council of Ministers and the European Parliament.
Finally, the amendment tightens up the language of subsections (3) and (4) by requiring not just that the EU and the other signatory or signatories should have ratified trade agreements, prior to Brexit, but that they should have done so with each other. The Bill as it stands simply says that they must have signed “a” trade agreement; it does not say that they have to have signed it with Japan—with the corresponding party. This is ridiculous. The Minister is looking confused. If he wants to intervene, I would be happy to give way to him on this point because it is material.
The Minister for Trade Policy (Greg Hands)
I thank the hon. Gentleman for allowing me to intervene. I am a little confused about his position on CETA. If CETA is not yet ratified by all the EU28 countries, the amendment, if it became law, would effectively prevent the UK from transitioning CETA to be a UK-only agreement. I know that the hon. Gentleman is opposed to CETA, and he represents a minority view within his party. However, the great majority of Labour MPs welcome CETA and voted in favour of it. It is also something that has already taken effect, so the effect of his amendment would be to take us out of the provisions of CETA that have already been in place and been provisionally adopted since September.
Barry Gardiner
The Minister, of course, chose not to respond to the point I allowed him to intervene on because of his confusion.
Barry Gardiner
I am happy to address the Minister’s point and have set out the Labour Front-Bench position very clearly. He should know that the provisions of the amendment do not do what he has claimed they do. What it says is that there must be proper parliamentary scrutiny. He is denying precisely the opportunity for that to happen when a treaty has been signed but not yet ratified. The point of the amendment is to ensure that proper scrutiny can take place and that ratification can have taken place to ensure that.
Faisal Rashid
On the point about CETA, does my hon. Friend share my concerns about the implications of bringing in certain provisions of the deal and not ratifying—for example, the investor-state dispute settlement provisions? The key point is that there will not be sufficient scrutiny or consultation or an impact assessment carried out.
Barry Gardiner
My hon. Friend pre-vents me—I think that is the sort of Latin term: he goes before me. He picks up a theme I was about to come to. The ISDS procedures have been a major concern of not just parliamentarians but many other people in this country and across Europe. Any hon. Member who says that his postbag and email have not reflected that has simply not been examining them carefully enough.
On my point about the requirement to sign “a” trade agreement, clause 2(3) states:
“Regulations under subsection (1) may make provision for the purpose of implementing a free trade agreement only if—
the other signatory (or each other signatory) and the European Union were signatories to an international trade agreement immediately before exit day”.
It does not specify that it must be the same agreement, and stating the need for a treaty “with each other” would clarify that, which is what the amendment seeks to do. There is no great confusion, but there might be some because the clause is ambiguous.
Amendment 9 speaks to the first of two Henry VIII powers. Those powers are the most egregious example of the power grab that characterises the Bill, despite the extraordinary spectacle of the Secretary of State using the letters page of The Guardian to claim the opposite—a travesty I detailed on Second Reading and which, for reasons of time, I do not wish to reprise here. For the record, though, I draw attention to paragraph 2 on the very first page of the delegated powers memorandum that accompanies the Bill, which states, in plain English:
“The Bill contains 6 individual provisions containing delegated powers. Two of these, clauses 2(1) and 7(3), include a Henry VIII power.”
I am still waiting for the Secretary of State to correct the record that he so carefully muddied previously. Amendment 9 simply seeks to remove the first of those two Henry VIII powers.
Ms Ryan, I am glad that your grouping of amendment 9 with amendment 5 has enabled me to speak to it now, because it follows nicely on from my comments on the UK-Japan trade agreement. It is bad enough that talks towards a trade agreement should have been initiated behind closed doors by a secret working group—no agendas, no minutes, no access to any documentation, no website to keep Parliament or the public abreast of what was being decided in our name—but at the end of that charade, a set of formal negotiations, still in secret, determined what obligations we as a country might or might not be saddled with for a long time.
Faisal Rashid
Does my hon. Friend agree that if the Government are certain of their ability to roll over existing agreements, there is surely no need for the Henry VIII powers?
Barry Gardiner
My hon. Friend is entirely right. The Henry VIII powers show that the Government also realise that it is not simply replica provisions that are being rolled over but, in fact, new agreements that may contain substantially different clauses. Because of that, they need powers to be able to progress those agreements. The Committee tried to address that during its sitting last Thursday afternoon but the Minister has been reluctant to take the matter on board, even when pressed on how he thought, given the Government’s red lines, he would be able to roll over our current agreement with Norway on the free movement of people, and that with Turkey on the relationships we have through that country’s agreement with the EU customs union. The Minister has failed comprehensively to address those points. It would be interesting if he were to do so when he responds to this group of amendments, but I fear my hon. Friend might languish in hope rather than expectation of the privilege of hearing such a response.
Greg Hands
It is a pleasure to serve under your chairmanship, Ms Ryan. Let me reassure you that, by exit day, the Government aim to have ratified all EU mixed free trade agreements that are currently provisionally applied. They include, for example, the EU-Canada CETA agreement and the Southern African Development Community co-operation in accreditation.
Barry Gardiner
If it is the Minister’s intention, as he says, to do what the amendment asks him to do, namely to apply these clauses only to agreements that have been ratified—and he says that they will all have been ratified—what problem does he have with accepting the amendment?
Greg Hands
The answer to that is straightforward. Although it is our intention to have ratified the agreements, that does not necessarily mean that they will have been ratified by the other EU27 countries. That is the important thing. I will come on to why the hon. Gentleman’s amendment would put at risk agreements that the UK is already party to and that UK businesses are already benefiting from.
We must remember that EU free trade agreements that contain areas of shared or member state competence must be ratified by all 28 member states before they come into force. As we know, that process can take considerable time. We drafted the clause 2 power so that signed EU free trade agreements fall within its scope. That will ensure that it can be used to implement agreements to replace those that have been signed, and which may have been provisionally applied but are yet to be ratified by the EU or the partner country.
Many such agreements are benefiting businesses and consumers as we speak. In other words, they have already taken effect. I know that the hon. Gentleman is opposed to CETA, for example, but we believe that it has benefited UK businesses considerably since it was provisionally applied and took effect in September. I know that he wants to throw away those benefits, so I remind him that most of his party sensibly sees the merits that CETA provides this country. Under his amendment, we would be unable to implement a free trade agreement that falls within this category, which would risk a cliff edge in any trading relationships covered by such an agreement.
To take another example, the UK ratified the EU’s Andean FTA with Colombia and Peru in 2014. In 2016, UK trade with those countries had a value of more than £2 billion. However, that FTA is still awaiting ratification by both the European Union and a number of EU countries. If that is still the case by exit day, the amendment would prevent the clause 2 power from being used to implement a transitioned FTA with Colombia and Peru, resulting in a likely reduction in trade flows between the UK and the Andean countries.
Let me turn to a few points that the hon. Gentleman raised elsewhere. He asserted that the agreement has to be signed by both parties. Clause 2(3), which relates to free trade agreements, states that in order for the Government to be able to use the power when implementing an agreement with a partner country, both the EU and that country must have signed a free trade agreement before exit day. In other words, both must have signed the same agreement.
Greg Hands
I think the hon. Gentleman said it was ambiguous, but the Government’s intention is clear. We have all laid it out frequently: to transition the effects of the 40-plus EU FTAs, not to renegotiate new agreements. He mentioned the cases of Norway and Turkey. As I laid out at considerable length at the Select Committee on International Trade last week—I know two of his colleagues are members of the Committee—the situation will depend largely on the UK’s future relationship with the European Union, which is a matter for the current negotiations, as Norway, Turkey and Switzerland’s relationships are very much linked to whatever our future relationship with the EU might be.
Barry Gardiner
Of course, the Minister is entirely right to say that the nature of the agreements that we conclude with those countries would depend on our future relationship as we negotiate our withdrawal from the EU, but the point is that this Bill is supposed to be simply rolling over the existing agreements. The Minister has made a great deal of the fact that we want no change and are simply rolling over what exists into what comes afterwards. That is the trap that he has set for himself, and he must extricate himself.
Greg Hands
I will just repeat what the Secretary of State said on Second Reading: the Bill is designed to be robust to the different cases of where the future UK-EU relationship might lead us following the negotiations.
The hon. Gentleman mentioned Japan. In the small number of cases where the EU seeks to establish an FTA, it might be too late to go through conventional EU scrutiny here, and there are also our agreements that will now be sole EU competence. Also, they might not necessarily happen through the current EU scrutiny process. We will consider this in due course, but we are committed to Parliament having its say. Earlier this month we published a response to the trade White Paper, and the Government will consider views as we develop proposals regarding the role of Parliament in future trade agreements.
If we are to avoid trade disruption, we need to make sure that signed EU agreements that are not yet ratified by the EU, including the examples I have given, such as CETA, the Andean agreement and the partner country agreements, fall within the scope of the Bill, otherwise we will jeopardise a considerable part of the current trading relations that benefit this country so much. Contrary to what the hon. Gentleman says, the amendment would not improve the Bill. It would actually threaten a great number of our existing trading arrangements.
It is worth remembering that a delay in ratification by another EU member state has no real relevance to the content of an agreement, or indeed to UK scrutiny of it. It is merely a reflection of that country’s domestic situation. To allow such a state of affairs as that suggested in the amendment, and to cause disruption to UK businesses, would be profoundly unsatisfactory.
Matt Western (Warwick and Leamington) (Lab)
Does the Minister agree that, as Alan Winters said in the evidence session when talking about business and concerns about continuity, the issue is not only transparency and scrutiny, but a recognition—we are calling for this in the amendment—that some changes required in any trade agreement will be technical or substantive? There is a need to understand the degree of what is substantive, and that is not determined anywhere. That is what we and the witnesses—business or academic—are calling for. There is nothing in the Bill that ensures the scrutiny of what is substantive and what changes should be allowed.
Greg Hands
I would say two things to the hon. Gentleman. By the way, I cannot remember whether he was in favour of CETA or against it, or what his individual position was within the Labour party on some of these agreements.
Greg Hands
Of course—the hon. Gentleman was not yet elected at that time.
The Government’s intention is clear. This is a technical roll-over: there will not be substantive changes to the agreement. However, that is not what this amendment deals with. The amendment talks about making sure that all deals that have yet to be ratified are outside the scope of the Bill. Our position is clear: agreements that have been signed but not yet ratified should be within the scope of the Bill.
Faisal Rashid
The Minister mentioned a few times proper parliamentary scrutiny of future trade agreements but, clearly, the provision confirming that there will be parliamentary scrutiny in future should not be in the Bill.
Greg Hands
I am absolutely clear that this Bill relates to the transition of our existing trade agreements. How we approach future trade agreements will be a matter for future consideration. I mentioned earlier that we will look carefully at the responses to the consultation. Of course, if the hon. Gentleman has views, we are keen to hear them. Indeed, we will be seeking views from across this House on what Parliament’s views on these matters might be, but that is entirely a matter for the future.
Amendment 10 would clearly create an unacceptable risk that agreements essential to trade could not be effectively provisioned. If the members of the Committee are concerned about the scope of this power, please let me reassure them that, as I referred to earlier, we have already set out in clause 2 restrictions on the scope of the power.
Given these constraints, the existing drafting of the power, and our clear and firm assurances that this power is not intended to be used for the implementation of future trade agreements, it would be strange to include this amendment, which sets out the required procedure for future trade agreements. I therefore ask the hon. Gentleman to withdraw amendment 5.
Barry Gardiner
I am not prepared to withdraw and I propose that we move to a vote.
Question put, That the amendment be made.
Judith Cummins (Bradford South) (Lab)
I beg to move amendment 6, in clause 2, page 2, line 29, at end insert—
“(4A) Regulations under subsection (1) may make provision for the purpose of implementing an international trade agreement only if the provisions of that international trade agreement do not conflict with, and are consistent with—
(a) the provisions of international treaties ratified by the United Kingdom;
(b) the provisions of the Sustainable Development Goals adopted by the United Nations General Assembly on 25 September 2015;
(c) the primacy of human rights law;
(d) international human rights law and international humanitarian law;
(e) the United Kingdom’s obligations on workers’ rights and labour standards as established by but not limited to –
(i) the commitments under the International Labour Organisation’s Declaration on Fundamental Rights at Work and its Follow-up Conventions; and
(ii) the fundamental principles and rights at work inherent in membership of the International Labour Organisation;
(a) women’s rights and are in accordance with the United Kingdom’s obligations established by but not limited to the Convention on the Elimination of All Forms of Discrimination Against Women;
(b) children’s rights and are in accordance with the United Kingdom’s obligations established by but not limited to the Convention on the Rights of the Child;
(c) the United Kingdom’s environmental obligations in international law and as established by but not limited to—
(i) the Paris Agreement adopted under the United Nations Framework Convention on Climate Change;
(ii) the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES); and
(iii) the Convention on Biological Diversity, including the Cartagena Protocol on Biosafety; and
(d) the sovereignty of Parliament, the legal authority of UK courts, the rule of law and the principle of equality before the law.”
This would ensure that international trade agreements do not conflict with the provisions of international laws or conventions on human rights and the environment, or with the rule of law.
The amendment is designed to apply to regulations implementing all UK trade agreements, of whatever sort. It is a high-level amendment that sets out our trade policy in the proper context of respect for human rights, environmental sustainability and the rule of law. I hope therefore that the Government will have no difficulty in accepting it as a friendly amendment.
The casual observer might think it bizarre that a trade agreement could endanger human rights. Luckily, help is at hand. For those members of the Committee who have not read it, I heartily recommend the comprehensive report of the United Nations independent expert Alfred de Zayas for the UN Human Rights Council, dated 12 July 2016, in which he enumerates the many ways in which trade agreements may indeed infringe on human rights and sadly have done so in the past.
I will not take the Committee through the whole report, but suffice to say that de Zayas examines the threat posed to human rights by international trade and investment across not only civil and political rights, but economic, social and cultural rights such as the rights to work, health, education and one’s own culture. In all cases, de Zayas offers examples of where international trade and investment activities can threaten the enjoyment of human rights. He warns against creating any new agreement that might exacerbate the harm that has already been done as a result of failure to pay proper heed to the nexus between trade and investment, and human rights.
I will draw out one recommendation in the UN independent expert’s report, because it is so utterly pertinent to our discussion of the Bill. His first and foremost recommendation to Parliaments around the world states:
“No parliament should approve trade agreements without exercising oversight functions and examining the compatibility of the agreements with human rights treaty obligations in the light of impact assessments.”
That sentence might usefully be read out, I suggest, at the beginning of every sitting of the Committee and at any subsequent debate on trade policy held by this House.
The amendment seeks to ensure that future UK trade agreements will never be able to undermine human rights in the ways that Alfred de Zayas describes so powerfully for the UN Human Rights Council. In particular, proposed new sub-paragraph (c) aims to establish a proper hierarchy in cases of conflict between human rights law and the treaty obligations of international trade agreements, so that human rights law will always take priority. That is in line with the Vienna declaration and the programme of action adopted by the world conference on human rights on 25 June 1993.
Sub-paragraph (c) also speaks to the basic legal principle of pacta sunt servanda, namely in this case that states are obliged to fulfil their human rights treaty obligations in good faith and should never enter into any trade or other commercial agreements that would undermine or in any other way render impossible the fulfilment of their human rights treaty obligations.
Our amendment goes further, however, in light of the fact that we have higher-order principles that are not related to human rights alone. We also require the UK’s international trade agreements to be consistent with international humanitarian law, which is the body of law governing the conduct of war, so that there can be no question of the UK entering into any agreement with a trading partner that might undermine such a critical pillar of the international order.
One obvious example of what happens when that principle is ignored can be found in the ongoing difficulty caused at European level by Morocco’s attempt to include the fishing rights of the Sahrawi people in its trade agreement with the EU. The trading relationship between the two partners has been critically undermined as a result of the European Court of Justice 2016 ruling that Morocco has no right to negotiate a fishing agreement with the EU covering the waters of the occupied Western Sahara, a territory that the UN has confirmed must be granted the right to self-determination, but where the Sahrawi population has lived under Moroccan military occupation for more than four decades.
Just this month, the ECJ advocate-general publicly stated that the EU fisheries deal with Morocco should be declared invalid because of its failure to accord with international humanitarian law. I am sure that, like us, the Government would not wish any future UK trade agreement to fall into a similar trap.
Faisal Rashid
Trade deals often impact a wide range of public policy areas. For example, a deal done with a foreign state can impact on the provision of services such as transport. The powers outlined in the Bill could potentially remove a duty on service providers to make reasonable adjustments for people with disabilities. According to Liberty, that would make access to transport more difficult for one in five of the UK population. Does my hon. Friend agree that, as we build the foundations for our future trade policy—I understand that the Minister argues with that—it is vital that the legislation contains provisions that protect such human rights, which are incredibly important for a huge number of people?
Judith Cummins
It is incredibly important to include an ethical dimension to any human rights legislation in the Bill. We also require all future UK trade agreements to be consistent with the sustainable development goals adopted by the UN General Assembly in September 2015.
The importance of those goals needs no further elaboration but may be a useful point on how the world’s poorest countries have been marginalised from the gains of global trade over the past 40 years. Although emerging economies such as China have clearly been able to use the export opportunities of a globalised economy to develop into leading actors in many fields of trade and investment, the countries that are home to the bottom billion, as the poorest have been called, have been left behind.
That is precisely what the World Bank’s former research director, Paul Collier, warned of in his best-selling book “The Bottom Billion”, where he concluded that reliance on trade is more likely to lock yet more of the bottom billion countries into the natural resource trap than to save them through export diversification.
Mr Mark Prisk (Hertford and Stortford) (Con)
I do not agree with the hon. Lady’s last argument. Millions of people have been lifted out of abject poverty because of trade. I would like to make clear that this is a friendly amendment, as the hon. Lady described it, for future trading agreements, rather than the agreements that the Minister has referred to.
Judith Cummins
It is important that we establish the principles of human rights within our trade agreements.
Mr Prisk
I entirely agree with the principle that human rights are important. I just want to be clear whether we are talking about existing agreements being transitioned, as dealt with by the Bill to which the hon. Lady has tabled her amendment, or, as her remarks indicate, about future agreements some way in the distance.
Judith Cummins
I am talking about both because human rights are the basis of principle, not a point, so my proposal covers both.
To prove the point, the world’s least developed countries saw their share of global merchandise fall still further, to under 1%, in 2015. Africa has seen its share of global trade cut by a half over the past 30 years. It is our task to ensure that the poorest countries can benefit from trade and investment. To that end, the sustainable development goals included three specific targets on trade, set out for all countries to follow, which include promoting a universal, rules-based, open, non-discriminatory and equitable, multilateral trading system under the World Trade Organisation.
Anna McMorrin (Cardiff North) (Lab)
In his speech to the World Trade Organisation in Buenos Aires, the Secretary of State reaffirmed his commitment to trade as a main tool for development, which is fantastic. The Government should therefore be keen to support the amendment, which reaffirms the UK’s commitment to the provisions of the SDGs, human rights, workers’ rights and environmental protections, which are key elements of development, growth and stability, as the Secretary of State said.
Judith Cummins
I absolutely agree. The sustainable development goals include the capacity to increase significantly the exports of developing countries, with a view to doubling the least developed countries’ share of global exports by 2020. The SDGs can also allow for timely and lasting duty-free and quota-free market access for the least developed countries, consistent with WTO decisions, including by ensuring that preferential rules of origin applicable to imports from the least developed countries are transparent, simple and contribute to facilitating market access.
The Labour party made a manifesto commitment to guaranteeing the world’s least developed countries continued duty-free and quota-free access to the UK market, post-Brexit. I am pleased that the Government agreed to match that pledge, but we need to go considerably further if we are to ensure that our trade policies really contribute to the realisation of the sustainable development goals. That is why this is such an important part of the amendment, and one that I am sure the Government will support.
One of the most powerful ways to ensure that international trade leads to poverty reduction and enhanced life chances is to ensure that working people benefit fully from the opportunities it offers. To that end, we wish to ensure that all new trade agreements are fully consistent with the UK obligations on workers’ rights and labour standards, starting with the International Labour Organisation’s declaration of fundamental rights at work, and its eight core conventions covering freedom of association, forced labour, child labour and discrimination. However, simply linking to those conventions is far from sufficient, as has been seen in so many cases where trade agreements have led to an undermining of other labour rights. We require a deeper commitment to principles and rights at work that are inherent in the UK’s membership of the ILO, to ensure that there can be no race to the bottom in labour standards as a result of the UK’s new international trade agreements.
Again, I have no doubt that the Government will share our desire to keep labour standards high. The Secretary of State for International Trade, who has not always been known as a champion of workers’ rights, made the case in a debate on exiting the European Union and global trade in the House on 6 July last year. I should be pleased to quote him at length, which is not something that I find myself doing too often:
“There are those who would make the case for a Britain with lower regulatory standards and fewer protections in place across the economy for the environment, for workers and for consumers. Let me tell the House that Britain will not put itself at the low-cost, low-quality end of the spectrum, as it would make no sense for this country economically to do so, nor morally would it give us the leadership we seek. I believe there is no place for bargain-basement Britain.”—[Official Report, 6 July 2017; Vol. 626, c. 1365.]
Encouraged by the Secretary of State’s new-found identity as a defender of high standards and workers’ rights, the Government will, I am sure, have no trouble in supporting this part of the amendment.
Equally, all new trade agreements must be consistent with women’s rights, not least because it has often been women workers who have suffered most in the international trading system.
Integration into global supply chains promised much to women workers in countries where they had not previously enjoyed other economic opportunities. In Bangladesh, for instance, formal employment in the export-oriented garment industry has provided millions of women workers with a regular source of independent income, which has in turn allowed them to enhance their social status and political participation. When done properly, trade can be a source of empowerment, yet many of those working women have found themselves trapped in dead-end jobs characterised by poverty wages and dangerous working conditions. That is a particular threat to workers at the bottom of global value chains producing goods for distant retailers that have ultimate power and control over the conditions under which their suppliers operate. The ILO has noted that all too often trade via global supply chains
“tends to generate economic benefits… (in terms of high productivity), but not necessarily for workers”.
For far too many women in the global economy, the promise of empowerment is eclipsed by the grim realities of exploitation. Trade agreements must be consistent with children’s rights, with the UK’s environmental obligations, and with the provisions of other international treaties ratified by the United Kingdom. Surely the Government will agree with us on these points. They must respect CITES—the convention on international trade in endangered species of wild fauna and flora—as well as the convention on biological diversity. None of these are idle concerns. The European Commission’s official impact assessment for the Transatlantic Trade and Investment Partnership recognises that under every potential outcome, the proposed EU-US agreement would create what it called dangers for natural resources and for the preservation of biodiversity.
Iain Stewart (Milton Keynes South) (Con)
The hon. Lady refers to TTIP and new trade deals; I am sorry for pressing this point, but they are not the point of this Bill. I agree with her on all the standards that she wishes to see in place, and I do not want Britain to race to the bottom, but that is not the point of the Bill; it is for future Bills. Please could we stick to the roll-over agreements that we are talking about in this Bill?
The Chair
Order. I remind the hon. Gentleman that it is for me to guide hon. Members on whether they are in scope.
Judith Cummins
I remind the hon. Member for Milton Keynes South that the opening line of the Bill says that its aim is to
“Make provision about the implementation of international trade agreements”
per se. It is about principle, and about the fact that the Bill is a legal entity in itself.
Judith Cummins
It is the Trade Bill. These principles, including on human rights, should be held dear; if they are not held dear by Government Members, they are at least by Opposition Members. Environmental degradation has just been dismissed as collateral damage when it comes to international trade agreements. That is no basis on which to construct a new trade policy for a United Kingdom.
Hannah Bardell (Livingston) (SNP)
The hon. Lady makes an excellent speech. Does she agree that we all have deep concerns about fair trade? There is already a creep in supermarkets looking at fairly traded products, rather than Fairtrade products, and we will see significantly more of that if the Bill passes without amendment. Given that many of our constituencies are Fairtrade towns, that should be of significant concern to all of us.
Judith Cummins
I thank the hon. Lady for that intervention. Fair trade should absolutely be a key element of any Bill that deals with trade.
Barry Gardiner
My hon. Friend quite properly reminds the Committee that the amendment is in scope—otherwise it would not have been selected; the Chair would have ruled it out of scope—because of the words at the front of the Bill. The amendment would of course have an impact on the roll-over agreements, as the Government call them, which are legally distinct, new agreements. If these provisions were put into law, they would apply to all new agreements that we completed in the future. I do not doubt that many Government Members would be happy to see included these provisions about human rights, equality and the rights of children—things that David Cameron, when he was Prime Minister, was keen to negotiate as one of the leaders on the SDGs. Would Government Members accept that the amendment is not only in scope, but could have a positive effect on future conclusions of trade agreements?
Matt Western
I thank my hon. Friend for being so generous. To amplify that point, I think it was Nick Dearden who, during the oral evidence sessions, spoke about modern trade deals and the huge opportunity presented to us. It is almost a no-brainer to include the things listed in the amendment. There is almost an assumption that they should be included, and that is why we are putting forward the amendment. These are modern trade deals. We have an opportunity to update the arrangements. This is a simple amendment.
The Chair
For clarity, when we vote, we will vote on the amendment as on the amendment paper. It is perfectly in order for the hon. Member for Bradford South to discuss the principles that she wishes to see applied in the Bill.
Judith Cummins
Finally, our amendment demands that the UK’s international trade agreements be fully consistent with the legal authority of UK courts, the rule of law and the principle of equality before the law. It does not take Sherlock Holmes to deduce that the amendment is designed to prevent the undermining of our legal system by the introduction of investor- state dispute settlement mechanisms in any future UK trade agreement.
ISDS represents an extraordinary transfer of power to foreign investors who gain exclusive rights, unavailable to any domestic investor, to sue host Governments in their own private judicial system. The investment protections they are granted go far beyond what they could be entitled to expect in any of their domestic courts. That has in turn spawned a massive industry of trade lawyers and hedge funds keen to speculate on the massive gains to be made from suing a country over any new rule or regulation that might be construed as being unfair to multinational companies operating there.
There have been more than 800 ISDS cases brought by foreign investors against their host countries. Some Governments have been forced to back down from introducing perfectly reasonable social or environmental measures. In the first ISDS case brought against Germany under the energy charter treaty, the Swedish power company Vattenfall sued in relation to its new coal-fired power plant outside Hamburg. The authorities were forced to drop the environmental conditions designed to protect the water quality of the River Elbe. In the infamous case brought against Canada under the ISDS provisions of the North American Free Trade Agreement, the US company Ethyl successfully sued the Canadian Government over their ban on the use of the fuel additive MMT. The ban had been introduced on public health grounds to guard against the inhalation of particles of manganese, which is known to be a neurotoxin. When the ISDS tribunal ruled against Canada’s procedural defence, it settled the claim by paying $13 million to Ethyl, rescinding the ban and issuing a public apology.
The prospect of being on the receiving end of such an attack generates its own regulatory chill, dissuading countries from upgrading their regulatory regime for fear of being sued for hundreds of millions of pounds in front of wholly unpredictable tribunals where the adjudicators often turn out to be working out as counsel for their corporate clients at the same time. The inclusion of ISDS or its equivalents in the most controversial bilateral trade agreements of recent years has been one of the key factors behind the loss of legitimacy and public support for international trade in general. We would do well to address that fact at this juncture.
The EU Trade Commissioner Cecilia Malmström was not exaggerating when she complained that ISDS had become the most toxic acronym in Europe. It turned her TTIP dreams into a nightmare, and it will do the same for any future UK trade agreements that seek to include it. There is absolutely no justification for the introduction of ISDS in any trade or investment agreement negotiated for the UK, and there is no need for it either. The UK holds more foreign investment stock than any other EU member state and boasts a higher score than any other European country on the index measuring the quality of judicial processes. Foreign investors can have full confidence in the UK judicial system and can rely on our domestic courts for any redress they seek as a result of unfair treatment, just as we do.
The previous coalition Government commissioned an official cost-benefit analysis of the prospect of extending ISDS rights to North American investors at the outset of the TTIP negotiations in 2013. The report they received is still well worth reading. It found that there would be no benefits to the UK economy from introducing ISDS, only costs. With that rebuke ringing in our ears, I trust that the Government will vote in favour of the amendment, as they should.
Mr Prisk
I strongly support the hon. Lady’s point about the value of human rights and the importance of workers’ rights and environmental standards, not only as we trade abroad but in how we deal with our domestic politics. That is very important. I am sorry that, at the tail end of her point, she started to suggest that one side of the House somehow does not agree with that. In fairness, there is a range of views across the spectrum, but the principles about human rights and workers’ rights and so on are there.
I cannot support the hon. Lady’s amendment, not because of the values that she talked about at some length but because, in her own words, the amendment seeks to change any future trading agreement. On a point of principle, I do not think that is something the Committee has the power, or is in the position, to do. On that principle, I will vote against the amendment, and I hope other Members do the same.
Greg Hands
I thank the hon. Member for Bradford South for her interesting and wide-ranging speech. I wholly agree with her strong comments on human rights and the UK being a leader in that space and the wide range of fields referred to in the amendment. In fact, I think all Conservative Members wholly endorse that.
However, I assure the hon. Lady that the amendment is unnecessary. The UK has always sought to comply with international law, and we will continue to uphold our strong commitments to human rights and labour and environmental standards around the world, as well as to the sustainable development goals, gender rights, disability rights, endangered species, fighting climate change and so on. The process of exiting the EU will not alter that position, and we will still be bound by our commitments under international law. Both the Secretary of State and I stated in the Chamber on Second Reading that our aim in undertaking the transition programme is to seek continuity in the effects of existing trade agreements. This is not an opportunity to renegotiate the terms of those agreements, which have already been scrutinised by Parliament.
The hon. Lady referenced least developed countries. I remind her that, despite her warm words, she voted against the Taxation (Cross-border Trade) Bill on Second Reading, which is currently being considered in another Committee and which enshrines a system of trade preferences for developing countries as we leave the EU, to make sure that those powers are in place for the UK to offer unilateral trade preferences. Unfortunately, if her vote on that Bill had been the majority view in the House earlier this month, the UK would not have a system of trade preferences for developing-world countries as we exit the EU.
The amendment is unnecessary, particularly in relation to our compliance with international law.
Faisal Rashid
The Government recently published a 25-year plan for the environment, committing the UK to:
“Leave a lighter footprint on the global environment by enhancing sustainability and supporting zero deforestation supply chains.”
Does the Minister agree that it is vital that the Bill is amended to ensure that the Government can meet that commitment, and to ensure that trade policy does not result in a reduction in environmental standards and protections or in an unacceptable, unsustainable global footprint?
Greg Hands
Let me be absolutely clear: there is no intention to reduce environmental standards. In fact, the point of the 25-year environment plan was to enshrine this country’s commitment to the environment over a very long period of time. I heartily commend that plan, but it is not part of today’s Bill. I am happy to underline that we will, of course, remain compliant with international law. On the basis of that assurance, the broader applicability of international law, and the UK’s commitments in all such areas, I ask the hon. Member to withdraw the amendment.
Greg Hands
I will, of course, take an intervention from the hon. Member for Warwick.
Matt Western
My constituency is Warwick and Leamington. They get funny about that in my area.
Based on my humble experience, I do not think we have the same kind of reputation for environmental safeguards as certain other countries—our history is weak in that area. One of the reasons for tabling the amendment was to ensure that those sorts of standards are included, and that we are putting that forward for our own protection, as well as the offensive interests of other Governments. The Minister may have a different view from mine. I understand that he has lobbied in Brazil on behalf of certain oil giants such as BP and Shell, so he will take a different stance. I believe that it is an important issue, which is why we tabled this important amendment.
Greg Hands
I thank the hon. Gentleman for that late but wide-ranging intervention. Let me try to deal with each of his points. On Brazil, it is quite clearly on the record that the discussions were to ensure a level playing field for UK companies, not to change Brazilian domestic requirements in a way that would harm the environment in Brazil.
Secondly, we have an exemplary record on the environment over the last seven years. The UK was a leader in the Paris agreement and the negotiations behind it, as the shadow Secretary of State will know only too well—he takes a keen interest in that and is even the party’s spokesperson. When it comes to recent regulations such as the banning of microbeads and efforts to prevent plastics from entering the environment, the Government have an exemplary record. On that basis, I ask the hon. Member for Bradford South to withdraw her amendment.
Judith Cummins
We will push the amendment to a vote.
Question put, That the amendment be made.
Bill Esterson (Sefton Central) (Lab)
I beg to move amendment 7, in clause 2, page 2, line 29, at end insert—
“(4A) Regulations under subsection (1) may make provision for the purpose of implementing an international trade agreement only if the provisions of that international trade agreement do not in any way restrict the ability—
(a) to make public services at a national or local level subject to public monopoly;
(b) to make public services at a national or local level subject to exclusive rights granted to private operators; and
(c) to bring public services at a national or local level back into the public sector for delivery by public sector employees.”
This would ensure that international trade agreements cannot restrict future decisions in respect of the delivery of public services.
It is a pleasure to serve under your chairmanship, Ms Ryan. Amendment 7 seeks once and for all to exclude public services from the remit of any future UK trade agreements. That nut has proved extremely difficult to crack in all of the multilateral and bilateral international trade negotiations that the UK has been involved with to date. Given the object lesson we have just been taught by the collapse of Carillion and the deep uncertainty it has caused in relation to the outsourcing of public services, we are more determined than ever to get it right for the future.
Service trade negotiations were introduced to the multilateral trading system through the general agreement on trade in services. GATS was part of the package of multilateral agreements negotiated in the Uruguay round of global trade talks, which took place between 1986 and 1994 and led to the creation of the World Trade Organisation. Each country submitted a schedule of GATS commitments detailing the level of liberalisation it would offer to other WTO members on a sector-by-sector basis and across the four different modes of service delivery—namely, cross-border supply, consumption abroad, commercial presence and movement of natural persons. That was done by what is known as positive listing, which means that only sectors put forward for liberalisation would be subject to the GATS market access and national treatment provisions. EU member states were able to register their own national limitations to the levels of liberalisation listed for each sector, either by withholding sectors from liberalisation entirely or by attaching national conditions to the opening of their markets. That means that, across the 160 service sectors, the EU’s schedule of commitments runs to more than 540 pages in length.
Services have become an important element in the bilateral trade negations that have proliferated since the demise of the WTO’s Doha round. Contrary to what is often heard in the media, the comprehensive economic and trade agreement between the EU and Canada—CETA—included the most far-reaching commitments to services trade liberalisation ever made by the EU. They were made by a negative listing, which means that only sectors specifically listed for protection from liberalisation would be excluded from the deal’s market access and national treatment provisions. That is commonly known as the “list it or lose it” approach, and it makes for a much more extensive liberalisation outcome than the positive list approach that has been used in multilateral services negotiations.
In all of those negotiations, there has been considerable concern about the potential for public services to fall foul of WTO rules on monopolies, competition and market opening. To that end, the original GATS text included an exemption for services
“supplied in the exercise of government authority”.
That exemption has been carried over into most other bilateral agreements. We sometimes hear people who are new to this issue claiming that this provides a carve-out for public services. However, the exemption for services supplied in the exercise of governmental authority is closely defined to mean only services that are supplied on a non-commercial basis and without any competition from the private sector. There is consensus among all trade policy experts that it is a carve-out not for public services, but only for specific state functions, such as the judiciary, the army or the police.
The detailed paper on the subject published by Professor Markus Krajewski notes that academics and trade policy practitioners alike now accept that most public services, including social, health and educational services, as well as network-based and universal services, are not covered by the exemption clause. The EU agrees. The European Commission has confirmed that public services such as the NHS are not protected by the governmental authority exemption. The relevant passage from the Commission’s proposal to modernise the EU’s treatment of public services in future EU trade agreements states:
“The scope of the GATS includes services which may be considered by each Member to be ‘public services’. A wide variety of so-called public services, including certain activities relating to education, healthcare, postal, telecommunications, waste collection, water provision, electricity, transport, etc as they exist today in many countries, including in most EU Member States will have certain commercial aspects and may be provided to some extent by private operators on a competitive basis. Where this is the case, they would normally fall within the scope of the GATS as representing ‘tradable’ services.”
Faisal Rashid
Does my hon. Friend agree that modern-day international trade agreements extend into a wide range of public policy making and it is therefore essential that our Government maintain the capacity to deliver public services?
Bill Esterson
That is absolutely right. It is at the heart of amendment 7 that our Government and this country retain the right to decide who runs vital national services. Our concern from the body of evidence over the years—I have started to run through where some of those concerns come from—is that there is doubt about whether that will continue to be possible.
Alan Brown (Kilmarnock and Loudoun) (SNP)
I am fully behind the principle of the amendment. Scotland still leads the way in terms of Scottish workers being employed under public ownership. We are looking at a public sector energy company and a public sector bid to run the ScotRail franchise. I completely support that public sector ethos. As was mentioned, the Bill is supposed to be about existing trade agreements being rolled over into UK law. Is the hon. Gentleman saying that even under existing EU trade deals, these public service operations are at risk, meaning that that would be a concern when any one of those deals was rolled over?
Bill Esterson
If the amendment is agreed, we are making sure that there is no prospect of there being a problem or concern about any of these things arising. I am glad that the hon. Gentleman mentioned some of the important elements of public services that are still in the public sector in parts of the United Kingdom, because in the Labour manifesto last year that is certainly what we envisaged for the whole country.
We believe that those with concerns are right to be concerned, given that the European Commission has said the following about including public services in the multilateral services regime in its proposal on modernising the system:
“Indeed, it is important for the EU that GATS does cover public services, as the EU, for whom services represent 70% of the overall economy, and where EU harmonisation has led to the liberalisation of former public monopolies in areas such as telecoms and postal services, is also the world’s largest exporter of services and seeks access to other markets.”
That is why public reassurances and best endeavour commitments from Ministers are not the issue here. Legal certainty and absolute exemption are required, which again answers the point made by the hon. Member for Kilmarnock and Loudoun. Amendment 7 seeks to exclude, once and for all, public services from the fear of being trapped by world trade rules, by prohibiting Ministers passing regulations to implement the trade agreement if that agreement in any way restricts the ability to keep public services in public hands or to bring them back into public hands once they have been outsourced.
In the wake of the disastrous collapse of Carillion, I would hope that the common sense of the amendment is so overwhelming that it will receive support from the Government. We cannot have a situation where the outsourcing of public services to the private sector might end up entangled in trade rules so that future Administrations find themselves in any way restricted in bringing those public services back into the public sector for delivery by public sector employees.
When the Secretary of State gave evidence to the International Trade Committee last February, he was invited by my hon. Friend the Member for Birmingham, Ladywood (Shabana Mahmood) to repeat the words:
“The NHS is off limits in any future trade deal.”
In reply, the Secretary of State stated:
“Let me tell you, as the person who will be in charge of negotiating that, it would not be happening on my watch.”
Let us hope that the Secretary of State’s commitment will encourage the Government to vote in support of the amendment and to ensure that our NHS and our other vital public services will never be pawns to be bargained away in international trade negotiations.
Alan Brown
It is a pleasure to serve under your chairmanship, Ms Ryan. I will expand briefly on the point I made in my intervention. We fully support the principles behind amendment 7. Scottish Water is still in public ownership in Scotland. Caledonian MacBrayne ferries recently went out to tender and there was a public sector bid, so that remains run by the public sector. Going forward, the Scottish Government are looking at the ScotRail franchise possibly coming into the public sector, as well as public sector energy companies. Of course, we all value the different national health services across the constituent countries of the United Kingdom.
The hon. Member for Sefton Central touched on Carillion, which is certainly a good example of how private does not always equal better. We have now seen the latest east coast main line fiasco—Stagecoach and Virgin were able to walk away and not honour their commitment to the public purse in the franchise moneys they were meant to pay. It is clear that that service has been run successfully in the public sector before and there is no reason why that could not be done again. We would certainly like to see more rail franchises operated by the public sector.
For those reasons, we would welcome these protections being added to the Bill. I would like to think that the amendment is not really required, but there does sometimes seem to be a confused position in the Labour party. The leader of the Labour party, the right hon. Member for Islington North (Jeremy Corbyn), has suggested that we cannot be in the single market and have rail nationalisation. This is not correct, given how many national rail companies operate in the UK and run UK franchises. Clearly, we can have nationalisation and be in the EU single market.
Barry Gardiner
Perhaps the hon. Gentleman will allow me to clarify. I believe that the contention is not that we cannot have a nationalised industry as a member of the single market; it is that once the sector has been liberalised, it then becomes very difficult to take it back under national control. That is the point my party’s leader was making, not the one he suggests.
Alan Brown
I thank the hon. Gentleman for that clarification. I would still contend that there is a confused viewpoint regarding the single market and how it aligns with membership or otherwise of the EU. Again, where the rail franchising system in the United Kingdom has been liberalised, clearly there is no impediment to the Scottish Government making a public sector bid. That proves that it can happen within the EU single market.
In conclusion, I welcome any commitment to strengthen the public sector ethos and public sector ownership, and I will be interested to hear what the Government have to say.
Greg Hands
As I have mentioned, the aim of continuity means that this exercise will not be used as a back-door way to alter how the UK delivers public services. I make it clear to the Committee that the protection of public service delivery is written into many EU trade agreements and they already include safeguards to protect EU country Governments from being forced to privatise their services. That protection has worked for 20 years.
I will turn to some of the individual points that have been raised. The hon. Member for Sefton Central talked about the agreement on government procurement. Just to be clear, the GPA operates on a positive list basis—that is, only areas listed by GPA members in their GPA schedules are covered by the GPA’s obligations.
Secondly, the hon. Gentleman will know, as I do, that negotiations on the trade in services agreement are ongoing at the WTO, but are not making a great deal of progress. The UK’s position, as it currently stands, will be represented in those discussions by the European Union.
Faisal Rashid
If the Government will not support the amendment today, will the Minister provide assurances to the Committee and to the British people that the Bill will not put vital public services, such as the NHS, at risk of piecemeal privatisations that are ultimately detrimental to those who rely on those services?
Greg Hands
We have been clear that many EU trade agreements presently provide those protections and we have been clear that this exercise of transitioning existing EU free trade agreements will not be used for any back-door attempt to do anything to the NHS that would prevent our right to regulate domestically for the NHS. This party has a proud record of defending and protecting the national health service, and that will continue.
Barry Gardiner
Does the Minister recall that during the drafting of CETA, while Germany put a clear exemption into the agreement’s text that it would not allow any privatisation of its health service in that way, the UK failed to do so? One reason the ancillary document—the interpretative document—was necessary was to make that clear, but that document was not binding in law. As such, the Government do not have a good record on this, do they?
Greg Hands
The hon. Gentleman and I had an extensive debate on this matter in February. We are satisfied that the protections in CETA are adequate for protecting our national health service and our right to regulate in the domestic market.
It has long been an aspect of UK Government policy under successive Governments to make sure that trade agreements work for services. That is actually in the UK national interest—80% of our country’s GDP comes from services and 79% of our employment comes from services—and has been an objective of successive Governments.
Greg Hands
Of course I will allow the hon. Gentleman to intervene, to clarify where he is with Tony Blair.
Barry Gardiner
My relationship with our former Prime Minister is probably not in scope for the Committee. However, I assure the hon. Gentleman that the Labour party and the Opposition in Committee do not in any way want to stop the very valuable exports that our service industries make to the rest of the world. We want to see them flourish, but we want them to do so within a framework that does not prejudice the protections that should properly—as the Minister has acknowledged—be in place for public services and the public sector in this country, and the right to protect our national health service and to ensure that public procurement can be done properly.
Greg Hands
I think we shall leave it at that. I thank the hon. Gentleman for his clarification of where he stands in relation to Tony Blair.
Protecting the UK’s right to regulate public services is, of course, of the utmost importance. UK public services are protected by specific exceptions and reservations in EU trade agreements where relevant. As we leave the EU, the UK will continue to ensure that rigorous protections are included in all trade agreements that it is party to. On that basis, I ask the Opposition to withdraw the amendment.
Bill Esterson
I will not be drawn on everything the Minister said, but I will go back to what the hon. Member for Kilmarnock and Loudoun said in his short speech. The amendment and the Bill are about trade agreements and not about the single market. My hon. Friend the Member for Brent North made it clear on Second Reading exactly what our relationship with the single market will be once we have left the European Union—if we are not a member of the European Union, it is not possible to have a say in the rules, so we are therefore not a full member whatever our relationship with the single market. He explained it extremely well.
The amendment is about the relationship with future trade agreements and about having the right protections for public services. I go back to what I said in my speech: the amendment is about ensuring that we have the ability in law to bring services back in, in the light of Carillion, whether they are to do with the NHS or other services. In the public interest—the public good—this country should have the ability to decide where its public services are run.
Matt Western
Back in February last year, as I understand it, the Minister told the International Trade Committee that the NHS would remain off limits in trade negotiations and that he would not sacrifice the Government’s right to regulate public services. Does my hon. Friend therefore share my surprise that the Minister is not keen to include the amendment in the Bill?
Bill Esterson
I share my hon. Friend’s surprise because, as I said in my speech, repeated public reassurances and “best endeavour” commitments from Ministers are not the issue; legal certainty and absolute exemption are required. If the Minister will not accept the amendment, perhaps he will tell us now that he will bring forward his own amendment later in our proceedings to achieve exactly that.
Greg Hands
We are talking here about future trade agreements, on which I have clearly laid out our position. I will just pick up on a point made by the hon. Member for Warwick and Leamington. I think he is incorrect in what he said on any evidence I might have given to the International Trade Committee last February. To be clear—and perhaps to my regret—I did not appear in front of that Committee until last week.
Bill Esterson
It is odd to be intervened on about the comments of another Member. I suspect my hon. Friend the Member for Warwick and Leamington meant the Secretary of State. I thought all Ministers spoke as one in Government, although we have seen enough evidence in recent days, weeks and months to suggest that that is not entirely true. Today is perhaps the latest example, with the leaked reports from the Secretary of State for Exiting the European Union. We are wandering, and I think the Chair might have something to say on that.
Over the weekend, the Prime Minister left a degree of ambiguity in her words on this issue. As my hon. Friend the Member for Brent North quite rightly reminded us, the German Government felt sufficiently concerned about CETA to exclude healthcare from its provisions. We should be very mindful of that. The Government are keen to, in their words, roll over that agreement, although with the acknowledgement that that may involve technical changes. Perhaps we can all agree that it will become a corresponding agreement.
There is a body of evidence from across the years showing the need for cast-iron guarantees to protect public services, so that they can be delivered in the public good and brought back in house where necessary. Without it being legally binding in the way we have set out in the amendment, it is difficult to see how that can be achieved. I will ask again: if the Government will not support the amendment, will they bring forward their own amendment that delivers on exactly that point later in our proceedings? There will be further opportunities in this House and in the other place to do so.
Question put, That the amendment be made
Judith Cummins
I beg to move amendment 8, in clause 2, page 2, line 29, at end insert—
“(4A) Regulations may only be made under section 2(1) if—
(a) the provisions of the international trade agreement to which they relate are consistent with standards for food safety and quality as set and administered by—
(i) the Department of Health;
(ii) the Food Standards Agency; and
(iii) any other public authority specified in regulations made by the Secretary of State;
(b) the Secretary of State is satisfied that mechanisms and bodies charged with enforcement of standards for food safety and quality have the capacity to absorb any extra requirement which may arise from the implementation of the agreement;
(c) the provisions of the international trade agreement to which they relate are consistent with policy to achieve reduction in the risk of disease or contamination as set and administered by—
(i) the Department of Health;
(ii) the Food Standards Agency; and
(iii) any other public authority specified in regulations made by the Secretary of State;
(d) the provisions of the international trade agreement to which they relate are consistent with achieving improvements in public health through any food policy priorities set and administered by—
(i) the Department of Health;
(ii) the Food Standards Agency; and
(iii) any other public authority specified in regulations made by the Secretary of State;
(e) the provisions of the international trade agreement to which they relate are compliant with policy to achieve targets for farm antibiotic reduction set by the Veterinary Medicines Directorate;
(f) the provisions of the international trade agreement to which they relate are compliant with retained EU law relating to food standards and the impact of food production upon the environment; and
(g) any food or food products to which the provisions of the international trade agreement apply meet standards of labelling, indication of provenance, and packaging specified by the Food Standards Agency.
(4B) A statutory instrument containing regulations of the Secretary of State under this section may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.”.
This would ensure that international trade agreements maintain or enhance food safety standards in the UK.
The amendment speaks to the critical issue of food and food safety, in the context of our future international third country agreements. No Committee member needs me to tell them of the central importance of maintaining food safety standards in this country and ensuring that the British people can have confidence in those standards. However, perhaps it is necessary to provide some explanation of why this has become such a totemic issue in the debate around international trade.
Alan Brown
In her opening remarks, the hon. Lady has talked about reassuring the British people. I note that the amendment mentions the Department of Health and the Food Standards Agency. Is it not deficient because it does not recognise the devolved Administrations? I wonder whether that is an omission, because Food Standards Scotland actually gave evidence to this Committee.
Judith Cummins
The hon. Gentleman makes a very good point.
It is easy to joke about chlorine chicken or hormone beef, and at least one of the witnesses in the oral evidence sessions noted that we have heard more about those particular delicacies than we would ever wish to. Yet there is a profoundly serious point underlying the reference to them—a point that was hammered home in November last year when Wilbur Ross, the man appointed by Donald Trump to be US Secretary of Commerce, addressed the annual conference of the CBI.
Mr Ross put the UK on notice that we will have to relax our food safety laws if we wish to have a trade deal with the USA. He specifically called out the sanitary and phytosanitary regulations that we have in place to protect against the importation of potentially dangerous products, and he complained that they act as a barrier to US exports, seeing as the regulations that US producers have to abide by in their home markets are much lower than those that apply in Europe. Mr Ross explicitly warned the British people that we need to downgrade our food standards if we wish to have a trade deal with the USA.
The regulatory system that we have developed over decades in the UK is based on the precautionary principle, which states that where there is a risk that public health or safety might be compromised, regulatory bodies must err on the side of caution. The principle applies even if the level of risk cannot be fully quantified under the science that we have today. Any company or individual who wishes to introduce a product or process to the market must—quite rightly—prove it is safe to do so.
Barry Gardiner
On the point made earlier by the hon. Member for Kilmarnock and Loudoun, proposed new sub-paragraph (iii) of the amendment refers to
“any other public authority specified in regulations made by the Secretary of State”.
Does my hon. Friend agree that that therefore makes provision for the other Administrations’ bodies to be included in the scope of the amendment, although I entirely take the hon. Gentleman’s point that Food Standards Scotland was not specifically mentioned, and it might well have been?
Judith Cummins
I thank my hon. Friend and the hon. Member for Kilmarnock and Loudoun for their interventions, in which they both made valid points.
In the USA, the requirement is reversed. Those who wish to introduce products or processes to the market are free to do so unless the authorities can prove that they are unsafe. What they have tried to call the “scientific” approach to food safety, as opposed to the risk-based approach that we enjoy in this country and throughout Europe, has meant that the USA has ended up with lower standards of food hygiene and food safety. That is why the processes behind meat production on either side of the Atlantic are so radically different.
More than 90% of US beef is produced with the use of bovine growth hormones that have been linked to cancers in humans. We have food safety regulations in place across Europe that have banned any imports of hormone-grown beef from the USA and other countries for 30 years. US poultry producers are permitted to douse chicken and turkey carcasses with chlorine washes before selling them on to consumers. Again, that practice has been banned in Europe for more than 20 years, and the USA has challenged the ban at the WTO as being a barrier to its ability to penetrate the EU market.
The connection with animal welfare is paramount in this respect, in that the European regulations seek to introduce at least some consideration for the welfare of the animals that are farmed for human consumption. The USA has no comparable regulations on animal welfare, and the conditions in which its industrial farming takes place do not bear thinking about. Let me make the central point clear: the issue before us in this Bill is not whether we like the idea of eating hormone-grown beef, or whether we care about animal welfare in the raising of poultry for slaughter—those are debates we can have another time; the issue before us here is that we must be the ones to decide on food safety and animal welfare issues, and we must do so in an open forum as the elected representatives of the people of the United Kingdom.
Faisal Rashid
Does my hon. Friend agree that, if we do not secure an amendment to protect food safety standards in the UK, we will be failing our constituents and potentially putting public health at risk?
Judith Cummins
My hon. Friend makes a very important point. It is important that we consider those wider issues in this Committee.
It is unacceptable that we might come to such a debate in the future only to discover that our right to choose what we eat and how it is produced has already been traded away in secret negotiations by a Secretary of State who ranks getting a trade deal far above protecting food safety for the British people. Amendment 8 would simply ensure that our trade agreements conform to food safety policies, not the other way around.
The significance of the challenge laid down by Wilbur Ross at the CBI last November was lost on no one. Two days after the speech, the EU’s chief negotiator, Michel Barnier, responded to Wilbur Ross and posed the No. 1 question for the UK: do the British people wish to remain aligned with the European Union’s relatively high standards, or do we want our food safety standards to be downgraded so we can do a dirty deal with the USA?
Matt Western
Does my hon. Friend agree that, given the Secretary of State’s statement that there
“are no health reasons why you couldn’t eat chickens that have been washed in chlorinated water”—
of course, that is the same Secretary of State who said that Brexit is the easiest thing in human history—it is crucial that we set out in statute that international trade agreements must maintain the food safety standards in our country?
Judith Cummins
My hon. Friend is absolutely right that that must be set out in regulations and in statute.
I want to spell out clearly the connection between this amendment and one of the key issues in the post-Brexit settlement between the UK and the EU—namely, the border issue on the island of Ireland. Hon. Members will recall the dramatic scenes last month when our Prime Minister finally managed to move us on to negotiations with the EU about what our long-term relationship should be after Brexit. That was achieved by way of an agreement in respect of the island of Ireland, which committed the UK to the following:
“In the absence of agreed solutions, the United Kingdom will maintain full alignment with rules of the Internal Market and the Customs Union which, now or in the future, support North-South cooperation, the all-island economy and the protection of the 1998 Agreement.”
When pressed further on what exactly that might mean, the Prime Minister was more explicit. She specified that there are six areas that are covered at present by north-south co-operation on the island of Ireland, and confirmed that one of them is agriculture.
The significance of the Prime Minister’s words goes far beyond the immediate issue of how we are to relate to the remaining 27 member states of the European Union in the future. Any suggestion that the UK might downgrade its food safety regulations to do a deal with the USA or any other trading partner would wreak havoc among farming communities both north and south of the border in Ireland, which would find themselves unable to continue trading freely. Allowing the Secretary of State to contemplate such a divergence in a trade deal with the USA or any other trading partner would jeopardise the peaceful co-existence that we have all endeavoured to hold together since the Good Friday agreement was signed 20 years ago. That is why amendment 8 is so important, and we hope the Government will vote to support it.
There are real threats. The USA agricultural lobby called for EU rules on pesticides to be downgraded in TTIP, given that we have far stricter regulations on the levels of chemical pesticide residue permitted in food. It called for our ban on the sale of genetically modified organisms to be eliminated, given that 70% of all processed food in US supermarkets is now made with genetically modified ingredients. It also called for an end to the mandatory labelling of products containing genetically modified ingredients, on the grounds that it represents a hidden barrier to trade. Consumer choice would go out of the window with public health, food safety and animal welfare rights.
Matt Western
Does my hon. Friend agree that this is clearly an issue, as has been described, of consumer information and consumer rights, in terms of not just the quality of food being put on our plates but the conditions in which our animals are kept, the state of the abattoirs and the standards we maintain so highly in this country?
Judith Cummins
I thank my hon. Friend for that intervention, and I repeat that it is important to maintain the regulatory standards we have in this nation.
The US Government trade representative confirmed in writing at the very outset of the negotiations that the USA’s TTIP negotiators would be seeking to eliminate or downgrade those sanitary or phytosanitary measures that prevent US exports from entry into the market of the UK and other EU member states. That was one of the central reasons why TTIP became so toxic across country after country in Europe, and why the European Commission soon discovered that it had no legitimacy to continue the TTIP negotiations at all.
I should also note that there is a commercial aspect to this. The celebrity chef, Jamie Oliver, was so concerned about the potential impact of TTIP on his business—which is based on high-quality food imports at every stage of the supply chain—that he took it upon himself to call on the previous Secretary of State for cast-iron guarantees that food standards would not be included as part of the TTIP negotiations. The Secretary of State was unable to give him those guarantees, since the TTIP negotiations were, at that same moment, addressing sanitary and phytosanitary measures at the express demand of the US Government. Of course, those negotiations were going on behind closed doors.
That is what Wilbur Ross meant when he warned that the USA would demand the downgrading of UK food standards. That is why it has been so appalling to see the current Secretary of State laughing off the threat represented by such a downgrading of our standards.
Greg Hands
I have been listening carefully, but to be absolutely clear, I think the hon. Lady referred to the previous Secretary of State. Obviously, the current Secretary of State is the first and only Secretary of State for International Trade. Could the hon. Lady perhaps clarify whom she is referring to as the previous Secretary of State?
Judith Cummins
I am referring to the right hon. Member for Twickenham (Sir Vince Cable).
Amendment 8 also seeks to ensure that the food we eat comes from healthy animals that are naturally resistant to disease, not dosed up with antibiotics as an alternative to maintaining food hygiene throughout the production process, which is a standard model of industrial farming in the USA. We all know about the real threat of superbugs that develop their resistance to antibiotics. That is why the Veterinary Medicines Directorate has set targets for the reduction of antibiotic use in agriculture. This is where the interface between animal welfare and food safety becomes most compelling, and why British farmers should be proud to produce food that adheres to the highest standards—all the way from farm to fork.
Finally, this amendment would ensure that the bodies responsible for upholding and enforcing food standards in this country have the capacity to meet any extra requirements placed on them.
Faisal Rashid
I was just reading some of the evidence submitted by Sustain, the alliance for better food and farming, which says exactly what my hon. Friend is saying:
“We want affordable food, not cheap food, which may be poor quality or unsafe to eat. Cheap, poor quality, imported food will come at a cost—to the farmer or food producer, to animal welfare, to the environment or jobs in UK food and farming. There may be hidden costs to our NHS and economy from food poisoning and lost days at work.”
Does my hon. Friend agree that this amendment will help to protect our food standards?
Judith Cummins
I thank my hon. Friend for that intervention and wholeheartedly agree that this amendment would help to protect our food standards.
To clarify my previous comments and the intervention by the Minister, I was referring to the right hon. Member for Twickenham in his former role as Business Secretary.
Finally, this amendment would ensure that the bodies responsible for upholding and enforcing food standards in this country have the capacity to meet any extra requirements placed on them as a result of new UK trade agreements. We absolutely do not wish to see any downgrading of capacity in relation to food safety officers or others responsible for ensuring that we can have confidence in the food on our shelves.
Once again, I find it hard to see how the Government can find any reason to object to this amendment, and I hope that we can count on support from the Government Benches in voting it through.
Trade Bill (Sixth sitting)
Tuesday 30th January 2018
(7 years, 9 months ago)
Public Bill CommitteesTrade Bill 2017-19 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 30 January 2018 - (30 Jan 2018)
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The Minister for Trade Policy (Greg Hands)
May I start by welcoming you to the Chair, Mr Davies?
The Government have already made it clear that we will not use the necessary and indeed pertinent exercise of continuing the effects of our existing agreements as a back-door way to reduce standards, including food safety standards. As the Prime Minister said in Florence in September, we are
“committed not only to protecting high standards, but strengthening them…we will always be a country whose pitch to the world is high standards at home.”
I am happy to reaffirm the Prime Minister’s commitment to the Committee. We are committed to upholding and strengthening our high standards in public health and safety, product performance and protecting the environment.
Faisal Rashid (Warrington South) (Lab)
How does the Minister plan to prevent a race to the bottom on food safety standards in the UK and to protect British consumers if he is not prepared to accept the amendment?
Greg Hands
The Government have always been clear that we will maintain our very high standards on food and animal welfare, and for protection in that space. There will be no race to the bottom. Nothing in free trade agreements precludes a Government from regulating in the domestic environment. I hope that that is enough reassurance for the hon. Gentleman. On protecting the environment, high standards and high quality are what our domestic and global consumers demand, and that is what we should provide.
To be clear, nothing in the Bill would allow us to do a free trade agreement with the United States because, as we know, the United States does not have a free trade agreement with the European Union. While the hon. Member for Bradford South gave an interesting speech of some length about what may or may not happen in any future trade agreement with the United States, it is worth mentioning that the Bill does not cover free trade agreements with the United States. Any future free trade agreement with the United States must work for UK farmers, businesses and consumers, and uphold food safety and animal welfare standards. However, that is a matter for a future day; it is not relevant to the Bill before us.
Barry Gardiner (Brent North) (Lab)
Surely the Minister appreciates that the examples of the USA were given in order to clearly illustrate the principles. At no point was it suggested that those examples were a necessary follow on. However, they illustrated the principles, and the Minister must appreciate that and take it seriously, in terms of the amendment.
Greg Hands
We take incredibly seriously food safety standards, animal welfare and so on. If the hon. Gentleman is suggesting that he has serious concerns in those spaces in respect of any of the 40-plus current EU trade agreements that we are seeking to move into UK law, perhaps he could let me know.
Barry Gardiner
I am very happy to adumbrate on that. The particular concerns relating to growth hormones in beef are, of course, of equal importance in the context of any future UK-Canada trade agreement, given that Canadian beef farmers are permitted to use growth hormones in a way that our farmers are not. The EU granted a higher quota to hormone-free Canadian beef exports in the EU-Canada comprehensive economic and trade agreement negotiations. It was only popular pressure that prevented the European Commission from relaxing the ban on imports of hormone beef. We simply want to ensure that Parliament is the place where this country takes decisions on whether to relax or tighten our food standards. We do not want those decisions taken in secret trade negotiations and then imposed on us through the excessive powers in the Bill.
Greg Hands
I am certain that CETA is consistent with our food safety and animal welfare standards. What is more, I think the majority of Labour MPs agree with me. Last February, Labour MPs split 86 in favour of CETA and 68 against, so whatever concerns the hon. Member for Brent North has, I gently suggest that he tries to persuade his own party before coming to see the Government.
Barry Gardiner
Again, I am happy to take on the Minister on that. He is talking about something that happened before the previous election, and as personnel change, so perhaps does the wish of the members of the parliamentary Labour party. However, that is not really the point. He will also find that those people on the Labour Benches who wanted to support CETA on that occasion seem now to have changed their views about whether CETA—the Canadian model—is a good model for us to pursue in the trade negotiations. Most of them seem to have turned tail and run to the other side.
Greg Hands
The hon. Gentleman is trying to mix up the transitional and existing trade agreements with our future trading relationship with the European Union—which, I remind the Committee, is also not a subject of the Bill. I think he said that his vote against CETA was before the previous election, and if he is suggesting that he might have changed his mind on CETA, I am all ears. When we come to ratification of the treaty, I would personally welcome him as a sinner that repenteth, were he to come into the Lobby with Conservative Members to support the Canadian free trade agreement.
Greg Hands
I will not give way. We are getting a little off the point.
We are absolutely clear that all existing commitments on standards and regulations will remain when those agreements are transitioned. That is in line with our clearly articulated principle that our intent is to transition solely the existing effect of the agreements. The amendment is therefore unnecessary and I ask the hon. Member for Bradford South to withdraw it.
Judith Cummins (Bradford South) (Lab)
We will not withdraw the amendment and wish to proceed to a vote.
Question put, That the amendment be made.
Barry Gardiner
I beg to move amendment 11, in clause 2, page 2, line 41, leave out subsections (8) and (9) and insert—
“(8) No regulations may be made under subsection (1) in relation to an agreement which meets the criteria in subsection (3) or (4) after the end of the period of five years beginning with exit day.”
This would make the sunset clause governing section 2(1) non-renewable.
The Chair
With this it will be convenient to discuss the following:
Amendment 12, in clause 2, page 2, line 41, leave out subsections (8) and (9) and insert—
“(8) No regulations may be made under subsection (1) in relation to an agreement which meets the criteria in subsection (3) or (4) after the end of—
(a) the period of five years beginning with exit day (“the initial five year period”), or
(b) such other period as is specified in regulations made by the Secretary of State in accordance with subsection (9).
(9) Regulations under subsection (8)(b) may not extend the initial five year period beyond the day which falls ten years after exit day.”
This would make the sunset clause governing section 2(1) renewable once only.
Amendment 35, in clause 2, page 3, line 3, at end insert—
“(10) No regulations may be made under subsection (8)(b) unless the Secretary of State has consulted with the Scottish Ministers and the Welsh Ministers.”
This amendment would ensure that there must be consultation with the Scottish Ministers or Welsh Ministers before any extension of the powers in Clause 2.
Barry Gardiner
I, too, am pleased to welcome you back to the Chair, Mr Davies. How do you know when a Minister feels guilty? It is when he or she introduces a sunset clause. The Government know they are pulling a fast one in the Bill and clause 2 includes the Henry VIII power for Government to amend primary legislation by fiat. The provisions in the rest of clause 2 and its accompanying schedules reduce hon. Members of this House to little more than bystanders at a royal pageant.
The Government try to mitigate their power grab by making the offending powers in clause 2(1) subject to a five-year sunset clause. The Secretary of State is on record as saying:
“I hear people saying, ‘Oh, we won’t have any before we leave’. Well, believe me, we’ll have up to 40 ready for one second after midnight in March 2019. All these faint hearts saying we cannot do it—it’s absolute rubbish”.
Let us for a moment take the Secretary of State at his word and believe him when he tells us that we will have all these shiny new agreements ready and waiting by the end of March 2019. The five-year sunset clause that the Bill gives the Government is surely, therefore, the sort of defeatist nonsense that the faint-hearted would say they need. According to the Secretary of State, a half-hour sunset clause would be more than enough—perhaps half a day to pick up the stragglers or half a week to pick up the rank outsiders, the real laggards in the case. What is this nonsense?
There is a serious issue, because these agreements are supposed to provide British businesses with the certainty they desperately need so as to plan their operations and their investments in respect of trade with those countries with which we already have agreements by virtue of our membership of the EU.
Yes, the Secretary of State for Exiting the European Union has confirmed that the UK will be unable to implement any of the new trade agreements until the end of a two-year transition period that we will negotiate with the EU, but that only buys the Government until the end of 2020 to come up with the 40 new trade agreements the Secretary of State promised would be ready by March 2019. The end of 2020 is the terminus proposed by the EU for our transition period, as was confirmed in the negotiating directives that it adopted yesterday.
Faisal Rashid
Does my hon. Friend agree that, without limits on the renewability of the sunset clause and against the backdrop of a Government failure to commit to a second trade Bill, this Bill will certainly be seen by many as a potential Trojan horse for the Government to introduce future deals with minimum levels of scrutiny?
Barry Gardiner
My hon. Friend is absolutely right to be sceptical. The Minister has made much of the arguments that, first, there is a need for speed and, secondly, this is only a temporary Bill that puts in place temporary provisions to roll over the existing agreements. In fact, the powers—certainly the ones relating to the agreement on government procurement—are not temporary; they last longer.
Here, in the provisions of the sunset clause, we have not just one sunset period but the possibility of indefinite roll-overs of the sunset clause itself: five years, followed by five years, followed by five years. If the Minister is absolutely confident that the Bill is a temporary necessity, one must wonder why he wants the sunset clause to continue indefinitely into the future at the Government’s will, when it enables the Government to take on a Henry VIII power.
When I say that there should be a proper process of consultation and scrutiny by which to debate the negotiations, I am only replicating what Anastassia Beliakova of the British Chambers of Commerce demanded in her oral evidence during our final witness session last Tuesday, when she said that provision needs to be made not only for “appropriate scrutiny in Parliament” but for a proper process of “stakeholder engagement for business” and “civil society” in order to scrutinise any changes that might arise as a result of the negotiations.
If the Government are adamant that such a process is to be denied us, rejecting the advice of business and the demands of trade unions and other civil society bodies, it should be denied us for an absolute maximum of five years, with no renewal of the sunset clause, as provided for in clause 2(8) and (9). Every day longer that the Government have those powers is another day for which parliamentary democracy is put on hold. The first of our amendments says that five years is enough. We believe that it is five years too many, given the unmerited powers that the Bill grants to the Government and the rights that it strips away from Parliament, but certainly five years should be enough. If the Government still have not managed to roll over their agreements by March 2024, that power should disappear along with the expiry date.
I really wonder whether Government Members themselves believe that an indefinite use of a roll-over to give an unending Henry VIII power to the Government is a sensible power that this Committee should grant.
Let us say that the Government persist in getting rid of amendment 11. Amendment 12 would allow the Government one renewal only. That is, the Government would be allowed to ask Parliament for permission to renew the sunset clause for one extension, but no more. That would allow the Government the unmerited powers in the Bill right up to the end of March 2029. Can the Minister really demand, with any sense of integrity, that this Committee afford him and the Government greater power than that?
Alan Brown (Kilmarnock and Loudoun) (SNP)
It is a pleasure to serve under your chairmanship again, Mr Davies.
First, I reiterate that Opposition Members do not see the Bill as fit for purpose. We accept the need for clause 2: the Government will need to manage the handover of trade deals that are currently accessed through the EU. However, clause 2 is deficient and we are still to hear what the Government will to do to improve it and to improve the Bill. They have voted down every amendment that has been proposed so far, so it would be good to hear the Minister’s plan. Again, that is particularly important regarding the Government’s attitude to the devolved Administrations.
Just this morning, BBC Radio Scotland led its headline news with a report on the European Union (Withdrawal) Bill, which is now moving to the House of Lords, and the fact that the House of Lords will have to make amendments to clause 11—amendments that were originally promised by the UK Government but were not brought forward. It did not paint the UK Government in a good light, especially when the UK Government could not even put up any spokesperson; it is plain why that was the case.
I say to the Minister that, given that the Scottish and Welsh Governments have both said that they will withhold a legislative consent motion unless there are amendments to this Bill, it would be prudent for him not to fall into that trap. Failing to make amendments once looks incompetent, but if proper amendments are not made to this Bill that satisfy the devolved Administrations, it will look a bit more sinister than mere incompetence.
I remind the Committee that it is not just politicians from the Scottish National party who are saying this; clearly, the Welsh Government are in agreement with the SNP. In the evidence sessions, which the Minister was at, we heard from different witnesses. Chris Southworth from the International Chamber of Commerce UK said:
“Overall...I would be concerned if I were in the devolved Administrations. There is specifically no opportunity for the devolved Administrations…to feed into decisions on trade. I would be very concerned about that, particularly in the devolved Administrations”.––[Official Report, Trade Public Bill Committee, 23 January 2018; c. 35, Q80.]
Michael Clancy from the Law Society of Scotland said:
“There is clearly an issue about how the Sewel convention or legislative consent convention is interpreted in respect of that…any proposals in UK Parliament legislation that seek to alter the legislative competence of the Parliament or of Scottish Ministers require the consent of the Parliament.”––[Official Report, Trade Public Bill Committee, 23 January 2018; c. 56, Q107.]
Professor Winters from the UK Trade Policy Observatory said:
“Parliament and the devolved Administrations need to have an important role in setting mandates, and there need to be consultation and information during the process.”––[Official Report, Trade Public Bill Committee, 23 January 2018; c. 58, Q111.]
In written evidence, the Fairtrade Foundation, Trade Justice Movement, Global Justice Now and Traidcraft all clearly expressed the need for the devolved Administrations and Chambers to be given a role in the UK’s future trade policy.
Unfortunately, despite all that evidence the position of the hon. Member for Brent North appears to be that if the devolved nations do not have the powers at present, they should not look at getting them in the future. His phrase earlier was that they “shouldn’t be looking upwards”. To me, that sounds a wee bit like, “Don’t get ideas above your station”.
We have not tabled any amendments to schedule 1, which imposes limitations on the devolved Administrations. I would argue that that in itself shows that the Scottish Government and the Welsh Government have taken a rational approach to the Bill in respect of the various amendments that have been tabled. We are not trying to create some form of awkward veto, as has been suggested elsewhere. Our simple intention is to make sure that the devolved Administrations are not ridden over roughshod. That means that there needs to be co-operation, consultation and consent.
Barry Gardiner
I want to reassure the hon. Gentleman that we are absolutely at one with him in wanting to ensure that the Bill does not make provision for Westminster Ministers to overreach themselves into devolved competences in any of the devolved Assemblies of the nations of our United Kingdom. We are equally concerned about that.
I have tried to present amendments in as open a way as possible, so that we can get the best wisdom from the Government and from the devolved Administrations, to ensure that nothing is done that would make it difficult, or indeed impossible, for a UK Government to honour any aspects of their international obligations under an international trade treaty. That is my only concern, and I am sure we can get to the right place with good will all round. It is a constitutional question, because these powers have not previously been possessed by the UK Government; they were held at EU level. It is therefore important that we give the matter the scrutiny that it deserves.
On amendment 35, which we are about to move on to, we are probably at one.
The Chair
Order. I remind hon. Members that interventions are meant to be briefer than the leeway I allowed the hon. Gentleman.
Alan Brown
Thank you, Mr Davies, and I thank the hon. Gentleman for his intervention. I welcome his opening remarks, and I might have an opportunity to show how much when other amendments go to a vote. I also welcome his support for amendment 35. He talked about the wisdom of co-operation and of working with Government, and the wisdom of devolved Administrations. It is maybe a pity that the wisdom of the devolved Administrations is coming through me rather than directly, but we will just have to deal with that.
Amendment 35 is very modest. All we are asking is that, if the UK Government propose to extend the sunset clause, they must consult the Scottish and Welsh Governments. That does not seem to be too big an ask to me. It is also more pertinent given the five-year period proposed in the Bill. Given that the Bill, as I keep hearing, is to do only with the UK’s access to existing EU trade deals and bringing those deals into UK legislation, it makes me wonder why we would ever need a period beyond five years. We are dealing with legislation that should be coming forward quickly, given the date for leaving the EU, and given that the International Trade Secretary has said that these negotiations will be the easiest in human history. Why we would need Henry VIII powers beyond five years is a mystery. We are just asking for the courtesy that the Scottish and Welsh Governments are consulted if that is the case.
Greg Hands
We have had a wide-ranging and interesting mini debate, full of historical references and colourful metaphors. We have had Henry VIII, plenty of sunsets and royal pageants. The hon. Member for Warrington South even introduced a Trojan horse. It has been a helpful debate.
Let me try to explain why we have included the sunset clause for this power, because once I have explained, all will become clearer. It is so that Parliament can have the chance to review its merits once again five years after exit date. However, since this power may be required to ensure the operability of transition agreements beyond the five-year period, potentially indefinitely, it is important that the Government have the option to extend the use of the clause 2 power. That will, of course, be subject to the approval of both Houses.
Hannah Bardell (Livingston) (SNP)
I am certain that the right hon. Gentleman is determined, in his approach and plan, to consult the devolved nations. If he is, why not put that in the Bill to ensure that it happens?
Greg Hands
Because I like to keep legislation as brief as possible and, as I shall explain, I do not think it necessary for us to write that obligation into the Bill. Of course, we would continue to engage should we need to extend the clause beyond its sunset five years after exit day.
I was intrigued by the exchange between the hon. Members for Kilmarnock and Loudoun and for Brent North. I am still trying to find out why, on Thursday, the Labour Front-Bench team did not support the amendment promoted by the Welsh Government. I am not sure that the hon. Gentleman properly explained, but perhaps when he responds he can throw a little more light on why he has seemingly jettisoned his colleagues from Wales, one of whom is on this very Committee.
On the requirement for a legislative consent motion, we have been clear that we are seeking such a motion for the Bill. I heard what the hon. Member for Kilmarnock and Loudoun said about that, and I am sure that we will engage further. We are obviously talking to the devolved Administrations so that we can work towards delivering a Bill that will benefit the whole UK. Given that, we do not think that the formal commitments on consultation and engagement in amendment 35 would add substantively to the Bill. I therefore ask hon. Members not to press the amendments.
Barry Gardiner
We have no intention of withdrawing amendment 11, so we need to press it to a vote.
Question put, That the amendment be made.
Barry Gardiner
On amendment 12, to respond to what the Minister said, we heard oral evidence from Mr Howarth, who was in fact an adviser to Conservative MPs, that the Henry VIII powers were needed only for minor changes, potentially around the EU agreements—
The Chair
Order. May I interrupt the hon. Gentleman? His opportunity to respond to the debate was before the previous Division. I was really just asking whether he wanted to move amendment 12 formally.
Barry Gardiner
I was simply explaining that, in the light of the Minister’s remarks, we do wish to move the amendment, because it conforms with the suggestions of one of the Government’s own witnesses.
Amendment proposed: 12, in clause 2, page 2, line 41, leave out subsections (8) and (9) and insert—
“(8) No regulations may be made under subsection (1) in relation to an agreement which meets the criteria in subsection (3) or (4) after the end of—
(a) the period of five years beginning with exit day (‘the initial five year period’), or
(b) such other period as is specified in regulations made by the Secretary of State in accordance with subsection (9).
(9) Regulations under subsection (8)(b) may not extend the initial five year period beyond the day which falls ten years after exit day.”—(Barry Gardiner.)
This would make the sunset clause governing section 2(1) renewable once only.
Question put, That the amendment be made.
Barry Gardiner
I beg to move amendment 13, in schedule 2, page 12, line 5, leave out from “section 1(1)” to the end of line 6 and insert
“may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.”
This would require regulations implementing the Agreement on Government Procurement to be subject to the affirmative resolution procedure.
This amendment is a simple but vital first attempt to restore democracy to the Trade Bill. It is simple because it replaces the negative resolution procedure the Government wish to use for future regulations under paragraph 2(1) of schedule 2 with an affirmative resolution procedure. It is vital because, without that, the Government have carte blanche to introduce regulations to implement the obligations arising from our independent membership of the GPA without the slightest hint of anything resembling parliamentary scrutiny. While the UK is a member of the World Trade Organisation in its own right and will continue to be so after Brexit, we are a member of the WTO’s plurilateral government procurement agreement only by virtue of our EU membership. We know that the Government will have to initiate a separate parliamentary procedure under the Constitutional Reform and Governance Act 2010 to prepare for the UK to rejoin the GPA in its own right. I am pleased the Minister made the commitment in our first line-by-line session last Thursday that there will be a vote in Parliament to decide on the terms under which we rejoin the GPA.
Greg Hands
I thank the hon. Gentleman for giving way. That is not a correct assessment of what I said on Thursday. I said we would allow the power for Parliament to bring forward a vote under the Act. It is clearly stated in Hansard.
Barry Gardiner
Good Lord, Mr Davies, it’s a jolly good job I have an extract from the Hansard here. I will press on and then quote from it.
CRAGA does not require there to be a debate or a vote on any treaty laid before Parliament under its terms, as has been repeatedly confirmed by the House of Commons Library via an expert witness from the Hansard Society and by everybody else who has read the Act or knows what it says. Yet, it certainly leaves the possibility open for Government to hold that vote if they are prepared to do so. Again, I am pleased the Minister reaffirmed last week not only that it is possible under CRAGA for the Government to bring forward a vote on the UK’s terms of entry into the GPA, but that
“the terms on which the UK enters the GPA in our own right will be subject to a separate vote in Parliament.”—[Official Report, Trade Public Bill Committee, 25 January 2018; c. 131.]
Those are the words the Minister actually used. I am surprised he wants to cavil about them now. As he knows, our dissatisfaction with CRAGA is that it includes no requirement for a debate or a vote on a treaty laid before Parliament under its provisions. We are dependent on the good will of the Government as to whether Parliament is granted or denied the opportunity for a vote.
In this instance, I thought the Government had confirmed that there will be a vote, not that there might be, depending on the Labour party, so we look forward to the Government introducing that debate in Government time. However, that in no way deals with the broader issue of why Parliament should be dependent on the Government’s good will to have the opportunity to exercise its rights to due democratic process.
Faisal Rashid
It has been widely documented that the use of the negative resolution procedure the Bill proposes affords Members less opportunity for scrutiny in the House than is currently enjoyed by Members of the European Parliament. Indeed, Jude Kirton-Darling MEP told the Committee in no uncertain terms that the Bill is
“an enormous step back in democratic oversight of trade agreements.”—[Official Report, Trade Public Bill Committee, 23 January 2018; c. 43, Q86.]
Does my hon. Friend therefore agree that, for the Government to meet their commitment that the Bill will replicate existing arrangements as closely as possible, they must support the amendment to ensure the opportunity for scrutiny enjoyed by Members is closer to that currently enjoyed by MEPs?
Barry Gardiner
Indeed—my hon. Friend is right. Many Members on both sides of the House think it a travesty that we are afforded less opportunity to scrutinise things and less transparency than is afforded to our colleagues in the European Parliament.
On the agreement on government procurement, once we have had our opportunity to debate and vote on the terms under which we will rejoin it, the Government will then lodge our annexes with the WTO. The next stage is to issue the regulations that will implement the terms of our accession to the GPA, and then, in the years thereafter, to make changes to our domestic legislation that reflect the accession of new parties to the GPA or the withdrawal of any countries that decide to leave it.
It is important to note that that is not a temporary power covered by a sunset clause, as with the international trade agreements in clause 2. This is a permanent power for the Government to issue regulations implementing the UK’s obligations under the GPA into the indeterminate future—for as long as the WTO remains and the GPA is one of its constituent agreements. When we look at the fine detail of the Bill, we yet again discover that it is not a temporary little Bill about rolling over existing agreements; it actually has permanent, lasting effect. The roll-over powers could give Ministers the powers in perpetuity, under the Henry VIII provision.
We hear that the Bill is small, necessary, timely and time-limited, but in actual fact it is not. Our amendment 13 seeks to replace the negative resolution procedure, which the Government wish to apply to clause 1(1), with the affirmative procedure. I will remind the Committee of what that means so that we have a proper understanding of what we are talking about in this context, because it will also be essential to several later amendments that we will bring forward to other parts of the Bill.
The scrutiny procedure for delegated legislation in the House of Commons has come in for intense criticism in the context of the European Union (Withdrawal) Bill. That criticism is well merited. The Hansard Society’s expert report, “Taking Back Control for Brexit and Beyond”, lifted the veil on just how badly the system is failing to deliver the necessary scrutiny of secondary legislation at precisely the moment we need full confidence in it as we rebuild our system of checks and balances for the post-Brexit future. That report does not make pleasant reading.
The negative resolution procedure the Government propose for regulations under clause 1(1) is the least rigorous of all parliamentary procedures available. Secondary legislation subject to the negative resolution becomes law automatically once it has been laid before Parliament and has remained unchallenged for the requisite number of days—no need for a debate, no call for a vote. MPs may pray against any regulation by means of an early-day motion, but there is no obligation for the Government to schedule parliamentary time to debate that prayer.
The convention is that prayers made by Her Majesty’s official Opposition should receive parliamentary time for a debate, yet even then there is no guarantee that the convention will be respected. In the 2015-16 parliamentary Session, the Leader of the Opposition tabled a dozen prayer motions for debate—five were granted. Of the 585 negative instruments laid before Parliament in that session, only 3% were even debated. In the following parliamentary Session, fewer than one in 100 statutory instruments subject to the negative resolution procedure were debated at all.
The main point of the negative resolution procedure is to allow the Government to have their way without any need to bother parliamentary democracy, and it has been spectacularly successful. The last time a negative instrument was successfully annulled in the House of Commons was the Paraffin (Maximum Retail Prices) (Revocation) Order in 1979. I think that tells the story about what is intended by making these provisions subject to the negative resolution procedure.
Faisal Rashid
Almost every individual who has appeared before this Committee over the past week, from business leaders to academics, civil activists and lawyers, has told us that more needs to be done by way of parliamentary scrutiny in this Bill. If the Government will not support these amendments, what good reason do they have to ignore the recommendations of these individuals?
Barry Gardiner
Again, my hon. Friend puts it very succinctly and very well.
The delegated powers memorandum argues that the negative resolution procedure is appropriate to implement the UK’s obligations as an independent member of the GPA. It argues that it would be inappropriate to demand primary legislation to bring in the legislative changes necessary to reflect our new status as an independent GPA member, as this could introduce a significant delay in the proceedings.
Labour Members agree; we are not opposing the Government on that point. Primary legislation would be inappropriate to implement our obligations under the GPA once we had fully debated the terms on which we were joining the agreement, as the Minister promised us last Thursday that we will. Yet the issue here is not primary versus secondary legislation; it is negative versus affirmative in respect of the resolution procedure that governs the secondary legislation.
We simply do not believe that the negative procedure can be appropriate, precisely because of the lasting damage that could be done to contractors currently providing councils with goods and services if the regulations about Government procurement are made wrongly. Nor do we accept the Government’s contention that they must be allowed to use the negative resolution procedure because of time pressures inherent in the GPA itself. It is entirely spurious to suggest that the 30-day period between depositing the UK’s instrument of accession to the GPA and the accession coming into force is in any way coterminous with the drafting of a statutory instrument and its passage through Parliament.
The guidance on drafting statutory instruments issued by the Government Legal Service recommends allowing an absolute minimum of 22 weeks for the very simplest of negative instruments, with more complex ones requiring anything up to 61 weeks from their inception to the time they come into force—that is, well over year. Affirmative resolution instruments require only marginally longer, depending again on how complex they are—the Government Legal Service suggests allowing 26 to 67 weeks. In both cases, the process requires many months of planning beyond the 30-day period stipulated in the GPA. Government officials will have had to start work on the secondary legislation months in advance of depositing the UK’s accession instruments with the WTO, and they can just as easily factor in an affirmative resolution procedure as they can a negative one.
When it comes to the future accession of other WTO members to the GPA, which may well happen, the situation is even more acute. Here, Members of Parliament will have had no opportunity to consider any of the ramifications of opening up our public procurement contracts to new countries. So the only chance we will have of subjecting those new regulations to any scrutiny will come through the procedure that we enshrine in this Bill.
The WTO lists 10 countries that are in the process of acceding to the GPA: Albania, Australia, China, Georgia, Jordan, the Kyrgyz Republic, Oman, Russia, Tajikistan and the former Yugoslav Republic of Macedonia. Five other WTO members have undertaken commitments in their WTO accession protocols to initiate accession to the GPA: Afghanistan, Kazakhstan, Mongolia, Saudi Arabia and the Seychelles. If and when they do accede, the UK will need to open up its Government procurement contracts to suppliers from every one of those countries. Once again, we agree with the Government that it would be overly burdensome to require new primary legislation every time another country accedes to the GPA. We are not asking for that. But we disagree that new Government regulations to implement our obligations should just be passed through on the nod. That is why we are arguing for the affirmative procedure in this case too.
Once again, the Government’s argument that we are constrained by the 30-day period between a country’s accession and our having to grant that country access to the UK’s public procurement market is entirely spurious. We will have been party to the negotiations surrounding their accession for months beforehand, giving Government officials ample time to prepare the requisite instrument for either negative or affirmative resolution.
This is a blunder. Even where a statutory instrument is subject to the affirmative resolution procedure, the scrutiny that it undergoes is still remarkably light. MPs who have previously been assigned to Delegated Legislation Committees—and there will be many in this House—know they are not encouraged by the Whips to engage and speak. The affirmative resolution procedure has been called farcical and a waste of time. The Hansard Society notes, not surprisingly, that this system is “not fit for purpose”. It concludes with the stinging rebuke to all of us who are responsible for the proper functioning of Parliament that
“MPs can no longer be indifferent to the inadequacies in the system. They must now finally take seriously their democratic responsibility for delegated legislation.”
That is why the Labour party has tabled amendments to the Bill calling for an upgrading of the process for parliamentary scrutiny in respect of regulations stemming from our new trade obligations. As we have noted repeatedly, those obligations are serious. They are binding commitments made in international treaties that cannot easily be repealed. Domestic legislation can be repealed much more easily. If there was ever an example of secondary legislation crying out for proper parliamentary scrutiny and oversight, this is it. For the regulations necessary to implement obligations arising from the UK’s independent membership of the GPA, we consider the affirmative resolution procedure to be appropriate and proportionate. However imperfect the system is, at least the affirmative procedure provides Members of Parliament with the possibility of a debate and a vote. It is then up to us to make proper use of that opportunity.
Having heard the objections of such an independent body as the Hansard Society, I hope Government Members will agree with us—on this amendment at least—and support it.
Greg Hands
The UK currently participates in the government procurement agreement, known as the GPA, through our EU membership. The GPA offers UK businesses guaranteed access to approximately £1.3 trillion per annum of global public contract opportunities. We intend to remain in the GPA with the same rights and obligations that we currently enjoy as part of the European Union. Those were negotiated by the EU on behalf of member states for the 1994 GPA. The 2012 revised GPA was negotiated by the EU and scrutinised by the European scrutiny Committees in Parliament.
The power in clause 1 is a narrow one designed to allow us to implement the GPA as an independent member, as well as to reflect new parties joining and crucially—the hon. Member for Brent North rather overlooked this—to allow existing parties to withdraw from it. It will be a case of the UK using clause 1 to reflect having a new status within an existing, established agreement on procurement.
Barry Gardiner
I agree with the Minister’s interpretation of what he has just read out. Does he accept that he also said the following:
“the terms on which the UK enters the GPA in our own right will be subject to a separate vote in Parliament”?—[Official Report, Trade Public Bill Committee, 25 January 2018; c. 131.]
Greg Hands
Hence, the clarification, twice over, to be absolutely precise how that vote would work. I know the hon. Gentleman has attacked the negative resolution procedure, but I do not remember any such exhortation when he was a Minister under Tony Blair—I did not listen to every single thing he said in those years, but I do not recall that. I think he would have troubled the scorers if he had attacked such a procedure at the time under CRAG, which as we know is an Act of Parliament introduced by the last Labour Government.
The hon. Member for Brent North confirmed last week that he did indeed vote for CRAG. He said it was important in the days when the treaties in question had already been scrutinised by the EU and scrutiny was also passed down to
“this Parliament, where the European Scrutiny Committee…would examine forensically the contents passed from Europe”.—[Official Report, Trade Public Bill Committee, 25 January 2018; c. 149.]
I can reassure the hon. Gentleman that the revised GPA in 2012 went through the very process he described to the Committee and the very process that he voted for in 2010.
The hon. Gentleman asked why the GPA power is not time-limited. The answer is that new accessions to the GPA are covered by the clause to ensure that the UK does not breach its own GPA commitments. It is also essential to have the power to reflect withdrawals to ensure that withdrawing parties do not continue to enjoy guaranteed access to UK procurement markets. I will speak in more detail about withdrawals from the GPA.
The hon. Gentleman asserted that the GPA power continues into perpetuity, including the Henry VIII power. There is no Henry VIII power in clause 1, which allows for the implementation of the GPA. The powers in clause 1 are narrow in scope. They are designed to allow the UK to make legislative changes that reflect its new status as an independent member but, none the less, as a member of an existing and settled agreement.
The UK needs to use the power in clause 1 quickly to prevent UK businesses from losing guaranteed access to valuable procurement markets. The revised GPA has already been scrutinised by the EU and the European Scrutiny Committee, using the powerful microscope the hon. Gentleman described last week and for which he voted not so long ago.
Faisal Rashid
Last Thursday my hon. Friend the Member for Brent North spoke of the emails members of this Committee had received from members of the public urging them to amend this Bill to protect our democracy. The number of these emails in my inbox—and, I am sure, in all other Members’ inboxes—has reached just over 5,000. If the Government will not support these amendments to introduce at least some degree of parliamentary scrutiny, what good reason can they give the 5,000 individuals who have taken time to contact us for ignoring their concerns?
Greg Hands
I thank the hon. Gentleman for his intervention, because it allows me to put on the record something that concerned all members of this Committee when they logged on last Tuesday and discovered, seemingly, a large number of emails—hundreds and, in one case, 1,200—about this Bill. I am sure he, in the course of being a good constituency MP, would seek to check whether those emails were, indeed, from his constituents. I have to report that my colleague who received 1,200 such emails discovered, following further examination by his very diligent parliamentary staff, that precisely four of those 1,200 emails came from his constituents.
I would say to the hon. Gentleman that, in respecting parliamentary rules, I would have a close look at those emails and ask where they are coming from. Is the hon. Gentleman, indeed, answerable to these people? All of them will have a Member of Parliament in this House who will be the right person to direct those emails to. Getting 5,000 emails from across Britain in relation to one issue in this Parliament need not necessarily be representative of a wider move against this Bill, which is a technical Bill all about the continuity of our existing trading arrangements.
Faisal Rashid
I thank the Minister for giving me time. This is a national issue; it is not just a constituency-based issue. I understand that there is parliamentary procedure and that we do not have to reply to all those emails if they are not from our constituents. However, surely it tells us, as parliamentarians, that the problems and issues among the general public and in the business environment are quite immense.
Greg Hands
I thank the hon. Gentleman for his intervention. We might be going too far down this road. I do not want to sound in any way condescending to a new Member, and my only advice to him, having been a Member in this House for 12 years, would be that the receipt of 5,000 emails from 650 constituencies is an average of nine emails per constituency. If he is suggesting that we make public policy, and that each of us makes our policy decisions, based on the opinions of nine constituents, I do not believe that would be a helpful road for us to go down.
Returning to the GPA, the UK’s independent membership will be considered under the CRAG process, meaning Parliament will be able to scrutinise the terms of the UK joining the GPA before the GPA can join, as I referred to in the debate on Thursday. The Government therefore believe that the negative resolution procedure provides an appropriate level of parliamentary scrutiny for the power to implement the GPA in clause 1.
Furthermore, the Opposition amendment would also apply the affirmative resolution procedure when the UK uses clause 1 to make regulations to reflect new parties joining the GPA or—this is a very important point—existing parties withdrawing from it. In the case of new and withdrawing parties, it is important that the UK is able to respond quickly and flexibly. Once a new party deposits its instrument of accession, there is a period of only 30 days before that accession comes into force. The UK will then be under an immediate obligation to provide that new party with guaranteed access to UK procurement opportunities covered by the GPA. If the UK failed to offer the new party this guaranteed access, it would be in breach of its GPA commitment. On the other hand, a party to the GPA can decide to withdraw unilaterally, and where a party notifies the GPA committee that they intend to withdraw, they will cease to be a GPA member just 60 days later. Therefore, it is vital we are able to react quickly to such a notification.
If the power to amend UK legislation to reflect parties withdrawing from the GPA were subject to any affirmative procedure, the UK might not be able to legislate in time to remove the party by the 60-day time limit, which, of course, could result in the UK contracting authorities continuing to give guaranteed access to UK markets to a party that is leaving or had already left the GPA, and was therefore no longer entitled to access.
Barry Gardiner
I am listening carefully to the Minister. Does that 60-day timescale for countries seceding from the GPA mean that in those cases the Minister will not be able to fulfil the guidelines for statutory instruments that I referred to? If that is the case, it suggests that at an absolute minimum a statutory instrument, even on the negative procedure that he proposes, would only be for 22 weeks and at the outside for 60 weeks. Is he confirming to the Committee that in those circumstances, the guidelines laid down by the Government and Parliament in this area, even for the negative procedure, would not apply?
Greg Hands
I want to make sure of the answer to the hon. Gentleman’s question. Perhaps I can pledge to write to him, copying in other members of the Committee and you, Mr Davies, on precisely how this fits in with our statutory instrument procedures.
Greg Hands
To conclude, the withdrawing party would have no obligation to give UK businesses reciprocal access to its procurement markets, and it is of course vital that Parliament has the opportunity to scrutinise new accessions to the GPA.
I reassured the Committee last week and earlier today that we want to ensure a clear and significant role for Parliament in scrutinising future trade agreements. The provisions will enable those agreements to be completed effectively and efficiently, while respecting due process in Parliament. New accessions to the GPA will be included within that scrutiny process. That will ensure that Parliament can scrutinise new accessions during accession negotiations. The power that we are discussing will be used after that scrutiny, and approval of the accession, so I invite the hon. Member for Brent North to withdraw the amendment.
Barry Gardiner
I am grateful to the Minister for his assurance that he will write to the Committee, but I will press the amendment to a vote, because it makes an important point.
Question put, That the amendment be made.
Barry Gardiner
I beg to move amendment 16, in schedule 2, page 12, line 5, leave out “or 2(1)”.
This is linked to amendments 14, 15, 17, 19 and 20.
The Chair
With this it will be convenient to discuss the following:
Amendment 14, in schedule 2, page 12, line 6, at end insert—
“(1A) A statutory instrument containing regulations of a Minister of the Crown under section 2(1) in respect of a free trade agreement which meets the criteria under section 2(3) may not be made unless all provisions of paragraph 2A have been satisfied.”
This amendment is linked to amendments 15 and 16, which would require the United Kingdom’s free trade agreements with third countries which already have a corresponding agreement with the European Union to be subject to a super-affirmative resolution procedure prior to ratification.
Amendment 15, in schedule 2, page 12, line 17, at end insert—
“Scrutiny of corresponding agreements: super-affirmative procedure
2A (1) Before a free trade agreement which meets the criteria under section 2(3) and to which the United Kingdom is a signatory may be ratified, the Secretary of State must lay before Parliament—
(a) a draft order to the effect that the agreement be ratified, and
(b) a document which explains why the Secretary of State believes that the agreement should be ratified.
(2) The Secretary of State may make an order in the terms of the draft order laid under subparagraph (1) if—
(a) after the expiry of a period of 21 sitting days after the draft order is laid, no committee of either House of Parliament has recommended that the order should not be made, and
(b) after the expiry of a period of 40 sitting days after the draft order is laid, a motion in the terms of the draft order is approved by a resolution of each House of Parliament.
(3) If a committee of either House of Parliament recommends that an order should not be made under subparagraph (2), the Secretary of State may, after the expiry of a period of 60 sitting days after the draft order is laid, make a motion for a resolution in each House of Parliament in the terms of the draft order.
(4) If a motion in the terms of the draft order is approved by a resolution of each House of Parliament under subparagraph (2)(b) or (3), the Secretary of State may make an order in the terms of the draft order.
(5) A free trade agreement to which this paragraph applies shall not be deemed to be a treaty for the purposes of Part 2 of the Constitutional Reform and Governance Act 2010.
(6) In section 25 of the Constitutional Reform and Governance Act 2010, after subsection (1)(b), at end insert—
‘but does not include a free trade agreement to which paragraph 2A of Schedule 2 to the Trade Act 2018 applies.’”
This would require the United Kingdom’s free trade agreements with third countries which already have a corresponding agreement with the European Union to be subject to a super-affirmative resolution procedure prior to ratification.
Barry Gardiner
Let me state for the record that I am grateful to you, Mr Davies, and to the Clerks for agreeing to the reordering that we requested, so that amendments 14 and 15 could be selected with amendment 16, and debated ahead of amendments 17 and 19. I will try to make it clear why that is necessary.
Faisal Rashid
The super-affirmative procedure closely replicates the powers that MEPs enjoy in the European Union, so does my hon. Friend agree that if the Government are to meet their commitment that the Bill will replicate existing arrangements as closely as possible, they must support the amendment?
Barry Gardiner
Again, my hon. Friend makes the point about the discrepancy between the scrutiny available to us here in this sovereign Parliament and the scrutiny available to members of the European Parliament. It would seem entirely at odds with the Government’s stated purpose for the European Union (Withdrawal) Bill if we ended up having fewer scrutiny powers than Members of the European Parliament. That would seem to be a travesty.
I look forward with perhaps slightly more than the usual expectation to the Minister’s response to the amendment, given that this is the issue on which not only the right hon. and learned Member for Beaconsfield spoke on Second Reading, but on which several other hon. Members from across the House registered their profound concern. This is the moment when we discover whether the Government are prepared to heed the calls of right hon. and hon. Members alike and look at the Bill in a much more sensible way.
Greg Hands
Let me reassure hon. Members that I listened very carefully to what the hon. Member for Brent North said. First, let me repeat that the majority of free trade agreements within the scope of the Bill have already been ratified, and Parliament had the opportunity to scrutinise them during ratification. Parliament’s European Scrutiny Committee also scrutinised these agreements when they were negotiated, included, signed and provisionally applied. They had, of course, already gone through the European Parliament process as well, to which the hon. Member for Warrington South helpfully drew our attention.
The Government have made clear their intention to ratify by exit date all the EU free trade agreements that currently provisionally apply, including the EU-Canada comprehensive economic and trade agreement, and the economic partnership agreement with the Southern African Development Community, or SADC.
The hon. Member for Brent North drew attention to the comments of a South African Minister. To be honest, I cannot remember precisely whom he referred to, but for clarity I refer him to the memorandum of understanding signed by the Secretary of State for International Trade in South Africa in either August or September. Both parties specifically agreed to transition the agreement and maintain continuity, without substantive change. Whatever the hon. Gentleman’s South African said, the memorandum of understanding is absolutely clear in that regard. As I said to the International Trade Committee last week, 70-plus countries have agreed in principle to maintain continuity in trading arrangements. For example, we signed a similar memorandum with the CARIFORUM group to do precisely that.
Parliament’s scrutiny of these agreements, which have already been scrutinised, will be guaranteed by the process under the Constitutional Reform and Governance Act 2010. As we have made clear, this is a technical exercise to secure continuity in our existing trading arrangements, not an opportunity to renegotiate the terms of existing agreements. That means that further scrutiny of those agreements, the benefits of which are already felt by businesses and consumers, is unnecessary. As we have made clear, we want Parliament to play a vital role in the scrutiny of future trade agreements that are not covered by the Bill, but that is for a separate occasion. We made clear in the trade White Paper and in this Committee on Thursday that our future trade policy must be transparent and inclusive.
Faisal Rashid
We heard from many witnesses last week that so-called roll-over agreements not only will be legally distinct from our existing EU agreements, but are likely to be substantially different in their terms. Does the Minister agree that those new agreements need to be subjected to adequate scrutiny and parliamentary oversight, and that a super-affirmative procedure is appropriate?
Greg Hands
I thank the hon. Gentleman for his intervention. I very much appreciate the way, as a new Member, he is getting stuck into the Bill, but I remind him that, in terms of securing the continuity of agreements, more than 70 countries have now agreed that there will not be substantive change. I mentioned South Africa, with which we have a memorandum of understanding saying that. There is no need to re-scrutinise agreements that are substantively the same and have already been through the proper scrutiny processes of both Houses. That is why we made clear in the trade White Paper and in this Committee on Thursday that our future trade policy must be transparent and inclusive, and that Parliament will be engaged throughout the process. I therefore ask the hon. Member for Brent North to withdraw amendment 16.
Barry Gardiner
We intend to press amendment 16 to a vote.
Question put, That the amendment be made.
Barry Gardiner
I beg to move amendment 17, in schedule 2, page 12, line 6, at end insert—
“(1A) A statutory instrument containing regulations of a Minister of the Crown under section 2(1) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.”
This would require regulations implementing international trade agreements to be subject to the affirmative resolution procedure.
The Chair
With this it will be convenient to discuss amendment 19, in schedule 2, page 12, line 6, at end insert—
“(1A) A statutory instrument containing regulations of a Minister of the Crown under section 2(1) may not be made except in accordance with the steps in subparagraphs (1B) to (1E).
(1B) The Minister shall lay before Parliament—
(a) a draft of the regulations, and
(b) a document which explains why the Secretary of State believes that regulations should be made in terms of the draft regulations.
(1C) The Minister may make an order in the terms of the draft regulations laid under subparagraph (1B) if—
(a) after the expiry of a period of 21 sitting days after the draft regulations are laid, no committee of either House of Parliament has recommended that the regulations should not be made, and
(b) after the expiry of a period of 60 sitting days after the draft regulations are laid, the draft regulations are approved by a resolution of each House of Parliament.
(1D) If a committee of either House of Parliament recommends that the regulations should not be made, the Secretary of State may—
(a) lay before Parliament revised draft regulations, or
(b) after the expiry of a period of 40 sitting days after the revised draft regulations are laid, make a motion for a resolution in each House of Parliament for approval of the draft regulations.
(1E) If a motion under subparagraph (1D)(b) is approved by a resolution of each House of Parliament, the Secretary of State may make the regulations.”
This would require regulations implementing international trade agreements to be subject to the super-affirmative resolution procedure.
Barry Gardiner
Amendment 19 would require any regulations implementing new UK trade agreements to be subject to a super-affirmative procedure. If the Government are not willing to allow us the super-affirmative procedure prior to ratification, as they have just shown they are not, we will be compelled to argue for it afterwards. Clearly, we would prefer to keep the stable door shut rather than having to retrieve the horse after it has bolted, but if we could at least provide for some parliamentary process subjecting implementing regulations to scrutiny, that would be better than nothing. As it is presently constituted, nothing is precisely what the Bill offers.
The procedure mirrors that which we seek to introduce with amendment 15: namely, in this case, a proper process granting Parliament the power to subject implementing regulations to scrutiny. The provisions are drawn from existing primary legislation that provides for enhanced scrutiny in other contexts. Once again, the key elements of them are that a Committee of either House can object to the regulations, and that both Houses must give their approval before the Secretary of State can proceed with making the regulations.
Greg Hands
I think we are potentially about to have quite a similar debate to the one that we just had, but let me be as succinct as I can. I remind Members that this power will be used only to introduce regulations that reflect current obligations in our EU trade agreements. That means that we are not seeking to change the effects of our existing trade agreements through the power. The agreements have already been examined by Parliament as part of its regular scrutiny of EU business. Ratified free trade agreements have already been through the normal parliamentary scrutiny process for treaty ratification.
Barry Gardiner
The Minister said that the Government are not proposing to change the provisions in any of the treaties. I think he said earlier in our debate that 71 countries had already agreed. Could he just clarify for the Committee once and for all, because he has failed to do so thus far, whether that includes Norway, Switzerland and Turkey?
Greg Hands
I thank the hon. Gentleman, but we have already covered that ground as well. The agreements with Norway, Turkey and Switzerland will inevitably be dependent on our future trading relationship with the European Union, because of the unique way that each of those countries operates in conjunction with the European Union.
The hon. Gentleman says that we are not proposing changes. It is just as important to recognise that more than 70 of our partners do not want substantive changes to the agreements either. Perhaps we need to put aside for a moment some of the ways in which the Bill operates, and think about what is in the interests of our trading partners. It is as much in their interests as ours to have continuity of the existing agreements. It is therefore not a surprise to me that more than 70 countries have said that they are not seeking substantive changes to the agreements.
Matt Western (Warwick and Leamington) (Lab)
I appreciate the point that the Minister seeks to make. However, as he says, there are 70 of them and one of us. In any negotiation, the disadvantage is always with the minority. We are going to be in a very difficult position. One could well imagine—this point came up at the International Trade Committee last week—that the opportunity exists for those nations to renegotiate or, recognising the time pressure that we will be under, to make changes. Surely it should be for Parliament to consider any such change to a trade agreement, not for the Minister or a select few.
Greg Hands
The hon. Gentleman puts his question in a reasonable way. I know he is a member of the International Trade Committee and was there for the evidence session last Wednesday. However, it is not the case that we and the 70-plus countries are in some kind of plurilateral agreement. The number he talks about is the number of agreements, not the number of negotiating partners to that same agreement. Essentially, they would run the same risk that we would run if anyone were to want to renegotiate the agreement. The risk is that we would run out of time to have the transitioned agreement in place come the day that we leave the European Union. We have as much risk and as much downside as the counterpart does. That is the important thing to understand. The Government therefore consider the negative procedure to offer the appropriate level of further scrutiny over the operation of the power.
Turning to amendment 19, as we have made clear, the purpose of the Bill is to help maintain the effects of our existing trading arrangements as we leave the EU. It is vital that we secure that continuity without delay, to avoid disruption for businesses and consumers. That is why we are seeking a power that ensures that our transitioned trade agreements can be implemented in the nimblest and most efficient way possible, through the negative resolution procedure. A switch to the super-affirmative procedure would risk undermining that objective. Statutory instruments subject to the super-affirmative procedure may take even longer than using primary legislation to implement a transitioned agreement, which would therefore increase the risk of a cliff edge in our trading relationships.
Matt Western
Just to clarify—the Minister can correct me if I am wrong—the agreements will in many cases be trilateral because of our existing relationship with the EU and the relationship with the other country among the 70-plus the Minister mentioned. There is therefore an opportunity for that other country to make the negotiation or arrangement difficult. That is why we are seeking to put in place scrutiny in Parliament.
Greg Hands
I refer the hon. Gentleman to the comments I made earlier: none of the 70-plus countries that we have spoken to has said that it wants to do that. It would not be in their interests for them to do so, for reasons of maintaining continuity in our trade relations. That is very much in our and their interests.
Let me finally remind the Committee that Parliament still has oversight of statutory instruments introduced under the negative resolution procedure, using well-established processes as outlined in CRAG. I therefore ask the hon. Member for Brent North to withdraw the amendment.
Barry Gardiner
We will press amendment 17 to a vote.
Question put, That the amendment be made.
Barry Gardiner
I beg to move amendment 20, in schedule 2, page 12, line 6, at end insert—
“(1A) A statutory instrument containing regulations of a Minister of the Crown under section 2(1) relating to an international trade agreement other than a free trade agreement which does not meet the criteria under section 2(4) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.”
This would require regulations implementing an international trade agreement which is not a free trade agreement and which does not correspond to a prior or existing EU agreement to be subject to the affirmative resolution procedure.
This is the final amendment in our series trying to introduce just a modicum of parliamentary scrutiny into the Bill. It refers to the last category of trade agreements that have not yet been covered in the previous amendments.
If hon. Members cast their minds back to amendment 3, which we presented in the first line-by-line sitting last Thursday, that amendment sought to expand the remit of the Bill to include not just agreements that correspond to existing EU agreements but those with countries where there is no prior EU agreement in place. The major set of amendments that I presented at that sitting sought to introduce a full process of preparation, debate and scrutiny up to the point of signature of free trade agreements within the category of comprehensive agreements that need to be notified under GATT article XXIV or GATS article V. Amendment 20 picks up on trade agreements that are not free trade agreements for the purposes of GATT article XXIV or GATS article V, and that do not correspond to an existing EU agreement. Without the amendment, they would not be covered anywhere in the expanded Bill as we envisage it.
We do not believe that it would be an appropriate use of parliamentary time to subject every new mutual recognition agreement to the full rigour of impact assessment and mandate-setting parliamentary scrutiny. We believe it would be enough to have the minimum scrutiny of the affirmative resolution procedure, which allows for a debate and vote where it is thought necessary, but which also allows for the swift passage of regulations through Parliament where they are clearly non-controversial.
I will point out here that some mutual recognition agreements and other agreements are potentially very controversial. In the case of mutual recognition agreements with countries whose regulatory systems are radically different from our own, such as the United States, there could be huge pitfalls in allowing for mutual recognition where it could lead to products entering the UK market that have not been subjected to the rigorous tests that we demand in our jurisdiction. If anything, we are erring on the side of being too pragmatic in suggesting that those agreements be subjected to the affirmative resolution procedure only, seeing as the affirmative procedure can be open to the abuse I described earlier in my reference to the Hansard Society’s report. At least we can take comfort in the fact that a Delegated Legislation Committee would have the power to hold the most controversial regulations up to scrutiny and subject them to a vote in Parliament, which would be a quantum leap from what the Bill currently offers.
Greg Hands
Clause 2 would limit the scope of agreements on which the power can be used to those where the other party had a free trade agreement signed with the EU before exiting. Amendment 20 would establish a procedure whereby the power is used in relation to agreements falling outside those parameters. As we do not wish to extend the scope of clause 2 to allow the power to be used in relation to more agreements, it follows that we do not need to apply a procedure to the implementation of such agreements. The amendment, therefore, is unnecessary in every way.
However, if the spirit of the amendment is to explore what constraints we have drafted into the clause 2 power, I am happy to provide reassurance to the Committee. As I have said before, the power can be used only in relation to free trade agreements with countries that have signed EU free trade agreements before exit day. A free trade agreement covers substantially all trade notifiable to the World Trade Organisation. To be clear, the power cannot be used to amend primary legislation except when that primary legislation is retained EU law. It cannot be used to implement a trade agreement between the United Kingdom and the European Union itself. Nor can it be used to extend or create new criminal offences or create new fees or charges.
The power has a five-year sunset clause from exit day. If the Government wish to extend this period, they may do so only with the permission of both Houses. We and our trading partners are clear that this will be a technical exercise to ensure continuity in trading relationships. It is not an opportunity to change or renegotiate the terms of these EU agreements. Therefore, I ask the hon. Member for Brent North to withdraw the amendment.
Barry Gardiner
I do not wish to shock the Committee, but we will not press the amendment to a vote. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Mr Mark Prisk (Hertford and Stortford) (Con)
I will not detain the Committee for long, but it is important when we establish a new authority to step back. Some of these issues will be raised in debates on amendments, so I will not get too far into the detail.
I strongly support the creation of the Trade Remedies Authority. As our trade policy is slowly developed in the months and years to come, we will need it to be underpinned by a robust remedies regime. Certain characteristics of the authority are very important, and it would aid the interpretation of the Bill in due course if the Government’s aims and intentions were set out on the record.
For an authority to be effective, it needs certain characteristics. First, it needs to be objective and evidence-based. I think that most Members would agree with that in general, but it becomes far more difficult when there is an acute case that is difficult in our constituencies or is of a totemic nature nationally. We need to be clear when we establish the authority that it should be objective and evidence-based in its deliberations and when advising Ministers.
Secondly, the organisation needs to have a broad base. It needs to be open and accessible. All stakeholders must feel that they are able to engage with the authority, and that they are listened to by its whole structure. We have heard examples of authorities in other countries. I simply say that I want to ensure that the consultation process includes not just the business world, but the workers whose jobs may well be threatened and consumers, whom we heard mentioned in evidence. I hope that the Minister can confirm that it will. Many of these issues require a balance between those two sides, and we need to ensure that we have such a balance. It is also important that the authority listens and is seen to listen. The characteristics I have touched on—objectivity, broadness and inclusivity—are important if the authority is to be recognised both here in the United Kingdom and by our trading partners abroad.
The third characteristic is efficiency—or timeliness, as some lawyers describe it. I always find it entertaining when lawyers describe timeliness. Efficiency is of course in tension with the idea of a broad consultation, but we are all aware that there will be cases where prompt action is required, so it is necessary to have good processes in place. Although those will clearly come later, it is important that we put that on the record at this stage, and we would benefit from hearing from the Minister about that.
The most important characteristic, however, is independence. We have heard on Second Reading and in Committee that we all want the authority to be independent and that, naturally, it should be at arm’s length from the Government—the current Administration and future Administrations—for many years to come. That is right, but if it is to be effective, the authority also needs to be able to withstand the media and political pressures that will arise when individual cases come forward. We must ensure that the structure that the Bill builds is robust enough to withstand those pressures. That is why the authority’s non-executive members must be appointed on the basis not of sectional interest but of merit.
We will debate in due course whether the non-executive members should include people from Wales or Scotland, or trade unionists. There are merits to ensuring that the authority listens to all such interests, but I worry that if non-executive members are appointed because they represent one sectional interest or another, the authority’s ability to give independent, objective advice to the Government will be limited. We will come on to the details of that when we debate amendments, but that is an important broad principle.
I strongly believe that if we are to have a remedies authority and an effective set of remedies rules, we need to ensure that those principles are clearly set out not just in legislation but by Ministers and those who are appointed to the authority, so that people both here and abroad can see that that is the intention. I think that would also answer some of the concerns about whether the authority will listen to workers through the trade union movement, by ensuring that consultation is broad and that the authority is clearly outward facing.
It comes back down to this last point: if we want others to follow the rules in trade, so that we have a free and fair system, we have to be seen to abide by those rules ourselves. There will come a moment when this authority reports to a Minister, when there will be a totemic business that is right on the cusp because of a particular practice, or there will be job losses that sharply affect a community that has already lost many jobs. At that moment, the test of the authority is whether it is objective. Is it giving its advice to Ministers on the basis of evidence? Is it genuinely independent and therefore able to be trusted by people here and abroad? Those are important principles and I welcome the Minister’s response.
Greg Hands
No.
Mr Davies, I would like to start by stressing that the Government recognise the important role of making sure—that you are in the right place at the right time. [Laughter.]
I will respond to my hon. Friend the Member for Hertford and Stortford because he raised some incredibly strong points. Free trade is not trade without rules, as the Secretary of State outlined on Second Reading. It is vital for us to have the ability to conduct and operate trade remedies. That is the position we need to be in. I am therefore doubly if not triply surprised that the Opposition voted against creating this body on Second Reading.
My hon. Friend outlined—I know that we will come on to debate some of this when we consider the amendments—some of the key parameters that we want in the Trade Remedies Authority, in that it needs to have regard to a wide variety of stakes and interests in this whole process: businesses, workforces, consumers and so on. We need to make sure that our regime is robust in this space.
It is also important for the message we send abroad, because Members know that free trade has been questioned by more and more countries over the last five to 10 years. Many countries are looking at what the UK does generally in trade policy—and that includes trade remedies—to show that we are committed free traders. People are looking forward to the UK rectifying its own schedules at the World Trade Organisation as we retain and regain our independent voice there to make these points. Trade remedies are a vital part of that and it would be folly for the UK not to have a proper arm’s length trade remedies authority that can do this.
As for my hon. Friend’s points on efficiency and promptness, regarding some of the detail of the Trade Remedies Authority’s operations, I advise him to have a look at what is going on with the Taxation (Cross-Border Trade) Bill, which incorporates a lot of the day-to-day workings of the Trade Remedies Authority and is being debated as we speak in another room. Most of all, regarding his important points about the independence and arm’s length nature of this body, it is incredibly important to ensure that we have specialists on it who can withstand pressures, non-executives appointed on merit and not representing sectional interests. We need to make sure that our Trade Remedies Authority members can consider UK-wide issues, but also regional issues at the same time, without being beholden to a particular sector or region. Our objective is therefore to have an independent, evidence-based approach to trade remedies.
Question put and agreed to.
Clause 5 accordingly ordered to stand part of the Bill.
Schedule 4
The Trade Remedies Authority
Bill Esterson (Sefton Central) (Lab)
I beg to move amendment 21, in schedule 4, page 14, line 24, leave out line 34 and insert—
“(a) a member to chair it, appointed by the Secretary of State with the consent of the International Trade Committee of the House of Commons,”.
This would establish the requirement for Parliament, through the relevant committee, to give its consent to the Secretary of State’s recommendation for appointment to the Chair of the Trade Remedies Authority.
The Chair
With this it will be convenient to discuss the following:
Amendment 39, in schedule 4, page 14, line 34, at end insert
“with the consent of each devolved authority,”.
This amendment would require the Secretary of State to secure the consent of each devolved authority before appointing the Chair of the TRA.
Amendment 38, in schedule 4, page 14, line 34, at end insert—
“(aa) a non-executive member appointed by the Secretary of State with the consent of the Scottish Ministers,
(ab) a non-executive member appointed by the Secretary of State with the consent of the Welsh Ministers,”.
This amendment would require UK Ministers to secure the consent of the Scottish Ministers and Welsh Ministers to one non-executive member each of the Trade Remedies Authority.
Amendment 22, in schedule 4, page 15, line 2, leave out subsection (3) and insert—
“(3) No person may be appointed as a non-executive member of the Authority under subparagraph (1)(b) unless—
(a) the Secretary of State has first consulted the Chair of the Authority on the proposed appointment, and
(b) the International Trade Committee of the House of Commons has consented to the appointment.”
This would establish a procedure for appointing non-executive members of the Trade Remedies Authority other than the Chair.
Amendment 23, in schedule 4, page 15, line 3, at end insert
“(3A) In making any proposal under subparagraph (3), the Secretary of State must ensure that there is on the Authority a representative of —
(a) producers,
(b) trade unions, and
(c) each of the United Kingdom devolved administrations.”
This would ensure that the Trade Remedies Authority must include, among its non-executive members, representatives of stakeholder bodies potentially affected by its recommendations.
Amendment 40, in schedule 4, page 16, line 20, after “may” insert
“, with the consent of each devolved authority,”.
This amendment would require the Secretary of State to secure the consent of each devolved authority before removing a person from office as the chief executive of the TRA.
Amendment 41, in schedule 4, page 17, line 27, at end insert—
“Offices
25A The TRA shall maintain offices in—
(a) Scotland,
(b) Wales, and
(c) Northern Ireland.”
This amendment would require that the TRA shall maintain offices in Scotland, Wales and Northern Ireland.
Bill Esterson
It is interesting that the hon. Member for Hertford and Stortford chose to speak in the clause 5 stand part debate, because many of the points he made relate to amendments 21, 22 and 23, which I now speak to on behalf of myself and my hon. Friends. During his interesting and thoughtful speech, he made very strong arguments in favour of each of our amendments. He spoke of the need to be evidence-based and objective, which would be much easier achieved by the balanced membership proposed by our amendments. Equally, he spoke of the need for a broad-based membership—I agree. He also made the argument for balancing the different interests that are involved in delivering trade remedies and an effective Trade Remedies Authority. I will be interested to see how he votes, given that he made the case for supporting each of our three amendments.
As ever, the Minister reminds us of the vote on Second Reading. He neglected to say that in our reasoned amendment we called for the need for effective legislation to implement the establishment of a Trade Remedies Authority to deliver the new UK trade remedies framework. We voted for that, and he voted against it. If he wants to tell me why he voted against an amendment that called for the establishment of a Trade Remedies Authority to deliver the new UK trade remedies framework, he can do so now.
Greg Hands
I thank the hon. Gentleman for allowing me to do so. We all know that the usual purpose of a reasoned amendment is that it allows an Opposition party to put forward a point of view about a Bill while nevertheless still allowing it not to oppose the Bill itself. That is the standard way in which reasoned amendments operate. We were simply amazed that once his reasoned amendment fell he nevertheless opposed the Bill. That shows that he opposes the continuity of these trade agreements, the creation of a Trade Remedies Authority, and data-sharing powers that will help our exporters. I am afraid that that is on the record from his vote on Second Reading.
Bill Esterson
I am glad that the Minister has confirmed that we voted to support the creation of a Trade Remedies Authority and that he voted against it. I think that was very clear in that lengthy intervention.
As the explanatory statements make clear, amendments 21, 22 and 23 would have the effect of giving Parliament the power of consent over the appointment of a chair to the Trade Remedies Authority set up by the Bill. They would establish a procedure for the appointment of non-executive members to the authority, and ensure that the TRA includes representatives of key stakeholder bodies among its non-executive membership—all things that the hon. Member for Hertford and Stortford requested.
Mr Prisk
I actually said that the non-executive members need not to be beholden to a sectional interest and they need to be able to make a corporate decision. My worry is that amendment 23 does precisely the former. There are some 5.3 million people in the west midlands and some 5.6 million in Scotland. Presumably, according to the logic with which the hon. Gentleman has drafted the amendment, we should also have somebody from the west midlands. I am sure that people from Yorkshire would then like to have someone from Yorkshire. My concern is that ultimately we will end up with one person representing not the broad picture, but a sectional interest. I am very happy to have people who have links and connections to those areas, but to appoint them on the basis of where they come from or to represent one sectional interest would be wrong. Merit should win.
Bill Esterson
Perhaps the appointment of the non-executives can cover all those areas.
Trade remedies and the Trade Remedies Authority are a key element of our trade policy. Gareth Stace of UK Steel told us in one evidence session that
“If we get this very wrong, we become the dumping ground—not just in Europe, but for the rest of the world.”–––[Official Report, Trade Public Bill Committee, 23 January 2018; c. 66, Q127.]
It is therefore essential that we get it right, and the Bill is our opportunity to do that. The Government have spent the past few days in Committee trying to convince us that the Bill is a technical little Bill that is not trying to do much other than put in place necessary frameworks. On the Trade Remedies Authority in particular, they have gone to great pains to stress that they are simply setting up the necessary structures to carry out our trade defence once we have left the European Union. This much is true: the Trade Bill does set up the Trade Remedies Authority, which will be a key component of our trade policy once we leave the European Union, when we have to carry out our own trade remedies.
Hannah Bardell
I thank the hon. Gentleman for giving way—that was a clash of interventions and I am glad to have won the battle. I absolutely agree with him. Does he agree with me that, although none of us, unfortunately, has tabled the amendment that has just occurred to me, the authority should reflect the gender balance of society? Perhaps there should be a gender balance mechanism, as it will be a public body.
Bill Esterson
It is really important that we take on the challenge set by the hon. Lady and apply it to all public bodies. How we achieve such a gender balance is perhaps a question for wider discussion, but her point is well made. The Minister might achieve the balance she suggests when he creates the authority.
Faisal Rashid
The role of Parliament in overseeing the creation of the Trade Remedies Authority was described to the Committee as “critical” by Chris Southworth of the International Chamber of Commerce. Does my hon. Friend share my concerns that if the Government do not support the amendment, they are clearly choosing to ignore the voice of the ICC? Does he also share my concerns about the repercussions that that might have for the future of UK trade?
Bill Esterson
My hon. Friend makes an excellent intervention, as he has done throughout Committee. That body has to carry the confidence of all sides of industry and all parts of society and of the United Kingdom. It is crucial that it does so, which is why we are attempting to push the amendments through. I imagine, from what the Minister has said, that he is unlikely to support us—why change the habit? Perhaps, however, he will explain how those points will be addressed and how the Government will respond to the witnesses mentioned by my hon. Friend, as well as some of the other witnesses.
The Minister is not letting on that trade remedies are not simply a technical detail of trade policy. They have the potential to be highly political. In essence, trade remedies defend domestic producers from unfair competition from dumped goods from other countries. The remedies are an essential policy tool to correct multilateral distortions, as Mr Stevenson, the specialist adviser to the Manufacturing Trade Remedies Alliance told us last week. Deciding when and how to use such trade defence instruments, however, is a political decision, and a highly political one at that, as is that on the membership of the TRA. It is crucial to get the membership right, to ensure that the TRA makes correct, balanced and evidence-based recommendations—as the hon. Member for Hertford and Stortford put it—to Government.
As the system is to operate under this Bill and the Taxation (Cross-border Trade) Bill, the Secretary of State has the capacity to use an economic interest test to allow the Government not to take action even when problematic trade behaviour by another country has been identified. In other words, the Government will have the capacity to decide that even when harm is being done to our domestic industries, other interests such as the consumer interest may outweigh those of the producers affected. To quote the words of George Peretz, QC, who we heard from last week:
“That seems to me to be a political position: it is balancing the interests of jobs in a particular area of the country against the interests of consumers across the country”.––[Official Report, Trade Public Bill Committee, 23 January 2018; c. 55, Q105.]
The same point was made on Second Reading by a number of hon. Members, including about the Scotch whisky and steel sectors.
The Minister cannot pretend that the Bill and the structures created by it are apolitical and purely technocratic. Trade remedies can make the difference between the survival of an industry and its decimation. They can protect thousands of jobs or let them be exported overseas. They can defend our foundation industries or let them fall by the wayside. I am sure the constituents of the hon. Member for Corby can attest to that.
Bill Esterson
The hon. Gentleman comments from a sedentary positon; perhaps he is allowed to do that.
Alan Brown
I just want to respond to the comments made by the hon. Member for Corby from a sedentary position. It is ironic that he is saying yet again that we should have voted for the Bill on Second Reading and then tabled amendments, even though the Government have voted against every single amendment.
Bill Esterson
The hon. Gentleman is of course right. I remind the hon. Member for Corby and his colleagues that he and they all voted against our reasoned amendment, which called for the setting up of the Trade Remedies Authority.
Trade remedies are absolutely essential in order to protect British industries, including the steel sector, ceramics, tyres, chemicals and pharmaceuticals. As Gareth Stace of UK Steel told us,
“Trade remedies...are the safety valve that enables free trade to take place.”––[Official Report, Trade Public Bill Committee, 23 January 2018; c. 66, Q127.]
One need only look at the steel sector to understand why trade remedies are necessary and also how incredibly political they can be.
As the steel crisis highlighted, when no trade remedies are put in place to defend our steel industry against dumping from countries such as China, thousands of jobs are lost and entire communities are negatively affected. We were reminded of that at BEIS questions earlier today, when my hon. Friend the Member for Redcar (Anna Turley) raised the ongoing devastating impact on the community and workers who lost their jobs at SSI. She spoke of the continuing struggle to replace their jobs and to create prosperous alternatives for her constituents. So far, that has not been resolved.
During the steel crisis the Conservative Government under David Cameron acted as the ringleader of a group of countries in Europe trying to block efforts at the European Council to put in place more rigorous anti-dumping measures against China by lifting the lesser duty rule. British steel was going through an existential crisis and the Conservative Government did not use all the policy tools available to them to restore a level playing field. The EU ended up imposing tariffs on unfairly traded steel, but they were much lower than those imposed by other countries such as Australia and the USA.
Now that we are leaving the European Union the Government have rightly set out to create an independent trade remedy regime, yet they seem to not have left their bad habits behind. They still envisage having a lesser duty rule in place. On top of that, they have introduced an economic interest test in the Taxation (Cross-border Trade) Bill. Once again British producers do not make it to the top of the list of concerns for the Secretary of State and Ministers. They seem to want to champion only consumer interests. That is why we believe it is important that Parliament has a say in the appointments to the Trade Remedies Authority and why we believe non-executive members of the TRA should include representatives of producers and trade unions from each of the devolved Administrations. There needs to be an in-built system of checks and balances so that all interests are taken into consideration and all voices are heard. As Mr Southworth from the International Chambers of Commerce said on Tuesday last week, issues such as steel dumping have
“huge implications for a lot of people, particularly in geographies that tend to be vulnerable...It is important that everyone has a chance to have their say about what that decision should be.”––[Official Report, Trade Public Bill Committee, 23 January 2018; c. 26, Q57.]
Even in the short time that the Department for International Trade has been in existence, its track record on being inclusive and mindful of the input of stakeholders has not been ideal. The consultation on the Trade Remedies Authority ended on the evening of 6 November. By early morning on the 7th, the Trade Bill had been published and delivered to Parliament. James Ashton-Bell of the CBI diplomatically said that
“the optics were not ideal.”––[Official Report, Trade Public Bill Committee, 23 January 2018; c. 34, Q79.]
What a disgrace. Why did the Government bother to have a consultation when they clearly had no intention of reading the responses, let alone taking on board the suggestions? That is a clear breach of the consultation principles issued to all Departments in 2016.
Greg Hands
I have a quick question: does the hon. Gentleman agree with his party leader that free trade itself is a dogma?
Bill Esterson
I think we should press on. The Minister has enough to worry about.
As Mr Stevenson of the Manufacturing Trade Remedies Alliance told us last week:
“Some see trade remedies as purely protectionist and would abolish them completely”.––[Official Report, Trade Public Bill Committee, 23 January 2018; c. 65, Q124.]
It is key, therefore, that Parliament, through its relevant Committee, should get to scrutinise who the Secretary of State appoints as the head of the relevant body, and that it should make sure it is someone with the competence, experience and disposition to stand up for the best interests of British industries and the British people.
Similarly, amendment 22 would ensure that the Secretary of State cannot appoint non-executive members to the TRA at his whim and fancy. He should not be able to stack the TRA with members of a certain political and ideological persuasion that would mean they would be less likely to act on complaints brought forward and less likely to recommend measures. We heard from Mr Stevenson of the MTRA last week that if all its members
“thought trade remedies were protectionist, we would never get any trade remedies through”.––[Official Report, Trade Public Bill Committee, 23 January 2018; c. 65, Q124.]
Parliamentary scrutiny of the membership of the TRA is even more important in the light of the evidence given to this committee by Mr Tom Reynolds of the British Ceramic Confederation. He highlighted to us at column 67 that, within the context of our membership of the European Union, the UK Government took on the role of the “liberal counterweight” opposing strong trade defence measures. However, now that we will not have the other 27 member states, of which a majority is for trade remedies, we cannot afford to take the same approach.
Unfortunately, according to Mr Reynolds, UK civil servants and experts are “steeped in that heritage” of the UK being a neo-liberal counterweight. We cannot afford to let that institutional memory dictate how our independent trade defence policy is conducted. We need to ensure that the non-executive board of the TRA is a watchdog that ensures balance in the system. The only way to do that is to allow this House, through the appropriate Committee, to have a say on the appointment of the board members.
Finally and most importantly, amendment 23 would ensure that the TRA includes among its non-executive members representatives of stakeholder bodies potentially affected by the recommendations of the TRA. Those stakeholders are the producers, the trade unions representing the workers and a representative of each of the devolved Administrations. We have put that into our amendment because we believe that the key stakeholders affected by unfair trading practices should be represented around the table where decisions are being made that affect the survival of their industries and jobs, and the wellbeing of their communities. The TRA will only be enriched by experts from industry, trade unions and the devolved Administrations, who are the ones facing the realities of dumping on a day-to-day basis and close to home.
Matt Western
Does my hon. Friend have a view on the recent situation with Bombardier and the involvement of the US trade body that found in its favour? Are there any learnings from that? I am specifically interested in the role of the unions on that body, as well as industry representatives.
Bill Esterson
My hon. Friend is right to raise that. The Bombardier experience shows that countries are prepared to apply very significant trade remedies. We have to be realistic. We need to be in a position to have our own trade remedies system, be prepared to use them and not expect that not using such processes is always appropriate. That is why we must have the right membership, including from the trade unions, to protect jobs, as my hon. Friend has said, because otherwise we leave ourselves wide open.
Greg Hands
Can the hon. Gentleman be absolutely clear? I am intrigued. Is he saying therefore that he agrees with the US approach—not having a lesser duty rule and allowing these very large punitive tariffs to be put on British industry, Bombardier in this case, exporting to the United States? I think he is agreeing that he likes the US approach.
Bill Esterson
That is not what I was suggesting. I am saying that we have to recognise that countries such as the US, as demonstrated by this case, are prepared to act. We have to be realistic about that. We have to make sure that we have the right representation on the TRA so that we are making the right case. I do not think 300% tariffs is a good idea at all, but we certainly need to be able to make the right judgments when such things apply. There is a balance between protectionism and the approach in the Bombardier case.
Barry Gardiner
Does my hon. Friend agree that it would be foolish to look at one specific example of an outrageous situation, as we have had with Bombardier in the US? Thank goodness that the ITC came to the correct conclusion there. Just because it is possible to arrive at the wrong conclusion should not mean that one judges the lesser duty rule simply on that.
Bill Esterson
Of course that is right. My hon. Friend deserves credit for taking the time and effort to go and meet the ITC and to make the case with the trade unions and others from this country. The lobbying that he and others were involved in played no small part in delivering for workers and business in the UK. He deserves a lot of credit for that. I will return to my speech—
Matt Western
This reminds me of Saturday afternoons watching wrestling. [Laughter.] The crucial thing about the TRA is that it is a facilitator, not a barrier, to ensure the needs of sectors and those involved in the sectors, whether workers or businesses. That came across very clearly in the representations from witnesses last week as something they want. My hon. Friend mentioned the chairmanship. As with the Office for Budget Responsibility, it is crucial that the chair is seen as an important role and not some political lackey.
Bill Esterson
Yes, that is exactly right. The point is to get the balance between how the Conservative Government under David Cameron blocked attempts to use appropriate trade remedy measures to defend our steel industry and the excessive use of them by the Americans. That is what the new TRA should do and that is why it needs to have the right balance of membership.
The message from the evidence given by the witnesses last week was loud and clear: stakeholders want representation on the TRA. They want their voices to be heard and their concerns taken into account, and they want that guaranteed in statute, not through ad hoc discussions with the Government. George Peretz QC told us that the composition of the TRA
“ought to be balanced by statute and that it ought to reflect a variety of different perspectives.”––[Official Report, Trade Public Bill Committee, 23 January 2018; c. 55, Q105.]
We also heard from James Ashton-Bell of the CBI, that:
“In anything where you are making choices about trade and how it will impact the wider economy, you should have a wide and balanced group of people advising Government, or an independent authority, about how to make those choices.”––[Official Report, Trade Public Bill Committee, 23 January 2018; c. 25, Q54.]
Chris Southworth of the International Chamber of Commerce concurred, saying that
“the representation is a critical point. An independent body, yes, but there must be representation within that independent body to represent all the important voices”.––[Official Report, Trade Public Bill Committee, 23 January 2018; c. 25, Q54.]
That responds to the question by my hon. Friend the Member for Warwick and Leamington.
If the Minister will not listen to me, will he at least listen to business associations, industry representatives, trade unions, academics, QCs and civil society? They are all coming out against how he and his Department are going about this. I urge Members on all sides to support our three amendments, but if the inevitable happens and the Minister leads them into voting us down, I look forward to him bringing forward his alternatives later in proceedings.
Hannah Bardell
It is a pleasure to serve under your chairmanship once again, Mr Davies. It has been a fascinating debate. I want to say at the outset that we absolutely support our colleagues in the Labour party in their amendments, but have also tabled amendments 39, 38, 40 and 41, which I will speak to.
The legislation needs to be strengthened. Amnesty’s response was interesting. It said that an independent body with appropriate expertise should be established with a remit to conduct or commission assessment impacts of future free trade agreements on human rights, equality and the environment in the UK and of trading partners. This could be the proposed Trade Remedies Authority if it were given the resources, remit and powers.
On powers, it is important to remember that we are 20 years on from devolution. Devolution delivered huge changes across the nations of the UK. I can understand that many in England perhaps feel somewhat left behind, because we have moved on in Scotland, Wales and Northern Ireland. I have some sympathy with that but the point of the amendments is respecting devolution, and recognising the nations of the UK and the relationship that they have developed directly with the EU, and the importance of trade.
The Scottish Parliament was established to be accountable and answerable to the people of Scotland, to be open and encourage participation, to be accessible and to involve all the people of Scotland in its decisions as much as possible, and to have power sharing. That is an important point: power should be shared among the Scottish Government, the Scottish Parliament and the people of Scotland.
On the decisions about where the Trade Remedies Authority is physically located and about whether it will have non-exec members, decisions about the businesses and the people of each of the nations of the UK are best made as close to those people as possible. We understand that the functions of the Trade Remedies Authority will be reserved and it will undertake trade remedies investigations across the UK, but it is important that Scottish, Welsh and Northern Ireland Ministers have a role in the Trade Remedies Authority.
Amendment 39 requires the Secretary of State to secure the consent of each of the devolved nations before appointing a chair to the Trade Remedies Authority. We feel it is only fair that we have a say in that matter. It is common practice for interview panels to be made up of people from a range of disciplines. The hon. Member for Hertford and Stortford said that there will be a range of people, but I am sure he will have sympathy with my view that, although the west midlands is a very important part of the UK, it is not a country in the way that Scotland is. Since 2007, Scottish exports to the EU have grown by more than 25%. The EU market is eight times larger than the UK’s alone. Scotland exported £12.3 billion-worth of exports to the EU in 2015, and that figure is growing, so the EU is a hugely important market for us. It stands to reason that Wales and Northern Ireland must have a fair and proper say in who is appointed.
Mr Prisk
On a point of order, Mr Davies. I have been listening to the hon. Member for Sefton Central and the hon. Member for Livingston, and it is clear that these are broad subjects. Will you confirm that it is not your intention to have an additional debate on schedule 4, and that given the scope of what is being discussed—not just the amendments but wider issues—this is in effect a stand part debate on schedule 4?
The Chair
That decision is at my discretion. It may actually end up being at the discretion of one of my fellow Chairs, and I do not want to commit them to anything, but I certainly hear what the hon. Gentleman says.
Hannah Bardell
I feel that it is important to make these broader points, because they are germane to the issue and to the amendments.
For us, the bottom line is ensuring that the devolved nations and the devolution settlements that were agreed on a cross-party basis are respected. That is absolutely at the heart of these amendments. I hope that we are able to get support for them, cross-party—and certainly from our Labour colleagues.
Greg Hands
May I start by correcting an inadvertent error I made earlier? I mentioned an agreement that was signed by the Secretary of State for International Trade with South Africa and SADC in August or September. It was actually earlier than that. It was signed in July by Lord Price. I know that the hon. Member for Brent North takes an interest in South Africa, so I will quote briefly from what was said:
“The Southern African Customs Union…has welcomed the UK’s intention to prevent disruption of trade relations with other countries as it leaves the European Union”.
I think that clears up where we are with South Africa.
Let me start by stressing that the Government recognise the important role that Parliament, industry stakeholders and the devolved Administrations play in building the UK’s future independent trade policy. We look forward to working with all those groups and organisations on the establishment and operation of the Trade Remedies Authority to ensure that their views and interests are taken into account where appropriate. However, these amendments are not appropriate to the creation of that new function.
Decisions on trade remedies cases can have profound effects on markets, so we need to create an independent and objective investigation process in which businesses and consumers have full confidence. That is why we are setting up the Trade Remedies Authority as an arm’s length body with the appropriate degree of separation from the Department for International Trade. The hon. Member for Sefton Central said that trade remedies are inevitably political. That is precisely why we are ensuring that investigation and evidence-gathering must be done independently.
Faisal Rashid
James Ashton-Bell of the CBI told us that the fundamental question it has about the Trade Remedies Authority is
“who makes the ultimate decisions about when to take action and when not to take action.”––[Official Report, Trade Public Bill Committee, 23 January 2018; c. 24, Q52.]
Given the lack of clarity about that, does the Minister agree that it is vital that appointment to and operation of the Trade Remedies Authority is as transparent as possible?
Greg Hands
Yes, and the authority is very transparent in its operation. A lot of how the authority operates is outlined in the Taxation (Cross-border Trade) Bill, which is being debated down the corridor. I strongly feel that there is really good transparency in the arrangements we have made regarding the authority’s independence, arm’s length nature and specialist and independent evidence-gathering. We are also ensuring that it is accountable to the Government and that, at the end of the day, a political decision is still taken about whether to impose trade remedies.
Barry Gardiner
I think we would all welcome a sense that this body was independent, so can it be right that one person with a particular view of trade should be empowered under the Bill to appoint every single member of the TRA, including the chair? Depending on the order in which they make the appointments, that is entirely possible under the Bill.
Barry Gardiner
The Minister is shaking his head, but under the Bill, so long as the Secretary of State appoints the chair last—there is nothing to prevent him doing that—he is empowered, absolutely on his own, to put his friends, cronies and the people who have his view of trade in every single position. He would then appoint the chair. If he appoints the chair first, he has to do the rest in conjunction with others.
Greg Hands
Let me be of assistance to the hon. Gentleman. It is quite clearly laid out in the appointments procedure that the Secretary of State appoints the chair, and the other non-executives in consultation with the chair. In exceptional circumstances, the Secretary of State can appoint the chief executive, but only if the chair has not yet been appointed. That is laid out in the legislation. The executive members are not appointed by the Secretary of State. It is important to understand that the Secretary of State does not appoint the whole body.
On top of that, the appointments process of course follows good governance principles and rules on public appointments. For the benefit of the Committee, I will outline those rules. First, the Government are responsible for setting out the processes and principles that underpin the management of public bodies. Secondly, there are explicit rules on the roles of Ministers and Departments in the public appointments process. The rules outline the role of the Commissioner for Public Appointments, who is the independent regulator of public appointments. I am sure they would take more than a casual interest in the TRA, were the case that the hon. Member for Brent North outlined to transpire.
The rules also include the governance code for public appointments. We have worked with governance experts in the Cabinet Office and HM Treasury to ensure that the TRA complies with those governance rules and others. The rules include guidance on managing public money and all the usual protections we would expect to see in an appointments process.
Barry Gardiner
Will the Minister, in the light of his remarks, comment on schedule 4(2)(1)? It states:
“The TRA is to consist of…a Chair appointed by the Secretary of State…other non-executive members appointed by the Secretary of State…a chief executive appointed by the Chair with the approval of the Secretary of State or, if the first Chair has not been appointed, by the Secretary of State, and…other executive members appointed by the Chair.”
In other words, the majority of the Committee—all the non-executive members, the chair and the chief executive—can be appointed by one individual: the Secretary of State.
Greg Hands
I refer the hon. Gentleman to later in the schedule. If he would care to turn over the page, it states:
“The Secretary of State must consult the Chair before appointing the other non-executive members.”
He is being highly selective in choosing elements of the Bill that appear to suit his argument.
Most importantly, these are public appointments, so we will of course have a standard competitive process following good governance principles and rules on public appointments. The successful candidates will be selected based on whether they have the right skills and experience to deliver this new UK-wide function effectively. The arrangements are broadly consistent with those of equivalent arm’s length bodies.
On the role of Parliament and amendments 21 and 22, it is important to ensure that the TRA’s senior leadership, and particularly its chairman, are in place as early as possible to enable the TRA to be operational by the time the UK leaves the EU. That will ensure continuity for UK industry. Giving the International Trade Committee a role in the appointment of members to the TRA, including its chair, would add additional stages to the appointment of non-executive members, thereby delaying the process. More significantly, referring back to the point made by my hon. Friend the Member for Hertford and Stortford, it would risk politicising the appointment process, thereby undermining the TRA’s status as an independent and impartial body.
Alan Brown
To be clear, people appointed on merit by the UK Government will be completely impartial, but people appointed by devolved Governments will suddenly have such conflicts of interest that it will pull the whole TRA system down a hole?
Greg Hands
I appreciate the hon. Gentleman’s point, but the point is to have a UK-wide perspective, and for the appointments to be based on expertise in that space, and made following good governance principles. That is the objective for the membership of the TRA.
On trade remedies, I think the hon. Member for Sefton Central impugned my hon. Friend the Member for Corby by saying that he was not sufficiently interested in the steel industry. I have known my hon. Friend for some time, and he is incredibly passionate about the steel industry. He takes a keen interest in the operations of the TRA, and is quite expert in this space. He knows that much of the detail of the operation of the TRA is not in this Bill but in the Taxation (Cross-border Trade) Bill.
Bill Esterson
The Minister really should not make such accusations; he knows that is not what I said or what I meant. I am well aware that the hon. Member for Corby takes a keen interest in the subject, along with all Members representing constituencies across the country with a steel industry presence; they work together extremely hard, cross-party, to try to support the steel industry. It was a completely inaccurate accusation, and I hope the Minister will withdraw it. My criticism was entirely of the Government and their failure in the European Union to support the measures that were needed.
Greg Hands
I think we are in one of those cycles; I am alleged to have impugned the hon. Gentleman by saying that he impugned my hon. Friend the Member for Corby. I will just leave it on the record that my hon. Friend is a doughty defender of the steel industry in the House, and through his influence with the Government.
I think the hon. Member for Sefton Central suggested that the Secretary of State should not appoint members at all. We need the Secretary of State to appoint the non-executive members in order to ensure that they are directly accountable to an elected representative with responsibility for the whole UK, because ultimately trade remedy measures will be taken across the UK. That person is quite properly the Secretary of State, who is accountable to Parliament. That is broadly in line with what happens in other arm’s length bodies.
The hon. Gentleman also talked about putting in place the right framework for the TRA. We are clear that we will operate a robust trade remedies regime to protect UK industry from injury caused by unfair trading practices and unforeseen surges in imports. I said of the TRA at the very beginning that free trade does not mean trade without rules. Rules are incredibly important, and making sure we have a strong defensive capability is a key part of that. That is why there will be a presumption in favour of measures in all dumping and subsidies investigations—that is in the Taxation (Cross-border Trade) Bill.
It is right that there is a mechanism for identifying whether measures are likely to have a disproportionate impact on other economic actors in the UK, such as downstream industries and consumers, and whether they might have a regional impact or an impact in one of the nations of the United Kingdom. The economic interest test ensures that the trade remedy system takes into account wider economic considerations in addition to the interests of UK producer industries. It is a chance to step back and consider whether measures would be in the best economic interests of the UK and will ensure that measures are not imposed where that is not the case.
Points were raised about different balances within the board. We have to come back to the overriding factor that should prevail to ensure that we comply with good governance principles: appointments are made following an open, competitive process on the basis of merit and on the basis of being able to discharge the function of looking at the whole question of a particular issue that might be prompting a trade remedy on a UK-wide basis. That is why it is important that we have built appropriate processes into the framework set out in the Taxation (Cross-border Trade) Bill to ensure that impacts on Scotland, Wales and Northern Ireland are given due consideration.
Barry Gardiner
The Minister is being extremely generous in giving way. Before he finishes his peroration, would he agree with me that there is a sensible distinction to be made between the executive members and the non-executive members of the TRA? Executive members are expected to be specialists. They are expected to have specialist trade knowledge or specialist knowledge that could determine whether dumping has taken place and so on. The non-executive members have more of a representative function. In that context, would he not see that that distinction in the amendments and others we support has some purchase?
Greg Hands
I thank the hon. Gentleman for that intervention because it allows me to say that I do not agree. The non-executive members are not intended to be representatives of particular interests or particular parts of the United Kingdom, or particular sectors or producers or consumers or trade unions. The idea is that all members of the board have the ability to think right across the question of what is happening in terms of the injury that has been created or reported to have been created. What is the best way of assessing all the evidence? What is the best way of doing, for example, the economic interest test? I entirely disagree with him. These people are not representatives. They are able to take a dispassionate, evidence-based and informed decision, looking at all of the available evidence.
The TRA will consider the wider impact of trade remedy measures as part of the economic interest test. As part of that process, the TRA will consider the impact of measures on different groups across the UK, including any regional or distributional consideration. It is important to understand that its members do not have to be, and in fact should not be, representatives of those regional distributional considerations or producer or consumer and so on. They are designed to look at the evidence and come to a recommendation based on the overall evidence in front of them. It will also consider the likely impact on affected industries and consumers. We would expect the TRA to gather information where relevant to inform the economic interest test. For those reasons, I ask the hon. Gentleman to withdraw the amendment.
Bill Esterson
I will not be withdrawing the amendment. The Minister talks about good governance. Non-executives often, on many boards, in many situations, come from membership organisations. They then use their judgment on a wide range of issues, but they come from those membership organisations. I am afraid he is wrong about that. He speaks of the risk of political appointments. There is one way to ensure that this is a politicised series of appointments: to leave everything in the hands of the Secretary of State. That is for sure. If the appointment process is so watertight, why is there a whole section in the Bill dedicated to what happens if the chief executive is appointed by the Secretary of State? It is being anticipated as, I guess, a quite likely scenario.
The Minister talked about accountability to Parliament, but there is none under the Bill. There are a number of examples of parliamentary scrutiny of appointments. Select Committees play a significant role in a number of appointments to public office. The Treasury Committee gives its consent to the appointment and dismissal of members of the Budget Responsibility Committee. The Digital, Culture, Media and Sport Committee has the power of veto over the appointment of an Information Commissioner, and there are a number of examples of pre-appointment hearings for significant public appointments.
When something is so crucial to our economic and international trade future, why do the Government not care to involve the Select Committee in the appointments? If they will not support the amendments, I look forward to them coming forward and dealing with the point that the Minister made in his summing up about how he expects accountability to be delivered to Parliament. I will put our three amendments to the vote.
Question put, That the amendment be made.
Trade Bill (Seventh sitting)
Tuesday 30th January 2018
(7 years, 9 months ago)
Public Bill CommitteesTrade Bill 2017-19 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 30 January 2018 - (30 Jan 2018)
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Chair
I call Hannah Bardell, who is not in her place—[Interruption]—unless she is!
Schedule 4
The Trade Remedies Authority
Hannah Bardell (Livingston) (SNP)
I beg to move amendment 42, page 18, line 39, at end insert
“and to each devolved authority”.
This amendment would require the TRA to send its annual report to each devolved authority.
The Chair
With this it will be convenient to discuss the following:
Amendment 43, page 18, line 40, after “Parliament” insert
“and shall supply copies to—
(a) the Scottish Parliament,
(b) the Welsh Assembly, and
(c) the Northern Ireland Assembly.”
This amendment would require the Secretary of State to supply copies of the annual report to the Scottish Parliament, the Welsh Assembly and the Northern Ireland Assembly.
Amendment 24, page 18, line 40, at end insert
“no later than 1 August of the calendar year in which the last day of the financial year covered by the report falls”.
This would ensure that the Secretary of State must lay the annual report of the Trade Remedies Authority before Parliament within a reasonable time frame.
Amendment 25, page 18, line 40, at end insert—
“Recommendation reports
31A (1) The TRA must prepare a report on each of the individual recommendations it makes to the Secretary of State in connection with the conduct of an international trade dispute.
(2) The report must accompany the recommendation submitted to the Secretary of State.
(3) The Secretary of State must lay the report before Parliament as soon as reasonably practicable, and not later than five days from the time it is submitted to the Secretary of State by the TRA.”
This would ensures that Parliament is kept informed, in a timely fashion, of the individual recommendations made by the Trade Remedies Authority to the Secretary of State in connection with cases of dumping, foreign subsidies and import increases causing injury to UK producers.
Hannah Bardell
I apologise for my lateness, Ms Ryan. I will be brief, because I know that time is of the essence. Amendments 42 and 43 are fairly straightforward, and seem to me to be a sensible and rational approach. Amendment 42 would require the Trade Remedies Authority to send an annual report to each of the devolved authorities; it is vital that we have those reports. Similarly, amendment 43 would require the Secretary of State to supply copies of the annual report to the Scottish Parliament, the Welsh Assembly and the Northern Ireland Assembly. In doing so, I hope that Ministers will also consider appearing, as they already do, before their Committees, particularly in relation to trade remedies. I cannot imagine why there would be opposition to that; it seems like an entirely sensible approach. I hope that the amendments will command support across the Committee.
Bill Esterson (Sefton Central) (Lab)
I will speak to amendments 24 and 25, which stand in my name and those of my hon. Friends. As the explanatory statement makes clear, the amendments would ensure that our Parliament is kept informed in a timely fashion about the work of the Trade Remedies Authority.
Parliament should be able to scrutinise the work of the TRA to ensure that it is working in the best interests of the UK economy and UK producers. Such requirements are nothing new in the realm of trade remedies. At European Union level, the Commission is obliged to report to the European Parliament and to give MEPs statistics on the cases opened and the number of measures adopted. Members of this Parliament should be given the same information from our TRA once it is up and running, so that they can scrutinise its work. MPs should be able to see how many cases have been initiated and measures adopted and so judge whether the TRA is taking measures to defend our industries or mostly putting consumer interests first at the expense of British producers, jobs and the regions.
Tom Reynolds of the British Ceramic Confederation pointed out that he would be more comfortable if there were a more rigorous approach for parliamentarians to get involved in the setting of the rules for the system. Just as in the rest of the Bill, the Government propose nothing in the schedule about parliamentary oversight or scrutiny of the TRA. Yet again, they want to make decisions that will have profound impacts on key sectors of British industry, thousands of jobs and many regions, behind closed doors and without any scrutiny or accountability to Parliament. The Minister and his colleagues might talk the talk on returning sovereignty to this Parliament, but when it comes to it, they once again fail to respect the very principles of parliamentary democracy.
Giving parliamentarians oversight powers over the work of the TRA will ensure proper scrutiny and accountability. A weak trade remedies regime is of benefit to nobody in our country. If anybody thinks that having a weak regime will open up trade opportunities with international partners, they are mistaken. Partner countries will take advantage of that, and we will once again see the loss of jobs, as we did in the steel sector in 2015 and 2016. It is only right that this House gets to scrutinise the work of the TRA to make sure that it is doing its job properly.
The Minister for Trade Policy (Greg Hands)
Welcome back to the Chair, Ms Ryan. May I start by congratulating the hon. Member for Livingston on redefining the term “moving an amendment”? She was actually in motion as she did it, so I commend her on her dexterity.
It is important that we create an independent and objective investigation process in which businesses and consumers will have full confidence, as I referred to previously. For this reason we are setting up the TRA as an arm’s length body with the appropriate degree of separation from the Department for International Trade. The Trade Bill requires the TRA to produce an annual report on the performance of its functions during each financial year. That must then be sent to the Secretary of State, who must lay the report before Parliament.
Let me deal with the four amendments. Amendments 42 and 43 are concerned with the sharing of the reports, requiring the TRA to submit annual reports on the performance of its functions to each devolved Administration, in addition to sharing copies with the Scottish Parliament, the Welsh Assembly and the Northern Ireland Assembly. Much as I strongly endorse our consulting with and involving devolved Administrations at all stages of this process, and expect the TRA to pay due heed to the devolved Administrations and to involve them as well, I must tell the hon. Lady that the amendments are unnecessary. The Bill already requires the Secretary of State to lay a copy of the TRA’s annual report before the UK Parliament, and at that point it will be a publicly available document for all to see right across the United Kingdom, including in Scotland, Wales and Northern Ireland.
Amendment 24 is on the annual report itself. The Bill already requires the annual report to be produced
“as soon as reasonably practicable after the end of the financial year to which it relates.”
The amendment, which seeks to impose an arbitrary fixed deadline for when the TRA is required to produce the report, is therefore also unnecessary. We are balancing giving the TRA a statutory requirement to produce the report on time, while recognising the importance of safeguarding operational flexibility, which is particularly important for a new organisation.
Amendment 25, on the investigation report, is interesting. I have referred a few times to the Taxation (Cross-border Trade) Bill, which is in Committee in another room. As laid out in that Bill, the TRA will be responsible for making recommendations on trade remedies cases to the Secretary of State. However, the amendment could lead to recommendations made by the TRA being released publicly before the Secretary of State has reached a final decision. Indeed, it is unlikely that the Secretary of State would make the decision in five days given the potential need to consult across Government. In my view, this could undermine the impartiality of trade remedies recommendations by increasing lobbying of Ministers by any parties affected by the TRA’s recommendations, be they producers, consumers or other stakeholders.
Faisal Rashid (Warrington South) (Lab)
Does the right hon. Gentleman agree that the amendment seeks a role for MPs that is akin to the role that MEPs have with regard to trade remedies?
Greg Hands
I thank the hon. Gentleman for that intervention. It is right that MPs have a role and that the TRA reports to Parliament. That is why the TRA publishes the annual report and is answerable to the Secretary of State, who is answerable to Parliament. Publishing the TRA’s recommendations before the Secretary of State has made the decision based on them is not a good idea, for reasons I will outline.
Barry Gardiner (Brent North) (Lab)
Does that explain why the Government were so backward in making representations to the US International Trade Commission with respect to Bombardier? The Minister said that it would be inappropriate to lobby such an organisation. Is it the Government’s position that it is inappropriate for lobbying to take place when a trade remedies authority is considering whether dumping has taken place or what remedies might be appropriate? Is that his approach to defending British industry when it faces trade defence measures abroad?
Greg Hands
The hon. Gentleman is confusing different processes. The British Government made extensive representations to the parties and the ITC during the investigation process in the United States. That is the key difference. Of course people will be expected to make representations during the investigation process in the UK, but my point was about publication of the TRA’s recommendations between the investigation process and the Secretary of State’s pronouncement.
In any case, I dispute the hon. Gentleman’s point. The UK Government have put in enormous efforts: my boss, the Secretary of State for International Trade, spoke at length with Wilbur Ross, and the Business Secretary also made representations. Very extensive and successful representations were made to US authorities, to Boeing and other companies, and to the US Administration.
Amendment 25 could lead to unnecessary disruption of the market in the key period between the TRA’s recommendations and the Secretary of State’s decision.
Greg Hands
Let me make a little more progress.
Amendment 25 could delay the Secretary of State’s decision. The evidence base for the TRA’s recommendations should be made available to the public after, not before, the Secretary of State accepts or rejects them, as required by World Trade Organisation agreement. That is the right time for the evidence base to be put in the public domain.
Barry Gardiner
It is only the one he deferred a few moments ago. I am grateful to the Minister, because he has engaged in debate and the Committee has been the better for it. However, he mentions the appropriate point for intervention. The American situation involved two decisions: the US Department of Commerce made an initial determination and then the US International Trade Commission had to look at whether any damage had been caused and recommend any appropriate charges. The situation was somewhat akin to a recommendation being made to the Secretary of State and the Secretary of State deciding what to do about it. There is a real parallel here that the Minister is denying. As I am sure he acknowledges, amendment 24 would not set an arbitrary deadline; it would ensure that the Secretary of State laid the report before Parliament in a timely fashion.
Greg Hands
May I end—again—by saying that I do not think it is right to make an exact comparison between the UK and US situations? As I said earlier, the design of the Trade Remedies Authority in the UK has been informed by international best practice, but it is fundamentally a different system. The right time for representations to be heard from businesses, consumers, MPs and other stakeholders is while evidence is being gathered, not between the TRA recommendation and the Secretary of State’s determination. On that basis, I ask the hon. Member for Livingston to withdraw amendment 42.
Question put, That the amendment be made.
Bill Esterson
I beg to move amendment 26, in clause 7, page 4, line 32, leave out subsection (1) and insert—
“(1) The Commissioners of Her Majesty’s Revenue and Customs may, by regulations, request any person to provide, or make provision authorising officers of Her Majesty’s Revenue and Customs to disclose, prescribed information for the purposes of assisting the Secretary of State to establish the number and identity of persons exporting goods and services from the United Kingdom”.
This would ensure that, where HMRC already has this information, it may be shared with the Secretary of State.
The Chair
With this, it will be convenient to discuss the following:
Amendment 27, in clause 7, page 4, line 38, at end insert—
“(2A) For the purposes of subsection (1) “prescribed information” means the names and addresses of persons who have exported goods covered by a prescribed code.”
This would ensure that the information to be collected pertains only to exports recognised as such for official purposes, in line with the Small Business Enterprise and Employment Act 2015.
Amendment 28, in clause 7, page 4, line 38, at end insert—
“(2A) For the purposes of subsection (2A) “prescribed code” means the commodity code or other identifier applied to a category of goods or services in connection with the preparation of statistics on exports from the United Kingdom (whether or not it is also applied for other purposes).”
This further qualifies what “prescribed information” means.
Amendment 29, in clause 7, page 5, line 3, at end insert—
“(3A) Regulations under subsection (1) may not make provision that could be made by regulations under section 10 of the Small Business Enterprise and Employment Act 2015.”
This would avoid duplication, in respect of the collection of information from exporters, with the Small Business Enterprise and Employment Act 2015.
Amendment 32, in clause 8, page 5, line 17, leave out from “trade” to end of line 19.
This would remove the power granted by the Bill to Her Majesty’s Revenue and Customs, or anyone acting on their behalf, to disclose information on United Kingdom exporters to any public and private body within or without the United Kingdom.
Bill Esterson
We recognise that it is essential to the efficient performance of the Department for International Trade and to the future delivery of trade policy that the Government have access to appropriate information about our imports and exports. We are also very aware of the impact on businesses, particularly small and medium-sized enterprises, of any increased burden in administration and mandatory reporting.
Clause 7 seeks to ensure that the Secretary of State may have access to such information, as collected by Her Majesty’s Revenue and Customs, that would establish the number and identity of exporters. What exactly the information is that will be required is not disclosed and the clause does not limit HMRC in terms of what information may be sought, only setting out that the information may be used for
“the purpose of assisting the Secretary of State”
in his endeavour. HMRC could, in theory, use the power to request significant volumes of information that might be subsequently determined not to be needed for the purpose of assisting the Secretary of State, but that none the less requires disclosure under this provision.
This is not a trivial matter. Businesses and business organisations have expressed their concern about the provision, because much of this information is already collected by HMRC and businesses do not want to have to provide it more than once, because of the time that that would require and the impact it would have on their day-to-day operation.
That prompts the question of why powers must be awarded that would replicate that which is already being done. If existing legislation does not provide for the Secretary of State to access this data, one may very well understand the need to stipulate that such information may be shared with his Department. However, if such information exists already, the burden should not be put on businesses to furnish the same information in a different format, simply because of a failure to collate the information that is already in the possession of Government Departments or agencies.
That is why we tabled amendment 26, which would allow the Commissioners for Revenue and Customs to authorise their officers to disclose such information to the Secretary of State for the purposes described in the Bill, and amendment 29, which would prevent the potential creation of duplicate or conflicting regulations.
Amendment 29 recognises that section 10 of the Small Business, Enterprise and Employment Act 2015 contains provisions on the disclosure of exporter information by HMRC. SMEs are, after all, the backbone of our economy and we should encourage them to increase exports and not bog them down with tax forms and administration that may put some businesses off exporting.
Currently, much of the information is contained in the various documents and forms that must already be furnished to HMRC. For example, there is mandatory Intrastat reporting, which requires goods exporters to submit on a monthly basis details of goods and exports within the European Union, subject to minimum annual thresholds. Of course, that measure is enforceable by the European Union, but perhaps the Minister will confirm whether it will continue to be enforceable under the terms of the European Union (Withdrawal) Bill. I imagine a note will wing its way to him about that shortly. [Interruption.] He already knows—impressive. There is always a first time.
Similarly, VAT-registered exporters are required to supply HMRC with EC sales lists that detail their EU customers, the respective country codes and the value of goods supplied to them. On top of that, customs declarations must be made that record product codes, transport modes, duties levied and other relevant information for the purposes of accumulating information on the number and identity of exporters.
The much-trumpeted new customs declaration service will allegedly be operating by March 2019. Will the Government be incorporating this reporting requirement into it, or will additional systems be needed? In other words, how does the Minister intend to avoid duplication? HMRC has already acknowledged that there is a risk that the new customs declaration service is unlikely to be in place by exit day, so it will be phased in, which will result in limited functionality and scope when launched. That prompts the question about whether the new customs declaration service will be geared up in time for the reporting requirements of the Bill. Will the Government consider additional resources for HMRC to carry out additional duties for all these additional reporting requirements?
Our amendments recognise that where such information may not otherwise be available, regulations may be passed to require other persons to disclose it. However, the Government must clarify whom the Commissioners for Revenue and Customs may so instruct. The provision is extremely vague and potentially awards sweeping powers to HMRC to request information from persons entirely unconnected to an exporter or indeed trusted agents and advisers who might otherwise be bound by a duty of confidentiality.
Clearly, as some of our witnesses suggested, many existing reporting obligations are applicable to the export of goods rather than services. That gap needs to be addressed. Unlike goods exports, which have commodity codes for export purposes, there are not the same proper definitions and appropriate attributable codes for services, which means that it is difficult to determine when a service becomes an export. If the Minister does not have the full detail on that, I will not be entirely surprised, but perhaps it is something for his officials to persist with. The service exports to which these provisions will apply must be qualified, particularly as the definition of what constitutes a service may be vague. Many businesses have significant group operations and may provide services between subsidiaries, which would be treated as intra-group charges. Do the Government intend to inflate service export figures by including those details?
Amendments 27 and 28 are designed to prevent services that should not or would not be considered to be exports from being considered such by requiring that only exports with appropriate codes and identifiers can be considered for those purposes; that includes new codes where needed. However, we also recognise and welcome efforts by HMRC to tackle abusive transfer pricing and aggressive tax planning. Can the Minister tell us whether HMRC will use that information for such purposes in addition?
Greg Hands
I thank the hon. Gentleman for his set of questions, which I will answer as far as I can. Let me start with why we need the data collection and sharing powers.
It is important that the Government have a more comprehensive understanding of UK exporters. The powers will allow the Trade Remedies Authority to fulfil its function by using full and proper data on the UK business population. They will also equip my Department with robust data to develop trade plans globally, and help us better to understand the impact of future trade agreements and policies so that we can direct our resources appropriately. Ultimately, that will provide better value for money for the taxpayer by enabling more targeted approaches to Government intervention and support for existing and potential exporters.
Clause 8 sets out the powers necessary for HMRC to share the data with the Department for International Trade and other Departments and organisations, for those bodies to carry out their public functions related to trade. I will come to the points raised by the hon. Gentleman in a moment, but those powers need to be wide enough to be able to withstand future institutional developments, so the clause will also allow HMRC to share the data with, for example: other bodies that DIT sets up to cover specific functions, such as the Trade Remedies Authority; bodies that carry out a public trade function, to ensure that the UK is able to put in place and maintain an independent trade policy as we leave the EU; and bodies outside the United Kingdom, such as the World Trade Organisation, with which the UK will be obligated to share data as part of our international obligations. That is currently done through the European Union; there is no change to the effect of that provision.
Amendment 32 would restrict the Government’s ability to take on functions related to trade formerly carried out by the European Commission, such as those related to trade remedies. You will know, Ms Ryan, that the European Commission currently does trade remedies investigations, a lot of which are data-driven. The amendment would hinder our ability to take such a data-driven approach ourselves.
Amendment 26 duplicates in clause 7 the necessary data sharing powers already set out in clause 8. Looking ahead to this country leaving the European Union, the amendment’s requirement to seek HMRC commissioner approval before any data is shared would also restrict the Government’s ability to share data at speed. It may be necessary, for example, to share data with the Trade Remedies Authority quickly or immediately when dealing with a trade defence case. I would not want the Trade Remedies Authority to be prevented from taking urgent action—sharing data about an important trade remedy quickly and efficiently, for example—in relation to a sector such as steel or ceramics because the Opposition had imposed an artificial delaying power with their requirement to seek HMRC commissioner approval before any data is shared.
Faisal Rashid
I understand what the Minister says about speed and things that have to be done, but many businesses, particularly small businesses, often struggle to stay on top of their reporting and administration requirements. There is a risk that any increased burden on them could put them off exporting. How do the Government intend to collect this information while ensuring that they do not place an unfair burden on small businesses?
Greg Hands
First, in the long run, small businesses will benefit from the Government being informed by a full set of data on the exporter community. It is difficult for the Government to set policy in relation to exporters without having a full picture of how many exporters there are and in which sectors. In the medium to long run, our ability to collect that data would help small businesses considerably. Secondly, the provision of that data will of course be voluntary. If a small business did not want to participate, for whatever reason, it would not be compelled to do so. It is very important to recognise that.
Anna McMorrin
What does the Minister intend to do with the information that is collected? Also, what international bodies do the Government believe that information—much of which may be commercially sensitive —should be shared with, and why should they require such data?
Greg Hands
On the international bodies, I refer the hon. Lady particularly to the WTO, with which we are actually obliged to share a lot of that data. Much of that data sharing is currently done through the EU, but once we are outside the EU we will be obliged to share that data with the WTO on a stand-alone basis. Domestically, sharing a lot of the data with the Trade Remedies Authority will enable it to be well informed as it looks at the impact of alleged dumping on UK domestic industry, which is, after all, the purpose of the TRA.
I will take an intervention from the hon. Member for Warwick and Leamington. [Interruption.] Oh, he had the same intervention.
Greg Hands
It is good to see people thinking similarly. Sharing data quickly and immediately may be necessary for, as I say, the TRA dealing with a trade defence case, or where data is immediately required in a fast-moving future trade agreement negotiation.
Clause 7 sets out the powers needed for the Government to collect data to establish the number and identity of UK businesses exporting goods and services. Amendments 26, 27 and 28 would narrow the ability of the Government, both now and in the future, to determine what data we wish to collect and how we may collect it. The Government should retain the ability to determine in the future what relevant trade information they may need to request from businesses, although I stress that providing that information is voluntary. At this time, we are not able to anticipate precisely what those needs will be.
On some of the individual points, I think the hon. Member for Sefton Central claimed that HMRC is unrestricted in what data it can source. I stress that the power in the Bill is to request information. The Treasury will specify what information will be requested, and will do so by regulations that will come before Parliament. There is no obligation on businesses to provide that information, although we say, and strongly believe, that it is in their interests to do so, to help to inform the Government’s export policy.
On additional resources at HMRC, I rather feel that that might be a debate for another day in another place. However, the resources given to HMRC post Brexit to deal with Brexit are already there. Various announcements have been made by the Chancellor of the Exchequer and the Chief Secretary to the Treasury over the last 18 months on that. I point out that the power has been assessed and its likely cost looked at. It has been deemed to be relatively inexpensive and overall will not add a cost burden on HMRC.
On inflating exporter numbers, I do not think that that would be accurate. The hon. Gentleman seems to think that there is some kind of Government plot to artificially boost the number of exporters, so that we can suddenly say what a great job we have done because the number has gone up. No—the purpose of collecting the data is to have an accurate picture of the number of exporters. For example, we know there are 5.7 million private sector businesses in the UK. HMRC collects export data from 1.9 million VAT-registered businesses. There are 2.2 million VAT-registered businesses in the UK. We therefore think that the Government do not collect any export data from about 4 million UK businesses. That is what we want to do. Our analysis suggests about 300,000 businesses in the UK could and should export but do not do so. The key is to find where those businesses are and encourage them to export, so that the UK does a much better job on exports.
The hon. Gentleman asked whether Intrastat will continue. When the UK leaves the EU, Intrastat will not be applicable for exports and will not continue in this case. Finally, there were questions relating to the interaction with the Small Business, Enterprise and Employment Act 2015. Similar to my response to amendments 26 to 28, the Government should retain the ability to determine in the future what relevant trade information they may need to request from businesses. At this time, we are not able to anticipate that precisely, but I have given some indication of the sort of areas we might look at and what all those needs would be.
Amendment 29 refers to powers in section 10 of the 2015 Act. Those powers relate to disclosure of existing exporter information by HMRC officials and therefore are not directly relevant to the powers in clause 7 relating to the collection of data. In other words, it is different data. Bearing all of this in mind, I ask the hon. Members not to press their amendment.
Bill Esterson
I thank the Minister for his answers. I was puzzled by one thing. Why does the Bill not specify that the data would be for sharing with the Trade Remedies Authority if that is the primary purpose in collecting it at this point? He says there will be other organisations, but it is a bit odd that the Bill does not say as much.
Our concern—a concern that comes from business—is about giving HMRC the power to request. That is an interesting phrase. Anyone who has had any dealings with HMRC as a business tends to experience that as a fairly strong power to request. If we asked most people who run businesses, they would say it is a bit more than a power to request; they interpret it as not having any choice in the matter. That is one of our big concerns, and I hope the Minister will take that on board.
The Minister made the point that this is about the medium to long run and there will be improvements for smaller firms over that period. By implication, that leaves out the short term. I would welcome a brief intervention to confirm the implication I gathered from what he said—that there may be a hit or an increase in the demands and burdens on smaller firms while the new system is settling down. I will give way to him if that is what he thinks is going to happen.
Greg Hands
I thank the hon. Gentleman for allowing me to intervene. I do not accept that there will be an increase in the burdens for anybody involved in this process, because it is a voluntary and essentially very limited process. I would say to him that the data could be extremely helpful in informing Government policy, and that is why he should withdraw his amendment.
Bill Esterson
I am grateful for that clarification. We are keen to avoid unnecessary reporting requirements and an adverse impact, especially on smaller firms, as this country needs them to do well in trade and exports. We are supportive of the right approach and the right level of data collection in achieving such an objective. In that spirit, I will not press amendments 26 to 28. We will press amendment 29 to a vote because we still think it is important to avoid the duplication of powers in the 2015 Act. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Amendment proposed: 29, in clause 7, page 5, line 3, at end insert—
“(3A) Regulations under subsection (1) may not make provision that could be made by regulations under section 10 of the Small Business Enterprise and Employment Act 2015.”—(Bill Esterson.)
This would avoid duplication, in respect of the collection of information from exporters, with the Small Business Enterprise and Employment Act 2015.
Question put, That the amendment be made.
Bill Esterson
I beg to move amendment 30, in clause 7, page 5, line 4, leave out subsections (4) and (5).
This would remove the Henry VIII power allowing for the modification of an Act of Parliament in respect of the collection of exporter information.
The Chair
With this it will be convenient to discuss amendment 31, in clause 7, page 5, line 10, leave out subsection (6) and insert—
“(6) Any statutory instrument containing regulations under subsection (3) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.”
This would require Treasury regulations that make provision for exporters to supply information on their exports of goods or services to be subject to the affirmative resolution procedure.
Bill Esterson
The amendments would remove yet more Henry VIII powers, this time bestowed on Her Majesty’s Revenue and Customs and allowing for regulations to be made that may modify primary legislation. Using the powers, HMRC may change the nature of the information being sought under the regulations and the persons from whom such information may be requested, such that the resultant requirements on business may ultimately be substantially different from the scope implied under the clause. We are entirely opposed to the use of Henry VIII powers, as we have repeatedly said, and we do not believe it appropriate that any agent of Government has the powers to amend primary legislation by way of secondary legislation.
Amendment 31 would ensure that any regulation to which clause 7 applied must be subject to the affirmative procedure in this House, giving Parliament the proper opportunity to scrutinise any changes. There can be no good reason for allowing Henry VIII powers or the negative procedure to be used in those circumstances. I mentioned in my speech on the previous group of amendments the Small Business, Enterprise and Employment Act 2015 but it is worth drawing the Committee’s attention to section 10 of that Act, in particular subsection (6), where such regulations are subject to the affirmative procedure. Logic and consistency might suggest that that would be appropriate in this Bill too. Perhaps the Minister will explain why that was appropriate in the 2015 Act but is not in this one, despite the similar circumstances. In advance of the 2015 Act, HMRC published an explanatory memorandum on the use of the powers, noting that such information could well be sensitive and thus recognising a need to limit the scope of the information collected and subsequently shared:
“This is deliberately tightly drawn and specifies the categories of information that may be disclosed under the regulations, and is limited to less sensitive but nonetheless useful information.”
That brings us to amendment 32, which would remove HMRC’s power to share the information freely with other bodies or institutions, whether in the United Kingdom or overseas. We recognise the need to accumulate comprehensive statistics. We are mindful of the evidence from our witnesses, Professor Alan Winters of the UK Trade Policy Observatory and Anastassia Beliakova of the British Chambers of Commerce, both of whom called for the greater sharing of information. However, that is not the same as calling for the sharing of commercially sensitive information. In the light of HMRC’s explanatory memorandum to the 2015 Act, such sharing must be subject to limitations to prevent sensitive information from being shared freely.
The Chair
Order. We debated amendment 32 under the previous group of amendments and are now debating amendments 30 and 31. The hon. Gentleman needs to confine himself to comments on those amendments. I hope that is helpful.
Bill Esterson
Thank you for bringing me back on track, Ms Ryan.
I trust that the Committee recognises the impact that poor application of those powers might have on businesses. It may even result in entirely opposite outcomes to those intended. I look forward to hearing the Minister’s response to such concerns. I hope that he will address my questions about how some of the powers will be exercised and what measures will be put in place to protect our exporters.
Greg Hands
The clause sets out the powers that will enable the Government to establish for the first time ever the number and identity of UK businesses exporting goods and services. HMRC currently collects export data from approximately 70% of the 2.2 million businesses that are registered for VAT. As I said earlier, there are 5.7 million private sector businesses in the UK. That means we do not collect export data from about 4 million businesses. Our data does not include certain sectors, smaller enterprises and many exporters of services.
Why is it important that the Government have a more comprehensive understanding of UK exporters? First, the information will allow the Trade Remedies Authority to fulfil its function using full and proper data on the UK business population. Secondly, it will equip my Department with robust data to develop trade plans globally and will help us better to understand the impact of future trade agreements and policies in order to direct our resources appropriately. Ultimately, it will all provide better value for money for the taxpayer by enabling more targeted approaches to Government intervention and support for existing and potential exporters.
We are not able to anticipate all the data that we might need in future, including for those functions that I have just described to the hon. Gentleman. It is therefore vital that we retain the ability to specify the type of information to collect now and in the future to ensure that the Government are able to discharge fully all relevant trade functions.
Should amendment 30 be passed, it would not be possible to collect trade data through the tax return. We do not know whether the collection of such currently unknown data might, for example, require the modification of an Act of Parliament. I confirm to the hon. Gentleman that at such time as the Government specify what information we wish to collect and how we will collect it, we will return to this House, as is already set out in clause 7(5). I also assure him that any information collected and the way we request it will be done in such a way as to cause minimal cost to Government and business. I therefore ask him to withdraw his amendment.
Bill Esterson
I wish to press the amendment to a vote.
Question put, That the amendment be made.
Alan Brown (Kilmarnock and Loudoun) (SNP)
I beg to move, That the clause be read a Second time.
It is a pleasure to serve under your chairmanship again, Ms Ryan. The good news at this stage is that there are fewer notes written in advance—the Committee might be quite relieved about that. New clause 3 was originally drafted by colleagues from Plaid Cymru, and my hon. Friend the hon. Member for Livingston and I were more than happy to add our names in support. Actually, we have been completely vindicated on that given how events have panned out today. There have been no concessions to any Scottish Government or Welsh Government amendments. The Government voted down the Labour amendment that would have allowed impact analysis to be undertaken and at least understood. They have excluded any provisions for devolved authorities to be involved in the Trade Remedies Authority.
The new clause is quite simple: it seeks to propose a sub-committee of the Joint Ministerial Committee, to look at effects in the devolved nations of any international trade agreement implemented by the powers in the Bill. It is simple, effective and it does not create a whole new body, because it just creates a sub-committee of the existing JMC. In terms of administration, it should not be excessive, and so I ask members of the Committee to support the new clause.
Greg Hands
I can be brief. The Government have made it clear that they seek to maintain the effects of the UK’s existing trade agreements. We make this commitment in relation to all parts of the United Kingdom, which means that we do not intend Scotland, Wales, Northern Ireland, or indeed England, to be disproportionately impacted by our transitioning of these agreements. As we have committed to seeking continuity in the effects of existing agreements, the impact of the transition should be neutral on all parts of the UK.
In relation to consultation with the devolved Administrations, as we have laid out frequently on Second Reading and in Committee, the Department for International Trade ensures that each of its Ministers, as well as directors and other senior officials, visit the devolved Administrations regularly and continually look for further opportunities to engage with a range of stakeholders across the UK.
Hannah Bardell
The Minister will forgive me if I find his comments somewhat ironic given what has been in the press over the last couple of days about impact assessments. Does it not seem reasonable that the Joint Ministerial Committee—which, as my hon. Friend says, is already in place—should have a sub-committee? He may think that as things stand there may not be an impact on the devolved nations, but I am sure that, like the rest of us, he does not have a crystal ball. Would it not make sense to put into legislation the ability for the devolved nations to have a sub-committee of the JMC to make it the best possible legislation that it can be?
Greg Hands
I accept the hon. Lady’s intervention, and she makes a case, but my point is that it is not necessary to have the review. These are existing agreements that, in a huge number of cases, are already in place. Some have been in place for a long time. The hon. Member for Kilmarnock and Loudoun says that an additional review process will be simple and effective, but I am not quite so sure. For example, the amendment makes neither reference to the intended product of such a review—how the review process would work—nor to the continued role of the devolved Administrations in the review after it has been reported.
I think it is much better that we stick with our position of consulting frequently and engaging with the devolved Administrations, without an extra review of agreements that are already in place. We have been clear that we will continue to engage with the devolved Administrations as we transition these agreements, therefore we do not need to commit this kind of review to legislation. I therefore ask the hon. Gentleman to withdraw the clause.
Barry Gardiner
It is appropriate to once again read out the long title of the Bill:
“To make provision about the implementation of international trade agreements”.
Everything that the Minister is saying ignores that the scope of the Bill precisely admits that we should be able to put into statute the procedure that the hon. Members for Livingston and for Kilmarnock and Loudoun have suggested.
The Minister has told the Committee that the Government
“will continue to engage with the devolved Administrations as we transition our current agreements”
and that:
“The Department for International Trade engages regularly with the devolved Administrations”.––[Official Report, Trade Public Bill Committee, 25 January 2018; c. 128.]
It is therefore surprising that the Government have not proposed any formal engagement procedure to ensure a statutory footing for consultation on the issues presented by the Bill—particularly given the Government’s approach to consultation thus far, which has been little more than lip service and press releases. An example of that was when the consultation for the Bill closed on 6 November and the Bill was published a few hours later on the morning of 7 November.
Modern trade agreements have extensive coverage, with chapters setting out substantial provisions in a range of areas, many of which might well be considered to touch upon matters that otherwise would be within the competence of the devolved authorities. We have gone over this ground in previous sittings, when we considered how trade agreements impact on our fishing industry, food standards, services regulation, agriculture, public services, procurement and so on. The day-to-day oversight and administration thereof may be wholly within aspects of devolved competence; however, the obligations that arise from a trade agreement might require changes to the way that those matters are managed. A question might then arise regarding when such a matter ceases to be a trade matter within the exclusive competence of the UK and becomes a matter within the competence of the respective devolved Administration.
That is why many other countries have set out formal consultation frameworks with their own constituent administrations, which may also have a degree of devolved competence. Indeed, the United States has such an engagement process to ensure that state-level representations can be fed into the negotiating process—albeit it is a process that is subject to controversy in various states that have sought to implement a much more robust consultation process, and have derailed the extension of the fast-track trade negotiating authority.
Canada has a similar process in order to ensure that, once an agreement has been concluded using the federal Government’s exclusive competence, it does not come unstuck at implementation stage. In his response to questions about the need for stakeholder engagement as early as possible in trade negotiations, our witness, Nick Ashton-Hart, noted that
“the political economy demands that you have the backing, as a negotiator, at home when you are sitting across the table from your counterparties and that they know that you have that…People know that you have to get to a sustainable deal also, and sometimes you have to do a concession at the right time to solve a problem in a domestic constituency for your counterparty”.––[Official Report, Trade Public Bill Committee, 23 January 2018; c. 10, Q12.]
The hon. Member for Kilmarnock and Loudoun touched on the concerns raised by another of our witnesses, Professor Winters of the UK Trade Policy Observatory, who noted that we cannot have a situation in which a trade agreement might be unpicked once it had been concluded. Therefore, he said,
“Parliament and the devolved Administrations need to have an important role in setting mandates, and there need to be consultation and information during the process.”—[Official Report, Trade Public Bill Committee, 23 January 2018; c. 58, Q111.]
The United Kingdom is clearly not unique in facing this matter; that is also the experience of other countries, many of which the Secretary of State is alleged to have identified as prospective gold trading partners. Those very countries may well wish to see a similar framework formally constituted in the UK before we come to the negotiating table. The European Union levelled that request at Canada prior to commencing negotiations on the comprehensive economic and trade agreement. The JMC appears to be an entirely appropriate forum for such consultation in the UK’s case. It would provide us with an off-the-shelf committee with the express purpose of seeking to avoid such complications.
The memorandum of understanding between the UK and the devolved Administrations notes that the four respective Administrations agreed
“to alert each other as soon as practicable to relevant developments within their areas of responsibility, wherever possible, prior to publication”—
of course, the GPA, which the Minister did not refer to, is one such case that is quite specifically about implementation within the devolved Administrations’ competence—
“to give appropriate consideration to the views of the other administrations; and…to establish where appropriate arrangements that allow for policies for which responsibility is shared to be drawn up and developed jointly between the administrations.”
Furthermore, in recognition that a commitment to engage may not be sufficient in certain cases, the memorandum of understanding sets out provisions for a formal consultation framework to ensure that engagement on such matters is more than just lip service.
Acknowledging that there will, of course, be matters relating to international issues that will touch on devolved matters, the memorandum of understanding requires the fullest possible engagement on such matters and sets out the framework for the Joint Ministerial Committee. Its terms of reference are
“to consider non-devolved matters which impinge on devolved responsibilities, and devolved matters which impinge on non-devolved responsibilities…where the UK Government and the devolved administrations so agree, to consider devolved matters if it is beneficial to discuss their respective treatment in the different parts of the United Kingdom…to keep the arrangements for liaison between the UK Government and the devolved administrations under review; and…to consider disputes between the administrations.”
The Government could have considered their own appropriate framework or forum for a proper consultation process with the devolved authorities and other key stakeholders in advance of beginning trade negotiations. The Secretary of State has, for example, reconvened the Board of Trade, of which he has appointed himself the president. Of course, for the Board of Trade to be effective, it would likely require significant expansion of its membership. Currently, I believe it has the sum total of one person—namely, the Secretary of State himself.
The creation of a formal consultation forum is essential before and during the negotiating process. In that respect, we will support the new clause. Of course, I wish to draw the Committee’s attention to our new clause 11—I hope it will be considered in a later sitting—which seeks to ensure that the JMC is convened for all trade agreements, including new trade agreements that correspond to existing EU agreements.
I hope that Government Members recognise from the Committee’s deliberations that this Bill contains a serious threat to the powers of the devolved Administrations, and that the installation of an appropriate consultation procedure to address such matters will assist Ministers in concluding agreements. Although this amendment seeks to mitigate any complications that might present at implementation stage after an agreement has been concluded, the Bill still fails to address the very serious concerns about the dilution of the devolved authorities’ powers in matters that may be considered within their devolved competence. In that respect, I ask the Government to address this matter either by supporting the new clause or by way of their own amendments to the Bill before it proceeds, with such amendments making clear that powers afforded to Ministers of the Crown under the Bill will not, and cannot, be used to undermine the rights and powers of the devolved Governments. If the Government do not seek to do that before the Bill progresses to its next stage, I assure the Minister that the Opposition will.
Greg Hands
Very briefly, in response to that long speech I have only three points to make. First, there is no serious threat to the devolved Administrations. What we are talking about is the transition of existing free trade agreements. The hon. Gentleman’s points—his parallels with the United States and so on—seemed to relate entirely to future trade agreements and not to the continuity of existing trade agreements. I also point out to him that the Secretary of State for International Trade has not appointed himself President of the Board of Trade. The Prime Minister has appointed him President of the Board of Trade.
Most importantly, the Bill is all about continuity and the technical transition of existing free trade agreements. The hon. Gentleman’s points seem to relate to future trade agreements, which will be a matter for another day.
Alan Brown
I take on board what the Minister says and know that logically it is correct in theory: this is just the roll-over of existing EU agreements into UK law. However, as the hon. Member for Brent North said, and as we heard from witnesses, there is still a risk that, even in trying to move over existing agreements, some matters come up for renegotiation. It is not crystal clear how matters will pan out and the new clause would at least give the protection of full analysis of the impact on the devolved nations in terms of any adjustments that end up happening in due process when we move over the existing agreements.
We have previously expressed our concerns about the UK Government getting competency in devolved matters, and the new clause would wrap up that aspect. For that reason, I will press the new clause to a vote.
Question put, That the clause be read a Second time.
Judith Cummins (Bradford South) (Lab)
I beg to move, that the clause be read a Second time.
The new clause calls for a process of review to examine the operation and impacts of all free trade agreements to which the Bill applies. Once again, let me make it clear that this applies to those comprehensive free trade agreements that are notifiable under GATT article XXIV and GATS article V. It does not apply to the many other trade agreements that fall under the undefined category of clause 2(2)(b).
We have already pressed for sustainability impact assessments to be conducted in advance of the start of negotiations towards those future UK free trade agreements that do not have a corresponding EU agreement. The new clause calls for there to be a parallel process of review after our free trade agreements have been in force for 10 years, and subsequent reviews every 10 years thereafter, which is essential to see how the agreements have worked and their effects. It will apply to all free trade agreements that fall within the scope of the Bill.
The call for regular reviews mirrors our earlier call for sustainability impact assessments in respect of the sectors to be covered, which would be a full disaggregation of the economic and social impacts of each free trade agreement, including the various regional impacts in different parts of the UK, as well as the impact on human rights, the environment, animal welfare and the interests of developing countries. Although the sustainability impact assessments to be carried out prior to new negotiations are ex ante, the reviews should represent a parallel process as far as possible ex post.
We have resisted the call from some quarters to require the reviews to take place every five years. Although we are keen to ensure regular monitoring of the impacts of any free trade agreements, we believe it will be more effective, given their reach and potential long-term consequences, to undertake fully comprehensive reviews less frequently, although the new clause provides for the option of holding earlier reviews when there is obvious social or economic harm as a result of a particular agreement.
The UK has an opportunity to establish best practice when it comes to the evaluation of international trade agreements. The EU produces annual reports on the workings of free trade agreements and can mandate a specific focus where there are particular concerns. For instance, the EU-Korea free trade agreement requires its annual monitoring reports to focus on sensitive sectors in addition to the standard implementation review. The EU also commissions more comprehensive external evaluations on a less regular basis—a major evaluation of the same EU-Korea free trade agreement is currently being conducted by two independent German institutes. It is examining a wide range of economic, social and environmental impacts of the agreement, including its impact on developing countries.
In addition, many countries have subjected their bilateral investment treaties to a thoroughgoing review in light of problems encountered as a result of the inclusion of investor-state dispute settlement clauses in previous treaties. Those reviews have led a number of Governments to question their previous agreements and in some cases to introduce radical alterations to the investment protection regime. Bilateral investment treaties have typically been subject to fixed terms of duration, after which it is possible to terminate them unilaterally, with reduced notice.
The Government will appreciate the wisdom of setting up a longitudinal system so that we can learn from the experience of our free trade agreements. Setting up such a system at the moment when the UK once again reclaims responsibility for trade policy will allow us to build a comprehensive set of data through which to register what has worked best and what still needs to be improved.
Hannah Bardell
I commend the hon. Lady on an excellent speech and an excellent new clause. Given the mess that the Government have got themselves in over impact assessments—it is making headline news around the world and we are becoming an international embarrassment as a result—does she agree that putting it in legislation that Governments of whatever colour must make proper impact assessments relating to whatever trade deals they have now or in future is absolutely vital?
Judith Cummins
I wholeheartedly agree with the hon. Lady that this is a straightforward example of best practice. We have a unique opportunity to get this right from the outset, and our new clause would allow us to do just that.
Greg Hands
The trade White Paper stated that our future trade policy would be transparent and inclusive, and we are committed to working with Parliament and the wider public to ensure that that is the case. It is important that the potential effects of trade agreements are considered as part of our trade policy, which is why the Government already conduct impact assessments on EU trade agreements where appropriate. However, it is not appropriate to legislate for that requirement in this Bill, which deals only with our existing trade arrangements.
I have to say that the new clause is not particularly well thought through. It calls for a review on each of the 40-plus agreements not just once, but twice. In 10 years —renewable in 20 years—there could be 80 or more reviews of these agreements, most of which are already in operation. Come 2039, the new clause might entail the Government conducting a review of an agreement that by then would already have been in place for 40 years. Therefore, the new clause should be withdrawn; it is not necessary.
Judith Cummins
I am struck by how limited the Minister’s ambition is for the UK. As I said in my speech, we have a unique opportunity to get this right and therefore I will press the new clause to a vote.
Question put, That the clause be read a Second time.
Alan Brown
I beg to move, That the clause be read a Second time.
The new clause is about how the Bill will be managed through the transitional period upon leaving the EU. To date, the Government have not clarified how a transitional period will affect the various legislation related to the UK’s withdrawal from the EU. To be fair to the Government, there is an obvious reason why they have not clarified that: as yet, there are no arrangements in place in terms of a transitional agreement, so they do not know what form a transitional period will take, how long it will be or if there will actually be one.
Assuming that the extreme Tory Brexit is averted and a deal concluded with the EU that includes an agreement on a transitional period, the new clause requires the Secretary of State to lay a report before Parliament ahead of the UK’s EU withdrawal on the application of this Bill during such a transitional period. The Minister might argue that the Bill relates only to existing EU agreements and to bringing legislation over. There have already been discussions about what happens if deals are signed but not ratified or further deals come on board with the EU. Those matters might need to be considered in terms of a transitional period, because they all relate to the terms of that period. This new clause aims to ensure that Parliament fully understands the impact of the transitional period and how the legislation will work.
Greg Hands
I am surprised that the official Opposition do not have anything to say to this clause. I thought that they took quite an interest in the application of the implementation period, but it appears not.
In any case, new clause 9 would require the Government to report to Parliament on how the Bill will be applied during the implementation period. I recognise the desire for clarity on how an implementation period will work and, specifically, how the powers in the Bill will be used in that period.
Irrespective of the exact terms of the implementation period, which need to be negotiated with the EU, as it stands the UK will no longer be part of existing EU FTAs or the government procurement agreement on leaving the EU. We will need the powers in the Bill to ensure continuity in our trading arrangements.
I also recognise the desire for clarity specifically on how trade remedies will work during an implementation period. We want to provide continuity to British industries, including retaining meaningful access to trade remedies.
Parliament will have plenty of opportunity to scrutinise an agreement between the UK and the EU, including on an implementation period. We have already committed to a vote on the final deal, and major policies in the withdrawal agreement will be enacted through primary legislation in the form of the withdrawal agreement and implementation Bill. I therefore ask the hon. Member for Kilmarnock and Loudoun to withdraw his new clause.
Barry Gardiner
The idea that the official Opposition have nothing to say on the matter is entirely wrong, but we have little to say because we agree with the new clause that is being proposed. We believe that it is eminently sensible. We are entering into a transition period, and it is right that Parliament should be brought up to date with what the Government’s intentions are. The new clause would do that. It is perfectly sensible.
Alan Brown
I listened to the Minister, who says that there will be lots of opportunity to debate the implementation period elsewhere and that, ultimately, we will have the take-it-or-leave-it vote in Parliament, but I would rather have security on these matters in the Bill. For that reason, I will press the new clause to a vote.
Question put, That the clause be read a Second time.
Trade Bill (Eighth sitting)
Thursday 1st February 2018
(7 years, 9 months ago)
Public Bill CommitteesTrade Bill 2017-19 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 1 February 2018 - (1 Feb 2018)
The Committee divided: - Ayes: 8 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 6 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 5 / Noes: 9 - Question accordingly negatived.
The Chair
We resume line-by-line consideration of the Bill. Proceedings must finish by 2 pm. The selection list for the sitting is available in the room.
New Clause 10
HMRC: impact
“No later than 12 months after this Act has come into force, the Secretary of State shall lay a report before Parliament on the impact of the provisions of sections 7 and 8 of this Act on the expenditure and staffing of HMRC.”—(Alan Brown.)
This new clause would require the Secretary of State to lay a report before Parliament on the impact of Part 3 of this Act on the expenditure and staffing of HMRC.
Brought up, and read the First time.
Alan Brown (Kilmarnock and Loudoun) (SNP)
I beg to move, That the clause be read a Second time.
It is a pleasure to serve under your chairmanship, Mr Davies. I will try to assist the Committee with concluding proceedings before 2 pm.
The new clause is all about the Bill’s impact on Her Majesty’s Revenue and Customs. The history so far is that, instead of taking back control, the Brexit process appears to be an interdepartmental bun fight for resources, both cash and human. Right now, there is a Brexit gravy train for consultants, and experts are suddenly back in demand. That was confirmed by the Chancellor, when in the autumn Budget he allocated a further £3 billion over the next two years to Brexit preparations.
Brexit will cause an unprecedented rise in workload for HMRC, whatever customs and tariff arrangements are made. In addition, goods traded with the EU will need to be accounted for as international exports. That is all happening at a time when, as all Members know, the Tory Government are slashing staff and closing HMRC offices across the nations of the UK.
At the same time, HMRC is launching a new customs declaration service, starting in August 2018, with the intention that it will be implemented in full by January 2019. That will replace the customs handling of import and export freight system, which is nearly 25 years old and cannot be easily adapted to new requirements. I think everyone on the Committee will be cynical about that—who has ever heard of a massive IT project that goes live on time and is easily adaptable to suit future processes?
There are serious concerns about whether the system can be put in place properly just a few months before Brexit, given that customs declarations are expected to more than triple once the UK leaves the EU. The National Audit Office has said that the number of customs declarations could increase from 55 million to 255 million if tax and duties must be collected on trade between the UK and EU.
Hannah Bardell (Livingston) (SNP)
My hon. Friend is making an excellent speech. Does he agree that what we have seen across the UK, including from the National Audit Office and the Public Accounts Committee, is huge criticism of the UK Government’s change programme? In my constituency, they want to centralise the Livingston HMRC office to Edinburgh. There will be a devastating impact on communities and the continuity of services will be impacted just a moment before these other plans take place. The Government should rethink the process wholesale.
Alan Brown
It will come as no surprise that I completely agree with my hon. Friend. The closing of HMRC offices is yet another example of the left hand not knowing what the right hand is doing and of a complete lack of strategic thinking.
Jon Thompson, the chief executive of HMRC, has warned that border and tax checks post-Brexit could require an additional 5,000 staff, with new customs checks costing the taxpayer up to £800 million. Given the uncertainty about future customs arrangements, the fact that HMRC is already undertaking a system overhaul, that the number of declarations could increase fourfold and that transitional arrangements are still unknown, it makes complete sense to assess the impact on HMRC, which is responsible for the taxing and checking of trade that will arise from the Bill.
The new clause would allow for greater parliamentary scrutiny and force an internal departmental impact assessment. This week alone has shown that it takes much effort to force the Government’s hand on impact assessments and for them to be up front about what the impact of Brexit will be. That is why I move the new clause.
Bill Esterson (Sefton Central) (Lab)
Welcome back to the Chair, Mr Davies.
May I say how much I agree with the comments of the hon. Member for Kilmarnock and Loudoun? The impact of HMRC closures, which the hon. Member for Livingston mentioned, on communities and on those losing their jobs was well stated. The same is true of my constituency, with the closures in Bootle and Liverpool.
The Minister advised the Committee in an earlier sitting that
“the resources given to HMRC post Brexit to deal with Brexit are already there.”
He also said that
“the power has been assessed and its likely cost looked at. It has been deemed to be relatively inexpensive and overall will not add a cost burden on HMRC.”––[Official Report, Trade Public Bill Committee, 30 January 2018; c. 261.]
I therefore trust that Government Members will support the new clause, as the hon. Member for Kilmarnock and Loudoun said. The Opposition will support it.
Of course, the Minister may well see fit to release the cost analysis he referred to in order to allay not only our concerns but those of the business community about the impact of additional duties on HMRC, given the significant task it faces in preparing for Brexit and in the light of the up to 40% cuts in staffing levels it has faced over recent years. The Minister referred to funding that has been made available to HMRC to support its preparedness to be Brexit ready. Will he tell us what that funding is, or confirm that it is the £250 million that the Government have made available to the cross-departmental and inter-agency border planning group?
Faisal Rashid (Warrington South) (Lab)
Does my hon. Friend share my concern that HMRC is already significantly understaffed? There have been widespread complaints over the last two years about poor customer service and the closure of hundreds of offices across the country.
Bill Esterson
Absolutely. I know that many of my hon. Friend’s constituents in Warrington are affected by those closures. We clearly cannot on the one hand see cutbacks, and on the other hand expect an expansion of HMRC’s work commitments.
The Public Accounts Committee recently published its report, following an inquiry into our Brexit readiness, in respect of the border planning group. It raised concerns that
“HM Treasury’s usual business model is inadequate for allocating Brexit funding to departments who are forced to operate together, at pace, to a hard deadline.”
That seems pretty clear to me. When giving evidence to that Committee, representatives of the relevant bodies on the border planning group explained that funding was released on a case-by-case basis, and demonstrated that much of the funding had yet to be drawn down.
HMRC is still wrangling with HM Treasury over a £7.3 million drawdown to cover upgrades to the CHIEF customs system—I think that is what the hon. Member for Kilmarnock and Loudoun was referring to—in order to level up functionality. HMRC also told the Committee that it was not expecting any shift in the risk profile of goods coming into the UK from the EU, and that it had “no evidence to suggest” that there would be increased trade flows with non-EU countries after Brexit. Will the Minister confirm whether his Department’s assessment matches that of HMRC, and that our standards and regulations will match entirely those of the EU, such that the risk profile of goods in or out remains the same?
HMRC has planned operating resources for no change after we leave the EU, per the evidence it gave to the PAC. Will the Minister confirm that it is Government policy for there to be no change in the regulations? Will he also confirm whether HMRC was right to say that there is “no evidence to suggest” that there will be increased trade flows with non-EU countries after Brexit? He is looking at me with a puzzled look, as he often does.
Bill Esterson
I was not taking it personally. I have seen him with that puzzled look on many occasions, not just when I am speaking—often it is in response to comments from those his own side.
If the Department for International Trade has any purpose, it is surely to absolutely change the volume of trade after Brexit. That, in turn, suggests that HMRC was not right to say that there would be no changes in trade flows. It also suggests that HMRC is significantly under-resourced, which is more to the point, if it is operating on a no-change assumption. HMRC’s new customs declarations service is geared up for a fivefold increase in customs processing once we leave the EU. Surely the Minister accepts that that is likely to put severe strain on HMRC’s capacity and significant strain on its resourcing.
What the Government and HMRC have said appears to be at odds when it comes to standards and regulations, and whether they will match—especially the comment about there being “no evidence” of increased trade flows. [Interruption.] I thought that the hon. Member for Livingston was trying to intervene, but she is not.
Faisal Rashid
I will give my hon. Friend a rest. Does he share my concern that if HMRC is not adequately resourced to collect and disseminate data in relation to our exports, placing any additional burdens on businesses to furnish that information is entirely unhelpful?
Bill Esterson
Absolutely. We made that point earlier in our proceedings and my hon. Friend makes it extremely well.
Coming back to what the hon. Member for Kilmarnock and Loudoun said, HMRC has suggested to the Public Accounts Committee that it will need 3,000 to 5,000 extra staff to perform effectively post-Brexit, but that will depend on the level of risk that Ministers are willing to take. The Public Accounts Committee received written evidence suggesting:
“There are very few International Trade businesses, both importers and exporters, who take Customs compliance seriously”
and that businesses need more support from HMRC to deal with post-Brexit requirements.
If that is the case, clearly a voluntary information disclosure, which the Minister has assured us the Trade Bill makes provision for, would be entirely futile as a means of gathering the information his Department requires. I note, as I did on an earlier occasion, that the Bill does not suggest that it is voluntary, and we are not aware of any business that would ever consider a request from HMRC to be voluntary in nature. The second point—that businesses require more support from HMRC to deal with post-Brexit requirements—is more telling; it further suggests that there will be a significant strain on HMRC’s resources if it is to carry out its existing functions, let alone carry out new ones.
If those new functions are subject to voluntary application, will they also be subject to voluntary roll-out from HMRC? In that case, perhaps there will be nothing to report in 12 months’ time. The additional burdens being placed on civil servants to prepare for Brexit are significant, and with limited resources being made available to support those endeavours, we are right to be concerned about the ongoing operability of HMRC, and indeed other public bodies. That is why we shall support the new clause.
Barry Gardiner (Brent North) (Lab)
Very briefly, I commend the hon. Member for Kilmarnock and Loudoun for tabling the new clause.
We have seen in recent days that the Government are usually reluctant to release any impact assessments or reports of any substance, for fear that they will prejudice negotiations and put the Government in the most awkward position. However, I am sure that the hon. Gentleman will take heart from the fact that it is now usual for the Government, 24 hours after saying that they will not publish a report, to decide that they will do so anyway. I confidently expect the Minister to stand up and say that those on the Government Benches cannot support the new clause—we will support it, as my hon. Friend the Member for Sefton Central said—but the hon. Member for Kilmarnock and Loudoun should not worry or be discouraged, because I have no doubt that within 24 hours, the Government will see sense.
Greg Hands
Welcome back to the Chair, Mr Davies; it is a pleasure to serve under you, as ever.
Clause 7, as we know because we debated it at length on Tuesday, sets out the powers that are needed for the Government to collect data to establish the number and identity of UK businesses exporting goods and services. Clause 8, in turn, sets out the powers that are needed for HMRC to share data with the Department for International Trade and other Departments and organisations in order for those bodies to carry out their public functions in relation to trade. Any trade information collected or shared by the Government under clauses 7 and 8 will come at minimal cost to business and the taxpayer—I will go into a bit more detail in a moment—and will be below the threshold needed for an impact assessment and review.
To deal with some of the points raised in the debate, the hon. Member for Kilmarnock and Loudoun asked about the impact on HMRC. I can confirm that HMRC will not require additional staff or resources for this function as a result of the data provision in the Trade Bill. From what the hon. Members for Sefton Central and for Brent North said, it sounded as if they are going to vote for the new clause. The different Opposition parties seem to be attacking the issue from different angles. Although the hon. Member for Kilmarnock and Loudoun said that too much resource is going to some places—I think that he called it the “Brexit gravy train”—the hon. Member for Sefton Central seemed to say that resources were too limited. However, I think that they are both coalescing around voting for the new clause.
Alan Brown
To clarify, I was talking about the Brexit process as a whole. It is certainly a gravy train for consultants, because the Government do not have the expertise in house.
Greg Hands
Well, I guess we will leave it at that. I accept the hon. Gentleman’s intervention to clarify precisely what he meant by the “Brexit gravy train”, but let us look at the truth.
The truth is that collecting the data will involve minimal cost to Government and business. The cost will certainly be below the level at which an impact assessment must be published, which is £1 million. I do not know what the cost of the hon. Gentleman’s assessment might be, by contrast, but the cost of the provision in the Bill will be less than £1 million. The Regulatory Policy Committee confirmed to my Department during the course of our analysis that no impact assessment was therefore needed, due to the low costs associated with the provision.
Matt Western (Warwick and Leamington) (Lab)
Does the Minister accept the interpretation that businesses will need additional support and that that is what is being proposed? HMRC will need additional capacity to help small businesses. Given that the Government and the Secretary of State are determined that businesses will look for new markets to diversify, those businesses will have a lot to do, so we need to give them as much assistance as possible.
Greg Hands
I agree, which is why we have made additional resources available for HMRC. We recognise that it will require additional staff, and that is being discussed. However, that does not relate to this Bill and this power. That is the most important thing to realise. The hon. Gentleman’s points about the generic nature of HMRC are well made, but my point is that this power will be introduced at minimal cost and will not affect the overall equation. The point that he raised about additional resources being needed for HMRC overall is not in dispute.
Matt Western
The Minister is being most generous. My point was that the report that we are requesting would help us to better understand the implications for HMRC.
Greg Hands
I do not think that that is necessary. The work that has been done shows that the cost would be less than £1 million. The new clause is all about trying to work out the cost of this particular measure, not about the wider implications for HMRC.
The hon. Member for Sefton Central asked whether this is a futile exercise. I say to him that we will be able to target support directly and ensure that UK business is at the forefront of post-Brexit opportunities, thanks to the data that this provision may well realise.
Finally, I remind the Committee that the Government currently do not collect any export data at all from about 4 million UK businesses. Our analysis elsewhere suggests that about 300,000 businesses in the UK could and should export but do not. We need this limited data collection and sharing power to be able to find and help them. I therefore urge the hon. Member for Kilmarnock and Loudoun to withdraw the new clause.
Alan Brown
I listened to what the Minister said. Clearly, if we stick to the existing trade agreements, nothing will change and everything will be much the same. Although there may be a logic to that, I will press the new clause to a vote because it would allow the Government to print an impact assessment that shows that nothing will change, that everything will be okay and that there will be no impact on HMRC. I would have thought that the Government would be happy to do that, and that it would not take too long.
Question put, That the clause be read a Second time.
Barry Gardiner
I beg to move, That the clause be read a Second time.
I made brief reference to this new clause during our discussion of new clause 3, but let me set out in a little more detail why we believe it is required. We have heard from the Minister about the Government’s intention to engage with the devolved authorities in respect of matters that may fall within devolved competences. However, if the Government are to demonstrate that they are serious in this regard, they must ensure that such a consultation framework is established in the Bill.
Modern trade agreements are increasingly broad and comprehensive, and extend into all aspects of governance, public policy and commerce. Inevitably and invariably, trade agreements will impact on matters that have long been, and rightly are, considered to be matters of devolved competence, albeit that our obligations to date have been determined at European level. The Government need to give clarity in the Bill about when an obligation ceases to be a trade matter that is within the exclusive competence of the UK and becomes a matter that is within the competence of the respective devolved Administrations.
We have heard that this matter is not unique to the United Kingdom. It is an emerging issue around the world, so we must consider it from an international perspective and ask ourselves not just what satisfies immediate domestic policy objectives but what we would demand from would-be trade partners who face similar issues and, perhaps more importantly, what they would expect from us.
I again refer the Committee to Nick Ashton-Hart’s evidence:
“the political economy demands that you have the backing, as a negotiator, at home when you are sitting across the table from your counterparties and that they know that you have that. They can watch your processes of consent and agreement and evaluate where your weaknesses are—where there are buttons they can push, but also where you are likely to need support.”—[Official Report, Trade Public Bill Committee, 23 January 2018; c. 10, Q12.]
We would be nothing short of foolish to allow our trade negotiators to commence talks without first having consulted and engaged with our constituent interests, which absolutely must include the devolved authorities. Trade negotiations can be brutal. The Americans have no qualms in telling us that they refer to counterparties to such talks not as “partners” but as “adversaries”. Any weakness in position or failure to come prepared can be extremely costly and damaging—especially so if complications are presented later when the Government seek to ensure implementation and compliance with the obligations stemming from the concluded trade agreement. A whole-of-Government approach is required, not only to avoid later difficulties but to ensure the democratic will is represented fully in the determination of our international outlook and the relationships we will form with other states.
Other countries have sought to create a consultation framework to mitigate any such complications at the earliest possible stage of the process. The US has its Trade Promotion Authority, born of the fast-track scheme. There are problems and complications with it, but it is there. The Government of Canada have given a much greater role to the country’s provinces in setting mandates and consulting in negotiations, as a result of the EU’s refusal even to begin trade talks unless it had confidence that the provincial governments would ultimately agree to implementation. Will the Minister tell us whether any of the trade working groups and dialogues that the Government have established with would-be trade partners have yet covered that issue, or whether the issue has been raised in the provisional soundings taken of the third countries with which we seek a trade agreement that corresponds with one they might have with the EU?
It is rumoured that the Government’s preference is to mirror as much as possible the Australian trade policy model. In Australia, no such formal consultation exists with state governments. They have the same rights as any other lobbyist: they can submit responses to open consultation in advance of the conclusion of trade agreements. Of course, that approach presents entirely different problems, and it would be foolhardy to believe otherwise. We have seen the Queensland state government implement policy that ignores obligations under Australia’s trade agreement with New Zealand in order to deliver on Queensland’s public interest and economic performance duties.
Will the Minister tell us what discussions his Department has had with each of those countries in this respect? Have concerns been raised about consultation with our devolved authorities? Conversely, have we asked about theirs? Perhaps the Government have given assurances that they intend not to consult with the devolved authorities and will use the powers in the Bill to override devolved competence. Perhaps it is a case of “put up and shut up”.
Faisal Rashid
On that point, is my hon. Friend aware that the Institute for Government found that in other countries, such as Canada, buy-in from provinces is crucial to make trade agreements such as the comprehensive economic and trade agreement work? The institute states that, otherwise, it is “political hell”. Does he agree that, similarly, the political buy-in of the devolved Administrations in the UK is necessary to implement trade agreements, and that early consultation and involvement is necessary to avoid political hell?
Barry Gardiner
Absolutely. My hon. Friend uses language that I would not wish to use in the Committee, but it is certainly a political mess. I think we can see that other countries have taken their responsibilities to their trading partners seriously, as well as their responsibilities to their constituent states, provinces and members. That is what we are seeking to do through the new clause.
Matt Western
It is a privilege to serve under your chairmanship, Mr Davies. I was particularly struck by what Elspeth Macdonald, the deputy chief executive of Food Standards Scotland, said. Perhaps my hon. Friend agrees with her. In giving evidence, she said:
“The principal issue with the Bill that causes us great difficulties is the way in which it constrains the ability of the Scottish Parliament and Scottish Ministers, and consequently our ability, to act and regulate in ways that are considered appropriate for businesses and the public in Scotland.”—[Official Report, Trade Public Bill Committee, 25 January 2018; c. 95, Q172.]
Barry Gardiner
I thank my hon. Friend, because that evidence is absolutely apposite to the new clause. All we are seeking to do is assist the Government in any future negotiations they may have as they seek to roll over agreements to corresponding agreements. We want to make it easier for them to persuade a trading partner that there will be no problems in implementing the agreements.
The Joint Ministerial Committee has already been the vehicle for similar engagement in respect of EU negotiations on the withdrawal deal, by way of sub-committee, establishing a clear precedent for a similar sub-committee in respect of trade agreements. That would be extremely helpful. It is therefore entirely appropriate that the Bill ensures that a similar forum is legislated for to ensure that the democratic will of the entire population of the country is represented fully throughout the trade agreement process and without threatening the devolved competencies.
I take this opportunity to remind the Government that they must not allow the Bill to afford Ministers of the Crown powers that would undermine the competence of the devolved authorities and the devolution settlements. While instituting a formal consultation framework through the JMC would go some way to protecting the rights of the devolved Administrations, it would not and cannot be considered as addressing the other concerns presented by the Bill, which I have previously adverted to in our proceedings. If the Government fail to address those concerns, the Labour party will return with further amendments.
Anna McMorrin (Cardiff North) (Lab)
The Trade Bill fails to set out a suitable framework for future trade agreements. The arrangements included in the Bill are insufficient and leave a lot to be desired on several important issues that I and many MPs raised in the debates on the European Union (Withdrawal) Bill. Just like that Bill, the Trade Bill puts restrictions on the Executive capacity of the Scottish and Welsh Governments, while placing no restrictions on the capacity of the UK Government. Essentially, under the Bill, Ministers of the UK Government will be able to legislate in devolved areas.
Wales is an outward-facing, globally trading nation and remains open for business.
Greg Hands
Could the hon. Lady outline to the Committee why she did not vote last week for the Welsh Government’s sponsored amendment in this area?
Anna McMorrin
I thank the Minister for asking that question. As he will recall, I spoke widely in support of that amendment. We will discuss that at a later stage.
In Wales, our economy offers great opportunities for both trade and investment. The Bill must not put that at risk. As I just mentioned, I spoke last week on the principles of devolution. Today, I want to reiterate that the Bill seriously lacks consideration of the principle of devolution and the appropriate frameworks to make it work. It is unacceptable that the Government expect the Welsh and Scottish Administrations to be content with handing over power on devolved areas to Whitehall.
The Bill in its current state hands over an unnecessary amount of power to the Government of the day, whoever they may be, and in no way does it safeguard the principles of devolution that people in Wales and Scotland have fought so hard for. I want to stress, once again, that my reservations with the Bill’s lack of consideration for devolution have nothing to do with extending the powers of devolution.
Faisal Rashid
Mr Southworth of the International Chamber of Commerce said that the devolved Administrations have cause for concern due to
“vulnerabilities on a whole range on different industries.”—[Official Report, Trade Public Bill Committee, 23 January 2018; c. 35, Q80.]
Does my hon. Friend therefore agree that there is greater need for consultation with the devolved Administrations?
Anna McMorrin
That is exactly what I am saying. I absolutely agree that we need that consultation and agreement with the devolved Administrations, in order that we do not jeopardise future trade agreements on an international level.
Our concern is that devolution is being rolled back because UK Ministers would be allowed to use Henry VIII powers to reach across into legislation within devolved competence and make changes. The Joint Ministerial Committee was created with the purpose of giving the devolved Administrations the chance to give their input. So far, it has been used sparingly: there have been few meaningful discussions, it has met rarely and little has come out of it. That needs to change.
Good governance requires co-operation between the UK Government and the devolved Administrations, as my hon. Friend the Member for Warrington South just set out. That was also set out in the devolution settlements. The Bill as written is unacceptable. It must contain appropriate frameworks that respect the devolution settlement. We will not agree to the rolling back of devolution and to seriously risking damaging our future trading agreements. Unfortunately, that is what the Government seem to want to do.
Alan Brown
I welcome the spirit of the new clause, but from my perspective, we should have something stronger than just consultation; we would be looking for the consent of the devolved Administrations. That is in line with some of our amendments that have been defeated. I certainly welcome the hon. Member for Brent North’s saying that the official Opposition will revisit some of the amendments on Report. We will certainly look to co-operate on this matter.
Barry Gardiner
I hope that that will all be unnecessary, because I trust that the Government will see the error of their ways and introduce those amendments themselves. If they do not, I reiterate my assurance to the hon. Gentleman that the Opposition will.
Alan Brown
Far be it from me to suggest that the hon. Gentleman may be a tad naive, but he is certainly optimistic if he thinks the Government have seen the light on this. I have made this point several times, but the devolved Administrations have said that they will withhold legislative consent motions if the Bill is not amended, so realistically, the Government will need to consider further amendments.
Greg Hands
The Government have made it clear that we seek to maintain the effects of the UK’s existing trade agreements. We make that commitment in relation to all parts of the United Kingdom, which means that we do not intend Scotland, Wales, Northern Ireland or, indeed, England to be disproportionately impacted by the transitioning of those agreements. Given that we have committed to seeking continuity in the effects of existing agreements, the impact of the transition should be neutral on all parts of the UK.
Hannah Bardell
While I take what the right hon. Gentleman says with the greatest of respect—I want to believe him—can he not see that, from the perspective of those of us from the devolved nations, the written and oral evidence given to the Committee paints a very different picture from that which he paints here today? Our concerns are legitimate, yet we have nothing. The Government have supported none of our amendments, despite promises made on the Floor of the House.
Greg Hands
I will come on to outline the engagement that we have had with the devolved Administrations and to talk about what that engagement might look like in the future. I stress to the hon. Lady that the Bill is about transitioning agreements that, in most cases, are already in place.
Matt Western
Gordon MacIntyre-Kemp, the chief executive of Business for Scotland, put it very simply. He said that the Bill
“puts the power to act almost unilaterally in the hands of a single Minister… At worst, it looks like a deliberate attempt to delay the transfer of EU-held powers…until after the UK Government has had free rein to agree deals that you could say run roughshod over the devolution agreements”.––[Official Report, Trade Public Bill Committee, 25 January 2018; c. 99, Q184.]
Greg Hands
Again, if I recall correctly, the evidence was almost all about future trade agreements that the UK may wish to enter into. To reiterate, the Bill talks about our existing trading arrangements.
Matt Western
Does the Minister not accept that they will technically be new agreements?
Greg Hands
As I have laid out frequently, the substance of the agreements will be the same. That is what we are looking to transition; that is the continuity factor of these agreements. There will of course be the opportunity in the future to come to new trade agreements with the same countries, but we are talking about the continuity of our existing trading arrangements—the 40-plus agreements with 70-plus nations.
On consultation with the devolved Administrations, the Department for International Trade ensures that its Ministers, as well as its directors and other senior officials, visit the devolved Administrations regularly and continually looks for further opportunities to engage with a range of stakeholders across the UK. Indeed, the hon. Member for Livingston knows that, because on a previous visit to Edinburgh I actually went to her constituency. The Secretary of State has engaged with the Scottish and Welsh Governments and with the Northern Ireland Executive.
Hannah Bardell
We were very glad to welcome the Minister to Livingston and I have been glad to engage with him on issues in my constituency. However, does he not recognise that engagement and consultation are very different from consent? The importance of consent and the devolution settlement being rowed back on are very different issues.
Greg Hands
I do not mean for us to keep throwing questions at each other, but I again stress that the Bill is about the existing trading arrangements of the United Kingdom as a whole. We will engage extensively with the devolved Administrations about what the future arrangements might be. We are being clear that we will continue to engage with the devolved Administrations as we transition these agreements as well. The devolved Administrations will, of course, have a role in implementing transitioned trade agreements in devolved areas, including, where appropriate, by amending retained EU law.
We have committed to consulting the devolved Administrations on the most appropriate way to implement the transitioned trade agreements and the agreement on government procurement in areas of retained direct EU law that have effect in otherwise devolved areas. We will welcome their input on the best way to do that so that the agreements are implemented effectively for the whole of the UK. We will also work closely with the devolved Administrations on the role they will play in shaping the UK’s future trade negotiations. It is right that we should have the opportunity to take these discussions forward and to engage the devolved Administrations to understand their views.
Alan Brown
I welcome the fact that the Minister is outlining the engagement he has had with the devolved Administrations, but can he confirm what the views of the devolved Administrations are on the provisions of the Bill?
Greg Hands
I do not think the hon. Gentleman needs me to confirm that. He has said himself what the position of the devolved Administrations is, including on the legislative consent motion. We have listened to them and will continue to listen to them very closely. He has put his point of view on the record as to the perspective of the Scottish Government.
I will come back to some of the points raised in the debate. The hon. Member for Brent North wanted to put devolved Administration engagement on the face of the Bill. I stress again that these agreements are about continuity, not future trade agreements. We have been clear in the White Paper that we will engage. We therefore do not require statutory engagement structures in the Bill.
Barry Gardiner
One of the trade agreements that we have repeatedly come back to, which makes it quite clear that this is not the simple roll-over of the existing trading arrangements that the Minister is talking about, is the treaty we currently have with Norway. Fisheries are an important part of Norway’s economy. It is almost inconceivable that in the roll-over of that agreement, there will not need to be some provision in that regard. Surely the Minister must address those points, because they are pertinent to the Bill and to the Government’s capacity to do what they seek to do, which in large measure the Opposition believe to be right and proper: to try to make the transition as seamless as possible. However, there will be areas where it is not, and Norway is one of them. We must address that and not simply gloss over it by saying, “Well, we’ll have to deal with that once we know what we’re doing with the EU final deal.”
Greg Hands
Of course we value our trade relations with Norway very strongly and closely. By geography alone, let alone the amount of oil and gas coming from Norway, we have incredibly strong trade relations. For the record, I met the Norwegian Trade Minister last autumn. I am perhaps going to sound like déjà vu all over again, but I repeat that the future trading relations with Norway will be very dependent on the future UK negotiations with the European Union. That is not a matter for this Bill; it is a matter that is being scrutinised on frequent occasions in this House and elsewhere.
The hon. Member for Brent North said that we need an engagement structure for future trade agreements. The Government agree that we need to engage the devolved Administrations in our future trade agreements for the benefit of the whole of the UK, as was made clear in the White Paper. We are talking to the devolved Administrations about what that will look like. The new clause would pre-decide that discussion.
The hon. Gentleman talked about international examples for consultation models with the devolved Administrations and gave us a quite interesting exposition of the position in Australia and other parts of the world. It was fascinating stuff, but our constitutional arrangement is very different from any of the international examples raised. As was made clear in our White Paper, we therefore need to design our own engagement structures, in consultation, that work for the benefit of the whole of the UK.
The hon. Members for Warwick and Leamington and for Cardiff North claimed that we were putting a constraint on the devolved legislatures. To be clear, the Bill will allow the devolved Administrations to make regulations that they consider appropriate for the purpose of implementing trade agreements in devolved areas, including in areas of retained EU law.
The hon. Member for Cardiff North said that devolution is being undermined. That is not at all the case. The Bill introduces new powers for the devolved Administrations to work collaboratively with the UK Government to secure continuity in our current trading relationships. Under the Bill, the devolved Administrations will be able to make every decision after exit that they can make before exit. We therefore do not need to commit to such a review or role for the Joint Ministerial Committee in legislation.
The official Opposition’s tabling at a late stage of this emergency extra new clause, which emerged earlier this week, seems to be more about Labour members of the Committee messing it up last week by controversially not supporting the Welsh Labour Government’s amendments, when everyone expected them to do so. When the hon. Member for Warrington South talked about a “political hell”, he might have been referring to the political hell we see all day, every day in the official Opposition in this House and elsewhere. On that basis, I urge the hon. Member for Brent North not to press the new clause.
Barry Gardiner
Had I been disposed not to press the new clause, the Minister’s final remarks would have made me all the more determined to do so. However, I was not so disposed, and we will press the new clause to a vote.
Question put, That the clause be read a Second time.
Barry Gardiner
I beg to move, That the clause be read a Second time.
This is the last new clause we will deal with in Committee, and it is our last attempt in Committee to introduce a high-level principle into the Bill. We have tried to establish the legal framework for an ethical trading policy that respects human rights, labour standards, environmental integrity and the needs of countries and communities poorer than our own. The Government turned down every single amendment and new clause that tried to enshrine those principles in law. None the less, we will have one final push. We are trying to establish the principle of animal welfare and sentience at the heart of our trade policy. Perhaps the Government will agree to stand up for those species that share our planet with us, but that have no representatives of their own to speak for them.
My hon. Friend the Member for Bradford South spoke persuasively—though not persuasively enough to get Government Members to agree—about the importance of maintaining high food standards in all our trade agreements. She referred to the connection between high food standards and the call for animal welfare, whether in respect of the general requirement for food hygiene or the specific target set by the Veterinary Medicines Directorate for a reduction of antibiotic use in agriculture. We also argued for animal welfare to be included in any impact assessment of the UK’s trade agreements, whether it is carried out ex ante or ex post. That call stands, and we will continue to press the point until we are satisfied.
I am pleased that the Minister saw fit to agree with us about the importance of this issue. I quote from the Hansard report of our sitting a couple of days ago:
“The Government have always been clear that we will maintain our very high standards on food and animal welfare, and for protection in that space. There will be no race to the bottom. Nothing in free trade agreements precludes a Government from regulating in the domestic environment. I hope that that is enough reassurance for the hon. Gentleman.”––[Official Report, Trade Public Bill Committee, 30 January 2018; c. 196.]
Greg Hands
The hon. Gentleman was a Minister in the Department for Environment, Food and Rural Affairs under Tony Blair. Can he point to specific occasions when he raised concerns about animal sentience with respect to trade agreements that were going through at that time?
Barry Gardiner
That is one on which I will probably write to the right hon. Gentleman. I am convinced that there were a number of occasions when I did exactly that. I will try to dig them out from my records and send them to him. I am delighted that he did not stand up to repudiate the remarks recorded in Hansard, as he did the other day. Given that, I take it that he stands by them.
Sadly, the Minister’s reassurance on this matter is not enough. The right of parties to regulate in favour of animal life and animal health is regularly mentioned in the text of international trade agreements, yet that same right is typically circumscribed by requirements that any measures to protect animal health must be undertaken while facilitating trade. Governments may take any measure they like to protect animal health so long as it does not create an “unjustified barrier to trade”. It is left to a tribunal of trade lawyers, who examine the justification of the measure in relation to international trade law, to decide whether it is justified or unjustified.
There is sometimes a clause in the general exceptions chapter of a free trade agreement that affirms that a state may introduce whatever measures are necessary to protect animal life or health, but the meaning of “necessary” is left up to another tribunal of trade lawyers to decide. They may rule that an alternative measure is available that would be less burdensome on trade and therefore conclude, even if the alternative would be less effective, that the measure that was taken does not qualify as necessary after all.
This is familiar territory to anyone who has looked into the history of international trade disputes, both before and since the founding of the World Trade Organisation. There is an entire sub-discipline of trade lawyers and academics who have written about what they call the “necessity test” that is employed to ascertain whether a measure is necessary and thus allowed under international trade law, or unnecessary and thus prohibited.
Let me take as a specific example a free trade agreement that was mentioned in written evidence by the RSPCA, because it contains a fleeting reference to animal welfare. The Government are keen to replace the EU-Korea free trade agreement with a new UK-Korea agreement, which would be implemented using the powers afforded to the Government by the Bill. The chapter of the EU-Korea agreement devoted to sanitary and phytosanitary measures includes specific clauses about enhanced co-operation between EU and Korean authorities on animal welfare issues—anyone who wishes to look them up will find them in article 5.9—yet those fine sentiments are thoroughly undermined by the clause at the outset of the chapter, which states that the objective of the chapter as a whole is
“to minimise the…effects of sanitary and phytosanitary measures on trade”.
The health and welfare of animals—and of humans, for that matter—is already subordinated to commercial interests. That is precisely the problem.
Mrs Kemi Badenoch (Saffron Walden) (Con)
I will be brief. We all believe in maintaining the very highest standards in animal welfare and food production; I do not think that is in dispute. The Government have done quite a lot in the last few months—we know about the ban on microbeads, to protect marine wildlife—but this is one of the areas in which we are able to go further and do better than we ever could while we were in the EU.
There is much to agree with in the statements from the hon. Member for Brent North; I, too, am against the export of live animals. However, we must remember the Bill’s purpose: ensuring the smooth roll-over of existing trade agreements. It is not about future trade agreements, so I do not believe that the Bill is the appropriate place for the new clause. In fact, if I were being cynical, I would say that this looks like a mischievous attempt to reignite the debate on new clause 30 that was proposed to the European Union (Withdrawal) Bill, in order to generate press releases.
Our job is to make good law. The draft Animal Welfare (Sentencing and Recognition of Sentience) Bill was published on 12 December. It sets out to do exactly what the new clause would do, but even better. If Labour Members were serious about raising animal welfare standards, rather than virtue signalling, they would focus on the draft Bill. We should not tack on to the Trade Bill a new clause that is outside its scope.
As it happens, the Environment, Food and Rural Affairs Committee yesterday released its report on the draft Bill. It made several recommendations for improving it, including bringing forward a new and completely separate Bill on animal sentience. The Government have to reflect on that report and its recommendations, and it would be inappropriate for us to pre-empt the Select Committee’s report and the Government’s reaction.
Alan Brown
As the hon. Lady said, nobody can argue against the new clause’s intentions: maintaining animal welfare and food production standards when entering into international trade agreements. I am sure that the Minister will say that the new clause is not needed, because existing agreements will roll over and they comply with all the legislation, but as we heard from witnesses, in the roll-over process everything is up for grabs, so there is an argument for protecting animal welfare and food production standards in the Bill, and I understand why the proposal has been made.
One concern that I have about the new clause is that it refers to UK law and does not recognise that law is devolved; animal sentience should also be a devolved matter once we withdraw from the EU. From my perspective, the new clause does not take cognisance of the Scottish Government and the devolved Administrations, so that causes me concern about how it is written.
The hon. Member for Saffron Walden said that the Tory Government are bringing in good law, but then admitted that the Environment, Food and Rural Affairs Committee has made recommendations against the draft Animal Welfare (Sentencing and Recognition of Sentience) Bill. As a member of that Committee, I can say that witnesses have basically said that the current proposal as regards recognising animal sentience is not good law and not fit for purpose, and the Committee is recommending that the Government think again on that Bill in terms of sentience, so they are a long way from making good law.
I support the principles of the new clause, but as stated, I have concerns about it not recognising the devolved Administrations.
Faisal Rashid
I commend my hon. Friend the Member for Brent North for his excellent opening remarks in support of a very important new clause. I hope that the Government will agree with me and my hon. Friends that it is vital that we protect animal welfare and food production standards when building our trade policy. We must prioritise a sustainable, long-term future for our farming, fishing and food industries. We cannot allow Brexit to be used as an excuse to reduce food standards or to allow cheap and inferior produce to flood the UK market. We have a moral duty to protect animals and their welfare, and that should go hand in hand with the protections that we must afford to our farming and production industry and to British consumers.
Anna McMorrin
Does my hon. Friend agree that this is not a partisan issue, but a question of the kind of society we want to live in?
Faisal Rashid
Absolutely. That is a crucial point, which I hope Government Members will take into account.
Mr Mark Prisk (Hertford and Stortford) (Con)
Is it not actually the case that good law is not made on the rush? The very nature of the new clause that we are debating is on the rush, and that is why we should reject it.
Alan Brown
I completely agree with the previous intervention: good law is not made in a rush. But that is exactly what the Government did in reaction to voting down amendments to the European Union (Withdrawal) Bill: they rushed out legislation that is really poor.
Faisal Rashid
I thank the hon. Gentleman for that intervention. I ask the hon. Member for Hertford and Stortford how the new clause would prevent the easy roll-over of EU trade agreements. This issue is controversial, but I will move on.
There are real concerns that if we produce trade agreements that allow the UK market to be flooded with cheap and poor-quality food, we will be forcing our farming and food production industries to make an impossible decision. Either they face becoming uncompetitive and being undercut by cheap and poor-quality imports, thus risking the jobs of the 3.9 million people employed in the industry, or they are pressured to cut corners and their own standards, putting at risk the welfare of the animals and potentially of consumers.
Many health risks are associated with poor-quality produce, and often such produce is consumed without knowledge, especially given the mass catering in schools, hospitals and takeaways. British people deserve to feel confident that they will be eating high-quality produce, wherever it has come from, following our departure from the European Union.
Nick Dearden of Global Justice Now told the Committee that
“we probably all now know more than we would like about chlorinated chickens”––[Official Report, Trade Public Bill Committee, 23 January 2018; c. 6, Q3.]
That is true, but it is important that we are aware of the potential negative impacts of failing to build a strong and sustainable future trade policy. Have the Government considered the negative impact on animals, on the farming and production industries, and on consumers of not supporting this new clause?
UK farmers have made great strides in recent years to improve animal welfare, and we are proud to have some of the highest animal welfare and food standards in the world. We have heard many times that our departure from the European Union is an opportunity for the UK to return to being a world leader in international trade. That prompts the question of why the Government are not committed to legislating for animal welfare protections to ensure that the rug is not pulled out from under the food and farming markets and to help the British farming industry to continue to lead the way in animal welfare and international trade.
There has already been much controversy surrounding the Government’s approach to animal welfare and sentience. It is no secret that the Prime Minister has faced difficulties in getting the Cabinet to agree on much in recent weeks, but she claims that it remains unified. The Secretary of State for Environment, Food and Rural Affairs said that there will be
“no diminution in our environmental or animal welfare standards in pursuit of trade deals.”
In that case, I am hopeful that we can expect Government support for this new clause, which would legislate for the protection of animal welfare standards—or is the Cabinet no longer unified on that position?
Matt Western
I rise to speak to new clause 12, and I thank my hon. Friend the Member for Brent North for proposing it. It would ensure that we provide important safeguards for not just livestock but our farming communities and our consumers by specifying animal welfare and sentience in the legislation.
In November, as we have heard, the Secretary of State for Environment, Food and Rural Affairs promised to make “any necessary changes” to UK law to ensure that it recognises that animals can feel pain. That came after proposals to accept that they are sentient beings were voted down. Now the Government are apparently looking at making UK law that specifically recognises animal sentience. I remind the Committee that the first sentence of the Bill says that it will
“Make provision about the implementation of international trade agreements”.
That is why—when we have spoken at previous sittings about ensuring that it is a comprehensive Trade Bill—we have said that this issue should be included.
According to the written evidence from the RSPCA, the EU has 19 farm animal welfare laws that the UK has implemented, giving a high degree of consistency on standards and a level playing field for trade in farm products. That will not be the case when the UK starts to negotiate FTAs with other countries. Thankfully, the UK has some of the highest farm animal welfare standards in the world, although it is well documented that Canadian and American farm welfare standards tend to be based on corporate standards rather than federal law, as we heard in the International Trade Committee yesterday.
Likewise, an FTA may include sectoral chapters on cosmetics, pharmaceuticals, chemicals and pesticides. The UK needs to be careful that it does not compromise any existing UK laws, such as cosmetics regulation, or risk that those laws are as sensitive to change as the farm animal ones that I have mentioned.
Greg Hands
The hon. Gentleman is making a good speech. One of the points he raises surely gets to the nub of the matter. When he says that we should not do anything contrary to domestic law in trade agreements, he rather makes the point for me that the Government and the country will have a right to regulate most of these matters domestically, which is the important thing. We can introduce protections domestically in our laws that would not be subject to the trade agreement.
Matt Western
I thank the Minister for his intervention. There is the law that goes through this place, and there is the role and power of the Minister, and very much at the nub of this debate over the Bill is the control the Minister has, as opposed to the controls we and other bodies will have, in influencing any trade agreements.
Anna McMorrin
It is imperative that animal welfare rights are protected after we leave the EU and that animals keep their status as sentient beings under UK law, which is why this new clause is absolutely vital.
I wrote to the Secretary of State for Environment, Food and Rural Affairs after the defeat in the House of Commons on this very issue. That letter was signed by over 100 MPs. It is disappointing that the Trade Bill neglected to make it clear that the UK will not enter any trade deals in the future that will require us to water down animal welfare standards. It is clear from the reaction of the public, and from the campaigns and letters that I am sure all MPs have received from constituents and organisations, that people have no interest in seeing chlorinated chicken in our supermarkets, are not happy to see live animal exports and are not willing to compromise in any way on animal rights to please the likes of the current US President or any other leader of a country that does not share the same concerns and views as us on animal welfare and animal sentience. Any trade negotiation or deal will impact on UK animal welfare standards.
Under article 13 of the Lisbon treaty, the UK recognises animals as sentient beings—that they are not just goods but have the capacity to feel pain, hunger, heat and cold—and that the Government must pay full regard to their welfare requirements. Recognising animals as sentient beings is accepted across animal welfare science and means that we acknowledge that animals are capable of feelings such as pain and are deserving of our respect. It is appalling that this Government could not vote in favour of maintaining—let alone progressing—existing animal welfare standards during the European Union (Withdrawal) Bill.
Greg Hands
I am not accusing the hon. Lady of spreading misinformation, of course, but a lot of the reactions to that vote spread a lot of misinformation. Various otherwise reputable news outlets such as The Independent and Evening Standard had to retract and withdraw and to print clarifications and apologies for putting out misinformation about the Government’s view on animal sentience. The Government strongly believe in animal sentience, and the European Union (Withdrawal) Bill vote was not contrary to that.
Anna McMorrin
I thank the Minister for his intervention, but the fact remains that this Government did not vote for that amendment, so are we to keep that trust that this UK Government will introduce those welfare standards post-Brexit? I for one do not find that trust. I struggle to understand this decision by the Government, which is a massive blow for the welfare of wildlife, pets and livestock alike.
Mrs Badenoch
There is a draft Bill on sentencing and animal sentience coming in. Why does the hon. Lady feel that there will be no commitments in that Bill, given what it is called? What are her concerns about that Bill?
Anna McMorrin
I thank the hon. Lady for her intervention, but does she not realise that this Bill is about the rules and regulations during trade? That is why we need the new clause in the Bill.
Only domestic animals are covered by the Animal Welfare Act 2006; animals in the wild and laboratory animals are expressly exempt. As we seek new deals in our negotiations with countries that perhaps have much lower animal welfare standards, we are particularly concerned that there will be the temptation to lower our standards. The Bill needs strengthening to better protect UK animal welfare standards. I hope the Government will see some sense and support the new clause to ensure that we do not water down those standards.
Greg Hands
The Government have made clear that we intend not only to retain our existing standards of animal welfare once we have left the European Union but, indeed, to enhance them. We are proud to have some of the highest animal welfare standards anywhere in the world, and they will not be watered down when we leave the EU.
Our food is held in high repute thanks to our animal welfare standards. The withdrawal Bill will transfer on to the UK statute book all EU animal welfare standards— it is very important to understand that in the context of the withdrawal Bill, which was raised by the hon. Member for Cardiff North. Our current high standards, including import requirements, will apply when we leave the EU.
Similarly, the Government are committed to retaining the EU’s recognition of animal sentience. That is why, as has been referred to quite a few times in this helpful debate, at the end of last year the Government published the draft Animal Welfare (Sentencing and Recognition of Sentience) Bill, which sets out how we can go even further and better enshrine in domestic law the recognition of animals as sentient beings. That point was capably made by my hon. Friend the Member for Saffron Walden and others.
Barry Gardiner
Does the Minister understand that the new clause’s intention is not to run counter to or prevent what we hope the Government will bring forward in that Bill? It seeks to establish the hierarchy of principles in international trade so that a necessity test or any other precursor in the clauses and paragraphs that deal with such issues cannot mean that animal welfare is of a lower order in that hierarchy.
Greg Hands
Let us try to separate out those two issues. We will deal with animal sentience in the draft Animal Welfare (Sentencing and Recognition of Sentience) Bill. What we are talking about here is transitioning existing trade agreements. I will return to the intervention I made on the hon. Gentleman in relation to existing trade agreements, but let me first point out a few more things in the draft animal welfare Bill. It proposes a new obligation on Ministers of the Crown to have regard to the welfare needs of animals as sentient beings when formulating and implementing Government policy. A public consultation on the draft Bill has recently closed and DEFRA is considering all the responses received.
We are absolutely clear that all existing commitments relating to animal welfare will remain when these agreements are transitioned—I cannot be any more definitive than that. That is in line with our clearly articulated principle that it is our intent to transition solely the existing effects of the current agreements.
On current agreements, Mr Davies, you and I were elected in 2005, and in a couple of those early years we shared in Parliament I distinctly remember the hon. Gentleman being a DEFRA Minister. I was intrigued when he was seemingly unable to offer any single occasion when, as a Minister in DEFRA—the Department with primary responsibility in this area—he had raised any objection to EU trade agreements going through the House in relation to animal welfare or animal sentience.
I look forward to receiving the hon. Gentleman’s letter, in which he will explain in detail those occasions he was unable to remember today—he may have time to dig through his filing cabinet from 12 or 13 years ago to find them. I remember well that it was very rare for any Government Minister in Tony Blair’s regime to go against the word of Mr Blair, and very rare for any Government Minister to go against the word of the European Union, so I am interested to see if the hon. Member for Brent North managed to do both at the same time. I very much look forward to getting this letter. May I suggest that he shares it with the whole Committee, because I do not think that it is something I should abuse by keeping it private to myself? I look forward to that letter.
Barry Gardiner
May I just point out to the Minister that I voted for the ban on hunting mammals with dogs? I believe that most of the Conservative party voted to retain hunting mammals with dogs. I also voted to secure an end to cosmetic testing on animals, to ban fur farming and to introduce the Animal Welfare Act 2006. So there were a number of occasions on which my voting record on animal welfare and animal sentience stands up very strongly. I suspect that it would it be in marked contrast to many Members on the Government side of the House.
Greg Hands
I thank the hon. Gentleman for that intervention, because I now find it even more illuminating. He has now been able to remember all these other occasions when he stuck up for animal welfare, but he still cannot remember a single occasion when, in relation to EU trade agreements, which is what the Bill is all about—
Greg Hands
Perhaps the hon. Gentleman has now remembered the single occasion. I will give him another opportunity to tell us all about this disagreement he had with Tony Blair or the European Union.
Barry Gardiner
It is not about a disagreement with Tony Blair or the European Union, because actually we did vote to ban the export of animals on the hoof in that Government. That was precisely about trade—it was banning live exports. The Minister has to accept that I have a very clear record on animal welfare in terms of not only domestic legislation in this country but international trade.
Greg Hands
I am still looking forward to the letter. The hon. Gentleman has still not remembered a single occasion when he raised this in relation to a European Union trade agreement. He has an opportunity. I am sure he will take a little bit of time to prepare the letter, and I am sure that all members of the Committee will look forward to receiving it.
The hon. Gentleman did mention live animal exports, which is an interesting subject. He says that he was concerned about live animal exports, but you and I know, Mr Davies, that while we remain an EU member we are unable to ban live animal exports. I do not know whether, at that point, he was taking an early Eurosceptic turn. Perhaps he mentioned to Tony Blair that he had this fundamental problem with the European Union. It was just after Tony Blair had promised a vote on the EU constitution, which was not delivered, so it may have been an interesting time to have made these Eurosceptic points that he now says that he has.
Matt Western
Far be it from me to talk about what happened five or 10 years ago and under a different ministerial dispensation, but my recollection was that in the 2000s there was a huge issue about veal being transported in crates, and it was EU legislation that was introduced that actually put an end to that. I would like to think that the UK Government were in support of that, but I do not know—I will defer to either the Minister or my hon. Friend the Member for Brent North.
Greg Hands
If the hon. Gentleman is a strong believer in EU law, surely he should be voting, and have voted, for the European Union (Withdrawal) Bill, which seeks to take all of this retained EU law into the UK domestic environment.
To return to the issue, we have a manifesto commitment to take early steps to control live animal exports as we leave the European Union. The hon. Member for Brent North claimed that FTAs contain provisions stating that animal health measures must
“not be unjustifiable barriers to trade”.
Again, that returns to the point I made in my intervention on the hon. Member for Warwick and Leamington, that it importantly does not prevent states from imposing their own high animal welfare standards, which is what we currently do and will expect to enhance in the future.
My hon. Friend the Member for Saffron Walden made an excellent and succinct speech, outlining why the Bill is about existing trade agreements and why the Government have separate proposed legislation relating to animal sentience. I can tell her that the consultation closed yesterday and we will consider the 9,000 responses, as well as the report by the Environment, Food and Rural Affairs Committee, in due course.
The hon. Member for Kilmarnock and Loudoun raised a relevant point when he said that the issue of animal sentience is devolved. I can tell him that the Department for Environment, Food and Rural Affairs is speaking to the devolved Administrations regarding animal sentience. The clause in the draft Animal Welfare (Sentencing and Recognition of Sentience) Bill refers only to UK Ministers and the role they play, but I would be interested to see what proposals the Scottish and Welsh Governments might bring forward in this space as well.
I hope that is sufficient reassurance to the hon. Member for Brent North. I very much look forward to his letter, but on that basis I ask him to withdraw the new clause.
Barry Gardiner
The Minister can ask, but he will not be successful. We will press it to a vote.
Question put, That the clause be read a Second time.
Greg Hands
Mr Davies, I thank you and everybody concerned with this Bill. I am delighted that we have so thoroughly scrutinised this short yet important Bill over the last five Committee sessions. I thank Committee members for the constructive way in which they have engaged in the debate. I am pleased that we have completed proceedings within the allotted time. In fact, we have a little time to spare.
This has been an unusual Bill Committee. The Bill, in my view, is relatively uncontroversial and certainly quite short. Indeed, on Second Reading, I think a little unfairly, the hon. Member for Brent North called it a
“hollowed out little embarrassment of a Bill, which extends to just six pages and four schedules.”—[Official Report, 9 January 2018; Vol. 634, c. 223.]
I think he was calling it small and unimportant; I am interpreting the words “hollowed out little embarrassment” in that way. Therefore, I find it all the more remarkable that the Opposition have called some 37 votes on the Bill so far. I am not trying to make a wider political point—or maybe I am—but it was clear on Second Reading and now that they are against the UK having its own trade remedies, against the UK being able to benefit from the more than 40-plus EU trade agreements, and against UK companies participating in the £1.3 trillion global procurement market. I hope they will change their minds on Third Reading.
I also thank the Government Whip and the Opposition Whip, who have ensured that the Committee has run smoothly and effectively. We have had a helpful and constructive consideration of the Bill, and the debate has been superbly conducted by you, Mr Davies, and by Mrs Ryan and Mr Gray, in the Chair. I am very grateful for your and their guidance during our deliberations.
Further, I would like to pay tribute to the usual channels, who I know quite well from previous experiences in this House, for their help and guidance throughout. I also recognise in particular the hard work of Hansard in recording everything. I thank the Clerk for his advice, the Doorkeepers for keeping good order, and my excellent team of officials for their support. This is the Department for International Trade’s first ever piece of legislation, and the officials have done the Department very proud indeed.
Barry Gardiner
I, too, would like to express, on behalf of all my team, my thanks to you, Mr Davies, to Ms Ryan and Mr Gray, and to all the officials who so ably supported the Minister. We tried to throw as many difficult questions at him as possible, and they tried to field them and provide him with answers as quickly as possible. I have to say we were not always convinced by the answers he came up with, but we recognise the work that went into them and hope that we did not cause the officials too much trouble.
I pay particular tribute to Kenneth Fox, the Clerk of the Committee. He is an exemplary Clerk, and he aided us in ensuring that our amendments were substantive and all in good order. It was extremely helpful to us to be assisted by someone of his experience and wisdom—and calm. I say that because, as you know, Mr Davies, amendments are worked on until the last moment to ensure that they are tabled in good time, and Mr Fox did so with the greatest humour.
I am grateful to all my team: my hon. Friends the Members for Bradford South, for Sefton Central, for Cardiff North, for Warrington South, for Blaenau Gwent and for Warwick and Leamington. It has been an excellent team effort. I am delighted that they were all able to contribute to debate in a most positive way. I also thank the Government Members. I thank the Minister, who I think took every intervention he was offered, for his courtesy. I know that serving on such Committees is often a thankless task for Government Back Benchers, who are told by the Government Whip to sit quietly and not to take up too much of the proceedings, but when they did intervene, they did so with courtesy.
We have scrutinised the Bill in great detail. We have not come to an agreement—that much is clear. There are lacunae in the Bill that need to be remedied, and we will return to it on Report and subsequently. I thank everyone associated with the Committee and in particular you, Mr Davies, for conducting proceedings with absolute fairness and impeccable order.
The Chair
I am very grateful to the Minister and the shadow Minister for their kind words. I thank the House authorities, including the Doorkeepers, who have been very busy with Divisions, and the Clerks. I reiterate the thanks to Kenneth Fox, the principal Clerk, who has guided me throughout these proceedings with his normal efficiency and courtesy. I thank all Members for making it so easy to chair the Committee. You have all been a credit to your respective parties.
Question put and agreed to.
Bill accordingly to be reported, without amendment.
Trade Bill
Tuesday 17th July 2018
(7 years, 3 months ago)
Commons ChamberTrade Bill 2017-19 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Consideration of Bill Amendments as at 17 July 2018 - (17 Jul 2018)
15:29 - The House divided: - Ayes: 284 / Noes: 314 - Question accordingly negatived.
15:44 - The House divided: - Ayes: 37 / Noes: 316 - Question accordingly negatived.
15:59 - The House divided: - Ayes: 285 / Noes: 315 - Question accordingly negatived.
16:54 - The House divided: - Ayes: 248 / Noes: 315 - Question accordingly negatived.
17:08 - The House having divided: - Ayes: 37 / Noes: 318 - Question accordingly negatived.
18:01 - The House divided: - Ayes: 295 / Noes: 314 - Question accordingly negatived.
18:15 - The House divided: - Ayes: 305 / Noes: 301 - Question accordingly agreed to.
18:30 - The House divided: - Ayes: 301 / Noes: 307 - Question accordingly negatived.
19:00 - The House divided: - Ayes: 317 / Noes: 286 - Question accordingly agreed to.
Mr Speaker
In calling the Minister to move the new clause—he is one of the most courteous Members of the House and therefore it may seem almost unnecessary to say this—I simply ask, not least in the light of what the Father of the House has just said, that he recognise that, although of course he must set out the Government’s position, possibly on a miscellany of different matters, we are short of time and that others wish to speak. In all propriety, if this debate is to be meaningful, they must be able to do so.
The Minister for Trade Policy (George Hollingbery)
I beg to move, That the clause be read a Second time.
Mr Speaker
With this it will be convenient to discuss the following:
Government new clause 13.
Government new clause 14.
New clause 3—Free trade agreements: Parliamentary scrutiny and consent—
“(1) The Secretary of State shall not commence negotiations relating to a free trade agreement unless—
(a) a Minister of the Crown has laid before Parliament a sustainability impact assessment conducted by a credible body independent of government following consultation with—
(i) each devolved authority,
(ii) public bodies, businesses, trade unions and non-governmental organisations which, in the opinion of the Minister, have a relevant interest, and
(iii) the public,
and the assessment shall include both qualitative and quantitative assessments of the potential impacts of the proposed trade agreement, including social, economic, environmental, gender, human rights, labour, development and regional impacts,
(b) a Minister of the Crown has laid before Parliament a draft of a negotiating mandate relating to the proposed trade agreement, setting out—
(i) all fields and sectors to be included in the proposed negotiations,
(ii) the principles to underpin the proposed negotiations,
(iii) any limits on the proposed negotiations, and
(iv) the desired outcomes from the proposed negotiations, and
(c) the House of Commons has approved by resolution a motion, drafted in terms which permit amendment, setting out a proposed negotiating mandate and authorising the Secretary of State to enter negotiations on the proposed trade agreement on the basis of that mandate, and the House of Lords has approved a resolution in the same terms as that approved by the House of Commons.
(2) The United Kingdom may not become a signatory to a free trade agreement unless—
(a) during the course of the negotiations, the text of the trade agreement as so far agreed or consolidated has been made publicly available within ten working days of the close of each negotiating round,
(b) between each round of negotiations, all documents relating to the negotiations have been made available for scrutiny by select committees in both Houses of Parliament,
(c) upon conclusion of the negotiations, the House of Commons has approved by resolution a motion, drafted in terms which permit amendment, setting out the text of the trade agreement as negotiated and authorising the Secretary of State to sign the proposed agreement, and the House of Lords has approved a resolution in the same terms as that approved by the House of Commons, and
(d) the text of the trade agreement includes provision for a review of the operation and impacts of the agreement no later than ten years after the day on which the agreement comes into force.”
This new clause would ensure that all new free trade agreements are subject to parliamentary scrutiny and consent.
New clause 6—Regulations: Parliamentary procedure—
“(1) If the Secretary of State considers it appropriate to proceed with the making of regulations of a type which fall under section 2(4A)(a) or (b)), he or she must lay before Parliament—
(a) a draft of the regulations, and
(b) an explanatory document.
(2) The explanatory document must—
(a) explain under which power or powers in this Act the provision contained in the regulations is made;
(b) introduce and give reasons for the provision;
(c) identify and give reasons for—
(i) any functions of legislating conferred by the regulations; and
(ii) the procedural requirements attaching to the exercise of those functions;
(d) contain a recommendation by the Secretary of State as to which of the following should apply in relation to the making of regulations pursuant to the draft regulations—
(i) the negative resolution procedure (see subsection (6)) or
(ii) the affirmative resolution procedure (see subsection (7)); and
(e) give a reason for the Secretary of State’s recommendation.
(3) Where the Secretary of State’s recommendation under subsection (2)(d) is that the negative resolution procedure should apply, that procedure shall apply unless, within the 20-day period, either House of Parliament requires that the affirmative resolution procedure shall apply, in which case that procedure shall apply.
(4) For the purposes of this paragraph a House of Parliament shall be taken to have required a procedure within the 20-day period if—
(a) that House resolves within that period that that procedure shall apply; or
(b) in a case not falling within subsection (4)(a), a committee of that House charged with reporting on the draft regulations has recommended within that period that that procedure should apply and the House has not by resolution rejected that recommendation within that period.
(5) In this section the ‘20-day period’ means, for each House of Parliament, the period of 20 days on which that House sits, beginning with the day on which the draft regulations were laid before Parliament under subsection (1).
(6) For the purposes of this section, the ‘negative resolution procedure’ in relation to the making of regulations pursuant to a draft of the regulations laid under subsection (1) is as follows—
(a) the Secretary of State may make regulations in the terms of the draft regulations subject to the following provisions of this subsection;
(b) the Secretary of State may not make regulations in the terms of the draft regulations if either House of Parliament so resolves within the 40-day period;
(c) for the purposes of this paragraph regulations are made in the terms of the draft regulations if they contain no material changes to the provisions of the draft regulations; and
(d) in this subsection the ‘40-day period’ means, for each House of Parliament, the period of 40 days on which that House sits, beginning with the day on which the draft regulations were laid before Parliament under subsection (1).
(7) For the purposes of this section the ‘affirmative resolution procedure’ in relation to the making of regulations pursuant to a draft of the regulations being laid under subsection (1) is as follows—
(a) the Secretary of State must have regard to—
(i) any representations;
(ii) any resolution of either House of Parliament; and
(iii) any recommendations of a committee of either House of Parliament charged with reporting on the draft regulations, made during the 40-day period with regard to the draft regulations;
(b) if, after the expiry of the 40-day period, the Secretary of State wishes to make regulations in the terms of the draft, he must lay before Parliament a statement—
(i) stating whether any representations were made under subsection (7)(a)(i); and
(ii) if any representations were so made, giving details of them;
(c) the Secretary of State may after the laying of such a statement make regulations in the terms of the draft if they are approved by a resolution of each House of Parliament;
(d) if, after the expiry of the 40-day period, the Secretary of State wishes to make regulations consisting of a version of the draft regulations with material changes, he must lay before Parliament—
(i) revised draft regulations; and
(ii) a statement giving details of—
(a) any representations made under subsection (7)(a)(i); and
(b) the revisions proposed;
(e) the Secretary of State may, after laying revised draft regulations and a statement under sub-paragraph (d), make regulations in the terms of the revised draft if they are approved by a resolution of each House of Parliament;
(f) for the purposes of sub-paragraph (e) regulations are made in the terms of the draft regulations if they contain no material changes to the provisions of the draft regulations; and
(g) in this paragraph the ‘40-day period’ has the meaning given by subsection (6)(d).
(8) The provisions of this section shall apply to all agreements for which regulations would be of a type which falls under section 2(4A)(a) or (b)), notwithstanding that they constitute retained EU law and may be governed by the provisions of the European Union (Withdrawal) Act 2018 or any other legislation with regard to Parliamentary scrutiny of regulations under this Act.”
This new clause would set up a triage and scrutiny system under the control of Parliament for determining how Orders under Clause 2 will be dealt with, in circumstances when the new UK FTA or international trade agreement is not in the same terms as the existing EU FTA or international trade agreement.
New clause 16—Transparency in trade negotiations—
“(1) The Secretary of State shall not make regulations under section 2(1) of this Act for the implementation of an international trade agreement (subject to sections 2(3) and 2(4)) unless the condition in subsection (2) of this section has been complied with.
(2) The condition is that the Secretary of State has provided to Members of both Houses of Parliament any information specified in subsection (3) relating to the agreement, within seven days of any meeting to which subsection (3)(a) applies.
(3) The information is—
(a) minutes of any meeting, whether formal or informal, between a representative of the United Kingdom and a representative of any other signatory state to discuss the agreement;
(b) any points of divergence between the terms of the proposed agreement between the United Kingdom and the other signatory (or each other signatory) and the terms of the agreement in place before exit day between the European Union and the other signatory (or each other signatory), that were discussed at the meeting; and
(c) measures that the Secretary of State considers will be necessary in consequence of any points of divergence under paragraph (b) of this subsection.
(4) The Secretary of State may specify conditions under which the information shall be made available under subsection (2).”
This new clause would require the Secretary of State to give MPs and Peers access to details of negotiations towards trade agreements with third countries if and when third countries seek changes to existing bilateral trade deals which the UK currently has through the EU.
New clause 20—Approval of negotiating mandates (devolved authorities)—
“(1) No negotiation towards an agreement that falls within section 2(2) shall take place unless—
(a) a draft negotiating mandate in respect of that agreement has been laid before—
(i) a committee including representatives from each devolved authority and constituted for the purpose of considering the draft, and
(ii) each devolved legislature,
and
(b) the draft negotiating mandate has been approved by resolution of—
(i) the committee constituted under (1)(a)(i) and
(ii) each devolved legislature.
(2) The committee in (1) shall be called the ‘Joint Ministerial Committee on Trade’ (‘JMCT’) and—
(a) may not approve a draft mandate other than by consensus,
(b) shall have the power to make its own standing orders,
(c) may include a Minister of the Crown or representative thereof,
(d) may be consulted on a draft mandate before it is finalised (but in such a case must also approve the finalised version), and
(e) shall only include a representative of a devolved authority if that representative has been appointed by the relevant devolved executive.
(3) The ‘devolved legislatures’ are—
(a) the Scottish Parliament,
(b) the Welsh Assembly, and
(c) the Northern Ireland Assembly.
(4) The devolved legislatures shall approve the draft mandate according to their own standing orders.
(5) If the negotiating mandate changes substantively during the process of negotiations then negotiations shall not proceed until the revised mandate has been approved by the JMCT.
(6) Each person who is—
(a) a member of the JMCT, or
(b) a Minister of the Crown
must co-operate with every other person who is within subsection (a), or (b) in any activity that relates to the drafting of a negotiating mandate as referred to in subsection (1).
(7) In particular, the duty imposed by subsection (6) requires a person—
(a) to engage constructively, actively, and on an ongoing basis in any process by means of which a negotiating mandate as referred to in subsection (1) is prepared; and
(b) to have regard to representations by any member of the JMCT or of a devolved executive in any process by means of which a negotiating mandate as referred to in subsection (1) is prepared.
(8) The ‘devolved executives’ are—
(a) the Scottish Government,
(b) the Welsh Government, and
(c) the Northern Ireland Executive.”
This new clause would ensure that any negotiating mandate is first approved by the devolved legislatures and creates a joint ministerial committee to encourage co-operation between the devolved administrations and the UK Government in drafting the negotiating mandates. It imposes a duty of co-operation on all parties in the preparation of the negotiating mandate.
New clause 22—Right of devolved legislatures to scrutinise trade negotiations—
“(1) A Minister of the Crown shall provide a devolved authority with such information relating to an agreement falling within section 2(2) as is reasonably necessary for the purpose of subjecting that agreement to scrutiny in relation to—
(a) all areas of that devolved authority’s competence; and
(b) anything falling outside an area of that devolved authority’s competence but having an impact within the territory over which that devolved authority presides.
(2) The information in (1)—
(a) shall be provided at the request of a devolved authority;
(b) may relate to international trade agreements at any stage of development including—
(i) before negotiations begin,
(ii) during negotiations,
(iii) after negotiations have been completed.
(3) An appropriate authority shall not rely on Part II of the Freedom of Information Act 2000 in relation to a request made under this section.
(4) If information requested by a devolved authority would fall within Part II of the Freedom of Information Act 2000, a Minister of the Crown may provide it exclusively to a committee of the relevant devolved legislature.
(5) A Minister of the Crown shall adhere to any reasonable time limit placed by a devolved authority on the provision of information under this section.”
This new clause would ensure that the devolved legislatures will have sufficient information to effectively scrutinise trade agreements and negotiations, without compromising negotiations or sensitive information.
New clause 23—Devolved consent—
“(1) No agreement that falls within section 2(2) shall be ratified without the consent of the devolved legislatures to any parts of that agreement that fall within subsection (3) of this section.
(2) The ‘devolved legislatures’ are—
(a) the Scottish Parliament,
(b) the Welsh Assembly, and
(c) the Northern Ireland Assembly.
(3) The parts of an agreement to which the devolved legislatures must consent are—
(a) any part concerning an issue that falls within the competence of a relevant devolved authority as defined in paragraph 7 of Schedule 1, and
(b) any part concerning an issue not falling within subsection (3)(a) but having an impact within the territory over which the relevant devolved authority presides.”
This new clause would create a right for the devolved legislatures to approve those aspects of an ITA that fall within their competence.
New clause 24—Review of international trade agreements (devolved authorities)—
“(1) No agreement that falls within section 2(2) of this Act shall be ratified unless it complies with subsection (2) of this section.
(2) An agreement that falls within section 2(2) shall include a clause which provides for that agreement to be—
(a) submitted for review by the appropriate bodies after five years from the date of ratification,
(b) submitted for review by the appropriate bodies every five years after the first review, and
(c) ended or amended based on the outcome of the reviews in subsections (2)(a) or (2)(b),
without sanction under the agreement.
(3) For the purposes of (2) the ‘appropriate bodies’ are—
(a) the UK Parliament,
(b) the Scottish Parliament,
(c) the Welsh Assembly, and
(d) the Northern Ireland Assembly.
(4) The appropriate bodies shall determine the procedure for the review in subsection (2) according to their own standing orders.
(5) Each international trade agreement shall be submitted to a review by the appropriate bodies according to the terms in subsection (2).
(6) A Minister of the Crown shall have regard to any representations made by an appropriate body resulting from a review undertaken under this section.”
This new clause would provide for Parliament and the devolved legislatures to review a trade agreement every five years and for the UK to bring an end to that trade agreement based on the outcome of those reviews without sanction under the agreement.
Government amendments 36 and 37.
Amendment 6, in clause 2, page 2, line 20, at end insert “, and”.
This amendment would provide that the Henry VIII provisions in Clause 2 may only be used when a new UK free trade agreement is in the same terms as an existing EU free trade agreement.
Government amendments 38 and 39.
Amendment 7, in clause 2, page 2, line 29, at end insert “, and”.
This amendment would provide that the Henry VIII provisions in Clause 2 may only be used when a new UK international trade agreement is in the same terms as an existing EU international trade agreement.
Amendment 8, in clause 2, page 2, line 29, at end insert—
“(4A) In circumstances where—
(a) a free trade agreement in respect of which regulations are to be made does not make the same provision, subject only to necessary changes in terminology, as a free trade agreement referred to in subsection (3)(a) or (b); or
(b) an international trade agreement in respect of which regulations are to be made does not make the same provision, subject only to necessary changes in terminology, as an international trade agreement referred to in subsection (4)(a) or (b);
an appropriate authority must not make regulations under subsection (1) unless the requirements of section [Regulations: Parliamentary procedure] have been met.”
Government amendment 42.
Amendment 19, in clause 2, page 2, line 40, at end insert—
“(a) No regulations may be made under subsection (1) in respect of a free trade agreement unless the text of that agreement has been subject to consultation prior to its ratification by Parliament, in line with any guidance or code of practice on consultations issued by Her Majesty’s Government.
(a) A consultation under paragraph (a) shall actively seek the views of—
(i) Scottish Ministers,
(ii) Welsh Ministers,
(iii) a Northern Ireland department,
(iv) representatives of businesses and trade unions in sectors which, in the opinion of the Secretary of State, are likely to be affected by the proposed free trade agreement, and
(v) any other person or organisation which appears to the Secretary of State to be representative of interests affected by the proposed free trade agreement, including local authorities.”
This amendment would require the Government to have published the text of each UK free trade agreement and opened it to consultation with business, trade unions, the devolved administrations and other parties prior to its ratification.
Government amendment 4.
Amendment 9, in schedule 2, page 12, line 5, after “2(1)” insert
“(unless the regulations are of a type which fall under section 2(4A)(a) or (b))”.
This amendment is consequential on NC6.
Amendment 2, in schedule 2, page 12, line 6, at end insert—
“(1A) A statutory instrument containing regulations of a Minister of the Crown under section 2(1) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.”
Government amendments 71 to 74.
Amendment 10, in schedule 2, page 12, line 20, at end insert
“(unless the regulations are of a type which fall under section 2(4A)(a) or (b))”.
This amendment is consequential on NC6.
Government amendments 75 and 79.
George Hollingbery
I am delighted to tell you, Mr Speaker, that I can accord with your wishes and those of my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke).
The Government have been consistently clear that the priority for the UK’s existing trade relationships as we leave the EU is continuity. Our partner countries are clear on that, too, and this Bill is about continuity. Specifically, clause 2 creates a power to help with the implementation of obligations of the trade agreements that we are seeking to transition into UK-only agreements as we leave the EU. I recognise that Members are seeking reassurance that the Government will be transparent about the content of these transitioned agreements and about what might need to change to deliver this continuity, which we have championed for so long.
Indeed, I understand the purpose of the new clause 6 and the associated amendments, tabled in the names of my hon. Friends the Members for Huntingdon (Mr Djanogly), for Wimbledon (Stephen Hammond) and for Bromley and Chislehurst (Robert Neill). My predecessor, my right hon. Friend the Member for Chelsea and Fulham (Greg Hands), and I held constructive discussions with my hon. Friend the Member for Huntingdon to ascertain how best we could help that transparency. As a result, the Government have tabled new clauses 12 to 14 and amendments 4, 36 to 39, 42, 71 to 75 and 79. I will now explain them in a little detail.
New clause 12 and the associated Government amendments will place a duty on Ministers to lay a report in both Houses of Parliament. This report will explain any changes made to the continuity agreements when compared with the existing EU third country agreements. The report will be laid in Parliament before the continuity agreements are ratified or at least 10 Commons sitting days before any implementing regulations are laid under clause 2, whichever comes first. We want these reports to be as helpful as possible. That is why they will signpost any significant changes being made, to ensure that existing trade agreements can function effectively in the UK-only context. Implementing regulations made under clause 2 will also now be subject to the affirmative resolution process, which will further enhance parliamentary scrutiny. I have also committed that, for each statutory instrument made under the clause 2 power, the accompanying explanatory memorandum will be explicit in referencing which of the changes identified in the report it plays a part in implementing.
With amendments 44 to 47, we are reducing from five years to three years the length of the period for which the implementing power can be used. The period will be renewable by agreement in both Houses of Parliament.
I hope that my hon. Friend the Member for Huntingdon agrees that these amendments address the spirit of the issues he was seeking clarity on and provide enhanced parliamentary scrutiny.
Bill Esterson (Sefton Central) (Lab)
We raised concerns in Committee about the Government’s power grab in the Bill. For 40 years, we have subcontracted our responsibility for trade agreements to the EU, while scrutiny has been delivered through the European Parliament and by our own European Scrutiny Committee, yet the Government are not proposing any equivalent scrutiny processes for agreements that will replace those we currently have through our membership of the EU. This lack of scrutiny is a major issue, and we raised the concerns of business, trade unions, civil society, consumers and many more in Committee.
The Labour party submitted a series of amendments in Committee that embodied a full process of parliamentary scrutiny and extra-parliamentary consultation. The Government responded by saying that the new UK agreements would just roll over the terms of existing EU agreements and would thus need no process of scrutiny, having already been scrutinised.
Greg Hands (Chelsea and Fulham) (Con)
Does the hon. Gentleman not accept that we are dealing with existing EU agreements that have already been scrutinised in both Houses of Parliament and that in many cases have already been in effect for a long time—in some cases, decades? It is important to have the ability to scrutinise the agreements if they have changed, but in general I think that he is barking up the wrong tree in alleging that this is an attempt to avoid parliamentary scrutiny.
Bill Esterson
The former Minister should have waited, because he anticipated my remarks: the Government’s delegated powers memorandum told a different story. Paragraph 46 noted that the new UK agreements would not just be legally distinct but could include
“substantial amendments, including new obligations”.
In other words, these will not just be roll-overs; they will be new treaties that can introduce wholly new terms of trade between the UK and our trading partners—terms that will be binding on us for years to come.
Government new clause 12 is confirmation that Labour was right to identify the problem here. It will require a report to be laid before Parliament before the ratification of any free trade agreement that will highlight and explain any significant differences between the new agreement and the corresponding EU agreement on which the new agreement is based. It is disappointing, therefore, to see this concession wiped out immediately by Government new clause 13, which will allow them to sidestep the obligation to lay such a report. It will also allow the Government to ratify new agreements without having produced the report in question. Government new clause 14 picks up the same point prior to implementation, but by this time the trade agreement will already have been ratified.
We will support new clause 12, but if the Government really mean what they say, they should withdraw new clause 13. We will also support new clause 3, which pays us the compliment of replicating the amendments that we tabled in Committee and which sets out the scrutiny process that should be adopted for new trade agreements.
Mr Jim Cunningham (Coventry South) (Lab)
My hon. Friend has just raised a serious issue. There is a great deal of concern among businesses and trade union organisations, which fear that the Government are trying to slip things through without proper scrutiny. Does my hon. Friend agree that that is the nub of the problem?
Bill Esterson
My hon. Friend is absolutely right. Following the Committee, six major business organisations —the CBI, the British Chambers of Commerce, the Engineering Employers Federation, the International Chamber of Commerce, the Institute of Directors and the Federation of Small Businesses—took the unprecedented step of issuing a joint statement with the TUC, Unite, the Trade Justice Movement, the Consumers Association, or Which?, and other industry bodies, calling for a proper model of consultation and scrutiny to govern the UK’s policy-making process in future.
The Secretary of State delivered his statement to the House yesterday, telling us about future plans for a more transparent and inclusive UK trade policy, but at the same time reminding us that the future process would not apply to the Bill or the agreements that correspond to our existing EU agreements. That is why our amendment 19 is so important: it provides for proper consultation on any substantive new elements in the 40 trade agreements that we need to replace the EU’s existing trade deals. The involvement of the widest possible group of stakeholders is essential if we are to ensure that the new trade agreements are properly designed to give our businesses, consumers, workers and public services what they need.
We argued in Committee that any regulations made under the Bill should be subject to the affirmative procedure in Parliament, not the negative procedure, as originally stipulated in schedule 2. I am pleased to see that the Government have agreed that we were right to insist on parliamentary accountability, as their amendment 75 provides that any regulations made under clause 2(1) will indeed be subject to the affirmative procedure. That is not the further extension to which the Minister referred; it is entirely new, and it removes the need for the triage and scrutiny system proposed in new clause 6. However, it leaves any regulations to be made under clause 1(1), in relation to the World Trade Organisation’s Government procurement agreement, subject to the negative procedure. The Minister did not explain the logic behind that, and I should like him to do so, especially given that amendment 32 will grant the Government the power to extend the disciplines of the GPA to new bodies if they so choose, not just to renamed or merged Government entities.
Worse still, Government amendment 34 will introduce what is effectively a further Henry VIII clause, in that it will grant the Government the power under clause 1
“to modify retained direct EU legislation”
in respect of GPA implementation. Members should note that that is a power in perpetuity, as there is no sunset clause in relation to clause 1. In Committee, we argued for the removal of all Henry VIII powers from the Bill, and we support the further attempt to limit those powers in amendments 6 and 7, tabled by the hon. Member for Huntingdon (Mr Djanogly).
The Government have told us:
“Retained direct EU legislation will operate in a different way to both primary and secondary legislation”,
with
“unique status within the domestic hierarchy.”
The European Union (Withdrawal) Act 2018 distinguishes between “minor” and “principal” types of retained direct EU legislation precisely so that Parliament can apply more rigorous powers of scrutiny to the more important elements. A modification of principal retained direct EU legislation, as envisaged in amendment 34, could therefore have a constitutional significance analogous to that of modifying primary legislation. Introducing to the Bill what is effectively yet another Henry VIII power, with no sunset clause to limit its future application, is a serious challenge to parliamentary democracy, and the Minister has not explained why the House should countenance such a move.
New clause 23 would give the devolved Administrations the right to veto a trade agreement before ratification. I simply point out that international agreements are a competence of the UK Government under the devolution settlement, which is why we will not support that proposal.
In his statement yesterday, the Secretary of State recognised the problems that are caused when Governments sign off trade deals that do not have public legitimacy. However, he has failed to follow the logic of his own statement in respect of the 40 agreements that we need to replace our existing EU deals. Even given the Government’s concessions, the Bill is still woefully lacking in transparency and scrutiny, and such a democratic deficit needs to be addressed. As the CBI representative asked us during the Committee, “If not now, when?”
Gillian Keegan (Chichester) (Con)
Thank you, Mr Speaker, for giving me the opportunity to speak in the debate.
I served on the Committee, and it is clear to me that we should pass the Bill in order to build the legal foundations that we need to support global trade by ensuring that existing trade agreements via the EU can continue, providing access to overseas procurement opportunities—an important market worth £1.3 trillion—and protecting our business from unfair practices via the new Trade Remedies Authority.
There is much debate about the shape of the future trading relationship between the European Union and the United Kingdom, but the Bill is required for every situation that our country will face as we leave the EU. It seeks to ensure that we will continue to enjoy the benefits of trade deals that the EU has done with more than 40 countries around the world. There is, however, an inherent assumption that the UK will reach agreement on the terms on which we continue trading with our biggest partner, the European Union. Any “no deal” scenario is likely to have an impact on how rules of origin are calculated in the trade agreements.
This is complex stuff. I think we all understand that we are making big decisions that will have an impact on businesses—both large multinationals and small and medium-sized enterprises—which export to or import from the EU. As someone who has worked in car manufacturing, financial services and technology for nearly 30 years, I am unfortunately burdened with some knowledge of how all this works and of the operating models that have emerged over the last 40 years, making many industries, such as car manufacturing, finally competitive. In the real world there is no such thing as a hard or a soft Brexit; there are just degrees of risk. The Prime Minister is seeking a low-risk Brexit in her Chequers White Paper—one that involves listening to businesses that have built highly integrated supply chains, such as Rolls-Royce in my constituency.
Of course it is possible to find examples of car parts coming from outside the EU without a problem, but the question is one of both scale and financial impact. Only a business will have a truly accurate view on this, but it is safe to assume that introducing costs will have a negative impact on businesses large and small throughout the country. They will want to avoid going back to the days when supply chains were not highly integrated and efficient. They will need to hold stocks in warehouses or lorry parks. I am probably the only person in the House of Commons who has sat in customs waiting to rescue a stranded part while a car production line lay idle. Delays are quite simply the difference between profit and loss. The same applies to agricultural goods. We have a thriving growers’ business in Chichester, and export more than £1 billion of perishable goods to the EU every year. Customs delays and perishable goods are two words that do not belong in the same sentence. That is why I completely support the pragmatic approach to goods set out in the Chequers White Paper and I believe it will also enable us to make future international trade agreements as envisaged in this Bill.
But as well as achieving these outcomes, we have to respect the referendum result. The British people voted to end freedom of movement and to get back control of their borders, laws and money. We can all have views on whether a better deal could be negotiated. These are views, not facts. However, I cannot help thinking that if we had been offered a deal a few years ago that ended free movement, stopped future payments to the EU, continued frictionless trade, and regained control over our fisheries and farming policies with no hard border in Northern Ireland, we would have readily agreed; in fact, we would have bitten the EU’s hand off.
Every successful negotiation requires compromise, and perhaps the Rolling Stones express our current predicament best in one of their greatest songs: “You can’t always get what you want, but sometimes you can get what you need.”
Several hon. Members rose—
Mr Speaker
Order. In calling in a moment the hon. Member for Brighton, Pavilion (Caroline Lucas), principally to speak to her new clause and in the knowledge that she is a celebrated and award-winning parliamentarian, I feel that I can say with total confidence that she will require no longer than five minutes to make her case.
Caroline Lucas (Brighton, Pavilion) (Green)
Indeed, I do rise to speak to new clause 3, which is in my name and signed by more than 50 Members of the House from four different parties, and I give notice that I would like to move it when it comes to the votes.
This amendment essentially seeks to remedy the Bill’s failure to provide for a proper role for parliamentarians in the scrutiny and approval of trade agreements. At present, trade agreements can be negotiated, or renegotiated as is likely to be the case with many of the existing EU trade deals covered by this Bill, entirely under royal prerogative powers, essentially giving the Government free rein to decide when and with whom to start negotiations, to set their own priorities and objectives, to conduct the negotiations in great secrecy, and to conclude the deal without any meaningful parliamentary scrutiny. That not only sidelines Members of this House, but it prevents valuable input by civil society organisations and the wider public. This Bill is supposed to help implement an independent trade policy following withdrawal from the EU, but it does nothing to put in place the kind of scrutiny and approval framework that should be required for an accountable trade policy in a modern democratic country. And this is the only legislative opportunity we are likely to have to put such a framework in place.
In his statement yesterday, the Secretary of State for International Trade once again sought to make a distinction between replacements for existing EU trade deals and future trade deals, but the fact is that effective parliamentary scrutiny and approval is needed for both, for it is increasingly clear that, contrary to the hope of Ministers, it is not going to be a simple case of transitioning, or “rolling over,” existing EU trade deals. Some or all of the countries in question are not simply going to be content to continue with the existing arrangements, and Ministers will have little choice but to negotiate a replacement deal. So while yesterday’s statement by the Secretary of State must be welcomed for its clear, if somewhat overdue, recognition of the current democratic deficit in the making of trade deals and the need to correct that if we are to have a modern, transparent and accountable trade policy, it needs to be applied much more fully and more extensively.
Unfortunately, the package of proposals set out yesterday falls well short of what is required, both because it does not apply to the existing EU trade deals covered by this Bill and because it does not go far enough. For example, it is welcome that the Secretary of State proposes a process for Ministers to set out their ambitions before embarking on a new set of negotiations, including scoping assessments, and the commitment to publish impact assessments is also a step forward, but the reality is that recent impact assessments by the Government on trade have focused purely on the impact for exporters, without taking into account at all the wider economic impacts, let alone social, environmental, gender and regional impacts and the effects on workers’ rights. So we need to see a much stronger commitment to transparency.
Most significantly of all, the Secretary of State’s proposals fail to give Parliament meaningful oversight of new trade deals. For that to happen, Members of this House need a guaranteed vote on the deal that emerges from the negotiations. Without that, all the other measures proposed by the Secretary of State yesterday risk being little more than window-dressing.
The Secretary of State contends that the Constitutional Reform and Governance Act 2010 is all that is needed. However, that process is an utterly inadequate rubber stamp: it gives Parliament a right to say whether a new trade deal should or should not be ratified, but does not enable Parliament to propose modifications. Moreover, as we know to our detriment time and again, Ministers can and do simply overrule Parliament and ratify the trade deal despite Parliament’s objections. In contrast, Members of both the European Parliament and the US Congress get an automatic vote. If this issue is about taking back control, why do we not take back some control in this Chamber and make sure we get the same kind of vote that other legislatures with whom we will be negotiating do?
Trade deals are not simply commercial negotiations; they are public policy negotiations and should be treated as such. Transparency, scrutiny and parliamentary approval should be embraced, not treated as a risk.
Mr Mark Prisk (Hertford and Stortford) (Con)
The hon. Lady’s new clause says the impact assessment should include
“both qualitative and quantitative assessments”.
Can she give an example?
Caroline Lucas
A qualitative impact would be the impact on the environment, for example. We want to know not just the economic quantity of the impacts in terms of how much trade gain we are going to get out of a negotiation, but the qualitative impact on the public policy areas that I am talking about. We cannot quantify necessarily the impact of a trade deal on our own environmental standards, but we can say whether qualitatively those standards are going to be degraded. That is why we need both those terms: we want to know the quantitative and the qualitative impacts. They are separate, and it is not that difficult to see the difference.
New clause 3 sets out the kind of framework we need. Before commencing the negotiation of a trade agreement, Ministers must bring before Parliament at the very least a sustainability impact assessment conducted by a credible independent body, covering not just the potential economic impacts, but the social and environmental ones. The devolved authorities, businesses, trade unions and the public must be consulted about the potential agreement, as is required in the US. If the decision is to go ahead, Parliament would be required to give its consent to a mandate for the negotiations, setting guidelines and boundaries, a process based on the Danish model. The Government would conduct negotiations transparently, releasing texts before and after each negotiating round, building upon the procedure in the EU and following practices common in other areas of international negotiation, such as climate talks.
My amendment is a very basic and simple one. It is asking for things that are common in many other countries around the world, and saying that we should do the same.
Mr Jonathan Djanogly (Huntingdon) (Con)
We are clearly in a very much better situation now with this Bill’s regulation scrutiny provisions than after the Second Reading in this House, and on that basis my recommendation will be that hon. Members do not vote for my new clause 6 or my amendments 6, 7, 8, 9 and 10, but that they vote for the alternative Government amendments, new clauses 12, 13 and 14 and all their tabled amendments to clause 2. If the Government amendments pass, Henry VIII will have been banished from this Bill and a sensible compromise scrutiny system will have been inserted. The Government have listened and done the right thing and we should support them for that, but there are still issues, so let me explain my thinking.
This Bill applies to around 40 existing EU trade-related agreements involving some 70-plus third countries. This actually also includes some agreements that are concluded but are still due to be implemented, which I shall call collectively FTAs. It is estimated that 10 of the UK’s top 50 export markets are served by these EU FTAs, accounting for 35% of UK trade. I can therefore understand why the Government are keen for the UK to adopt these FTAs post Brexit, or “roll them over” in the terminology used by Ministers. In addition, I understand the practicalities of the situation: the Government have limited negotiating capacity and the idea of dealing with all of these 70 third countries and starting deals from scratch is undoubtedly unrealistic in the immediate term. Indeed, the average time for negotiating an FTA is seven years and the recent Canada deal took more like 15 years. So I understand that there is a lot at stake here for the UK, and I appreciate that the International Trade Department is under a lot of pressure to deliver.
Having said that, I do not think that the Department has covered itself in glory in its handling of these roll-overs. To start, I would make the point that we have been given a wall of silence. The International Trade Committee back in March asked the then Minister to prioritise these negotiations more, to publish a detailed timetable of the work-streams involved, to produce a risk register identifying clearly the agreements concerned and to have contingency plans even for where third countries have only given an assent in principle. It took the Government until 15 May to respond to the Committee report, and to call their response bland and non-committal would be an understatement. In the meantime, various leaks and rumours have been appearing, maintaining that some of the negotiations with third countries have not been going quite according to plan and that the EU has not been as helpful as the Ministers had originally thought it might be. This would include the EU telling us that it will not ask its FTA trade partners to allow the UK to benefit from their existing deals until the UK signs the final legal text of the Brexit deal. That could leave us with only a few months up to next March in which to negotiate the roll-overs.
Given all this, I have some sympathy with new clause 16, tabled by the hon. Member for Swansea West (Geraint Davies), which demands further details of the status of these proposed roll-over deals, and the Minister should acknowledge the frustration on this that is shared by everyone outside his own Department. We have received vague assurances from the Department that the roll-over discussions are going according to plan and that everything will be all right on the night. We are also being told that the Government need to have this legislation in place so that they can action the roll-overs, and that they need the regulatory powers to make this happen quickly if need be, including in the situation of our Brexiting with a no-deal scenario.
I am trying to show that the Government have asked for sweeping Henry VIII powers while keeping people pretty much in the dark as to what they might be needed for, and while providing little hard evidence of what has been achieved to date. Of course, UK business has also been crying out to know where we stand as regards these important overseas markets. I hope that the Government are right and that the roll-overs will take place as planned with no or few changes, but that does not mean that it would be acceptable that any material changes to the deals should just be waved through by Ministers without any parliamentary scrutiny. For instance, let us say that one of the EU third countries with which we wish to roll over a deal says, “Yes, we agree that you can roll over, but let’s face it, you are a market of only 50 million people rather than 500 million, so we’ll agree to roll over, but only on condition that we also get 50,000 visas a year.” Under the Bill, that could be pushed through by Ministers on a negative order with no scrutiny at all. By the way, I do not see this as a remain argument or a leave argument; I see that as simply wrong. If Brexit is about returning power to Parliament, it is surely not about then just giving Ministers sweeping new powers, not least in a scenario where so little information has been given to hon. Members.
The Government have been maintaining that they wish to use these powers to roll over existing EU deals before possibly coming back to renegotiate substantive deals with the same countries, which would be subject to a scrutiny process yet to be proposed. However, I do not see why these same powers should not be capable of being used again after roll-over to make further changes to the same FTA during the five-year period—a sunset period which, with a possible further five-year extension, is in my opinion much too long.
All those reasons led me to think that we have a real problem with these provisions and I therefore tabled my amendments, looking for a triage and scrutiny system. However, since tabling the amendments, I have had an ongoing dialogue with Ministers, including my right hon. Friend the Member for Chelsea and Fulham (Greg Hands) and more recently the Minister for Trade Policy, my hon. Friend the Member for Meon Valley (George Hollingbery). Discussions have been courteous and positive, and I am pleased to say that the Government have listened and tabled their own amendments—I think more than 40 of them—to clause 2.
This will mean that the first proposed statutory instruments related to an FTA will need to be laid not less than 10 sitting days after the issuing by a Minister of an explanatory report. The changes proposed in the report will then be cross-referred to in the related SI’s explanatory memorandum. Further, it is now proposed that all related SIs will be subject to the affirmative procedure, however material or immaterial they may be. This effectively takes away any need for sifting provisions. Finally, the sunset period is proposed to be cut from five to three years, plus up to a possible further three years following an affirmative resolution.
Vicky Ford (Chelmsford) (Con)
I have received many hundreds of emails from my constituents asking me to support my hon. Friend’s amendments in order to bring more transparency to the trade process. Can he confirm that the amendments that the Government have tabled today will meet their requests? I have had four times as many emails on this as I had on the White Paper.
Mr Djanogly
Yes, the approach that has now been adopted is, I believe, a fair one, subject to some ironing out that might need to be done in the other place. Yes, it is a good deal for my hon. Friend’s constituents.
After no little discussion over the last few months, I think that the position is now very much improved. Let us keep in mind that a single FTA might have many SIs attached to it, so to have the report laid 10 sitting days in advance of the first SI, setting out all the changes in the proposed deal that will need to be considered, should be more transparent than just attaching a period for scrutiny to the SIs themselves. Furthermore, attaching the 10 sitting days’ time delay to the report will allow any comments that people wish to make to be made before the SI is laid, which is more effective from a review point of view.
I am concerned that these powers could be used multiple times on the same FTA—say, if different trading terms were agreed a couple of years after roll-over. I understand that this is not the Government’s intention and I believe that the effect of these Government amendments would be to prevent that, unless the proposed changes came within the scope of the initial report. However, if they did not come within the scope of the report, Ministers should be required to provide a further report. Clarification on this point, perhaps today from the Minister or in the other place, would be appropriate.
I note the insertion of a provision in new clause 13 saying that Ministers should not have to prepare a report on the proposed FTA in exceptional cases. Apparently the Constitutional Reform and Governance Act 2010 contains a similar provision. The Minister has assured me that this provision is unlikely ever to be used, and that if it was, a report would still need to be prepared and there would still be a need for an affirmative resolution. Again, I hope that the Minister will refer to this in his closing remarks.
A further issue is the need to confirm that the scrutiny provisions to be used on these FTAs will be those set out in this Trade Bill and not those in the European Union (Withdrawal) Act 2018. This is provided for in my new clause 6. From discussions with the Minister, I understand that he has been advised that all regulations relating to rolled over EU FTAs will necessarily need to be dealt with under the terms of this Bill, but again, clarification would be helpful.
Yesterday we debated the Taxation (Cross-border Trade) Bill, which itself contains its own powers to make orders. Although other colleagues have been focusing on that Bill, I remain concerned that the scrutiny system in today’s Bill ties in with that Bill. This is relevant because aspects of an FTA, which are customs related, will be dealt with by yesterday’s taxation Bill rather than by today’s Bill. The regulation provisions may therefore need to work in sync.
All hon. Members from both sides of the House have been involved in this, and I thank those who have supported my amendments. The outcome has not been a victory for any Brexit faction; it has been Parliament that has won this debate in upholding its right to review the actions of the Executive. Having said that, I would point out that more than 40 Government amendments were received within the last week. As welcome as they were, and while the principle of them is agreed, the details deserve a review by the other place. I have mentioned the interconnectivity between this Bill and the taxation Bill, and these would be good topics for further review.
Stewart Hosie (Dundee East) (SNP)
I should like to speak to new clause 20, which is in my name and those of my hon. Friends. I shall also speak to new clauses 22, 23 and 24 and make brief reference to new clause 21. New clauses 20 to 24 combined are an attempt to provide and further strengthen a comprehensive framework for future trade negotiations. This is to ensure that the devolved nations are respected, consulted and fully engaged in trade deals, and that their voices and national interests are properly reflected in trade deals, from determining the negotiating mandate right through to reviewing progress on deals after ratification and implementation.
That is important because although the UK devolution Acts grant Westminster full power over international trade, the domestic impact of many trade agreements extends beyond the competence of Westminster. The devolved Administrations have responsibility for a broad range of policy issues including health, education, agriculture and the environment, and many modern trade agreements include provisions with the potential to lower environmental standards, open up public services to privatisation, expand intellectual property rights or risk increasing the cost of medicines. Those agreements can encroach on the devolved Administrations’ policy space, restricting their ability to make public policy in those areas. That is something that none of us wants to see.
Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
My hon. Friend is making an important point, and he is not asking to reinvent the wheel. In Canada, the International Trade Committee heard evidence from John Weekes, who is an ambassador to the World Trade Organisation and also a Canadian negotiator. He said that squaring off the provinces of Canada, though adding to complexity, made for better trade deals and a more harmonious Canada. Canada is obviously more interested in keeping itself together than the current United Kingdom is.
Stewart Hosie
My hon. Friend the Chair of the International Trade Committee makes an important point. We have already seen the impact of sub-state Parliaments in Europe on previous European trade deal discussions. Indeed, my hon. Friend is right that we have seen the impact of provincial governments in Canada, and we would do well to take that on board here. In a sense, that is what my new clauses are about.
New clause 20 sets the role of the devolved Administrations in helping to approve the negotiating mandate. It suggests that a joint ministerial committee on trade be set up with representatives from all the devolved Administrations, that that committee be required to reach consensus on any draft negotiating mandate, and that it be revisited if the mandate changes during the negotiations. New clause 20 also requires that the consent of the Scottish Parliament and the other devolved Administrations be secured specifically for areas under devolved control that may be affected by a trade deal. That is not a veto, as the Labour Front-Bench team would describe it; it represents responsibility for the areas that the devolved Governments have responsibility for. In short, new clause 20 ensures that any negotiating mandate is first approved by the devolved legislatures and that a joint ministerial committee is created to co-operate and agree the mandate.
Several hon. Members rose—
Mr Speaker
Order. We are very constrained for time, and I know that the hon. Member for Gloucester (Richard Graham)—great diplomat of international renown that he is—will not absorb the House’s attention for more than five minutes, but we will savour those five minutes.
Richard Graham (Gloucester) (Con)
Thank you, Mr Speaker. I welcome the Minister’s announcement that today’s debate is about continuity and transparency, but the truth is that it is laced with a cocktail of amendments with very different agendas. The two most popular agendas represent attempts to lock us into either the or a customs union, as in new clause 5, or to secure a customs union were the negotiations to fail to secure frictionless FTAs, which is in new clause 18. That would be the clearest invitation to the European Union to refuse those negotiations. The third one—[Interruption.] Be patient.
Geraint Davies
The hon. Gentleman is referring to new clause 18, which is in the next group. We have limited time and he is talking about the wrong section of the Bill.
Mr Speaker
Forgive me; because I was engaged in discussions at the Chair, I did not notice that. The hon. Member for Gloucester (Richard Graham) must focus with razorlike precision on the matters in this group. If he does not wish to do so, he must wait until we are discussing another group. If he can find a way of delicately relating his concerns to the group with which we are dealing, rather than one with which we are not, that would be in order.
Richard Graham
Thank you, Mr Speaker. If the hon. Member for Swansea West (Geraint Davies) had waited but two seconds, he would have realised that I was precisely there with my third illustration of today’s agendas: the attempts to avoid free trade agreements altogether, of which new clause 3 is the most striking example, or to scrutinise them to death, as set out in new clause 20.
I wish to linger on new clause 3. It may appear to those outside this House that it contains reasonable requirements. It states that Ministers of the Crown should lay a draft of the negotiating mandate, setting out fields, sectors, principles, limits and desired outcomes of agreements that may well be an exact and absolute rollover of existing agreements that were negotiated decades ago. The truth is that this is the “we do not want any free trade agreements” clause. It would frankly be absurd to pretend that we could ever get anything done, given the requirement to ensure that
“between each round of negotiations”
of some 40 agreements
“all documents relating to the negotiations have been made available for scrutiny by select committees”,
unnamed and unnumbered. Those who drafted that new clause would clearly have been against the anti-corn laws of 1832 and against Adam Smith’s “The Wealth of Nations”. They would be against this country actually receiving anything at all in trade, specifically if we manufactured or produced it here in this country. Micro-management would run riot, and it would mean the end of all free trade agreements for all time. I therefore completely reject that approach.
My second point is that what we are talking about tonight ultimately comes down to difficult decisions about what type of nation we want to be when we leave the European Union. It has always been clear to me that if we are to leave the EU, we cannot stay in the or a customs union. It is bizarre that some Opposition Members do not see that our inability to decide our trade preferences, particularly with the poorer nations of the world that are currently disfavoured under the common external tariff regime, could not be significantly improved by having our own free trade agreements.
The next point—the right hon. Member for Twickenham (Sir Vince Cable) is a classic example of this particular school of thought—is that we will not be able to negotiate effective free trade agreements on our own once we have left the European Union and the customs union. I urge all those in this House who believe that to look closely at the potential of the Trans-Pacific Partnership and the warm interest from all those involved in that complicated and important agreement in an area of vital growth to the world. The opportunity for us there is significant. We should not listen to those who put up new clauses that would get rid of free trade agreements forever, and we should seize the opportunities that leaving the customs union will offer us if we are to leave the European Union, which we are.
Geraint Davies
I will be brief. The Trade Bill is of course the latest part of the Brexit fantasy built on the illusion that the trade we lose from the EU will be made up by the US and, in particular in this Bill, by the continuation, without any change, of the existing 14% of our trade with third countries. We know from Donald Trump that we cannot rely on the US. This is about whether we can rely on the 70 countries and 40 agreements to deliver the 14% of our trade in the same way, and the simple fact is that, rather than negotiating as team EU, any country now looking to negotiate against the UK alone is bound to want a new agreement, because we are a much weaker party.
That is why, in speaking to new clause 16, I simply ask that MPs have information about the countries that ask for changes in those agreements. The current Minister and previous Ministers have claimed that no one is asking for any changes, but we already know that both Chile and South Korea are asking for such changes. This is about transparency and scrutiny.
As it stands, the Trade Bill gives Ministers the power to amend domestic law to match any new trading arrangements, so we are talking about Ministers having the right, behind closed doors, to change standards, to change tariffs, to change human rights, to enable visas, to change environmental protections, to undermine public health and to change workers’ rights. [Interruption.] There is a bit of heckling, but the reality is that in bilateral trade agreements if Ministers decide there will be different standards, rights and protections, that may be permitted without the scrutiny of this House. Indeed, tribunals and mechanisms like the investor-state dispute system could be introduced behind closed doors. All new clause 16 says is that there should be scrutiny of that.
Geraint Davies
There is no time for me to give way. All I am asking with my simple amendment is that we have the power to know in advance when people ask for concessions. The Government should accept the amendment, because they claim that nobody is asking for any changes and that it is business as usual. If they deny the amendment, they will just be illustrating that, behind closed doors and under the cloak of darkness, we could see our protections and rights undermined.
Jeremy Lefroy (Stafford) (Con)
In speaking to the amendments on the transparency and scrutiny of free trade agreements, I ask the House to lift its eyes beyond the detailed scrutiny that will inevitably and necessarily take place in this House and consider whether we should not also be looking to join others not in the European Union but in free trade associations.
Pretty much every single country in the world is part of some kind of free trade association, whether a very close one or a much more loose-knit one—whether it is Mercosur in South America, the Common Market for Eastern and Southern Africa or the North American free trade agreement. I therefore ask the Government to look at the European Free Trade Association, which is not synonymous with the EEA or with Switzerland. If it will have us, as I very much hope it will, EFTA would provide the ideal vehicle for both the withdrawal agreement and the transition arrangement of 21 months, during which time we will be members of the EEA, and for the association agreement thereafter.
Angus Brendan MacNeil
The hon. Gentleman is fantastic in making the fundamental point that the rest of the world is in regional trade agreements. He is just about correct. Only five countries are not in regional trade agreements, which is what the UK is heading towards: East Timor, Somalia, South Sudan and, we think, Mauritania—
Mr Speaker
Order. We do not have time for these long interventions. Short question, one sentence. Thank you.
Angus Brendan MacNeil
Does the hon. Member for Stafford (Jeremy Lefroy) think it is incumbent on the UK to think again about being in that company?
Mr Chris Leslie (Nottingham East) (Lab/Co-op)
This group of amendments is about parliamentary scrutiny, and in a way it is a shame that some on this subject are in later groups. The key thing I want is to ensure that appointments to the Trade Remedies Authority are subject to confirmation by the International Trade Committee in the same way that the Treasury Committee has confirmation hearings on the Monetary Policy Committee and the Financial Policy Committee.
New clause 12 gives me a little tickle, a little laugh, because it says that Ministers will now come to report to the House when there are any significant differences in the free trade agreements we have as a member of the EU that will be rolled over. Apparently the agreements will be cut and pasted, and it was only at last year’s Conservative party conference that the Secretary of State for International Trade himself promised that, one second after midnight, all 40 agreements will be rolled over and available from March 2019. Well, it has not quite been going his way, because the Government have not got a single other jurisdiction to sign up legally to doing that.
Several hon. Members rose—
Greg Hands
I welcome the return of the Bill to the House and, perhaps not surprisingly, I support the Government’s approach, having been the Minister responsible for the Bill until about three weeks ago. I commend the approach taken by my successor in moving a number of these issues forward, particularly in his discussions with my hon. Friend the Member for Huntingdon (Mr Djanogly).
Parliamentary scrutiny is crucial for trade agreements, and we have seen the difficulties in recent years with trade agreements that have been insufficiently scrutinised, or where there was a feeling that there had been insufficient scrutiny—the Transatlantic Trade and Investment Partnership perhaps being the most important example.
I very much welcome the Secretary of State’s proposals yesterday for the scrutiny of new trade agreements. Returning to where we started, it is vital to distinguish between the 40-plus existing EU trade agreements and what may happen for future agreements. No one should underestimate the importance of those EU agreements. With Japan being in scope, too, the volume of our trade that is done with countries for which there is an EU trade agreement—that is not the same as saying the volume of trade that is dependent on those agreements—rises to around 16%, which is an incredibly important part of our trade. As we know, none of these countries is in principle opposed to doing and rolling over these agreements. I have had productive talks with South Korea and South Africa, as I am sure my successor has. Various memorandums have been signed agreeing to transition these agreements. So I refer anybody who says that these countries have problems doing that to those agreements that were signed, for example, the one signed with the South African Trade Minister, Rob Davies.
I welcome the approach taken by my hon. Friend the Member for Huntingdon and his agreement that we are now satisfied with and have coalesced around new clauses 12, 13 and 14. We are always trying to get a balance between ensuring that any significant change to a trade agreement is scrutinised by Parliament and not creating a laborious and cumbersome procedure that would potentially jeopardise the future of one or more of those 40-plus agreements. I am delighted that we seem to have reached that agreement. I have visited businesses that are directly impacted by some of these agreements, including the Ford factory just outside Johannesburg, which is very dependent on the EU-South African Development Community agreement, in terms not just of taking components for vehicles from the UK to South Africa, but exporting finished vehicles to the EU. The business voice is very much saying that it wants these agreements to continue—that is business’s principal concern.
Finally, I wish to argue against new clauses 3 and 16, and other proposals that seek to legislate now for future trade agreements. It is only fair that we look at the proposals made by the Secretary of State yesterday in this House and do not prejudge them by passing legislation today, as it would have an impact on future trade agreements. We must make sure we listen to all voices, so that they are included in consideration of where we take future trade agreements.
Several hon. Members rose—
Mr Speaker
Order. I want to call the Minister to wind up at 3.25 pm, and I hope that the hon. Member for Bath (Wera Hobhouse) will take account of that.
Wera Hobhouse (Bath) (LD)
Thank you, Mr Speaker. This Bill would not be needed if we remained in the customs union. The Government are repeating, like an old record, that, “Leaving the EU will transform us into global Britain, striking trade deals around the world. While striking them, we just carry over existing deals.” How realistic is that? Outside the EU, Britain is a much less attractive trading partner. Businesses invest in Britain because we are an entry point to the European market and the single market. Is it reasonable to think that the UK can negotiate alone the same deals it can when part of a bloc of 28 countries? Although some countries have indicated they are prepared to copy and paste over existing deals, others will be watching and waiting, reserving judgment to see exactly what access the UK will have to the EU after Brexit. For that reason, we simply cannot accept that existing trade deals will be copied and pasted; significant changes will come along.
I am pleased that the Government have recognised that Parliament needs some say in the matter by tabling amendment 75 and accepting my amendment 4. However, the Government’s understanding of parliamentary democracy remains pretty poor. Amendment 75 allows MPs to approve, by affirmative statutory instrument, any changes in the law required by one of these continuity deals. It is a take-it-or-leave-it vote. It is not amendable and it is not meaningful. That is why the Government need to meet the concern raised in new clause 3, which stands in the name of the hon. Member for Brighton, Pavilion (Caroline Lucas) and which I support. People voted leave for different reasons, but nobody voted to make themselves poorer, to lose their job or to have food and product safety standards thrown out the back door.
With your permission, Mr Speaker, let me just say something about new clause 2, which is in the final group. The Government must be honest about the impact of any trade deals they sign and Parliament must be able to scrutinise this. The Tory leavers say, “Brexit is the will of the people”, but the Tories are in disarray, trying to work out among themselves what the will of the people actually is. As the chaos and confusion grows, it is time that more Members, on both sides of the House, joined the Liberal Democrats in supporting a people’s vote on the deal. We need to be honest with our constituents about the economic realities of Brexit and then give the people a final say on the deal.
George Hollingbery
I shall try to be brief, Mr Speaker. I thank the Opposition spokesman for his remarks, but I am going to limit my comments in return to saying that I am very disappointed that Labour Front Benchers could not welcome what is undeniably a good and robust scrutiny arrangement. We have hugely improved the position. The House will now have adequate and deep opportunity to challenge the Government’s proposals on any transitioned free trade agreement, and I just think it was a shame they could not say so.
The hon. Member for Brighton, Pavilion (Caroline Lucas) knows very well that this Bill is about the continuity of existing arrangements. The Secretary of State yesterday set out our approach to new trade arrangements in the House, with plans for extensive public consultation, continuous parliamentary engagement and the setting up of the strategic trade advisory group, and clear plans for engagement with the devolved authorities, civil sector and civil society more generally.
My hon. Friend the Member for Huntingdon (Mr Djanogly) asked several questions. I very much welcome his comments on our discussions and the fact that he is prepared to accept our amendments today. I can confirm that not all transitioned agreements will need clause 2 powers to implement changes. I can further confirm that it is not the intention to use powers in clause 2 to implement a transitioned free trade agreement more than once, although of course these will need to remain operable over time. In relation to the clause 2 power, “exceptional” is modelled on the Constitutional Reform and Governance Act 2010 process. The threshold is high and the flexibility provided is simply a matter of prudence. Finally, he asked for reassurance about powers in the European Union (Withdrawal) Act 2018. That Act allows regulations to be made that deal with matters arising from the UK’s exit from the European Union. The implementation of or transition to free trade agreements is not such a matter, so we cannot use that Act for the purpose of implementing a free trade agreement.
The hon. Member for Dundee East (Stewart Hosie) will know only too well that the Bill is about continuity: it is about not our future arrangements but our current arrangements. Yesterday, the Secretary of State comprehensively laid out our plans. We are committed to working with the devolved Administrations on our approach to the implementation of trade agreements that are signed after we have exited the EU, and they will also have a role in shaping the UK’s future trade negotiations. The Department held a successful deep dive on trade with devolved authorities in March 2018. A major outcome of that was the joint agreement on a regularised senior officials meeting, to take place every six weeks between the Department and the devolved authorities. A detailed rolling programme of policy and market-focused roundtables will take place over the rest of 2018. Beyond that, the hon. Gentleman has the reassurances that the Secretary of State gave yesterday on the devolved authorities’ participation. I hope that that at least gives him confidence that the Government are serious about their wish to negotiate with devolved authorities.
George Hollingbery
No, I am afraid I will not.
Finally, I thank my right hon. Friend the Member for Chelsea and Fulham (Greg Hands); my hon. Friends the Members for Chichester (Gillian Keegan) and for Gloucester (Richard Graham); and the hon. Members for Swansea West (Geraint Davies), for Nottingham East (Mr Leslie) and for Bath (Wera Hobhouse) for their contributions to the debate.
Question put and agreed to.
New clause 12 accordingly read a Second time, and added to the Bill.
New Clause 13
Reporting requirement not to apply in exceptional cases
“(1) Section (Report on proposed free trade agreement) does not apply to a free trade agreement if a Minister of the Crown is of the opinion that, exceptionally, the agreement needs to be ratified without laying before Parliament a report which meets the requirements of subsection (3) of that section.
(2) If a Minister determines that a free trade agreement is to be ratified without laying before Parliament a report which meets the requirements of section (Report on proposed free trade agreement)(3), the Minister must, as soon as practicable after the agreement is ratified, lay before Parliament—
(a) a report which meets those requirements, and
(b) a statement indicating that the Minister is of the opinion mentioned in subsection (1) and explaining why.”—(George Hollingbery.)
See Member’s explanatory statement for NC12.
Brought up, read the First and Second time, and added to the Bill.
New Clause 14
Report to be laid with regulations under section 2(1)
“(1) This section applies where a Minister of the Crown proposes to make regulations under section 2(1) for the purpose of implementing a free trade agreement to which the United Kingdom and another signatory (or other signatories) are signatories.
(2) A draft of the statutory instrument containing the regulations may not be laid before Parliament unless, at least 10 Commons sitting days before the draft is laid, a Minister of the Crown has laid before Parliament a report which gives details of, and explains the reasons for, any significant differences between—
(a) the trade-related provisions of the free trade agreement to which the United Kingdom and the other signatory (or other signatories) are signatories, and
(b) the trade-related provisions of the existing free trade agreement.
(3) Subsection (2) does not apply if, at least 10 Commons sitting days before a draft of the statutory instrument containing the regulations is laid, a report in relation to the agreement has been laid before Parliament under section (Report on proposed free trade agreement)(3).
(4) In this section—
‘Commons sitting day’ means a day on which the House of Commons begins to sit;
‘the existing free trade agreement’ means the free trade agreement to which the European Union and the other signatory (or other signatories)—
(a) were signatories immediately before exit day, or
(b) where the report is laid before Parliament before exit day, are signatories on the day the report is laid before Parliament;
the ‘trade-related provisions’ of a free trade agreement are the provisions of the agreement that mainly relate to trade.”—(George Hollingbery.)
This new clause requires a Minister to lay a report before Parliament at least 10 Commons sitting days before regulations implementing a new free trade agreement are laid in draft under clause 2(1). The report is required to explain any significant differences between the new agreement and the existing agreement with the EU. The duty to lay a report does not apply if a report on the agreement has already been laid under NC12.
Brought up, read the First and Second time, and added to the Bill.
New Clause 3
Free trade agreements: Parliamentary scrutiny and consent
“(1) The Secretary of State shall not commence negotiations relating to a free trade agreement unless—
(a) a Minister of the Crown has laid before Parliament a sustainability impact assessment conducted by a credible body independent of government following consultation with—
(i) each devolved authority,
(ii) public bodies, businesses, trade unions and non-governmental organisations which, in the opinion of the Minister, have a relevant interest, and
(iii) the public,
and the assessment shall include both qualitative and quantitative assessments of the potential impacts of the proposed trade agreement, including social, economic, environmental, gender, human rights, labour, development and regional impacts,
(b) a Minister of the Crown has laid before Parliament a draft of a negotiating mandate relating to the proposed trade agreement, setting out—
(i) all fields and sectors to be included in the proposed negotiations,
(ii) the principles to underpin the proposed negotiations,
(iii) any limits on the proposed negotiations, and
(iv) the desired outcomes from the proposed negotiations, and
(c) the House of Commons has approved by resolution a motion, drafted in terms which permit amendment, setting out a proposed negotiating mandate and authorising the Secretary of State to enter negotiations on the proposed trade agreement on the basis of that mandate, and the House of Lords has approved a resolution in the same terms as that approved by the House of Commons.
(2) The United Kingdom may not become a signatory to a free trade agreement unless—
(a) during the course of the negotiations, the text of the trade agreement as so far agreed or consolidated has been made publicly available within ten working days of the close of each negotiating round,
(b) between each round of negotiations, all documents relating to the negotiations have been made available for scrutiny by select committees in both Houses of Parliament,
(c) upon conclusion of the negotiations, the House of Commons has approved by resolution a motion, drafted in terms which permit amendment, setting out the text of the trade agreement as negotiated and authorising the Secretary of State to sign the proposed agreement, and the House of Lords has approved a resolution in the same terms as that approved by the House of Commons, and
(d) the text of the trade agreement includes provision for a review of the operation and impacts of the agreement no later than ten years after the day on which the agreement comes into force.”—(Caroline Lucas.)
This new clause would ensure that all new free trade agreements are subject to parliamentary scrutiny and consent.
Brought up, and read the First time.
Question put, That the clause be read a Second time.
Toby Perkins (Chesterfield) (Lab)
On a point of order, Mr Speaker. There is a great deal of concern across Parliament about the mysterious disappearance of the right hon. Member for Twickenham (Sir Vince Cable). He has been missing since last night. This morning, he was texting about being the only person really fighting Brexit. I just wonder if you and the parliamentary authorities could ascertain his whereabouts and whether he is indeed safe, and report back to me and all those people who are so concerned.
Mr Speaker
I would not want to take upon my shoulders such a major responsibility. I must advise the hon. Gentleman that I wish all the best to the right hon. Member for Twickenham (Sir Vince Cable). I have no reason to be perturbed on his account. I am not aware that he is indisposed, and I very much hope that he is not. The right hon. Member for Carshalton and Wallington (Tom Brake) is beaming in a mildly eccentric manner from a sedentary position.
Tom Brake
Further to that point of order, Mr Speaker. Thank you for letting me raise this. On the same subject, have you had any concerns raised with you about the absence of the Leader of the Opposition in relation to fighting against Brexit for the past two years? Has anyone shared any concerns that they may have on that score?
Mr Speaker
I am not concerned unduly about either matter. They do not fall within the auspices of the Chair, but the point has been made by each right hon. and hon. Member, and I trust that we can leave it there.
Schedule 2
Regulations under Part 1
Amendments made: 4, page 12, line 5, leave out “or 2(1)”.
Amendment 71, page 12, line 7, leave out “or 2(1)”.
This amendment is consequential on Amendment 75.
Amendment 72, page 12, line 11, leave out “or 2(1)”.
This amendment is consequential on Amendment 75.
Amendment 73, page 12, line 13, leave out “or 2(1)”.
This amendment is consequential on Amendment 75.
Amendment 74, page 12, line 20, leave out “or 2(1)”.
This amendment is consequential on Amendment 75.
Amendment 75, page 13, line 30, at end insert—
Part 2A
Scrutiny of regulations under section 2(1)
Scrutiny of regulations made by Minister of the Crown or devolved authority acting alone
“3A (1) A statutory instrument containing regulations of a Minister of the Crown under section 2(1) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.
(2) Regulations of the Scottish Ministers under section 2(1) are subject to the affirmative procedure (see section 29 of the Interpretation and Legislative Reform (Scotland) Act 2010 (asp 10)).
(3) A statutory instrument containing regulations of the Welsh Ministers under section 2(1) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the National Assembly for Wales.
(4) Regulations of a Northern Ireland department under section 2(1) may not be made unless a draft of the regulations has been laid before, and approved by a resolution of, the Northern Ireland Assembly.
(5) This paragraph does not apply to regulations to which paragraph 3B applies.
Scrutiny of regulations made by Minister of the Crown and devolved authority acting jointly
3B (1) This paragraph applies to regulations of a Minister of the Crown acting jointly with a devolved authority under section 2(1).
(2) The procedure provided for by sub-paragraph (3) applies in relation to regulations to which this paragraph applies as well as any other procedure provided for by this paragraph which is applicable in relation to the regulations concerned.
(3) A statutory instrument which contains regulations to which this paragraph applies may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.
(4) Regulations to which this paragraph applies which are made jointly with the Scottish Ministers are subject to the affirmative procedure.
(5) Section 29 of the Interpretation and Legislative Reform (Scotland) Act 2010 (asp 10) (affirmative procedure) applies in relation to regulations to which sub-paragraph (4) applies as it applies in relation to devolved subordinate legislation (within the meaning of Part 2 of that Act) which is subject to the affirmative procedure (but as if references to a Scottish statutory instrument were references to a statutory instrument).
(6) Section 32 of the Interpretation and Legislative Reform (Scotland) Act 2010 (laying) applies in relation to the laying before the Scottish Parliament of a statutory instrument containing regulations to which sub-paragraph (4) applies as it applies in relation to the laying before the Scottish Parliament of a Scottish statutory instrument (within the meaning of Part 2 of that Act).
(7) A statutory instrument containing regulations to which this paragraph applies which are made jointly with the Welsh Ministers may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the National Assembly for Wales.
(8) Regulations to which this paragraph applies which are made jointly with a Northern Ireland department may not be made unless a draft of the regulations has been laid before, and approved by a resolution of, the Northern Ireland Assembly.” —(George Hollingbery.)
This amendment provides for regulations under clause 2(1) of the Bill (implementing international trade agreements) to be subject to the affirmative procedure in Parliament when made by a Minister of the Crown, and in the relevant devolved legislature when made by a devolved authority. Where the regulations are made jointly by a Minister and a devolved authority (by virtue of paragraph 5 of Schedule 1) they are required to be approved in draft by both Parliament and the devolved legislature in question.
New Clause 4
Convention about Parliament legislating on devolved matters
“(1) Regulations made under section 1(1) by a Minister of the Crown, may not normally make provision which would be within the devolved competence of a devolved authority unless—
(a) so far as they contain provision which would be within the devolved competence of the Scottish Ministers (within the meaning given in paragraph 7 of Schedule 1), the Scottish Ministers consent, or
(b) so far as they contain provision which would be within the devolved competence of the Welsh Ministers (within the meaning given in paragraph 8 of Schedule 1), the Welsh Ministers consent, or
(c) so far as they contain provision which would be within the devolved competence of a Northern Ireland department (within the meaning of paragraph 9 of Schedule 1), unless the Northern Ireland department has given consent.
(2) Regulations made under section 2(1) by a Minister of the Crown, may not normally make provision which would be within the devolved competence of a devolved authority unless—
(a) so far as they contain provision which would be within the devolved competence of the Scottish Ministers (within the meaning given in paragraph 7 of Schedule 1), the Scottish Ministers consent, or
(b) so far as they contain provision which would be within the devolved competence of the Welsh Ministers (within the meaning given in paragraph 8 of Schedule 1), the Welsh Ministers consent, or
(c) so far as they contain provision which would be within the devolved competence of a Northern Ireland department (within the meaning given in paragraph 9 of Schedule 1), unless the Northern Ireland department has given consent.
(3) This paragraph does not apply to regulations made by the Secretary of State under—
(a) section 35 or 58 of the Scotland Act 1998 (as amended),
(b) section 82 or 114 of the Government of Wales Act 2006 (as amended), or
(c) section 25 or 26 of the Northern Ireland Act 1998 (as amended).”—(Barry Gardiner.)
This new clause would ensure that regulations made by a Minister of the Crown within devolved competence require the consent of Ministers in devolved authorities in accordance with the convention about Parliament legislating on devolved matters while making clear that this does not alter the current powers of Ministers of the Crown in respect of international agreements.
Brought up, and read the First time.
Barry Gardiner (Brent North) (Lab)
I beg to move, That the clause be read a Second time.
Mr Speaker
With this it will be convenient to discuss the following:
New clause 21—Right of devolved authorities to appoint negotiators—
“(1) Each devolved authority shall have the right to appoint one member of any delegation tasked with negotiating an agreement with another state on behalf of the UK if that agreement falls within section 2(2).
(2) A devolved authority shall not make an appointment under subsection (1) unless the person appointed is reasonably competent to carry out the role of a trade negotiator.”
This new clause would permit the devolved authorities to each appoint one member of any negotiating delegation and would ensure that the person appointed is competent to carry out the role.
Amendment 25, in clause 1, page 1, line 15, at end insert—
“(1A) No regulations may be made under this subsection by a Minister of the Crown, so far as they contain provision which would be within the devolved competence of the Scottish Ministers (within the meaning given in paragraph 7 of Schedule 1), unless the Scottish Ministers consent.
(1B) No regulations may be made under this subsection by a Minister of the Crown, so far as they contain provision which would be within the devolved competence of the Welsh Ministers (within the meaning given in paragraph 8 of Schedule 1), unless the Welsh Ministers consent.”
This amendment and Amendment 26 seek to ensure that regulations cannot be made without consent from devolved Ministers.
Amendment 26, in clause 2, page 2, line 40, at end insert—
“(7A) No regulations may be made under subsection (1) by a Minister of the Crown, so far as they contain provision which would be within the devolved competence of the Scottish Ministers (within the meaning given in paragraph 7 of Schedule 1), unless the Scottish Ministers consent.
(7B) No regulations may be made under subsection (1) by a Minister of the Crown, so far as they contain provision which would be within the devolved competence of the Welsh Ministers (within the meaning given in paragraph 8 of Schedule 1), unless the Welsh Ministers consent.”
See explanatory statement for Amendment 25.
Amendment 27, in clause 2, page 3, line 3, at end insert—
“(10) No regulations may be made under subsection (8)(b) unless the Secretary of State has consulted with the Scottish Ministers and the Welsh Ministers.”
This amendment would require the Secretary of State to consult with Scottish Ministers and Welsh Ministers before deciding whether or how to prolong the period during which implementing powers can be used.
Government amendments 49, 50 and 61 to 63.
Amendment 28, in schedule 1, page 7, line 24, at end insert—
“(4) This paragraph does not apply to regulations made under section 1(1) or 2(1) by the Scottish Ministers or the Welsh Ministers.”
This amendment would remove the constraints on Scottish and Welsh Ministers in making regulations under this Act which modify retained EU law.
Government amendments 64 to 67.
Amendment 29, in schedule 1, page 8, line 5, at end insert—
“(4) This paragraph does not apply to regulations made under section 1(1) or 2(1) by the Scottish Ministers or the Welsh Ministers.
Requirement for consultation in certain circumstances
3A (1) No regulations may be made by the Scottish Ministers or the Welsh Ministers acting alone under section 1(1) or 2(1) so far as the regulations are to come into force before exit day unless the regulations are, to that extent, made after consulting with a Minister of the Crown.
(2) No regulations may be made by the Scottish Ministers or the Welsh Ministers acting alone under section 2(1) so far as the regulations make provision about any quota arrangements or are incompatible with any such arrangements unless the regulations are, to that extent, made after consulting with a Minister of the Crown.
(3) In sub-paragraph (2) ‘quota arrangements’ has the same meaning as in paragraph 3.”
This amendment would follow amendments made to the EU (Withdrawal) Bill to replace a requirement to seek the consent of the UK Ministers before making regulations to be commenced before exit day, or regulations making provision about quota arrangements, with a requirement to consult.
Government amendments 68, 69 and 76 to 78.
Barry Gardiner
I rise to speak to new clause 4, which stands in my name and those of my right hon. and hon. Friends.
The extent to which the Bill encroaches on matters of devolved competence and undermines the power of devolved authorities is of particular concern. I am proud that it was a Labour Government who delivered the devolution settlements. They were established with a presumption of full devolution, except in matters considered reserved to the Government of the United Kingdom. Indeed, amendments to devolution legislation contained in the Scotland Act 2016 and the Wales Act 2017 specifically put that presumption on to a legislative footing, stipulating that Ministers would not legislate on matters that fell within devolved competence without “normally” seeking the consent of the appropriate devolved Government. However, the Bill seeks to do exactly that.
The Public Bill Committee heard in great detail the serious consequences the Bill would have for the United Kingdom and each of the devolved nations and their respective Administrations.
Barry Gardiner
A little later.
Certainly, my good friend the shadow Secretary of State for Scotland has impressed on me the deficiencies of the Government’s approach, and it is with her strong advice that I have sought, in consultation with the shadow Secretaries of State for Wales and Northern Ireland, to propose a strong new clause that absolutely and even-handedly respects the devolution settlements and the Sewel convention.
Barry Gardiner
Once I have explained a little bit about what new clause 4 would do, I will happily give way to the hon. Gentleman.
The provisions in clauses 1 and 2, taken with the Government’s latest amendment 34, would allow the Government in Westminster to use Henry VIII powers to modify primary legislation or retain direct EU legislation in areas of devolved competence, such as procurement, agriculture and food standards, without the consent of the relevant devolved authority—even without any consultation. That goes far beyond the convention of not “normally” legislating in matters of devolved competence without such consent.
Just as the Government have erred on one side by proposing in the Bill a disrespectful power grab downwards into areas of devolved competence, so the Scottish National party, in seeking to amend the Bill, have erred in the other direction by failing to respect the boundaries of the devolution settlement and seeking a power of veto and co-decision making in matters that were always reserved to the United Kingdom sovereign Parliament. We must be clear that international trade is a matter of exclusive competence of the UK Government. At no stage has any devolved authority had any competence in respect of matters of international trade, but I will deal with the Government’s amendments first.
Modern trade agreements are so complex and so extensive that there are areas where matters of trade competence do cross over into matters that would otherwise be devolved competence: food standards, animal welfare standards, access to fishing waters, determination of regulatory and oversight bodies, and so on. All these are the substance of international trade agreements, and where such agreements have been negotiated, a devolved authority is entirely right to consider that its consent must be sought prior to regulations to implement the agreement on such matters being made in accordance with the powers in the Bill.
That the Bill allows for Ministers to act in contravention of that convention and without seeking consent from or even consulting the relevant devolved authority is precisely why neither the Welsh nor the Scottish Government have agreed to give the Bill their legislative consent. That is why Labour said in Committee that it would table an amendment to require the convention to be observed, while ensuring that no power of veto was afforded to a devolved Government on matters that were the exclusive competence of Her Majesty’s Government.
Barry Gardiner
I am just about at the point where I will.
Our new clause 4 would achieve this by setting out that normally the Government must seek the consent of the devolved Governments before making such regulations, ensuring that the convention is protected in the Bill, while similarly allowing the Government to use existing powers where a devolved Government act or—importantly—fail to act in such a way that ensures the UK is in compliance with its legally binding obligations arising from an international trade agreement.
Stewart Hosie
The hon. Gentleman is getting this completely wrong. The Scottish Government do not want a veto; the Scottish National party does not want a veto. We recognise that trade is a reserved matter. Our amendments simply say that Scottish Ministers should be consulted, or their consent sought, when UK policy intersects with devolved policy. This is not a veto on a reserved matter. It is common sense. It is equality—it is parity—in respect of implications for devolved matters. Labour Members should go back to the drawing board, because they are simply getting it wrong.
Barry Gardiner
I note the hon. Gentleman’s objections. We clearly have a different view of the nature of the devolution settlement. I will try to take his amendments in turn and explain to him precisely why I believe that he is mistaken.
Let us imagine circumstances in which a devolved Administration simply failed to introduce implementing regulation to an aspect of a trade treaty that that Administration did not like. It would be the UK Government, not the devolved Administration, who were held to be in breach and subject to any penalties that might be imposed. That is why the relevant devolution Acts provide that—not “normally”, but in such exceptional circumstances—the UK could implement such regulations without consent to ensure that the UK complied with its international obligations.
Of course, other amendments have been tabled on these issues. New clause 20, tabled by SNP Members, calls for the devolved authorities to have a right to vote on whether Her Majesty’s Government may exercise what is currently the Government’s exclusive competence to begin trade talks. Our new clause states that negotiating mandates should be formulated transparently and with formal engagement with key stakeholders, including the devolved authorities. However, a right of veto on whether trade talks can begin is a power that no legislature in the country—including the House of Commons—currently has, and it would constitute a substantial new power for the devolved authorities.
Mr Paul Sweeney (Glasgow North East) (Lab/Co-op)
My hon. Friend’s definition of a veto seems to be disputed by the Scottish National party. Does he agree that, in terms of initiating as well as ratifying any trade negotiations, if the Scottish Parliament withholds its consent, that is, in effect, a veto?
Barry Gardiner
My hon. Friend has put it very succinctly, and he is absolutely correct. That is why the SNP’s new clause 20 does not respect the devolution agreements; nor is it about ensuring that devolved authorities have a say. If that were the case, I would have expected SNP Members to support the amendment that we tabled in Committee, which called for the Joint Ministerial Committee to be convened to consult on the implementation of regulations under the Bill and on negotiations on future trade agreements. Indeed, our new amendment 19 would ensure that such consultation frameworks are established.
Similarly, in new clause 21, the SNP has sought to ensure that each devolved authority takes aspects of trade competence from Her Majesty’s Government and to provide for devolved authorities to have their own appointed trade negotiators at trade talks. Our new clause 4 could does not support that, because it could ultimately lead to several trade negotiators’ working against each other to secure the best terms only for their respective territories. Such a bunfight at the negotiating table would allow negotiating partners to play our own negotiators off against each other.
We believe that trade deals must ensure that benefits are delivered across the United Kingdom and that a whole UK approach must be taken to negotiations. That is why we have called for advanced consultation to ensure full and proper representation in those negotiations. It is also why we would have been happy to support new clause 22 had it been put to the vote. It sought to ensure transparency on trade talks, and it would have afforded a right to the devolved Parliaments to scrutinise all aspects of a trade agreement and related correspondence or documents as they so required.
Our new clause 4 would absolutely guarantee the right of consent to devolved Administrations whenever a Government sought to implement regulations to carry out their obligations under international treaties. What it would not do is give the devolved Administrations a power of veto over the ratification of international treaties, the negotiation of which is a matter for the Westminster Government. SNP Members would seek to secure the ultimate power of veto that has thus far eluded them in other amendments and that they have been very clear about seeking.
Barry Gardiner
I am pressed for time. I know that you want me to conclude my remarks very shortly, Madam Deputy Speaker.
While other amendments are about consent before the making of regulations implementing obligations arising under a trade agreement, that clause would prevent the trade agreement from ever having legal effect, as it could not be ratified unless the devolved authorities had consented. It has been carefully worded, but its intent is clear: it is not limited only to matters of devolved competence, but covers all trade agreements in their entirety even if no aspect of that agreement would touch on devolved competence and even if absolutely no regulations were required to implement that agreement. New clause 23(3)(b) would ensure that any trade agreement
“having an impact within the territory over which the devolved authority presides”
was subject to this consent power. Quite clearly, every single trade agreement will be, as there will be exporters across the UK who can trade under the terms of that agreement. It is a thinly veiled attempt at securing the Wallonian veto power that the hon. Member for Kilmarnock and Loudoun (Alan Brown) told us in the Committee was his intention.
The Committee took many more pieces of evidence. I will not detain the House with them today, but simply say that new clause 4 absolutely respects the devolution settlement. It sets out the right relationship so that Government cannot overreach into devolved competence nor the devolved authorities reach up into powers that are reserved for this sovereign Parliament.
I also support new clause 19, but I will not detain the House any longer.
Stewart Hosie
I shall speak to amendment 25 in my name and to amendments 26, 27, 28 and 29. New clause 21 is in this group, but I referred to it earlier so will not do so again now.
First, however, let me make an observation about the Labour party’s position. It seems to rely on the new form of words that the UK Government would not normally legislate or do this or do that in relation to anything that was a devolved competence. If we were talking about normal, reasonable people in normal, sensible times when they did not interfere at all except in extremis, perhaps we could accept that. However, they have taken the Scottish Government to court to undermine a democratic decision of the Parliament, so, of course, we accept the principles of devolution, but to make them work there now must be formal arrangements and consent must be sought. We can no longer rely on the formulation of the UK Government not normally doing x, y or z.
Angus Brendan MacNeil
Does it not also show, sadly, a centrist approach from the Labour party, which cannot adopt the maturity of Trudeau’s Canada and scoffs at the fact that Belgium is not such a control-freak state that it can allow Wallonia some say in the governance of Belgium?
Stewart Hosie
“International” only goes so far—perhaps just to the white cliffs of Dover.
The Trade Bill among other things ensures that the UK can implement any procurement obligations that arise from it being a member of the GPA—agreement on Government procurement—in its own right and ensures that agreements with partner countries corresponding to the EU’s free trade agreements are in place prior to Brexit. If that is all the Bill did, and it maintained all the rights and responsibilities, it might not be great, but it would make sense and probably go through on the nod. The problem is that it goes further than that: it carries on from the provisions in the EU withdrawal Bill limiting the actions of the Scottish Government and other devolved Administrations in areas that are, or ought to be, devolved, and—this goes to the first point about the GPA—that includes procurement.
That is why when the Scottish Government lodged a legislative consent motion in the Scottish Parliament initially, it explained their objections to the Trade Bill with the recommendation that Parliament could not consent to it being introduced. While they welcomed the powers being conferred on Scottish Ministers, the LCM made it clear that they could not accept the constraints placed on the use of those powers, which were analogous to those in the EU withdrawal Bill.
Legislative consent is required for part 1 of the Bill, but is not required for some of the other parts. Specifically, consent is required for the purposes within the devolved competence of the Parliament, which is that the Trade Bill seeks to maintain continuity in the UK’s trade and investment relationships through two implementation powers: implementation of the agreement on Government procurement as an independent member of the WTO; and assisting in the transition of current trade arrangements by enabling, so far as may be required, the implementation in UK domestic law of trade agreements the UK intends to conclude after withdrawal from the EU. These powers may be exercisable within devolved areas, and that is why this is important.
John Redwood (Wokingham) (Con)
I want to be able to understand whether this is a real problem. Can the hon. Gentleman give me a specific example of where he thinks the UK Government might assert a power that they should not assert, and how that might arise?
Stewart Hosie
That is a reasonable question, and I will answer it properly. Clearly we cannot tell precisely where the problems will arise, because we do not yet know precisely what the UK Government might do. Having said that, the Bill gives back to Ministers discretionary powers over procurement. In Scotland, because of the actions taken there, 78% of publicly procured contracts go to small and medium-sized enterprises, 60% to Scottish SMEs. The UK Government figure is 20%. If that power is taken back, and if oversight is retained by Westminster, there would be a real risk that we could lose that economic diversity and that fantastic achievement in a real-life area. That is a real concern that I hope the right hon. Gentleman will share.
I shall turn briefly to the amendments. Amendments 25 and 26 seek to address an issue in the Bill that has a direct read-across to clauses in the European Union (Withdrawal) Act 2018 that confer powers on UK Ministers in devolved areas without any form of devolved consent. No amendments have been made to the Act to alter that approach or to require the consent of Scottish Ministers when UK Ministers make regulations in devolved areas. Amendments 25 and 26 seek to ensure that the UK Government seek consent from devolved Ministers before amending legislation in devolved areas.
Before I move on, I meant to say that I recognise that Government amendments 64 and 66, and consequential amendments 65 and 67, now require Scottish Ministers only to consult and not to seek consent in certain areas. However, the number of areas is limited, and the amendments do not address all the problems.
Amendment 27 requires the Secretary of State to consult Scottish Ministers before deciding whether, or for how long, to prolong the period during which implemented powers can be used. That is important because there is no equivalent provision in the European Union (Withdrawal) Act 2018, and because no amendment has been made to the existing provisions in the Trade Bill that allow the UK Government unilaterally to alter the powers of Scottish Ministers in relation to grandfathering trade arrangements for further periods of up to five years at a time.
At present, it is envisaged that the powers in the Trade Bill relating to the grandfathering of existing free trade arrangements with third countries would have to be used in only a very small number of cases that could not be dealt with under the European Union (Withdrawal) Act—for example, for reasons of timing. However, with so much uncertainty around the ease with which existing agreements will be rolled over, it is possible that this restriction could have a more significant impact, not least because many of the 24 areas likely to be subject to the clause 11 regulations—that is, the power grab—are highly relevant to the world of trading and trade deals. If left unamended, or amended only along similar lines to the amendments in the withdrawal Act, this provision in the Trade Bill would in effect allow the UK Government to change the law in devolved areas to allow for the implementation of these arrangements, which might not necessarily remain exactly as they are at present. In essence, that is close enough to having an ability to implement a new trade Bill with almost no consultation or consent at all. Our amendment 28 deals with that problem.
Amendment 29 is small and seeks a direct read across from the European Union (Withdrawal) Act 2018. It would replace the need for consent from UK Ministers in certain circumstances with the need only to consult. As I said, I note the Government amendments in that regard.
We are not arguing for vetoes for Scotland nor for any sense of Scottish exceptionalism; we are simply looking at the facts, understanding what is going on and what needs to happen. If Scottish Ministers are required to consult or seek consent when Scottish parliamentary responsibilities intersect with UK responsibilities, we are simply arguing that UK Ministers should be under the same obligation to consult or seek consent where UK policy responsibilities intersect with those of the devolved Administrations. It was said in the last debate that that happens with the Parliaments of Belgium, and it also happens with the Canadian provinces. The world does not collapse when proper respect and statutory weight is given to the rights and responsibilities of sub-state administrations. It is common sense. We are trying to improve the situation to make it work and to ensure that our voices and our national interests are protected and that the rights of the devolved Administrations are respected.
Time is short, and we do not want many votes on this group so as to allow time for the last group, particularly new clause 18, which needs to be properly debated, but I hope to press amendment 25 to a vote.
Kirsty Blackman (Aberdeen North) (SNP)
I will not speak for long because our Front-Bench spokesperson, my hon. Friend the Member for Dundee East (Stewart Hosie) has covered the issues well, but I want to talk briefly about why it is important that the Scottish Parliament, Scottish Ministers and the Scottish people in general should have more of a say in deals going forward than is proposed by the UK Government.
In recent times, the UK Government have not had responsibility for signing off and negotiating trade deals. They have not been the key player. Therefore, they have not been able to undertake some of the practices that we think they could undertake, so it is understandable that the Scottish people are worried given that we have been monumentally badly served by the UK Government over decades. Just look at the roll-out of universal credit, the bedroom tax, the rape clause and the passage of the European Union (Withdrawal) Act 2018—legislation that happened despite the Scottish Parliament refusing consent. All those things show the ways in which the UK Government are badly serving Scotland.
Until I was an MP, I genuinely thought that the UK Government were, at times, probably trying their best. When I got elected to this place, I discovered that when the UK Government propose legislation and we say to them, “Have you thought about how this will affect Scotland?” the answer is not that they are trying to do anything bad, it is just that they forget we exist. They just do not even consider the views of Scotland or the differences in Scotland. Look at how the common fisheries policy has been negotiated by the UK Government, for example. The way that the Government negotiated swaps removed quota rights from Scottish fishermen to the benefit of fishermen in the south of England. Such choices made by the UK Government have a direct negative impact on Scottish people. On that basis, it is understandable that we are worried that the UK Government will not take decisions in Scotland’s best interests because they may simply forget that we exist.
John Redwood
Does the hon. Lady understand that the common fisheries policy and international trade deals have been entirely in the power of the European Union? To the extent that they do not suit Scotland, it is the EU’s fault. Can she not see that power is coming back to the benefit of Scotland and the United Kingdom?
Kirsty Blackman
Perhaps the right hon. Gentleman did not hear what I said. The issue is that the UK Government have chosen to negotiate swaps that directly disadvantage Scottish fishermen. The concern is that the weight of the population in the south of England will mean that the UK Government continue to take decisions that improve life for people in the south of England without taking account of the fact that those decisions are detrimental to people in Scotland.
The amendments we have tabled would therefore ensure that, in decisions that are taken in this place—decisions on which the UK Parliament will have more power than it has had in recent decades—the voice of Scotland is heard, because we need decisions that do not disadvantage the people of Scotland.
Angus Brendan MacNeil
You catch me finishing off a Trebor extra-strong mint, Madam Deputy Speaker, and very nice it was, too.
At a time when the House is investigating bilateral trade agreements, my hon. Friend the Member for Aberdeen North (Kirsty Blackman) made the fantastic point that for 40 years the UK Government stipulated in their bilateral trade agreements, “London airports only.” It was only when they demanded that Iceland should fly to London airports and Iceland said, “There is no way we’re flying to a London airport to get the sleeper back to Glasgow,” that some change was brought about—that was relayed to me by the Icelanders themselves.
Trade agreements, by their very nature, require trade-offs, and there should be aggregate gains to the two parties involved. Within those aggregate gains, there will be people in certain sectors who lose. My International Trade Committee heard about that from Kevin Roberts of Meat Promotion Wales. He told us that some 80% of Wales is either upland hills or pasture and is suitable only for livestock farming, which is a fragile sector. About 80% of the net farm incomes of Wales come from EU subsidies, which is another matter.
Let us consider a situation in which the UK Government find themselves in a trade negotiation with somebody who says, “Do you know what? See if you could let us have some access to your market for our lamb and we’ll give you something else.” Wales would lose out. The aggregate gain to UK GDP would be increased—the right hon. Member for Wokingham (John Redwood) spoke on this point—but there would be a loss to Wales and there would be resentment in the UK to fiscal transfers back to Wales, which had sacrificed and given up things for the aggregate gain of the UK as a unit. That is one reason why many countries do not have the control freakery of the Labour and Conservative parties and allow territories, states and subnational Governments to have a voice at the table.
We should remember that Wales is not a member of the UK in the same way as Ireland is a member of the European Union. Ireland, as we have seen week in and week out, day in and day out, month in and month out, and hour in and hour out, has a real voice in Europe. In fact, some Brexiteers complain that Ireland is now the tail that wags the EU dog. If only that were a possibility for Wales, Scotland or Northern Ireland within the UK, there might not then be the concerns that my hon. Friend the Member for Dundee East (Stewart Hosie) raised. That is why there should be some responsibility and some form of acknowledgement from the big beast of the UK—England, or the south-east of England—that it might gain from a free trade agreement at the expense of other places. We need some counterbalancing measures.
In a way, the Brexiteers are constitutional gold dust, because I want to see Scotland catching up with Ireland at the top of the EU growth league, rather than being at the bottom with the UK. This is putting a strain on the United Kingdom. As Laura Dunlop, QC, told the Exiting the European Union Committee:
“At the moment, there is a sense of a double-whammy: that the international arrangements, whatever they are going to be, will be negotiated by the UK Government, and then the UK Government will be telling the devolveds what they have to do to comply with them. The participation is minimal.”
That is an unsustainable way forward. It does not respect the words we heard in 2014, “Scotland, stay in and lead. Do not just be a part; lead the UK.” When push comes to shove, as we have seen all the way through the European Union withdrawal process, Scotland is shoved to one side. It is all rhetoric. If the Government had the grace to put some of their rhetoric into action, they would be accepting some of the amendments here today. This is not big stuff in any other country, so why is it a big deal in the centralised UK, both to the Tory Government and, sadly, to the Labour Opposition, who feel that they must also adopt the centralising approach? It is really disappointing from both of them.
George Hollingbery
It is important to reiterate that the Government are committed to ensuring that withdrawal from the EU is a successful and smooth process for the whole of the UK. As set out in our trade White Paper, our intention, working closely with the devolved Administrations, is to seek to transition all existing EU trade agreements and other EU preferential arrangements.
Hywel Williams (Arfon) (PC)
In a reply to my hon. Friend the Member for Ceredigion (Ben Lake) yesterday, the Secretary of State said the following in respect of having agreements ratified by the devolved legislatures:
“I would imagine that, in line with other agreements, we would seek legislative consent from the devolved Administrations where there were elements in which they were required to apply parts of those negotiations.”—[Official Report, 17 July 2018; Vol. 645, c. 51.]
Is that the Government’s settled view on this matter? Notwithstanding the shortness of time, will the Minister give us a brief example of how that would apply?
George Hollingbery
I thank the hon. Gentleman for his question. What I can say on that is that the Scottish National party has already welcomed a number of measures in the Bill today. The negotiations are ongoing with the Welsh Government and I would hope that in due course we will reach those legislative consent motions.
As I was saying, this will ensure that England, Scotland, Wales and Northern Ireland maintain the greatest amount of certainty, continuity and stability in our trade and investment relationships for our businesses, citizens and trading partners. I am certain that all Members across the House support the importance of maintaining these trading opportunities for business across the UK, such as we see with the 10% of Scotch whisky exports that go to countries with which we wish to transition existing trade agreements. As parts of these agreements will touch on devolved matters, this legislation creates powers for devolved Administrations to implement them. These powers will be held concurrently by the devolved Administrations and the UK Government. That approach will ensure that where it makes practical sense for regulations to be made once for the whole UK, it is possible for this to happen. However, in the trade White Paper, and throughout the Committee stage, the Government have publicly and repeatedly committed to not normally use the powers in the Bill to amend legislation in devolved areas without the consent of the relevant devolved Administrations—and not without first consulting them. I make that commitment again today. As such, new clause 4 is unnecessary.
Barry Gardiner
I take in good faith the assurance the Minister has given across the Dispatch Box that the Government would not normally do that, but surely he cannot equate that with having the security of that commitment in the Bill. He must accept that on this side of the House we have tried to be even-handed in ensuring that the terms of the devolution settlement are respected both by government and by the nationalists in Scotland. If he is simply saying, “Everybody must rely on an assurance across the Dispatch Box”, that is not good enough.
George Hollingbery
I say to the hon. Gentleman that the Sewel convention is well established. It has been in place for many years and it has proved more than adequate up to now. We believe it is the right way forward to handle this particular issue, so we see no need for new clause 4 to be in the Bill.
We will work closely with the devolved Administrations to deliver an approach to the implementation of trade agreements that works for the whole of the UK, reflecting the needs and individual circumstances of England, Scotland, Wales and Northern Ireland. The Government’s approach respects a long-standing and robust convention between the UK Government and the devolved Administrations.
Anna McMorrin (Cardiff North) (Lab)
Will the Minister explain how he is going to work with the devolved Administrations on this? For example, would this involve a UK council of Ministers?
George Hollingbery
Our intention is to carry on negotiating with the devolved authorities to find a way forward to get the signatures on the legislative consent motions that we wish to sign, and that we believe we are in a position to sign with those Administrations if we continue to co-operate with them and to negotiate properly.
Several hon. Members rose—
George Hollingbery
If Members do not mind, I shall make a little more progress.
Concurrent functions have always been a normal part of our devolution arrangements, and the Bill broadly replicates the concurrent approach taken under section 2(2) of the European Communities Act 1972. That has proved an efficient and effective precedent for the devolved Administrations and the UK Government. I thank the hon. Member for Dundee East (Stewart Hosie) for raising the issue of the devolved authorities’ role in the transitional agreements and any extension of the sunset provision. I am happy to confirm that, should they make the decision to use the three-year sunset extension or provision, the Government commit to engaging the devolved Administrations in that decision-making process in advance.
The Government have made a number of their own amendments to reduce restrictions on the powers conferred on devolved Ministers, bringing greater parity between UK Ministers’ powers and devolved Ministers’ powers. I particularly wish to draw the House’s attention to two changes. Government amendments 64 to 67 change the requirement on devolved Ministers from seeking the consent of UK Ministers to consulting UK Ministers before making regulations under the Bill’s powers that relate to quotas or the pre-exit commencement of regulations.
Barry Gardiner
I am concerned about what the Minister said. Does he not accept that if the provisions in clauses 1 and 2 are taken in conjunction with Government amendment 34, they will allow the Westminster Government to use Henry VIII powers to modify primary legislation or retained direct EU legislation in areas that are a matter of devolved competence? That is to go beyond “not normally”, which is why new clause 4 is essential.
Mr Speaker
Order. May I just emphasise that there is no obligation to continue up to the wire? I know that sometimes some people on the Government Bench say “Keep going till the cut-off point,” but it is not necessary to do so. There is a lot of other material to be debated. The Minister, who is a most courteous fellow, was extremely succinct earlier; he should not think that that was unpopular in the House.
George Hollingbery
You will be glad to hear, Mr Speaker, that I do not have a great deal more to say.
Let me engage with the shadow Secretary of State’s point. The powers that the Government are taking relate to where any regulations under section 12 of the European Union (Withdrawal) Act are in force and intersect with devolved Ministers’ rights to modify retained direct EU law. We are carving out an area in which the UK Government believe it is right and proper that the interests of the wider United Kingdom have precedence. I think the shadow Secretary of State understands what I mean; indeed, from the look on his face I believe he probably secretly agrees with what I am saying.
George Hollingbery
The hon. Member for Dundee East will know that work is ongoing around the extent of the areas which I have just outlined to the shadow Secretary of State and which will be covered by section 12. The changes I have outlined recognise the important role that the devolved Administrations will play in implementing trade continuity agreements in devolved areas. I reiterate that, in line with convention, UK Government will not normally implement such measures in devolved areas without the consent of the devolved Administrations.
The amendments demonstrate significant progress in our discussions with the devolved Administrations.
Stephen Kerr (Stirling) (Con)
On a very quick point, is it not true that the working relationship between the UK Government and the Scottish Government is much more positive and much more healthy than we would be led to believe from listening to the rhetoric of the SNP Members in this place?
George Hollingbery
It is not for me to make judgments on how people approach negotiations, save to say that the experience of Government officials is that deep, proper and real conversations have occurred at Scottish Government level between officials and indeed between those in the Executive.
Let me reiterate that, in line with convention, the UK Government will not normally implement in devolved areas without the consent of the devolved Administrations. These amendments demonstrate significant progress in our discussions with the devolved Administrations to whom we have been listening throughout the passage of this Bill, as has been admirably demonstrated. We will continue to engage actively with the devolved Administrations to achieve the agreement of a legislative consent memorandum. As such, I hope that the hon. Member for Dundee East will now feel able not to push amendment 29 to a vote.
Question put, That the clause be read a Second time.
Hilary Benn (Leeds Central) (Lab)
On a point of order, Mr Speaker. What is going on?
Mr Speaker
What is going on is that a Member is being exhorted to remove himself from the Division Lobby, and that will happen. The result of the vote will be declared very soon. I understand the consternation of the right hon. Gentleman, but I have his and all other Members’ interests at heart. We will not long be delayed before proceeding with the next group, for which there is very little time. We must not dilly-dally on this matter any longer.
Mr Speaker
We come now to the third and final group of new clauses and amendments, beginning with Government new schedule 1. In the friendliest and most convivial possible spirit, I remind the Minister on the Treasury Bench that it is not necessary for him to speak at length. It might make him even more popular than he already is if he does not.
New Schedule 1
Transfer Schemes
“1 (1) The Secretary of State may make one or more staff transfer schemes in connection with the establishment of the TRA by this Act.
(2) A ‘staff transfer scheme’ is a scheme providing for the transfer from the Secretary of State to the TRA of any rights or liabilities under or in connection with a contract of employment.
2 (1) A staff transfer scheme may, among other things, make provision—
(a) for the transfer of rights and liabilities that could not otherwise be transferred;
(b) for the transfer of rights and liabilities arising after the making of the scheme;
(c) which is the same as or similar to the Transfer of Undertakings (Protection of Employment) Regulations 2006 (SI 2006/246);
(d) creating rights, or imposing liabilities, in relation to rights or liabilities transferred;
(e) about the continuing effect of things done by the Secretary of State in respect of any rights or liabilities transferred;
(f) about the continuation of things (including legal proceedings) in the process of being done by, or on behalf of, or in relation to, the Secretary of State in respect of any rights or liabilities transferred;
(g) for references to the Secretary of State in an instrument or other document in respect of any rights or liabilities transferred to be treated as references to the TRA;
(h) that is supplementary, incidental, transitional or consequential.
(2) A staff transfer scheme may provide—
(a) for the scheme to be modified by agreement after it comes into effect, and
(b) for any such modifications to have effect from the date when the original scheme comes into effect.
3 For the purposes of this Schedule—
(a) an individual who holds employment in the civil service of the State is to be treated as employed by virtue of a contract of employment, and
(b) the terms of the individual’s employment in the civil service of the State are to be regarded as constituting the terms of the contract of employment.”—(George Hollingbery.)
This amendment inserts a Schedule that sets out powers for the Secretary of State to make a scheme providing for the transfer of staff from the Secretary of State to the Trade Remedies Authority.
Brought up, and read the First time.
Mr Speaker
With this it will be convenient to discuss the following:
Government amendment 58.
Amendment 12, in schedule 4, page 14, line 34, at end insert
“with the consent of the International Trade Committee of the House of Commons,”.
This amendment would give the International Trade Select Committee scrutiny and consent powers for the appointment of Chairs of the Trade Remedies Authority.
Amendment 30, in schedule 4, page 14, line 34, at end insert—
“(aa) a non-executive member appointed by the Secretary of State with the consent of the Scottish Ministers,
(ab) a non-executive member appointed by the Secretary of State with the consent of the Welsh Ministers,”
The Trade Remedies Authority will undertake trade remedies investigations across the UK, which will inevitably touch on devolved areas or areas of significance to Scotland. This amendment would require the consent of Scottish and Welsh Ministers to the appointment of one non-executive board member each.
Amendment 13, in schedule 4, page 14, line 35, at end insert
“with the consent of the International Trade Committee of the House of Commons,”.
This amendment would give the International Trade Select Committee scrutiny and consent powers for the appointment of other non-executive members of the Trade Remedies Authority.
Amendment 22, in schedule 4, page 14, line 35, at end insert
“including representatives of UK manufacturing sectors and trade unions in manufacturing”.
This amendment would ensure that UK producers including manufacturers, and their employees, are included in the corporate governance of the new Trade Remedies Authority.
Amendment 80, in schedule 4, page 14, line 35, at end insert
“including representatives of—
(i) producers,
(ii) trade unions, and
(iii) each one of the devolved administrations.”
This amendment would ensure that the Trade Remedies Authority includes, among its non-executive members, representatives of key stakeholder bodies.
Amendment 14, in schedule 4, page 14, line 37, after “State” insert
“, and with the consent of the International Trade Committee of the House of Commons,”.
This amendment would give the International Trade Select Committee scrutiny and consent powers for the appointment of the chief executive of the Trade Remedies Authority.
Amendment 15, in schedule 4, page 14, line 38, after “State” insert
“with the consent of the International Trade Committee of the House of Commons,”.
This amendment would give the International Trade Select Committee scrutiny and consent powers for the appointment of the inaugural chief executive of the Trade Remedies Authority.
Amendment 23, in schedule 4, page 15, line 2, leave out from “must” to end of line 3 and insert
“, before appointing the other non-executive members, consult
(a) the Chair,
(b) organisations representing UK manufacturing sectors, and
(c) trade unions in manufacturing.”
This amendment would ensure that UK producers including manufacturers, and their employees, are included in the corporate governance of the new Trade Remedies Authority.
Amendment 16, in schedule 4, page 15, line 12, at end insert—
“4A It must be publicly disclosed if any candidate for appointment as a non-executive member of the TRA has, in the last five years, been employed by a political party, held a significant office in a political party, has stood as a candidate for a political party in an election, has publicly spoken on behalf of a political party, or has made significant donations or loans to a political party.”
This amendment would require candidates for appointment as non-executive members of the TRA to disclose political activity, consistent with guidelines set out in the Cabinet Office Governance Code on Public Appointments.
Amendment 17, in schedule 4, page 15, line 16, at end insert—
“5A It must be publicly disclosed if any candidate for appointment as an executive member of the TRA has, in the last five years, been employed by a political party, held a significant office in a political party, has stood as a candidate for a political party in an election, has publicly spoken on behalf of a political party, or has made significant donations or loans to a political party.”
This amendment would require candidates for appointment as executive members of the TRA to disclose political activity, consistent with guidelines set out in the Cabinet Office Governance Code on Public Appointments.
Amendment 18, in schedule 4, page 15, line 31, at end insert—
“10A A member of the TRA, whether executive or non-executive, shall not actively engage in any business, vocation or employment which may give rise to a potential conflict of interest, for the duration of their service on the TRA.”
This amendment would militate against conflicts of interest by precluding TRA members from engaging in any commercial activity for the duration of their time on the TRA.
New clause 1—EU customs union—
“(1) It shall be the objective of an appropriate authority to take all necessary steps to implement an international trade agreement which enables the UK to participate after exit day in a customs union with the EU in the same terms as existed before exit day.
(2) Exit day shall have the meaning set out in section 20 of the European Union (Withdrawal) Act 2018.”
New clause 2—Review of the impact on the UK economy—
“(1) Before the end of the initial five year period, the Secretary of State must publish and lay before both Houses of Parliament an assessment of the impact of all international trade agreements implemented under section 2 of this Act on—
(a) the economy of the United Kingdom,
(b) the economy of the different parts of the United Kingdom and different regions of England, and
(c) individual economic sectors.
(2) The assessment in subsection (1) must so far as practicable analyse the expected difference in outcomes between the international trade agreements implemented under section 2 of this Act and those international trade agreements to which the United Kingdom would have been a signatory had it continued to participate in the EU Customs Union.
(3) In this section—
‘the initial five year period’ has the same meaning as in section 2(8)(a),
‘parts of the United Kingdom’ means—
(a) England,
(b) Scotland,
(c) Wales, and
(d) Northern Ireland
‘regions of England’ has the same meaning as that used by the Office for National Statistics.”
New clause 5—Implementation of a customs union with the EU—
“(1) It shall be the objective of an appropriate authority to take all necessary steps to implement an international trade agreement which enables the UK to participate after exit day in a customs union with the EU.
(2) Exit day shall have the meaning set out in section 20 of the European Union (Withdrawal) Act 2018.”
New clause 8—Internal Market Negotiating Objective—
“It shall be a negotiating objective of Her Majesty’s Government to ensure the United Kingdom has full access to the internal market of the European Union, underpinned by shared institutions and regulations, with no new impediments to trade and common rights, standards and protections as a minimum.”
New clause 9—UK membership of EFTA and the European Economic Area—
“(1) It shall be the objective of an appropriate authority to achieve before exit day the implementation of an international agreement to enable the UK to become a member of the European Free Trade Association and continue as a signatory to the EEA Agreement.
(2) ‘Exit day’ shall have the meaning set out in section 20 of the European Union (Withdrawal) Act 2018.”
New clause 10—UK membership of EFTA—
“(1) It shall be the objective of an appropriate authority to achieve before exit day the implementation of an international agreement to enable the UK to become a member of the European Free Trade Association.
(2) ‘Exit day’ shall have the meaning set out in section 20 of the European Union (Withdrawal) Act 2018.”
New clause 11—Assessment of slavery or servitude—
“The Secretary of State shall, before concluding negotiations relating to an international trade agreement, make an assessment of the steps taken by the other signatory to the agreement (or each other signatory) to prevent and punish activity which, if undertaken in England or Wales, would constitute an offence under section 1 of the Modern Slavery Act 2015 (slavery, servitude and forced or compulsory labour).”
New clause 15—Ratification of international trade agreements—
“An international trade agreement shall not be ratified unless it enables the United Kingdom to require imports to—
(a) comply with any standards laid down by primary or subordinate legislation in the United Kingdom regarding food safety, the environment and animal welfare, or
(b) have been produced to standards that are deemed by the Secretary of State to be comparable in effectiveness to those of the United Kingdom in protecting food safety, the environment and animal welfare.”
This new clause would ensure that UK standards regarding food safety, the environment and animal welfare could not be undermined by imports produced to lower standards.
New clause 17—UK participation in the European medicines regulatory network—
“(1) It shall be the objective of an appropriate authority to take all necessary steps to implement an international trade agreement, which enables the UK to fully participate after exit day in the European medicines regulatory network partnership between the European Union, European Economic Area and the European Medicines Agency.
(2) Exit day shall have the meaning set out in section 20 of the European Union (Withdrawal) Act 2018.”
This new clause would ensure that it is a negotiating objective for the UK Government to secure an international agreement through which the UK may continue to participate in the European medicines regulatory network partnership between the EU, EEA and the European Medicines Agency, ensuring that patients continue to have access to high-quality, effective and safe pharmaceutical and medical products, fully aligned with the member states of the EU and EEA.
New clause 18—Free trade area for goods—
“(1) Before exit day it shall be the objective of Her Majesty’s Government to achieve the implementation of an international agreement to enable the United Kingdom to establish a frictionless free trade area for goods between the UK and the EU.
(2) If an international agreement of the type set out in subsection (1) has not been agreed by 21st January 2019 then it shall be the objective of Her Majesty’s Government to achieve the implementation of an international agreement which enables the United Kingdom to participate after exit day in a customs union with the EU.
(3) ‘Exit day’ shall have the meaning set out in section 20 of the European Union (Withdrawal) Act 2018.”
This new clause would make it a negotiating objective of the UK to establish a free trade area for goods between the UK and the EU and if that cannot be agreed then it should be the objective of the UK to secure an agreement to enable the UK’s participation in a customs union with the EU.
New clause 19—Reporting on trade between the United Kingdom’s devolved nations and regions with the Republic of Ireland—
“(1) The Secretary of State shall, no earlier than 12 months and no later than 18 months after Royal Assent has been given to this Act—
(a) lay before both Houses of Parliament an assessment of the implications of this Act for trade between the constituent parts of the United Kingdom and the Republic of Ireland, and
(b) make arrangements for the assessment to be laid before the Scottish Parliament, the National Assembly for Wales and the Northern Ireland Assembly.
(2) In preparing the assessment under subsection (1), the Secretary of State shall consult with—
(a) the Scottish Ministers, the First Minister or the Lord Advocate,
(b) the Welsh Ministers, and
(c) a Northern Ireland devolved authority.”
This new clause would ensure that the impact of the UK’s exit from the European Union on trade across the border between the Republic of Ireland and Northern Ireland, and between the Republic of Ireland and other parts of the United Kingdom is properly reviewed and reported to Parliament.
New clause 25—Trade agreement with the EU: mobility framework—
“It shall be the objective of the Secretary of State to take all necessary steps to secure an international trade agreement with the European Union which includes a mobility framework that enables all UK and EU citizens to exercise the same reciprocal rights to work, live and study.”
Government amendments 31 to 35.
Amendment 11, in clause 2, page 2, line 12, at end insert—
“or (c) a regulatory cooperation agreement.”
This amendment would ensure that HM Government is able to efficiently replicate existing regulatory cooperation agreements that may be required for continuity of business arrangements if the UK exits the European Union.
Amendment 3, in clause 2, page 2, line 29, at end insert—
“(4A) Regulations under subsection (1) may make provision for the purpose of implementing an international trade agreement only if:
(a) the provisions of that international trade agreement do not conflict with, and are consistent with—
(i) the provisions of the Sustainable Development Goals adopted by the United Nations General Assembly on 25 September 2015,
(ii) international human rights law and international humanitarian law,
(iii) the United Kingdom’s obligations on workers’ rights and labour standards as established by but not limited to the commitments under the International Labour Organisation’s Declaration on Fundamental Rights at Work and its Follow-up Conventions,
(iv) the United Kingdom’s environmental obligations in international law and as established by, but not limited to, the Paris Agreement adopted under the United Nations Framework Convention on Climate Change, the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), and the Convention on Biological Diversity, including the Cartagena Protocol on Biosafety,
(v) existing standards for food safety and quality as set and administered by the Department of Health, the Food Standards Agency and any other public authority specified in regulations made by the Secretary of State,
(vi) the United Kingdom’s obligations as established by the Convention on the Elimination of All Forms of Discrimination Against Women and by the Convention on the Rights of the Child, and
(vii) the sovereignty of Parliament, the legal authority of UK courts, the rule of law and the principle of equality before the law.
(a) the provisions of that international trade agreement do not in any way restrict the ability to determine whether public services at a national or local level are delivered by public sector employees, and
(b) the Secretary of State has laid before Parliament an assessment that considers the potential economic, social, human rights and environmental impacts of the international trade agreement on the contracting parties.”
Amendment 24, in clause 2, page 2, line 29, at end insert—
“(4A) Regulations under subsection (1) may make provision for the purpose of implementing an international trade agreement only if the Secretary of State has made an assessment under section (Assessment of slavery or servitude) in respect of that agreement.”
Amendment 81, in clause 2, page 2, line 29, at end insert—
“(4A) Regulations under subsection (1) may make provision for the purpose of implementing an international trade agreement only if a principle of non-regression, according to which the protection of the environment, ensured by legislative and regulatory provisions relating to the environment, is incorporated.”
This amendment would ensure that environmental standards are not lowered in a new UK international trade agreement by maintaining and continually updating current standards through an environmental non-regression clause.
Government amendments 40, 41 and 43.
Amendment 20, in clause 2, page 2, line 40, at end insert
“and shall include any agreement to which the UK is party by virtue of membership of a free trade association, including the European Free Trade Association”.
This amendment would make it clear that the implementation powers under the Act would apply equally to implementation of any free trade agreement to which the UK is party through EFTA.
Amendment 5, in clause 2, page 2, line 40, at end insert—
“(7A) No regulations made under subsection (1) shall preclude the United Kingdom from participating in a customs union with the European Union following exit day.”
This amendment allows for the implementation of international trade agreements while leaving open the possibility of negotiating a customs union with the EU.
Government amendments 44 to 48 and 51 to 57.
Amendment 1, in clause 6, page 4, line 10, at end insert—
“(aa) the conduct of trade within a customs union within the meaning of section 31 of the Taxation (Cross-border Trade) Act 2018,”.
Amendment 21, in clause 6, page 4, line 10, at end insert—
“(aa) the consequences for the UK of membership of the European Free Trade Association,”.
This amendment would place a duty on the TRA to give advice to the Secretary of State on the consequences of membership of EFTA.
Government amendments 59 and 60.
George Hollingbery
There is a wide range of issues covered by this final group of amendments we are debating today. I therefore propose to focus on the Government amendments in my opening remarks.
We are committed to creating a world-class Trade Remedies Authority. That is why Government have already begun recruiting TRA staff into the Department for International Trade, so that they can be properly trained before the TRA becomes fully operational. Once the TRA is legally established, staff who have been recruited into the Department will be transferred over to the TRA. Government new schedule 1 and Government amendment 58 are crucial to ensuring that this transfer can take place. This is standard practice when establishing a new arm’s-length body, as set out in the Cabinet Office’s statement of practice on transfers of staff in the public sector.
Trade remedies cases can have material impacts on markets and jobs. We must therefore create an independent investigation process that businesses can trust. That is why we are setting up the TRA as an arm’s-length body, giving it the appropriate degrees of separation from government, and ensuring that people with the right qualities and qualifications are appointed to the board to oversee this new function.
There are other amendments in this group, tabled by other hon. Members, on the TRA. I will wait to hear the points they make before responding to the detail of those amendments. Before I sit down, however, I will underline the point made by my right hon. Friend the Secretary of State for Trade yesterday in his statement to the House. The Bill is about continuity rather than future arrangements. This is why we have now separately set out the role that Parliament, the devolved Administrations, the public, business and civil society will have in our future trade agreements. We believe our approach makes good on our commitment to build an inclusive and transparent future trade policy.
Amendments 44 to 47 reduce the sunset period and renewal periods from five to three years. This has been discussed in previous debates. Amendments 31 and 32 allow Agreement on Government Procurement, or GPA, power to reflect updates to the list of Government entities in the UK’s GPA schedule. Amendments 34, 40, 41 and 48 clarify the scope of the powers in clause 1 and 2. Amendments 59 and 60 update references to data protection legislation, and amendments 31, 35, 43, and 51 to 57 are drafting changes.
Judith Cummins (Bradford South) (Lab)
It is a pleasure to follow the Minister and to contribute to the Report stage of this important Bill.
I rise to propose amendment 80, in my name and that of my hon. Friends, on the Trade Remedies Authority, and to speak to the other clauses and amendments in this group. Labour supports new clause 5 and our own amendment 5 on the implementation of a customs union with the EU. Labour’s policy is for a new customs union with the EU to protect jobs and the economy, and to avoid a hard border in Northern Ireland. We will also be supporting new clause 18, as it keeps open the possibility of a customs union with the EU.
My Labour colleagues and I tabled amendment 5, which requires that any international trade agreement must not stop the UK participating in a customs union with the EU. This is in line with our party’s policy to negotiate a new customs union with the EU. As the Bill deals with international trade agreements, we wish to ensure that no other trade agreements impede on the UK’s capacity to enter into such a new customs union with the EU.
On new clause 18, as I have said, Labour believes that the only way to deliver frictionless trade and to prevent a hard border in Northern Ireland is to negotiate a comprehensive customs union with the EU. The Chequers White Paper published by the Government put forward a different proposal. We think that the so-called “facilitated customs arrangement” is unnegotiable, undeliverable and unworkable, but it at least accepts the need for frictionless trade and to prevent a customs border between the UK and the EU.
Stephen Hammond (Wimbledon) (Con)
It is a great pleasure to speak on Report and I rise to support new clause 9, amendments 20 and 21 and new clause 18. Let me start briefly with new clause 9. We are leaving the European Union and I accept the result of the referendum, but that referendum did not tell this House and this Parliament how we should do so. That is what Parliament is here to decide and what it is going to do.
I think the Common Market principles are the best way to leave the EU. The Common Market principles that I am referring to are the removals of barriers for trade between the United Kingdom and the EU and the protection and development of complex supply chains across the continent, which will protect, as my right hon. Friend the Member for Broxtowe (Anna Soubry) said yesterday, the jobs and livelihoods of our constituents. As we leave the European Union, I believe that should be the key priority of this House.
New clause 9 refers to the European economic area and the European Free Trade Association. EEA and EFTA members incorporate most of the single market regulations. Most goods are not checked for compliance with EU regulations at the border and I think that would go a long way to mitigate complex supply chains and the Irish border issue, as well as the potential congestion at UK ports. That is one reason I support the White Paper; it refers to a common rulebook.
John Redwood
Does my hon. Friend understand that last year 21% of all the components needed for making cars under just-in-time principles came from outside the EU and passed our borders without friction or difficulty?
Stephen Hammond
My right hon. Friend has just made the point that 79% of them do, and in business I was always taught the 80/20 rule, which I would advise him to apprise himself of.
As I was saying, the White Paper is very similar to the common rulebook, and that I think is appropriate. I will not dally too long on clause 9, but I think that the EEA-EFTA, as an institutional structure, is off the shelf, tested and something the EU is familiar with and which we could engage with. I accept, however, that the White Paper sets out a different direction, and I want to make sure we keep the White Paper and the plan negotiated and moving forwards.
What I really want to talk about tonight is new clause 18. I would contend, and I say to my Front Bench, that new clause 18 is exactly in line with their White Paper. It says that,
“it shall be the objective of Her Majesty’s Government to achieve the implementation of an international agreement to enable the United Kingdom to establish a frictionless free trade area for goods between the UK and the EU.”
That is absolutely in line with the White Paper. What causes the Government and others in the House concern is the word “union”.
George Hollingbery
It might help if I could advise the House that, in recognition of contributions from right hon. and hon. Members today, it is my intention to bring forward an amendment in the other place—[Laughter.] If I may. [Interruption.] If I may. Thank you.
George Hollingbery
It is my intention to bring forward an amendment in the other place that takes in the essence of new clause 18 but removes the defective element relating to the customs union. The Government amendment will restate our intention to establish a customs arrangement with the EU. [Interruption.]
Stephen Hammond
Very few people ever say that, Mr Speaker.
It is a generous offer from the Front Bench, and one that I am tempted to accept, but I would say to the Minister: let’s do this the other way around. I will make him a generous offer. Why does he not accept new clause 18 today and then amend it in the Lords? [Hon. Members: “Hear, hear!] I will tell the House why. Subsection (2) of my new clause is entirely in line with the European Union (Withdrawal) Act 2018, which is now part of our law in this country, the House having passed it. All it says is that it should be the objective, after 21 January, which date is in clause 13(10) and (11).
Had I used any other word than “union”, the Front Bench would have accepted it. Frankly, I do not see the problem. Yesterday, we took several amendments that we were told did not undermine the Bill, and this does not undermine the Bill either. It keeps the plan on the road. I say to my Front Bench in all good faith: why not do it this way round? Accept new clause 18 now and I will work with them to find something in the Lords that they find acceptable.
George Hollingbery
It is the policy of the Government not to remain part of a customs union. That is why we cannot accept the amendment today. Clearly, we would not be able to implement any independent free trade deals and would still be a member of the commercial policy. We are absolutely clear that we wish to work with my hon. Friend to reach an agreement that is satisfactory to him. We will do that in the Lords over the next several weeks and come to a conclusion on this matter.
Stephen Hammond
And a good man, as my right hon. Friend says, and I know that he is fulfilling the Government’s wishes. But I remind him that I stood on a Conservative manifesto that said we were leaving “the” customs union. New clause 18 does not commit us to “the” customs union. It commits us to “a customs union”, which is a customs arrangement or a customs partnership. There is a slight deviation in the definition. This absolutely does not affect our ability to engage in international trade, for other customs unions with the EU are already in place. So I ask the Minister to think again during the 25 minutes before we vote on this matter, and to accept new clause 18.
Dr Paul Williams (Stockton South) (Lab)
I do hope that we can vote on new clause 17. NHS patients will not be helped if we leave the European Medicines Agency. Being part of the EMA means that when a new drug is developed, a common set of protocols is followed to get that medicine approved. The UK is a world leader in pharmaceuticals and biomedical sciences. We have been the driving force behind the EMA, which has provided significant employment and revenue here in London, and has helped to raise and maintain standards for patients throughout Europe. We have already lost the EMA to Amsterdam, but although we have lost it geographically, we still have the chance to be part of the European medicines regulatory network partnership, and continue to benefit from the work of the EMA.
There are three big markets for new drugs in the world: the United States, Japan and the EU. Companies already have to follow different processes to get their drugs approved in those countries, but, together with the EU, we are part of a single powerful bloc that represents 22% of the global pharmaceutical market. Companies prioritise getting their drugs to us, because we provide a single European system. If we leave the EMA, we will have only 3% of the global market. Quite simply, we will not be a priority for new drugs. Switzerland and Canada have separate approval systems, and typically get their new drugs six months later than the EU. That is the cost of leaving the EMA: a six-month delay. Try explaining to a patient that a new life-saving cancer drug will not be available to them because we left the EMA!
So why are we leaving? Our life sciences industry is not complaining about EU “red tape”; it likes the common system. According to the Association of the British Pharmaceutical Industry,
“Creating a standalone UK regulator would require significant resource, time and expertise, and...would…still leave the UK behind the US and EU”.
We are leaving the EMA because people voted to leave the EU, but how many people knew that when they voted to leave the EU, they voted to increase the cost of new medicines regulation, a cost that will be passed on to the NHS; to reduce the UK's international influence and excellence in this area of life sciences; and to delay access to new drugs for cancer patients? New clause 17 asks that we “take all necessary steps” to continue to participate in the European medicines regulatory network partnership. We could do that by remaining a member of the EU, by becoming a member of the European Free Trade Association, or by negotiating an associate membership of the EMA.
We are already seeing the high cost of Brexit to the NHS. We are seeing an exodus of EU staff which is making recruitment challenges much harder, we are seeing the threat to the supply chain if we leave the customs union, and now we face delays in the delivery of new drugs to cancer patients. It does not have to be this way. I will be voting for new clause 17 tonight, and I hope that Members in all parts of the House will put the interests of NHS patients above Brexit ideology and join me in voting to remain part of the European medicines regulatory partnership.
Dr Phillip Lee (Bracknell) (Con)
It is a pleasure to follow the hon. Member for Stockton South (Dr Williams), who is a co-signatory to my new clause 17, as are other medically qualified Members: the hon. Member for Central Ayrshire (Dr Whitford) and my hon. Friend the Member for Totnes (Dr Wollaston), the Chairman of the Health Committee.
We all recognise the importance of remaining part of the European medicines regulatory network partnership. New clause 17 would make it a “a negotiating objective” for the Government to secure an agreement that would allow the United Kingdom to continue to participate fully in the partnership. This is vital because it is how we get our people and our NHS the medicines they need. It is also important for our pharmaceutical sector, about which my right hon. Friend the Prime Minister has observed that it is hard to think of an industry of greater strategic importance to Britain and that does so much to improve the lives of patients around the world.
Let me explain further. The European medicines regulatory network partnership makes the process of accessing life-saving new medicines and moving medicines quick and easy. If we leave that partnership, the NHS would get ground-breaking new drugs like those for cancer, dementia and diabetes long after other parts of the world. That is because pharmaceutical companies will apply for licences in the much larger American, European and Asian markets before they come to the UK. It would also be harder to get the medicines we need when we need them. This is particularly worrying for time-critical drugs and equipment. For example, some of the trauma treatments used for victims of last year’s Manchester Arena bombing were stocked in Amsterdam; we got them straightaway because there were no borders or checks. After Brexit we could, in effect, create a hard border so this would not be so easy.
Antoinette Sandbach (Eddisbury) (Con)
AstraZeneca has a supply line of 4,000 people in the north-west. They assist in the manufacturing of a cancer drug that is exported to Europe. Without that export to Europe it would not be viable, because it helps 130,000 people across Europe. Does my hon. Friend agree that remaining in the European Medicines Agency would allow such frictionless trade to carry on?
Dr Sarah Wollaston (Totnes) (Con)
Evidence to the Health and Social Care Committee overwhelmingly showed the importance to patients of our maintaining close regulatory alignment not only here, but across the EU. Does my hon. Friend agree with the Committee that we must do more to publish the contingency planning and the consequences of not maintaining alignment so that the public can see this?
Mr Speaker
Order. We must hear the response to that question, but we must also hear from other Members, including the Father of the House.
Dr Lee
I will be as brief as possible, Mr Speaker.
Yes, I do agree with my hon. Friend’s comments. Every month 45 million patient-packs of medicine go to the EU from the UK and 37 million packs move the other way. It is hard to think of a single other product that illustrates so well the importance of frictionless trade.
This amendment supports the Government’s intentions as explained in the Prime Minister’s Mansion House speech and their White Paper, but we must go further and enshrine them in law because of the very real impact on people’s lives, on the NHS’s ability to operate, on the industry, and on investment in the UK. That is why I will press this new clause to a vote.
I will also support new clause 18 this evening. Yesterday was the worst experience in politics I have had in eight years, and I am sorry that it has changed the dynamic. I started the week intending to support our Prime Minister in her deal and the White Paper. Yesterday changed that, and that is why I will be supporting other colleagues on these Benches when we come to new clause 18 this evening.
Gareth Snell (Stoke-on-Trent Central) (Lab/Co-op)
I shall speak briefly on new clause 11 in my name and the names of 20 of my Co-operative party colleagues—the Co-operative party being the third largest party in this House, despite what some in here say.
New clause 11 simply asks the Secretary of State to make an assessment of slavery and servitude as part of any new trade deals. Modern slavery is a stain on society and we in this country are making great headway in tackling it through the Modern Slavery Act 2015, particularly sections 1 and 54, but, sadly, slavery is all too apparent in some parts of the world. Most people in this room will be wearing an item of clothing that has been made by a slave, and we should be using our international prowess and purchasing power to try to deliver a reduction in slavery and servitude.
Amendment 22, which was very kindly tabled by the hon. Member for Stafford (Jeremy Lefroy), supported by the hon. Member for St Austell and Newquay (Steve Double), relates to trade remedies. The British Ceramic Confederation has worked very hard on this. I shall also be supporting amendment 80, because that will also help to protect our manufacturing base.
Mr Kenneth Clarke (Rushcliffe) (Con)
I shall be voting for new clauses 9, 17 and 18. I will not repeat the very eloquent arguments that have already been put forward by my hon. Friend the Member for Wimbledon (Stephen Hammond), the hon. Member for Stockton South (Dr Williams) and my hon. Friend the Member for Bracknell (Dr Lee), who have put the case perfectly. I do not see any answer to it. The only question I wish to pose relates to my understanding that the Government are resisting these new clauses, which I find completely incomprehensible, particularly since yesterday. I personally cannot see why we are leaving the single market and the customs union, because that does not follow on from the referendum at all. However, I accept that staying in them has been ruled out and, in the spirit of getting a reasonably broad compromise, I am prepared to give the Government a chance to produce some other version that will preserve totally frictionless trade and no barriers to trade and investment with Europe, if they think that there is one. Therefore, I would not press new clauses 1 and 5 to a vote, and I do not think that my right hon. Friend the Member for Broxtowe (Anna Soubry) would do so. Let us give the White Paper a chance, which is what new clause 18 does. What I do not understand, given that the White Paper also supports keeping our present arrangements, if we can, by remaining within the European Medicines Agency, is why on earth these proposals are being resisted.
Yesterday, I was astonished that the Government used a three-line Whip to secure a majority for my hon. Friend the Member for North East Somerset (Mr Rees-Mogg) and his European Research Group faction, which they only just managed to do, by chance. The Government actually whipped my party to defeat their own policy, as set out in the White Paper. Today, we have amendments that are entirely consistent with the White Paper, but the Government are so terrified of the Daily Mail, The Daily Telegraph and the European Research Group that they are now applying the whip to try to defeat these measures. I really hope that they will go away for the summer and have a good rest—perhaps they should lie in a quiet, dark room at some stage—then come back and tell us exactly how they intend to negotiate these serious matters relating to the future of our country.
Several hon. Members rose—
Mr Leslie
Surely new clause 17 is a no-brainer. If we are going to preserve anything, we must surely keep the frictionless flow of medicines and treatments for our national health service going. If ever there were an example of an ideology getting in the way of common sense, it would be that of a hard Brexit attitude physically placing itself at the border in the way of the free flow of those medicines. We know that 45 million packages of medicines cross that border every month. That is how essential this is, so new clause 17 has to be supported.
New clause 18 has been tabled by the hon. Member for Wimbledon (Stephen Hammond). I have to say to him that he is being incredibly generous to the Government in relation to this proposal. He is giving them the benefit of the doubt on the free trade area in goods. It is true that, whatever we get, the lowest common denominator will be a free trade area in goods. We will have to get that. But frankly, I am really quite surprised by the way in which some Conservative Members have been treated by the Government in respect of the ERG amendments—all of which were accepted without any objection—when some of them are trying their best to preserve the Prime Minister’s Chequers plan. Those Conservative Members are being very generous, but I think it is reasonable to put in place a safety net in the form of a customs union in January. I hope that, on this one occasion, we can put party politicking to one side and do the right thing for our country.
John Redwood
Every day, a large number of components come into our country from outside the EU and they meet the deadlines of the just-in-time systems, as do the components from the EU. My hon. Friend the Member for Wimbledon (Stephen Hammond) should understand that you cannot send a car out with only 79% of its components assembled because they are the ones that came from the EU. Manufacturers send their cars out with 100% of their components, including the non-EU ones, which are coming in perfectly well. More than half our trade is done with non-EU countries that are not part of the single market or the customs union. We have already thought about the need to get rid of frictions on the borders for non-EU trade. We have worked internationally through the WTO which, through its trade facilitation agreement, has several instructions for us and for the EU to ensure that there is a minimum of friction at the border for non-EU, non-customs-union trade as well, which is why our manufacturers can work with it.
EU trade is not without administration and bureaucracy. The Intrastat declaration must be made, the commodity code must be identified, the VAT has to be settled and the excise must be settled if necessary. Those things are not done at the border. The lorry drivers do not have to stand in a queue while trying to work things out. When we are outside the EU’s customs union, the situation will be the same for everything else that does not come in within the customs union framework. This is the modern world. It is electronic. There are computers. There is the off-site settlement of taxes and of customs. The WTO knows about that.
The future for us will be great, but we must be free to have our own international trade policy and our own agreements with countries other than those in the EU. We must have the ability to set out our laws and spend our own money. The British public would expect no less of this Parliament, and they will not accept any higgling of their decision to leave the EU.
Emma Reynolds (Wolverhampton North East) (Lab)
If the customs union is not important, why have BMW, Jaguar Land Rover and Airbus suggested that they need to keep the current border arrangements? If we are to preserve just-in-time manufacturing in this country—Jaguar Land Rover is on the outskirts of my constituency—we must either have a customs union or find an equivalent, as suggested by the hon. Member for Wimbledon (Stephen Hammond), who is being patient with the Government. The suggestion from some Members, as we have just heard, that the customs union or an equivalent is not important flies in the face of the evidence and what businesses up and down the country are telling us.
Nicky Morgan (Loughborough) (Con)
I will necessarily keep my remarks extremely brief. I cannot match the magnificence of my right hon. Friend the Member for Broxtowe (Anna Soubry) when she spoke yesterday, but let me say the following to the Chamber. Brexit is a matter of national interest. It is time to put party politics aside, which is why I welcome the fact that Labour Members are open to supporting the Chequers proposals, as captured in new clause 18, which I rise to support. I hear what the hon. Member for Bradford South (Judith Cummins) said about her scepticism regarding whether the proposals could work, but the Prime Minister did the right thing in the national interest by putting on the table a workable, practical proposal, captured at Chequers, that could be negotiated with the EU.
Nicky Morgan
No. Some Government Members chose to try to scupper that agreement and those proposals yesterday. Some of us tried to stop that; but sadly, we failed. What is proposed in new clause 18—I am delighted to join my hon. Friend the Member for Wimbledon (Stephen Hammond) in proposing it—is eminently sensible. We want to give the Prime Minister space for the negotiations, and it is clear that there is a majority in this House for a customs union to safeguard business, jobs and our constituents’ future financial security. I hope that the House will have the opportunity to demonstrate that shortly.
Angus Brendan MacNeil
The majority of the world’s countries are in a customs union. We need to be in a customs union and, I would argue, the single market. The damage that will result from not being in those two things and instead having a free trade, or less trade, agreement with the EU will be 6% of GDP. The panacea often offered is the United States of America, but the US will counter that drop to the tune of 0.2%. To make up for the damage that will be done by not being in the customs union and the single market, we need 30 US-style agreements. The US has a population of about 300 million, and a deal with it will yield a 0.2% gain in GDP. By that arithmetic, we need to make US-style agreements with about 9 billion people, but there is one problem for the Brexiteers: the population of the world is only about 7.4 billion. They should be listening to their friends and colleagues and making absolutely sure that they are not playing fast and loose with jobs, security, employment and with the life chances of people in the UK, young and old. It is a pity for me that Scotland is hitched to this lot at the moment.
Greg Hands
There are three or four very strong arguments not to be in a customs union as outlined in new clause 18. First, being in a customs union puts massive restrictions on having an independent trade policy. Trade agreements are all about WTO schedules, and if we are in a customs union, we cannot have our own WTO schedules. Secondly, who would run trade remedies in such a position? Would trade remedies be run in London or would they be run in Brussels, and in whose interest? With British jobs and British companies on the line, it is incredibly important that we have the ability to run trade remedies.
Thirdly, on the subject of trade preferences, we want to do better for the developing world. Being in a customs union would prevent that. Finally—
Stephen Hammond
With a heavy heart, I beg to move, That new clause 18 be added to the Bill.
Question put.
The Secretary of State for International Trade and President of the Board of Trade (Dr Liam Fox)
I beg to move, That the Bill be now read the Third time.
Let me begin by thanking right hon. and hon. Members from across the House who have shared their time and expertise to help enhance the Bill. We have spent today on Report thoroughly examining the measures in this short but significant proposed legislation. This followed four days of line-by-line scrutiny in Public Bill Committee. I would like to thank those who gave oral evidence to the Committee, and the individuals and organisations who provided written evidence and recommendations. I also extend particular thanks to the members of the Committee, on which the hon. Member for Brent North (Barry Gardiner) led for the Opposition and the hon. Member for Aberdeen North (Kirsty Blackman) led for the Scottish National party, for their detailed examination of the Bill and the positive way in which they contributed to debates on its provisions. I would also like to pay particular thanks to my right hon. Friend the Member for Chelsea and Fulham (Greg Hands), who as Minister of State for Trade Policy played a vital role in developing the Bill and in steering it through the preceding parliamentary stages. I, and all my parliamentary colleagues, owe him a great debt.
This is an important Bill. It provides continuity and stability as the UK leaves the European Union for individuals, businesses and our international trading partners. It will be the confident first step that the UK takes towards establishing itself as an independent trading nation for the first time in over 40 years. As the hon. Member for Brent North concluded on Second Reading:
“The need for a Bill to establish a trade remedies authority, to establish our independent membership of the WTO government procurement agreement, to enable us to maintain strong trading ties with partner countries that have had historical agreements with us through the EU, and to establish the power to collect and share…information—all are uncontroversial requirements.”—[Official Report, 9 January 2018; Vol. 634, c. 221.]
I wholeheartedly concur.
As the UK leaves the EU, the Government are committed to seeking continuity in our current trade relationships. One way we will achieve this is by introducing powers to let us make domestic legislation implementing our independent membership of the Agreement on Government Procurement, or GPA. This continuity is important for both business and the taxpayer. GPA membership will maintain the access of UK businesses to a global public procurement market estimated at £1.3 trillion every year, across major economies such as the United States, Canada and Japan.
Taxpayers and users of public services will also benefit. The GPA has led to increased choice, quality and value for money in the public sector. TheCityUK, which represents financial and related professional services, wrote to the Public Bill Committee to say:
“We fully recognise the need for the UK to become a party to the WTO GPA”.
As it explained:
“The GPA requires that open, fair and transparent conditions of competition be ensured in government procurement…which cover both goods and services”.
The Federation of Small Businesses said:
“it is essential that the UK is able to become an independent member of the GPA, allowing small businesses to have continued access to government contracts and procurement opportunities.”
It is clear that the agreement is of great value to UK businesses and its importance is endorsed by organisations representing their interests.
As an EU member, the UK participates in many trade agreements with partner countries. We want continuity as far as possible in our existing trading relationships with these existing partners. As these agreements account for 12% of the UK’s total international trade, this will be important in preventing disruption to businesses, consumers and workers. The International Trade Committee observed in a recent report that:
“Almost no one who contributed to our inquiry suggested that the Government’s policy objective of seeking continuity was the wrong one.”
Additionally, the Scotch Whisky Association, which I have much pleasure in promoting at home and abroad, has said that
“continuity of current EU trade agreements is vitally important to us”.
British Sugar stated:
“We support the Government’s overriding intention to maintain continuity by replicating existing trade as closely as possible and believe that this is the best means by which to provide certainty to business.”
Continuity for the taxpayer, businesses, consumers and our international partners—that is what this Bill is about. To be absolutely clear, and as I made clear in my statement yesterday, this Bill is not about signing new trade agreements or making substantial changes to existing ones.
Despite many misleading claims to the contrary, the Government will not use measures in the Bill to implement substantially different agreements with existing partner countries. Our policy has always been, and remains, one of securing continuity first and seeking new opportunities second. We have been clear with our trading partners that continuity remains our primary objective, as I made clear earlier this evening. However, as debated on Report, to further reassure the House, the Trade Bill requires the Secretary of State to table a report outlining all the changes made to existing agreements as part of the transition into UK-only agreements. This places in statute the Government’s clear commitment to transparency—to aid appropriate parliamentary involvement, allowing Members of both Houses of Parliament the opportunity to see what changes have been made to secure continuity.
Additionally, the use of the clause 2 power will now be subject to the affirmative resolution procedure, allowing both Houses to debate regulations made under that power. The Government will not use the powers in the Bill to implement the obligations of new free trade agreements—ones with countries with which the EU does not already have a free trade agreement. We consider these to be future trade agreements and we announced this week our proposals for them.
The Bill also provides for the establishment of the Trade Remedies Authority. The World Trade Organisation allows its members to provide a safety net to protect domestic industries against injury caused by unfair trading practices, such as dumping and subsidies, and unforeseen surges in imports. Trade remedies level the playing field and restore the competitive balance. They are key to ensuring an effective rules-based system for international trade. The European Commission is currently responsible for undertaking trade remedies investigations and imposing measures on behalf of the UK. The Government are establishing the TRA to ensure that the UK can continue to provide a safety net for domestic industries after we have left the EU. I am grateful to Members on both sides of the House for the support that they have given on this issue.
Specifically, the TRA will be responsible for making an assessment in a case for a trade remedies measure, based on the evidence available. It will then make impartial recommendations to Ministers. This includes protection from goods that are heavily subsidised or dumped in the UK market at below domestic price. It also includes injury caused by unforeseen surges in imports. The investigative and decision-making framework that the TRA will be responsible for delivering is set out in the Taxation (Cross-border Trade) Bill.
The Government’s commitment to establishing the TRA has been recognised by stakeholders—by both producers and consumers. The Public Bill Committee was told by the British Ceramic Confederation:
“It is clear that we need a TRA, and it is certainly welcome that the Bill establishes one.”––[Official Report, Trade Public Bill Committee, 23 January 2018; c. 64, Q123.]
In its written evidence, consumer organisation Which? stated that it
“recognises the need to develop a trade remedies regime and establish a new TRA which will be able to consider the need for remedies objectively, on a case by case basis”.
As the International Trade Committee also recently acknowledged:
“Establishing a trade defence regime is critical to protect UK domestic industries from injury from adverse trading practices.”
The Committee described the Trade Bill and the Taxation (Cross-border Trade) Bill as “important, necessary steps” and stated that
“we welcome the Government’s attention to this subject.”
The Bill also includes measures that will allow HMRC to collect more detailed information on trade and share it with appropriate bodies, primarily the Department for International Trade. This will allow the Government a sharper picture of how the UK trades and where we can best target support for British businesses. These provisions will also ensure that the UK is able to fulfil its international transparency obligations to share data with organisations such as the WTO. This function is currently undertaken by the European Union and it is vital that the UK can take over this responsibility, if we are to operate an independent trade policy.
Appearing as an expert witness before the Public Bill Committee, Professor Winters of the UK Trade Policy Observatory said:
“Information is very important, not least in my trade, for analysing what goes on. The case for collecting reasonable amounts of information, as long as it is cheap to do so, is very strong indeed”.––[Official Report, Trade Bill Public Bill Committee, 23 January 2018; c. 57, Q108.]
In a similar vein, the British Chambers of Commerce told that Committee:
“If, in the future, there can be a more robust collection of data and stronger assessments of UK-third country trade, that would be helpful.”––[Official Report, Trade Bill Public Bill Committee, 23 January 2018; c. 72, Q136.]
Angus Brendan MacNeil
Given the vote just now and that the UK is turning its back on the customs union, we will most likely have a border in Ireland. In that eventuality, we will not have a transition agreement with the Republic of Ireland. If we have a border but no transition agreement, will the Government be ready in March 2019 with the TRA and will they have in place the 40 trade agreements that are vital for industry?
Dr Fox
I do not accept that the Government’s proposals will require a border in Ireland. In fact, the Cabinet took a specific decision to bring forward a proposal to take to the EU that will prevent us from having that border. Nor will we accept a border down the Irish sea, because all parts of the UK, however much the hon. Gentleman might dislike it, will be treated the same by this Government, who are proud to be a Conservative and Unionist Government.
The Bill also brings forward measures that will ensure a joined-up UK approach to implementing the GPA and continuity trade agreements. However, the Government respect the devolution settlement, as reflected by the amendments tabled by the Government on Report and accepted by the House. We have worked closely with the devolved Administrations to make progress towards legislative consent. Let me reiterate the Government’s commitment to not normally using the powers in the Bill in areas of devolved competence without the consent of the devolved Administrations. These powers are primarily here for administrative efficiency. We will not be taking back any powers currently in the hands of the devolved Administrations, however much the nationalists pretend that we will be. In fact, as powers return from Brussels, more will sit with the Scottish, Welsh and Northern Irish Governments than ever before.
As we leave the European Union, we want to provide continuity for businesses, for consumers and for our trading partners. This Bill sets the scene for the United Kingdom’s independent, sovereign trade policy. We will approach that with optimism and confidence. I commend the Bill to the House.
Barry Gardiner
I thank the Minister for Trade Policy for stepping into the shoes of the right hon. Member for Chelsea and Fulham (Greg Hands) with great aplomb. He has displayed his customary tact in all our engagements and has helped the Government deliver the Bill, despite all the pressures he has faced. I pay tribute to the hon. Member for Huntingdon (Mr Djanogly), who I thought made an exceptionally thoughtful speech on Report and gave the Government a great deal of wise counsel that they might have done better to take even more notice of than they did.
In particular, of course, I want to thank my hon. Friends the Members for Sefton Central (Bill Esterson) and for Bradford South (Judith Cummins) for their exceptional work in preparing for the debates on Report and in Committee. It has been a long process since last October. We were not quite sure whether we would see the Bill this side of the summer recess, or whether it would even resurface before Christmas, but it is a great tribute to them that they were able to scrutinise the Bill with the care it deserved.
I echo the Secretary of State’s remarks about the expert witnesses. It is one of the great features of the innovations over the past 15 to 20 years in this House that expert witnesses now give their testimony to Committees at the beginning and inform our procedures. We certainly benefited hugely from all they said. Of course, I wish that the Secretary of State and the Minister had taken a little more notice of what they said, because they were often extremely critical of the Government, but that was not to be.
Finally, let me apologise to the Government Whips. I am not known in this place for speaking with brevity, and I must apologise to the Whips because when I curtailed my remarks this afternoon, it meant that the session did not go the full length, and I think that they took their wrath out on the Minister for ending it early.
Trade Bill
Wednesday 18th July 2018
(7 years, 3 months ago)
Lords ChamberTrade Bill 2017-19 Read Hansard Text Amendment Paper: Consideration of Bill Amendments as at 17 July 2018 - (17 Jul 2018)
Trade Bill
Tuesday 11th September 2018
(7 years, 1 month ago)
Lords ChamberTrade Bill 2017-19 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Consideration of Bill Amendments as at 17 July 2018 - (17 Jul 2018)
The Minister of State, Department for International Trade (Baroness Fairhead) (Con)
My Lords, I am pleased to open this debate, with so many vastly experienced and distinguished Members on the list of speakers. I particularly look forward to hearing from my noble friend Lady Meyer, who is making her maiden speech today. I warmly welcome her to the House.
Let me start with some background. This Bill is fundamentally a pragmatic and, in most parts, technical Bill. It is about continuity and about certainty—continuity of the existing trade agreements that we already have through the EU, and the certainty that this gives to businesses and our trading partners. It may be a pragmatic Bill, but it is no less important for that. Before we sign any new trade agreement, we need to maintain the effects of our existing ones. Whatever the outcome of our negotiations with the EU, our current trading partners have made clear that they do not wish to lose access to our market—that of the fifth-biggest economy in the world—and nor do we to theirs.
Britain has always been a natural trading nation. We pioneered the global trade in mass manufactures at the start of the nineteenth century and globalised financial services towards the end. It is a deep part of our heritage, leaving its mark everywhere you go. Trade is more central to our economy now than it has ever been. In fact, it represents 60% of GDP, with exports making up 30% of that. It maintains jobs and touches almost every job up and down the country.
Of course, as we look to the future, we can be certain that the shape of the economy will change, just as it has in the past, whether it is from demographic shifts, artificial intelligence or anything else. Government has a duty to prepare the country for those changes. But one thing that we can be sure will not change is that trade will continue to be an important part of our economy and critical to the people of our country, which is why it is right that we now have a department dedicated solely to increasing international trade, and why we are supporting trade through our export strategy and our more than 200 recent ministerial visits from DIT alone overseas.
We can also be sure that the countries with which the EU has existing trade agreements will be a crucial part of that trade. Those agreements—the subject of this Bill—are with more than 40 non-EU countries. They represent 12% of our trade. We must ensure that we can replicate the effect of those agreements in UK law, with a transparent and timely process. Parliament, and especially this House, has a particularly crucial role here, because getting that right—the details, the technicalities, the practicalities—has always been where this House comes into its own. That is something this Government genuinely do value.
I am clear that this Bill has been improved by scrutiny in the other place. As a result of that input, the Government have made amendments to increase scrutiny, so that the Government would have to lay a report in Parliament setting out changes to existing trade agreements when they get transferred and use the affirmative resolution procedure where appropriate, not the negative; and by reducing the sunset period by two years. The amendments also give certainty that the new Trade Remedies Authority can be up and running on day one by letting us set up the TRA in shadow form without risking staff employment rights. They also iron out some technical consequences of machinery of government changes for the agreement on government procurement, so that we do not just have certainty, but are seen by our trading partners to have certainty.
So what, moving to the detail, does the Bill do? In short, the key elements are, first, as I have said, to seek the powers to ensure that we can implement existing continuity agreements with trading partners, both full free trade agreements and other agreements relating to trade. Secondly, it seeks the powers to ensure that we can become an independent member of the WTO’s agreement on government procurement, so that UK businesses do not lose access to a £1.3 trillion market. Thirdly, it seeks powers to establish the Trade Remedies Authority, to protect domestic industries from unfair and damaging trade practices. Fourthly, it lets the Government gather and share information on trade.
On the first of these, the Bill provides for the legal power to continue the trade agreements that the EU currently has with third parties, such as those with South Korea and Canada. Of course, once we have left the EU, the Government will not require additional powers to continue the trade agreements themselves—the power to negotiate and sign treaties is a prerogative power and always has been. Agreements concerning trade are no different. International agreements, once signed, are then ratified subject to the process set out in the Constitutional Reform and Governance Act 2010 and laid in both Houses alongside an Explanatory Memorandum to give Parliament oversight.
This Bill instead concerns the domestic implementation of those continuity agreements, where domestic law is required. Again, in many cases, this will already be preserved through the withdrawal Act, but it is essential that we have the legal power to make such agreements operable under UK law. The Bill will make sure that they can be. We should remember that many of the agreements are ones that the UK itself pushed for as a member of the EU and that all of them are bringing jobs across the country.
From preliminary discussions, the Government are confident that other countries want to be able to continue these existing agreements. Many of these countries have already said as much publicly. We are the world’s fifth-largest economy, its sixth-largest importer and its 10th-largest exporter, so even outside the European Union we will be one of the world’s most significant markets in our own right.
The second function of the Bill is to allow the UK to implement the changes required so that we can remain a party to the Agreement on Government Procurement—known as the GPA. This agreement, covering 19 parties and 47 countries, operates under the structure of the World Trade Organization. Although we are a member of the World Trade Organization in our own right, our GPA membership is through the EU.
The Government already have the power to accede to the GPA, subject to the Constitutional Reform and Governance Act. The power in this Bill will allow the UK to make the necessary changes in domestic legislation to reflect that accession. Being in the GPA means letting businesses from overseas compete in some of our procurement markets on level terms with domestic firms, with guaranteed reciprocated access. Around one-quarter of UK procurement contracts are opened up to foreign providers under both UK and EU rules—that is £68 billion—though in practice the vast majority are still won by British companies. In fact, only around 2.5% of the larger contracts go to foreign suppliers. In return, the Government get better value for money through more competitive tendering and our own businesses can sell into the world’s largest public procurement markets. Last year, British firms won contracts abroad that secured thousands of jobs. As I said, the opportunity is estimated to be worth £1.3 trillion a year.
To be clear, there is no requirement, and it is certainly not the policy of this Government, to open up the NHS or any other public service to international private sector competition. Nor will the Government put our own businesses at a disadvantage. We currently apply GPA rules through our EU membership; this clause simply lets us continue with the status quo. Our market access offer to the GPA remains completely in line with what we currently offer as an EU member state. Our schedule will be replicated. Continuity and reassurance are what this clause of the Bill provides.
The UK will continue to decide, at its sole discretion, which services to open up to competition, not our trading partners. The Bill will allow us to make necessary changes to our domestic legislation to reflect our independent membership of the GPA. In addition, it will allow for further limited changes; for example, to account for other countries joining or leaving the GPA.
The Bill’s third purpose is to let us set up a new public body, the Trade Remedies Authority, or TRA. This will allow the UK to investigate and, where appropriate, take action against unfair trading practices such as dumping and subsidies or unexpected surges in imports where they cause injury to UK industry, in line with WTO rules. This action usually takes the form of an increase in duty on imports of specific products; these are known as trade remedies measures. Such measures are key to ensuring an effective, rules-based system for international trade by levelling the playing field and restoring the competitive balance. They allow us to protect UK businesses and UK jobs.
Currently, the European Commission is responsible for undertaking trade remedies investigations and imposing measures on behalf of the UK. Once we are operating our own independent trade policy, that responsibility will be ours. That is why we have set up our own trade remedies framework, through the Taxation (Cross-border Trade) Bill, which noble Lords debated last week. This will ensure that the UK can continue to provide a safety net to domestic industries after the UK has left the EU. It is vital that this Government can continue to protect our businesses from unfair or injurious trading practices by other states.
Lord Davies of Stamford (Lab)
Have the Government heard from any of the countries currently enjoying free trade agreements with the European Union, or do they know by any other channel that any of those countries are going to propose, or have proposed, any changes in the provisions of those treaties when they apply simply to the United Kingdom and the country concerned as a new, bilateral agreement?
Baroness Fairhead
I can confirm that we have had some positive discussions with each of those third-party trading countries. We will address this in the bulk of the debate and I will also address it in my closing speech. Was that helpful?
This is also why we have engaged extensively with UK industry in developing this function, through multiple round tables, ministerial meetings, technical discussions and site visits. After all, producers play a crucial role in our economy and jobs are at the heart of their communities. This Bill will set up the TRA as a new public body and provides for a governance structure designed to make sure that the TRA is independent and operates an objective investigation process. That is why we are setting it up as a non-departmental public body, to ensure that it has the appropriate degree of separation from government. This will also ensure that businesses have the assurance they need that their complaints will be treated fairly and impartially.
Finally, the Bill lets HMRC collect information about exporters and share export data with certain third-party organisations. We intend to ask companies and partnerships, through the tax returns they already submit, to provide information, on a voluntary basis, about whether they are an exporter of goods or services, or both. Having the correct data will enable government to make better policy and align assistance and resources to help our exporters. HMRC will be able to share information with the Trade Remedies Authority, to give it the evidence it needs for its independent investigations. HMRC will also be able to share information with the Department for International Trade, to support evidence-based policy-making. This data sharing will be subject to strict controls to maintain privacy and commercial confidentiality, including the criminal sanctions in the Commissioners of Revenue and Customs Act 2005. Those four things are what this Bill is about.
I would also like to clarify those areas the Bill does not cover. It is not about new free trade agreements that will come into effect in the future. The Bill does not give the Government powers in this area, nor would it be appropriate to do so. We do not yet know what those agreements will look like; nor can we, because until March next year our duty of sincere co-operation with the EU prevents us negotiating them. The Secretary of State recently set out the process for consultations on new free trade agreements, which I shall explain in further detail in a minute.
The Bill is not directly about Brexit. Of course, we would not have had the Bill if we were not leaving, but the Bill itself is not about whether or how we leave the European Union. Leaving the EU flows from the European Union (Notification of Withdrawal) Act 2017 and the European Union (Withdrawal) Act 2018, both already debated in this House. Whether this Bill passes makes no difference whatever to whether we leave the EU, when we leave the EU, or who gets what votes on the final deal. The nature of our withdrawal and our future relationship with the EU—hard, soft or any other form—will not be changed in any way via the measures in this Bill. Clearly, this Bill is happening because of Brexit—
Lord Liddle (Lab)
Surely one of the main concerns of the manufacturing industry is what will happen to rules of origin in British trade agreements with countries such as South Korea, when the EU rule is that 55% of cars have to be manufactured domestically yet we manufacture only 40% of our content domestically. Surely this is highly relevant to Brexit and the economic damage that Brexit could cause to a sector of our economy on which 1 million jobs depend. Therefore, to say that the Bill has nothing to do with Brexit is very strange.
Baroness Fairhead
I did not say it was not happening because of Brexit. In fact, I was clear that the Bill is happening because of Brexit. But Brexit is not happening because of the Bill. It is a fine point but it is clear. There is the decision on Brexit and then this is about the four areas that I talked about. We will come on to rules of origin in the debate. It is a really complex and important area, and something that we are negotiating with both the EU and the third countries in the continuity agreements. I have little doubt that we will talk about this and I expect to cover it in my closing speech. If the noble Lord is happy with that, I will proceed.
Lastly, the Bill is not an attempt by the UK Executive to take power from Parliament, the devolved Administrations or anyone else—in fact, the opposite. On devolution, the Bill grants devolved Ministers the powers they need to implement existing trade agreements and procurement legislation, respecting their competence in these areas. It retains for the UK Government the powers they need—nothing more. We have also agreed changes to the Bill with the devolved Administrations, in the other place. We look forward to continued engagement with the devolved Administrations throughout the passage of the Bill and hope to work together to secure legislative consent Motions.
On wider public engagement, the Government have no desire to push through trade agreements without public support. Frankly, that is not in our interests. When Governments try to push through trade agreements, not only is it the wrong thing to do but it almost always backfires, as we saw with the Transatlantic Trade and Investment Partnership—TTIP. In any new free trade agreements, the Government will engage with the public right from the start. In June we published our engagement strategy for the pre-negotiation stage of future trade agreements. The comprehensive four-point plan includes open public consultations. We launched four online consultations on 20 July, open for 14 weeks. These ask for public feedback on potential free trade agreement negotiations with the United States, Australia and New Zealand. They also ask for views on the UK potentially seeking accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership —CPTPP.
We also set out detail on UK-wide outreach events; detail on thematic and sectoral groups of stakeholder experts; and information on our intention to convene a strategic trade advisory group, consisting of experts from across the country from academia, trade unions, consumer groups and businesses from different sectors and of different sizes. That is just for the pre-negotiation stage. There will be more targeted engagement as we move forward. As I said, the Bill is about existing trade agreements. These agreements are already in place. Maintaining their effects in UK law merely preserves the status quo and will not involve changes on the ground for businesses or consumers.
Finally, on the role of Parliament, as noble Lords will know, these trade agreements have already gone through the normal parliamentary scrutiny processes for EU legislation and have already been scrutinised by both Houses of Parliament. In any case, the power to implement continuity trade agreements under Clause 2(1) is exercisable only for three years from exit day—unless both Houses agree extensions. This is one of only seven delegated powers in the Bill and one of only two Henry VIII powers. The other Henry VIII power relates to HMRC data collection. This is also subject to the affirmative resolution procedure and is very narrowly defined, as requested by HMRC itself. All these delegated powers are necessary. It would be simply impossible to implement our continuity trade agreements or the GPA membership in the time available without them. We would also miss the opportunity to understand how best to help UK businesses by collecting export data. That is why the Government have requested them, and for that reason alone.
In conclusion, we are forging a new trade policy to make the most of the opportunities of Brexit but we need to get the practicalities right first. I look forward to hearing the views of all noble Lords today as we enter the detail of the Bill. I will listen carefully and seek to engage as fully as I possibly can, whether with groups, by party or with individuals, to ensure that proper scrutiny is given to the content and intent of the Bill. It is a necessary and pragmatic Bill. It is one that respects Parliament, respects the devolution settlement and puts in place a firm foundation for our future trade policy for the years to come. It is with that in mind that I commend this Bill to the House. I beg to move.
Lord Grantchester (Lab)
My Lords, I welcome the Minister to her first Bill in your Lordships’ House and I look forward to the maiden speech of the noble Baroness, Lady Meyer. This Second Reading debate offers us an all-too-rare opportunity to consider in detail what should constitute the UK’s future trade policy and what changes to our legislative structures, now and into the future, are required. At the moment there is still huge uncertainty about what relationship the UK will have with the European Union, or about how the Government think that our national trade policy will be built around that relationship. Certainty is what our business community needs.
As the Minister has just explained, the Government believe that all that is needed at this time is a technical Bill, aimed at facilitating our engagement with the government procurement agreement, establishing the Trade Remedies Authority and making sure that the UK can roll over the existing free-trade agreements negotiated by the EU with some 80 third-party countries. On the latter point, Japan and Chile have both indicated that they are not happy to simply roll over their agreements and George Hollingbery, a Minister at the Department for International Trade, said in evidence last week that,
“it is not an absolute given that we can get them all transitioned”.
Is a technical Bill sufficient? What is our trade policy, and who operates and agrees it? What powers lie with the devolved Administrations and how are disputes to be resolved? What impact will these agreements have on ordinary people, on consumers, on companies and businesses up and down the country? How will our trading activities as a nation impact on third countries, particularly developing ones? These issues are still to be determined.
One of the most disappointing shortcomings in the Bill is that it proposes to restrict trade policy almost entirely to the UK Government. In doing so, it ignores the devolved authorities and largely bypasses Parliament. It has no engagement with civic society and, ultimately, fails to offer accountability or to offer opportunities to nations, regions or cities. Even if the right thing to do at this stage, given the massive uncertainties around Brexit, is nothing more than rolling over the trade deals that we currently enjoy as part of the EU, what happens if these trading partners ask to renegotiate? Is it possible that countries such as China and South Korea may wish to change the terms of the agreement when dealing with a market of 65 million people, when the original deal was premised on access to a much more diverse and remunerative market of over 500 million? We must make plans for how the UK will approach such challenges and take into account all the diverse viewpoints and outcomes.
On transparency, the Bill fails to guarantee the disclosure of any information relating to negotiations or to mandate consultation on continuity agreements, while essential scrutiny of secondary legislation is compromised in some of the most crucial areas. It offers few checks and balances—fewer, indeed than those the EU currently routinely guarantees for its trade deals to the European Union Parliament and civic society. It tries to set up the UK’s trade policy as a simple continuation of where the EU has got to, but it ignores the growth in public interest in trade agreements.
The Bill also misses an opportunity to act as a framework for our future trade policy and set out the UK’s pitch as an ethical trading nation right from the beginning. Trade policy should not be pursued only for self-interest but should also be used to shape a world that better reflects our ideals. I refer to advancing human rights, eliminating poverty, promoting sustainable development and reflecting the UK’s concern for high environmental and welfare standards in production methods.
This gives me the opportunity to touch briefly on the issue of tariff rate quotas, which deal with the split quantity of certain goods within the overall EU allocation, which can be traded at reduced tariffs following our departure. A large share of such goods is related to agriculture, so the issue is central, not only to our economic prosperity but to the food we all eat. I am sure many will be aware of the disputes that have arisen as a result of nations such as Canada and the US claiming that plans to divide these quotas will disadvantage them. This is an issue that must be resolved, and it can be examined at later stages to allow the Government to best do so.
The Trade Bill should guarantee that even our continuity agreements promote these principles, and that our trade policy has its sights on goals beyond benefiting our own economy. I am sure the Minister will offer assurances that our trade policy will be principled, but if her Government are serious about this commitment then they should enshrine these ideals in the statute book. The Bill also paves the way for the UK to participate in the government procurement agreement, and we welcome that. However, there is no detail in the Bill about what constraints, if any, will be placed by the UK on third-country companies bidding for UK public bodies contracts. We will be putting down amendments to scrutinise that and making suggestions for how procurement can be used to advance social objectives.
As the Minister said, the key proposal in the Bill is the establishment of the Trade Remedies Authority. Labour recognises that, provided it is set up properly, it is guaranteed independence from the Government and has the right powers to protect UK industries from unfair trading practices. I am sure the House is well aware of the dumping of Chinese steel, where the market has been flooded with goods being sold below the cost of production without profit, leading to dreadful consequences for the UK steel industry. Unfortunately China’s dumping of steel is not an isolated case. Trade dumping has become a major feature of the international trading market. The House also needs only to look towards the aggressive and protectionist trade policies of President Trump to demonstrate the need for strong defences. This is a serious issue with serious ramifications for jobs and the economy. The TRA will need substantial resources if it is going to do the job required. We will be looking carefully at the structure proposed for it and how best to guarantee its independence.
Lastly, I come to the greatest missed opportunity: the chance to settle the question of whether the UK will negotiate a new customs union. One of the many myths peddled by this Government is that the UK is better off outside the customs union with the EU. Surely we can trust businesses to know what is best for them, and the clear majority of them say they are best off in a customs union with the EU. The reason is simple: a customs union could allow for frictionless trade with the EU and offers the best possible basis for dealing successfully with the Irish border issue. It could also pave the way for access to over 50 trade agreements with third countries. Together, these markets accounted for 62% of UK goods and services exports in 2016.
The country was encouraged by the Prime Minister’s recent trip to Africa. We were all pleased to see efforts to expand into these markets. However, it is worth reminding the House that South Africa, the focus of the trip, already has an agreement with the EU, from which both South Africa and the UK greatly benefit. In addition, 34 of the least developed African countries already benefit from tariff- and quota-free access to the EU through the Everything But Arms policy. Nearly all African countries receive preferential access to EU markets. The Prime Minister is right to look to Africa and elsewhere for future trade, but a customs union with the EU is the best way to do so.
With Britain outside a customs union, there seems no remotely realistic scenario in which British businesses would find it easier to sell their goods and services abroad. This is for the simple reason that the UK alone is unlikely to secure trade deals more effectively than it does in the EU. First, there is the question of capacity and experience. While the EU has more than 40 years’ experience negotiating trade deals, the UK would be starting from scratch. Secondly, it is a question of negotiating power. While the EU can offer access to a huge market of more than 500 million people and extract large concessions in exchange, the UK can offer access to a market of merely 65 million people and will have to accept fewer concessions in return. A customs union with the UK at the front and centre is a solution for our future trading policy. This would allow us to broker new trade deals and expand markets through the joint bargaining power of the UK and the EU, while solving the Irish border question. A trading bloc is inherently more powerful than an isolated nation state.
It should be noted that services—on which the customs union has limited impact—must also be protected. We hope to provide for this issue during the later stages of this Bill. The enhanced equivalence provisions on services, set out in the Chequers proposals, are inadequate and erect significant barriers to trade.
Ultimately, this Bill is a missed opportunity to prepare the UK for a new chapter in our trading history. It betrays the principle of accountability and devolution which are so vital for any future trade policy. It creates a Trade Remedies Authority which will be woefully unprepared to fulfil its responsibilities. It misses the opportunity of mandating the Government to remain in a customs union with our major trading partner. The UK’s trade policy should have both our nation’s self-interest and the advancement of our ideals globally at its heart. Unfortunately, this Bill fails to prepare our nation to build a trading policy which can achieve any of this.
Lord Fox (LD)
My Lords, here we are again. Last term, playing to packed houses, we had the long-running debate on the EU (Withdrawal) Bill. Last week, for one night only, we had the Taxation (Cross-border Trade) Bill. Today, we start the third act in this tragedy.
Just now, the Minister set out the latest instalment in a programme of national self-harm. This Bill sits alongside the Government’s plan to take a smooth-running customs system and swap it for the facilitated customs arrangement—an unworkable technological fudge of Heath Robinson complexity. As the Minister has already admitted, leaving the European Union puts at risk 40 trade agreements, accounting for around 12% of our exports. It is, in effect, throwing them into the air without any idea as to how they are going to come down. In around 200 days, at the end of March, something will emerge, but it will not be what we have today. Nobody in this House knows what it will be.
I welcome the Minister to her first Bill. I am optimistic that she understands the challenges that are presented to business. She knows that this badly thought-through legislation will seriously affect the country’s economy. It will grow more slowly. Exports will be tied up much more and investment will slow. She understands the effect this will have on productivity. My hope is that she, alongside other sensible Members on the Benches opposite, will eventually realise that this is a path we should not be going down.
It will not surprise your Lordships when I say that the Liberal Democrats regard the Bill as unnecessary because we should not be leaving the customs union in the first place. By leaving the customs union, the UK is abandoning not only the world’s largest trading bloc but every free trade deal that the EU has negotiated with third countries.
The Liberal Democrats are champions of open markets and free trade, but we believe that the UK can negotiate better deals as a member of the huge EU bloc than it can as an individual country. That is why, all over the world, countries form blocs to negotiate trade agreements: they find it easier than doing it on their own. Being in the EU has not harmed other countries by preventing them from being acquisitive and getting their own deals. Germany has done very well, thank you, in international trade, despite the “huge impediment”, as some people would have it, of being in the European Union.
As we have heard, Clause 2 is premised on the assumption that the UK can effectively copy and paste the terms of the trade deals that the EU has signed with those 40 other countries or groups of countries, so that they can fly, as are, at the end of March. This is just one of the many acts of faith that we have to put up with every day in this place. It just is not going to happen. Although some countries may be prepared to roll the deals over, many others will demand renegotiation and changes because the power arrangement has changed—it has shifted; they are in the driving seat.
Many countries are already stepping forward. Seven, including the USA, have already written to the UK to complain about how it proposes to divide agricultural quotas after Brexit. It is inevitable that they will seek to change the terms. The Government may try to believe that they can roll these deals over, and I look forward to the Minister’s closing speech and her answer to the question of the noble Lord, Lord Davies of Stamford: what do you have in writing, what do you have that is real, other than a nod and a wink that this might be doable?
The Government are also trying to implement these deals by the back door. I know that the Minister talked about transparency, but the use of secondary legislation to implement these negotiated deals is not right. We need to involve Parliament more. The Government plan to comply with a trade deal by changing the law using statutory instruments. This has been improved thanks to the adoption of the Lib Dem amendment to switch to the affirmative procedure, and that is welcome, but it does not go far enough.
Although Parliament will get to ratify deals, it will not be involved or consulted in the process of delivering them—quite unlike what goes on in many other democracies, and certainly different from how things are handled in the European Union today. So much for taking back control: Parliament is ceding control over trade deals.
Future deals will have a significant impact on consumers and businesses. Although the Minister talked about them being rollover, temporary deals, we should remember that they can be extended, so they could carry on for some time. They should not be used by the Government to participate in a race to the bottom in ethics and standards. I want to hear what the Government have to say about that.
Clause 2 must ensure that trade deals cannot be signed and endorsed unless they are consistent with all the UK’s commitments to combat climate change, uphold food standards, promote sustainable development, defend labour laws, create a more equitable international order and defend human rights. These are all important parts of what make us the United Kingdom. To support that, an impact assessment is very important.
I turn briefly to plans for the facilitated customs agreement—I know that the Minister probably does not want to talk about it. It is important because it will be the mechanism by which trade will be delivered with our most important trade partners. This is the third attempt by the Government to come up with a frictionless replacement for a customs union, but that is an impossible dream. I do not think anybody really believes that the FCA will work, or that it is acceptable to the EU 27. However, just in case, and to understand how the Government are thinking on this, can the Minister explain how the following few issues will be dealt with: mutual recognition of standards; licensing arrangements; procurement rules; labelling; origin; IP law; environmental standards and employment legislation? All of these reflect on goods that are moving around in the European Union, some of which will have been facilitated to come into this country through the trade agreements being discussed today. How will goods be traced? How will standards be maintained? Referring back to last week’s debate, how will the tariffs and duties be totted up and shared out across the European Union? This is just the tip of an incredibly complex iceberg which indicates how unworkable this solution is.
Because the Minister knows that the FCA is a non-starter, I am sure that she understands why your Lordships’ House is so worried about the Northern Ireland issue, which was again revealed through Questions today. Brexiteers huff and puff and say that this is an exaggerated issue, but of course it is not. Nothing in this Bill, or its sister Bill debated last week, facilitates a border solution to maintain the Good Friday agreement. As I said last week, this Bill, and last week’s, are the enemies of that agreement.
In winding up, I cannot help but remind the Minister that 29 March is around the corner, yet it is hard to detect a sense of urgency. Indeed I still see tendencies to obfuscate. For example, after this debate there is absolutely no sign of a committee stage. I had expected to return in October and find committees ready and waiting, but no. It is not on the programme so far; is it happening in mid-October, late October, or November? Perhaps the Minister or someone in government can help. Either way, if this Bill is so important, why are we not getting on with it? It seems to me, and others, that the Government are sitting in their own version of David Copperfield and waiting for something to turn up.
The Government cannot, at the moment, help business with what is going to happen and that is the central issue which concerns me as business spokesman for the Liberal Democrats. Decisions and investment have to be made, products developed, and marketing plans put in place. What can you tell those businesses, big and small, north, south, east and west across the United Kingdom? You cannot tell them anything. The people working for those businesses deserve answers. For their sake, if no one else’s, please get on with this. Address the issues, step back, think again and hold on to what we have, because it is more valuable than what is on offer.
Lord Kakkar (CB)
My Lords, I thank the Minister for the thoughtful way in which she introduced her first Bill in this House. I remind noble Lords of my entry in the register of interests as chairman of University College London Partners and Business Ambassador for Healthcare and Life Sciences. I will confine my remarks to Clause 6 of the Bill, dealing with the question of the European medicines regulatory network.
The life sciences sector is hugely important to our country in terms of both the economy and the broader health of the nation. We are fortunate to be home to two of the world’s top 10 pharmaceutical companies. There are some 5,000 businesses in the life sciences sector, employing some 235,000 people between them. The sector is worth some £68.5 billion a year to the economy. Over the last 20 years, the pharma industry has been a positive net contributor to our nation’s trade surpluses.
As a result of the expertise in this country, the United Kingdom is the number one destination in the European Union for inward investment in the life sciences sector. Small and medium-sized enterprises—some 3,500 companies—have grown consistently since 2009 at a faster rate than the rest of the economy, and more than 500 of those small and medium-sized enterprises now actively export.
However, beyond the businesses involved in life sciences, the expertise in our country has resulted in both the development and sustaining of a broader ecosystem. That ecosystem includes four of the top 10 biomedical universities in the world and a series of other university departments, charities, and of course the National Health Service, which are seen as fundamental not only to this sector in our country but fundamental more broadly because of their global contribution.
In that context your Lordships’ House, on Report of the EU withdrawal Bill on 18 April of this year, heard from my noble friend Lord Patel on an amendment that dealt with the question of clinical trials regulation. Inevitably, in such an important sector that so directly affects the lives of citizens across every European country, there is a degree of important regulation that attends the question of how the database—the research that justifies the introduction of new medicinal products—is conducted. In 2004, the European Union introduced the clinical trials directive. Regrettably, over time that was shown not to be achieving what was intended, and Her Majesty’s Government, among others, led the way in ensuring a revision of that directive, which resulted in the clinical trials regulation of 2014.
When considering the withdrawal Bill, Her Majesty’s Government rightly identified that, although the clinical trials regulation had indeed been passed by the European Union, it was yet to be fully adopted because there was a need to establish a central portal for the accumulation of data associated with clinical trials that would be made available across all member states. As a result, the 2014 regulation could not be considered—certainly at the moment we were considering the withdrawal Bill—as retained EU law that would therefore be directly transposed into domestic legislation at the time we left the European Union. That is a very important point because the clinical trials directive has hindered clinical research, particularly in the United Kingdom. The new trials regulation overcomes those problems, and it could have left us in the situation where our country was left with the old directive on statute, governing the way that trials are conducted in the United Kingdom, while the new regulation providing a much better framework would not be, and therefore we would be left in a disadvantaged position.
The noble Baroness, Lady Goldie, when answering that amendment, which was ultimately withdrawn, gave the assurance that the elements of the clinical trials regulation that could be incorporated by Her Majesty’s Government in domestic legislation would be incorporated to ensure that many of the disadvantages of the directive would be overcome, irrespective of what status the regulation had by way of retained legislation. However, there are two elements that the Government were not able to give an assurance about. The first was the participation of the United Kingdom in the clinical trial portal, which is vital if we are going to participate across the European Union in clinical research in future and vital for ensuring the competitiveness of the life sciences sector in terms of developments and innovations in our own country that could ultimately undergo rigorous clinical trial testing and then be adopted across a substantial market which has very high global standing. Clearly, Her Majesty’s Government were keen for the United Kingdom to participate in that portal but were unable to give the assurance.
The second element was participation in the single assessment procedure that would result from the new clinical trials regulation, streamlining the way that applications for new medicinal and device products were considered by the European Union—which, again, is vital for market access. When the Trade Bill was considered by the other place, a contested amendment was introduced that resulted in Clause 6, which commits now for every effort to be made to ensure that the United Kingdom participates in the European medicines regulatory network. This is a network comprising the European Commission, each member state’s own regulatory authority for medicinal products and the European Medicines Agency.
The Minister has said that this is principally a technical and pragmatic Bill, and therefore I have a couple of technical points to put to her. The first is this: does Her Majesty’s Government believe that this clause and, therefore, the European medicines regulatory network, provide the vehicle by which they will be able to pursue the big questions they were unable to deal with in terms of considering the clinical trials regulation—that is, participation in the research portal and the question of participation in the single assessment procedure? Secondly, if this is to be the vehicle, can we be clear that the Government feel it is the mechanism by which they will now deliver on the commitment they made on Report in the withdrawal Bill, which resulted in that particular amendment not being voted on?
Finally, I would like to understand a little more about how the Government propose to use this commitment to participation in the European medicines regulatory network to take forward broader opportunities for securing the life sciences base in our country.
Lord Lilley (Con)
My Lords, it is a great privilege to follow the noble Lord, Lord Kakkar, who has delivered the kind of well-informed speech that I, as a new boy, have looked forward to hearing in this House, and which is such an important feature of its contribution to the working of Parliament.
The Trade Bill is useful, workmanlike and necessary. I was tempted to add that it is crucially important, because I have a vested interest in emphasising the importance of trade Bills and trade deals. I am probably the only person in the Chamber—or rather, one of the few—who participated in negotiating a trade deal in the Uruguay round, which culminated in the creation of the World Trade Organization. I was also the Secretary of State for Trade and Industry who had to introduce the whole single market programme into our country, by introducing the legislation that made us part of the single market. At the time, I made speeches emphasising how immensely important these developments were and how dramatically they would change everything.
I am a scientist by training so, when I make a prediction, I subsequently look back to see whether it has come true. I have to say that it was hard to see a seismic change following either the Uruguay round or the single market. Since the single market was implemented, our exports to the European Union have grown at 1% per annum compound, which is not a huge deal though better than no growth at all. It is hard to see a dramatic change in our trade, or in the trade of the whole world, following the Uruguay round. I believe that both were important and valuable, but we should not exaggerate their importance. What drives trade is producing goods and services of a quality, and at a price, that other people want to buy. One can have the best trade deals in the world but, without that, one will not prosper. It depends far more on your domestic competiveness, productivity, investment, training and skills, rather than the trade deals we negotiate. Yes, let us have good trade deals, but let us not imagine that they are the solution to our problems or will create a sudden, dramatic change—or that the loss of trade deals, though regrettable, would be the end of the world.
The Uruguay round halved the tariffs between developed countries on trade in goods. This means that future free trade agreements based on goods between developed countries are of limited value. The average tariff on trade in manufactured goods between developed countries is in low single figures, smaller than fluctuations in the exchange rate in a week or a month. Indeed, the tariffs are quite small compared with other factors too. There is merit in removing those tariffs but we should not think it is the be-all and end-all. Therefore, as far as goods are concerned, the most valuable free trade agreements are with countries with highly protected markets—typically the fast-growing countries of Asia, Africa and Latin America. It would be wonderful if we could indeed join the CPTPP agreement, as the Government have indicated they want to do, as the first non-Asian member of that trade group.
More than 50% of the value added that Britain exports is in services, so trade deals that emphasise services are particularly important to us. Unfortunately, they are less important to the EU and, as a result, 90% of the trade deals that the EU has agreed have no significant benefits for services. Switzerland, for example, has its own trade deals, a third of which have a significant component of service-enhancing trade. We will be able to do the same if we are outside the EU, but as a member of the EU we have to go along with the lowest common denominator, which is not necessarily in accordance with our interests.
The Bill will enable us to novate the existing EU deals—covering some 70 countries, we are told—into UK law and take over our share of those agreements. That sounds a daunting task, and of course it is significant, but I understand that no country has said that it is unwilling to renegotiate or reapply deals with us. Even those who have said that they wish to exploit the opportunity to change the terms, as the noble Lord, Lord Fox, has suggested, will, I understand, in the interim continue on existing terms, as is allowed under WTO rules, while any revised agreement is being finalised.
It is not the case that trade will suddenly stop. In fact, most of the countries that I have visited—I have been to Australia and New Zealand and have talked to a number of other countries nearer to home—want, subsequent to rolling over those deals and once we have some spare negotiating capacity, to negotiate better, more comprehensive deals. There is the scope for that because the deals that we have at present are those negotiated by the EU, which had to get the unanimous agreement of all 28 countries, not all of which were in favour of free trade and all of which have the exceptions that they wanted to make. Therefore, those deals are less comprehensive and we will be able to say, “Those exceptions don’t matter to us because we don’t manufacture that sort of thing. We can make you a concession on that in return for concessions on other things”. Therefore, there is scope for improvement even there.
I understand that the bulk of these different agreements is carried out with very few countries. Seventy countries sounds daunting but half of all our trade with those 70 countries is with one of them—Switzerland—and 80% is with three or four of them: Switzerland, Korea and Norway; I forget the fourth. Therefore, as long as we prioritise those, we can deal with most of our trade very well. However, I do not think that we should neglect the smaller countries. I am the former chairman of the All-Party Parliamentary Group on Trade out of Poverty. It happened to be a personal interest of mine that we should open our markets—and keep our markets open—to the developing countries of Africa and elsewhere. All my talks with those countries indicate that they want that too and that they will not put obstacles in the way of novating the trade deals that they have with the EU into trade deals with us.
This debate, like many others, has given people the opportunity to spread what I call plausible myths: things that sound plausible but unfortunately are not true. The noble Lords, Lord Grantchester and Lord Fox, said that, as a member of a big unit like the EU, we will be able to negotiate better, faster and more-extensive agreements than we would as a country in our own right. That sounds very plausible but it is simply not true. A study of all the trade agreements negotiated in the last 20 years shows that the average speed at which they were negotiated was 28 months. If, however, you exclude multilateral deals—essentially those involving the EU—the remaining bilateral deals were negotiated in much less than two years. Australia found that, when it told its negotiators not to go for the perfect agreement, but for the best agreement that they could reach in 12 months, it got three agreements within 12 months—with, I think, Taiwan, South Korea and Japan. It is possible, therefore, to do it more speedily when you are not part of a big group.
It is possible to do it more comprehensively, too, because if the EU is negotiating as 28 countries, each country has things it wants reserved, and the country it is negotiating with says, “Well, if you do not include this, and that, we will not include everything either”. So the EU’s group agreements tend to be less comprehensive than bilateral agreements that would be possible with us. There could also be more such agreements. Switzerland—which does not seem to think it necessary for its just-in-time trade to be a member of a customs union—is able to negotiate its own trade agreements, and has one with China. Even Iceland has an agreement with China. The EU does not. Switzerland has agreements with countries with a collective GDP that is far greater than those of the countries with which the EU has negotiated agreements. The same is true of Chile.
I do not think we should allow ourselves to be misled by things which sound plausible but which, when we confront them with the facts, turn out not to be true.
Lord Hain (Lab)
My Lords, I, too, welcome the noble Baroness, Lady Meyer, who, I am sure, will recharge the flailing Brexiteer case in this House with her great eloquence.
This Bill could have huge significance for people’s jobs, people’s rights and the economy, because it illustrates how Brexit puts at risk not only our trade agreements with the other 27 member states of the EU, but agreements with around 70 so-called third countries around the world that collectively account for around two-thirds of the UK’s trade. In a no-deal scenario on exit day—which is enthusiastically advocated by many Brexiteers—we risk losing not only tariff-free access to the biggest single market in the world but the benefits of our participation in the EU agreements with these third countries.
It is also important that we debunk the Brexiteer myth that Britain will be freed to conquer new global trade markets if, and only if, we leave the single market and the customs union. Germany is in both, and its biggest trading partner is China. There are absolutely no barriers within the EU preventing us getting a greater share of global trade.
A further problem, once the UK ceases to be regarded as EU territory, is that for the purposes of complex rules of origin which define when a product benefits from tariff-free quotas, UK component parts and products will no longer qualify. This could have a huge impact on UK trade, especially in sectors such as the automotive industry and aerospace, where complex supply chains currently operate freely within the EU.
All these difficulties are exemplified—noble Lords will not be surprised to hear me mention it again and again—in the case of the Irish border. InterTradeIreland’s report last March, Cross Border Trade and Linkages, found that the vast bulk of cross-border trade is accounted for by firms that trade simultaneously in both directions. Although these two-way traders amount to just 18% of firms, they account for over 60% of imports and 70% of exports. The data also shows that most cross-border trade occurs in intermediate inputs—components of final products—and highlights the considerable interconnectedness of cross-border supply chains on the island of Ireland.
In addition to being exposed to costs from customs duties and increased administration, two-way trade also risks disruption from delays, particularly where supply-chain links are concentrated in perishable food products such as milk. Milk tankers cross the Irish border about 33,000 times a year. Northern Ireland produces around 2.2 billion litres of milk a year, of which some 30% is processed in the Republic. Milk and dairy products move in both directions, sometimes several times. For example, cream from Northern Ireland milk is removed in Virginia, County Cavan, in Ireland and sent back to the Baileys Irish Cream plant in Mallusk, County Antrim, in Northern Ireland. We should not think of trade across the Irish border as being confined to the island; much of it is connected to global trade as well. For example, this complex cross-border supply chain underpins global exports in powdered milk products from the island of Ireland, north and south. It is exposed on two fronts by Brexit. First, in the event of a hard Brexit, the north-south milk trade would become unprofitable due to tariffs ranging from 40% to as much as 64% depending on fat content. The second concern is that when the UK exits the EU, it will no longer be included in EU export agreements. It could take a period of years to put new export agreements into place for key milk powder markets. What is supposed to happen in the meantime to those dairy farmers and the thousands of other jobs dependent on these supply chains? The Brexiteers have absolutely no idea.
And for those no-deal zealots, in July, Pascal Lamy, the former director-general of the World Trade Organization, described as “pie in the sky” the idea that there would be no border on the island of Ireland if there was no deal. Therefore, as Labour has rightly argued, a new comprehensive customs union with the European Union after Brexit is the best way to protect jobs and the economy, as well as avoiding a potentially disastrous hard border on the island of Ireland. That is what the TUC, the CBI and major businesses such as Jaguar Land Rover and National Grid want.
For the last 40 years, when trade deals have been negotiated by the EU on behalf of its members, scrutiny has been delivered through the European Parliament’s Committee on International Trade and in the UK by the European Scrutiny Committee of the House of Commons. These mechanisms will no longer apply after Brexit. But surely trade negotiations must be transparent and open to scrutiny by stakeholders and the public. As things stand, these new arrangements with third countries which the Government call “continuity agreements” would be excluded from the Government’s new arrangements, admittedly still lacking in detail, for structured engagement with stakeholders in relation to the new trade agreements announced by the Secretary of State for International Trade on 16 July.
My Labour colleagues in the Commons successfully argued that the Government’s Bill as introduced was woefully deficient in that it accorded yet again a number of Henry VIII powers to Ministers but made no provision for parliamentary scrutiny, as takes place in other countries including Germany, New Zealand and Australia. Following an unprecedented campaign by trade unions, the trade justice movement and industry and consumer representatives, the Government, in fear of their own Back-Benchers, tabled amendments very late in the day addressing at least some of the issues. However, the Government simultaneously tabled an amendment that would allow Ministers to ignore these scrutiny provisions should they so choose. So much for taking back control. Furthermore, those provisions for enhanced parliamentary scrutiny did not extend to the clauses relating to the UK’s future membership of the WTO’s Government Procurement Agreement covered by the Bill. This is very worrying, as protections relating to public procurement need to be in place for public services such as the NHS and the public sector more generally in the UK. The Bill remains seriously deficient and still needs significant amendment to be made fit for purpose on these scrutiny issues.
I find it mind-boggling that, with the clock fast running right down, we still have absolutely no idea how, after Brexit, we will be trading with our biggest partner, Europe, or any other country outside. No wonder that investors and traders are giving up on the British economy and that Jacob Rees-Mogg has had to volunteer that we will be poorer for decades. He asserts that it is worth it because we will be free of Brussels: free, free, free at last, but poorer, poorer, poorer as well.
As they confirmed recently, Boris Johnson, David Davis, Liam Fox, Jacob Rees-Mogg, Iain Duncan Smith and the rest—and quite possibly the noble Lord, Lord Lilley—have no plan for their cherished Brexit. Meanwhile, government Ministers admit that we have no idea where we are going but we are going there anyway. What a way to run a country—no wonder the rest of the world thinks that reliable old Britain has gone barmy, with this Parliament a willing accomplice to what is rapidly becoming a national tragedy. The trade unions and others are providing a lead to rescue the country from this madness by demanding a people’s vote on the final deal. I hope that we will all support that.
Baroness Meyer (Con) (Maiden Speech)
My Lords, it is a great honour and privilege to introduce myself to you today. I would like to thank noble Lords from all sides of the House, officials, staff members and the wonderful doorkeepers, all of whom have welcomed me into this House so warmly. I am particularly grateful to my sponsors, my noble friends Lady Jenkin of Kennington and Lord Black of Brentwood.
Even as I stand before you, I have to pinch myself that I am here. You see, my long journey to the Palace of Westminster began in Petrograd in 1917, 100 years ago, where my mother was born on the eve of the revolution. It was a long and winding road that brought my family and me, against all odds, from revolution-torn Russia to Brexit-torn Westminster. My mother’s family came from the old Russian aristocracy. They fled the Bolsheviks. My grandfather, a tsarist officer, fought in the White army. In the end, destitute, they found refuge in Manchuria. After all kinds of trials and tribulations, my mother found herself a young woman in Hanoi. There, she married a French army officer but a year later, in 1945, he was killed fighting the Japanese. She was left alone, homeless and eight months pregnant with my half-sister, hiding from the Japanese in Saigon. The wheel of fate turned again. She was rescued by a French naval officer after he had survived a Japanese prisoner-of-war camp. They married and I am the result. When I think of my parents, I think of fortitude, suffering and survival. They were together for 60 years and set me a fine example. My mother died last year at the age of 100. My only regret is that neither of my parents is here to listen to me today.
My parents sent me to the French Lycée in South Kensington. I took my degree at the School of Slavonic and East European Studies and began my career in the City. I was one of the first women to be licensed as a commodity broker. Working in a hard-driving male environment in the 1980s certainly had its challenges but I survived and, though I do say so myself, I ended up becoming one of my firm’s top producers. However, just like my parents and grandparents, I have lived a life full of peaks and troughs. Speaking before your Lordships today for the very first time is one of the highest peaks. It ranks with arriving in Washington in 1997 with my husband, Christopher, as he took up his post as ambassador only 24 hours after we married. What a honeymoon those five and a half years proved to be: we arrived with Monica Lewinsky and left with Saddam Hussein. In between, we also experienced the horrors of 9/11, which are to be remembered today.
No trough could have been deeper than when, in 1994, my children were illegally retained by their German father in Germany. During the next 10 years, despite the supposed international conventions, I saw my sons for a total of only 24 hours. To be separated from your children in this way is beyond a nightmare. I could not reach them, I constantly worried about them and, even today, I find it difficult to talk about. I was confronted by a merciless German legal system. I was buried under huge legal bills, and I ended up having to sell everything I had. I lost my job. I queued for unemployment benefits in Fulham Road, still unable to see my sons. I know how it feels to be a victim of an injustice—I will never forget it. This is why the protection of children is a subject on which I will always want to speak.
Even in this nightmare, there have been some points of light. It drove me to set up a charity against child abduction, as I soon discovered that many other parents were in a similar predicament. I ran it for 19 years; we achieved quite a lot, not least thanks to the help of the police and the Home Office under Theresa May. It introduced me to politics, as I pressed my case and that of other parents with the White House, the US Congress, the Élysée, the French Senate, the Belgium Senate, and, of course, noble Lords and Members of the other place. On points of light, in the photographs of my introduction to this House, you will see my sons—now grown men—standing by me, smiling proudly, having come from Germany to see their mother’s ceremony. My charitable work also took me to the European Commission and the Parliament in Brussels, where my experiences shaped my opinion of the European Union, just as my experiences in the Soviet Union in the early 1960s, when I went to visit my aunt in Moscow, made me realise the folly of the socialist dream and how lucky I was to be living in the United Kingdom.
I arrived in London as a French citizen of Franco-Russian blood. I quickly fell in love with this country—with its customs and respect for individual freedom and democracy. This is why I chose to become a British citizen. It was not forced upon me; it was not a requirement of my job, or of marriage. Though views may differ about France, I was not even fleeing a totalitarian regime. I felt I belonged here: British is what I wanted to be.
This background has given me a very particular view on the matters before us this afternoon in the Trade Bill, which I support because it lays the foundation of an independent trade policy. We should not let our divisions and differences of opinion over Europe get us down. This is democracy at work—a sign of self-confidence, and strength. We should face our future with the fortitude and optimism of our ancestors who, time without number, overcame the challenges that confront this nation. I say this to your Lordships as someone who is both a true Brit and a true European. Thank you.
Baroness Neville-Rolfe (Con)
My Lords, it is a great privilege to follow my noble friend, who has been a friend for nearly 20 years. We worked together on the charity she founded, now called Action Against Abduction. I know that all noble Lords will join me in extending to my noble friend Lady Meyer a very warm welcome, and thank her for her fascinating and emotional personal story.
The great strength of her contribution today has been to show her achievements nationally and internationally, especially in the area of children and families, for which she was duly honoured by Her Majesty the Queen. She brings experience, knowledge and good sense to your Lordships’ House, and we very much look forward to her next contribution. She has an energy, vibrancy and charm that will warm the whole House.
I start my contribution to today’s debate by referring to my interests in the register and by congratulating my noble friend Lady Fairhead on her opening speech. I liked her clear summary of the powers in the Bill and of the work already in hand. I will add a historical perspective. Trade is the linchpin of prosperity. It is a fascinating subject, from the trading of obsidian and flint during the stone age to the Hanseatic League, an alliance of trading cities in northern Europe—a precursor of the EU—running a trade monopoly between the 13th and 17th centuries.
Trade is disproportionately important economically, as we have heard. For example, there was a great trade collapse after the last financial crisis between the third quarter of 2008 and the second quarter of 2009. World GDP dropped by 1% and world trade by an amazing 10%. So, in view of the enduring importance of trade to the UK, the Government are right to want to prepare for a vibrant international trading future in the post-Brexit world.
I support the Bill and its speedy passage. It rightly seeks to provide continuity in our trade and investment relationships with third countries. It replicates the effect of existing EU preferential trade agreements and makes us a member of the government procurement agreement on our own account. The Bill passed by this House last week will deal with tariffs and customs matters, but this Bill will allow us to implement our non-tariff obligations. It does not look forward to new free trade agreements since, as the Secretary of State for International Trade helpfully made clear in his Statement on 16 July in another place, these will now be the subject of new primary legislation. This Bill is concerned with existing agreements, making it less contentious and very urgent as we need these to continue on Brexit day, transition or no transition.
I will touch on a few issues. I am known for my interest in impact assessments and I studied the one issued on this Bill as long ago as 11 September last year. The bad thing about it is that, understandably, it gives no figures on the impact on business, either static or dynamic, of future continued FTAs or procurement arrangements. The good thing about it is that it sets out a list of the existing third-country agreements that the UK will seek to continue. My noble friend Lord Lilley touched on these in his very perceptive speech.
What I found most interesting was that from this group, in 2015 Switzerland, the Iceland, Lichtenstein and Norway group, Canada, Turkey and Korea were our top five trading partners among those with FTAs. When I worked at Tesco I had something to do with the agreement with Korea. When it was being negotiated, the Korean Government were very helpful with my company’s problems as an overseas investor. Keen to conclude the FTA, they shied away from discrimination against our business and that of others in a similar position. But, once the EU-Korea agreement was signed, our problems returned in spades. Indeed, Tesco has since sold the business to help restore its balance sheet. But, given the vibrancy of that business—called Homeplus in Korea—its contribution to the whole group on innovation and digital, and, looking at it the other way, the substantial amount of capital it received from us to build a leading Korean retailer, this seems very sad. The lesson for today is the importance of looking beyond the here and now of a trade agreement to what happens afterwards and the need for good remedies and dispute resolution.
That brings me on to an area of the Trade Bill that I am interested in exploring—the Trade Remedies Authority. As my little example shows, the quality of this aspect of trade arrangements is very important. The EU’s comparable body has some of the very best career officials, as I saw when I was a Business Minister in the EU Council. So we need a highly professional team looking after the UK’s trade interests in the new world. I have to admit that I am somewhat doubtful about having a new authority separate from the trade department, partly because of the stringent financial controls on pay imposed on such bodies. However, that has been decided and we cannot delay the Bill.
The proposed body is of a very special type. Different considerations apply to it than apply to most, superficially comparable, bodies. In this case, having everyone inside the tent would not be a good idea. In particular, I would be very much against including stakeholders, whether from producing industries, trade unions or devolved Administrations, as members or non-executives of the new authority.
I was glad that the Commons voted against this concept. The investigation process should be run by people who are independent-minded and able to stand up to the various interests who will want to influence the outcome of something as a delicate as a trade dispute. I am also pleased that the Government are planning to move some of the experienced staff that they have developed or recruited for the Department of Trade into the new authority.
Another area that is very important and on which I have had representations from the retail sector is how VAT will operate post Brexit and the sums involved. While it is strictly a tax issue and not for this House, I hope that the Minister will agree to find time to answer questions on this.
Finally, in response to the noble Lords, Lord Grantchester, Lord Fox and Lord Hain, perhaps I may offer a wider, fundamental observation. I voted remain in the referendum, because, on balance, I thought then that continued membership of the EU was the better option. However, it does not follow that, when we leave, people of my persuasion should consider the best outcome to be to remain as close as possible to the EU, via membership of the single market, customs union or whatever. Past support for remain implies no such conclusion.
We need to review the matter from first principles, covering such considerations as why the UK would profit from membership of an organisation whose rules are set by others. My point is simple: remainers who now advocate the closest possible ties with the EU need to argue their case and not assume that all who once agreed with them must accept the truth of their current proposition. Of course, if we stay in the customs union or the EEA, the powers in this Bill and the new authority will go largely unused, bringing home the extent to which that outcome would limit our influence on trade.
Baroness Kramer (LD)
My Lords, let me from these Benches join in the welcome extended to the noble Baroness, Lady Meyer. Sometimes in this House we have a Member who gets to their feet and speaks deeply from the heart; she did that today, and I hope that she will continue that passion into her future speeches.
I have the great advantage of speaking in the middle of the batting order, so I can now select just a few topics on which to focus. I think that it will not surprise the Minister that I want to talk about rules of origin. She said that that she would address that issue in her summation. Unfortunately, it will be difficult to challenge her at that point in the discussion, so I hope that she will be comprehensive.
In the continuity FTAs that are to novate—as the noble Lord, Lord Lilley, phrased it—the 40 to 43 existing deals that the EU has with 70 countries, rules of origin become critical. As this House will know, the right to reduce a tariff to zero is in many cases dependent on the content of the good being exported. Local content has to reach a pre-agreed threshold. In the example often used, of the sale of automobiles to South Korea, the required local content threshold under the EU agreement with South Korea is 55%.
The UK is a major exporter of cars to South Korea. It has no difficulty using that definition of EU content in reaching the 55% threshold. However, the UK alone has content that is far lower. From reading speeches of Mike Hawes of the SMMT, which is basically the automobile trade association group, I understand that the core UK content is on average about 20%. Through various other mechanisms, that number can for some vehicles be raised to about 40%. To get to 55% or 60% is generally acknowledged to be impossible. The rationale for that is simple: it is economies of scale. Major manufacturers are not going to want to have multiple ball-bearing parts in every country from which they export; they are not going to want to replicate the construction of tyre wheels, or whatever else. It is the supply chain, collectively, that delivers that final product to the UK for onward export to Korea.
My understanding is that it would be very difficult to get a variance from that 55% to 60%, for the simplest of reasons: the benchmark is used in trade deal after trade deal across the globe, and many of those trade deals include a clause that says that if more favourable terms are offered to another country, then automatically that more favourable benchmark is included for each country that is engaged. You know that if the UK were able to get a benchmark reduced to 20%, for example, the EU would enjoy that, as would many other countries that have free trade deals with South Korea, so we create a problem. The answer that the Minister often gives is that we will have a triangulation system that allows the UK to treat EU content for these purposes as if it were UK content and vice versa. However, my understanding is that that would last only to the end of the transition period even under the Chequers agreement, and if there is no deal then there is no possibility that that arrangement will even be in place late on 29 March next year. Perhaps the Minister will take us through those various issues.
I took a look at a very handy chart derived from world import-export tables—these are 2016 numbers—produced by a company called Absolute Strategy Research. That 55% to 60% benchmark is quite common for a wide variety of goods: we are not talking just about automobiles. It may be lower for some: there is an agreement in aerospace, for example, that there will be no benchmark. I looked at this and at UK content of its exports. In electrical equipment we just about get to 20%, in food products we are below 10%, in rubber and plastic products we are at just about 20% again, and in chemicals at just over 20%, so there is a very wide range of our exports in which we could not meet the local content benchmark in these free trade deals that we intend to novate. We could if we included other EU products, but that requires agreement with the EU and requires the EU to renegotiate every one of its existing free trade deals, because of course it has to make that adjustment as well.
I would really like some realistic comment from the Government, because I have a sense from my discussions that they think it will be an absolute no-brainer to get an agreement to bring the thresholds down to something like 20% or 30%, because Britain is Britain—that seems to be the logic, as far as I can see. For the reasons I have described, including the impact on trade deals all over the globe, I cannot see that that is likely. I certainly cannot see that it would ever happen without reciprocal giveaways. I shall give this House the example of Korea. The South Koreans basically said that if they were to change the threshold and allow EU content to be considered as local UK content, they would wish to do the same for Chinese products. As I understand it, the automotive industry in the UK has now said that if that door were opened, essentially it is the end of automobile production in the UK, because it would allow such a flow of cheap Chinese automobiles into the UK and it would be so damaging to our manufacturing that every investor would have to fundamentally reconsider. Spread this across industry sector after industry sector and we deserve a better answer.
I want to pick up one other issue around rules of origin. It is a point that I made in debate on the customs Bill, but that was such a truncated debate that it would be wrong not to make the point in this context as well. The noble Lord, Lord Lilley, said that tariffs are not really such a problem—they have been coming down all over the world, so it really does not matter if we do not have a zero-tariff regime: our competitors might have it but we can still do fine. But rules of origin have a huge non-tariff cost. The estimate given by the Government—perhaps the Minister will confirm it—is that a single certificate for rules of origin will cost £30 to produce. I have previously used the example of a small stationery supplier in Northern Ireland, who imports his goods from the Republic of Ireland—he has no choice; there is a wholesaler only in southern Ireland—and the shipment comes every week. The cost to him for that shipment would be £30 for the pencils, £30 for the white paper, £30 for the blue paper, £30 for the filing cabinet, £30 for the pens, and so on. The slightest difference creates the requirement for a new certificate of origin.
Lord Lilley
The Swiss have to fill in rules of origin on their trade with Europe, which constitutes 80% of their exports. They say that the overall cost of dealing with borders is about 0.1% of the value of trade. How does the noble Baroness make that tie in with the scare story she is currently retelling?
Baroness Kramer
This is not a scare story. I think the Government will be able to confirm the description that I have just given. I will make one, more general comment but I do not want to go on because of time. Different countries have different patterns of production and trade. Over the past 40 years the UK has integrated into a supply chain, just as the Northern Ireland economy has integrated across those borders. I cannot speak about the Swiss because I do not know that economy in detail. It requires detailed knowledge of the specific economies. We are part of a crochet, deeply embedded into it, just as many of the supply-chain countries are, with constant trading across borders within the EU.
Even under the Chequers proposal, rules of origin certificates are required on every good. I have talked before about the small company that sells party supplies across Europe. It would be £30 every time they sent out a shipment of cups, £30 for the plates, £30 for the paper napkins, £30 for the tablecloths—you can go on with those kinds of numbers and you quickly realise why for many companies this is a totally destructive additional cost, which changes the game completely. I ask the Minister: can we please have some comprehensive answers? Can we have the impact assessment of what this will do to our businesses as they are today—not the fictitious new businesses that may develop in the next 20 years which will abandon the kind of trade that I have described and specialise in something different, perhaps more along a Swiss pattern, but the real businesses that exist today, in which people have invested and by which people are employed?
Lord Purvis of Tweed (LD)
My noble friend may be interested to learn, on the Swiss example, that the regulations associated with all agricultural, tradeable and industrial goods are fully aligned with the European Union, and Switzerland is part of the Schengen agreement, so for the movement of people and those agricultural and trade goods there are no necessary checks.
Lord Butler of Brockwell (CB)
My Lords, I am delighted to be the first Cross-Bencher to congratulate the noble Baroness, Lady Meyer, on her very moving and powerful maiden speech. I have previously known her as the wife of her husband. I knew some of the story she told us today, but not all of it. None of us can be in any doubt that the range and depth of the experiences that she described will enable her to contribute very powerfully to the business of this House.
I support the Second Reading of the Bill. Like the earlier withdrawal Bill, it is clearly necessary if the UK is to leave the European Union. As has been said, it will be an important first step if the UK, as a third country, is able to novate trading agreements that we already have as members of the EU. Of course, it will be for the EU’s trading partners individually to decide whether or not they want to make such arrangements with the UK. As the noble Lord, Lord Grantchester, said, that will not in every case be straightforward. The Secretary of State assures us that the auspices are good; we must hope that he is right.
However, there is the much larger question of trade with the EU countries themselves. I accept what the Minister said—that this Bill is not directly about trade with the EU—but the EU is such an essential part of UK trade that it is bound to be relevant to a Trade Bill. I hope that we can reach an agreement with the EU and believe that we must not be excessively dismayed by the reports of negative reactions from the EU negotiators to the Chequers proposals. As we all know, the EU has a habit of cobbling together an agreement at the 59th minute of the 11th hour. Nevertheless, we must be realistic about the consequences of failing to reach a deal.
In a recent article, Professor Ngaire Woods, the director of the Blavatnik School of Government at Oxford, pointed out that because world markets are becoming increasingly interdependent, other countries are consolidating their supply chains, not breaking them up. She made the point that three-quarters of world trade in goods consists of inputs to items finished elsewhere. For all countries, there is a premium on the ease of transmission of goods across borders. Half of current British exports are to the EU. I know that I do not have to give a lecture on these matters to the Minister, with whom I had the great pleasure of working during my brief foray into commercial life.
There is also the fundamental importance to the UK of exports of services. Here, I draw attention to my interests in the register. The Chequers proposals do not cover such exports but here again, mutual recognition of standards is as important as it is for goods. Of course, an agreement on these matters is important also for the EU, which is a reason for hoping that a deal will ultimately be done. But it is more important for us because trade with the EU is a more important part of our economy than trade with the UK is for its members, so we cannot afford to be light-hearted about the consequences of no deal or an inadequate deal. I know that the Government are not light-hearted about that but we have to ask ourselves whether, in the event of no deal or an inadequate deal, the advantages of leaving the EU still outweigh the disadvantages. Can we assert that a majority of the British people, in voting for Brexit, were in a position to take an informed view on this question? Of course, they could not have been because the terms of our future relationship were not known when the referendum took place—indeed, they are not known today.
I do not believe that it be would be right or responsible for the British people to go over the cliff without being asked to make an informed choice when the terms of our future relationship with the EU are available. If an amendment to this Bill is tabled to provide for such a choice, I will again support it. I cannot accept the Prime Minister’s response that providing the British people with an opportunity for an informed choice would be “a negation of democracy”. On a matter of such importance, precisely the reverse is the case.
Lord Hamilton of Epsom (Con)
My Lords, I congratulate my noble friend Lady Meyer on her maiden speech, which was distinctly moving. I knew about the story, which I had read in the press, of the problems that she had in being reunited with her children as a result of German divorce laws—but I must say that to hear it again strikes dismay, and many other emotions, in the heart of any mother or indeed father in this country today. I wish I could say that it was only the German divorce laws that were depriving mothers of their children; I am afraid the state in this country as well has a role to play in that.
She described her White Russian grandparents, a persecuted minority who had to flee. She also said that she was standing up for Brexit in this House. She will not be persecuted but she will certainly be in a minority—a very small minority, I have to tell her, because for some reason there are serried ranks in your Lordships’ House who think that the country made a very great mistake in voting to leave the EU and are not really reconciled, as we have heard from the noble Lord, Lord Butler, to the vote, which was a quite clear decision that made it absolutely clear to the country that we wanted to leave. This is strange, because I always think of the noble Lord as coming from what I call the mandarin class—people who have made the decision to dedicate their lives to politics but not to stand for election. Then someone makes a democratic vote—the country votes—and they say, “No, no, they’ve got it wrong”. Suppose that we ignore the vote of the country. Where does that leave the people of this country?
Lord Butler of Brockwell
I am very grateful to the noble Lord for giving way—I intervene because he referred to me. I do not assert that the British people got it wrong. I assert that they were not in a position to make an informed choice—and that is what I now want to see happen.
Lord Hamilton of Epsom
I would point out to the noble Lord that you could make exactly the same point about the verdict of a general election. You could say that the people who won the election did not give the right information, ignored many vital issues and produced inaccuracies in their election addresses. Do you, on that basis, reverse the general election? If you do, you will find that people will be given no option but to take to the streets.
Actually I am rather heartened by the people contributing to this debate. Many of my noble friends who have arraigned us with their views do not seem to be speaking here today. Perhaps they have been somewhat discouraged by the lack of enthusiasm for the rebels in my party in the other place, who failed to uphold any of the amendments to what was then the European Union (Withdrawal) Bill—perhaps the stuffing has been knocked out of them.
This seems to be a very sensible Bill because it paves the way for transferring many of our trading arrangements. As my noble friend Lord Lilley pointed out, this is not a very complicated exercise because, of the countries that have free trade agreements with the EU, only about four, accounting for 80% of our exports, really matter in terms of the negotiations.
The point was made by the Opposition Front Bench that some of these countries might want to alter the agreements. I have to say that I sincerely hope they do—but that does not mean that we do not transfer the agreements as they stand today on a cut-and-paste basis and then go back at a later date and negotiate a more wholehearted deal that will incorporate a lot more trade.
Baroness Kramer
I have a question for the noble Lord, which I hope might help. How does he propose we cut and paste rules of origin and local content? I find it a really interesting concept that we could do that.
Lord Hamilton of Epsom
The noble Baroness mentioned the question of origin, and I thought my noble friend Lord Lilley dealt with that. I do not think it is quite the problem that the noble Baroness seems to make it out to be. I do not see that there is going to be any great problem in transferring over the existing agreements. Indeed, there is tremendous good will from the countries involved that want to do this.
Lord Hamilton of Epsom
I am not going to give way again. The noble Baroness cannot go on getting up; I have only a limited amount of time. It must be right that we sign up to the government procurement agreements as well, because they involve a lot more countries. This will make it easier for us to leave the EU without an agreement and resort to the WTO.
It is interesting that, during the progress of these negotiations, the whole idea of going to the WTO and having no deal on trade has been taken off the table. Let us face it: the Government had a very weak hand, and no deal was the only ace in that hand. It almost defies credibility that, at one point during the negotiations, it was taken off the table. Now there is a lot of preparation being done for no deal and for the WTO. This Bill will form part of the preparation.
The whole attitude of the EU has completely changed. There are a large number of manufacturers in the EU saying, “What does the WTO mean for us?”. What it means for German car manufacturers is a 10% tariff on all assembled cars they send to this country. Everybody says, “Oh, it’s a much smaller amount of trade for the EU than it is for us”—as the noble Lord, Lord Butler, did a moment ago. The eurozone sells us one and a half times as much as we sell to it, and the Germans sell twice as much in manufactured goods to us as we do to them. So it does impact on them. There was a moment when we were told that we were being the laggards of Europe and that our growth rates were falling. I agree that you cannot believe quarterly figures, but now our growth rates are up by a margin over those of the EU. So the EU is not in such a strong economic position that it can say, “For political reasons, to punish the British, we are going to have a really hard deal which means that we sell less to them than they do to us”.
Let us look at what has actually happened. It was not that long ago—before the election, I must admit—that the Prime Minister said that no deal was better than a bad deal. That was in the days when Nick Timothy was her special adviser. As a result of the general election, he has gone. Now we have Olly Robbins instead, and we seem to be in the position where any deal is better than no deal. The result has been the Chequers agreement. In my opinion, this is a complete dog’s breakfast that could have been dreamed up only by a civil servant. Why have we moved away from the simplicity of a Canada free trade deal with serious additions? I do not understand why that was ever taken off the table and why we are in the nonsensical position that we are today. If this country is going to have a future, we want a clearly understood deal, based on Canada. That will get us out of the EU and trading as the Canadians intend to do in the future.
Lord Browne of Ladyton (Lab)
My Lords, since my introduction into your Lordships’ House, on each occasion when I have risen to speak from these Benches, I have endeavoured to find some point of common cause with the previous speaker—some point on which we can agree, or some way in which I can seamlessly weave myself into the debate. The noble Lord, Lord Hamilton, will appreciate that, on this occasion, I choose to divert myself from that and to take this opportunity to welcome the noble Baroness, Lady Meyer, to your Lordships’ House. I particularly congratulate her on her maiden speech. I was privileged to be here in person to listen to it. She has a compelling personal story. I have not practised law for some time but, when I did, I spent a lot of time trying to persuade judges of what was in the best interests of children. If she intends to use her opportunity as a Member of this House to do this, she can guarantee that I shall be behind her. I honestly think that people are much more likely to listen to her because she can translate her personal circumstances into a compelling argument, and I thank her for that.
In the third or fourth sentence of the Minister’s opening remarks, she said that the principle that guided the Bill—I think this is the phrase used by Liam Fox in the other place—was that of continuity. She suggested in her peroration that the purpose of the Bill is substantially to preserve the status quo. During the passage of the Bill through your Lordships’ House, to the extent that I can engage with it, I intend to test whether it in fact gives any bankable guarantee of continuity or whether it creates a series of opportunities, which I suspect that the Government will not resist, to do the opposite in some specific cases. I intend to use my time to identify some of them and ask some specific questions of the Government about their intentions.
I begin by going back to a point made by several speakers, including my noble friend Lord Grantchester and the noble Lord, Lord Fox. Indeed, before we even started on Second Reading, the noble Lord, Lord Purvis, asked the noble Lord, Lord Callanan, about this. My noble friend Lord Davies of Stamford also asked about this in his intervention. We are promised that, in summing up the debate, the noble Baroness will come back to address the issue of whether the Government can achieve what they set out to do, which is to roll over these trade deals in the time available in a way that generates continuity.
Whether the noble Lord, Lord Hamilton, likes it or not, third parties are involved, and that guarantees that we cannot just cut and paste these trade deals. First, the European Union has to take action and then the third-party countries have to agree. Some of these countries are required by their constitutions to ask their Parliaments whether they can agree to the novation of these trade deals; in some, the head of state has the equivalent of our prerogative power to do so; in others, it is relatively simple, and departments can do it.
This point was brought to my attention by press reporting over the weekend. I am thinking specifically of the report in the Independent—it may have been only online—on 8 September of an answer given to an FoI which revealed that, beyond trade, there are more than 750 such deals with at least 168 non-EU countries. They cover a wide variety of issues: airline services, nuclear safety, fisheries, agriculture and data sharing, over and above those that relate to trade, which we are specifically dealing with here.
I ask the Minister to address the specific question asked in the FoI: whether the Government have central information on the number of those agreements and whether information is held about their individual status—in other words, the degree to which a likely positive response from a third-party country had been gained by discussion and negotiation, principally by her department. I understand that, in answer to that question, Charles Marquand was told that the Government do not hold the information relevant to the request.
It was reported that none of these 168-odd countries have given clear agreement to roll over any deals, yet there is no date for asking them to do so. Given what the noble Lord, Lord Purvis, was told by the noble Lord, Lord Callanan, in Oral Questions—that these all have to be rolled over by 29 March—perhaps the Minister can confirm in her promised response to this debate that the Government do know how many third-party countries have promised or agreed to roll over agreements. Perhaps she can persuade your Lordships’ House that the Government are confident that this information actually exists somewhere. Can she quantify the risk of loss of trade after Brexit if any of these countries refuse to roll over agreements or require significant changes to them?
I have a few minutes left in which to make a second point, which relates to geographic indications. No one who knows my history of representing a Scotch whisky constituency for 13 years will be surprised at this. In case I run out of time, I repeat to the Minister what the Scottish Whisky Association, which has briefed me on this issue, has asked me to put to her:
“If the UK does not agree to reciprocal protection, it risks the status of the UK’s GIs”—
there are 86 of them and a lot of rural economies utterly depend on them—
“in the EU and globally with those countries that have trade agreements with the EU”.
I make this point because the Minister of State for Trade Policy went to the Scottish Parliament on 5 September to give evidence to its Finance and Constitution Committee. He told it specifically—it is in the Official Report—that the Government do not agree with the European Union’s position on geographic indicators because they consider it to be a barrier to free trade. That suggests to me that the Government intend to undermine many of these geographic indicators. That would be a very significant detriment to many rural communities, particularly in Scotland.
I have taken up too much of my time in making these two points. At later stages of the passage of the Bill, I also want to engage the Government about devolution issues. Again, Ministers went to the Scottish Parliament and said some really interesting things about that.
Baroness Jones of Moulsecoomb (GP)
My Lords, it is a pleasure to follow the reasonable and well-reasoned comments from the noble Lord, Lord Browne. I am not sure if it is the convention, but I welcome the noble Baroness, Lady Meyer, who has left the Chamber, as the first Green to do so. I am of course the only Green, which is a source of great sadness to me and, I am sure, to many Members of your Lordships’ House. I take issue with the rather rude and disagreeable comments about Brexiters from the noble Lord, Lord Hamilton. I voted leave, but I had no idea that this Government would make such a hash of it, so I will be voting against almost everything that the Government bring forward unless they listen carefully to the debates and arguments in this House.
I used to be an archaeologist so I have a little experience of trade 5,000 to 10,000 years ago. My knowledge is not that much more outdated than that of the Government. The Trade Bill sounds rather like an attempt to continue with 20th-century arrangements, which are based on ideas from the 18th and 19th centuries. Of course, if that is not going far back enough in history, some of the measures here are more 16th-century—the Henry VIII powers that Ministers are trying to grab for themselves yet again.
The Government try to tell us that this is simply business as usual, but we all know that that just is not true, and that this legislation will have far-reaching impacts in economic, democratic and constitutional areas. It is therefore for us to talk sense to the Government and hope that they will listen. Trade deals are no longer just about removing tariff barriers between countries. Modern trade deals can change vast areas of public policy, such as food standards, environmental protections, working conditions and the privatisation of public services. A trade deal can make huge changes to our hard-won rights and protections, yet the Government want a blank cheque to trade away those rights if they feel it is appropriate, without parliamentary scrutiny or approval. Obviously I am going over some areas that have been mentioned already, but I will say it differently—and, quite honestly, these things need repeating. The Government frame this Bill as simply the rolling over of existing deals, but there is nothing on the face of the Bill to stop their powers applying to renegotiated or even entirely new trade deals.
We have been told, time and again, that Brexit is about taking back control, that Parliament will once again be sovereign, and that the UK Supreme Court will be the ultimate arbiter of legal disputes. But the provisions in the Bill will undermine that. Any control taken back from the EU will be jealously guarded by Ministers and shielded from scrutiny by this Parliament. This arrangement will hold the powers outside of the supervision of the Supreme Court, too, which is already limited in its capacity to question the exercise of royal prerogative. If things were not bad enough, many modern trade deals create supranational legal bodies—so-called investor-state dispute mechanisms—whereby corporations and lobbyists can take national Governments to secretive courts for the crime of hurting their profits. The idea that we are taking back control is clearly laughable. The Government appear to be seizing power on behalf of international capitalism at the expense of workers and the environment. The simple truth is that we are losing control with the Bill, and I fear for our democracy if it goes through. Ministers will have the power to change primary legislation to meet the demands of any dictator who chooses to intervene. Whether it is Putin, Xi Jinping or Donald Trump, anyone could negotiate with Liam Fox, who is desperate for some high-value deals, and I do not trust him not to sell us out while he tries to outfox Mr Art of the Deal.
To put all this in perspective, let us compare the scrutiny arrangements in the Bill with those of some of our trading partners. The United States, the European Union, New Zealand and Canada all have some degree of public and parliamentary scrutiny which exceeds the proposals in front of us. In the United States, negotiating texts are reviewed by a body of representatives, and Congress has both a power of amendment and a binding vote on the final agreement. In the EU, the European Parliament is consulted throughout, and MEPs get a binding ratification vote on the final agreement. In contrast, our Parliament will have little say and zero power; even the so-called undemocratic EU will be more democratic than us, which is very embarrassing. Parliament will be on its knees, begging for scraps from the Government, while our counterparts in other countries can be said to be running the show. Trade justice campaigners have told me that they always thought the EU system was flawed and undemocratic, but the proposals in the Bill have managed to concoct something even worse. This is not what anyone meant by “taking back control”.
My big worry is not just the procedural and democratic argument; I am extremely worried about the massive changes that could be made to some important laws. We already know, for example, that the US is pushing for us to reduce our food standards to allow it to import food that would currently be deemed unsafe and probably plain yucky by British consumers. We hear a lot about chlorinated chickens, but in fact the unsanitary, diseased conditions of American mass farming are the scary part rather than the chlorine, which is designed to make the meat safe to eat, so we should be glad that American chickens are chlorinated. Just one statistic: someone eating food in the United States is 10 times more likely to contract food poisoning and other food-borne illnesses than if they were eating in the UK. We can be sure that people like Donald Trump will insist that we lower our standards and flood the market with American goods, if we want a trade deal. It cannot be left to Ministers alone to wave goodbye to our food standards and safety; it is Parliament that passed these laws, and Parliament should take them away.
Of course, different departments could pursue completely different objectives: the Department for Environment, Food and Rural Affairs might have one idea about trade while the department for trade is negotiating the complete opposite. We must make sure that protections are in this Bill to ensure that our standards and rights are protected, and that all departments negotiating trade deals are clear that these protections are not up for grabs.
We have an opportunity here to rethink what trade means and what trade deals are. Trade does not have to be a race to the bottom; it can be used as a way to work with other countries to create good jobs and improve living standards. Instead of working together to bargain away workers’ rights and environmental protections, we could make deals in which we agree collectively to strengthen our standards and take them to new heights. It is possible to be ethical about these things and to shape policy for good; we should be setting our sights rather higher. Much of Britain’s wealth was created by plundering and exploitation of the global south; we have to move away from that mindset with our modern approach to trade. We can demonstrate global leadership by championing fairer trade and rising standards, not just free trade.
From a green point of view, there is absolutely no point in continuing with trade for trade’s sake. Global thinking is that trade is incredibly important but, where something can be produced and consumed locally, we should aim for that; it will have less environmental impact both globally and locally. Food is also much healthier when we get it locally rather than have it shipped in. A noble Lord mentioned earlier how there is lots of exchange—milk, for example, goes backwards and forwards across borders. Why on earth does that happen? We should think more locally. I would like to see the Government do more to encourage local and regional trade and I hope to hear from the Minister about any ideas that the Government have.
The proceedings around the EU withdrawal Bill proved that there is a lot of concern with the way things are going. I look forward to working with other noble Lords to help make this legislation fit for purpose but, unless significant changes are made, I will vote against the Bill.
Baroness McIntosh of Pickering (Con)
My Lords, I am delighted to follow the noble Baroness. I refer to my interests in the register, particularly the work I do with the Dispensing Doctors’ Association. I welcome the Minister to her ministerial position. I also add my congratulations to my noble friend Lady Meyer on her excellent speech and welcome her to the House. Like her, I have a mother born outside of the United Kingdom—my mother came from Denmark. I warn my noble friend the Minister that I will be focusing on a number of issues where I think Denmark is doing particularly well.
The Trade Bill is appropriate, as Britain is a trading nation. We are liberal and outward-looking and the UK has benefited from our membership of the European Union since 1973. Through our membership of the EU, as the Minister said earlier, we benefit from wider trade agreements and, most recently, from economic partnership agreements with third countries. The Trade Bill is to be welcomed as putting arrangements in place for our leaving the EU and becoming, effectively, a third country. However, the provisions of the Bill before us today relate to internal aspects only, rolling over the provisions of existing free trade agreements into our law. As the noble Lord, Lord Browne of Ladyton, mentioned, there is an external aspect where the agreement of a third country needs to be sought on the subject of a free trade agreement—or possibly of the EU if it is a mixed agreement. I urge the Minister to continue to keep the House informed in regard to these matters.
We must also have regard to the sheer timescale of negotiating and concluding even the simplest of free trade agreements. As we leave, we are giving up access to 440 million remaining consumers in the EU, as well as access to an additional 47 countries through the EU free trade agreements, so there are dangers in over-emphasising the opportunities of these new trading relationships.
I welcome the commitment in Clause 6 to continuing to participate in the European medicines regulatory network, but questions remain over the free movement of medicines, medical devices and UK participation in European clinical trials, as referred to by the noble Lord, Lord Kakkar. The EU has been our most important trading partner and clearly has other benefits, such as close cultural ties and geographic proximity, so the costs of trading with our EU partners are clearly substantially lower than if we were to trade with, say, the US, Japan, Korea, Australia and New Zealand, as well as such trade being more sustainable and less damaging to the environment.
The challenges of seeking new trading arrangements must be clearly understood. There is the possibility of protectionism and, as the noble Baroness, Lady Jones, referred to, hormone-produced beef and chlorine-rinsed chicken, as well as food insecurity and potential disruptions in the event of a trade dispute. The size of these new markets and their distance from us means that they will not easily fill the void left by our previous trade with our existing EU partners.
Under World Trade Organization terms, the most challenging aspect is the rules of origin, as a number of noble Lords have mentioned. I take the example of the humble sausage. The contents of each sausage will, more likely than not, emanate from more than one country, with a multiplicity of ingredients in each. Every individual product would have to be identified and its source confirmed before a nomenclature and potential tariff could be agreed. However, as with all aspects of trade, it is often the potential non-tariff barriers that cause the greatest threats.
There are concerns over the regulatory powers set out in the Bill. I would prefer that as a general rule no power to make policy decisions should be vested in the Government without proper parliamentary scrutiny being in place. I would go further and propose that Parliament be given the formal power to approve trade agreements, as well as the power to approve the UK’s negotiating position and the final text of each agreement.
Farmers have had to meet the highest possible standards of food safety, animal health and hygiene in producing our food, and they have been proud to do so. It would be singularly inappropriate for deals to be sought with countries such as the US, Argentina and Brazil that do not meet the criteria that our farmers currently have to meet. Most producers, whether of food, farming or manufactured goods, welcome the broad thrust of the Chequers plan and, in particular, the fact that there will be an acceptance of a common rulebook to ensure a smooth transition as we exit on 29 March next year so that our goods will still be accepted into the EU. Anything less would be a travesty. Producers and consumers alike need to know that there will be continuity of supply, as well as high standards of production, in what has become a very sophisticated integrated supply chain between us and our existing EU partners.
I should like to take Denmark as an example. With a population of only 6 million, it punches way above its weight in exporting its foodstuffs. Largely through the work of industry and a particularly strong co-operative movement, with some limited government support, Denmark has a strong export showing to China and other far-flung places of meat, dairy and other food products, even while remaining a full member of the EU. I am mindful of the fact that our main export, above all—this will delight the noble Lord, Lord Browne of Ladyton—is whisky. Britain recently appointed an agricultural attaché to China, since when our agricultural exports have been boosted to the benefit of companies such as Karro, whose food plant was formerly the Malton bacon factory in North Yorkshire, which now proudly exports to China pigs’ trotters and other pig parts for which there is no home market.
Our agricultural attaché is financed mostly by industry, with only a modest contribution from the Government. This is a model shown to have brought results and should be rolled out in other countries too. The Food and Drink Federation calls for in-market specialists in priority markets, identified—in addition to China—as the USA, India, Japan and the UAE. Figures provided by the Food and Drink Federation show how UK food and drink exports have played catch-up with our EU partners, with our exports to China increasing by 94% between 2015 and 2017, due no doubt to the work of the agricultural attaché as well as the strong growth of the Chinese consumer market.
Danish exports of food and drink to China in 2017 were still substantially greater than ours, as were their exports to Japan. Growth of UK food and drink sales to Japan, at 10%, lags behind growth of food and drink exports from Ireland, Spain and Germany, as well as from Denmark. So there is clearly great potential for future growth in exports for the food, drink and farming sectors. We did not, however, have to leave the European Union to achieve it.
The Agriculture and Horticulture Development Board levies a statutory fund of about £60 million each year from farmers, growers and others. It is currently under review and needs to build on its role in promoting exports. I hope that this will be cautiously considered, so as not to damage our growing export market. The Minister may not be aware that there is growing concern over the position of organic farmers post Brexit, when their niche market may be lost because they will have to renegotiate recognition and certification from scratch.
The trade remedies and dispute resolution mechanisms raise questions about problems arising from the relationship between this Bill and the customs Bill. One issue of which the Minister may be aware relates to bricks and ceramics, which face potentially unfair competition from unsustainable sources in developing countries, and reduced exports—with an effect on domestic production—arising from the recent Trump tariffs and the retaliatory measures from China.
In conclusion, whatever happens with the process of this Bill we must beware of cutting our producers off from their main existing export markets in the EU. The potential impact of no deal could be catastrophic for farming and the food and drink industry. I am firmly of the view that the Chequers paper sets us on a direction of travel that could take us to a safe haven, such as the EEA or EFTA, by forging a bespoke customs union with them, while carrying on with negotiations and keeping our longer-term trading options open. I hope the House will give the Bill a fair wind.
Lord Adonis (Lab)
My Lords, the noble Baroness, Lady McIntosh, has just spoken powerfully about the benefits of expert sectoral attachés at our embassies, and I am sure that the Minister will be taking her suggestions seriously.
I make no apology for returning to the critical issue of Northern Ireland, following on from my speech on the Taxation (Cross-border Trade) Bill last week. Ireland is the Achilles heel of Brexit, because it cannot be squared with the prosperity and flourishing of Ireland, because of the impediments it will impose on trade within Ireland and between Ireland and Great Britain. The crucial thing to understand about this, as I now appreciate only too well from successive visits to Belfast and Dublin in recent months, is that as an island off an island, Ireland’s trade is overwhelmingly centred on, or routed through, Great Britain. Some 14% of Ireland’s trade is directly with Great Britain, while 85% of Ireland’s EU freight trade is routed through British ports.
The issue we and Ireland face, therefore, has two critical dimensions. The first is the extent of the trade between us and the damage we will inflict on Ireland if we unilaterally erect barriers to that trade. The second is the impact on the fragile peace and stability of Northern Ireland, which, even 20 years after the Good Friday agreement, is in a state of crisis, with no Assembly or Executive for 600 days and the constant threat of re-entering a spiral of civil disturbance or worse. These two issues are interrelated, since nothing contributes to peace more than prosperity, and nothing undermines prosperity more than civil unrest, uncertainty and an absence of democratic institutions able to deliver for the people.
Since I spoke last week the position has worsened, because of the incredibly inflammatory remarks by Boris Johnson, Mrs May’s Foreign Secretary until two months ago, about her Brexit policy being a “suicide vest”. Leaving aside the nauseating attention-seeking tone of that metaphor, it is important to understand that Mr Johnson was referring to the backstop provision for Northern Ireland. As an irresponsible hard Brexiter, Mr Johnson has long been opposed to the backstop by which EU law and the EU’s trade regime will continue in Northern Ireland if there is any question of a hard Brexit requiring border infrastructure after the implementation period in 2020.
Mr Johnson’s reason is simple: the backstop imperils Brexit itself. This is in fact true. The problem is that anything else imperils the Good Friday agreement and threatens to provoke paramilitary activity in Northern Ireland—which is precisely why the Prime Minister agreed to the backstop last December, as a key element of any withdrawal agreement between the United Kingdom and the European Union this autumn.
I know that the Minister will totally dissociate herself from the “suicide vest” remark—but will she say what the Government’s current position on the backstop is, given that the Prime Minister herself said in Belfast, shortly after Mr Johnson’s destabilising resignation, that she no longer favoured a backstop that had force in European law or was not time-limited?
I have two other vital questions for the Minister about the Government’s post-Brexit trade and customs policy on Ireland. First, can she say how Section 10 of the European Union (Withdrawal) Act relates to the Irish backstop? My specific point is that if there is no deal, there is no backstop—so, by definition, on 29 March 2019 there will be a hard border and customs tariff arrangements between Ireland and Northern Ireland. I do not see how this, or any weakening of the backstop, is compatible with Section 10 of the European Union (Withdrawal) Act, which noble Lords will recall—because we inserted it into the Act—provides that a Minister of the Crown must act,
“in a way that is compatible with the terms of the Northern Ireland Act 1998”.
The same provision—Section 10 of the European Union (Withdrawal) Act—also specifically prohibits the Government from agreeing to,
“create or facilitate border arrangements between Northern Ireland and the Republic of Ireland after exit day which feature physical infrastructure, including border posts, or checks and controls, that did not exist before exit day and are not in accordance with an agreement between the United Kingdom and the EU”.
I ask the Minister, therefore, whether Section 10 prohibits no deal, or a weakening of the previously agreed backstop in relation to Northern Ireland?
As a further consequence of the crisis in the Conservative Party this summer, following the Chequers declaration on Brexit policy in July, the Government have gone significantly further than Section 10 is respect of provisions relating to Ireland. We now also have Section 55 of the Taxation (Cross-border Trade) Act that we enacted only last week, which was inserted as an amendment in the House of Commons by Mr Jacob Rees-Mogg. Section 55 of the latest Act states:
“It shall be unlawful for Her Majesty’s Government to enter into arrangements under which Northern Ireland forms part of a separate customs territory to Great Britain”.
This gives rise to an obvious and huge question that I will now also put to the Minister. If under Section 10 of the European Union (Withdrawal) Act a no-deal Brexit or any Brexit without a backstop is illegal in respect of Northern Ireland, and given that Section 55 of the Taxation (Cross-border) Trade Act states that it is not legally permissible to have different customs arrangements between Northern Ireland and Great Britain, does it not logically and necessarily follow that a no-deal Brexit, or any hard Brexit that is inconsistent with the Northern Ireland backstop and the Good Friday agreement, is illegal not only in Northern Ireland but across the whole of the United Kingdom?
I would be grateful if the Minister would respond to these two questions, either verbally at the end of the debate or in writing as soon as possible. Given the gravity of the issues at stake, it may be that she will want to give me a full response in writing. I should also say that I am taking other eminent legal advice on these vital questions. In conclusion, it looks to me as if the Irish Achilles heel of Brexit might be about to go gangrenous—and the force of the Brexit laws already enacted by Parliament might well be the cause.
Viscount Waverley (CB)
My Lords, the breaking news today is that Monsieur Barnier, the EU negotiator, may have blinked. Also, the Governor of the Bank of England, Mark Carney, has agreed to stay on. Being reluctant but optimistic on Brexit, this portends well. In the circumstances, this Trade Bill is a necessary piece in the Brexit jigsaw.
A question to start, however, is this: will this Trade Bill survive the environment in which it must serve or will it require amending once the conditions under which we are leaving the European Union are known? It would appear that the architects of the Brexit vision did not anticipate the complexity of the negotiations in addition to the unfolding contagion in important emerging markets together with trade tariffs distorting globalisation, all of which could become centre-stage challenges. Those are insecure foundations on which to build a secure future.
The noble Lord, Lord Lilley, who is not in his place, did make some substantive points about renegotiating trade agreements; nevertheless, the Government have to shoulder the consequences of their policies and actions. History will judge whether the architects of Brexit made a fundamental error of judgment by looking to the future through blinkered vision, along with a negotiating flaw of not being sensitive to the unsurprising strength of opinion across the Channel that could possibly haunt us further. Time will tell, and shortly at that. At this late stage we must be flexible, opportunistic and respectfully Machiavellian. All that said, we are where we are—but where are we? We must either wrap up what was started or change tack, decisively searching for an assured future. As Cicero said, “Where there’s life, there’s hope”, so in that we may take some comfort.
There are many aspects to this Bill, but I will focus my central remarks on a cornerstone of our economy: financial services. The Bill represents a building block, and it needs to do so. It is inconceivable that the EU 27 would allow as important a sector as financial services to remain fully offshore. Brexit may indeed mean Brexit, but Brexit also means consequences. Post-Brexit pressure will undoubtedly grow on the City of London and other centres around the United Kingdom. The European Central Bank is already implementing its location to the continent in mandatory stages. The combination of principle and the possibility of rich pickings will place further sustained pressure on the financial services sector. The list of annual rankings of international financial centres is published today or tomorrow. Let us keep an eye on how London fares both now and in subsequent years, having mostly maintained its position at number one up to now.
The financial services sector is on the move and we must be diligent and keep abreast of that. The likes of Frankfurt, Paris, Toronto, Tokyo, Seoul, Astana and Moscow along with others are the founding members of the newly established World Alliance of International Financial Centres, to be headquartered in Frankfurt and incorporated under Belgian law. Currently, London has observer status only. The Minister may wish to become acquainted with this alliance.
Then there is China’s increasing influence in Europe and the world at large. As in times past when the pound was superseded by the dollar, so a potential parallel yuan could become a base currency for the changing face of global geo-economics, which the likes of Ankara, Tehran and others might find increasingly appealing. China’s impact is growing. It is delivering west-bound the infrastructure that supports economic growth and the development of the old Silk Road. The UK has experience of and proven ability in supporting and promoting infrastructure development. Together we can advance east-bound, thus increasing trade and connectivity, improving quality of life and reducing the cost of living. In the first five years since the belt and road initiative was announced, 103 countries worldwide have signed 118 agreements with China. China is delivering west-bound the infrastructure that supports economic growth and development along the old Silk Road route and far beyond. The UK’s expertise is considered to be well placed, with useful experience in supporting and promoting that infrastructure development.
But corporate partnership in the spirit of local content is fundamental and I would urge UK players to seek out co-operation agreements with local players of merit, wherever the trillions of dollars are going to be unfolded. Many countries and regions along the belt and road have considered integrating the initiative with their own development programmes—including Mongolia’s Prairie Road, Kazakhstan’s Nurly Zhol, and the Eurasian Economic Union—with Pakistan having high expectations, together with the EU’s Juncker investment plan. The belt and road initiative has been incorporated into the documents of many international mechanisms including the UN, the G20 and the Asia-Pacific Economic Cooperation.
The US-China trade war is not close to being resolved and its impact is already being experienced in Asia, particularly in those countries that have existing good trade relations with China such as South Korea and Singapore. UK trade with these countries has had an upward trend during the last years and is likely to be impacted as these countries get caught in the crossfire. China warned yesterday that it will take countermeasures if the United States escalates the trade war. The United Kingdom needs to take a holistic approach. Technological advancement makes access to any financial centre easy. This is a good time to look to the future and fully understand and respect the importance of partnerships. As Amina Turgulova, head of global markets at the Astana International Financial Centre in Kazakhstan reminded me just this morning, while London will always be an attractive destination with many opportunities, there must be a clear and innovative development plan based on partnership. It follows that it is imperative that we build strategic links with other capital markets. Linkages and partnerships are paramount. The London Stock Exchange Group is working on links with the Shanghai Stock Exchange, and the London Metal Exchange belongs to the Hong Kong exchange.
There is a real necessity for a regulatory framework to adjust to changes; this will distinguish the leading financial centres from the rest. No less a body than TheCityUK is calling for the UK to make the most of the once-in-a-generation opportunity to recalibrate and repurpose its trade and investment policy to benefit the wider economy once it leaves the EU. I commend its thinking to the Government and refer the Minister and her team to its report of January 2017, entitled Future UK Trade and Investment Policy. TheCityUK’s latest report of 30 August 2018, entitled A UK-EU association agreement and future UK free trade agreements, in effect builds on last year’s report by going further into the detail of the issues that will concern financial and related professional services. I share many of its conclusions.
The potential presented by deals that focus on regulatory coherence and co-operation, as well as next-generation international trade and investment agreements, would not only strengthen London’s position as the leading global financial centre but bring new growth opportunities to key financial centres across the country. Trade policy is useful ammunition in the tool box; equally, it serves as a carrot. I absolutely recognise the importance of trade, which is vital to allowing people to work their way out of poverty, supporting job creation, value addition and clean industrialisation. A message to the world at large is that trade is as critical to us as it is to others. The Government should ensure, however, that equivalent levels of market access are accorded. The Minister referred to reciprocal access.
Agreements with implications such as these for consumers, businesses, development and human rights, to which should be added the scourge of corruption, should have maximum scrutiny. As I understand it, it is suggested that the replication of some FTAs and EPAs is the way forward. I can see the benefits, but does this approach merely store up problems for the future and need to be challenged? Scrutiny and approval of all agreements on the overseas front should become mandatory. I anticipated a shake of the Minister’s head. Her opening remarks served as a comfort to a degree. However, although I am broadly supportive of much that is before us, I request that the Government reflect on the benefits of scrutiny and participation by allowing a framework that covers consultation with stakeholders. I was enthused by the reference to public support.
We need a more formal system of accountability, definition of the devolved Administrations’ role, full debate, approval by both Houses—including a dedicated committee—and parliamentary scrutiny in the process proposed. I recognise that this requires a seismic change but our country’s future should centre on change to prepare for tomorrow’s world. The role of Parliament in approval and ratification processes for international trade agreements—enshrining the Ponsonby rule, whereby international treaties have to be laid before Parliament 21 days before ratification—should be embraced unequivocally. The Government’s performance in ratification timelines is, if I may choose my word carefully, precarious. This needs attention.
Lord Risby (Con)
My Lords, it is a great pleasure to follow the noble Viscount, who always speaks clearly and directly. It also gives me great pleasure to add my congratulations to my noble friend Lady Meyer, whom I have known for many years. She brings efficiency, competence and great humanity, as shown in her speech, and I know that all those characteristics will be well represented in her contributions to your Lordships’ House.
It is a personal pleasure to add some comments on the Trade Bill. For some years, I have been one of the Prime Minister’s trade envoys, trying to help British businesses with commercial opportunities abroad. I pay tribute to my fellow trade envoys in both Houses of Parliament, across all parties, who do this voluntarily but with much enthusiasm and, in many instances, considerable success.
I also applaud the Secretary of State for International Trade for his incredible energy and dedication to the task at hand. I can only hope that whatever vitamin pill he takes is made in Britain. He has a strong ministerial team, not least in my noble friend, who brings such immense experience to her role. Her department offers such help and professionalism to me and my fellow trade envoys.
We should remind ourselves of the Bill’s objectives, which are not complicated: to keep important trading partners that currently have relationships with us via the European Union; to collect and share information, where there is certainly much more work to be done because it is imperfect at the moment; to enable us to defend our commercial and industrial sector from inappropriate trading practices; and, most importantly, to establish powers to move from having current trade agreements via the EU to dealing with them ourselves, given that trade policy has been an exclusive EU competence.
Sitting, as I do, on two of your Lordships’ EU committees, we have heard repeatedly, and passionately at times, about the need for British business and our business partners abroad to have a sense of continuity and order during and after the Brexit process. This is all inextricably intertwined. In addition to these key elements of our economic life and prosperity post Brexit, it is crucial that we stand out as a beacon of free, unimpeded trade, upon which historically we have thrived and in which we have been a role model. Although President Trump may have highlighted perceived unfairness and lack of balance in bilateral or multilateral trade architecture, there is a great danger of a destructive, tit-for-tat approach developing. That could seriously undermine the world economy, which has in some measure been sustained by much more open markets over the years as well as low interest rates and generous liquidity.
One of our greatest challenges in this age is the problem of migratory flows from poorer countries. It is so obvious that any attempts further to restrain free international trade would most seriously affect the poorest people on our planet. In this context, I welcome the strong links developing between us and the WTO.
This country has an enviable reputation for transparency and has led the charge against bribery and corruption, whether direct or indirect, which regrettably influences commercial decisions in some countries. However, I should add that, in my role in trade promotion, our firm commitments and tough laws to preclude this are much appreciated and commented on by Governments seeking to tackle this corrosive activity.
One element of our departure from the EU is our participation at present in the Agreement on Government Procurement. It is crucial that we maintain access to global public procurement markets, so I welcome our involvement in and intention to join the GPA after we leave the EU. As many of your Lordships will know, government procurement is a substantial part of the business profile of many of our actual and potential markets.
For some years, I have been the deputy chairman of the Small Business Bureau, trying to encourage a suitable tax and regulatory framework for the sector. However, it is a fair generalisation to say that our economy has been very consumer driven. I express my admiration for and appreciation of the Government’s real attempts to stimulate the small and medium-sized businesses in our country into getting involved in overseas trade activity. Many of our European neighbours have moved on much more successfully than we have in changing the culture of export promotion, particularly with respect to the SME group.
In this context, I want to touch on my personal experience as a trade envoy. In the past few months, we have signed contracts in Algeria, the country of my particular responsibility, to the tune of about $1 billion, mostly in the energy sector but also in the defence sector. This followed a trade show held last year in Algiers, organised largely by our embassy there, where numerous small, superb, defence-related British companies showed their brilliant range of activity.
My final observation is on the role of securing business in situ. Last month, in Cape Town, the Prime Minister announced the most welcome new partnership for Africa, an additional £4 billion programme for UK investment in African countries that will pave the way for £4 billion of private sector financing. That includes £3.5 billion through the Government’s development finance institution, the CDC, and an African investment summit, set to take place next year. This is very important in the context of what we are trying to do to explore new markets.
The House should be very grateful to my noble friend Lady McIntosh for pointing out the importance and efficacy of having specialists—in agricultural products in this case—attached to our embassies. However, I wish to be blunt: the trade promotion grind is often done at a local level. The Prime Minister talked about our national interest. In my view, it is patently absurd that the Foreign Office budget is less than 1/10th of our overseas aid budget. Indeed, the Department for International Trade’s budget is a quarter of that of the Foreign Office. It is totally disproportionate.
Particularly in countries which are quite statist, a number of our fiercely competitive European neighbours have established chambers of commerce or invested in a whole range of skilled, local employees, often fanning out and securing business in their particular countries by talking to governors or key business people. The digging out of investment opportunities by people in situ will be a critical part of the architecture of our winning export business in the future, particularly in the new regime which we will have.
I conclude by saying that there are huge challenges which face us post Brexit and I want to acknowledge the key role, which I greatly admire, of those who are involved in this activity, particularly in our posts abroad. It has to be recognised, as part of the topography of trade promotion abroad, that they are appropriately resourced to enable us to compete effectively, which is in all our interests whatever our attitude is to Brexit, and to ensure our capacity to trade successfully in the future.
Lord Taverne (LD)
My Lords, I intend to speak about Clause 15 of the Bill, which says that, “This part”—that is, the provisions on interpretation and extent—
“comes into force on the day on which this Act is passed. … The remaining provisions of this Act”—
which is the bulk of this Bill—
“come into force on such day as a Minister of the Crown may by regulations made by statutory instrument appoint”.
But if there is no Brexit, no Minister will appoint a day and the Bill will never take effect.
I believe that no Brexit is a very real possibility. Why? First, the odds are that there will be no deal. Despite the recent conciliatory words of Monsieur Barnier, none of the proposals that the Government have put forward for avoiding a hard Irish border is credible. This has been convincingly demonstrated in speech after speech in our recent debates, and again today by the speeches made by the noble Lords, Lord Hain and Lord Adonis.
The Government will therefore be forced to fall back on the backstop agreement, which they solemnly pledged last December to put into statutory form as an essential step to move to the next stage of the negotiations. The backstop agreement, as the noble Lord, Lord Adonis, has stated, means that Northern Ireland will continue to remain in the EU’s single market and customs union without a hard border, but it means that the border will be in the Irish Sea. Thus, one part of the United Kingdom will be in the customs union and single market while the rest is not. Mrs May, despite her solemn pledge, says this will never be acceptable—one can see why not—but no backstop means, in effect, no deal.
There are other potential deal breakers. The same problem arises in the negotiations about a free trade deal between Britain and the EU. Again, there is a need for a frictionless border, but trade negotiations between the UK and the European Union at present have not offered any viable solution that is acceptable to the EU 27 or that has proved workable anywhere.
So what sort of trade deal will prove negotiable? No deal, it is generally agreed—except by the denizens of another world who belong to the ERG—would be a disaster. But there is no reason why no deal is inevitable if negotiations break down, because Parliament has been promised a meaningful vote and can, and almost certainly will, reject no deal.
What then? What will be the alternative? To tell the Government to negotiate a better deal is mission impossible, especially after their chaotic record of incompetent negotiation. A general election, leaving aside the complications of overcoming the rule of five-year Parliaments, will hardly be seen by the Government as an attractive option after the last one.
At the same time, there has been a surge of support for letting the people have the final say. Early this year, only 10% favoured a new referendum; now, it has overwhelming support among the trade unions and, as polls show, among Labour voters. In my view, it is likely to become official Labour policy at some stage. Polls also show that it has majority support among the public generally, not least because the politicians cannot agree among themselves. There has also been a major shift in public opinion about Brexit. The last poll showed as much as 59% for remain against 41% for leave, and there is a lot more bad news about Brexit in the pipeline, which is bound to have an influence on MPs’ votes. A new people’s vote is the obvious and likely solution.
The only meaningful choice in a new referendum would be between no deal and remain. It would not be a re-run of the last and would not show a disrespect for the people’s verdict, because the facts have changed. This time, we would know, or certainly have a much clearer idea, of what Brexit means. In a democracy, people must be allowed to change their minds, if it is clear they want to. I believe that the result of a new referendum will be to stop Brexit, but the remain campaign will have to be a very different one and show that it understands the reason why so many voted leave.
Nowhere has the effect of Brexit and the positive case for our membership of the European Union been put more eloquently and persuasively than in a recent booklet by Will Hutton and the noble Lord, Lord Adonis. It is a small booklet called Saving Britain. It gives good reasons why, despite all the sorts of eloquence and insights we have had displayed in this debate, today’s debate will prove irrelevant because Clause 15 will never take effect.
It is very important that industry recognises that there is a real possibility of no Brexit, both here and abroad, and that they think again before they take too many irreversible decisions which are so damaging to the European Union as well as Britain.
Lord Tugendhat (Con)
My Lords, I will begin with three preliminary remarks. First, like others, I congratulate my noble friend Lady Meyer on her maiden speech. All of us bring the experience of our previous lives to our role in this House and her experience has been particularly unusual and hard. All of us will benefit from the insights she will bring to our debates.
Secondly, I support my noble friend Lord Risby in what he said about the Foreign Office. The corollary of leaving the European Union must certainly be to reverse the squeeze that has been so consistently put on the Foreign Office’s finances and manpower over the years. We will have a much greater need for embassies and for trade missions in the future as we will not be able to rely on the European Union’s support.
Thirdly, I congratulate the Minister on her introduction to this debate. Having listened to the very authoritative way in which she introduced the Bill, I think we can look forward to a much greater degree of engagement between the Front Bench and the House on this Bill than was the case on what was then the European Union (Withdrawal) Bill. That is very important because the nature of some of the amendments that will no doubt be moved on this Bill is that they may appear technical and arcane but they have very far-reaching consequences. It requires the Minister to have a real command of the subject and an ability to think on her feet to be able to handle these in a constructive way, and to carry the House with her.
I have one further point to make about amendments. It would be wrong to refight the battles decided during the passage of the withdrawal Bill. I voted for most of the amendments carried against the will of the Government and I wish that the House of Commons had supported them. But it did not and, once we have asked the House of Commons to think a second time and it has, one has to accept the result, and it would be wrong to bring those issues back on this Bill.
As I listened to the Minister’s confident exposition and her expectation that the Government will have everything in place for continuation of the existing FTAs and EPAs for Brexit day, I could not help thinking of what her Secretary of State, Liam Fox, said in July 2017 about doing a deal with the EU. As many Members will remember, he said:
“The free trade agreement that we will have to do”,
with the EU,
“should be one of the easiest in human history”.
He then admitted that it might not be so easy in practice because politics gets in the way. He was right about the politics but, even so, he was devastatingly underestimating the problems of doing a deal with the EU.
While I certainly support the Government’s aim of seeking to achieve the greatest amount of certainty, continuity and stability in our trade and investment relationships for our businesses, citizens and trading partners, I cannot help feeling that it will be miraculous if, by the time we are due to leave the EU, all those matters have been wrapped up. It would be very surprising indeed if difficulties did not arise. Both the noble Lord, Lord Grantchester, from the Labour Front Bench and the noble Lord, Lord Fox, put very relevant questions to the Minister on this matter. I hope that she will be able to deal satisfactorily with what they said.
Then there is the question raised by the noble Lord, Lord Butler of Brockwell, about what will happen if there is no deal. What will happen then? Is not the subject that we are talking about now, the FTAs and EPAs, yet another instance of where the country is unprepared for such an outcome? The result, if that does happen, will be considerable uncertainty for the businesses and citizens it is the Government’s objective to protect. In saying this I am not criticising the Government. I recognise that they are doing all they can to bring about a deal that will preserve jobs and employment. It is a very difficult task and I fully support the Prime Minister’s approach. But it is a criticism of those—largely, I am sorry to say, in my own party—who are putting up barriers to compromise and trying to thwart negotiations for ideological reasons in the belief that failure will promote their personal ambitions. This is a very real danger. I did not agree with my very good friend, the noble Lord, Lord Taverne, when he said that he did not think there would be a Brexit. Sadly, there most likely will be one, but it is important that the terms should be as good as we can get, and I fear that those who are trying to sabotage what the Prime Minister is doing are doing a great disservice to the country.
On the whole, those people, and indeed some others, say that we should not fear a no deal and a crash-out because we will be able to rely on WTO rules. I will put two points to the Minister on this subject. First, what assessment has the Department of Trade made of the effect of the United States’ unwillingness to make an appointment to the WTO disputes arbitration body? Am I not right in thinking that there is a considerable danger that by the end of this year that body will not be quorate? If we are relying on WTO rules, which some people seem to think is such a good idea, what is the Department of Trade’s assessment of the nature of the problems that will arise if the disputes arbitration body is unable to function?
Secondly, what assessment has the Minister’s department made of the suggestion recently put forward by President Trump that the United States might withdraw from the WTO? I know that President Trump makes many suggestions and does not fulfil all the things he says—but, none the less, if we are to put our trust in the WTO, it is slightly concerning that the President of the United States, the largest trading country in the world, is contemplating the possibility of withdrawing from that organisation. I wonder what discussions Her Majesty’s Government have had with the United States Government on this subject. I should be very grateful if my noble friend could tell us what has been happening on that front as well.
Lord Monks (Lab)
My Lords, 2018 is the 150th anniversary of the TUC. In a debate yesterday the congress came close to expressing no confidence in the Government’s conduct of the negotiations with the EU so far and edged rather reluctantly towards supporting a popular vote on the outcome of the talks. Why did it do that? It is because the trade unions are worried: worried about the impact on jobs and rights after Brexit, the byzantine complications of the Chequers proposals, and our country crashing out of the EU with no deal and becoming distanced from our biggest trading partners, with no customs union and no single market.
To hear some Brexiters talk, British business can survive cut off from obligations to the EU. But pause for a moment: what is British business nowadays? The UK has been unique among the world’s largest economies in having permitted extensive foreign ownership of what might be termed the commanding heights of the economy, with many companies in sectors such as cars, energy, utilities, aerospace, transport, investment banking and many others under ultimate foreign control. All this risks our open economy, which is particularly vulnerable to disruptive actions by companies rethinking their locations for research and production. I have never understood why the nationalists among the Brexiters have paid so little attention to the extent of foreign ownership of UK businesses.
Of course, in the past we have certainly welcomed inward investment. We would not have a large car industry without it. Much of it resulted from our membership of the EU single market as companies rushed to get in. But take that away—I hope everyone will recognise that there is a huge risk involved, unless the future trade issues are agreed amicably and quickly. While we wait for the Brexiters’ plan, their alternative, we know that it is likely to focus on tax cuts, deregulation, competing in the bargain basement and not raising our sights to compete on investment, innovation and productivity with the best. It is a sorry prospectus and I am glad that the Prime Minister has resisted it to date.
In my time in Brussels as secretary of the European Trade Union Confederation, I was involved in the EU trade negotiations on the South Korea free trade agreement, TTIP and the Canada deal. In each of these negotiations, we managed to insert a trade union role and voice into the processes. Our aim always was to replicate features of the EU single market in those deals, so that there was a measure of social and environmental protection in them. We succeeded in the South Korea agreement. Having listened to the noble Baroness, Lady Neville-Rolfe, speak about her experience with Tesco, it may be that we should revisit that, but, at the time, we thought that we had succeeded. We thought that we had succeeded, too, in the Canada case. We did not succeed with the Americans in relation to TTIP, which is one reason why it ran into such heavy bombardment on both sides of the Atlantic. I note what the Minister said earlier, but we are concerned that this trade union influence and role might not be continued or replicated in the new UK arrangements. I am interested in her response to the following question: will the Bill include measures which can reassure stakeholders that they will be engaged and involved as fully as possible in future trade negotiations? What is the Government’s reaction to the call from the TUC, the CBI and the International Chamber of Commerce for such engagement of trade unions, employers, civil society and the devolved authorities in trade policy?
I am suspicious that some of the countries with which the EU has negotiated trade deals that we would hope to roll over would welcome this opportunity to jettison measures concerned with social and perhaps environmental regulation. The Conservative Party has had a long aversion to the social dimension of the EU single market—remember the opt-out in the Maastricht treaty? Can the Minister assure us that, as the Government seek to roll over existing trade deals and conclude new arrangements with the countries concerned, they will not jettison the social and environmental features? One way of helping with this would be to include trade union and other stakeholder representation among the non-executive members of the Trade Remedies Authority. I ask the Government for an assurance on this point, too.
Similarly, the Bill needs to make provision in trade deals for the protection of fundamental worker rights as enshrined not just in ILO core conventions but in its decent work agenda, which is rather more ambitious. I hope, too, that proper respect is shown for public services such as the NHS. We cannot allow them to be swamped by private companies pleading that a free trade arrangement permits them to challenge the continued existence of public services, with allegations that their monopoly is not subject to market pressures and so on. That was a certainly a huge problem with TTIP.
In the recently published document, Framework for the UK-EU Partnership: Open and Fair Competition, the Government state that the UK proposes committing to high levels of social and employment protections through a non-regression commitment, which is welcome, but they go on to use the phrase, “on domestic labour standards”. What does “domestic” mean? Does it mean the EU social acquis—the 60 or so EU directives on employment which the UK has absorbed? Does it mean that the working time directive and its provision for four weeks’ paid holiday a year are to be protected? Or does it mean just that employment laws generated domestically will not be interfered with? Can we have the Government’s assurance that it means the former and that we will continue to mirror the measures in the EU’s social and employment programmes? I hope that the Minister can clear that up during the passage of the Bill through this House and look forward to her responses.
Lord Dykes (CB)
My Lords, it is a great pleasure to follow the noble Lord, Lord Monks, and once again to acknowledge the value of someone coming to this House with such experience of a particular sector, representing as he does modern enlightenment in trade unionism and its respectable and necessary role in modern economic society. One recalls all the work that he did along with famous people such as Jacques Delors, Michel Rocard and others in Britain gradually to change the minds of trade union members and officials in this country about our membership of the EU, which was a fantastic achievement.
Although she is not here at the moment, I want to add my congratulations to those offered to the noble Baroness, Lady Meyer, for her riveting and devastatingly moving maiden speech. I have not met her before nor heard her speak, but I was so struck by it that I think that she will be an immensely valuable Member of this House. I happen to have the pleasure of knowing her husband, with whom I had a few words beyond the Bar of the House earlier. I am glad to see that he has at long last begun to recover from that most awful attack that he suffered in Victoria station. I am sure that we wish both of them well.
Debates such as this always please me in the sense that, as usual, in the civilised House of Lords, the significant pro-European majority comes out, with speeches that imply that they would much prefer to stay in the EU. I entirely agree. Why leave? There is no reason to leave at all. That is not to disrespect the result of the referendum of 23 June 2016. However, others have taken a different view, and the contributions have been many and varied. Although he is not here now, I want to praise in particular the noble Lord, Lord Adonis, for his unstinting work on behalf of the good cause of Europe.
We have all been aided and abetted by the excellent documents on this Bill provided by House of Lords officials. While it is a necessary, technical Bill in the sense of our having to be ready if there were to be a Brexit—I understand the Minister’s utterances in that regard—none the less I always feel in these debates like Ian McEwan apparently still does, who said at the beginning of the whole ghastly process, “No, this can’t be happening. It’s just a dream. I’m only dreaming it. When I wake up in the morning, everything will be all right”. I think that, quite rightly, he still says exactly the same thing.
I was particularly pleased to receive the excellent NFU briefing on these complicated matters. It is anxious to make sure that UK food production standards, which have been maintained under the EU membership system, will continue if the worst were to happen—which I hope it will not.
I declare a personal interest as an officer of the Food and Drink Manufacturing All-Party Group. Submissions from Food and Drink Federation officials remind us that this is the largest single manufacturing sector, with many and variegated items in it. We have huge food and drink exports to all over the world. There has been a big increase in exports to the EU and the rest of the world in the last period. Those are important sectoral interests that have to be maintained.
It was interesting to hear it implied by some in the debate that it may be okay to go to WTO rules. I was grateful for some remarks about that made recently in the press by a leading expert on how the WTO works. He wrote:
“However, since representing ourselves as a single country against 163 others wields less influence than being represented by the largest single market on the planet, the UK parliament nominated the EU to represent us at the WTO. As the UK is the third largest member of the EU28—after Germany and France—the country punches above its weight inside the Union and therefore is also over-represented at the WTO—as things stand”.
Giving that up and going into all the expense, tariffs, rules and regulations of the WTO would be a nightmare for this country after that experience led by the combined EU effort. One can understand why the Prime Minister really does not want to leave all aspects of our EU membership and has now reached an extraordinary state of acceptance of things, which of course causes huge headaches for the strong and often hysterical Brexiteers, particularly in the other House—we know some of the famous names.
The noble Baroness, Lady McIntosh, who is not here now, referred to what Denmark was doing. The Danish newspaper, Jyllands-Posten, wrote recently that, while the UK is not shy about proclaiming its soon-to-be-regained “freedom”—by which, I mean this Government—it is simultaneously begging the EU to continue co-operation on 60 different policy areas. The article points out that the UK wants to maintain a semi-strong relationship with the EU rather than completely burning all its bridges; this is particularly clear when one looks at the UK Government’s White Paper. Apart from some exceptions, the UK Government wish to maintain the close relationship as well as the benefits that EU co-operation provides.
Jyllands-Posten points out that the term “common rulebook” is mentioned 44 times where the UK is proposing a set of common rules covering the EU and the UK. In contrast, the word “sovereignty”—what an old-fashioned word nowadays, in an interdependent world where we all work together—is mentioned only 11 times. This is surprising considering that Prime Minister May emphasises that Brexit is about regaining control and sovereignty. On the home front, Brexit is spoken of as an event that will allow the UK to determine its own destiny. It is thought-provoking that the UK has concluded that there is much more in the EU it wishes to embrace than to get rid of.
The fact remains that this is the continuing nightmare—the tragedy—that this Government have inflicted upon the country, without any authority from Parliament in terms of numerical support and other background factors. The 8 June election came two years after the previous one. It is interesting that people say we cannot have another vote of the people so soon after the previous one—although it would not be connected with the previous one, the result of which we still respect. The public were so disgruntled with their own socioeconomic weaknesses, as a result of government austerity, that that is the way they voted, for all sorts of reasons, in an advisory-only referendum, giving an opinion. Now we see that Mrs May lost her mandate completely in the 8 June election—she had only a shaky one before. She thought she was going to triumph; it did not happen: Parliament refused to give that mandate. That is the reality that I hope the Labour Party will at long last build on, and come out strongly in favour of what is needed to save this country from total perdition.
Lord Cooper of Windrush (Con)
My Lords, I start by echoing and warmly endorsing the many words of praise for the maiden speech of my noble friend Lady Meyer. I do not think I was the only person in the House with tears in my eyes hearing her extraordinary story: she will make a tremendous contribution to the House, I am sure.
Since 24 June 2016 dawned, the fundamental question hanging over the Brexit debate has been, to paraphrase Metternich’s comment on the death of Talleyrand, “What did they mean by that?” On what terms did the narrow majority in favour of the UK leaving the European Union want us to deliver that? What were, if you like, the people’s red lines? Issues within this Bill go to the heart of that question. Many of those who support Brexit have changed their answer to that question considerably over the last two years; attitudes have hardened as the confident pre-referendum assertions have collapsed; things that many of them were in favour of, or at least open to, in June 2016 are now seen as red lines by many of the same people. It is obvious that not all the 17 million people who voted to leave the EU did so for identical reasons, or with the same aspirations in mind, but some hopes and some assumptions were shared by most, so what can we discern about the key outcomes that people were hoping for?
An opinion poll earlier this year asked people to think back to the EU referendum campaign and to list, without prompting, all the arguments they remember being made in favour of Brexit by the leave campaign and its supporters. The argument for Brexit that is by far the most strongly recalled is £350 million a week extra for the NHS. The second is cutting EU immigration. The third is stopping sending billions of pounds a year to Brussels. Those three, which we may or may not think are likely to appear as a product of Brexit, are far ahead of anything else. Far behind—recalled by just 12%, fewer than one in eight people—is new trade deals with other countries. Most people do not even remember that having been made as an argument in favour. Other polling reveals that in as much as trade was a factor at all in voters’ minds, their dominant focus was, rightly, on ensuring that we sustain our EU trade, not the pursuit, which so enchants Brexit dreamers now, of theoretical future trading opportunities with mostly much smaller and much more distant economies.
During the campaign itself, the remain campaign’s private polling tracked the public’s view on what the most likely end state would be if the country did indeed vote to leave the EU. Consistently, about one person in four thought that if the UK voted to leave the EU we would in fact end up not leaving. They thought the EU would panic and come back and offer us a much better deal, and that we would end up accepting it and staying in. Another group had a completely contrary perception, which was that if the majority did vote for Brexit we would leave the EU, the single market and the customs union, and lose the benefits of being in the EU, such as they were. That was the expectation of less than 20% of the electorate. Four voters out of five did not think that voting for Brexit and getting Brexit would result in us leaving the single market and the customs union and risking or forfeiting the trading terms that we have with the EU now. Most voters had come to a completely different expectation. They concluded from the referendum campaign and the arguments that they heard playing out that if Vote Leave were to win, the UK would leave the EU, but it would agree and keep access to the single market and the customs union, and keep many of the benefits of membership. More than half the country believed that that would be the outcome, and nearly two-thirds of the key swing voters whose final decision on that question determined the result.
There has been a lot of polling on what the UK’s priorities and red lines should be in negotiations, and the extent to which trade with the EU should or should not be a priority over other things. The point is that most people voting in that referendum in June 2016 had been persuaded that we would never have to face these trade-offs at all. In focus group discussions, of which we did dozens, where people discuss these issues in greater depth, trade with the EU was virtually the only benefit that most people could think of from being in the EU, but they were keen to retain it and they were clear about its significance for our economy.
More than 60% of the electorate, and about 70% of the key swing-voter group, thought that even if the UK did leave the single market we would still get some kind of different free trade agreement with very similar benefits that would be essentially almost the same as being in the single market and the customs union, and that we would be able to do so without having to accept free movement of people and without having to pay into the EU budget. Most people thought that because they had been told it repeatedly. They believed it because they had also been told repeatedly that the EU needed us more than we needed it. That was the basic false logic from which flowed the conclusion that we could somehow have our cake and eat it.
It was, of course, a fantasy all along. Liam Fox’s confident prediction of historically easy trade deals, which my noble friend Lord Tugendhat referred to, was wrong. Michael Gove’s reassurance that,
“we hold all the cards and we can choose the path we want”,
was completely wrong. Boris Johnson’s promise that,
“there will continue to be free trade, and access to the single market”,
after Brexit was quickly withdrawn as a view which he now defines as treason. The Brexit Secretary tells us that in a no-deal scenario, for which the Government are preparing, there will be adequate food. If they had put that on the side of the bus we would not be in this situation now.
The leave campaign had the option, of course, of making the case to the British people for leaving the single market and the customs union, sacrificing free and open trade with the EU in pursuit of their vision of vague new trading deals on the other side of the world, but they did not make that case. A few individuals might have alluded to it but others said precisely the opposite. It was not the message of the leave campaign. It is not what most people heard. It is not the Brexit that most people voted for. Most people certainly hoped that Brexit would bring real change in some respects in this country but they assumed that in terms of trade we would stay in the single market and the customs union, or something very close to it. That is the outcome that I still strongly support and I urge other noble Lords to do the same.
Baroness Falkner of Margravine (LD)
My Lords, I welcome the noble Baroness, Lady Meyer, to the House. As she knows from our personal interactions, and after her fabulous contribution today, she will find friends right across the Chamber. I have had chats with her since she arrived here but it was good to hear from her formally in the Chamber.
Turning to the forceful arguments advanced by the noble Lords, Lord Risby and Lord Tugendhat, regarding resources for the Foreign and Commonwealth Office as we go forward, I would go further and suggest to the Minister—whom I welcome to her first Bill—that she tells her colleagues that the logic of the UK’s future trade relations requires that we amalgamate the Foreign Office and the Department for International Trade, as the Australians and, indeed, the Canadians do. They have been doing this on their own for a very long time and they know how to do it.
The Minister will be pleased to hear that I broadly support the Bill and, given the generalities that she has heard around the Chamber today, that I will confine my remarks to the detail of the Bill itself. It is a wholly necessary piece of legislation to keep the show on the road as we prepare to leave the EU. Continuity will be fundamental to ensuring that we get the best for the British economy.
It is good that the Government improved the Bill in the Commons; for example, the change in the duration of sunset clauses, which the Minister mentioned in her opening remarks, and the reassurances of parliamentary scrutiny. I find the Bill in rather better shape than some others that have made their way to the Lords in recent times. However, the argument in the Commons that the Government should emulate the European Parliament’s powers in the provisions of the Bill is flawed, and they should resist those sorts of moves here if it comes to it. Although there are elements of the scrutiny of trade negotiations where the European Parliament does a very good job, there are others where it is effectively a sui generis institution: it reflects the weight and strength of national groups. For those of us observing TTIP, when we hoped that it would go through, it was evident that the trade preferences and political priorities of certain countries prevailed, while those of others did not. It was not a level playing field and some countries were disadvantaged by that. It was hardly a negotiation that delivered for all 28. Although the EP attempted to improve it, it seems just as well that it did not go forward in the way it was likely to.
Clause 3 concerns parliamentary scrutiny. I note the debates in the other place on enhancing scrutiny. I have similar aspirations for what we do with the Bill in this Chamber. I have no doubt that we will see debates along those lines and amendments of those sorts moved here and I look forward to debating them. But when it comes to parliamentary approval of the negotiating mandate, as well as the requirement for the Government to publish their negotiating text at the end of each round of negotiations, I urge against this level of micromanagement. In trade negotiations, both sides have red lines but these are not necessarily disclosed as they form part of the give and take of the negotiation itself. I cannot see how giving Parliament, in effect, control of the negotiation would lead to a more optimal result in that regard.
I welcome the improvements to parliamentary scrutiny in Clause 4 but it is not entirely clear to me why the clause was deemed necessary given the concessions made in Clauses 2 and 3. I know that the Minister is required to lay a report as soon as possible after the trade agreement is ratified to explain why it was not possible to do so before ratification but perhaps we might be given an indication of the cases that are so exceptional that ex post facto reports would be deemed necessary. This exceptional cases clause seems to slightly contradict the powers that the Minister has.
Turning to the Trade Remedies Authority, paragraph 2(2) of Schedule 4 restricts the total number of members of the authority to nine. This appears unduly restrictive. Perhaps the Minister will tell us why the Government have settled on a firm figure rather than having a range, such as nine to 12. One can foresee situations where, over time, in a complex, multisectoral, comprehensive future agreement taking several years, it might be helpful to expand the membership of the TRA to bring on board those with specific and particular skills, to build flexibility into the body’s governance. In paragraph 2(4) the Government are rather more flexible about how they define good governance. It states:
“The Secretary of State and the Chair must ensure, so far as practicable, that the number of non-executive members is at all times greater than the number of executive members”.
That seems rather too tentative. If the Trade Remedies Authority is to be accountable, as it should be, the number of non-executives should always exceed the number of executive members. I hope the Government will look again at that in Committee. If the restriction in paragraph 2(2) was resolved, it is likely that the issue in paragraph 2(4) of the balance between executive and non-executive members would conflict. I look forward to the Government’s response in that regard.
I will conclude on a general point. I see this as a necessary Bill to prepare the ground for Britain’s withdrawal from the EU. Here in the Lords we have a duty to improve it and I have no doubt that we will. The European Union (Withdrawal) Act is now behind us and we need to move forward to put in place machinery in government and Parliament to ensure continuity and build on the UK’s interests as an open, globally significant trading nation, building on a philosophy articulated by Adam Smith and David Ricardo more than 250 years ago. We know how to trade, we know how to make things that other people want, and we know how to work with others to make multilateral institutions fairer and more effective. I have no doubt that we will face significant challenges in the period immediately following our exit from EU arrangements, but I also remain open to new opportunities for trade with new partners—and, more importantly, in new sectors—as the global economy changes and evolves, as it is doing, with phenomenal speed. The challenge still awaits us but for now we need to get on with the Bill.
Baroness Hooper (Con)
My Lords, this has been a most illuminating debate. As most speakers have said, clarity and certainty are what is most needed for business, investment and the future prosperity of this country. My noble friend the Minister gave us an outline of what is intended with great clarity. Indeed, I do not envy the task facing my noble friend of winding up a debate which has been very wide-ranging, has included a remarkable maiden speech, and has attempted in some cases to make what she described in her introduction as a “technical Bill” to give the UK Government “the powers they need—nothing more” into something far more comprehensive and complicated.
I am not going to follow the example of the noble Baroness, Lady Falkner, in going through the clauses of the Bill, because I wish to focus on aspects of the trade opportunities. I shall use as an example Latin America, a region with which I am familiar and which, incidentally, has a combined population of well over 500 million—rather comparable to that of the European Union itself. Latin America comprises 20 republics and has huge and important natural resources and tremendous good will towards the United Kingdom because of the historic support we gave to their independence movements over 200 years ago. Many of them also have enviable GDP growth, although I recognise that, at the moment, some have rather acute political and economic problems.
The European Union already has trade agreements with Mexico, central America, Colombia and Chile, all of which will be candidates for the rollover procedure that my noble friend the Minister explained at the outset. I think it was the noble Lord, Lord Grantchester, who suggested that Chile has already expressed the wish to do more than just roll over, and that may well be the case for other countries in Latin America as well. There is also the possibility that the long-awaited European Union-Mercosur agreement will be concluded before March next year. Indeed, it is hoped that it will be concluded before the elections in Brazil in October. The Mercosur countries are, of course, Brazil, Argentina, Uruguay and Paraguay—in all of which the United Kingdom already has a presence, but where there is plenty of scope for improvement. In addition, there is the potential for a future agreement with the Alianza del Pacifico countries: Mexico, Colombia, Peru and Chile.
It must be remembered that in these cases we will have to negotiate with the trade blocs as a whole and not with the individual countries, as we might prefer to do. We may prefer to choose or cherry pick—however noble Lords wish to describe it—but that may come as a surprise to some people. These countries are committed to trading as a bloc, in much the same way as we have been within the European Union. I am happy to say that a good start has been made with the appointment of a trade commissioner to Latin America, Jo Crellin, who is currently based in São Paulo and working on a trade plan for the region. In addition, the Prime Minister has appointed special trade envoys to Mexico, Brazil and Panama, along with one to Colombia, Peru and Chile combined. My noble friend Lord Risby gave us a very good account of the value of such voluntary appointments. There has also been an increase in ministerial visits to the region, and many countries in Latin America see Brexit as an opportunity to increase their trade with the United Kingdom as it looks beyond its traditional partners. All that sounds very hopeful.
Can my noble friend reassure me, however, that when the time comes to get up and go, her department will have adequate qualified staff, with adequate language skills, to enter into negotiations once this framework Bill is in place and, indeed, once we know whether we will have a transitional period during which to sort ourselves out? Much as we all appreciate the efforts of our ambassadors and diplomats, which have already been referred to, a lot more will be needed. As a matter of interest, is it intended to redeploy the Brits currently working in the trade team in Brussels for this purpose?
When the time comes to enter into these bilateral trade deals, on which the Government are placing so many hopes for a post-Brexit Britain, I trust there will be a strong focus on some areas that have already been mentioned, including health and medicine and agriculture. But there is also the education sector and the energy sector, especially renewables. Indeed, the Prime Minister announced a strategy today for more clean energy, with electric cars, increased battery storage facilities and all the research that is involved in that. These will be important areas to move forward in and, as focus areas, would provide opportunities for reciprocal trade and investment with Latin American countries.
Like others who have spoken in this debate, I wish to make it clear that I voted to remain in the European Union in the referendum. I would very much prefer to feel that we had the clout of a group of like-minded countries with which to negotiate, and with which to insist on the ethical, environmental and other social policy standards that we have developed within the European Union, but I hope and trust that those will continue to be applied by our negotiators in the future. In spite of that, I believe now that we must all make every effort to make the best of going it alone. It is in that spirit that I wish the Bill a fair wind.
Baroness Henig (Lab)
My Lords, first, I add my congratulations to our new colleague the noble Baroness, Lady Meyer, on her riveting maiden speech. I look forward to hearing her future contributions in this House.
I wish to speak to Part 1 of the Bill. We are repeatedly told by those keenest to pursue our departure from the EU that our ability to make our own future trade deals is one of the most significant opportunities that Brexit will bring us. Given the importance of the issue, it must therefore follow that they and the Government will welcome keen and effective scrutiny, and recognise that the collective experience of this House will be extremely useful in helping to illuminate and improve not just this Bill but, I hope, also our future trade policy. Unfortunately, I have to tell the House that in the two years since the formation of the Department for International Trade, we have heard virtually nothing about its priorities or policies. Recently, there has been a consultation on new bilateral trade negotiations with the United States, New Zealand and Australia, but we have not been told what the Government hope to achieve by prioritising these countries. We have seen Answers to Parliamentary Questions that provide little detail on either our proposed trade policy or on the progress of the talks that we are having to replicate the existing trade agreements covered by this Bill.
The avoidance of any real scrutiny of the UK’s trade negotiations reached new heights when Cabinet Minister Liam Fox appeared before the International Trade Select Committee in the other place on 11 July. In relation to ongoing UK negotiations at Geneva to re-establish independent WTO schedules, he told the committee that,
“negotiations are going quite well ... people do understand our position … Of course, the problem is not with the United Kingdom”,
by which he presumably meant to imply that the problem was with the EU. Two weeks later, when the UK’s schedules were formally submitted, correspondents in Geneva cited a number of countries which were in fact going to lodge objections to the existing treaties because, in the process of transfer, they wanted to change one or more provisions. That must surely have been known at the start of July but Parliament was not told. On this evidence, can we trust the Government to provide honest information to Parliament?
If we in Parliament cannot trust the Government, imagine what business and civil society will think. In the case of businesses, we are talking about changes to their access to other markets in potentially as little as six months’ time. All we have heard from Ministers is that discussions are progressing well and that no countries have raised objections. On the evidence of the information provided regarding WTO negotiations, there is no way that businesses can rely on such assurances. Surely we want our businesses to be as well briefed and prepared for the future as possible.
The Government should be equally concerned about the impact of secrecy on civil society. Four years ago I was a member of the EU sub-committee examining the EU-US trade agreement, TTIP. It caused considerable controversy, not least because people objected to its being negotiated in secret. In our final report we judged that,
“insofar as a public debate on the TTIP exists, EU member states are losing it”.
What lessons have the Government learned from that? Few in this House would wish to repeat the experience—say, for example, with a US-UK trade deal being negotiated behind closed doors, which potentially, through some of its food provisions or trade dispute resolution clauses, could render any other trade agreement toxic. This is indeed what nearly happened in the EU when TTIP nearly endangered the EU’s trade deal with Canada.
The Secretary of State has been making speeches about the need to support trade agreements, calling in aid on occasion the work of David Ricardo. With respect to Liam Fox, it has been aptly said that he should perhaps tell us more about how the UK will beat the challenges of the 21st century rather than those of the 19th. These 21st-century challenges are those of policy, trust and communication, and to date—and indeed in the Bill—I fear that the Government have comprehensively failed to meet them. On policy, we have yet to see the Government communicate in any way what objective they would like to achieve in future trade negotiations and agreements. This relates to the existing trade agreements as well as to those to be concluded in future.
We have heard many experts, and Members of the House today, say that UK manufactured goods may not be eligible for tariff preferences in these replicated trade deals because trading partners will not accept the continuation of existing rules of origin once the focus is the UK, not the whole EU. Can the Minister give us an update on the Government’s progress on this matter, given the importance of this issue to companies here and now? It is equally important to understand what the Government would like to protect. For example, we have a verbal promise that our food standards will not be changed, but as far as I can see there is nothing to stop the Trade Bill being used to make such changes. Would it not be reasonable for our farmers to have that commitment written in legislation?
That leads us on to the crucial question of trust. As I have already pointed out, the Government have not yet done enough to create a position where we can trust assurances that Ministers will lay meaningful reports before Parliament stating the difference between the trade agreement previously and the proposed new one. That is why I believe we will need to consider amendments in Committee to ensure effective scrutiny. For example, I suggest the Government might commit to the report being produced or audited independently, perhaps by a committee of this House or of the other place or by an arm’s-length body. This simply echoes the kind of best practice that exists at this moment across the EU, and I am sure we would not want to depart from such practice or to lower existing standards of scrutiny in relation to the negotiation of trade agreements. Good communication lies at the heart of trade policy. Ultimately, Parliament has to hold the Government to account on this. The Secretary of State’s commitment on 16 July to keep Parliament closely involved with regular ministerial Statements and updates is welcome but not in any way sufficient, either for us to provide scrutiny or to give reassurances to businesses and individuals who will seek details from us as to exactly how they are going to be affected.
It is crucial that the Government should commit to providing Parliament and indeed the devolved Administrations with an update of all the negotiations covered by the Bill on a regular basis, which is to say perhaps three times a year. I do not believe that that is too much to ask. It would ensure that we were able properly and effectively to provide scrutiny and add our expertise to the Government’s efforts. There are Members of this House who know very well that negotiations even to replicate agreements can be very difficult. There are Members who appreciate that agreements with the likes of Norway and Turkey, for example, will be difficult to replicate without the UK maintaining a close relationship with the EU. I would like the Government to acknowledge that. How will these agreements be dealt with, and how will the challenges they pose be overcome? I will not hold my breath while I wait for an answer, but this is precisely why we need to consider an amendment along these lines in Committee.
The Government are currently treating Parliament and, I fear, business and civil society as the enemy in trade policy, who should be given as little information as possible. This approach is dangerous and counterproductive. Businesses, federations, trade unions, pressure groups and individuals all need to know what is being negotiated on their behalf and they need to be able to contribute meaningfully to the process, as indeed the Minister said in her opening remarks. I absolutely agree with her that people need to be consulted and to know what is going on. I hope that in Committee we can look to facilitate that process. After all, taking back control has to apply to them and to Parliament, not just to the Government.
I believe we need to start to create some consensus around the sort of trade deals that we want to conclude in future. That is so important after everything that has been happening recently. If we fail to create consensus, we will surely face an uphill battle to create a country that is open to trade and exporting successfully.
Lord Astor of Hever (Con)
My Lords, I support the Government’s objectives with the Bill. I also congratulate my noble friend Lady Meyer on her exceptional maiden speech.
This Bill is the necessary first step towards establishing ourselves as an independent trading nation, but we must now make the necessary changes to face up to the challenges post Brexit and to make the most of the trading opportunities in future. The DIT must be appropriately resourced; it is still a very poor relation compared to some other Whitehall departments. The mechanics have been changed in Whitehall, but often not abroad. I agree with my noble friend Lord Risby on the issue of resources being disproportionate at the moment. It cannot be right that there is a ratio of 10 DfID personnel to only one from the DIT in Africa. DfID has more personnel in Kenya than the DIT has in the whole of Africa, yet it is the DIT that is creating the wealth for our country, and I believe that we stand a better chance of lifting people out of poverty by trading with them and helping them to develop.
To make a success of exports and inward investment post Brexit, we must ensure that DIT trade promotion and the FCO teams in the embassies overseas work collectively and constructively together. They are on the same team, and they should be working together to support UK interests and to help to strengthen our economy. I have been very fortunate, as the Prime Minister’s trade envoy to Oman and formerly as a Minister, in my dealings with that country. At all times, from the excellent ambassadors down, the whole team at the embassy has been joined up. Like my noble friend Lord Risby, the embassy has had some huge export successes on both the military and civilian side. However, in some other countries there are internal conflicts within embassies. On very rare occasions, an ambassador or high commissioner has little interest in furthering Britain’s international trade interests.
Human rights are of course an important aspect of the FCO’s agenda, and that must be continued. But it must be done subtly. An ambassador who has chastised a foreign Government for their supposed human rights failings will often have caused huge offence to that host Government, so he or she cannot expect a warm reception the next day when accompanying a British company pushing for a huge export order in that country. That country would have good reason to feel aggrieved. Nevertheless, the human rights issue must not be neglected.
What is to be done in the very few cases when this does cause problems? Will the area trade commissioners be able to step in to ensure that trade interests do not suffer in that country? Most ambassadors who do their job well will have nothing to fear. I hope that the trade commissioners will not only express their opinion about the effectiveness of DIT staff in the region but will have an input into an ambassador’s or high commissioner’s annual report on the DIT staff in his embassy. I would be grateful if the Minister could confirm that this is the case.
Lord Kerr of Kinlochard (CB)
My Lords, it is a pleasure to follow the noble Lord, Lord Astor, who spoke so warmly of my old service, and to take part in this debate, introduced so clearly and convincingly by the Minister.
There is absolutely no doubt that, if we leave the European Union in March next year—something about which I am becoming increasingly doubtful—we need to have a Bill of this kind on the statute book. As the noble Baroness, Lady Henig, reminded us, there is a lot to be done on the detail in this Bill: the balance it strikes between the Executive and the legislature; future roles of and relationships between industrial, social, environmental, consumer and trade policies, and how transparent it should all be. In Part 2 of the Bill, I hope we shall look at the devolution aspects in relation to the Trade Remedies Authority. The noble Lord, Lord Browne of Ladyton, drew our attention to this. A threat that is seen as not particularly substantive UK-wide, could be seen as significant in a devolved part of the country.
I think we shall spend quite a long time in Committee. For reasons that escape me at the moment, we are about to be sent away on holiday. It is clear from this debate that we should take advantage of our last chance before the October European Council—which was meant to be decisive—to tell the Government what we think about deal, no deal, what it might take to get a deal and what no deal would mean for our country. I shall try to go into that territory too. I shall cover almost exactly the same themes as were addressed by the noble Lord, Lord Hamilton, in his typically splendid, rambunctious speech, although I may address them in slightly different terms. There is nothing between me and the noble Lord but a fundamental disagreement.
On no deal, I am not always sure that those of us who claim that it would be perfectly fine if we were to trade with the world and have the EU trade with us on WTO terms, understand what WTO terms would mean. I exempt the noble Lord, Lord Hamilton, from this criticism. The WTO’s guiding principle—the most favoured nation principle—means that, in the absence of any agreed bilateral or multilateral free trade agreement covering substantially all trade, WTO members must offer the same terms to all fellow members. Without an EU-UK free trade agreement covering substantially all trade, the EU could not offer us terms better than it was ready to offer everyone. This is what WTO terms means. It means tariffs, queues at Calais, UK supply chain disruption and queues at Dover because the trucks have to go in both directions. I am talking only of the effect of the EU being on WTO terms in relation to us, whatever we do.
What would we do? Take the United States. In the absence of a UK-US free trade agreement covering substantially all trade—and the President is not exactly rooting for trade liberalisation—any specific concessions that Dr Fox were to offer the Americans in order to try to open up their market, he would have to offer to all third countries. This would seem to be some way down the road, if ever. These are the WTO rules. Concessions outside FTAs, covering substantially all trade, have to be erga omnes. I have not heard Mr Gove explaining this recently to UK farmers.
Going to WTO rules would mean a major economic shock. Some would say that it might be salutary. Professor Minford is all for it. Perhaps the noble Lord, Lord Hamilton, is too—I do not know. Gardeners in the Cotswolds would come much cheaper if the car factories in Swindon and Oxford were to close. The Bullingdon boys would be just fine. They could carry on giggling about two-thirds of diddly squat. The country would not be fine. WTO rules, in the absence of a free trade agreement with the EU, would hit our producers and exporters. We would have left the world’s largest single market and seen it obliged, by WTO rules, to act against our exports. In the absence of the full rollover of and continuing participation in the EU’s 40-odd free trade agreements with third countries, or newer, successor free trade agreements with all 40, WTO rules would mean that we would have to allow wider market access. If we allowed it for a particular import from one country, we would have to allow it for that import from all. Professor Minford would love it. He wants the end of all tariffs, quotas and duties. UK farmers and manufacturers would not. Prices would undoubtedly fall, but so would employment, growth and revenue.
I might be accused of setting up a straw man. The 27 have said all along that they would like to have tariff-free trade with us. It has been in all their texts. I believe they mean it. They have said all along—or for more than a year— that they would be ready to offer us a Canada-type free trade agreement. I believe they mean that too. This assumes that there is a deal. If there is no deal, there is no free trade agreement. Why? Twenty-eight member state Prime Ministers, including our own, have defined the deal. They agree that it means a framework declaration about the future, although I fear this is increasingly likely to be alarmingly vague and aspirational. It also means a treaty covering citizens’ rights, the money we owe, a backstop solution to the Irish border problem and a transition period.
If Mr Rees-Mogg, Mr Johnson and their friends have their way; if we renege on the Prime Minister’s December commitment to pay the £39 billion we agreed we owed; and if we ignore Section 10 of the EU (Withdrawal) Act—recalled by the noble Lord, Lord Adonis—and renege on the Prime Minister’s commitment to find an acceptable backstop in Ireland, ensuring the Irish border stays open, there will be no treaty. The EU will see us in court. They will want their money back. There will be no UK-EU FTA, but tariffs at Calais. There will be no EU co-operation on rollover deals on the third-country free trade agreements and the division of quotas, and there will be no transition period, but a cliff edge in less than 200 days’ time. It is not a straw man. It is a clear and present danger because it is the consequence of what Mr Johnson is advocating, even if he does not understand that.
Actually, I think the money question is settled. I was alarmed by what the noble Lord, Lord Callanan, said at our Dispatch Box this afternoon, but I was fortunate enough to run it past the Chancellor of the Exchequer in a committee upstairs and was reassured by his reaction. He confirmed that, in the event of no deal, the United Kingdom would honour its legal obligations. I never thought that we would default. We never have.
The crux is the Irish border issue. Mr Johnson complains that it is the tail wagging the Brexit dog. Mr Rees-Mogg cheerfully talks about going back to the way the border was—or, rather, was not—controlled during the Troubles. Brexiteers dare to say that the Belfast agreement, the Good Friday agreement, has run its course. I find that shaming. It is certainly not the view of the other 27 Governments. I do not believe it is the view of our Government. It is an international agreement, so the others are entitled to have a view. In my view, that is not how anyone in this House sees it. It seems to me that we all stand by what the Prime Minister has been saying about the Good Friday agreement.
If there is no secure backstop, I do not believe that there will be a withdrawal treaty or a free trade agreement. My Brussels friends tell me that there has been no sign of the backstop deadlock breaking. Mrs May rejected the 27’s proposal. Her counterproposal, the Chequers idea of a customs partnership—with all imports at all UK ports to be examined, segregated and taxed differentially and then tracked to their ultimate UK or EU destination—looked pretty implausible from the start. The implausible became the impossible when the Government accepted the ERG amendments on the customs Bill, so purporting to require the other 27 to impose the same complex dual system on their ports, clogging them up and increasing their costs. Of course they will not, and the Government must have known that. Mr Barnier has certainly said it.
What is our next trick? I see only one workable solution. It would be warmly welcomed by UK industry, commerce and inward investors. The CBI and the TUC have both called for it. The Opposition parties all favour it, and this House voted for it in April by a majority of 123. The solution—or nine tenths of the solution—to the problem of the Irish border is for the UK to negotiate a customs union with the European Union. I very much hope that in addition to all the technical improvements that I am sure we will make to the Bill, we will add to it a provision requiring the Government to do just that. I hope that it will have the support of the noble Lord, Lord Tugendhat, as it did last time.
Without a credible Irish backstop—a commitment to a customs union would be the most credible—I do not believe that there will be a withdrawal treaty. Without a withdrawal treaty, there will not be a free trade agreement any time soon and we will be thrown back on WTO terms which, as I have tried to explain, will certainly mean an economic shock. Whether one sees that as a good or bad thing is a matter of judgment. I think it is a very bad thing. It is imminent, because no treaty means no transition period.
I cannot believe that our Government would be so irresponsible as to propose a no-deal Brexit, or this Parliament so irresponsible as to permit it. I do not see the charlatans being allowed to run the show. Rather, I foresee an Article 50 extension and an exercise in democracy to establish the will of the people—the informed will of the people—when the outcome of the present negotiation, at last defining the choice before them, is clear.
I must remind the noble Lord, Lord Hamilton, who is sadly not here, that the polls show that a majority across the country now believes that there should be such a poll. So, as in Whitehall in the distant past, I still stand with the noble Lord, Lord Butler. Meanwhile, of course, I do not oppose the Bill, although, like the noble Lord, Lord Taverne, I very much hope that events will render it otiose.
Lord Horam (Con)
My Lords, my knowledge of European politics and institutions is obviously much less extensive than that of the noble Lord, Lord Kerr of Kinlochard, but I remember that, when I was Science Minister in the Major Government in the 1990s, I went to a meeting of European Science Ministers to hear presentations from eastern European countries—they were not then part of the European Union, of course—as to why we should give them a lot of money; they were rather short at the time. I noticed my Danish colleague—the Science Minister from Denmark—making ticks after every speech. I asked him what he was doing and he showed me his note. It read: “Goethe 4, Molière 2, Shakespeare 10”. Those were the languages which the Ministers from the eastern European powers were using to make their case to us. Even then, in the 1990s, English had almost become the lingua franca of the European Union, much to the chagrin of the French.
It is rather sad that just at the point when that is indisputable, we are leaving the European Union. I still regard that as a fundamental error and regret it very much. However, as the noble Baroness, Lady Hooper, said, we are where we are. We have the Bill in front of us. As others have said, the Minister presented it clearly. An important part among the four elements that constitute it is that it gives the Government power to collect data from exporters for the purposes of trade promotion. Heavens, that is needed. As the Minister said, as a nation we have been great traders, but our performance in recent years has been extremely poor. Only 11% of companies in this country do any exporting at all: 89% do not export outside the United Kingdom.
The Minister made the point that we are the 10th-largest exporting nation in the world. Yes, but about 10 years ago, we were the fifth-largest. In the past 10 years, we have been overtaken by South Korea, France, Italy and the Netherlands, and Belgium, Canada and Mexico are snapping at our heels. This is a major cause of our continuing trade deficit. We have never had a surplus, apart from two years, in the past 15 years. Those trade deficits are getting worse. The only way we balance it is to sell off our assets—as Harold Macmillan might have said, selling the family silver. That cannot go on for ever and is very dangerous in many respects.
Brexit will make this worse, at least in the short term, because you always do more trade with your neighbours than with distant countries for obvious reasons. If there is any disruption to that, we will suffer. I am glad that the noble Lord, Lord Lilley, made the point that trade deals are no panacea in this area. Trade deals are not that important. He made the point that it is really trade in goods and services and having the right kind of goods and services that matters. Therefore, in or out of the European Union, export success will require hard work over a long period: more companies involved in exporting and investing overseas in existing markets and new ones, forming long-term relationships, which will really count.
I therefore welcome the one good thing which has come out of Brexit, which is a dedicated Department for International Trade, with all the elements in one pair of hands. They are good hands: I am grateful that the Minister comes with her interesting and important experience, as did her predecessor. One thing that the House of Lords can contribute to the Government is people with real experience of business—much greater, I suspect than we have in the other place.
I also take the point made by the noble Lord, Lord Risby, that this needs to be properly resourced. The killer facts which he spelled out about the relationship between the overseas aid budget, the Foreign Office and the Department for International Trade must be looked at. That must be remedied because it is completely out of kilter. The trade promotion aspect of the Bill is very important and I wish the Government and my colleagues well on all of that.
Finally, I will say a brief word about Brexit itself. The people have spoken and it is the Government’s job to deliver on Brexit as competently as possible. I totally accept that a lot of time has been wasted, though it is not entirely surprising given the strong feelings involved. We now, belatedly, have the Chequers proposals. I flag up the report from the External Affairs Sub-Committee of your Lordships’ European Union Committee—of which my noble friend Lord Risby and I are members—which will come out in 10 days’ time, more or less the same day as the Salzburg meeting. It goes into the customs aspect of this and is well worth a read, as many House of Lords Select Committee reports are.
The Government’s Chequers proposals are, without question, hideously complex. They have received a very poor initial reception both in the UK and, more importantly, in Europe. However, pushing aside for the moment the politics of the matter—difficult to do, I agree—they have very considerable merits in terms of trade in goods. The proposals deliver frictionless trade; there are no tariffs, cumbersome customs controls or rules of origin. There is no halt in the just-in-time arrangements which we have come to rely on in this country for the manufacture of motor cars and so forth. There is no hit on inflation because there are no tariffs and, in that respect, little disruption to trade in Ireland. Although they are not liked by hard-liners on the Brexiteer side or the relentless remainers on the other, that may be an advantage, given that the vote was 52% to 48%. People on all sides, whatever their opinion, should begin to realise that there comes a time when you have to compromise. If we expect Brussels to compromise and we have to too, people in the UK should begin to realise that they have to do it as well.
Latterly I have noticed that Brussels has begun to change its tone. I agree that it is only a change in tone, not in the content, and that is therefore less good, but the dogmatic legalism which my colleague Mr Raab pointed out is less obvious. There is a sense of a more pragmatic political approach. I agree with my noble friend Lord Tugendhat that it would be almost miraculous if some sort of agreement came in the way that we hope. Many, many hurdles have to be overcome, but it can be done and I hope it is. If the Prime Minister does achieve an agreement along these lines, it would be a great triumph for her and would deserve support from inside Parliament as well as outside.
Lord Liddle
My Lords, speaking as one of what the noble Lord, Lord Hamilton, so kindly described as the unreconciled, I do not like this Bill. It is an unnecessary Bill in pursuit of a foolhardy objective of having an independent trade policy, which is not actually required by EU withdrawal. Far from being technical and pragmatic, as the noble Baroness, Lady Fairhead, said in her introduction, it is actually a matter of ideological choice. It is a very bad choice to pursue this independent trade policy because the most obvious way of cutting the Gordian knot of frictionless borders and the Northern Ireland problem is for us to stay members of the customs union. I hope that, in Committee, the House will return to the question of the customs union and the European Economic Area. I was interested in what the noble Lord, Lord Cooper, said about public opinion and the public’s expectations of what Brexit would mean. The pursuit of an independent trade policy comes very low in the public’s priorities. Safeguarding our trade through membership of the customs union and single market is much higher.
This is a very misguided Bill, and I do not believe that the Government have presented any kind of evidence for the benefits of the UK having an independent trade policy. Could the Minister tell the House what research work the Department for International Trade has done on this question? If it has done research papers, why have they not been published? What are the gains that we believe we would achieve as a result of being able to conduct our own trade agreements as opposed to retaining the benefits of the single market which we are clearly on the point of losing?
The case for this independent trade policy is weak, and I have heard two arguments that for me completely destroyed the case. The first was a lecture by Sir Martin Donnelly, who was Liam Fox’s Permanent Secretary, in which he demolished the Government’s arguments for the policy, point by point. He ended up with the wonderful line that it was like forgoing a three-course dinner for a packet of crisps. That is what I believe it to be. The second was in this House when, on 18 April this year, we heard the most wonderful speech from the noble Lord, Lord Patten of Barnes. He took the Government apart on this question. I recommend that every Member of this House should read it. On all these Brexit questions, the Government have always completely failed to provide any rebuttal of serious intellectual arguments made against these ideological policies.
The Government have an aspiration for an independent trade policy but, beyond that, they are very confused. There is tremendous tension on the question of what we are trying to do. Are we prepared to sacrifice standards in order to get trade agreements with countries such as the United States? Michael Gove says we are not. So what sort of trade agreement are we going to be able to negotiate with the United States? In the Brussels negotiations on the withdrawal agreement, the Government are hanging out against the protection of geographical indications—the Scotch whisky-type thing—precisely because they know that that kind of protection is the sort of thing that the US trade negotiators would be going for straightaway, as soon as we tried to negotiate an agreement with them. I have a local worry about this. Cumberland sausage is about to suffer; it is going to be sacrificed on the ideology of this Government’s commitment to an independent trade policy. What a disgrace.
Another serious point is the one about rules of origin, which I raised with the noble Baroness, Lady Fairhead, in her clear introductory speech. I have not heard any satisfactory answer from a Minister on how this problem is going to be dealt with in the rollover of existing EU trade agreements. The very serious problem that gets in the way is this business of trying to pretend we are still in the EU when we are not, yet being able to negotiate our own deals because we are not in it. Yet, in order to have the rules of origin provision, we have to pretend that we still are. This is the total confusion of the Government’s approach to these negotiations.
The noble Lord, Lord Lilley, made a good attempt to justify the independent trade policy, but I rather agree with the noble Lord, Lord Horam, that the key question is competitiveness rather than trade deals. You have to ask yourself the question: if the EU is such an obstacle in its trade agreements to British success in export markets, why are the French and Germans beating us around the world hands down? It is not because of the EU but because we have fundamental problems of competitiveness that we have to address. On the argument about Switzerland, as I understand it, the Swiss have been unable to get any services provisions in their negotiations with China, and the argument that small countries are able to negotiate big deals is simply wrong about the modern world. When President Juncker of the Commission went to see Donald Trump, he managed to get him to back off from imposing industrial tariffs on the European Union. Why? Because the European Union is a very big market, and Trump thought that it was much better politics to have a go at China.
What we have here is basically an ideological obsession, which I am afraid is delusional, and I wish that the Government would abandon it so that we could have a soft Brexit around which a national consensus could be established.
Viscount Trenchard (Con)
My Lords, I thank the Minister for her clear and well-presented introduction to this debate. I also add my congratulations to my noble friend Lady Meyer on her most interesting and moving maiden speech. Like her, I have also lived and worked in Brussels and, like her, my feelings about the European Union were affected by my experience. I also strongly support what my noble friends Lord Risby and Lord Tugendhat said about the crucial need to protect and restore as far as possible the Foreign Office budget.
Last week, we had an opportunity to debate the customs Bill, which, as a money Bill, did not provide your Lordships with an opportunity to try to improve it. Your Lordships strongly rejected the regret Motion moved by the noble Baroness, Lady Kramer, on behalf of the Liberal Democrats, which sought to ensure that the UK would remain a member of the customs union and the single market. As the House is well aware, to remain in either would effectively prevent the country regaining the authority to make its own laws in this Parliament and would leave it powerless to negotiate new trade deals and resume our natural role and destiny as a free trading nation with an influential voice in the WTO and other international institutions.
The Trade Bill is absolutely necessary, whether we reach agreement with the EU on something like the Chequers proposals, negotiate a Canada-plus-type free trade agreement with the EU, or leave the EU without agreement and trade under WTO rules. Its purpose is to provide continuity in our current trading relationships with some 40 agreements with around 70 countries. If an implementation period with the EU is agreed, this should not be too difficult, but in the event that we leave without a deal, the Government will be under serious time pressure to roll over all those agreements in the time available.
Still, it should be remembered that our trade under these agreements covers only 12% of our total trade, and I imagine that a small number of those agreements account for a large majority of this. Can the Minister say how many of these agreements need to be rolled over in order to protect, say, 80% of our total trade under those agreements, and is she confident that we can achieve this in the event of leaving without a deal—in other words, move to trading with the EU under WTO rules as we do at present for all our non-EU trade? My noble friend Lord Lilley has mostly answered that by saying that over half of this trade is covered by Switzerland, Norway and a couple of other countries.
Those who seek to ensure that we remain as closely tied as possible to EU regulation in order to protect our existing trade, even to the extent of making us very unattractive as a new potential trade partner, are wrong, because they seek to protect the status quo, good and bad bits alike, and do not recognise the upside potential of being free once more as an independent nation to enter into new bilateral and multilateral trade agreements. They are also wrong because they seriously overestimate the threat to our existing trade.
I was encouraged to read in the Chequers proposals that the Government seek “potentially” to accede to the Comprehensive and Progressive Trans-Pacific Partnership, although the inclusion of the word “potentially” sounds alarm bells. Does the Minister agree that the degree of continued alignment with EU rules and regulations, especially the proposed subordination to a common rulebook, makes it questionable that we would be acceptable to the other members of the CPTPP as a partner? If under Chequers we are unable to take advantage of opportunities such as this, it negates the benefits of leaving the EU.
I doubt that the CPTPP countries would be willing to contemplate a restricted form of membership covering services but not goods. As Policy Exchange’s excellent paper Trading Tigers explains,
“comprehensive liberalisation across goods as well as services and investment”,
is,
“one of the core unifying principles”,
on which the partnership is founded. The CPTPP is not a customs union, and members are free to set their own external tariffs. Neither does it have,
“a common set of regulatory standards but seeks to harmonize regulations for those standards members have agreed to”,
harmonise. It therefore does not involve integration at the depth of the EU single market. Six of its members are Commonwealth countries, including Australia, New Zealand and Canada. It also includes Japan, whose Government have already expressed support for the UK’s accession. When fully implemented, it will eliminate 98% of tariffs among its members. It achieves more than most bilateral FTAs and much more than what the WTO has been able to achieve.
I am not sure whether the Government are planning to novate or enter into bilateral FTAs with countries such as Australia and Japan first and then later consider entering into multilateral partnerships such as CPTPP. Would it not be much easier and quicker just to apply to accede to CPTPP at a stroke? That would give 11 for the price of one, as it is not necessary also to have separate bilateral FTAs with each member. Besides, it might be 15 for the price of one, as four other countries have indicated that they wish to join soon. It is important to push ahead now with exploratory discussions with CPTPP member countries, and the fact that we were doing so would encourage the EU to be more reasonable in its approach to the UK. The UK’s accession to CPTPP might also encourage the United States to reconsider its decision not to join. It is also notable that Canada’s trade agreement with the EU, CETA, does not prevent its accession to CPTPP, which gives confidence that the UK’s accession would not be incompatible with a Canada-style deal with the EU.
As a result of an amendment to the Bill supported by another place, the Bill somewhat strangely deals specifically with the UK’s future relationship with the EU solely in the medicines sector. If full participation in the European medicines regulatory network is achieved as part of our withdrawal agreement, it will mean that the UK will be bound to follow evolving EU rules in this sector without any direct control over the formulation of those rules. As I mentioned during the debate on the customs Bill, I think this may well act as a disincentive to investment in the UK by international pharmaceutical companies.
I lived and worked in Japan for 11 years and continue to visit regularly. During my visit to that country in July, I met the CEO of a major pharmaceutical company which has made significant investments in research and development in this country. I have known him for over 40 years. He told me that, while he did not initially welcome Brexit, he was now looking for the upside of the UK’s escaping from the very bureaucratic EU regulation covering the sector. His company has invested a considerable amount in its “Plan B”, by changing its corporate structure and framework to ensure that it can continue to supply medicines in the UK and EU after Brexit, as it does now. He told me he believes that, whatever happens, the UK will continue to be the best country in the world in which to conduct pharmaceutical R&D and to innovate new treatments.
He expects that a future UK regulatory framework, while appropriately protecting patients from exposure to potentially harmful new products, could provide a more supportive regulatory regime, which will not give excessive weight to the precautionary principle when this is not supported by facts. It seems to me that he and others who think the same way will be disappointed if the UK does not institute its own independent medicines approvals mechanisms. Obviously, products developed for export to the EU will have to continue to comply with the letter of EU rules, but that need not unnecessarily impede our adopting a less restrictive, more innovation-supportive regime to develop products for the domestic market and for the wider world.
The noble Lord, Lord Grantchester, said that a trade bloc, in its ability to negotiate trade deals, is more powerful than an individual nation state. I cannot agree with the noble Lord. Rather, I wholly agree with my noble friend Lord Lilley, who clearly explained why it is so much easier as a single country to negotiate an FTA. I add that, in most EU trade agreements, the benefit accruing to the UK is proportionately much lower than for all other EU countries. I support the Bill and trust that your Lordships will not seek to obstruct it.
Lord Wigley (PC)
My Lords, I am delighted to follow the noble Viscount, Lord Trenchard, although I cannot possibly agree with him on most of what he said, particularly not on his last comments about medical products. I invite him to reconsider very carefully what he said about the precautionary principle not being overused where facts were not available. Surely the whole point of having a precautionary principle is to deal with cases where the facts are not always available, as a means of making sure in such cases. My real fear is that deregulation is going to drive us down this road and leave vulnerable people exposed. I also congratulate the noble Baroness, Lady Meyer, on her moving maiden speech, which I think was very well received in the House.
I can understand the logic of the Bill before us tonight, but it is a sideshow compared with the main issue, as outlined so clinically by the noble Lord, Lord Kerr. As noble Lords might expect, I shall be looking from the viewpoint of industry, business and consumers in Wales, as well as in the context of the powers of devolved Administrations. As I understand it, the Scottish Government recommended against giving legislative consent to the Bill, and the Welsh Labour Government said that amendments would be needed before they could recommend legislative consent. Government amendments to the Bill made in the House of Commons reduced the restrictions on devolved Ministers’ use of the relevant powers but did not address all the concerns raised by both the Scottish and the Welsh Governments. I noted from the Minister’s opening comments that the Government are willing to conduct further discussions with the devolved Governments. I very much hope that the House can be kept informed of progress on this, as was requested by the noble Baroness, Lady Henig, a few moments ago.
In this context, I seek an assurance from the Minister that nothing in the Bill will restrict the Welsh Government from maximising the extent to which their procurement policies encourage expenditure to go to suppliers in Wales, within the context of the existing EU guidelines. This is so that the Government’s expenditure in Wales can help to support the Welsh economy—something which has been done very effectively over the last 10 years. I also flag up the issue touched on by the noble Lord, Lord Browne of Ladyton, in relation to geographic labelling, which other colleagues also mentioned, including Scotch whisky, Welsh lamb and Cumberland sausages. I hope there will not be any question of these being actively discouraged as labels by the UK Government. The issue is already a hot potato in Wales, as was shown in the Royal Welsh Show in Builth in July, when it became a very controversial issue indeed. It is undoubtedly a matter that will cause rancour, and—I suggest to the Government—unnecessarily so.
Notwithstanding the comments of the noble Lord, Lord Tugendhat, I suspect that many colleagues on all sides might wish to ask the House of Commons to consider again an amendment requiring the Government to seek to remain in the customs union with the EU if it cannot negotiate a frictionless free trade area. I note that attempts to secure this in the Commons were defeated by a majority of only six votes, and that was after a considerable amount of arm-twisting. If the Government insist on pulling us out of the single market and customs union, their action will scrap existing free trade deals with over 50 countries outside the EU, as well as endangering our trade with the 27 member states themselves. That, of course, is what this Bill is all about.
Trade with third countries with which we have free trade agreements arising from our membership of the European customs union account for almost £140 billion of UK trade. If we were to lose, even for a transitionary period, any significant proportion of that trade, it would have a major effect on the UK economy. In moving Second Reading, the Minister claimed that the Bill will simply translate those deals into domestic legislation. However, the Bill’s Delegated Powers Memorandum describes the process of,
“transitioning EU-partner country trade deals into UK domestic law”,
as “uncharted territory”. Furthermore, the Bill’s own Explanatory Notes admit that:
“It may also be necessary to substantively amend the text of the previous EU agreements … so that the new agreements can work in a UK legal context”.
We are reliant on the immediate co-operation of 50 nations with which we have existing deals if those deals are to continue. That is something that the Secretary of State and his chief negotiator, Crawford Falconer, admitted in oral evidence, which they gave to the International Trade Committee on 1 November last year, to be matters on which they have been unable to secure guarantees. I understand that we still do not have cast-iron guarantees on those matters. Will the Minister tell the House what evidence she has that this has changed since last November? And in doing so, will she indicate whether the public consultations launched by the International Trade Secretary, Liam Fox, on 18 July, on potential future trade deals the UK might seek with the US and New Zealand, have proven to be fruitful in any way?
It seems to me that President Trump is blowing hot and cold on the promise of a trade deal with the UK in the wake of the Chequers declaration, and that this bodes badly for any assumption of an automatic endorsement on rollover agreements from such unreliable partners. I also ask the Minister, in this context, to address the issue of New Zealand’s opposition to the EU and UK’s proposal to split tariff rate quotas on lamb, which is clearly a matter of huge significance in Wales. In leaving the EU, the UK will have to separate its tariff rate quotas from the EU, and its new schedules would be subject to approval by all WTO members. New Zealand might well choose to block such approval.
I now return to the implications of this Bill for the devolution settlements in Wales. It seems to me that the Government are indeed ignoring the existing pattern of devolved powers and the engagement of devolved Administrations in helping to formulate new trade agreements. The Welsh Government have a responsibility for the economic development of Wales; they receive financial assistance from the EU for that purpose. The success of Welsh agriculture and industry in exporting its products is fundamental to the well-being of the Welsh economy. The Welsh Government have, over the past 19 years, undertaken a wide range of initiatives to boost Welsh exports for the benefit of both our own economy in Wales and that of the UK, and they have of course done so most often in partnership with the UK Government. We need to build on that, and in the post-Brexit world we need to harness all such resources. The UK Government should be seeking a new and ambitious role for the devolved Administrations that will ensure that they have a real say over important issues that impinge on their responsibilities. If the UK is a union of equals, the Government should really start to understand this.
Time is squeezing and I point out only that over the last year consideration has been given, in the context of securing some understanding between the devolved Administrations and the UK Government, to the need for the existing Joint Ministerial Committee to be overhauled and rebuilt into a statutory UK Council of Ministers covering the various aspects of policy for which agreement between all four UK Administrations is required. In my opinion, any future trade deals should require statutory endorsement by the devolved Administrations, and in this context there should clearly be Welsh and Scottish representation on the new UK Trade Remedies Authority.
The degree of wishful thinking on which this Bill is based beggars belief. I hope only that the Government will face reality: they cannot expect to have all rollover trade links in place by 29 March next year, less than seven months away, and, in a panic to achieve that wholly artificial and unnecessary deadline, they will sell out on myriad issues in order to get nominal trade deals in place in time. This is not the way to conduct international trade agreements. In considering the Bill in detail in Committee, this House should do its utmost to force the Government to face up to the folly of a rushed Brexit and, more than anything, enable the other place to think again on the central issues of an ongoing customs union relationship with our European partners, which would make this Bill totally unnecessary.
Lord Cavendish of Furness (Con)
My Lords, however much I disagree with the noble Lord, it is always a pleasure to listen to him and I admire enormously his commitment.
I thank and congratulate my noble friend the Minister on her elegant opening speech explaining to the House the purpose of the Bill. It is a technical Bill, in my view. I recognise that it is important and I wish it safe passage, but I will leave it to others better qualified than me to comment in detail on its contents.
I have grown accustomed to addressing your Lordships as part of a minority whose members believe, as I do, with some passion that it is in the best interests of this and future generations that my country is out of the European Union. However, today’s debate is about trade and I share with others a burning interest in the subject. Although I believe that becoming once more a self-governing country trumps all other considerations, I also say with absolute conviction that, with or without a deal, Britain will prosper mightily outside the EU, and I shall give your Lordships my reasons for saying so.
I speak today as a minority in one other respect. I have listened patiently over many months, and even years, to lectures about trade from the large cohort of people who lay claim—many with some justice—to having made significant contributions to Britain’s trading performance. However, for the most part, these very clever people have never traded so much as a brass button in their long and distinguished careers. That they make a contribution is beyond doubt, but it is one, I venture to suggest, that should be kept in perspective. As with previous debates, the mandarin class told us all how the country was not clever enough to understand the issues, and I will come back to that in a moment.
Meanwhile, I declare an interest. Although I relinquished chairmanship of my family’s business, I remain involved, and details of my interests appear in the register.
The SME sector, to which my family business belongs, accounts for some 90% or more of UK businesses. It is a sector that has difficulty in making its voice heard; we are usually too busy to go to those seminars and conferences so well attended by officials. Personally, I have traded goods and services for more than half a century and have operated in a huge array of markets around the world, including some quite challenging ones—at least, I remember thinking as I was trying to secure an important export order that being kidnapped at gunpoint in a South American jungle was a little out of the ordinary. I succeeded in securing it, as it happens.
I agree with my noble friend Lord Risby that the role of our ambassadors is hugely important. Looking back over some years, from my perspective a good ambassador meant that you did trade, certainly in Latin America, and a bad one meant that you did not. It was as simple as that.
My main point, however, is that the endless and often tedious debate about trade deals tends to obscure the fact that there would be no trade without British companies being able to produce goods and services that overseas customers want to buy at prices they can afford—a point made very forcefully by my noble friend Lord Lilley. To those who wag their fingers at me and say ad nauseam that business needs certainty, I shall respond as gently as I can and tell them that they are talking tosh. Conceivably there are some big tier 1 companies that, without fail, and without much effort, receive a monthly order from Her Majesty’s Government and operate at negligible risk, but never—literally never—in my working life have I woken up to certainty; nor have I wanted to. Certainty is not a feature of normal commercial life.
I have made the point before that I find little evidence that the Government and their official class place much value on the SME sector. Regulation, high taxation—much of it stealthy—and a generally hostile environment among the numerous public bodies that impact on our lives combine to erode margins and discourage investment. My own family business recently deferred—perhaps indefinitely—a £13 million local investment that only a few years ago would certainly have gone ahead. That may sound like small beer but if others do likewise as real returns diminish and risks increase, then I fear for the future.
However, that is as nothing compared with the hostility that the SME sector faces from EU institutions. Brussels plays host to tens of thousands of lobbyists paid for by big business. Their job is to influence officials so that regulation is framed to benefit their companies and, more importantly, harm their smaller competitors. Lobbyists become especially active and vindictive when they spy a small competitor coming over the horizon. I have personal experience of that and I am pleased to put on the record that, after a seven-year battle, we fought off a significant fiscal injustice with the valuable support of Her Majesty’s Treasury.
We all understand and accept the need for regulation. However, I can think of no regulation that does not entail cost, and that cost will always fall disproportionately on the smaller enterprise. It will also curtail innovation unless the burden is kept to a minimum.
In economic terms, the real benefit will accrue to Britain outside the EU from policies of free trade. History teaches us that this path is not always painless—and I do not expect this one to be—but it is always successful where the political will exists to see it through. Precisely because the European Union is a protectionist organisation, one of the great benefits of leaving it is that the consumer—that person whose cause is so rarely championed in Brussels—will be substantially rewarded by not having the common external tariff. Benefits will ultimately flow from abandoning the indefensible CAP and the morally loathsome fishery policies.
Another advantage for trade will be escaping from the corruption that is endemic in the EU. In 2014, the Commission reckoned that corruption cost the EU €129 billion—not far short of the EU’s annual budget. The promised update from the Commission never materialised. However, a study commissioned in 2016 found that those costs might be as high as €990 billion —that is, eight times higher than previous estimates. I have not invented those figures; they were commissioned by the European Parliament. Therefore, it can hardly come as a surprise to hear Mr Drago Kos, chairman of the OECD working group on bribery, say:
“It is obvious that the fight against corruption has never been a priority for the EU”.
EU officials lecture us interminably about the importance of rules while, without blinking, driving a coach and horses through their own rulebook whenever it suits them. If you add to that the squalid scandal of the recent promotion of Mr Martin Selmayr, I wonder whether there is any limit to the Commission’s bad practice, which does not fall short of that of the worst kind of banana republic.
The party opposite, not being the party of government, is entitled to the luxury of not having to explain too precisely its policies. Given that a large number of its supporters voted to leave and given its manifesto commitment, I think it is time we had a clearer idea of where it stands. I have asked over the years whether the Labour Party cares about the inhuman impact of the EU on real people, and I shall probably address these questions particularly to the noble Lord, Lord Grantchester, who brought up the human qualities of the EU. Do its members care, I wonder, as professed internationalists, about the Europe-wide astronomical levels of youth unemployment or the fate of the Greeks? Does the impact of the common external tariff on the poorest in our society bother them at all, with a tax of between 18% and 20% on clothes, footwear and food? Are they concerned about the protectionism implicit in a customs union that damages poor developing countries? Finally, do they look at the EU and not see the huge risk of remaining in that dreadfully flawed construct, that lurches from crisis to crisis studiously ignoring the suffering of its citizenry? No, I fear that the party has morphed from a movement that once championed the poor and the vulnerable into a smug, self-satisfied elite that feels most comfortable talking to itself inside the borders of the M25.
More generally, given that this House is so strongly remain, I wonder if noble Lords ever reflect on the strange fact that this is probably the first time in modern history when the expression “Peers and people” has lost its meaning: gone for ever, I fear, is the public perception that the House of Lords is on the side of the people. Aside from the class—and the individuals within it—that benefits from EU largesse, and socialists who love to redistribute our hard-earned cash without needing to account for it, I remain utterly baffled why normally sensible people should want to bind themselves to the midden of corruption and venality that is the modern EU.
The people understand, as we all do, that the consequence of unaccountable power is not sometimes a car crash: it is always a car crash. They understand, as we all do, that uncontrolled corruption has appalling social and political consequences, and its chief victims are always the poor and vulnerable. I hope that they understand, as most of us do, that the rule of law that evolved in this country over 1,000 years, and was exported successfully to the rest of the English-speaking world, has held citizens in good stead and guaranteed their freedom. The institutions of the EU have become terminally infected with all the most pernicious viruses that one associates with rotten self-serving governance. The country voted for a new and glorious dawn. It understood perfectly what it was voting for. It is not just time that we left: our departure is long overdue.
Lord Livermore (Lab)
My Lords, it is a privilege to speak in this debate with so many who are expert in this field. It is a pleasure to follow the noble Lord, Lord Cavendish of Furness, although I do not think that I agree with anything that he said. I also join other noble Lords in congratulating the noble Baroness, Lady Meyer, on her powerful and fascinating maiden speech.
I will concentrate my remarks on the provisions in this Bill to implement an independent trade policy, and to transition the existing trade agreements between the EU and third countries. I will focus on these provisions because they neatly encapsulate the futility of the Brexit process, which involves recklessly dismantling all the benefits that we currently enjoy, with the promise of a better—but as yet unspecified—replacement at some distant point in the future, only for us to end up in a far worse position than we started with.
When this Bill was debated in the House of Commons—and this point was repeated by the Minister in her opening speech—the International Trade Secretary, Liam Fox, said that it was about,
“continuing what we have at the present time”.—[Official Report, Commons, 9/1/18; col. 210.]
What then, we might ask, is the point of it? Why are we expending huge amounts of time and energy? Why are we setting ourselves red lines for the negotiations that are proving impossible to reconcile with each other, and threaten to scupper the chances of any exit deal at all, with the hope only of continuing what we have now? Surely such effort is worthwhile only if we end up with more trade than we had before?
As the noble Lord, Lord Cooper, made clear in his speech, the point is certainly not to honour the referendum result. Only 12% of the public even recall independent trade deals ever being mentioned in the course of the referendum campaign. The fear must surely be that once again theological obsession is being allowed to take precedence over the economic well-being of our country. As my noble friend Lord Browne of Ladyton argued earlier, the central question must surely be: is the goal of simply maintaining what we have now itself realistic?
Noble Lords will know that the UK is currently party to more than 40 EU trade agreements covering more than 80 third countries. Indeed, the EU has trade deals in place with more countries than the US, China and Australia combined. These third-country trade deals amount to 15% of the UK’s total trade, over and above the trade we do with the EU.
The Government have acknowledged that transitioning these existing trade agreements will not be a matter simply of rolling them over, but they have not yet explained how they will be replicated. Other countries will need to agree to transition their existing agreements without asking for substantive changes, otherwise the UK will need to renegotiate many, or possibly all, of these agreements before we leave the EU.
At last year’s Conservative Party conference, Liam Fox said:
“Well believe me, we’ll have up to 40”—
free trade agreements”—
“ready for one second after midnight in March 2019”.
I would be very grateful if the Minister could confirm, when she responds to this debate, whether the Government remain confident of achieving this commitment, on this timescale, and update us on how many third countries have so far agreed to roll over their existing trade agreements on the exact same basis as now.
In reality, renegotiation will be complicated because of rules of origin, clauses tied to service sectors and investment flows, mutual recognition and tariff rate quotas. It will take only one of those 40 countries to renegotiate their existing agreement to our detriment for us to be in a worse position than we are now as a member of the EU. Furthermore, if we were to leave the EU with no deal, Britain would be the only country in the world which did not have a single trade agreement with anyone else. In fact, I might be wrong. I believe that there are two countries in the world that trade only on WTO terms: Venezuela and Yemen. Quite an ambition for a country such as ours.
This Bill is necessary only because of the Government’s decision to leave the customs union and the single market—a decision taken without first undertaking any economic analysis of the consequences. With Europe on our doorstep, the UK’s current annual trade with countries in the customs unions is £466 billion. It is estimated that leaving the customs union would cost the UK £25 billion every year, and leaving the single market some £45 billion. New tariffs alone would cost UK exporters £4.5 billion a year. HMRC has estimated that new customs checks would increase the cost of imported goods to businesses and consumers by 24%. The National Audit Office estimates that the number of customs declarations each year will increase from 55 million to 255 million and that UK-based companies will have to comply with far higher levels of bureaucracy and additional costs. To take just one example, Honda, which is based in Swindon, receives 2 million components every day thanks to the free and frictionless movement of goods. Outside the customs union, to store the minimum nine days-worth of components on site, it would need to build the third-largest building on earth, measuring 300,000 square metres—the size of 42 football pitches. The Government have repeatedly committed to delivering a future trading relationship with the EU that has the “exact same benefits” as we currently enjoy, yet they have no realistic, viable or acceptable proposal to do so.
The Cabinet spent several months of valuable negotiating time arguing over either a streamlined customs agreement or a customs partnership, neither of which was actually workable and both of which had already been rejected by our negotiating partners. When the Prime Minister chose between the two, it prompted the resignation of her Brexit Secretary and her Foreign Secretary, and it was promptly and predictably shot down by the EU. We now have the spectacle of the Government unable to save their Chequers proposals but without any credible strategy to put in their place, while the more extreme Brexiters in the European Research Group have abandoned publishing their alternative plans for fear that they could be “too easily ridiculed”.
We have frequently been told that the great prize of Brexit is the ability to strike free trade deals with new countries. Presumably for Brexit to be worthwhile, the new trade deals would, at a minimum, replace the trade with the EU that by the Government’s own admission would be lost by leaving the customs union and the single market. Yet many of the countries cited as targets for new trade deals barely compare to the nearly 50% of our trade that is currently with the EU. Australia accounts for just 1.7% of our trade, India 1.7%, Indonesia 0.2% and New Zealand 0.2%. According to analysis by the National Institute of Economic and Social Research, the estimated increase in UK trade from free trade agreements with Australia, Brazil, Canada, India, Indonesia, New Zealand and the US combined would be less than 5%.
By contrast, leaving the single market would see a reduction in UK trade of between 22% and 30%. Even the Government’s own analysis shows that new free trade deals will add only between 0.2% and 0.7% to UK GDP, compared with their own estimate of a 5% reduction in GDP from leaving the single market. Moreover, the long-term benefits of a free trade deal with the US, their most prized goal, are estimated by the Government to be worth just 0.1% to 0.3% of GDP. As my noble friend Lord Liddle pointed out, Sir Martin Donnelly, former Permanent Secretary at the Department for International Trade, has said that leaving the single market and the customs union to seek new trade deals is like,
“giving up a three-course meal now for the promise of a packet of crisps in the future”.
These economic effects are to say nothing of the practical difficulties. New agreements will take many years to negotiate, with huge trade-offs and large countries holding the whip hand in negotiations. Third countries will not be in a position to even start negotiations until they know what the UK’s future trading relationship with the EU will be, which currently looks several years away. Agreeing an independent status at the WTO will not be straightforward, with the US, Canada and Brazil already raising concerns. In talks with the US, negotiators will demand that the UK lowers its environmental and food standards and accepts products such as hormone-treated beef and chlorinated chicken, while US healthcare companies will lobby for the right to bid for NHS contracts. What is more, all this relies on dealing with President Trump, who is yet to show himself as an advocate of mutually beneficial trading relationships.
It is clear that transitioning existing trade agreements on the same beneficial terms we currently enjoy cannot be taken for granted. It is also clear that new trade deals with other countries will not remotely come close to making up for our lost trade with the EU, the largest free trade area in the world. The reality is that this Bill will reduce UK trade, not increase it or even maintain it. On trade, as with so much of Brexit, the damage will be huge, the benefits illusory and the reality so very different from the promise. The case for giving not only Parliament but the people a meaningful vote on the final deal is ever more compelling.
Lord Lansley (Con)
My Lords, it is a pleasure to follow the noble Lord, Lord Livermore, not least because I did find occasion to agree with him on certain points. I was particularly pleased that he reiterated the metaphor used by the noble Lord, Lord Liddle, because those of us who are gathered here at the moment are all giving up our three-course dinners for the purpose of Brexit.
I join with others in congratulating my noble friend Lady Meyer on her maiden speech. The character of what she had to say, her heritage, experience and proven values all demonstrate what a valuable addition she will be to our debates and to the House. I should like to add from my own point of view that this is the first occasion on which I have spoken this year. My medical treatment made it very difficult for me to participate in debates until now, so I am particularly grateful to colleagues for their many kindnesses over that period. I want to put on the record that this House is a very good place for looking after people. Lastly, I draw attention to my entry in the register of interests, in this instance my co-chairmanship of the UK-Japan 21st Century Group. Six parliamentarians from this House and the other place were in Japan the weekend before last for the annual conference of the group, so perhaps I may return to the issue of Japan. I agree with much of what my noble friend Lord Trenchard had to say; he understands Japan extremely well.
My noble friend Lady Fairhead gave us an excellent introduction to the Bill, and she spoke very well back in December in our previous debate on trade policy. I agree with her that the Bill is necessary to ensure continuity. There is a frustration, made perfectly clear by the noble Lord, Lord Livermore, at the effort that is having to be expended to maintain the status quo. This is part of that effort. However, in this instance, if we go down the path of Brexit—especially if we do not have a withdrawal agreement in place at the end of March next year—the need to have this Bill in place is obvious to all.
Few noble Lords have mentioned the Trade Remedies Authority. It is important that a shadow TRA is in place, even if there is an implementation period and the European Commission continues to exercise those responsibilities during that period. Many years ago, I was responsible for the generalised scheme of preferences in the chemical industry at the DTI and anti-dumping cases. I know that the degree of knowledge one has to acquire of not only the trade environment but the industry to which those remedies are to be applied—internationally, too—is not acquired quickly. It is the product of long and sometimes exhausting work. Getting a Trade Remedies Authority up and running is a priority for us, even if it takes the best part of two years before it is imposing remedies.
My main point concerns the customs union. I will not repeat what was said by the noble Lord, Lord Kerr of Kinlochard— he said it better than I could and I agree substantially with him—but I want to come back to the customs union, which I voted for in the withdrawal agreement legislation. My noble friend Lord Tugendhat said that we asked the Commons to think again and it did, but answered that it did not endorse this point. Of course, the other place was not strong-armed into it, as I think somebody said. I know colleagues there who supported this matter, a significant number of whom did not support that amendment because they supported the Chequers deal and wanted it to go ahead. In a nutshell, if we could get everything that the Government are looking for in the Chequers deal, including no rules of origin, frictionless trade and diagonal cumulation—meaning that in the free trade agreements, local content in the UK is treated as EU content and vice versa—we would be pretty close to what we genuinely need. That is the beauty of the Chequers deal. If the EU sign up to it, all will be well and good. But it may not, and the point at which it may not because it regards the deal as trespassing on too many of its red lines is the point at which colleagues in the other place will have to reconsider whether we should be in the customs union or out, on a no-deal basis. That is a different question, on which they should be asked to think again. Frankly, I suspect that during the passage of this legislation we will have the opportunity and occasion to reconsider the issue in broadly those terms.
As my noble friend Lord Trenchard said on Japan, it is very clear that we should be moving through a sequence and grandfathering the EU-Japan agreement. People are asking whether Japan will do it; the answer is yes, because it does not think that the agreement is long term. It is very pleased about and supportive of us joining the CPTPP, which offers us some advantages. For example, the e-commerce provisions in the TPP 11 agreement significantly benefit our strong digital market offer, relative to what is in the EU-Japan agreement, so there is a reason to transition to that multilateral agreement. As part of talking about our future trade policy, we should look for such opportunities, specifically multilateral trade arrangements. There is a reason why President Trump likes bilateral agreements: in a world of purely bilateral agreements, might is right, and more often than not, he will win on a straight bilateral trade negotiation because of the sheer weight of his economy. Frankly, that is why we are in the EU: to give us the weight in trade negotiations to counterbalance the United States, and now China. He fights those battles thinking that he still has the weight to do so. We should not allow him to go down the path of bilateralism and dismantling WTO machinery, as referred to by my noble friend Lord Tugendhat. That is what he aims to do and we must frustrate him by being advocates of multilateral agreements across the globe.
I have two final points. First, supporting the WTO also means reforming it, which we have not talked about. Perhaps we will be able to introduce some of these issues in debating the Bill. We should be very clear: the WTO should do more on e-commerce, mutual recognition of standards on an international basis—as President Obama set out to do in 2012, although he did not get very far—and developing the General Agreement on Trade in Services, which it is in our interest to push through in that forum. As my noble friend Lord Tugendhat said, we should make sure that the dispute settlement works because at the moment, that is the one bit of the WTO that everybody has to rely on more than anything else and the Americans are trying to dismantle it.
Secondly, I will not reiterate everything that has been said about trade promotion and export support, but FTAs are only as good as the use we make of them.
Many points have been made by my noble friends Lord Lilley, Lord Horam and Lord Cavendish, and others, about the necessity of supporting export promotion. It is not just about government; it is about industry’s capacity to do it. When I was deputy director-general at the British Chambers of Commerce, we introduced the active exporting scheme and ran the Export Marketing Research Scheme. The trade bodies and the chamber of commerce movement could—and should—come in and support the Government internationally. Look at the Handelskammern in Germany and what they are able to do in support of German industries. I encourage us also, in debating this important and necessary Bill, to talk about how we can develop our international trade policy and export promotion effort.
Lord Hannay of Chiswick (CB)
My Lords, it is a great pleasure to follow the noble Lord, Lord Lansley. It is good news that he is back playing an active role in our debates. I say that all the more so because I agree with a large amount of what he just said, but that is not the only reason. The only point I make on what he said is that I think a link with the CPTPP—the Pacific grouping—is of great importance, but it is much more likely to be achieved by the European Union in a more successful way. That is why I support the idea that we should stay within a customs union and negotiate with that objective.
A great deal of the Bill is highly technical and process-driven. The Minister made an excellent effort to persuade us that that was all that it was about, which is not the case, but those aspects require careful scrutiny, and perhaps amendment in Committee and on Report. I intend to focus my remarks today on the broad political thrust of the Bill, which is the imperative view of the Government that this country must have an independent trade policy outside the EU and its customs union—within which this House voted to remain, I recall, as others have done, by a three-figure majority when the issue was discussed in another context.
The contention of those who supported Brexit in the referendum campaign—it since remains the Government’s view—is that an independent trade policy is absolutely vital and that it will be good news for the United Kingdom. Outside the EU and its customs union, Britain, they say, will emerge on to the sunlit uplands of a free trading world, freed of the shackles of the EU’s trade policy with prosperity assured. Negotiating trade deals around the world would be easy as pie—that is what the Secretary of State for International Trade told us, although his assurances were slightly undermined by the fact that he has never negotiated a trade agreement. If only that picture were true the Government would have a case, but it is not. It is, frankly, false.
First, take the EU’s trade policy. It is, of course, not perfect and it has some protectionist features which need to be changed. That is what the EU was attempting to do in the Doha multilateral trade negotiations and in the TTIP negotiations with the US; the EU was not responsible for the failure of either. When the EU was founded, it did have a pretty protectionist trade policy but, over the decades, that policy has been progressively liberalised, not least by the leadership of a whole succession of British Trade Policy Commissioners: Lord Soames, for whom I worked, Lord Brittan, the noble Lord, Lord Mandelson, and the noble Baroness, Lady Ashton. Britain, as a member state, was at the forefront of that liberalisation campaign with great success. Now, the results of that campaign, in the form of the European Union’s trade policy, are being denigrated, belittled and cast off. Nor is the EU and its trade policy in any way the only important point. After all, we export only about one-third of the amount that Germany does to China. That is not because we are shackled by the EU but because we are not quite as competitive as the Germans. That will not be solved by leaving the EU or by negotiating separate trade agreements.
There is then the still-growing network of bilateral trade deals that are an integral part of the EU’s trade policy and its customs union: most recently the agreement with Japan, but also those with South Korea—where our exports have hugely increased since that agreement came into effect—Turkey, Chile, Colombia, Mexico, the 50 or so African, Caribbean and Pacific associates, and the countries of eastern Europe, the Mediterranean and the Caucasus. There are negotiations now under way with Mercosur, which hopefully will lead to a successful conclusion, and with Australia and New Zealand. Are we going to do better than those deals that are being handed to us on a plate? Will we do more for developing countries than the EU’s “Anything but Arms” policy? I rather doubt it.
How about those sunlit uplands? Well, the sun is not shining up there any more, as President Trump rampages through the international trade commitments that the United States has, mistakenly believing that trade wars are easy to win and that trade between nations needs to be bilaterally balanced. This is the very antithesis of this Government’s trade policy, yet the US seems to be the jewel in the crown when it comes to our negotiating independently. Some hope.
Then there is China, which has negotiated free trade deals such as the one it did with Switzerland, which gave China tariff free access to the Swiss market straightaway and told the Swiss that, with a bit of luck, in 20 years’ time they might get something like that.
Lord Lilley
The noble Lord said in 20 years’ time. Actually, the Swiss deal with China reduces tariffs by two percentage points a year. The high tariffs are 18%, so in nine years they will all be gone. They are already half way through. Where are we, in our membership of the European Union, in the process of getting free trade with China?
Lord Hannay of Chiswick
That remains to be seen, of course. If we were in a customs union, I have no doubt that the issue of freeing up trade between the European Union and China would become a very important point—and, since the Chinese are now being sucked into a trade war with the United States, they might take a rather different view of a free trade agreement with the European Union than they have in the past. I do not know. All I can say is that they are more likely to do so if what they are offered is access to a 500 million single market, with the UK in a customs union with it, rather than what they have at the moment.
Then what will we say to India and Brazil, for example, which undoubtedly will raise with us issues about the visa burden on their students, businessmen and researchers? It is obviously desirable that we should have agreements with Australia and New Zealand, but what will that mean for our producers of sheepmeat and beef, who are already at risk of being struck by the loss of their continental European markets if all does not go well with our negotiations with the EU. What will we say to that?
One day, I hope, when President Trump’s memorial library is being constructed—there will not be many books in it, I imagine—the world will resume the search for multilateral and plurilateral trade agreements to remove tariffs and non-tariff barriers to trade. What role will we play in such negotiations as an independent actor with our own trade policy? I can give noble Lords a clue: a very modest one, is the honest answer. I was a very junior member of the negotiating team in the Kennedy round, which was the last occasion on which the UK operated independently before it joined the European Communities. We were in a much stronger position then than we are now. Our share of world trade was much greater and we had a stronger economy on the whole compared with other people. However, even then, in the 1960s, the deals were cut between the US, Japan and the European Community. In future, it will be between the US, China, the European Union, Japan and India. Of course, we will be there on the margins, our eye glued to the keyhole, saying, “Me, too”, when they reach an agreement, but our role will be that of a watcher and not, as we are at the moment, an actor. So the case for an independent trade policy does not stack up. It is a chimera and a mirage, doomed to disappoint.
Of course, if we were to remain in the customs union, we would need to raise some quite important issues with the EU to ensure that we had a proper consultative role in shaping its trade policy and that any trade deals negotiated by the EU applied fully to all members of the customs union, including the UK, and did not require separate negotiation. But how can we find out whether these possibilities are even faintly viable if we are not ready to ask for them to be put on the table and to discuss what the reaction of the other side would be? Since this would greatly help the problems of Northern Ireland, I suspect that it would be pretty positive.
The other day, I heard a representative of one of the think tanks that supports Brexit and an independent trade policy, the IEA, say, quite clearly, that an independent trade policy is “the only prize” remaining from Brexit. But is it a prize? I very much doubt it.
Lord Elton (Con)
My Lords, your Lordships are weary and so am I, so I shall be short. As far as possible, I shall restrict myself to the structure of the Bill and its purposes, and not the great field of foreign policy and philosophy in which it is being fought out.
I begin with pleasure in congratulating the noble Baroness, Lady Meyer, on a most remarkable maiden speech. I suspect from what she told us that she will bring to this House a bigger measure of both patience and wisdom than most of us are able to offer. I also welcome my noble friend Lady Fairhead to the Front Bench and to her first Bill, an experience in relation to which she has my great sympathies—I remember being in the same situation many years ago. I should also welcome my noble friend Lord Lansley in breaking his silence in such a welcome manner this evening.
The Bill has four functions, all of which are necessary. Our job is to see whether they are effective or can be made more so. In Part 1, the particularly sensitive area seems to be the devolved authorities. I hope that my noble friend the Minister will give us a little more detail than we have had so far. I am interested particularly in the effect of the absence of any Northern Ireland Assembly and how that will bear on proceedings where its existence is assumed in the Bill. I would like to know more also about Scotland’s reluctance to give its approval to the Bill. I realise that it does not have a veto, but, on the other hand, there is a political price to pay if it is not listened to.
On Clause 6, I am happy to rely almost exclusively on the advice of the noble Lord, Lord Kakkar, who is expert in that area.
I am interested also, as is the noble Lord, Lord Kerr of Kinlochard, in the balance between Parliament and Executive as it is affected by Clause 4, which gives Ministers an exemption from parliamentary supervision. Paragraph 46 of the department’s memorandum on delegated powers states:
“There will be textual changes to current agreements that ensure future operability. There could be consolidation of agreements. The power is broad enough to allow implementation of substantial amendments, including new obligations”.
It seems to me that we need to look very carefully at that exemption, and I look forward to my noble friend’s explanation of their necessity.
On Part 2, concerning the TRA, along with the noble Baroness, Lady Falkner of Margravine—I am always glad of an opportunity to agree with somebody in the Liberal Democrat Party—I think we need to look closely at the composition, membership and powers of the TRA.
On HMRC and data, I am no expert on information and my only view is that data is, at the moment, a highly sensitive subject and its control is not entirely understood.
The position from which I start is that I am anxious to improve the Bill, I regard it as necessary and therefore I wholeheartedly support my noble friend on the Front Bench in getting it on to the statute book—if possible, in a slightly better form.
Lord Whitty (Lab)
My Lords, the Minister has been rightly commended for her comprehensive, elegant and precise introduction to the Bill: it was, indeed, a good introduction. However, she did not disguise—indeed, she did not attempt to disguise—that the Bill is very limited in its application and in its relevance to the kind of questions that are being asked out there as to what our future trade position is going to be.
Like many other noble Lords, I have had to absent myself from the Chamber for much of this debate, but I have taken part in two other important, relevant debates. I have been upstairs with your Lordships’ Select Committee, which is finalising its report on customs arrangements. That report will fall on Ministers’ desks, and the rest of our desks, in a few days’ time and it asks a huge number of questions about what the future customs arrangements are going to be, none of which is answered by the Bill.
Then, just now, I was at a reception for the manufacturing sector, for electronics and electrical manufacturers who are asking a lot of detailed questions about how their trade is going to be affected post Brexit, none of which, again, can be answered by the Bill. That is disappointing because, if noble Lords cast their minds back a few months, just post the Lancaster House speech there was an announcement that we were going to have eight Brexit Bills, two of which would be a trade Bill and a customs Bill, which, between them, would describe the whole new golden age of global Britain and its trading place in the world. I fear that this Bill, even taken together with the Bill we considered last week and were not allowed to amend, goes nowhere near giving any answers to the people who are actually doing trade or who wish to trade with us as to what Britain’s position will be.
I will restrain myself, like the noble Lord, Lord Elton, and try to concentrate on what is actually in the Bill, rather than what is not in it. I shall start with the provisions on the rollover of agreements that the EU currently has with third parties. This sounds simple, but it is not a straightforward situation. Not only will we have to get the agreement of those third parties, we will also have to make sure that that the provisions of it do not alienate the EU, and it will also eventually have to be endorsed by the WTO. None of those is straightforward. We heard from my noble friend Lord Grantchester that already there have been objections to the rollover in relation to tariff quotas from Japan—one of the biggest agreements that the EU has, and a new one—and from Chile, and I am sure that other countries will be the same. We know that, in the WTO context, the independent rescheduling of the UK tariffs is being objected to by some of those very people we would expect to be having agreements with: both those third parties that are in an arrangement with the EU, such as Japan, and others such as Brazil and Australia. This is not a straightforward arrangement, and the fact that the Bill provides for the legal implementation of it is all very well and good but it does not actually reflect the trading and negotiating reality.
My second point is rather different. The Bill does not at all address the wider issues of trade negotiations. Clause 1 signs us up to the Agreement on Government Procurement, which is a good thing, in principle, and straightforward. But the other issues that exist in world trade agreements these days are more value laden and have actually caused major agreements such as TTIP to fall flat on their face in the end. These issues include: the rights of workers and ILO conventions; human rights generally; how we implement and reflect within trade agreements the Paris commitments on climate change; food standards; animal welfare; the protection of endangered species—we were debating the Ivory Bill only this week; and the protection of our public services. No doubt the noble Lord, Lord Cavendish, and others will say that the raising of these issues is part of the protectionist mode of the EU and actually you should leave all these extraneous things out of trade agreements, but that is not the politics of trade these days—or of our country. We have developed those things through the EU and they should find an important place in any modern agreement. Yet the Bill, which purports to be the basis of a new determinant for trade policy, does not reflect that at all.
Another area that is only partially touched on in the Bill—the noble Lord, Lord Kakkar, referred to it earlier and it was the subject of an amendment that was carried in another place against the wishes of the Government—is the reference to the medicines agency and the medicines network. I hope that we can build positively on the amendment, but it ignores the fact that even in the transition period, and certainly beyond it, the UK’s future association with so many agencies of the EU is not addressed anywhere in the Bill, not even in relation to the rollover treaties. This is vital for so many areas, but the Bill makes no mention even of those areas that the Prime Minister herself has picked out, such as aviation and chemicals, and our future relationship with those agencies, let alone the food standards and animal welfare agencies, which are vital to both our trade and our agricultural sector.
Clause 4 provides for the Trade Remedies Authority. I welcome the commitment to establishing that early on. My sub-committee of the EU Select Committee did a report on state aid post Brexit in which we recognised the need to establish such a body. I am a bit worried about how its composition is described. Although I do agree on occasion with the noble Baroness, Lady Neville-Rolfe, I rather take the opposite view that leaving the appointments entirely to the Secretary of State without any constraint regarding the sectors, concerns and expertise that should be covered by that agency is not helpful to its positive development.
It was also clear in our report—the noble Lord, Lord Lansley, was already a member of my committee at that point—that the Trade Remedies Authority will deal with only one aspect of future trading problems relating to state aid and procurement. Where there are problems such as dumping, unfair procurement practices or unfair state aid, it is not only the trading partner’s behaviour you have to address but your own. How we are going to deal with the provisions of state aid within our own country in the light of Brexit and the different roles of local authorities and public bodies is an important part of it. That role will be handed to the CMA. It is the congruent part of how we are going to approach state aid in our trade arrangements, yet the role and powers of the CMA are not in the Bill; nor, as far as I am aware, have they yet been spelled out by the Government in any other piece of legislation.
I will touch briefly on the devolved Administrations. The early reference to the devolved Administrations is more inhibiting than empowering. But in relation to state aid, you also have to take account of the role of the devolved Administrations, both in how they implement actions against other countries and how we administer state aid internally within the UK. None of that is covered by the Bill.
Limited though the Bill is, it is too limited and it needs to address some of these problems. I hope that the Minister and her colleagues can address them in the course of debates on the Bill, because there will be amendments brought forward and questions answered. She said in her opening remarks that the Bill was about detailed practicalities and technicalities. My colleagues—who I have left having a drink downstairs—from the electronic and electrical manufacturers of Europe, as well as of Britain, want to know some of the details of those practicalities. This Bill will not tell them.
I end on the same inadequacy with which I ended my remarks on the other Bill last week: the inadequacy of the provision for parliamentary scrutiny. Although this Bill provides for a report to Parliament, and for the statutory instruments to follow, that is at the end of the process when the Government have negotiated with other parties, whether those are rollover countries or others. We need a system of trade scrutiny within this Parliament at least equivalent to that which the European Parliament has had on our behalf for the last 40 years, and that which Australia, Canada and the United States have within their own parliamentary systems. This House and this mother of Parliaments should insist on nothing less.
Lord True (Con)
My Lords, it is a pleasure yet again to follow the noble Lord, Lord Whitty. I like to think it is because we are under T and W but perhaps it is because I am rising from the graveyard to fill the final Back-Bench slot in what has been an excellent debate. I am sorry that my noble friend Lady Meyer is not here but I think we all agree that it was graced by her moving and brilliant maiden speech.
I support the Bill and congratulate my noble friend the Minister on the way in which she introduced it. The Bill is needed to maintain smooth trading arrangements for this country outside the EU, which is where the British people have voted to be. We should get on with it. Yes, of course scrutiny and revision are our job but we should not be using them as a stage for the kind of wrecking tactics that failed in the other place, by tacking on a customs union or a second referendum—although having heard some of the contributions today, I rather fear that we are heading that way.
I would like to highlight one salient truth of the Brexit debate: the decisive, and I would submit shameful, role of the Labour Party in the fight to subvert the referendum verdict. At the last election, Labour promised its electors in the north of England and the Midlands that it would honour the referendum result: that we would come out of the single market, have control of immigration, end EU interference in our laws and leave the customs union. Since then, in vote after vote, Labour has dishonoured the promises it gave the British people. It signalled yet again today from the Front Bench that it wants to use this Bill to keep Britain in the customs union which it promised to take us out of. It has provided the compliant troops in both Houses for the schemes and devices of those who wish to reverse the referendum result. In this, as in so much else, Mr Corbyn’s Labour Party simply cannot be trusted and everyone who voted for Brexit should mark this fact. There would have been no problem in any vote to implement Brexit in either House if Labour had not voted to stop it. A factional thirst for power has consistently been put before the democratic duty not to renege on promises given to the British people.
For all the words of gloom we have heard today—and we have heard many—I submit that on Brexit, we have nothing to fear but fear itself. Project Fear proved a total failure. Do your Lordships remember threats to pensions, the warnings of slumps, mass unemployment and the flight of capital from the City? People saw through it; Project Fear was fantasy. Now, in place of Project Fear, outside this House, we have Project Panic: claims that after 29 March planes will stop flying, trade will halt, food supplies will run out and the Army will be on the streets—fantasy, my Lords. In whose interest is it exactly to stop trade, the flow of French food or German car parts into the UK? Mr Macron—sorry, should I call him “Monsieur”, or “Monsieur Le Président”? If French vegetables were rotting in Calais, Monsieur Le Président would soon hear the rumbles of French farmers’ tractors coming down the Champs-Élysées. It will not happen under any model for Brexit unless a malevolent hand wills it to happen.
Last week, sadly, I attended the funeral of my only brother, who was a victim of an unpleasant cancer. Recently some of the authors of Project Panic have talked of cancer victims dying because supplies of medicines and isotopes would be blocked after 29 March. Who precisely would block them? Do those who spin these kinds of things have any conception of the anguish they cause patients and their families? Do they care? Such pedlars of panic, in my most generous estimation, are jackals.
I repeat: we have nothing to fear but fear itself. Outside the EU, Britain can be the country that I demonstrated for as a young man: a trading nation open to the world, confident in its future, competitive, innovative, job-creating, a champion of free trade and a beacon to the world of civility, culture and common sense.
Today we have heard several more attacks on those who argue for Brexit; indeed, we were described as “denizens of another world”—and that was one of the kindest things said. We have heard many pleas that even now, we must stay in the EU. I must respond to that. I declare an interest as a part-time resident of Italy for 40 years—and one, frankly, without an ounce of fear that even under a WTO deal, the carabinieri would come knocking at my door. That is another fantasy of Project Fear.
When in Italy, I contemplate the catastrophic failure of the European project and the euro project that was piled on top of the previously widely accepted EEC. I see 600,000 to 700,000 illegal immigrants, most of them fit young men with iPhones and designer clothes, many begging in the streets from Italians who have lost their entire life’s work in the 2016 earthquake. I see 31% of young people without a job. I see a country that has barely grown since it entered the euro. I see a country that has lost 16% of its industrial production since it entered the euro. I see a country where 158,000 small businesses have closed in the last eight years. That is the monstrous toll of the amoral euro project, not just in Italy but across the Mediterranean.
I see a country that, when it votes in politicians who want to control immigration and change some of these things, first faces a failed coup to impose a Government of pro-EU austerity technocrats and then, when they are seen off, is told by a German EU Commissioner, “The markets will teach Italians how to vote”. That is the behaviour and the language not of partners but of masters.
I see a country where the EU promises to help with illegal immigration but delivers nothing but lectures, where criticism of the Commission is declared inadmissible and Monsieur Le Président turns back 50,000 immigrants at the French border and fraternally declares himself the principal opponent of the elected Government of a neighbouring country. I see a country where politicians who step outside the tent of the overweening EU elite and talk about problems that really confront ordinary people are condemned as extremists or populists. The problem that some cannot stomach in Italy, Austria, Hungary, Poland or Britain is that these so-called populists are popular and Brussels is not. Tens of millions of people voted for them. Precisely who elected the Brussels elite, or, come to that—I hate to say it—their useful allies in this House? Whatever else we think in this debate, we should dispose of the canard that, inside the EU, all is joy and strength and outside is doom and despair. Things may well be well, as we heard, in Denmark, but there is something rotten in the state of the European Union.
We face a historic choice between a free and fast-moving economy in a fast-changing world, or taking our rulebook from an organisation where what is once agreed can never be changed and anything new takes months or years to agree. It is a choice between free trade and lower prices, and tracking the part of the world which has seen the lowest growth in the last generation. A clear way forward was once offered—a free trade deal on the Canada model. I wish it had been grasped then and I hope it will be pursued now. Whatever route we choose, we need this Bill, which my noble friend has so excellently presented. We should speed it on its way, fast.
Lord Purvis of Tweed
My Lords, with all the travails afflicting Italy, they should be relieved that they can rely on the sunny optimism of the noble Lord, Lord True, to see them through in the future. I am perhaps in the same pickle as the noble Lord, Lord Browne of Ladyton, who could not find any common cause with his previous speaker, the noble Lord, Lord Hamilton. I shall take a trick out of his book and find something positive to say by congratulating the noble Baroness, Lady Meyer, on a wonderful maiden speech. I see she is back in her place.
It seemed easier a year ago, when Liam Fox suggested at the Conservative Party conference—reportedly to cheers from activists—that it would be a breeze to get all the existing EU trade agreements in place before Brexit in March. He said,
“believe me, we will have up to 40 ready for one second after midnight in March 2019”.
The Trade Secretary added:
“All these faint hearts saying we cannot do it—it’s absolute rubbish”.
I have never considered the noble Lord, Lord Tugendhat, to be a faint heart, but the term he used was “miraculous”. I think that that is more accurate. Perhaps Dr Fox, on the Marr programme 10 days ago, showed himself a little faint-hearted. When asked if he stood by what he said then, he replied:
“That remains our aim. Of course a lot of countries are waiting to see exactly what that relationship will be with the European Union”.
Well, they are not the only ones. However, the noble Lord, Lord Callanan, seemed to be back on track for the second-after-midnight position during Questions today.
As the noble Lord, Lord Browne, and others have said in this debate, we are expecting the Minister, in her summing up, to clarify how many countries have confirmed, in writing, to the UK Government that there is agreement in principle to ratify agreements before March 2019, and on what terms. If they have not, what are they asking of us? This information should be with the Government. If it is not, it is extremely alarming. If it is, the Government need to tell the House and the best opportunity would be for the Minister to do so when she sums up.
Time is nearly up. Businesses cannot wait any longer. I told the House before the Recess that our pharmaceutical industry was starting to stockpile because there was no clarity on what customs arrangements would be. As the industry has said, it is estimated to take 10 years for the technological side of any new customs arrangements to be in place and operational. The Government have rolled over and rubbed out one of their previous red lines, of being distinct and separate from the European Medicines Agency, thereby ultimately now accepting the jurisdiction of the European Court of Justice by taking its rules and having no say in the making of them. Irrationally, they cannot see the case for other regulatory bodies critical to UK trade. As the noble Lord, Lord Whitty, asked, why is this the case? What is the Government’s position as to why they are not in this Bill?
The trade association EURIS, which represents thousands of British businesses and £148 billion of UK trade, together with the independent UK Trade Policy Observatory, has published a survey just today, showing that 83% of British industrial product manufacturers support continued regulatory alignment in order to remain competitive in a global market. Respondents overwhelmingly say that they see no benefit in moving away from the EU regulatory system for industrial and manufactured products. The report states:
“UK companies told the survey that their supply chains have already been disrupted by post-referendum currency changes and that EU27 companies have started to select non-UK suppliers amidst the ongoing uncertainty of post-Brexit arrangements”.
It added:
“It is not a choice of exporting to Europe or the rest of the world. If we become less competitive in the EU we will be less competitive in other international markets. The UK Government’s target to develop stronger trading relationships with other non-EU countries is a positive move, but this can only be achieved if we maintain a strong alignment with EU regulations and supply chains”.
That is an industry response to the position of the noble Lord, Lord Lilley, who is not in his place for the winding-up speeches. Perhaps, as he did this afternoon, he has nipped out to be in Committee Room 9 to share a desk with Boris Johnson, if the BBC reporting is accurate. It is telling that one of the first to speak up for the Government left this debate to be with Jacob Rees-Mogg and Boris Johnson, when they said this afternoon that the Chequers position, which the Minister supports, is now worse than the status quo of staying in the European Union. I wonder what the Minister’s response to that will be.
The Bill is all about disruption, or the futile attempts to prevent or minimise it. The UK has a trading relationship or is in discussion for one, over and above WTO base rules, with 143 countries. In addition to the single market with the EU 27, we have an FTA with 36 countries, with a further 46 where the agreement is provisionally applied. Agreements with eight countries are pending ratification, and five are being updated. With a further 21 countries, negotiations are ongoing or paused, and we have had a role in all those discussions.
This cannot possibly, by any stretch of the imagination, be called a cut-and-paste job simply to put it into UK law. For the noble Lord, Lord Lilley, to indicate that that would be a straightforward process is a flight of fantasy. The agreements in place are also indefinite. I hope that the Minister will be able to answer this, too. Are we asking them to ratify an indefinite deal but also telling them that it will last for only three years unless we renew it? Can she confirm that she has stated that to all of our partners? What of those likely to mature into force after next March but during the implementation period?
It is now incumbent on the Government to publish what they have told each of those countries and let Parliament know. If we rollover those deals and then deviate from them—because we will be part of a common rulebook, as is the Government’s position, but from which the Government say we will be able to deviate—we will, by definition, deviate from all the agreements that we will have rolled over because we are adopting the existing EPA or FTA components. Parliament cannot possibly approve any of those agreements with confidence when we do not know what our customs or non-tariff regulations will be.
I take just one example: food and plant health imports from South Africa, where the Government say that we are having constructive discussions. If we are part of a common rulebook, importing a vegetable product from South Africa requires 13 sets of regulations out of 43, from warehousing to labelling and exports. All are under the jurisdiction of the CJEU, which will define whether they are being met. A third country will go to that court if it thinks that we are not satisfying those criteria. I hope that the Government can be clear on the relationship between their position on a common rulebook and their view on rolling over the agreements.
Some of the EPAs which we have said we shall be rolling over include ongoing discussions on services. Are we also committed to run a parallel process on those services, because they are currently part of the discussion that the EU is having on them? The SADC EPA agreement includes a joint council and proposals for structures and a framework. What is the Government’s position on rollover agreements and joint framework arrangements to discuss them?
A government statement recently promoted the rollover for the South African customs union agreement, representing 0.7% of all UK trade—less than one-quarter of what we export to Belgium. No. 10 spun that as the first new trade agreement that is now going to be in place for after Brexit. However, the SACU Ministers said that they welcomed the UK’s intention to avoid disruption for its trading partners as it withdraws from the European Union. If you study the fine print, it states that we are committed to having the agreement in place in the event of no deal. It is not even necessarily going to be in place if there is an agreement on the withdrawal.
This leads on to why Parliament needs to have an enhanced position in the scrutiny of it. Under the existing EU arrangements, a mandate would have been sought and secured by the Commission from the Council to enter any of these discussions and then published for Parliament to see. A public scoping exercise would have been carried out and published and Parliament would have been able to see that too. This Bill and the Government’s proposals, not just for the rollover agreements but also for other trade agreements, will afford this Parliament fewer opportunities to provide scrutiny than the European Parliament currently does to the Commission and the Council.
In her opening remarks, the Minister said that the Bill was about transparency and heralded consultation. As preparation for this debate, I was enthused to go on to the DIT website and complete the consultation for the United States. I filled it in as an individual business from Scotland, potentially concerned about the impact there may be for Scottish farmers on beef products et cetera. I was asked my age and ethnicity and where I lived; that was all fine. The first question was:
“What concerns, if any, do you have about a free trade agreement (or related trade talks) with the United States, and why?”
I filled in a simple response. It then asked:
“Which of these areas of a free trade agreement best describe the concerns that you have outlined above?”
I clicked: “Products. Standards, regulation and certification”, because of the concerns, mentioned by other noble Lords, about animal products, environmental regulations, health and safety et cetera. In order to provide feedback, as the Minister said, I was expecting to see what the current discussions were, what the terms were, and what was being outlined with America. What turned out to be the final question then came up, asking:
“Is there anything else that you would want to say about the UK’s future trade relationship with the United States?”
That was it. I do not think that that is sufficient consultation with the public, so I am submitting my comments in Hansard instead.
Why does this matter? It matters because one of the key elements of the discussions with the United States and with Europe is the equivalence of how we see and interpret these regulations. They are core to any of the discussions. Do we consider equivalence with the European Union, as the White Paper has said, or see equivalence in the United States’ regulations, as it has asked us to do? As the noble Baronesses, Lady McIntosh and Lady Jones, said, we will not be able to do both.
On issues concerning devolution, there needs to be much greater clarity—in paragraph 3 of Schedule 1 and paragraph 9 of Schedule 2—on devolved Ministers having to consult Ministers of the Crown. What happens if Ministers of the Crown disagree? When there are joint actions with devolved Administrations, UK Ministers cannot act alone without the approval of devolved Ministers. What if they refuse? We need to know more about the Government’s intentions for the operation of a UK single market. You cannot separate that from any of the trade agreements either.
The noble Baroness, Lady Neville-Rolfe, may have built up her hopes about Liam Fox stating that we can rely on passing this Bill because any future trade agreements will require primary legislation, so Parliament will have a much greater voice. I will quote from what Dr Fox actually told the House of Commons. He said that the Government would,
“bring forward a bespoke piece of primary legislation when required for each new future trade agreement that requires changes to legislation and where there are no existing powers”.—[Official Report, Commons, 16/7/18; col. 42.]
Therefore, by implication, if a new trade agreement does not need changes to legislation, or if those changes can be made using existing powers, Parliament is bypassed. That is simply not acceptable. This is why the International Chamber of Commerce told a meeting that I chaired last week that the Government are proposing a 19th-century approach for approving trade agreements in a 21st-century trading environment. That is why the Bill will have to be scrutinised and, most likely, amended in Committee.
A trade policy for the 21st century for a truly global Britain would be based on zero tariffs to our largest and nearest trading partners and be an open market to those who share our high values; based on combined regulations where we have a say in how they are made and shape them for the economic and new trade challenges and opportunities of the future, such as e-commerce and technology; and based on principles of openness and fairness, especially for the least-developed countries that we trade with. This was at the heart of the commission that I chaired with the Nigerian Trade Minister for the All-Party Group on Trade Out of Poverty. A truly global Britain would use that group of trade partners to help us negotiate free trade with partners further afield, with no trading cost to our businesses, to take advantage of the growth potential of non-EU countries. Therefore, a truly global Britain would see that the Bill necessarily has to be changed in order ultimately for us to meet those kinds of “Global Britain” requirements—which is to continue to be part of the European Union customs union and, if necessary, to give the British people the option of the right to make the decision that we remain a truly global Britain in a customs union based upon open principles, transparency and accountability. That is sorely lacking in what is currently offered.
Lord Stevenson of Balmacara (Lab)
My Lords, I thank the Minister for the many meetings and discussions we have had in the rather extended period while we waited for the Bill to come into your Lordships’ House. We have learned a lot about each other’s positions, as was reflected by her speech today—rather annoyingly, because she anticipated some of the things that I might have said later. But that has been useful in building up a relationship, particularly as she comes new to the job of taking a Bill through the House. I also congratulate her, as other noble Lords have, on the clarity of her introduction; it is rare to have such a clear exposition of a Bill, and it was helpful to the debate that followed.
I join other noble Lords in congratulating the noble Baroness, Lady Meyer, on her maiden speech. She shared with us some dark and difficult moments on a long journey of great interest, and I look forward to hearing more of her contributions as she builds on her career in this House as well as on her previous life.
This has been a good debate, except, as was picked up by the noble Lord, Lord Purvis, for a slight deterioration towards the end of the speeches from the Back Benches. I was sorry to hear that. I do not think that we earned any of the disapprobation levelled at us by the noble Lord, Lord True, and it did not seem to fit in with the generally engaged debate and discussions we have had. Nevertheless, he has the right to make his own speeches as he wishes, and we must learn from them and move forward as best we can. But this debate has been enhanced by contributions from former Secretaries of State, former Ministers and officials who have worked in trade, and envoys who have had experience in the real world; they have brought their experience to bear in the comments they made, and we have all learned a little from that.
The Minister talked warmly about this House’s skills and ability to scrutinise Bills, and I share her view on that. It is therefore something of a surprise, as the noble Lord, Lord Fox, noted in his introductory speech, that while we know about the business through to 21 October 2018, no dates have yet been suggested for Committee. One wonders whether in fact it will proceed; at the present rate, it is unlikely to be ready for Royal Assent until perhaps the end of December 2018, which seems rather late and does not quite fit with the urgency that was expressed about certain aspects of it.
The Minister tried to persuade us that this was not a Brexit Bill and that it raised no issues about the timing or the content of any withdrawal agreement that might be emerging from the current negotiations. But the House, by a ratio of about 4:1, as I made it, has taken a contrary view. Indeed, thanks to the interesting contribution by the noble Lord, Lord Cooper of Windrush, and other noble Lords, I feel much better informed about where we are in the post-Chequers situation. Indeed—although it might have been concealed by my strictly temporary face covering—I allowed myself a small smile of satisfaction at the thought that we might as a country be coming to our collective senses and finding a way through the muddle we are now in. The Government might wish to reflect on why they have misjudged the view of the House on this issue. I suggest that there is more than a grain of truth in the comments made by my noble friend Lord Liddle. His assessment was that it stemmed from the feeling that the Government’s current position on Brexit, and on trade in particular, is economically illiterate and quite probably politically unsustainable.
Let us roll back for a moment and use the benefit of history to review where we are. Many Members of your Lordships’ House will remember that the Cobden-Chevalier Treaty was signed with France in 1860, marking the world’s first free trade agreement. A Back-Bench supporter of the treaty told the House of Commons that it would both advance the prosperity of our country and benefit peace and happiness. His point, of course, was that trade is a tool, not limited to promoting self-interest but also uniting and shaping our world. “Prescient” is a great word for that; he certainly seemed to know what was coming.
In the following century and a half, no agreement has in my view better demonstrated this principle than the European Union. It has brought nations together into sustained peace and, at the same time, offered and delivered economic prosperity: security, peace and prosperity are a pretty potent mix. Yet, as the UK’s departure from the EU looms, our Government are preparing for a trade policy that shies away from that proven principle. They do not welcome calls to allow civic society, trade bodies, trade unions and consumers to feed into negotiations; they have not worked out how to engage properly with the devolved Administrations, the English regions and our great cities.
Ministers are trying to claim that this Bill is nothing more than a technical measure. But the questions raised today go far further, getting to the heart of what we are as a nation and how we engage with the world. What will be the basis of our trade policy? Who will operate it and how will it be agreed? How will it impact on ordinary people in the UK and outside?
Assuming that there will be a Committee stage, we will be laying amendments in the hope of improving this Bill. The way the government procurement agreement will work in practice, how to ensure protection for our high-quality services, labour and environmental standards, and how we will preserve our human rights protections must all be tested and made clearer in the Bill. At the same time, we have to make sure that UK firms can compete for the procurement on offer in signatory countries on a fair and equitable basis.
We need to strengthen the independence and integrity of the TRA, the Trade Remedies Authority. The model here is surely the CMA and the Information Commissioner’s Office, or even Ofcom. It is not, and certainly cannot be, simply another non-departmental public body under the control—or under the thumb, perhaps—of the Secretary of State; it needs resources to be guaranteed on the face of the Bill.
Recognising the calls from all around the UK for a proper, open, transparent and inclusive system, under the control of Parliament but engaging with the devolved Administrations, we need a system, perhaps a Joint Committee of both Houses, for setting up a trade policy, agreeing a mandate, receiving information on the progress of free trade agreements, and making recommendations to Parliament, for Parliament to decide, on whether or not to accept the proposed deal.
The noble Lord, Lord Whitty, was right to spell out the many issues that now need to be included in a modern free trade agreement. This sparks the thought that we are talking at present about rolling over, without question or scrutiny, something like 40 free trade agreements. Some could happen during a period when these issues are not at the forefront of negotiations, or they could fail, as the recent CETA agreement does, to do justice to human rights or other issues; surely this makes the case for proper scrutiny. The Government have begun to move on this issue, but they need to go much further, including continuation deals as well as any new ones. We need to spend some time on tariff rate quotas, as mentioned by my noble friend Lord Grantchester. GIs were raised, as were state aid rules and, more generally, how we protect UK businesses and raise productivity in the United Kingdom as a result of all this work, which was a key point raised by many people.
Finally, we need to return to the question of a customs union. I agree, for the reasons given by the noble Lord, Lord Lansley, with the argument for looking again at this. I add one additional point: there are very few successful customs unions in the world, and very few with the depth, breadth and strength of the EU. I think the evidence is there to make it absolutely clear that there is no remotely realistic scenario under which businesses in the UK outside such a customs union would be in a better trading position than if the UK stays inside. Our businesses will suffer outside a customs union and it will be far more difficult for them to sell their goods abroad.
The noble Baroness, Lady Neville-Rolfe, made the point clearly that trade is the way to prosperity. We have to make sure that, whatever we do, laser like, we focus on that. Put simply, a stand-alone UK is extremely unlikely to secure a more effective trade deal than one struck while we are within the EU. Whether or not we have zero tariffs, non-tariff barriers to trade and their impact on our services—the golden egg of our economy —will destroy the UK economy and reduce living standards. I look forward to the debates that are to follow.
Baroness Fairhead
My Lords, I am grateful for the insightful contributions from across the whole House to this evening’s excellent and wide-ranging debate. We are fortunate to have heard so many well-articulated, informed and expert contributions from noble Lords with considerable interest in and experience of trade issues, including my noble friends Lord Lilley, Lord Tugendhat, Lord Cavendish of Furness, Lord Trenchard, Lord Lansley, Lord Horam and Lady Neville-Rolfe. I loved the point that customers need to want to buy what we make or buy our services.
The debate was also well informed by our trade envoys, my noble friends Lord Risby and Lord Astor of Hever. We are well served by trade envoys across this House. The noble Viscount, Lord Waverley, focused in particular on services, and the noble Lord, Lord Kerr of Kinlochard, has extensive knowledge of this area. This considerable experience will be invaluable in helping us to put in place an effective independent trade policy after we leave the EU. I also thank the noble Lords, Lord Stevenson of Balmacara and Lord Purvis of Tweed, for the very active engagement that we had before this debate.
I confess that I join the horde of instant admirers of my noble friend Lady Meyer, and I am delighted to welcome her. She made an exceptional and utterly compelling maiden speech, and I have no doubt that this House will benefit greatly from her unique experience, her vibrancy and her tireless work against injustice. I am grateful for her recognition of the importance of the Bill and for supporting its speedy passage—and I loved her assertion that she is a true Brit and a true European.
I am pleased to have heard support for the Bill from a number of other noble Lords, including the noble Baroness, Lady Falkner of Margravine, and the noble Lord, Lord Butler of Brockwell. I am grateful also to my noble friends Lady Hooper, Lord Astor of Hever, Lord Cavendish of Furness, Lord Lansley, Lord Elton and Lord True for their support.
A number of issues have been raised in this thoughtful debate and I will try to cover as many as I can. I may not be able to respond to each point, but of course my door is open.
I am aware that many noble Lords hold strong views about the wider Brexit issues. As I mentioned in my opening remarks, that is not for this Bill, so I will try to focus primarily on your Lordships’ questions that have direct application to the Bill, and I will put them in the following blocks: continuity; the GPA; readiness for no deal; standards, including on medicines; devolution; the TRA; the World Trade Organization; and the Northern Ireland border situation.
The Bill is about providing continuity. That is our overriding objective and clear ambition, and I welcome the support expressed by many noble Lords for the importance of maintaining the effects of the agreements which we currently benefit from as a member of the EU. Almost no one who contributed to the International Trade Committee’s inquiry into continuity suggested that that objective was wrong. I also welcome the suggestion from my noble friend Lady McIntosh of Pickering about the practices in Denmark. I promise to pick those up with her at an early stage.
As well as having the legal power to provide for the continuity of existing agreements, we must also agree to do so with our trading partners. This point was raised by several noble Lords, including the noble Lords, Lord Grantchester, Lord Browne of Ladyton and Lord Fox, as well as my noble friend Lord Tugendhat. The Government’s aim is supported by our partner countries, whose own businesses and people will benefit from keeping the arrangements in place. We have had positive discussions with our trading partners about how best to continue these agreements. That is why we agreed that our continuity programme is a technical exercise, not an opportunity to renegotiate terms.
Of course, it is not surprising that some can see ways in which the agreements might be improved when we are no longer a member of the EU. But our partner countries agree with us that it makes practical sense, in the first place, to provide continuity. The negotiations are in different phases, but I can reassure the noble Lord, Lord Fox, and the noble Lord, Lord Browne of Ladyton, who raised concerns. One example is Canada, which has agreed that our bilateral trade and investment relationship will continue to go from strength to strength, has welcomed the approach to provide continuity during the implementation period and envisages a swift transition to a new bilateral arrangement once the implementation period has passed.
We are confident of securing continuity during the implementation period, under the terms of the draft withdrawal agreement. However, we of course continue to prepare across government—this is a cross-government initiative, with the FCO, DIT and DfID all working on these agreements—for a range of possible scenarios to maintain continuity, including one in which we do not reach an agreement with the EU on withdrawal.
Many noble Lords, including the noble Baroness, Lady Kramer, the noble Lord, Lord Liddle, and my noble friend Lady McIntosh of Pickering, raised the important area of rules of origin. In the debate today we have heard many detailed points. Rules of origin are a vital and very complex part of most trade agreements. Noble Lords raised detailed, technical questions that are difficult to cover fully in this debate.
We are, however, confident that we will be able to put in place provisions relating to rules of origin in our continuity agreements. They will seek to achieve maximum continuity for exporters in the UK and in our partner countries, who will continue to benefit from preferential trading terms. During the implementation period we will operate as if we were in the EU. The rules of origin in each agreement are a matter for agreement between the parties, including the EU and third countries. A number of noble Lords talked about diagonal accumulation, whereby we act as if we were part of the EU.
On a point raised by the noble Baroness, Lady Kramer, on rules of origin—
Lord Liddle
Is diagonal accumulation envisaged as applying during the implementation period, or as continuing after the implementation period? And what is the basis for the Minister’s confidence that our trading partners will agree to it?
Baroness Fairhead
Clearly, this is subject to negotiation. During the implementation period we will act as if we were in the EU and be treated as such. Diagonal accumulation is about agreeing with a third country that it will accept the UK beyond the implementation period. That was the point about rules of origin raised by the noble Baroness, Lady Kramer. I am happy to reassure noble Lords that it is common in trade agreements for the signatory countries to agree to allow accumulation of content with other countries. The approval of those other countries is not required, so the EU does not have a veto over what we can agree with our partner countries.
The subject of geographical indications, GIs, was raised by the noble Lord, Lord Browne of Ladyton, and the noble Lord, Lord Liddle. I can again reassure the House that the UK will be establishing its own geographical indications scheme after exit, through the European Union (Withdrawal) Act 2018. This will be in line with, and indeed above, the requirements of the WTO agreement on trade-related aspects of intellectual property. I appreciate how important Scotch whisky and GIs are to Scotland. The new framework will provide a clear and simple set of rules and continuous protection for geographical indications in the UK.
Lord Liddle