Taxation (Cross-border Trade) Bill (Fifth sitting)
Tuesday 30th January 2018
(6 years, 9 months ago)
Public Bill CommitteesRead Full debate Taxation (Cross-border Trade) Act 2018 View all Taxation (Cross-border Trade) Act 2018 Debates 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: 8 / 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.
Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
I beg to move amendment 137, in clause 13, page 9, line 4, leave out “public notice” and insert “regulations”.
This amendment, together with Amendments 138 and 139, makes the power to give effect to an accepted recommendation of the TRA exercisable by regulations rather than public notice.
The Chair
With this it will be convenient to discuss the following:
Amendment 138, in clause 13, page 9, line 8, leave out “public notice” and insert “regulations”.
See explanatory statement for amendment 137.
Amendment 139, in clause 13, page 9, line 17, leave out “public notice” and insert “regulations”.
See explanatory statement for amendment 137.
Jonathan Reynolds
Good morning, Ms Buck. It is a pleasure to begin the second week of our Committee’s consideration of the Bill.
The amendments, like many that the Opposition have tabled, concern the democratic deficit in the Bill. As we have covered in numerous evidence sessions and in our discussions so far, the Bill is far too reliant on secondary legislation. The scrutiny of Delegated Legislation Committees—especially those that consider instruments laid according to the negative procedure, as the majority will be—is insufficient for taxation matters of such potential magnitude. Parliament will have the option to raise objections to the instruments, but they will not be debated on the Floor of the House as a matter of course.
The amendments are important because the Bill introduces an even more troubling concept: that of making law by public notice. After Second Reading earlier this month, the House of Lords Delegated Powers and Regulatory Reform Committee published a report that probed the most worrying aspects in detail. The report emphasises that the concept of public notice, on which the Bill is heavily reliant, is effectively a modern form of rule by proclamation that removes the opportunity for parliamentary scrutiny. It states:
“For Ministers and others to make law by ‘public notice’, without any recourse to Parliament, is highly unusual and such provisions should attract strict surveillance by Parliament.”
It also notes that
“the Treasury’s Delegated Powers Memorandum says that such notices will only make provision that is purely technical or administrative in nature. Nonetheless, clause 32(9) of the Bill allows anything that can be done under public notice to be done by regulations, implicitly acknowledging the importance of things done by public notice.”
It identifies the Bill as a throwback to the Statute of Proclamations 1539, which
“gave proclamations the force of statute law…it was repealed in 1547 after the death of Henry VIII”.
We should all be grateful for the institutional memory of the House of Lords.
Equally problematic are the mechanics by which public notice takes place. As the Delegated Powers and Regulatory Reform Committee emphasises, under clause 37(5) the only qualification for public notice is that the person who issues it has selected a channel that they consider appropriate, but a definition of “appropriate” is absent from the Bill. Public notice could therefore mean anything from a full-page advert in the Financial Times to a small ad in a trade journal or perhaps even a tweet. Clause 24 permits Her Majesty’s Revenue and Customs to establish a system for making rulings to determine the customs code and the place of origin of particular goods, both of which have an impact on the duty. Other rulings could affect the rights and liabilities of an individual.
The Delegated Powers and Regulatory Reform Committee recommends
“the creation of a generally applicable system for making determinations which are capable of affecting an individual’s legal position should ordinarily be dealt with by legislation, subject to scrutiny by Parliament, rather than by public notice without any such scrutiny”—
checks and balances. The Opposition agree wholeheartedly —hence our amendments.
The Government’s manoeuvres are deeply concerning. We would be failing in our duty of scrutiny if we did not step in to raise our anxieties about how powers of proclamation may be used. We are well aware of the volume of new legislation that needs to be produced to create and implement a new customs code, and of the temptation to create or take advantage of constitutional shortcuts to facilitate the process. However, protecting the rights of the individual must come first. Where matters of taxation are concerned, the parliamentary process is usually more rigorous with respect to the reasons for setting the duty.
As I have already said, the secondary legislation process is not optimal, and we believe that the balance between primary and secondary legislation in the Bill is unsound. However, using delegated legislation for these matters instead of creating regulations by public notice would surely be the least-worst option. It would allow for a bare minimum of parliamentary involvement and oversight of new tax and customs law. Even the negative procedure gives Parliament the option to reject a statutory instrument, although no formal debate takes place. Where possible, more significant matters should surely be considered via the affirmative procedure, so that at least there would be the basis for debate.
The Opposition believe that, without such debate, we will be at risk of setting a dangerous precedent that allows the ruling Executive to make regulation by public notice as it pleases, potentially even beyond the scope of the Bill. Therefore I call upon all members of the Committee to support the amendment, to ensure that we can continue to perform our vital role providing checks and balances in the structure of taxation and customs law in the UK.
Kirsty Blackman (Aberdeen North) (SNP)
Thank you for the opportunity to speak and for chairing the meeting, Ms Buck. I would like to speak briefly around the amendments. One of my earliest questions about the Bill was: what is a public notice and how does one justify that it has been made sufficiently public? The Opposition raised that case clearly. On the definition of public notice and the fact that the person making the public notice has to make that judgment call, particularly in relation to clause 13, which concerns the dumping of goods, foreign subsidies and increases in imports, and given that the UK has not had provision to make regulations and rules, it seems sensible to say that a public notice is not the best way. Parliament should have some say. We have raised concerns previously that, although Brexit is apparently about taking back control, it appears that control is being taken back to the Executive rather than to Parliament as a whole. I will therefore support amendments 137 to 139 if they are pushed to a vote.
The Parliamentary Under-Secretary of State for International Trade (Graham Stuart)
It is a great pleasure to serve under your chairmanship again, Ms Buck, and to welcome back the hon. Member for Stalybridge and Hyde. This group of amendments would require trade remedies measures to be imposed and given legal effect by regulations. I appreciate the concerns in relation to the use of public notices, which were raised by both Her Majesty’s Opposition and the Scottish nationalist party representative. I am grateful for the opportunity to set out why this is an entirely appropriate procedure for imposing trade remedies measures.
If you were cynical, Ms Buck, you might think that, because the Opposition have decided to make parliamentary scrutiny the central theme of their critique of the Bill, they are leveraging that into every single argument at every single stage. I am not a cynic, and take the concerns at face value, as the genuine ones that I am sure they are.
The imperative is to act quickly once the Trade Remedies Authority has identified the need to tackle injury to UK industry. I would have hoped that Members on both sides of the Committee would recognise that the imperative is to act quickly when injury to UK producers has been identified, and to move as swiftly as possible to put that right. Measures will be calculated and recommended by a fully expert and independent body, following an extensive investigation that is governed by strict World Trade Organisation rules. Our priority has to be to ensure that those recommended measures are imposed quickly, to provide relief to industries suffering injury.
The additional proposed process would delay our ability to apply measures precisely at a time when UK industry is suffering injury, and when it has been independently established that that is so. It would run counter to the calls we have heard from industry for a swift process. The use of public notices to implement trade remedies measures is consistent with the approach taken in comparable WTO countries such as New Zealand and Australia, and is therefore in line with international good practice.
Therefore I say to the hon. Member for Stalybridge and Hyde that, to suggest that this use of public notice is untoward and could lead to further government by proclamation, even outwith the Bill, is disproportionate. The reality is that this set of amendments, as with so many put forward by the Opposition, would in fact undermine the very principles that they say they are interested in: namely, to protect UK industry to ensure that we have a proportionate and speedy response to unfair dumping or use of subsidy and make sure that injury to British industry is put right. It is a shame that, collectively, the Opposition’s amendments suggest that their priorities are somewhere else.
Jonathan Reynolds
The Minister’s case is that this needs to be used for reasons of speed. Can he give us detailed information about how long it takes to prepare a statutory instrument to be brought before the House, given that that does not need parliamentary time in the Chamber—it cannot be that extensive? Exactly how much time will be saved by this proposed new form of parliamentary process?
Graham Stuart
The hon. Gentleman has been in the House for some time. I would have thought he would be familiar with the calendar of the parliamentary year, with long periods of recess when Parliament does not sit. Why on earth would Her Majesty’s Opposition, so often accused, doubtlessly unfairly, of being in hock to the producer interest and blind to wider society and the interests of the consumer and the ordinary citizen—though I decry that attitude—because of their links to the trade union movement, wish to put delays in place?
The hon. Gentleman knows full well the delays that can come with secondary legislation. To have that at the end of that extensive, independent and exhaustive expert assessment that has established injury, why on earth would the Labour party, or indeed the Scottish nationalist party, want to get in the way of swift, effective and proper defence of British jobs, British workers and British business?
Kirsty Blackman
I am pleased that the Government are now concerned with ensuring that such things are put in place incredibly quickly if there is injury to UK industry. In that case, will the Government bring forward amendments to speed up other parts of the process, given that they will now be taking longer than the EU’s similar processes?
Graham Stuart
I apologise for getting the name of the hon. Lady’s party wrong—it is the Scottish National party. We have put forward a proportionate and swift system, and hope that we would be able to deliver a speedier, more proportionate and balanced response than that of the EU. That is certainly our aim. I note again that amendments tabled by the hon. Lady’s party and Her Majesty’s Opposition suggest that their priority is entirely different.
Jonathan Reynolds
I am grateful for the infusion of energy that the amendments have brought to the Committee. The Minister’s bluster revealed a lot. I noticed that he did not actually answer my question. If the Government’s concern is the wish to bring a trade remedy during recess, they have to invent a new constitutional procedure to do that. I am afraid that is a very thin case and the Minister did not provide a reason why the new process is required in the interests of brevity. He was not able to give us any clear information, so we will push the amendment to a vote.
Question put, That the amendment be made.
The Chair
With this is will be convenient to discuss the following:
Amendment 12, in clause 32, page 19, line 32, after “which” insert—
“section (Dumping of goods and related activities: enhanced parliamentary procedure, etc)(6) applies and”.
This amendment is consequential on NC5.
New clause 5—Dumping of goods and related activities: enhanced parliamentary procedure, etc—
“(1) No regulations may be made by the Secretary of State in exercise of the power in section 13(5) except in accordance with the steps set out in subsections (2) to (5).
(2) The first step is that a Minister of the Crown must lay before the House of Commons a draft of the regulations that it is proposed be made.
(3) The second step is that a Minister of the Crown must make a motion for a resolution in the House of Commons setting out, in respect of proposed regulations of which a draft has been laid in accordance with subsection (2)(b), the amount of import duty proposed to be applicable to any goods that are or are proposed to be subject to a quota.
(4) The third step is that the House of Commons passes a resolution arising from the motion made in the form specified in subsection (4) (whether in the form of that motion or as amended).
(5) The fourth step is that the regulations that may then be made must, in respect of any matters specified in subsection (4), give effect to the terms of the resolution referred to in subsection (5).
(6) No regulations may be made under the following provisions unless a draft has been laid before and approved by a resolution of the House of Commons—
(a) paragraph 1(3) of Schedule 4 (definitions and determinations in relation to goods being “dumped”);
(b) paragraph 5 of Schedule 4 (determination of certain matters relating to “injury” to a UK industry);
(c) paragraph 26(1) of Schedule 4 (provision for suspension of anti-dumping or anti-subsidy remedies);
(d) paragraph (1)(2)(c) of Schedule 5 (defining a “significant” increase)
(e) paragraph 2 of Schedule 5 (definitions relating to “serious injury” to a UK industry);
(f) paragraph 22(1) of Schedule 5 (provision for suspension of safeguarding remedies).”
This new clause establishes a system of enhanced parliamentary procedure for regulations setting quotas under Clause 13 to give effect to recommendations of the TRA, with a requirement for the House of Commons to pass an amendable resolution authorising the quota provisions of the proposed regulations, and also requires that certain regulations under Schedules 4 and 5 are subject to the affirmative procedure.
Graham Stuart
The Bill ensures that the UK customs regime is ready for EU exit. A key part of our readiness for exit day is our ability to operate our own trade remedies system. Trade is good for the UK. It can lead to higher wages, stimulate business efficiency and productivity and improve consumer choice. Analysis by the OECD suggests that a 10% increase in openness is associated with a 4% increase in income per head.
Nic Dakin (Scunthorpe) (Lab)
Will the Minister clarify whether the Government have done a comparative impact assessment of the processes involved with the EU and the processes they are trying to put in place in terms of speed and timeliness, which we are all concerned about?
Graham Stuart
I am grateful to the hon. Gentleman for that question. I will seek at some point in the debate to address his point.
Free trade does not and should not mean trade without rules. Trade remedies are an important safety net. They can help enforce the rules that make free trade work by addressing injury to a domestic industry caused by unfair trading practices or unforeseen surges in imports. That is why all major WTO members have a trade remedies regime, and why we are taking forward the measures in the Bill. The European Commission currently carries out trade remedies investigations and imposes measures on our behalf. Once we leave the EU, we will need to be able to do that for ourselves. Clause 13, together with schedules 4 and 5, sets up the UK framework to allow us to do just that.
These proposals fall under the international framework set by the WTO. We are legislating for the full suite of powers permitted under that framework, which will enable us to impose additional duties on imports that cause injury to UK industry. The message is clear: free trade and the benefits it brings are welcome, but the UK will act decisively to address trade that causes injury to our domestic industries.
We cannot forget the wider ecosystem of our economy. Tackling injury is the priority, and the Bill makes clear that there is a presumption in favour of imposing additional duties when UK industry suffers injury as a result of unfairly dumped or subsidised imports. In recent years, trade remedy measures have protected UK industry and its employees, particularly in the steel and ceramics sectors but also in the chemicals, biofuels and glass industries. Considering that manufacturing contributes around 10% of UK gross value added and 8% of employment, the need for the UK to have a trade remedies system once we leave the EU is apparent.
Without the ability operate our own trade remedies regime, the UK would be exposed to unfair trading practices and unforeseen surges in imports, with potentially damaging consequences for UK industry and the economy more widely. However, there must also be a mechanism for ensuring that imposing such duties is not contrary to the best interests of the UK as a whole. Duties on imports can increase costs for downstream industries that use those imports to create their products. They can also hit the purses of consumers. That is why the Bill ensures that any duties are set at the level needed to address injury to UK industry and no higher. That levels the playing field without causing unnecessary harm to downstream users and consumers.
We are also building in a safety valve to ensure that measures are not imposed where they are not in the overall interests of the UK. The economic interest test will consider whether duties would have a disproportionate impact on a particular area of the UK or on particular groups in the UK. The test will also consider issues such as the impact on the longer-term competitive environment in the UK.
Businesses can have full confidence that that test, and investigations as a whole, will be objective and impartial. The new Trade Remedies Authority, which will be established through the Trade Bill, will have the independence and technical expertise to determine complex matters of fact. When the authority concludes that measures are justified, it will make independent recommendations to Ministers, who will then reach a final decision. Ministers will be able to reject recommendations to impose duties where they consider they are not in the public interest. Where Ministers do so, they will do so transparently, and they will have to make a statement to Parliament setting out their reasons.
As Monckton Chambers noted in its response to the trade White Paper, that structure ensures that
“the complex judgments made in such cases are, and are seen to be, made independently”.
It strikes a delicate balance between ensuring that the investigation and the calculation of proportionate duties is carried out by impartial experts, and ensuring that there is an opportunity for Ministers to intervene if duties are not in the public or wider economic interest. We believe that these provisions are therefore fundamental to establish a robust but proportionate trade remedies system for the UK.
Peter Dowd (Bootle) (Lab)
It is lovely to serve under your chairmanship again today, Ms Buck. The Minister has clearly had three or four Weetabix today, given his assertions. I say to him: legislate in haste and repent in court at leisure—for these are the sort of things that will be challenged in the courts. Unless the judges in those courts are going to be enemies of the people, we are best to get it right first-hand. Lord Judge made that very point today, and he was formerly Lord Chief Justice; so we cannot ignore parliamentary scrutiny on this particular issue.
New clause 5 establishes a system of enhanced parliamentary regulations for setting quotas under clause 13 to give effect to recommendations of the TRA, with a requirement for the House to pass an amendable resolution authorising the quota provisions of the proposed regulations. It also requires that certain regulations under schedules 4 and 5 be subject to the affirmative procedure.
I have made this point in the past and make it again. The new clause seeks to introduce a scrutiny role for Parliament in this crucial area of taxation and trade policy. The current provision in clause 13 gives the Secretary of State powers through regulation to introduce a tariff rate quota to determine the amount of import duty applicable to certain imported goods, after he has accepted a recommendation from the Trade Remedies Authority. It also gives the Secretary of State the power to revoke or suspend the tariff rate quota.
New clause 5 would instead ensure a democratic and open process, by making sure that Parliament has that power—not just the Secretary of State. The enhanced parliamentary procedure also ensures that there is a failsafe in the event that the Trade Remedies Authority makes a recommendation for the suspension of a quota and the Secretary of State refuses. In that instance Parliament has the ability to overrule the Secretary of State and side with the expert recommendation of the Trade Remedies Authority if it so decides.
I am sure that hon. Members of the Committee are hearing echoes from last week in relation to the issue of parliamentary scrutiny. We have heard about it today, and that is our job on this side of the Committee. I am not sure whether the Minister thinks we should not do that, but we will continue to do it. We are concerned that if we do not have parliamentary scrutiny and oversight and the expertise that comes with that, we will end up in the courts. The Minister’s wish that things do not get delayed will be thrown out of the window by the approach that the Government seem to be taking.
Suffice to say that, if the Government are arguing that this is a money Bill, which it is, and it goes to the House of Lords— who will probably have to watch it go past as though it was a bus—they are tacitly accepting that the measures contained here are essentially fiscal. It is therefore appropriate that statements made to the House of any regulatory changes in relation to fiscal matters are Parliament’s responsibility and duty, as they have been for centuries, and we believe that there should be a vote if appropriate. The system outlined would provide a very robust means of doing that. I know that virtually every Minister, not just this Minister, would not want to have that level of scrutiny, but it comes with the job; scrutiny has to be there. Of course, an annual fiscal statement, such as that expected in the spring, with subsequent parliamentary authority could also prove a mechanism for us to test it out.
I hope that Conservative Members will not take a blasé approach and brush aside the issue of parliamentary democracy on the grounds that the Opposition somehow want to drag the matter out in the future. We do not; we want to make sure that this works properly. We all accept that we have to have a process in place, but let us get it right and hold Ministers to account.
Kirsty Blackman
The Government have asked for an awful lot of trust. They are asking us to trust them to make the right decision. Given that they do not have a track record of making such decisions over a very long number of years, it is very difficult for us to trust the Government on that. There is also the fact that the Government said that they would table amendments to clause 11 of the European Union (Withdrawal) Bill, and then they did not.
I do not think that the Conservative Government have quite recognised what they are doing with all their decisions to hold power in the Executive over any number of things. When the Conservatives are inevitably no longer in government there will be another Government in place, and they will be in opposition saying, “Why are so many decisions being made by the Executive without parliamentary scrutiny?”
The UK is at a point where we are choosing how our future looks in relation to Brexit. We are choosing how things will go in this Parliament, and into the future. We are choosing how much say we will have over trade policy, so it is vital how we decide to go about this. The way that the Government are setting this up is absolutely wrong. There should be parliamentary scrutiny of such things, and democratically elected Members should have the opportunity to look at them, to have an input and not just have them done by public notice.
Graham Stuart
The Opposition parties protest too much. As we all know, the point of a trade remedies system is to be balanced, proportionate and move swiftly to protect British industry. That is why we are setting up, through the Trade Bill, the specialist body to do that: the Trade Remedies Authority. We are talking about the implementation of the Trade Remedies Authority’s recommendations. Why on earth, after that exhaustive effort, with the appropriate, balanced tests in place, would anyone want to create burdensome, parliamentary oversight? It does not make any sense.
The TRA makes the decision. If the Secretary of State disagrees with it, they will have to come to Parliament and make a statement, so there will be the opportunity to deal with that. When the TRA has made an assessment and wants to help British industry, why on earth would the Opposition parties want to make a wider political point about lack of scrutiny, just for the sake of it, when it is totally inappropriate for this measure? I leave outsiders to judge whether that is for political interests or for the interests of either British consumers or producers.
Kirsty Blackman
If the Trade Remedies Authority will be so good at making decisions, why will the Government simply have to make a written statement to the House if they disagree with it, rather than go through some kind of regulation procedure? If the Trade Remedies Authority is set up in such a great way that it will always make the best decisions, why will the Minister be allowed to disagree with it simply by written statement, and not by any sort of parliamentary procedure?
Graham Stuart
The legislation makes it clear that the Secretary of State should look at it, and various people who have commented on the structure have said that it is right that, although the main body of work should be conducted by experts, ultimately it should be a politician accountable to Parliament, part of a democratic process, who should make that decision. Were they in any way to disagree, they would have to come to Parliament to make a statement. That is appropriate and proportionate, and why on earth the Opposition parties would want to go to such lengths to try to stop us bringing in effective remedy to protect British producers, I cannot imagine.
Jonathan Reynolds
Very briefly, why can the Minister not give us any detail about the methodology by which injury will be calculated, or any of the basic details that the US and the EU have already put in primary legislation? He cannot tell us how that will be because it is not in the Bill. Surely, we need some parliamentary safeguards about what the decisions will be, because the Minister cannot tell us the process that will be followed.
Graham Stuart
Our purpose here is to be probed, so even when that probing is redundant or tiresome, one should deal with it in as fair a way as one possibly can. As we know, this is a framework Bill; the secondary legislation, which will have parliamentary scrutiny, will bring in the details as it does in most other jurisdictions. We will follow a balanced, proportionate and effective basis to ensure that we assess that injury in the right way, and we will do so under the aegis of the WTO. Efforts to cut and paste aspects of the WTO system on to the face of our legislation when we are subject to WTO rules anyway are unhelpful and unnecessary.
Question put and agreed to.
Clause 13 accordingly ordered to stand part of the Bill.
Schedule 4
Dumping of goods or foreign subsidies causing injury to UK industry
Peter Dowd
I beg to move amendment 23, in schedule 4, page 58, line 2, after “consumption”, insert “by independent customers”.
This amendment requires the comparable price for the purposes of determining the normal value to be assessed with respect to consumption by independent customers.
The Chair
With this it will be convenient to discuss the following:
Amendment 24, in schedule 4, page 58, line 4, at end insert “sub-paragraphs (2A) to (2L) and with”.
This amendment paves the way for Amendment 25.
Amendment 25, in schedule 4, page 58, line 6, at end insert—
“(2A) For the purposes of sub-paragraph (2) the following shall apply.
(2B) Where the exporter in the exporting country does not produce or does not sell the like goods, the normal value may be established on the basis of prices of other sellers or producers.
(2C) Prices between parties which appear to be associated or to have a compensatory arrangement with each other shall not be considered to be in the ordinary course of trade and shall not be used to establish the normal value unless it is determined that they are unaffected by the relationship.
(2D) Sales of the like goods intended for consumption in the exporting foreign country or territory shall normally be used to determine the normal value if such sales volume constitutes 5% or more of the sales volume exported to the United Kingdom, but a lower volume of sales may be used when, for example, the prices charged are considered representative for the market concerned.
(2E) When there are no or insufficient sales of the like goods in the ordinary course of trade, or where, because of the particular market situation, such sales do not permit a proper comparison, the normal value shall be calculated on the basis of—
(a) the cost of production in the country of origin plus a reasonable amount for selling, general and administrative costs and for profits, or
(b) the export prices, in the ordinary course of trade, to an appropriate third country, provided that those prices are representative.
(2F) Sales of the like goods in the domestic market of the exporting foreign country or territory, or export sales to a third country, at prices below unit production costs plus selling, general and administrative costs shall be treated as not being in the ordinary course of trade by reason of price, and disregarded in determining the normal value, if it is determined that such sales are made within an extended period in substantial quantities, and are at prices which do not provide for the recovery of all costs within a reasonable period of time.
(2G) The amounts for selling, for general and administrative costs and for profits shall be based whenever possible on actual data pertaining to production and sales, in the ordinary course of trade, of the like product by the exporter or producer under investigation.
(2H) When it is not possible to determine such amounts on the basis prescribed in sub-paragraph (2G), the amounts may be determined on the basis of—
(a) the weighted average of the actual amounts determined for other exporters or producers subject to investigation in respect of production and sales of the like product in the domestic market of the country of origin,
(b) the actual amounts applicable to production and sales, in the ordinary course of trade, of the same general category of products for the exporter or producer in question in the domestic market of the country of origin,
(c) any other reasonable method, provided that the amount for profit so established shall not exceed the profit normally realised by other exporters or producers on sales of products of the same general category in the domestic market of the country of origin.
(2I) If the TRA determines that it is not appropriate to use domestic prices and costs in the exporting country due to the existence in that country of significant distortions, the normal value shall be constructed exclusively on the basis of costs of production and sale reflecting undistorted prices or benchmarks, subject to the following provisions.
(2J) “Significant distortions” for this purpose means distortions which occur when reported prices or costs, including the costs of raw materials and energy, are not the result of free market forces because they are affected by substantial government intervention.
(2K) The TRA shall use the corresponding costs of production and sale in an appropriate representative country with a similar level of economic development as the exporting country, provided the relevant data are readily available; and, where there is more than one such country, preference shall be given, where appropriate, to countries with an adequate level of social and environmental protection;
(2L) If such data are not available, the TRA may use any other evidence it deems appropriate for establishing a fair normal value, including undistorted international prices, costs, or benchmarks; or costs in the exporting country to the extent that they are positively established not to be distorted.”
This amendment makes further provision on the face of the Bill about how the normal value and the comparable price are to be determined in certain circumstances.
Amendment 26, in schedule 4, page 58, line 6, at end insert—
“(2M) A fair comparison shall be made between the export price and the normal value.
(2N) The comparison for the purposes of sub-paragraph (2M) shall be made at the same level of trade and in respect of sales made at, as closely as possible, the same time and with due account taken of other differences which affect price comparability.
(2O) Where the normal value and the export price as established are not on such a comparable basis, due allowance, in the form of adjustments, shall be made in each case, on its merits, for differences in factors which are claimed, and demonstrated, to affect prices and price comparability.”
This amendment provides for fair comparison between the export price and the normal value.
Amendment 27, in schedule 4, page 58, leave out lines 8 to 15 and insert—
“(a) to provide guidance with respect to the application of sub-paragraphs (2) to (2O).”
This amendment replaces the provision for definitions of key terms and the determination of related matters in individual cases with guidance about the application of the existing provisions and those contained in Amendments 25 and 26.
Amendment 62, in schedule 5, page 80, line 5, at end insert—
“and shall be determined in accordance with Article 4 of the WTO Agreement on Safeguards.”
This amendment provides that the meaning of serious injury for the purposes of Schedule 5 shall reflect the relevant provisions of WTO Agreement on Safeguards.
Amendment 63, in schedule 5, page 80, line 6, after “make” insert “further”.
This amendment is consequential on Amendment 62.
Amendment 64, in schedule 5, page 80, line 9, after “make” insert “further”.
This amendment is consequential on Amendment 62.
Peter Dowd
Clearly, being tiresome is my role in life, as far as the Minister is concerned.
Peter Dowd
I do it very well. I will make sure I have five Weetabix on Thursday.
I am glad to turn to some of the very substantial amendments that we seek to demonstrate to the Committee are essential for the proper operation of our customs regime and to provide a level playing field for vital British industries. We want to ensure that British industries do well. We wish them the best and we want to set the framework for them to do well. I say gently to the Minister that the only political points being made are from him. We all want British industry to do well; we all have industry and businesses in our constituencies—I have a huge port in my constituency. Frankly, the idea that Labour wants businesses to do well simply because of parliamentary democracy is nonsensical.
The amendments clarify a number of important points about constructing a functional trade remedy mechanism that will not be open to challenge in the courts and will not slow the process down. The Government seem to have completely missed that. The amendments will establish a level playing field for the purpose of promoting and encouraging free trade across UK borders, ensuring that British producers are not unfairly disadvantaged.
It is important at this stage to remind ourselves of the comments made at the Bill’s evidence session on this particular point, to briefly set the context for the amendments. Dr Cohen from the British Ceramic Confederation pointed out last week that a remedy is not a matter of protectionism, but is simply a means of addressing “unfair competition” when overseas manufacturers are not playing by the internationally agreed rules. Dr Cohen made it clear, by using the example of the ceramics industry in the Minister’s constituency, that it is not the case that our producers have skimped on investment or have failed to seek out productivity enhancing measures, because they take every opportunity to compete. Indeed they have made very heavy investment in
“state-of-the-art, energy-efficient manufacturing with digital printing technology.”
Given a level playing field, this industry can, in Dr Cohen’s words,
“take on the world. All we want is a level playing field” ––[Official Report, Taxation (Cross-border Trade) Public Bill Committee, 23 January 2018; c. 67, Q104.]
and trade remedies that allow us to ensure the greatest level of trade.
Nic Dakin
It is a pleasure as always to serve under your chairmanship, Ms Buck. As my hon. Friend has pointed out, the amendment is about certainty for business and industry. At some point, the Government need to bring detail forward. The longer detail is left, the more problematic it will be for business confidence, particularly in an industry such as steel, which is freely traded. It is a free trade industry, so it needs to ensure fair trade. That is why it is not surprising that steel has such a significant number of trade defence instruments in the European Union. That ensures a level playing field under WTO rules against other parts of the world where people want to trade unfreely.
At some point the Government need to bring forward the detail. The problem with this part of the Bill is that it is just a framework with nothing more to it. I therefore very much welcome the amendments tabled by my hon. Friends, because they would bring some certainty and sense into the area. At some point the Government will have to do that. They may say the amendments are not appropriate now—they are drawn very much from what is already there in the European Union and have been written across—so my challenge to them is to ask why they are not appropriate. When will we have the appropriate provisions in place?
We need to have certainty and confidence. These major foundation industries, such as steel, ceramics, oil and gas, that rely on strong trade defence instruments to ensure that they can trade not only freely but fairly need significant capital investment to stay at the cutting edge of development. To make that capital investment now, they need confidence about the framework of the future. That is why the Government should not dilly-dally. The sooner they can bring things forward the better.
The Opposition are doing their job in trying to be helpful to Government by bringing forward something that is compliant with WTO rules and would give the necessary confidence. We would know more about how investigations would be conducted, how calculations would be made and how remedies would be applied—the sort of detail that industry needs.
In a sense, the challenge to the Government is that we all agree. I welcome the Minister’s robust approach this morning—it is the approach we always enjoy from him—but there has been a clear commitment to speedy, timely and effective protection and relief for businesses that are unfairly competed against by the threat of dumping from abroad. However, we need appropriate mechanisms in place to deliver on that rhetoric. The longer it takes to get that detail in place, the more the hesitation, concern and lack of trust in the Government will grow. It is in no one’s interest that the Government should not be trusted in such a crucial area. Therefore, the Government, by taking steps sooner rather than later, and embracing the Opposition proposals, would be moving briskly in the direction of the Minister’s rhetoric.
Graham Stuart
I thank the hon. Members for Bootle and for Scunthorpe for excellent contributions to the debate. I entirely agreed with many of the issues that they highlighted.
The amendments would set out a great deal of the technical detail about the determination and calculation of dumping on the face of the Bill, rather than in secondary legislation, and would require the Government to define the meaning of
“serious injury to UK producers”
affected by unforeseen surges in imports, in accordance with article 4 of the WTO Agreement on Safeguards.
Of course, we accept that it will be necessary to set out further details in legislation. As I and my right hon. Friend the Financial Secretary have said from the beginning, the Bill is a framework Bill. It is intended to provide the framework for the UK’s trade remedy system but, as is normal where there is a great deal of technical detail to be legislated for, that will be set out in secondary legislation.
Industry has contributed its thinking to the detailed technical areas, and we shall engage with all stakeholders with detailed proposals in a series of meetings starting next month. I entirely agree with those who have spoken so far about the need for speed; but they would also agree about the need to get things right. Our aim and the purpose of introducing the Bill is to make sure we have a suitable framework for the long term. That is why we are going to get it right, as well as getting it in place in the appropriate time.
Graham Stuart
I shall do so in due course. The detail of the secondary legislation will be constrained by and compliant with the WTO rules, but the rules that we set will be appropriate for the UK. Because they will be set out in secondary legislation there will be the necessary flexibility to allow changes to be made quickly, reflecting developments in best practice and WTO case law. I am sure that the Committee will agree that that is important, and that is why we do not think it is appropriate to include those matters in the Bill.
As to market distortions I reassure the hon. Member for Bootle that the legislation will enable the UK trade remedy system to account for particular market situations in anti-dumping cases. All major economies have a trade remedies framework that allows alternative methodologies to be used in investigations when the normal value of a good cannot be properly determined based on information from exporting countries. The UK will be no different. We have already discussed this with industry and will continue to do so, to get it right.
I recognise the underlying intent of amendment 62, to increase legal certainty for UK industry by including the requirement to act in accordance with the WTO Agreement on Safeguards. However, it is unnecessary. As members of the WTO we will be required to adhere to the provisions of WTO agreements, and we have been clear about the fact that we are committed to developing the detail of the UK’s trade remedy system in a way that is fully compliant with the obligations. By way of further reassurance, clause 28 of the Bill requires the Secretary of State and the TRA to have regard to their international obligations. On that basis I hope that the hon. Gentlemen can see that their concerns will be met by the approach that we shall continue to take, and that the amendment will be withdrawn.
Peter Dowd
I thank the Minister in good faith for his explanation. None the less, the Opposition take the view that there is a cumulative effect to the proposals. It is okay for the Minister to say that this is a framework and that we will add all the detail later, but there is a difference between a framework and a skeleton. This is not a framework but a skeleton. We must add meat to the bones of the skeleton, but we have not got that here today.
While I accept what the Minister is saying in good faith, we need to press this issue. We must make the point that we need more detail and more certainty. Of course, he might not be the Minister in the not-too-distant future—we do not know who the Minister might be. Therefore, while I have every faith in him, I am not sure whether I can say that about the future Minister.
Graham Stuart
It is a framework Bill—skeletal or otherwise—and the detail will come in secondary legislation, as is entirely normal for issues such as this. In response to the question from the hon. Member for Scunthorpe on when we will be ready to bring secondary legislation forward, we will do so as soon as possible. Evidently, that will need to be in time to ensure that the UK system is ready for when we exit the EU. That is the time constraint. We are working on this. We will engage in detail with industry, starting next month. We are bringing this forward as quickly as we can.
If the Opposition decide to press the amendment, that is fine, but cutting and pasting WTO agreements with which we will comply is not the same as having an appropriate system in place for the UK. This is not the right moment or place for these proposals, because this is framework legislation.
On why we should have secondary legislation, we need flexibility to adapt to developments in WTO case law and, if the Committee were to support the Opposition’s amendments, that flexibility would be removed. Changes in WTO case law are frequent: for instance, only last week there was a panel decision on article 2 of the WTO anti-dumping agreement. It is therefore important that we have the flexibility that only secondary legislation provides, so I ask the Opposition to think again.
Nic Dakin
Will the Minister confirm once more that the Government intend not to make things any more difficult for producers in terms of trade defence instruments and that, as the detail comes forward, people producing stuff in the UK will not be any worse off in future than under the current EU rules? I think that is what he is saying.
Graham Stuart
I would go further than that. By having a system that is entirely aligned with and attuned to the interests only of UK producers, we hope to have a better system than the one we have now. I cannot give firm timelines, because the TRA is not set up yet, but hopefully it will be speedier, more proportionate and balanced, absolutely scrupulous in observing WTO case law, flexible enough to implement it, better attuned to the needs of UK producers, and more effective at averting injury to them.
Grahame Morris (Easington) (Lab)
I thank the Minister for giving way and hope he will bear with me. Given the emphasis he is placing on the importance of secondary legislation, and the fact that, as he said a moment ago, the TRA has not been set up yet, has he had a chance to reconsider putting trade union representatives on the TRA?
Graham Stuart
It took the hon. Gentleman’s contribution finally to silence the hon. Member for Scunthorpe, who normally heckles throughout everyone’s address—[Interruption.]. As has rightly been said, that is harsh but fair.
I thank the hon. Gentleman for his question. The aim is that this should be an expert body, that the normal, rigorous civil service appointments process should be observed in its appointment and that we should have an organisation that has impartiality and effectiveness as its primary concerns, rather than being driven by political or indeed representative considerations. That is what we are planning to do.
Question put, That the amendment be made.
Jonathan Reynolds
I beg to move amendment 28, in schedule 4, page 58, line 33, after “contribution”, insert
“within the meaning of Article 1 of the WTO Agreement on Subsidies and Countervailing Measures”.
This amendment provides a definition of financial contribution by reference to the WTO Agreement on Subsidies and Countervailing Measures.
The Chair
With this it will be convenient to discuss the following:
Amendment 29, in schedule 4, page 59, line 24, at end insert—
“and shall be determined in accordance with Article 3 of the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994.”
This amendment provides that the meaning of injury for the purposes of Schedule 4 shall reflect the provisions of the relevant article of the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994.
Amendment 30,in schedule 4, page 59, line 25, after “make” insert “further”.
This amendment is consequential on Amendment 29.
Amendment 31, in schedule 4, page 59, line 31, after “make” insert “further”.
This amendment is consequential on Amendment 29.
Amendment 33, in schedule 4, page 61, line 20, at beginning insert
“having regard to the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 and the WTO Agreement on Subsidies and Countervailing Measures”.
This amendment requires regulations determining what constitutes “negligible” and “minimal” to have regard to relevant WTO provisions.
Jonathan Reynolds
This is the second group of amendments on today’s amendment paper relating to schedule 4, on injury caused by dumping. Amendment 28 provides a definition of financial contribution by reference to the WTO agreement on subsidies and countervailing measures. Amendment 29 provides that the meaning of injury for the purposes of schedule 4 shall reflect the provisions of the relevant article of the agreement on implementation of article VI of the general agreement on tariffs and trade 1994. Amendment 30 is consequential on amendment 29, as is amendment 31. Finally, amendment 33 requires regulations determining what constitutes “negligible” and “minimal” to have regard to relevant WTO provisions.
I recognise that in the previous debate the Minister moved a little toward us in acknowledging some of the shortcomings of the Bill and the areas where there will eventually have to be clarity. These amendments concern one of the central issues regarding how we construct our future trade defence policy. In last week’s evidence session, it was made clear by representatives of UK industries that Brexit represents a potential opportunity for the UK to expedite its remedial processes when it comes to dumping and calculating injury—something that has already been referenced by all sides in the discussion today and by the Minister.
Industry also emphasised that, while assessing dumping margins can be relatively easy and straightforward, calculating injury margin needs much more involvement from industry and Government, and the results are not always so obvious. My hon. Friend the Member for Scunthorpe has again mentioned the steel crisis, and I would direct Members to read the Business, Energy and Industrial Strategy Committee’s transcripts from the previous Parliament on the crisis, which articulate very clearly the issues involved. It is of great concern to the Opposition that manufacturers and British industry are telling us that the Bill is seriously lacking in the detail they need to plan effectively for the future.
Members of this Committee, as well as its witnesses last week, have spoken at some length on the shortcomings of the proposed approach, not least that UK industry will be in the dark until all the statutory instruments that are required have been promulgated. As industry and those in many parts of the parliamentary process have repeatedly emphasised—in contrast to the Minister’s comments—it is highly unusual that secondary legislation is considered the appropriate means through which to establish the central tenets of our future trade defence policy. Indeed, it is considered normal practice by most of our major trading partners for these issues to be dealt with in primary legislation. Equally, because of the way in which the statutory instruments will be considered, this forum might well be the only opportunity to debate these measures and give them the proper scrutiny they demand.
The point of the amendments is to bring some of the detail and certainty that UK industry is seeking. Understandably, members of UK industries feel anxious voyaging into the unknown with only vague reassurances from Government. As my hon. Friend the Member for Bootle has said, there is no certainty about this Government’s future or that of the individual Ministers concerned. As the Manufacturing Trade Remedies Alliance has made clear—
The Chair
Order. Can I encourage the hon. Gentleman to be specific in relation to his amendments, as far as possible?
Jonathan Reynolds
I will be, Ms Buck.
The package of amendments offers a relatively straightforward solution to these issues by using a pre-existing, widely accepted set of terms to define injury. As referred to in amendment 29, the agreement on implementation of article VI of the general agreement on tariffs and trade 1994 is a set of World Trade Organisation rules, which already provides a blueprint to many major global economies. That will form a solid basis, which UK industry can use to start planning how it will adapt to the new post-Brexit landscape.
Complying with the requirements in the amendments will help to provide consistency following our exit from the European Union, and align us with existing trading standards in economies we seek to trade with globally. It makes little sense to delegate this decision to secondary legislation when we are already in a position to opt for a widely accepted and road-tested definition that would keep us aligned with potential trading partners. That would also have the major advantage of offering certainty to UK industries today—not years from now—on how the trading landscape will look post-Brexit, and allow them to plan accordingly.
I urge the Ministers to support this amendment. It is a relatively small commitment, which would help to bring consensus and certainty to the British economy.
Graham Stuart
These amendments seek to include specific reference to the relevant WTO agreements in the Bill. As I said in our earlier discussion, the Government have carefully considered the right balance between primary and secondary legislation. Where there are very technical provisions in a regime, those are usually set out in secondary legislation because they are very detailed. That is the case here, so we have taken powers to make the necessary regulations.
As a member of the World Trade Organisation, the UK will be required to abide by the WTO agreements. We intend fully to comply with these obligations, and the regulations will therefore reflect the detail of the WTO agreements. However, as I have said, clause 28 does require the Secretary of State, and the TRA, to have regard to international obligations, which should provide any reassurance needed.
It has been suggested that the injury margin is more complicated and harder to define than the dumping margin. We do not believe that that is the case. Both calculations are based on industry data and export data and involve a number of variables where the TRA would be afforded discretion to use its expertise in determining the appropriate approach.
Nic Dakin
Does the Minister recognise that the EU is moving away from that calculation and that, according to the evidence that was presented to us, that calculation involves greater bureaucracy but does not make a great deal of difference in the end, in terms of impact on prices?
Graham Stuart
I do not agree with the hon. Gentleman. From a technical point of view, I do not believe that the EU is moving away from its approach to injury. As I say, we are subject to the WTO. The Secretary of State has to have regard to international obligations, and the detail needs to go into secondary legislation. I therefore ask hon. Members to withdraw their amendment.
Jonathan Reynolds
I am grateful for the Minister’s response, which gave us some degree of detail that we have not had to date, but I think that there is a difference of opinion on some of the evidence we heard last week. In my notes, the Manufacturing Trade Remedies Alliance made it clear that the methodology of the assessment on how to decide appropriate trade remedies was, in its words, a key detail that it is missing. It said that that was relevant in particular to the application of the lesser duty rule and that it would welcome further clarity and legal certainty. With that in mind, I will press the amendment to a vote.
Question put, That the amendment be made.
Anneliese Dodds (Oxford East) (Lab/Co-op)
I beg to move amendment 32, in schedule 4, page 61, line 20, leave out from ‘minimal’ to end of line 33.
This amendment removes the need for a market share requirement to be met before the TRA may initiate a dumping or subsidisation investigation.
The Chair
With this it will be convenient to discuss the following:
Amendment 34, in schedule 4, page 61, line 45, leave out paragraphs (g) and (h).
This amendment is consequential on Amendment 32.
Amendment 35, in schedule 4, page 62, line 1, leave out ‘(d)’ and insert ‘(c)’.
This amendment is consequential on Amendment 32.
Amendment 36, in schedule 4, page 62, line 6, leave out ‘(d)’ and insert ‘(c)’.
This amendment is consequential on Amendment 32.
Amendment 37, in schedule 4, page 62, line 16, leave out ‘(d)’ and insert ‘(c)’.
This amendment is consequential on Amendment 32.
Amendment 38, in schedule 4, page 62, line 37, leave out ‘(d)’ and insert ‘(c)’.
This amendment is consequential on Amendment 32.
Anneliese Dodds
We tabled the amendments because the proposed market share requirements will not only put us out of step with comparable nations but stop action being taken to prevent uncompetitive disruption of infant industries. According to the Government’s proposals, applications to the TRA for an investigation will be subject to a UK market share threshold. As with so much in the Bill—as we have been discussing—we do not know how the threshold will be determined nor what its range is likely to be, let alone the actual value for different industrial sectors. The Government have given as their explanation for the measure the filtering out of cases with little chance of success. Yet, as already discussed in Committee, the Government have already set out a range of tests that must be passed before any action can be taken—tests that are already more stringent than is the case under EU legislation, and considerably stronger than those that the EU is moving towards.
I normally agree fully with every word that is uttered by my hon. Friend the Member for Scunthorpe, but I did not completely agree when he said that he was pleased to hear the Government saying, or hinting at least, that we would have a system at least as favourable to British industry as the existing one. With the different tests to do with economic interest or public interest, whether those applied by the TRA or the Secretary of State, that regime is far more stringent than that applied by the EU.
In addition, I am concerned that the measure proposed in the Bill could cause a lot of ambiguity and be problematic for the TRA. We are informed that the TRA must accept an application that meets the UK market share threshold, although of course both it and the Secretary of State can then decide not to proceed as a result of their overly stringent tests once they get into the investigation—but let us leave that aside. If an application does not meet the UK threshold but does meet WTO thresholds, the TRA may use its discretion as to whether to accept it. However, we can legitimately ask why the TRA should be put in a potentially difficult position, especially when legal action could be levelled against it by the company that is deemed to have engaged in dumping precisely because the TRA has used that discretion.
In addition, I do not understand why the UK has decided to adopt an apparently higher threshold of market share before applications may be accepted when, according to the stakeholders I have talked to, no other country seems to have adopted that approach. This is not about criteria within the investigation: it is about the criteria necessary before an investigation is allowed at all. As with the unique electoral system that led to the hanging chad problem in the US, there is a clear reason why this approach is so unique: it is not workable. The Minister rightly referred to learning from best practice, so it would be helpful for us to know which countries have that test in place before an investigation can be started and why it was believed that this is best practice. I have so far not been able to find any countries that operate such a system. If there are some, it would be wonderful to hear about them.
The Minister suggested in his previous remarks that, much of the time, all the Government are doing is simply transposing WTO requirements. However, the terms of the general agreement on tariffs and trade enable countries to take action, particularly to prevent uncompetitive disruption to infant industries. That could be prevented by this kind of test before an investigation can even be started. That process of uncompetitive disruption to infant industries is known as material retardation, which is quite a well-known concept when it comes to trade disputes and is interpreted quite broadly.
Rules within the Mercosur agreement—the South American trade agreement—state that countries can take measures, first, to ensure that infant industries can be established, but also that there can be, without uncompetitive disruption, the establishment of a new branch of production in an existing industry, the substantial transformation of an existing industry or the substantial expansion of an existing industry supplying a relatively small proportion of domestic demand. That is a very wide reading of what measures against material retardation can enable, and a broad reading of the concept of an infant industry as well. Those rules are already in action in the Mercosur agreement, so I hope the Minister will clearly explain why the UK should deny itself those kind of powers that other countries seem keen to avail themselves of.
I hope he will also indicate how he envisages that market share restriction working, which will be used even before investigations start. I read the “Trade Remedies Research” paper, produced by Van Bael & Bellis and Copenhagen Economics, which I am sure other Members have looked at as well. They looked in great detail at some of the methodological issues relating to the use of trade remedies and they indicated in detail the variety of considerations relevant to calculating market share that the EU has used once an investigation has opened—not as part of a test to determine the opening of an investigation but as part of determining the harm caused by dumping.
They indicated the potential drawbacks of, for example, setting a quantitative measure on the evolution of import volumes in relative terms—in comparison with domestic consumption—in order to determine how the market share of foreign exporters against UK industry has changed over time following dumped imports. That is because our market in the UK is small, and so domestic consumption can vary dramatically from year to year because the number of industry operators tends to be more concentrated.
There are some very difficult methodological issues here when it comes to calculations that might be involved in an investigation. We are talking about the TRA having to carry out calculations potentially with a similar level of methodological difficulty, even before an investigation is opened. Will the Minister indicate what kind of methodology he proposes to avoid those problems? Above all, will he please let us know why our country seems to be adopting this approach, which, as I say, I cannot find any analogue for in comparable nations?
Kirsty Blackman
I will say just a few things to follow on from the shadow Front Benchers on this. It is strange that market share is being used in this regard as something that will be taken into account. It is almost as if the TRA cannot be bothered to investigate a company if it does not have a certain market share. For that industry, and for manufacturers in particular, it does not matter what their percentage of market share is; what matters is the injury that is being done to them by dumping. Market share is not relevant, and I do not understand why it is included in the Bill. It may be relevant to the Treasury because it affects the tax take it gets from the industry, but it is not relevant to the protection we should be affording to the industry.
This proposal has geographical implications, given that these new goods will be made in the industrial north of the country. Those products may not meet the market share threshold, but they may be incredibly innovative and may improve productivity and make this country a better place to be. Those things will not be taken into account.
I have argued previously that if the fishing industry is decimated as a result of Brexit, that is a geographical issue for the affected communities. It does not have a massive implication for the Treasury’s tax take, but it does for those communities. I fear that this market share test is not only unnecessary, but has implications for the choices that communities make.
Kirsty Blackman
Absolutely, and conversely they are the ones that have been getting the most European funding, so the choice they thought they had to make because of the inequality and uneven economic growth in the United Kingdom will make them lose out in more than one way.
On the issue of new good and fledgling industries, we cannot predict what the world will look like in 20 years’ time. Who could have predicted the rise in the need for electric vehicle charging points, for example? If something suddenly becomes a thing, the effects cannot be predicted. For example, companies making paper straws in the UK are probably seeing their shares going through the roof. We cannot predict the market share of those companies and how quickly it will grow as a result of changes in the culture of the country. I do not think the market share test is appropriate. It is strange to have it in the Bill, and the Government need to rethink it.
Graham Stuart
I thank hon. Members for their contributions. I hope I can reassure them about the issues they raised. Perhaps there has been some misunderstanding, which I can clear up.
Amendment 32 and its consequential amendments 34 to 38 seek to eliminate a market share threshold that we have designed to make sure businesses have a transparent benchmark for judging whether their complaint is likely to be successful. On the question of why we have the threshold, an independent evaluation of the EU system suggested that the system should focus on producers’ market share as a way of informing inquiries.
I was also asked which other countries have the threshold. We understand that other countries consider whether cases are likely to result in measures at the point of applications, but they tend to use rather opaque systems. The market share threshold is intended to give industry greater certainty in a more transparent way about how the system will operate in this country. We are learning from experiences in other countries and are seeking to improve on them to the betterment of our system.
The provisions for the market share threshold fit with the industry’s calls for the TRA to focus on the cases that matter most. For instance, the British Ceramic Confederation said in its response to our White Paper that the TRA
“should not spend its time investigating vexatious complaints and needs to focus on cases where there is a real UK manufacturing interest.”
The market share threshold will be part of providing that.
Anneliese Dodds
I am grateful for the Minister’s comments. The additional information that he provides is useful, but he still has not made it clear whether any other countries operate such a restriction. I appreciate what he says about the potential opacity of other regimes, but we have not had a clear answer to that question. It may well be that some independent actors have written an evaluation of the EU system that says that such an approach should be implemented. However, as I understand it, the EU has not committed to moving towards such a system. It seems to be just the UK that is explicitly adopting it as a policy commitment, unlike any other country.
Graham Stuart
I thank the hon. Lady for that comprehensive intervention. As I said in reply to the hon. Member for Bootle, our aim is to make improvements. We want a better system that provides greater certainty for UK industry, and one that makes the TRA focus, as the industry has requested, on the cases of greatest import, not an opaque system as in other countries. The TRA may quickly respond to someone with a de minimis market share who comes forward with no real case and tell them that they have no chance, but what we are doing is creating a system that is much easier to understand and more transparent.
I hope the secondary legislation we implement will include other world firsts, too. So long as what we do is based on a proportionate, balanced approach that is fully compliant with the WTO and better tailored to the needs of British industry, I shall be proud to see us innovate. I am not afraid to innovate if it is in the interests of British industry and a better system. We should aspire to doing that.
Kirsty Blackman
The Minister argues that, in the case of a producer with a small market share in the UK, there may be a disproportionate effect on UK consumers. Given that an economic interest test takes into account the impact on consumers, is the market share test necessary?
Graham Stuart
For the reasons I have set out, I think the market share test is an eminently sensible part of our regime. I hope the Committee will agree.
Anneliese Dodds
I am grateful to the Minister for letting us intervene—he has been very generous in that respect. I say gently that I would have hoped for a little more impact assessment before we signed up to a system that is, to adopt the kind of language he used, unique in the world and a world-beating innovation, if we are indeed doing that.
The hon. Member for Aberdeen North made clear that vexatious complaints will be screened out by the economic and public interest tests, which are more stringent than those in the EU regime that we will take on board under the TRA.
The Minister referred to this process being an indication to firms of whether they have any hope of success, but it is not. We are not talking about a guideline. We are talking about a threshold that is a block. Yes, that block can be disregarded by the TRA, but it cannot be overruled by the complainant. That is the whole point. It is not just an indication. It is stronger than a guideline or a set of theoretical considerations. It is potentially a block on firms trying to seek redress through the TRA, which is unique in the world. I had hoped that we might have more explanation of that, despite the Minister’s valiant attempts.
Graham Stuart
Let me try to come back again. The share test comes at the beginning. We have to think about the order. The point is to provide transparency at the beginning of the process and to ensure, exactly as industry has asked, that we do not waste time on complaints, vexatious or otherwise, that have no chance of resulting in measures. That is the whole point of the test. It will be quickly applied and—the Opposition do not seem to have understood this—will have exemptions for infant industries. The system will provide a more transparent form of that which is routinely applied in other countries.
Question put, That the amendment be made.
Jonathan Reynolds
I beg to move amendment 39, in schedule 4, page 64, line 21, at end insert—
“Part 2A
Recommendations: general provisions
12A (1) The provisions of this paragraph apply to all recommendations made by the TRA under this Schedule.
(2) In any case where the TRA makes a recommendation to the Secretary of State, the TRA must, at the same time as making that recommendation, provide any relevant select committee of the House of Commons with—
(a) a copy of that recommendation, and
(b) an account of the evidence on which the TRA has based that recommendation.”
This amendment requires recommendations made by the TRA under Schedule 4 to be made available to relevant select committees of the House of Commons, along with an account of the evidence basis for the recommendation.
The Chair
With this it will be convenient to discuss amendment 70, in schedule 5, page 83, line 44, at end insert—
“Part 2A
Recommendations: general provisions
11A (1) The provisions of this paragraph apply to all recommendations made by the TRA under this Schedule.
(2) In any case where the TRA makes a recommendation to the Secretary of State, the TRA must, at the same time as making that recommendation, provide any relevant select committee of the House of Commons with—
(a) a copy of that recommendation, and
(b) an account of the evidence on which the TRA has based that recommendation.”
This amendment requires recommendations made by the TRA under Schedule 5 to be made available to relevant select committees of the House of Commons, along with an account of the evidence basis for the recommendation.
Jonathan Reynolds
These amendments have been grouped because they both refer to making recommendations by the new Trade Remedies Authority, and the evidential basis for those recommendations, available to the relevant Select Committees of the House.
Clearly, how the TRA operates is essential to our future trade policy. We know some things from the Bill about how it will operate—schedule 5 refers to the procedure that will be followed where an increase in imports of goods causes serious injury to UK producers, so there is more detail than we had previously—but the intention is for further detail about the interpretation of what constitutes a significant increase to be set out in secondary legislation. The TRA will also have considerable discretion in many areas of its operation.
Given the stage we are at with the Bill, we are being given a fairly limited set of options in terms of addressing the lack of accountability in key parts of how the framework will operate. These amendments would introduce an additional layer of scrutiny and consultation, which is needed to ensure that the interests of UK industry are properly represented. Select Committees provide vital checks and balances, and given their policy specialisms and ability to call relevant witnesses, they are best placed to scrutinise decisions by the TRA.
These amendments would not only allow us to address the democratic deficit, but provide a platform for engaging with the wide range of inputs needed fully to understand the implications of TRA decisions on different parts of our economy and different segments of UK industry. That might include the Transport Committee, the Treasury Committee, the International Trade Committee and, of course, the Exiting the European Union Committee. The amendments would provide an important democratic backstop to the new process that avoids concentrating too much power in the hands of the Secretary of State or the TRA. In the absence of greater detail in the Bill, I urge members of the Committee to support the amendments to bring some much-needed future accountability to the TRA and to our trade defence policy.
Graham Stuart
New paragraphs 12A and 11A, introduced by amendments 39 and 70, would require the recommendations made by the TRA under schedule 4 to be made available to relevant Select Committees of the House of Commons, along with an account for the evidence base of those recommendations. Let me begin by stating that transparency is one of the four design principles set out by the Government for the trade remedies framework. The inherent assumption of a lack of scrutiny implied by the amendments is simply untrue.
To protect the TRA’s status as an independent public body, its recommendations to the Secretary of State should not be subject to political influence before a decision to accept or reject them has even been taken. Those recommendations will be made on the basis of the framework set out in this legislation and underpinned by technical and procedural details to be set out in secondary legislation. Giving the Select Committee a role in that process will undermine the impartiality of the process—an impartiality which is supported by industry. Publishing the recommendation in advance of the decision by the Secretary of State could also further undermine impartiality by increasing lobbying of Ministers by the affected parties, and could also lead to unnecessary disruption of the markets affected.
The Bill provides for public scrutiny of both the TRA and the Secretary of State’s decisions. Whether the Secretary of State accepts or rejects the recommendation, the evidence base for the TRA’s recommendation will be made available to the public, as is required under the terms of the WTO agreements. Furthermore, if the Secretary of State rejects the TRA’s recommendation to apply measures, he or she must lay a statement before Parliament setting out the reasons for that decision. Parliament will then be able to hold the Secretary of State to account if it considers the reasons to be unsound.
Kirsty Blackman
It would be lovely if the Minister could explain how parliamentarians can hold Ministers to account if they make a written statement.
Graham Stuart
The hon. Lady has been a Member of this House for some time and will know that there is a series of means by which that can be pursued. Making a statement to the House provides the initial spur to start that scrutiny, if that is what the Select Committee or others decide. There are urgent questions, Adjournment debates, Backbench Business Committee debates—I will not list them all, as the hon. Lady is probably rather better on parliamentary process than I am. She will know that there is a huge number and they can all be used. Her Majesty’s Opposition or the SNP and their spokesmen have other means by which to raise the issue.
On that basis, I ask the hon. Gentleman to withdraw the amendment.
Jonathan Reynolds
I have two observations to make, the first of which is on impartiality. I would strongly refute that scrutiny by Select Committee would increase the partisanship or the partiality of the transparency of the process. The House’s Select Committees are to me the best example of cross-party working and cross-party accountability in the entire parliamentary process, and we should not shy away from using them when they can improve the process.
Secondly, there was reference to technical and political considerations. The decisions are not just technical. Of course they will draw on technical expertise and criteria, but they are inherently political. We saw that in the steel crisis, where frankly even with very clear technical evidence of dumping, there was a political point of view—not one I share—that the benefits to the UK of dumped steel outweighed the benefits of protecting the UK steel industry. That was not held by all parts of the Government, but certainly by some.
A transparent process that allows decisions to be analysed in that context would certainly add to the process, especially when we consider the lack of detail we have so far. I therefore press the amendment to a vote.
Question put, That the amendment be made.
Peter Dowd
I beg to move amendment 40, in schedule 4, page 65, line 2, leave out from “goods” to end of line 3.
This amendment removes the requirement for the TRA to be satisfied that requiring a guarantee meets the economic interest test.
The Chair
With this it will be convenient to discuss the following:
Amendment 58, in schedule 4, page 75, line 23, leave out from first “the” to end of line 24 and insert—
“economic benefits of the remedy to the United Kingdom industry within the meaning of paragraph 6 are significantly outweighed by the economic costs to the importers, users or consumers of the goods in the United Kingdom.”
This amendment provides greater specificity to the operation of the economic interest test.
Amendment 59, in schedule 4, page 75, line 29, leave out sub-paragraph (i).
This amendment removes the requirement to take account of the economic significance of affected industries and consumers in the United Kingdom.
Amendment 75, in schedule 5, page 93, line 22, leave out from first “the” to end of line 23 and insert—
“the economic benefits of the remedy to the United Kingdom industry within the meaning of paragraph 3 are significantly outweighed by the economic costs to the importers, users or consumers of the goods in the United Kingdom.”
This amendment provides greater specificity to the operation of the economic interest test.
Amendment 76, in schedule 5, page 93, line 28, leave out sub-paragraph (i).
This amendment removes the requirement to take account of the economic significance of affected industries and consumers in the United Kingdom.
Peter Dowd
This group of amendments relates to the economic interest test in the Bill. It requires the Trade Remedies Authority or Secretary of State to consider an economic interest test before recommending an anti-dumping remedy. That means that the TRA or Secretary of State must take account of a number of additional factors when considering whether to apply an anti-dumping remedy, to determine whether the remedy will be in the United Kingdom’s wider economic interest.
This is a highly unusual measure. The Manufacturing Trade Remedies Alliance describes the application of an economic interest test as “unique” among WTO users of trade remedies. There are few precedents for a functioning economic interest test, as only a handful of Governments conduct them. This provision is not in the WTO agreement or in EU regulation. Furthermore, the economic interest test in the Bill is very widely drawn, allowing the TRA or Secretary of State to introduce a wide range of additional macroeconomic considerations into the determination of a trade remedy.
It has been only two years since the former Chancellor of the Exchequer stood on a platform of building a Britain
“carried aloft by the march of the makers”,
yet now we are being carried off in a different direction, hence our amendment. Hon. Members on both sides of the Committee will note that, despite that, we have not taken the step of seeking to remove the economic interest test entirely, to bring the UK into line with well worn national agreements and regulations. Instead, in the spirit of conciliation, we have tabled a number of amendments that would clarify the exact uses of an economic interest test and ensure that the Secretary of State could not overwrite the democratic process entirely.
Amendment 40 would remove the economic interest test from the consideration of the Trade Remedies Authority at the preliminary stage of determination. Part 2 of schedule 4 gives the TRA powers to make an initial, provisional recommendation to the Secretary of State that dumping may have occurred and that therefore all importers of the goods in question should be required to give a guarantee in respect of any additional amount of import duty that would have been applicable, or may be applicable, subject to further investigation. The Bill requires the TRA to have considered first whether that requirement to guarantee is necessary to prevent injury and, secondly, whether it would meet the economic interest test.
As amendment 40 makes clear, we do not believe that it is appropriate for the economic interest test to be inserted at this early stage, when provisional remedies are being required ahead of a later full and final determination. The addition of an economic interest test at this point in the process places a large additional burden on the TRA when only provisional guarantees are being requested. It is impractical for the TRA to be expected to carry out a full economic interest test at this stage. It could also bear down on the speed at which all necessary provisional remedies are applied. That relates to the points about speed and pushing things on, as the Minister would like. Slowing the process will allow injury to producers to continue unchecked, reducing the efficiency of the system as a whole.
Furthermore, the application of the economic interest test at this stage in the remedy process goes well beyond WTO rules, which require only a consideration of injury. This would leave the UK with a higher bureaucratic threshold to rectify injury than most nations we hope to trade with. Surely the Minister must agree that a central ambition of any Trade Remedies Authority is responsiveness and agility, but this measure flies in the face of what he told us earlier. Our amendment removes the burden of the economic interest test being placed on the TRA at this early stage in proceedings to allow it to take swift provisional measures pending further investigation, and so that we can act quickly as and when necessary to protect our industries.
Amendment 58 addresses part 6 of schedule 4, which sets out the economic interest test in more detail. We hope to address the balance of priorities that the economic interest test attempts to juggle to give proper due to the interests of producers and, subsequently, consumers, workers and so on. The point was made in the evidence session that producers are also consumers, who will no longer be able buy anything if they lose their jobs due to dumping injury.
This amendment clarifies the exact circumstances in which the economic interest test is considered not to have been met. There is little detail in the Bill regarding what those circumstances might be. Instead, sweeping powers are given to the Secretary of State to make up his or her mind as he or she sees fit. That is in keeping with the Government’s wider approach to the Bill.
This amendment clarifies that the economic interest test will be assumed to have been met so that a remedy can be applied, unless the
“economic benefits of the remedy to the United Kingdom industry… are significantly outweighed by the economic costs to the importers, users or consumers of the goods in the United Kingdom.”
It attempts to clarify the balance of forces that should weigh up any judgment in that regard. That is a completely reasonable addition to the Bill, which merely adds necessary detail where it is lacking, and gives all parties concerned clarity about how different interests will be considered. I hope the Minister will accept this amendment, which will clearly improve the Bill without cutting across the established roles of different actors in the process being developed.
Amendment 59 looks a few lines further down the list of factors that the TRA or Secretary of State should take into account when
“considering whether the application of an anti-dumping remedy or anti-subsidy remedy is not in the economic interest of the United Kingdom”.
Our amendment seeks to remove the first provision that states that the TRA or Secretary of State should consider the economic relevance of
“affected industries and consumers in the United Kingdom”.
As it stands, schedule 4 gives preference to large enterprises over small and to established sectors over new. Without our amendment, the Secretary of State could stamp out a small, growing sector or extinguish an embryonic area of British entrepreneurship because they deemed it not of “economic significance” to the UK. That would be a travesty. It seems to be an incredibly short-sighted approach to the UK economy and, if I may say so, strangely interventionist from a party that claims not to believe in the state picking winners. By extension, it cannot justify allowing the state to forcibly create losers.
It is highly unusual and inappropriate to allow the Secretary of State to write off an infant industry or area of consumption based on a crystal ball prediction of its future significance. Amendment 59 removes this dangerous sub-paragraph from the Bill to ensure that Secretaries of State keep their minds on likely impacts across the different interests at play, rather than gambling with the UK economy. Again, this is not a radical step, but a sensible reduction in the scope of the powers being handed to the Secretary of State, tabled in the name of democracy and, for the Minister, good economic management, of which the Government are losing sight.
Amendment 75 addresses one of the strangest lines in the Bill: sub-paragraph 2 of schedule 5 part 5, on page 93. For a Bill with very little detail, it is incredible that the Government managed to include a sentence of such baffling circularity. It bears repeating, so the Minister may hear it read aloud. It is reminiscent of Danny Kaye in the film “The Court Jester” saying:
“The pellet with the poison’s in the vessel with the pestle; the chalice from the palace has the brew that is true.”
It is well worth watching, and this pales into insignificance—I am sure Danny Kaye would do a better reading of it than I. It says:
“The economic interest test is met in relation to the application of a safeguarding remedy if the application of the remedy is in the economic interest of the United Kingdom.”
It is remarkable—I think it is wonderful—that somebody produced that phrase. Perhaps the Minister would like to elaborate on it, while using the words “economic interest”, “application” and “remedy” just once each. I eagerly await his explanation of the useful addition that the clause makes to an otherwise rather slim Bill.
Nevertheless, amendment 75 may help the Minister by adding the wording that I tried to add to schedule 4 of the Bill through amendment 58. Amendment 75 is therefore effectively a consequential amendment, in that it adds much-needed clarity to the balance of interests that the Secretary of State should weigh up when assessing the economic test in schedule 5, to match the amendment that we have set out in schedule 4 already.
Similarly, amendment 76 removes the requirement that the Trade Remedies Authority or the Secretary of State consider
“the economic significance of affected industries and consumers in the United Kingdom”.
Again, we seek with the amendment to adjust schedule 5 of the Bill to align it with the changes that I outlined in my comments on schedule 4, this time to reduce the scope of the Secretary of State to predict the future success or otherwise of sectors of the British economy, or to preference large-scale industries over emergent or otherwise vital forces that might just end up giving our ailing, low-productivity economy a much-needed boost.
In summary, as hon. Members on both sides can see, we are engaging with this vital section of the Bill fully and constructively, to ensure that the right balance of interests is properly considered when trade remedies are investigated, and to construct a properly efficient process for doing so. I look forward to the Minister engaging with all the amendments on similarly constructive terms, and I hope that Committee members will carefully consider supporting them to ensure the best level playing field for UK industry, fair regard to producers and consumers alike, and an agile and efficient means of remedying any disputes that might arise.
Graham Stuart
Let me start by explaining that the objective of the economic interest test is to ensure that measures are in the best interests of the UK. It ensures that measures are not imposed where they might have disproportionate impacts on wider groups such as downstream industries or, as the hon. Gentleman rightly said, consumers. Let me take the amendments in turn and set out why they would undermine our objective of a balanced and proportionate trade remedies framework.
With amendment 40, the Opposition seek to remove the application of the economic interest test before the imposition of provisional anti-dumping and anti-subsidy measures. It would mean that the test is considered only at the final stage of imposing definitive measures. Given that provisional measures can have profound wider economic impacts, we believe that the test should be met before they can be imposed, just as before definitive measures. That ensures consistency between the two stages of the investigation, and operates in the same way as the existing Union interest test in the EU’s regime, thus providing continuity for UK businesses.
I understand the concerns of UK industry that the inclusion of the test at the provisional stage could delay the application of measures. However, that will not necessarily be the case. In practice, the TRA will have the ability to gather evidence on the economic impacts of applying or not applying measures in parallel, rather than sequentially, to other aspects of the investigation.
Graham Stuart
What I can confirm is that our system will be much more transparent. It will allow those who apply to it, or might be affected by it, to be clearer about how the system will work. That form of transparency is one of the fundamental principles on which we have built this structure.
Peter Dowd
That was a valiant attempt to show why the Government are taking a hammer to crack a nut.
Peter Dowd
I am not privy to the details, but I believe there will most probably be more tests. I think those tests will be more bureaucratic and will lead to inflexibility. By the time we get around to designing them, they will be more complicated than they need to be. The Government’s position, as I have indicated, is to take a hammer to crack a nut. They are not fleet of foot enough on this issue. I have tried to lay out where we think the Government should give careful consideration. Though I hear what the Minister says, and his concern about transparency, this is so transparent that we can see through the Bill. That is the problem: there is nothing there. Though the Minister has tried to reassure us, I think he has missed the point. The Government are going into potentially dangerous territory and poking their fingers into all sorts of places that they do not necessarily need to poke into. We will therefore push the amendment to a vote.
Question put, That the amendment be made.
Peter Dowd
I beg to move amendment 41, in schedule 4, page 66, line 1, leave out from “dumping” to “in” in line 2.
This amendment removes the reference to the amount of the subsidy as an upper limit on the anti-dumping amount in the recommendation under paragraph 14.
The Chair
With this it will be convenient to discuss the following:
Amendment 42, in schedule 4, page 66, line 6, leave out from “dumping” to end of line 7.
This amendment is consequential on Amendment 41.
Amendment 43, in schedule 4, page 66, line 7, at end insert—
‘(3A) The provisions of sub-paragraph (3) are subject to the provisions of sub-paragraphs (3B) and (3C).
(3B) If the TRA finds that the dumping has been fully or partially caused by market distortions affecting the prices of raw materials or other industrial inputs paid by the exporting producers, the estimated anti-dumping amount shall be the margin of dumping as determined in accordance with sub-paragraph (3)(a).
(3C) If the TRA finds that there is an inadequate level of social and environmental protection in the exporting country, the estimated anti-dumping amount shall be the margin of dumping as determined in accordance with sub-paragraph (3)(a).”
This amendment provides for the anti-dumping amount to be the margin of dumping in certain specified circumstances.
Amendment 44, in schedule 4, page 66, line 8, leave out paragraph (4) and insert—
‘(4) For the purposes of sub-paragraph (3)(b) the TRA shall, in determining the amount which it is satisfied would be adequate to remove the injury described in that provision, take account of all elements of the material injury being caused to the UK industry, including, but not limited to, the impact of reduced sales volumes, price suppression and curtailment of investment.
(4A) Regulations may make further provision for the purposes of sub-paragraph (4).”
This amendment makes provision on the face of the Bill for the main factors to be considered in determining the amount for the purposes of paragraph 14(3)(b).
Amendment 49, in schedule 4, page 69, line 18, leave out from “dumping” to “in” in line 19.
This amendment removes the reference to the amount of the subsidy as an upper limit on the anti-dumping amount in the recommendation under paragraph 18.
Amendment 50, in schedule 4, page 69, line 22, leave out from “dumping” to end of line 23.
This amendment is consequential on Amendment 49.
Amendment 51, in schedule 4, page 69, line 23, at end insert—
‘(4A) The provisions of sub-paragraph (4) are subject to the provisions of sub-paragraphs (4B) and (4C).
(4B) If the TRA finds that the dumping has been fully or partially caused by market distortions affecting the prices of raw materials or other industrial inputs paid by the exporting producers, the anti-dumping amount shall be the margin of dumping as determined in accordance with sub-paragraph (4)(a).
(4C) If the TRA finds that there is an inadequate level of social and environmental protection in the exporting country, the estimated anti-dumping amount shall be the margin of dumping as determined in accordance with sub-paragraph (4)(a).”
This amendment provides for the anti-dumping amount to be the margin of dumping in certain specified circumstances.
Amendment 52, in schedule 4, page 69, line 24, leave out paragraph (5) and insert—
‘(5) For the purposes of sub-paragraph (4)(b) the TRA shall, in determining the amount which it is satisfied would be adequate to remove the injury described in that provision, take account of all elements of the material injury being caused to the UK industry, including, but not limited to, the impact of reduced sales volumes, price suppression and curtailment of investment.
(5A) Regulations may make further provision for the purposes of sub-paragraph (5).”
This amendment makes provision on the face of the Bill for the main factors to be considered in determining the amount for the purposes of paragraph 18(4)(b).
Peter Dowd
I thank the organisations that sent in further written evidence today; that was very helpful. The TUC, among others, gave us information that helps with the amendments. Amendments 41 to 44 and 49 to 52 concern the removal of a mandatory lesser duty rule for estimating the injury of state-sponsored dumping. This is a potentially contentious area, and we have to get the balance right. Schedule 4 rightly defines dumping as imported goods priced below their normal value, where “normal value” means the domestic price, or another value if that is appropriate. I touched on this earlier. This definition recognises that the injury margin of domestic prices here does not always reflect the actual injury to UK manufacturers when dealing with goods from distorted economies such as Russia or China.
UK manufacturers are rightly concerned about leaving the methodology for these specified cases to regulation created by the Treasury and/or the Secretary of State, with little parliamentary input. The Opposition’s amendments on the trade remedies and Trade Remedies Authority seek to address this concern and ensure that the methodology by which the TRA calculates the injury caused to manufacturers by dumping sufficiently protects UK manufacturing and industry. I refer hon. Members to the TUC document, which gives the examples of aluminium foil, aluminium road wheels, coated fire paper and continuous filament glass fibre production. One of the biggest concerns that UK manufacturers have with the trade remedies Bill is outlined in schedule 4—that is, the introduction of a mandatory lesser duty rule. That requires the calculation, in dumping investigations, of the level of injury to domestic industry, in addition to the level of dumping. The duties correspond to the lesser of the two indicators, which means that they might not necessarily properly reflect the damage to British industry. That is important in a whole range of areas. My hon. friend the Member for Scunthorpe referred to this in relation to steel; and we heard about ceramics. It is important that we get this right. In other words, it is relatively straightforward to calculate the cost of dumping, but less easy in relation to injury, with a full investigation, which may be an appropriate action. I think that Dr Cohen was pretty clear about that in her evidence.
As witnesses from key industries, including steel, ceramics and chemicals, pointed out last week, the best estimate of the distortion to trade is the dumping and subsidy margin. The creation of a mandatory lesser duty will result in lower duties that in some cases may not reflect the actual injury. It is labour-intensive for the investigating authority and does not reflect the full—
Trade Bill (Fifth sitting)
Tuesday 30th January 2018
(6 years, 9 months ago)
Public Bill CommitteesRead Full debate Trade Bill 2017-19 View all Trade Bill 2017-19 Debates 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
(6 years, 9 months ago)
Public Bill CommitteesRead Full debate Trade Bill 2017-19 View all Trade Bill 2017-19 Debates 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: 7 / 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.
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The Committee divided: - Ayes: 2 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 7 / 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: 2 / 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: 2 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
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
(6 years, 9 months ago)
Public Bill CommitteesRead Full debate Trade Bill 2017-19 View all Trade Bill 2017-19 Debates 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.
Taxation (Cross-border Trade) Bill (Sixth sitting)
(6 years, 9 months ago)
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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 Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Wragg, Mr William
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Chair
I remind the Committee that with this we are discussing the following:
Amendment 42, in schedule 4, page 66, line 6, leave out from “dumping” to end of line 7.
This amendment is consequential on Amendment 41.
Amendment 43, in schedule 4, page 66, line 7, at end insert—
“(3A) The provisions of sub-paragraph (3) are subject to the provisions of sub-paragraphs (3B) and (3C).
(3B) If the TRA finds that the dumping has been fully or partially caused by market distortions affecting the prices of raw materials or other industrial inputs paid by the exporting producers, the estimated anti-dumping amount shall be the margin of dumping as determined in accordance with sub-paragraph (3)(a).
(3C) If the TRA finds that there is an inadequate level of social and environmental protection in the exporting country, the estimated anti-dumping amount shall be the margin of dumping as determined in accordance with sub-paragraph (3)(a).”
This amendment provides for the anti-dumping amount to be the margin of dumping in certain specified circumstances.
Amendment 44, in schedule 4, page 66, line 8, leave out paragraph (4) and insert—
“(4) For the purposes of sub-paragraph (3)(b) the TRA shall, in determining the amount which it is satisfied would be adequate to remove the injury described in that provision, take account of all elements of the material injury being caused to the UK industry, including, but not limited to, the impact of reduced sales volumes, price suppression and curtailment of investment.
(4A) Regulations may make further provision for the purposes of sub-paragraph (4).”
This amendment makes provision on the face of the Bill for the main factors to be considered in determining the amount for the purposes of paragraph 14(3)(b).
Amendment 49, in schedule 4, page 69, line 18, leave out from “dumping” to “in” in line 19.
This amendment removes the reference to the amount of the subsidy as an upper limit on the anti-dumping amount in the recommendation under paragraph 18.
Amendment 50, in schedule 4, page 69, line 22, leave out from “dumping” to end of line 23.
This amendment is consequential on Amendment 49.
Amendment 51, in schedule 4, page 69, line 23, at end insert—
“(4A) The provisions of sub-paragraph (4) are subject to the provisions of sub-paragraphs (4B) and (4C).
(4B) If the TRA finds that the dumping has been fully or partially caused by market distortions affecting the prices of raw materials or other industrial inputs paid by the exporting producers, the anti-dumping amount shall be the margin of dumping as determined in accordance with sub-paragraph (4)(a).
(4C) If the TRA finds that there is an inadequate level of social and environmental protection in the exporting country, the estimated anti-dumping amount shall be the margin of dumping as determined in accordance with sub-paragraph (4)(a).”
This amendment provides for the anti-dumping amount to be the margin of dumping in certain specified circumstances.
Amendment 52, in schedule 4, page 69, line 24, leave out paragraph (5) and insert—
“(5) For the purposes of sub-paragraph (4)(b) the TRA shall, in determining the amount which it is satisfied would be adequate to remove the injury described in that provision, take account of all elements of the material injury being caused to the UK industry, including, but not limited to, the impact of reduced sales volumes, price suppression and curtailment of investment.
(5A) Regulations may make further provision for the purposes of sub-paragraph (5).”
This amendment makes provision on the face of the Bill for the main factors to be considered in determining the amount for the purposes of paragraph 18(4)(b).
Peter Dowd (Bootle) (Lab)
I will continue not only to move amendment 41, but to look after the interests of parliamentary democracy and British industry. It is good to see you in the chair again, Mrs Main.
I started to talk about the creation of the mandatory lesser duty rule, which instead results in lower duties that in some cases may not reflect the actual injury. It is labour intensive for the investigating authority and it does not reflect the full level of market distortion. It is also worth pointing out that a small minority of World Trade Organisation members use a mandatory lesser duty rule. The EU is moving to a conditional application because it has seen weaknesses in having a mandatory lesser duty rule. If the UK adopts a mandatory lesser duty rule, our trade remedies will be, in effect, an outlier.
The incorporation of amendments 41, 42, 43, 44, 49 and 50, 51 and 52 into the Bill would ensure that UK trade remedies post-Brexit will closely mirror the evolving EU practice, whereby the lesser duty rule will not be applied in anti-subsidy cases, or in fact in anti-dumping cases, where state-distorted raw material markets have been a factor in enabling or aggravating dumping. Reflected in our amendments is the rule that is practised by the EU but not mandatory under the WTO, which states that
“duties should be calculated to remove either the amount of dumping/subsidy found, or the injury found, whichever is the lower.”
The amendments lay out specific circumstances where the margin of dumping would be applied over a lesser duty rule. These circumstances include where the Trade Remedies Authority finds that the dumping of goods is directly linked to market distortions that affect the price of raw materials, for example in the case of Chinese steel, which is heavily subsidised by the state, and where it finds inadequate levels of social and environmental protection in the exporting country. These specific circumstances mirror the current regulation that the EU follows when determining trade remedies. In a sense, the amendments try to be in the spirit of that.
The Government have offered no evidence of why a mandatory lesser duty rule would be beneficial in comparison with the flexibility to exercise a lesser duty rule on a case-by-case basis. We all know from the evidence session that a representative from the trade unions, and others who work in key sectors pointed out that they had seen no evidence that a mandatory lesser duty rule works, is desirable and that the UK needs it. The amendments go to the heart of trying to deal with that particular issue.
Currently, only nine of the 30 remaining anti-dumping users in the WTO have a mandatory lesser duty rule. They include: Australia, Brazil, India, Israel, New Zealand, Turkey and Thailand. Only three have both the public interest test and a mandatory lesser duty rule, which is what schedule 4 proposes. That includes the EU, Brazil and the Eurasian Customs Union. Detailed evidence given by Cliff Stevenson to the Department for Business, Energy and Industrial Strategy using the Eurostat update looked at four cases where the lesser duty rule was applied over the dumping rate. In the case of the dumping of cheap aluminium road wheels from China, to which I referred earlier in relation to TUC evidence, the EU adopted the lesser duty rule in 2010, with the injury margin of 22.3%. It is important to look at that in relation to the amendment.
The dumping margin permitted by the WTO was from 23.8% to 67.7%, meaning that the margin adopted was 1.5% less than the lowest estimation of the dumping margin. According to Stevenson’s study, the EU’s adoption of the lesser duty rule has had no impact on the volume of cheap aluminium road wheels imported into the EU from China. We have tabled the amendments because we do not believe that the framework—skeleton or otherwise—addresses the issue.
In the case of ceramics, the EU introduced trade remedies in late 2010 against the import of continuous filament glass fibre products from China. Again, it chose to adopt a lesser duty rule when investigating the injury level. The injury margin was set between 7.3% and 13.8%, while the dumping margin permitted by the WTO is between 9.6% and 29.7%. The rate adopted by the EU is therefore at least 2.3% below the dumping margin. Stevenson’s research shows that the EU’s trade remedies have had little impact on the importation of continuous filament glass fibre from China; since they were adopted, rates have largely remained consistent. Our amendments are a genuine attempt to deal with that problem.
Some have argued that the adoption of the lesser duty rule protects the consumer against being ripped off when the dumping margin is calculated and added to the price of the products imported. However, the claim that prices do not rise significantly because tariffs are imposed at too high a rate was dispelled clearly, compellingly and authoritatively by Gareth Stace, director of UK Steel, in his evidence to us last week:
“I have an example. In the hot rolled coil case recently—hot rolled flat is used for car bodies…the injury margin was 17.5% and the dumping margin was 29%.”
The lesser duty rule was applied by the EU. Gareth Stace continued:
“That is a difference of 11%...If we think of a luxury car that cost €45,000…if the lesser duty rule was not applied in this case, it would increase the value of the €45,000 car by €16.”––[Official Report, Taxation (Cross-border Trade) Public Bill Committee, 23 January 2018; c. 71-72, Q109.]
Disapplying the mandatory lesser duty and giving the Trade Remedies Authority the flexibility to apply a higher dumping margin if necessary will not mean sudden runaway costs being handed on to the consumer—quite frankly, I consider that a myth that needs to be dispelled, preferably as soon as possible. Importantly, higher dumping margins will be considered only when dealing with heavily distorted economies.
The amendments would ensure that the United Kingdom has trade remedies that maintain free and liberalised trade, as well as providing a safety valve to UK producers and manufacturers. That, in turn, will have a positive impact on consumers. We seek not to introduce protectionist measures, but to ensure a level playing field for UK manufacturers. We want to protect the steel industry, for example; my hon. Friend the Member for Scunthorpe has made that point on many occasions and he is absolutely right, as I know his constituents recognise. Our amendments would provide a remedy to the unfair competition that arises when overseas manufacturers do not play by the same fair rules as UK manufacturers. Giving the Trade Remedies Authority the power to establish the correct level of injury is so important.
I exhort hon. Members to consider our amendments carefully, and the Minister to accept them in the spirit in which they are intended.
Nic Dakin (Scunthorpe) (Lab)
It is a pleasure to see you in the Chair again, Mrs Main. In supporting the amendments tabled by my hon. Friend the Member for Bootle, I, too, draw on the evidence of Gareth Stace, director of UK Steel. He was compelling when he said:
“One of the aims of Brexit was to strip things away, make things more simple and have less people employed working on these things”.
If Brexit is about taking the opportunity to get some sort of bounty that makes things better, herein lies an opportunity for us to do that.
Mr Stace went on to say that
“calculating the dumping margin is a really easy process. It can be done fairly quickly. It does not need a lot of people to do it and does not need a lot of work from industry and the Government. Calculating the injury margin does. It is a bit of a black box—you do not know what is going to come out of it—whereas the dumping margin is very transparent.”––[Official Report, Taxation (Cross-border Trade) Public Bill Committee, 23 January 2018; c. 71-2, Q109-10.]
That is why the EU is going for a conditional application of the lesser duty rule, which is the right direction of travel. It makes it slicker and simpler, and still effective. There is an opportunity for the UK to do the same—or even better.
To look at comparators in terms of timeliness, speed and pace of decision making, systems in the US are put in place within 45 days—we all commend the US as a bastion of free trade, yet that is how it ensures its industry is not disadvantaged in particular ways—whereas until recently in Europe it had been after 9 months. There is an opportunity for the UK to get things slicker and faster than for the EU currently, with one such way being to move towards conditional use of the lesser duty rule, as is implicit in the amendments. I hope that the Government are listening and willing to take this opportunity.
The Parliamentary Under-Secretary of State for International Trade (Graham Stuart)
It is a pleasure to serve under your chairmanship, Mrs Main, and to be in this reassembled Committee, probing and holding the Government to account on this excellent framework Bill. The amendments in the group look to set the parameters around what the TRA can recommend by way of anti-dumping and anti-subsidy measures. I begin by reassuring the Committee that the UK trade remedies system will provide robust protections for UK industries where they are suffering injury because of dumped or subsidised imports, or because of unforeseen surges in imports.
Amendments 41 and 49, and their consequential amendments, would remove the requirement that provisional anti-subsidy measures recommended by the TRA must not exceed the subsidy margin. WTO rules clearly provide that anti-dumping measures cannot exceed the margin of dumping and anti-subsidy measures cannot exceed the amount of subsidy. That is a strict requirement, applying to both provisional and definitive measures, which is reflected in schedule 4. Let me clarify that our policy intention is simply to incorporate those WTO rules and not to provide that the amount of subsidy somehow offsets the dumping margin, or vice versa—I think there may have been some misunderstanding of the Bill’s phrasing.
Schedule 4 relates to both anti-dumping and anti-subsidy investigations, which are largely identical. That is why the provisions refer to both the margin of dumping and the amount of subsidy. By removing the requirements around the maximum amount of anti-subsidy measures, the amendments would mean that the Bill would not be compatible with WTO rules. I am sure that was not the intention.
Amendments 43 and 51 would restrict the application of the lesser duty rule in cases of raw material distortions and when the exporting country does not respect adequate levels of social and environmental standards. The lesser duty rule achieves our objective of protecting UK industry by ensuring that it can operate on a fair playing field without causing unnecessary injury to UK consumers and downstream industry.
The evidence shows that trade remedy measures are effective and have a lasting impact even with a lesser duty rule in place. Anti-dumping duties on a range of important steel products determined under the lesser duty rule have been very effective in curtailing dumped imports from China. For example, in the year to August 2017, UK imports from China of rebar hot-rolled and cold-rolled flat products were down by more than 90% compared with the year leading up to their respective anti-dumping investigations. There is, therefore, no evidence of a need to remove the lesser duty rule in the case of raw material distortions. Measures are already clearly effective in addressing the injury caused by those practices.
Peter Dowd
I completely take those points in the spirit of co-operation and conciliation that we are trying to get in the Bill. This is not about one side attacking industry and the other side protecting consumers. It is about the balance. That is the question we have to ask ourselves today: does the Bill give the balance we need? With our amendments, we are trying to say that we believe it will give the balance between producers and consumers. The Minister talked about it being an untested concept, but this whole Bill is an untested concept. This whole experience and journey we are having in relation to Brexit, which we genuinely have to try to make the best of, is the father of untested concepts. This untested concept is just one of the many little ones compared with the totality. We are in a complicated, three-dimensional landscape. That is the nature of the beast and of where we are, and we have to try to make the best of it.
Our amendments are genuinely an attempt to listen to what the witnesses were saying to us. I know we can cherry-pick evidence here and there, but the tone that we got from the witnesses, from those who have subsequently put other evidence in and from our own backgrounds—our knowledge and context of these issues, and the discussions that we have all had outside this room—leads us to believe that the Government, in the round, are perhaps going a step too far. Our amendments are an attempt to bring the balance back. There does not appear to be any significant evidence from what I can see that the producer is in any significant way disadvantaged, because we were clearly told that it was a convoluted and complicated market. I understand where the Minister is coming from, but we have a different perspective.
My final point is that in their evidence many of the witnesses were concerned about the Government not listening to them. They were, in a sense, coming to Parliament as some sort of intermediary, to get Parliament to try to act on their behalf and to be a voice with the Government. That is why they were saying to us that they needed the parliamentary protections. That has been part of our push.
The amendments balance the needs of both producer and industry, and on that basis, while I acknowledge everything the Minister said, I do not think we are able to withdraw them. We have to make that point clearly and unambiguously.
Graham Stuart
We have not heard any evidence of the lesser duty rule not working in practice. I have been able to rebut any suggestions. The hon. Member for Scunthorpe said that the US imposes measures in 45 days. As everyone on this Committee who is not as busy as he is will know from reading their papers, that is simply not true. The WTO rules prevent the imposition of provisional anti-dumping and anti-subsidy measures before day 60 of the investigation. The US makes a preliminary injury determination in 45 days, but that does not mean the imposition of measures. That was completely incorrect, and I am sure the hon. Gentleman will want to correct the record. The average time that the US takes to impose provisional measures is just under five months, and in most steel cases it takes around six months.
Nic Dakin
The Minister is absolutely right that, after 45 days, an interim decision is made. That essentially gives confidence to the industry. The amendments are an opportunity for the Government to take measures quicker. At the height of the steel crisis, the lesser duty rule did not help. It took a long time for things to come in. The problem is time and space. The other thing is that the UK will be one of very few countries in the world that apply the lesser duty rule without exception if it goes ahead in this way—out of step and out of place. This is an opportunity to be in the right place.
Graham Stuart
The hon. Gentleman accepts that measures are not imposed in 45 days. He presented no evidence—I believe there is none—to suggest that the lesser duty rule in any way slows things down, so the slowness of the process in the EU responding to the steel crisis is an entirely separate element. I know he is scrupulously fair and always seeks to be, so he would recognise there is no linkage, although he may have wished there to be one to bolster an argument that has otherwise turned out to have no basis whatsoever. On that basis, I ask for the amendments to be withdrawn.
Question put, That the amendment be made.
Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
I beg to move amendment 45, in schedule 4, page 66, line 24, after “must” insert “within two weeks”.
This amendment prescribes a period within which the Secretary of State must decide whether to accept or reject a TRA recommendation.
The Chair
With this it will be convenient to discuss the following:
Amendment 47, in schedule 4, page 68, line 42, leave out from beginning to “to” and insert
“will normally be 5 years unless the TRA considers that a shorter period will suffice”.
This amendment creates a presumption that the specified period will be 5 years.
Amendment 48, in schedule 4, page 69, line 7, leave out from “20(4)(c))” to end of line 8.
This amendment removes the provision for the TRA to recommend an earlier date than the day after the day of publication of the public notice.
Amendment 53, in schedule 4, page 69, line 30, leave out from “that” to end of line 34 and insert
“an anti-dumping amount or a countervailing amount should apply to goods from the day after the date of publication of the public notice under section 13 giving effect to the recommendation.”
This amendment removes the provision for the TRA to recommend an earlier date than the day after the day of publication of the public notice.
Amendment 54, in schedule 4, page 70, line 9, after “must” insert “within two weeks”.
This amendment prescribes a period within which the Secretary of State must decide whether to accept or reject a TRA recommendation.
Jonathan Reynolds
It is a pleasure to serve under your chairmanship, Mrs Main. I will speak to amendments 45, 47, 48, 53 and 54, relating to time periods. I draw the Committee’s attention in particular to amendment 45, which prescribes a period within which the Secretary of State must decide whether to accept or reject the TRA recommendations—in this case the recommended period is two weeks—and amendment 47, which corrects the presumption that the specified period will be five years. That relates to the amount of time for which special measures regarding TRA recommendations will be enforced.
The general principle of the amendments we seek today is to provide greater clarity and certainty to UK industry about the terms of engagement with the new TRA. As I believe we have placed on the record, this is a framework Bill—it is a piece of legislation where many key details for the trading regime in future are unidentified. Therefore, we remain somewhat vague about what the modus operandi of the TRA will be. Too much is being left to the whims of that authority and the Secretary of State. We believe it is important to set out guidelines at this stage that give greater clarity to the role and scope of TRA activity.
One way to achieve certainty is to bring an easily-observed, enforceable time limit on the activities both of the TRA and the Secretary of State and their relationship with each other. These amendments have been brought forward in consultation with the Manufacturing Trade Remedies Alliance, which has significant insight into what UK industry needs from future trade defence policy.
Amendments 45 and 54 would mandate the Secretary of State to make a decision on TRA recommendations within two weeks. As the MTRA highlights, although there is provision in the Bill for a deadline to be brought on the TRA through secondary legislation at various points in an investigation, there are none specified for the Secretary of State. In theory, that would allow decisions to be delayed indefinitely. Let us imagine a situation in which the UK is led by such an indecisive Government that members of the Cabinet could not agree with each other on our future trading relationships—that would be a problem. The scenario is hard to envisage, but we should surely safeguard against it.
In today’s globalised economy, markets and events can move much faster than we would ever have anticipated. In a short time, key UK markets could suffer serious injury if appropriate remedial action were not taken quickly. In fairness to Ministers, we have heard that speed of decision-making is something they are looking to achieve. This is surely the rationale behind the Government’s decision to stipulate deadlines on TRA investigations, to prevent time lags occurring which could bring that about. In the Opposition’s view, it seems ineffective to include these requirements but not mirror them for the Secretary of State in accepting the recommendations of TRA investigations. That raises a concern that there could be an option simply to kick the can down the road when a politically difficult decision presents itself. We believe that the MTRA recommendation of a two-week deadline in which the Secretary of State must reach a decision is reasonable and would protect against such abuses.
In a similar vein, the Bill specifies a maximum five-year period but no minimum with regard to the time considered necessary for duties to be imposed, where that forms part of the TRA’s recommendations. It merely states that duties should be imposed for such a period as the TRA considers necessary. However, as the MTRA points out, it is considered normal practice globally for anti-dumping and anti-subsidy measures to last for a minimum of five years, including within key partner markets in the EU and the US. The alliance suggests, therefore, that the default duration of duties should be five years, starting from the date of definitive measures. The Opposition agree.
It is vital to add certainty where we can for UK industry and that we align with our global trading partners to gain consensus and be as consistent as possible on the universally accepted World Trade Organisation principles. I therefore call on the Committee to support the amendments.
Graham Stuart
Three groups of amendments need a response. I will start with amendments 45 and 54, which seek to impose a two-week time limit on the Secretary of State’s decision to accept or reject the TRA recommendation. I will then turn to amendment 47, which seeks to create a presumption of five years as the normal, rather than the maximum, duration of definitive measures. Finally, I will address amendments 48 and 53, which seek to ensure that the duration of definitive measures is not affected by the length of any provisional measures that might have been applied against the same imports.
On amendments 45 and 54, on receipt of the TRA recommendation, it is the responsibility of the Secretary of State to respond in a timely manner, while ensuring that the public interest aspect of their role is given due weight. We fully recognise that a swift response is crucial to UK industry, as the hon. Gentleman said, so that the injury being caused by unfair trade practices can be halted. However, in some cases there will inevitably be difficult matters that the Secretary of State will need to reflect on. Although we expect that such matters will be rare, it is important that he has full opportunity thoroughly to consider the issues in making his decision. That might lengthen the process, but it is important to do the job well rather than quickly. To place an arbitrary two–week time limit on the Secretary of State is, therefore, not appropriate. Even though that duration might be sufficient in most cases, the legislation must provide flexibility for cases in which complex considerations must be made in the public interest.
As the hon. Gentleman is aware, once the investigation has been concluded and measures have been proposed by the TRA, the pressure on the Secretary of State quickly to come forward with the adoption of the measures to protect British industry will be great. I perhaps lack the hon. Gentleman’s imagination, but I find it hard to imagine a situation in which the pressure on the Secretary of State to get on with it would not be much greater than a pressure to delay and put it into the long grass, as the hon. Gentleman said. I think we can be confident that any Secretary of State under any Government would wish to make the decision as quickly as reasonably possible.
For those reasons, I do not agree with an arbitrary two-week limit. I understand why the hon. Gentleman has tabled the amendment and I hope it is a probing one. I understand what lies behind it, but I hope I have reassured him.
On amendment 47, it is important to note that the WTO agreements set out that measures may remain in force for up to five years. They do not provide that five years is the default. In fact, they specifically set out that measures should remain in force only for as long as, and to the extent, necessary to counteract the dumping or subsidisation that is causing injury. The TRA analysis may suggest that a period shorter than five years will be sufficient to counteract injury, and in such cases the TRA should set an appropriate duration accordingly.
On request, the TRA will initiate an expiry review before the termination of any measures, provided that UK industry can demonstrate that injury would continue or recur if the measures were to expire. If the review finds that continued application of measures is required to maintain sufficient protection for UK industry, the measures will be continued. I assure the hon. Gentleman that industry is adequately protected without the need for the amendment and I ask him to consider withdrawing it.
Finally, on amendments 48 and 53, I understand the hon. Gentleman’s concerns, but I have to reassure him that that which he fears is not the intention of the provisions. The WTO agreements allow in certain circumstances for trade remedies to be applied from a date prior to the date of the application of definitive measures. The purpose of the provisions is to allow us to reflect that in secondary legislation, not to shorten the duration of definitive measures. We are not seeking to shorten the duration of definitive measures, but are seeking to allow trade remedies to be applied from a date prior to the date of those measures.
The unintended consequence of the Opposition amendments would be to prevent the TRA from collecting duties for a period before the date of the section 13 notice, even though this is permissible under the WTO agreements in limited circumstances. I entirely understand why the hon. Gentleman tabled the amendment and what he was seeking to probe. I hope my explanation has been sufficient to make him see that that which he desires will not be delivered by the amendments.
We believe that this is a necessary provision. We have been clear that we want to incorporate all of the protections permitted under WTO rules into the UK’s trade remedies framework. Removing the ability to do that could be detrimental to the protections available to UK industry. It is on that basis that I ask him to consider withdrawing the amendment.
Kirsty Blackman (Aberdeen North) (SNP)
I express the Scottish National party’s support for the Opposition amendments. It is sensible that we are asking the Secretary of State to make a decision within a relatively short time period because, as has been stated, we do not want that to be dragged out for any significant length of time. It is reasonable that, after a significant investigation has taken place—and the TRA’s investigations will be significant—the Minister will quickly review the evidence presented and make a decision in the shortest possible time.
On amendment 47 and the five-year period, I have the Department for International Trade call for evidence on the current EU trade remedy measures. I can see possibly one that is in place for less than five years. In fact, many have been place for over a decade because they have been renewed. It is very unusual in that document, which lists all the trade remedy measures currently in place, for any of them to have a review date of less than five years. It is completely reasonable that the Opposition are asking for the starting period default to be five years, and for the TRA to decide on a lesser period in compelling circumstances. Given the number of these measures that have been extended and how few of them have fallen at the five year period, I suggest that five years is likely to be a reasonably short period for trade remedies to be in place, and that it is sensible for them to extended as a result.
We are talking about the trade remedies body doing substantive investigations and coming up with a huge amount of evidence. Asking it to do so on more than a five-yearly basis would probably be adding to their workload unnecessarily. The Opposition’s suggestion is incredibly sensible in that regard. The presumption should be five years, and the TRA should make decisions for it to be less if it believes that that would be appropriate.
Jonathan Reynolds
I appreciate the Minister’s response but it is our intention to move these amendments to the vote.
In respect of amendment 45, the Minister has already talked about the political pressure that has almost certainly been brought in the event of the TRA making a determination. However, it is also true that there are many examples we could go through of Governments resisting such political pressure. We should bear in mind that, in our discussions earlier, the Government effectively brought back a new constitutional procedure in order to stress the need for speed of announcements. Therefore, it does not seem consistent this afternoon to say that there is very little flexibility offered by the need for speedy resolution of cases.
Amendment 47 offers flexibility where five years would not be appropriate, but as the hon. Member for Aberdeen North just said, given the standard length of time these measures tend to be in place, this is—as industry has told us—a fairly modest measure, making it consistent with industry practice. We will press the amendment to a vote, Mrs Main.
Peter Dowd
I beg to move amendment 46, in schedule 4, page 67, line 6, at end insert—
‘(6A) For the purposes of this Schedule, references to the “public interest” are to be construed as relating to the security of the United Kingdom and its citizens.”
This amendment provides a definition of public interest for the purposes of Schedule 4.
The Chair
With this it will be convenient to discuss the following:
Amendment 60, in schedule 4, page 79, line 15, at end insert—
‘(2A) References in this Schedule to the “public interest” are to be construed in accordance with paragraph 15(6A).”.”
This amendment is consequential on Amendment 46.
Amendment 71, in schedule 5, page 85, line 39, at end insert—
‘(5A) For the purposes of this Schedule, references to the “public interest” are to be construed as relating to the security of the United Kingdom and its citizens.”
This amendment provides a definition of public interest for the purposes of Schedule 5.
Amendment 77, in schedule 5, page 97, line 38, at end insert—
‘(2A) References in this Schedule to the “public interest” are to be construed in accordance with paragraph 13(6A).”.”
This amendment is consequential on Amendment 71.
Peter Dowd
The amendment is about the public interest and I think the public have a particular interest here. The amendments to schedules 4 and 5 would define the public interest as referring strictly to the national security of the United Kingdom and its citizens. As drafted, the measures in schedules 4 and 5 would create a public interest test that would allow the Secretary of State to veto any recommendations on the adoption of trade remedies from the Trade Remedies Authority on public interest grounds.
To be clear, the WTO does not require the UK to adopt a public interest test. In fact this would put the UK in an extreme minority, as only other multi-national members of the WTO, such as the EU, and Brazil currently operate a public interest test. If we consider countries operating both a public interest test and a mandatory lesser duty rule, that puts the UK in an even smaller and pretty selective group. All the countries that currently have a form of public interest also clearly define what the public interest actually is. We do not appear to do that.
Several witnesses who gave evidence last Tuesday pointed out that the establishment of a public interest test as outlined in schedules 4 and 5 is overkill at best, and overreach at worst. The representatives of the UK ceramics, steel and chemicals industries were divided on the number of tests the Government have set out in schedules 4 and 5 and which have to be met before trade remedies can be issued. The director of UK Steel counted as many as six in the current provisions, with five economic tests and one public interest test. That is why we want to narrow the focus, as the Government do not appear to have done so, although they might say that they will.
Although there is clearly a case for assessing the economic impact of trade remedies on key sectors of the economy and certain exports, the establishment of an undefined public interest test is more worrying. Currently, schedules 4 and 5 would give the Secretary of State for Trade carte blanche to define what is and is not in the public interest. The lack of a definition means that the public interest is largely subjective. It puts the Secretary of State in a similar position to his opposite number in Australia, where the Trade Minister, according to a report from the Department for International Trade, has “unfettered discretion” to choose not to impose measures. Using those vague new powers, could not the Secretary of State argue that flooding UK markets with cheap chlorinated chicken from the US is in the public interest, or that cheap aluminium wheels from China would lower the cost of cars and therefore also be in the public interest?
It is not only the Opposition who are concerned about the Government’s lack of clarity about what might be considered to be in the public interest. In her evidence to the Committee, Dr Cohen, chief executive of the British Ceramic Confederation, expressed her alarm at the prospect that the test could be used to justify a future free trade agreement with China based on levels of potential inward investment. It appears that an undefined test could lead quickly to a scenario in which the public interest is not only conflated with the interests of consumers, but wholly dependent on the personal perceptions and considerations of whoever holds office in the Department for International Trade. Our amendment therefore tries to define public interest more tightly.
The EU’s anti-dumping regulation defines the public interest as being
“based on an appreciation of all the various interests taken as a whole, including the interests of the domestic industry and users and consumers”.
We think that definition is too broad and open to interpretation. Amendment 46 and the consequential amendments would instead require the Government to adopt a definition of public interest for the purposes of schedules 4 and 5 that relates specifically to national security. Under such a definition, the Secretary of State’s power to veto TRA trade remedy recommendations using a public interest test would be constrained to situations involving harm to national security.
The Opposition consider that in an extreme case, such as the United Kingdom going to war, national security considerations would supersede and far outweigh the arguments for trade remedies. Any discussion of national security would have to involve other Cabinet members, including the Defence Secretary, the Home Secretary, the Foreign Secretary and the Prime Minister. A more consensual approach would have to be reached, either by the Cabinet or by a Cabinet Sub-Committee, to establish whether the suggested remedies would harm national security interests.
Closely restricting the public interest test to issues of national security arguably leaves a broad definition, which some argue the Government could seize on and push to the very limit—for example, the Secretary of State could reject trade remedies on Chinese steel under the guise of national security by claiming that cheap steel from China is needed for energy security and the next generation of nuclear power plants—but I believe that the tight definition outlined in our amendments would limit that ability. Furthermore, I suspect that few Cabinet colleagues would support such a crude interpretation of national security, as it could interfere with their briefs and would only raise further questions.
An undefined public interest test would give the Secretary of State vast powers that could easily lead to abuse. Our amendments therefore seek to define “public interest” sensibly to constrain those powers, to open a wider discussion between the Secretary of State and other Cabinet members, and to limit use of the public interest veto to times of national emergency. However, we are not just pushing on regardless. If the Minister wishes to elaborate on what “public interest” could mean—the extent of it, who decides whether to invoke it, the process and steps for arriving at such a decision, and the checks and balances in place—we will be more than happy to listen.
Graham Stuart
As the hon. Member for Bootle has explained so fluently, his amendments would make it clear that the Secretary of State could use public interest grounds to reject the TRA’s recommendations for the imposition of duties only in limited circumstances, namely those in which national security was deemed to be at risk.
It may help hon. Members if I briefly run through the interaction of checks and balances in the trade remedies system. As we have discussed, the TRA is required to conduct an economic interest test when deciding whether to recommend the imposition of measures. There is a presumption in favour of the imposition of duties in respect of anti-dumping and anti-subsidy measures. However, it is not for the TRA to take into account wider public interest considerations such as matters of national security, as the hon. Gentleman mentioned, nor to determine whether the imposition of duties would run counter to wider Government policy.
When the Secretary of State receives the TRA’s recommendations, he will satisfy himself that the TRA has properly weighted the individual elements of the EIT and that imposing duties is in the public interest. Only where there is a strong argument against following the TRA’s recommendations will the Secretary of State reject putting measures in place. In the exceptional case where he does, he will be required to explain his decision to Parliament.
The hon. Gentleman mentioned Gareth Stace of UK Steel and his evidence. It is worth putting on the record that when discussing a public interest test, he said
“you need a public interest test at the end, because there may be those extraordinary circumstances where it is or is not in the public interest to apply or not apply tariffs.”––[Official Report, Taxation (Cross-border Trade) Public Bill Committee, 23 January 2018; c. 73, Q111.]
So in fact, UK Steel gave evidence supporting public interest tests.
Other Governments, including those of the United States, Canada, Australia and New Zealand, and the EU take public interest into account when deciding whether to impose measures, so we are not acting out of step with other countries. I dispute what the hon. Gentleman said.
Peter Dowd
Does the Minister at least acknowledge that, notwithstanding what he has said, those countries have a more clearly defined test? Whether he agrees with it or not, their public interest test is a bit tighter and clearer. Ours appears to be rather loose, to say the least.
Graham Stuart
It is not really a test. It is a final common-sense check that the measures will not run against our national security interests or wider Government policy, as the hon. Gentleman set out—all the pressures that we discussed in a previous debate. The pressure will be on the Secretary of State. Industry will call for the inquiry and participate in the TRA’s investigation, then the TRA will come out and say that the economic interest test and the market share threshold have been passed and that it has decided that we need to impose these measures. After that, the Secretary of State will give it a sense check, and in extraordinary circumstances might say no.
In his recent article for UK Trade Forum, George Peretz QC said that such decisions are
“best made by politicians who can, and will have to, defend those decisions in the political arena.”
It is right that there is a role for Ministers to take those public interest considerations into account and intervene if imposing measures is not in the UK’s wider interest. It is also right that they are accountable to Parliament if they do so. The system that we have proposed, whereby an independent body carries out the investigation and makes recommendations, but Ministers ultimately have responsibility for acting in the country’s best interest, is the right one. I hope hon. Members agree and that the hon. Gentleman will agree to withdraw the amendment.
Peter Dowd
As I said earlier, when we are talking about very important matters, we are prepared not to push amendments to a vote in the spirit of co-operation and conciliation. This is one of those occasions, so I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Amendment proposed: 47, in schedule 4, page 68, line 42, leave out from beginning to “to” and insert
“will normally be 5 years unless the TRA considers that a shorter period will suffice”.—(Jonathan Reynolds.)
This amendment creates a presumption that the specified period will be 5 years.
Question put, That the amendment be made.
Anneliese Dodds (Oxford East) (Lab/Co-op)
I beg to move amendment 55, in schedule 4, page 70, line 39, at end insert—
“(2A) Reviews under this paragraph shall only be initiated after a period of at least 12 months has elapsed since the measures subject to that review were implemented in accordance with paragraph 20(4), except that a review requested by a new supplier to the United Kingdom of the level of duties applicable to that new supplier may be initiated earlier.”
This amendment provides for a general minimum period of 12 months prior to initiation of a review except in prescribed circumstances.
The Chair
With this it will be convenient to discuss amendment 56, in schedule 4, page 71, line 33, at end insert—
“(4A) All measures implemented in accordance with paragraph 20(4) will continue to be applied during the conduct of any review under this paragraph into those measures.”
This amendment provides for measures to remain in place while a review is conducted of them.
Anneliese Dodds
It is a pleasure to serve with you in the Chair once again, Mrs Main.
Like many of the Opposition’s amendments, amendments 55 and 56 try to improve the legal certainty in the Bill. They would ensure that reviews could not normally be opened into measures that were less than one year old, in line with EU practice, and that duties remained in place while reviews were conducted. With no restriction on the time period before which reviews can be initiated, the UK again appears to be ploughing its own furrow and going against the international direction of travel. I note from much of the previous debate and the comments from the hon. Member for Aberdeen North, who rightly indicated that the average cycle for this kind of remedy is five years, that it is a long-term cycle, and without the expectation of review before the remedy having been in place for one year.
Since reviews can be initiated after an interested party asks for one, WTO rules require a reasonable time to have elapsed since the imposition of definitive measures, and that has almost always, from what I can see, been interpreted as being at least one year. The only exception seems to be the US, where the standard review period is one year, but that is apparently unusual. In the EU, at least a year must have passed.
The problem with earlier reviews is that they could be administratively costly, after having put a remedy into action, and that they would reduce the predictability of the trade remedies regime. The latter is surely essential for the long-term health of British manufacturing, which needs to know that the business environment will not change radically in the very short term. With uncertainty appearing to be one of the factors underlying the current low levels of private sector investment in the UK, we surely must ensure that trade remedies are proportionate and do not make our British firms less secure than if they were based in other industrialised countries.
Kirsty Blackman
The hon. Lady makes a compelling case and I want to reassure her that Scottish National party Members will support the Labour party in the incredibly sensible move it looks to make, particularly with amendment 55.
Anneliese Dodds
I am grateful to the hon. Lady for the SNP’s support. The amendments focus on trying to provide the certainty that the Bill lacks but which is present in other trade remedies systems. Will the Minister indicate whether the Government have considered inserting such a provision in the Bill, in line with international practice? If not, will he say why not, given that no other country seems routinely to allow a review before a year has passed?
Graham Stuart
Amendment 55 seeks to provide a timeline in relation to reviews of continuing application of an anti-dumping amount or countervailing duty amount. Amendment 56 asks that definitive anti-dumping and countervailing duties will continue to be applied during the investigation process of any review.
On amendment 55, let me start by explaining that there are a number of different types of reviews of definitive anti-dumping and countervailing duties, which apply in different circumstances—for example, to reflect the appearance of a new exporter, to address evidence that measures are being circumvented, or to review measures that are due to expire, to determine whether it is necessary to extend them. Reviews ensure that measures can be changed where and when appropriate. I recognise the desire for clarity regarding timelines in the review’s framework, but as demonstrated by the WTO agreements and EU rules, there is no uniform timeline that is appropriate for all review types.
The amendment is unnecessary, as it appears to apply to all review types, irrespective of the lack of uniform timelines currently applicable under the EU system. For example, it would not be beneficial to UK industry if it is required to wait 12 months before a circumvention review may be carried out. On amendment 56, paragraph 21(4)(b) already allows us to provide in secondary legislation that measures may be extended beyond five years where a review is being undertaken. However, an extension is not appropriate in every type of review—for example, the WTO specifically sets out that duties may not be applied during a new exporter review. Therefore it is more appropriate for this to be provided for in secondary legislation. The development of the review’s framework is still ongoing. It is intended that there will be targeted stakeholder engagement across the UK industry to discuss this issue in more detail, prior to setting out the details of the various review processes in secondary legislation. It is a complicated area, as my explanation of the unintended impact of these amendments shows. I therefore ask the hon. Member to withdraw these amendments.
Anneliese Dodds
I am grateful to the Minister for that explanation. My concern is that the fact that that period is not set within the Bill could lead to a situation where there is no certainty for producers about the length of time during which a remedy would remain in place. I take on board the Minister’s comments. I hoped that they would reduce some of those concerns at least, and I hope that he will accept the concerns we have been suggesting, given that, for certain types of review, other regimes have at least a year’s threshold before decisions can be reconsidered. I am sure the Minister understands that, without having such a set period, we have these concerns. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Anneliese Dodds
I beg to move amendment 57, in schedule 4, page 74, line 1, leave out “request” and insert “consider a request for”.
This amendment provides for the TRA to seek to apply price undertakings in response to a request to do so.
This is a tidying-up amendment. It provides for the TRA to seek to apply price undertakings in response to a request to do so. Our amendment seeks to clarify the precise role of the TRA within the process of application of undertakings. I should mention that this process can be complex and some stakeholders have understandably drawn attention to the problems of ensuring compliance with price undertakings. However, that is not exactly the focus of the amendment. Rather, we are concerned that the Bill seems to suggest that the TRA would be proffering different alternative undertakings.
International practice indicates that authorities arbitrate the different options for undertakings that are presented not by the authorities themselves, but by exporters. That is in line with WTO practice. Article VI of the general agreement on tariffs and trade 1994 and the agreement on the implementation of article VI—the “anti-dumping agreement” that we have referred to in Committee—explicitly authorise the imposition of anti-dumping measures by WTO members, as we know. Article 8 of the anti-dumping agreement includes the set of rules governing undertakings. It refers to the offering and acceptance of undertakings from any exporter—not by authorities themselves—to revise their prices or cease exports at dumped prices. The action is from the exporter, not from the authority.
However, the language in schedule 4 gives the active role to the TRA, referring to regulations giving the authority the ability to request an undertaking. From what I can see, this contradicts the language earlier in part 5 of the schedule that rightly refers to overseas exporters and relevant foreign Governments rather than the TRA offering undertakings. Our amendment would offer a helpful clarification about the role of the TRA, and help to prevent confusion. I hope the Minister will take this in the constructive way in which it is intended.
Graham Stuart
The amendment would mean that the use of undertakings would rely solely on an undertaking being offered by an exporter or a foreign authority, and would deny the TRA the ability to prompt the offering of an undertaking, as the hon. Lady set out in her speech. Our aim is to provide the TRA with the full suite of tools available under the WTO agreements. We must ensure that the TRA is equipped to deal with every possible future scenario.
The Government understand industry’s concern that it is more common practice—the hon. Lady rightly laid this out and is right to probe—for a foreign authority or an exporter to offer an undertaking than to be prompted into giving one by request. None the less, this power to request undertakings is not unusual, as it is set out in a WTO agreement, and adopted in EU regulations. This power is required to cater for certain situations that may arise. For example, the TRA may need to request an undertaking following a review where the level of undertaking needs to be varied, or where the UK is committed to seeking constructive remedies with a trading partner as part of a trade agreement. Therefore, removing this power would serve to undermine the TRA and the discharge of its functions, which I know is the exact opposite of what the hon. Lady would wish.
We would expect that the TRA will exercise this power only where necessary, which we envisage to be rarely. The secondary legislation under this power will outline these circumstances, and we will engage with stakeholders as we develop proposals going further. I hope that, by doing so, we will be able to answer any remaining concerns the hon. Lady has.
It is also worth stating that, as per the WTO agreements, following a request from the TRA, there will be no obligation for an exporter or a foreign authority to enter into such an undertaking that will further limit the power. Once a request has been made, and if an undertaking is subsequently offered, the TRA will still need to conduct an assessment of the undertaking and its terms and conditions to decide whether accepting it would be appropriate and whether it would be in the UK’s economic interest. The fact that the TRA requested the undertaking in the first place will not predetermine this assessment in any way. For these reasons, I ask the hon. Lady to consider withdrawing the amendment.
Anneliese Dodds
I beg to ask leave that the amendment be withdrawn.
Amendment, by leave, withdrawn.
Question proposed, That the schedule be the Fourth schedule to the Bill.
The Chair
With this we will consider:
New clause 15—Review of transitional measures—
“(1) Within three months of the passing of this Act, the Secretary of State shall undertake a review of the advantages and disadvantages of making provision under section 51(1) to secure that transitional measures are applicable on the same day that the tariff provided for in section 8 first has effect.
(2) For the purposes of this section, “transitional measures” are those anti-dumping duties, or anti-subsidy duties, or undertakings, as the case may be, that were applicable in the European Union on the day preceding the day referred to in sub-paragraph (1) to which subsection (3) does not apply.
(3) This subsection applies to any goods in respect of which the TRA has made a recommendation, prior to the date referred to in subsection (2), that injury to a UK industry in the goods would not be likely to occur if a transitional measure were not applied.
(4) The Secretary of State shall, as soon as reasonably practicable after the completion of the review under this section, lay a report of the review before the House of Commons.”
This new clause provides for a review of the case for the continued effect of EU trade remedies after introduction of the new standard import tariff and pending full implementation of the new arrangements under Schedule 4.
Graham Stuart
We have had a useful and interesting discussion about many of the elements in schedule 4. As I have said, the trade remedy system that we operate when we leave the EU will be fully compliant with our WTO obligations. The WTO agreements on anti-dumping, subsidy and countervailing measures set out the requirements that all members must meet to be able to impose either anti-dumping or countervailing measures. This schedule enshrines the key principles of both agreements into UK law. Further detail will be set out in secondary legislation.
I have already explained that this will be technical in nature. Indeed, amendment 25 is a good indication of the level, and amount of detail, that will need to be included, and it would not be appropriate for this to be in the Bill.
Schedule 4, therefore, provides power to the Secretary of State to set out in secondary legislation detailed provisions regarding how to establish dumping, subsidisation, injury and how to calculate those. The schedule includes technical provisions regarding the thresholds that must be met before the TRA may initiate an investigation, including the WTO criteria of what constitutes negligible and minimal. The Secretary of State can also set out detailed provisions about the conduct of investigations, including the information that is required, and of oral hearings; about the different types of reviews the TRA may undertake and their conduct and potential outcomes; about undertakings; about the suspension of measures where market conditions have temporarily changed; and about when and how particular measures may be reviewed and appealed. They are technical, as I said.
It is necessary to set all that out in secondary legislation so that the system is flexible enough to adapt should WTO case law or international best practice move on. I reassure hon. Members that the system will be fully WTO compliant. We will continue to engage with stakeholders as it is developed.
Graham Stuart
The hon. Gentleman is precisely right. As ever, he represents the steel interests in his constituency with assiduity, hard work and focus. He is right to say that we must ensure that measures in place to protect British industry continue smoothly after we depart the EU. That is exactly what the Government intend.
The Trade Remedies Authority will have the important role of reviewing the maintained measures so that they reflect the UK domestic market. The precise timing of reviews being carried out will depend on the terms of any agreement with the European Commission about an implementation period and on the outcome of the call for evidence, which will confirm the number and type of measures that will be maintained.
If the aim is to look again at the general policy to transition the existing EU measures that matter to the UK, that does not need to be revisited. If we take no action to maintain those measures when we leave the EU, they will no longer apply to products arriving into the UK with immediate effect. That would leave important UK industries, including the steel, ceramics and chemicals sectors, vulnerable to dumped and subsidised imports. A review of the policy approach would create uncertainty for UK industry as to whether measures will be maintained. Stakeholders have been clear that it is vital to transition existing measures to maintain protection against injury from dumping.
To return to schedule 4, having an effective trade remedies system in place is crucial to protect our industries from unfair trading practices that cause injury. It is vital to the UK’s interests that the system is transparent, balanced, impartial, efficient and works for the UK as a whole. The system proposed by this schedule and the secondary legislation that will be made under it achieves that, and is the best way to protect UK industries when we are outside the EU. I will respond to new clause 15 when I have heard the arguments made for it by hon. Members.
Peter Dowd
I started to listen to the Minister out of a morbid sense of curiosity, but he became far more plausible as time went on. Do I smell a rat? No, I do not at the moment, but there is some concern. The new clause provides for a review of the case for the continued effect on the UK of EU trade remedies after the introduction of the new standard import tariff, and pending full implementation of the new arrangements under schedule 4. It seeks a review of the case for continued use of EU trade remedies between the UK’s exit from the EU and its negotiation of a new relationship.
I am conscious of the statements made yesterday by Michel Barnier. I do not want to poke into that issue—I think hon. Members will be grateful for that olive branch—but there are wider concerns about which EU regulations and rules the UK will follow in the transition period. Will we continue to be a member of the EU in all but name, or will Ministers seek to pick and choose? I will have to look at Hansard, but I got the impression from the reply given to my hon. Friend the Member for Scunthorpe that, unless there are egregious breaches, we will remain for all intents and purposes virtually as we are, which is quite helpful.
Naturally, the outstanding questions about transitional measures are causing great confusion and concern among UK manufacturers currently protected by EU trade remedies. I take some comfort from the Minister’s reassurances, but in evidence to the Committee last week, UK Steel, the British Ceramic Confederation and the Chemical Industries Association were all less than convinced about the Government’s intentions. They all made the case that the trade remedies outlined in schedules 4 and 5 are not only weaker than those currently in place in the EU, but in some instances worse than those used by other WTO countries. It will be important to tease that out a little more in due course.
New clause 15 would require the Government to undertake a review of the advantages and disadvantages of the new trade remedies outlined in schedules 4 and 5. The reality is that such a review may relate to issues of policy or of practice. I am quite flexible about that, as I am sure the Government are—let us have a look at both, if need be, on a case-by-case basis.
Outlining the potential benefits to UK manufacturers of continuing to use EU trade remedies throughout the transition is also crucial. The new clause should not be too controversial, because if the new trade remedies are as robust and thorough as the Minister suggests, a review will show that. However, if the review showed the new trade remedies to be inferior to the current EU measures, that would not be good news. It would clearly show that the Government were content with laxer trade remedies and were not on the side of UK manufacturers, which are some of the largest employers in the country.
I have a number of questions for the Minister about transitional measures. Can he offer assurances to UK manufacturers that the Government will honour the trade remedies currently in place for the UK? He appears to have indicated that—I think that is what he said—but I do not want to put words in his mouth, so I would like to tease that out a little more. Will the Government consider extending the current trade remedies where necessary?
Does the Minister accept that the trade remedies framework outlined in the Bill may not be up and running by the time Britain leaves the European Union? How confident is he that UK manufacturing will be sufficiently protected from state-sponsored dumping throughout the transition period? Have the Government set a date for members of the Trade Remedies Authority to be selected and a date for the TRA to be fully functional? I think the Bill implies that UK trade remedies will apply during the transition period, but how does that fit with the tone of the statement made by Mr Barnier?
It is clear that the Government have huge questions to answer about the effectiveness of the trade remedies in the Bill, and about how they will work throughout the transition period. The devil is in the detail, so I hope that the Government have listened carefully and will try to answer our concerns and those of many people out there.
Question put and agreed to.
Schedule 4 accordingly agreed to.
Schedule 5
Increase in imports causing serious injury to UK producers
Jonathan Reynolds
I beg to move amendment 65, in schedule 5, page 81, line 31, leave out from “application” to end of line 32
This amendment removes the requirement for a preliminary adjustment plan.
The Chair
With this it will be convenient to discuss the following:
Amendment 66, in schedule 5, page 81, line 44, leave out sub-paragraph (3)
This amendment is consequential on Amendment 65.
Amendment 67, in schedule 5, page 82, line 14, leave out paragraph (e)
This amendment is consequential on Amendment 65.
Amendment 68, in schedule 5, page 82, line 21, leave out “(d)” and insert “(c)”
This amendment is consequential on Amendment 65.
Amendment 69, in schedule 5, page 82, line 26, leave out “(d)” and insert “(c)”
This amendment is consequential on Amendment 65.
Amendment 72, in schedule 5, page 86, line 29, leave out from “21)” to end of line 34
This amendment removes the requirement for an adjustment plan to be in place prior to TRA making a recommendation under paragraph 14.
Amendment 73, in schedule 5, page 91, line 8, leave out paragraph (d)
This amendment is consequential upon the removal of reference to an adjustment plan in Amendment 72.
Jonathan Reynolds
Amendments 65 to 69 and amendments 72 and 73 have been grouped together as they all refer to the removal of the preliminary requirement for adjustment plans. It states in the Bill that the Trade Remedies Authority may only make a recommendation if it is satisfied that there is an adjustment plan in place setting out how the UK producers of the relevant goods intend to adjust to the increased importation of goods affecting their industry. In addition, it stipulates that the TRA may only initiate a safeguarding investigation in relation to goods where the application for it is accompanied by a preliminary adjustment plan. As is explained in the Bill’s explanatory notes, this is to ensure that producers have a plan to improve their competitiveness alongside any measures which may be imposed, so that measures are not only a temporary solution.
The amendments tabled by the Opposition would remove the need for such adjustment requirements. The reasons behind this are numerous. It seems counter-intuitive to make it incumbent on industries to draw up their own adjustment plans. Surely if an application is being made to the TRA then this is already a measure of last resort for an industry. It may also provide an easy exit for the TRA to avoid opening an investigation if it is perhaps resource-constrained, by pointing instead to the measures that the producer has drawn up as an alternative to remedies being imposed. Equally, given that time is of the essence—that seems to be a point of agreement between both sides of the House—mandating producers to include adjustment plans before a recommendation can be made risks adding a delay to a process that is already time-sensitive.
Kathleen Walker-Shaw of the GMB, who gave evidence to the Committee on 23 January, said that she was
“extremely alarmed by how weak the remedies were in terms of anti-dumping cases.”
She pointed out specifically that they
“are very data, document and resource-heavy cases to bring forward.”
It therefore makes little sense for us to add to that burden by putting another barrier in place for UK industry to jump over right at the outset by drafting an adjustment plan.
This is not simply the view of the Opposition. Representatives of industry have also argued that these requirements are likely to be problematic. The Manufacturing Trade Remedies Alliance has explained that there is absolutely no requirement in the WTO agreement for an adjustment plan at any of these early stages, either prior to an investigation being opened or when measures are being considered for extension. As the MTRA highlights, the only stipulation from the WTO is that there must be evidence of the industry adjusting if the relief is to be extended beyond four years, and they point out that the EU follows the same approach.
The Manufacturing Trade Remedies Alliance also believes that the requirements as laid out in the Bill are disproportionate, and conflict with the provision allowing safeguarding measures to be entered into in the case of a threat of serious injury. It also highlights the risk that these measures could reduce the Government’s options for tackling aggressive trade protectionism by foreign countries. It notes that the EU has in the past introduced safeguard measures to temporarily protect the steel industry from the side effects of WTO-incompatible tariffs imposed by the US pending resolution of the dispute.
It is surprising that—for a Bill which is so light on detail—this is the one area in which the Government have decided to provide some certainty that flies in the face of expert advice to the contrary. Given the historical context and the anxieties of UK industry, these concerns are understandable. All members of the Committee will be familiar with the implications of what will happen if we do not get this right, as was illustrated catastrophically by the impact of cheap Chinese steel imports.
It is important that the Government give confidence to the UK industry at this stage that they are not anti-protection in principle. This amendment would demonstrate that the Trade Remedies Authority is supportive of this notion, and would streamline the process towards remedies where they are necessary. It would not preclude the development of an adjustment plan on a longer term basis by the industry or producer in question, but would simply prevent a more restrictive process being in place that is out of step with the one being followed by our global partners.
I conclude by returning to Kathleen Walker-Shaw’s testimony of 23 January on those anti-dumping rules. She said,
“I just feel that the provisions in the Bill do not fulfil the promise we were given that British jobs, British industry and the British economy would thrive post-Brexit.”—[Official Report, 23 January 2018; Vol. 635, c. 36, Q43.]
This Committee is now in its third day of investigating ways to try and do this, and can get us closer to that outcome.
Graham Stuart
The hon. Gentleman keeps referring to and giving evidence of anti-dumping. These amendments affect adjustment plans that apply to safeguards—so not anti-dumping.
Jonathan Reynolds
I said in my introduction that this is about the hoops that have to be jumped through before the Trade Remedies Authority can take action. As I was just coming to my conclusion, I now appeal to the Minister for greater certainty for industry and greater authority so that they can plan for going forward, by adding more clarity at this stage and not introducing things that are not replicated in our closest trading partners.
Graham Stuart
The amendment would provide that in safeguard investigations UK complainant producers are not required to provide adjustment plans outlining the steps they intend to take to adjust to increased imports in their market. That would be out of step with our objective to create a balanced and proportionate trade remedies system for the UK. It is noticeable that the only detail given in the hon. Gentleman’s presentation was not do with safeguards, but with anti-dumping. It was not clear from his response whether that was due to confusion or because there simply was not enough information to back up what he was saying about safeguards.
There are many benefits to requiring adjustment plans and the need to promote adjustment is implicit in the WTO agreement. Adjustment plans serve to reinforce the rationale for applying safeguard measures and ensure that measures are used fairly. Unlike anti-dumping and countervailing measures, safeguards relate to perfectly fair trade and apply globally. Therefore it is especially important that those measures balance the interests of producers and downstream consumer industries. Having listened to the speech just given, one would be forgiven for thinking that those issues were not true.
Having a plan for adjustment helps to ensure that measures protect producers from injury, while giving them time to adjust to increased imports. It provides precisely the certainty which, in his peroration, the hon. Gentleman called for. However, though we have put that on the face of the Bill, because of the nature of safeguards —which have got nothing to do with dumping—we have a peroration that asks why we do not provide certainty. It is exactly the certainty that we need to provide. We have spelt it out; we have taken the principle implicit in WTO agreements and put it in the Bill, so that we can improve on existing operations—stick conceptually to the existing rules but do so in a better way, which gives exactly the certainty that the hon. Gentleman talked about wanting to provide.
As so often in our debates in this Committee—which has been a stimulating and fantastic experience so far—amendments tabled by the Opposition have exactly the opposite effect to the ones that they claim. They say they want to do one thing, but when one bothers to read their amendment, look at the Bill and put the two together, one sees that the effect is the exact opposite. It is fascinating to see how, in almost all cases, the Scottish National party supports the Opposition, even when it is clear that the amendments are technically flawed—they do not do what the Opposition think they are doing, let alone achieve the end policy result. Perhaps that is a sad reflection on the state of the Opposition today.
Our intention is not to create additional burdens on business but to ensure a light touch approach which means that industry is able to compete without the need for protection as measures are rolled back. As such, it is undoubtedly in the interests of UK producers to use these plans and to be thinking about adjustment as early as the initiation stage of an investigation. Furthermore, the steps outlined in an adjustment plan provide a useful tool for determining the suitable pace of liberalisation, tailoring measures where appropriate. In drafting our secondary legislation, the Government intend also to build in flexibility to account for scenarios where different levels of detail would be appropriate in the plans.
In terms of whether they would be overly burdensome on business, we will ensure that the process is both flexible and proportionate, in order to serve the needs of business in the most appropriate way possible. It is for those reasons—although I can provide others—that I ask the hon. Gentleman to withdraw the amendment.
Jonathan Reynolds
In my experience as an admirer of the Minister, whenever he gets somewhat tetchy it is perhaps to disguise from the House his own shortcomings. I am not satisfied with his response and nor, I believe, is British industry. Therefore I wish to press the amendment to the vote.
Question put, That the amendment be made.
Anneliese Dodds
I beg to move amendment 74, in schedule 5, page 91, line 9, at end insert—
‘(3A) The TRA shall only recommend extending a safeguarding remedy, whether in the form of a safeguarding amount or a tariff rate quota, beyond the 4 year period referred to in paragraph 15(2)(b) if it is satisfied that there is evidence that the UK producers are adjusting to the importation of the goods in increased quantities.
(3B) The total duration of a safeguarding remedy after any such extension shall not exceed 8 years.”
This amendment makes provision on the face of the Bill about the extension of a safeguarding remedy.
The Chair
With this, we will consider the question that schedule 5 be the Fifth schedule to the Bill.
Anneliese Dodds
I will not speak on this for long. We have much else to get through this afternoon, and maybe I am about to be surprised, but I anticipate that we may have a similar result to one we just had, particularly given that many of the same issues come up in relation to this amendment as to that just moved by my hon. Friend. It would be interesting if we had a plurality of views; maybe that day will come eventually.
As with many of our other amendments, this amendment clearly aims to increase the predictability for British business in the Bill. In particular, we think it is important to make provision in the Bill about exactly how a safeguarding remedy could be extended, to expand the considerations taken on board in that process.
With this amendment, the TRA would only recommend extending a safeguarding remedy beyond four years if the authority were satisfied that there was evidence that UK producers were adjusting to the importation of the goods in increased quantities—so not a plan, actual evidence of that adjustment would be necessary. The total duration of any such extended remedy would be only be another four years, so eight years in total. As with many other elements of the Bill, more clarity is needed here and our amendment would deal with that deficiency.
Graham Stuart
Schedule 5 sets out the provisions that will apply in cases where UK industry finds itself being harmed by unforeseen surges in imports. The WTO agreement on safeguards set outs the requirements that must be met for the UK, as for other members, to be able to impose safeguard measures. Through this schedule, we are adopting the key principles into UK law and setting out the broad elements of the safeguard process that will be operated by the TRA.
As we have already discussed, there will be a need for more detail. This will, rightly, be set out in secondary legislation. The schedule also provides the necessary powers for the Secretary of State to make regulations to do this, including, for example, to define what is meant by “increased quantities”, “UK producers” and “like goods”. Paragraph 19 of schedule 5 provides that regulations can be made to set out the process for reviewing safeguard measures. The regulations will set out, among other things, the circumstances in which measures can be continued.
Amendment 74 seeks to require UK producers to provide evidence that they are adjusting to increased imports before a safeguard measure can be extended beyond four years. It also aims to add into primary legislation that safeguard remedies may only be in place for a maximum of eight years. As I explained earlier, once we leave the EU, the UK clearly needs to be able to take action where our industry is being harmed by unfair trade from other countries, whether that is by dumped or subsidised goods, or as a result of fairly traded but unforeseen surges in imports. The safeguard provisions set out in schedule 5 achieve this. Unlike anti-dumping and countervailing measures, safeguards relate to fair trade and apply globally. Therefore, it is especially important that these measures balance the interests of producers and downstream consumer industries by facilitating adjustment.
We have already discussed adjustment plans when considering the previous group of amendments. As I said, these are a vital tool in ensuring that safeguard measures not only provide protection, but allow those affected the opportunity to make necessary adjustments. It is not appropriate to introduce a requirement for producers to provide evidence of adjustment when seeking to extend measures beyond four years.
I ask the Committee to consider for a moment that we have measures in place—a safeguard—because of a massive surge on imports. The TRA has done its work. In an entirely novel process—I am aware of no parallel anywhere—Her Majesty’s Opposition, doubtless supported by their allies in the Scottish National party, want to impose a bureaucratic and burdensome measure—[Interruption.] I notice that the SNP Members are shaking their heads. For once, perhaps, they will strike out and not support something that is so clearly damaging to the interests of Scottish producers. Why on earth would the producers have to provide evidence of their adjustment when the main issue should be other aspects and criteria? It is a strange innovation that the Labour party has put forward.
Introducing a requirement for producers to provide evidence of adjustment when seeking to extend beyond four years would undermine the need for flexibility in our approach, which recognises—this is worth reflecting on—that adjustment is not always dependent on a producer’s own efforts. Yet, under the amendment, protection measures would cease if producers were not able to provide evidence that they were adjusting. Adjustment plans are a more suitable way of building in that flexibility and ensuring that there is a commitment to adjustment from as early as the initiation stage. Finally, with regard to the eight-year rule, the Government intend to be WTO-compliant by setting that out in secondary legislation.
Kirsty Blackman
I would appreciate it if the Minister let us know where it says that UK producers are supposed to produce that evidence. My reading is that the TRA has to find the evidence rather than the producers submitting it.
Graham Stuart
The hon. Lady will find that the evidence of adjustment by UK producers is unlikely to be provided by anyone other than UK producers. It is a rather strange innovation to insert that into legislation for the continuation of measures that are put in place because of the injury caused and the massive surge on imports. It is an entirely novel concept. I am not aware of its being anywhere in WTO schedules although, admittedly, after so little time in the job I cannot claim to know them inside out. If any Member of the Opposition, who after all came up with the extraordinary innovation, has evidence of a basis in WTO law or anywhere else, I would be fascinated to hear it. Perhaps the hon. Lady will support the amendment anyway, even though there is no evidence for it, legally or otherwise but I hope that she, like me, will oppose the amendment if it is pressed to a vote.
Anneliese Dodds
I am pleased to hear the Minister accept our call to ensure that the total duration of any such extended remedy shall be for another four years—eight years in total. He seemed to suggest that that would be forthcoming in secondary legislation. We are pleased to hear that, although it is unfortunate that it is not clear in the Bill.
On the evidence, much of our concern behind the amendment is motivated by the burden on the affected industry. That was set out clearly in remarks on a previous Opposition amendment. I hope, Mrs Main, that you will not see this as facetious: talking about novelty, we learned this morning that the market share threshold before an investigation can be initiated appears to be novel in the world, and the Minister said it was a wonderful innovation on the part of the British Government, so perhaps he can also sometimes see innovation when it comes from the Opposition.
Question put, That the amendment be made.
Kirsty Blackman
I beg to move amendment 110, in clause 14, page 9, line 45, at end insert
“following consultation with relevant stakeholders including consumer representatives and agricultural producers.”
This amendment requires consultation before the making of regulations to increase the customs tariff for agricultural goods.
The Chair
With this it will be convenient to discuss the following:
Clause 14 stand part.
New clause 6—Additional import duty on agricultural goods: enhanced parliamentary procedure—
“(1) No regulations may be made by the Treasury in exercise of the power in section 14(1) except in accordance with the steps set out in this section.
(2) The first step is that a Minister of the Crown must lay before the House of Commons—
(a) a statement of the reasons for proposing to make the regulations; and
(b) a draft of the regulations that it is proposed be made.
(3) The second step is that a Minister of the Crown must make a motion for a resolution in the House of Commons setting out, in respect of proposed regulations of which a draft has been laid in accordance with subsection (2)(b)—
(a) the proposed additional amount of import duty; and
(b) the proposed period for the purposes of section 14(1)(a);
(c) the proposed trigger price for the purposes of section 14(1)(b).
(4) The third step is that the House of Commons passes a resolution arising from the motion made in the form specified in subsection (3) (whether in the form of that motion or as amended).
(5) The fourth step is that the regulations that may then be made must, in respect of any matters specified in subsection (3), give effect to the terms of the resolution referred to in subsection (4).”
This new clause establishes a system of enhanced parliamentary procedure for regulations setting additional import duty on agricultural goods, with a requirement for the House of Commons to pass an amendable resolution authorising the rate of import duty on particular goods and the relevant conditions.
Kirsty Blackman
I rise to move amendment 110, but I will mention now that if new clause 6 is moved at the appropriate stage, we will support it, because an enhanced parliamentary procedure seems sensible.
Clause 14 is headed “Increases in imports or changes in price of agricultural goods” and deals specifically with special agricultural safeguards and what can be put in place in relation to them. Our amendment is a very short one, but it is designed to require that the Secretary of State consult with consumer representatives and agricultural producers when making any decisions relating to special agricultural safeguards.
The Minister, when he spoke earlier about safeguarding, said that the decisions taken are about balancing the needs of producers with those of downstream consumers. This is exactly the kind of thing we are trying to do: we are trying to ensure that the Secretary of State, when making the recommendation to the Treasury to exercise the regulations, is doing so after consulting both consumer groups and agricultural producers. That is the only sensible thing to do in this case. The Minister has previously been clear that the Government like consulting with people and tend to try to do so wherever they can, but it would be sensible if it were stated in the Bill that they were required to do so in advance of putting in place, via a relatively unusual process, relatively unusual measures that would have an impact on our agricultural producers and consumers.
That is important because Brexit is looming on the horizon and our farmers do not know how they will be supported financially after 2020. I think Ministers have given undertakings to safeguard the money that comes from the EU until that point, and farmers have no certainty beyond that period of time. The UK Government are looking to make their own trade deals, which may change the agricultural landscape in the UK or result in our taking imports we have not previously because because of the trade deals as part of the EU—we have previously discussed things such as chlorinated chicken. Given all the changes on the horizon, both for agricultural producers and for consumers, who are already finding, for example, that the price of butter is going through the roof because of the increase in sterling, it is difficult for the Government to foresee what may happen in the future. If the Government are going to put in any measures related to increasing imports or the price of agricultural goods, particularly through the safeguarding measures, it would be sensible to consult both agricultural producers and consumers in advance of putting those in place.
Peter Dowd
The Minister was getting a little bit tetchy and prickly there. There is a quote from “Henry VIII” which, given that we are talking about Henry VIII powers, seems appropriate today:
“Be advised:
Heat not a furnace for your foe so hot
That it do singe yourself.”
The new clause would establish an enhanced parliamentary procedure in relation to import duties on agricultural goods. During our sittings, the Committee has heard serious concerns expressed by multiple witnesses about the democratic shortcomings of the Bill. The Bill is, first, strikingly light on detail, notwithstanding the Minister’s assurances that things will be put into place and more detail will come in due course. The Government are pushing that detail on to secondary legislation, but the delegated legislation process was designed to make administrative changes to laws—in effect, a rubber-stamping process—not for items that will form the material basis of our trade defence policies and so require proper scrutiny and debate. More worrying are the items to be channelled directly through the Executive in an unacceptable concentration of power, which ought to be subject to scrutiny, with Parliament given a say in holding the Government to account. The amendment is one of several in which the Opposition are calling on the Government to put critical decisions on tariffs, quotas and preferential rates in front of Parliament.
The measures in the Bill are at odds with the greater democratic control persistently promised to voters. Bringing back control, as we have said a million and one times, is about bringing back control to Parliament, not to a cadre of Ministers sitting in their offices in Whitehall. The new clause sets out four steps to enhance parliamentary scrutiny: first, a Minister must come to Parliament to explain the intentions of the draft regulations; secondly, a Minister must tell Parliament the import duty amount, as well as the period and trigger price under the relevant section; thirdly, the House must pass a resolution arising from the Minister’s motion; and, fourthly, regulations must be made to give effect to that resolution—all in the cold light of parliamentary scrutiny and sight. It is not for the Government to make decisions single-handedly behind closed doors, nor for the Secretary of State to steer the process unilaterally. Rather, such decisions must be subject to proper democratic accountability, with the essential checks and balances enshrined in law.
As I have said before, the Opposition recognise that the Government must make necessary preparations to create the UK customs and tariff regime post-Brexit, but they cannot have carte blanche. We should not allow, or be considering, a carte blanche process allowing the Government to concentrate all those new powers in the Executive. The Opposition’s view is that in this instance the interpretation of taking back control— moving it from Brussels to the Executive—is not acceptable. That is not only true of the provision before us today, but evident in the European Union (Withdrawal) Bill and the Trade Bill. The Government are attempting to sidestep parliamentary scrutiny, and that is not acceptable.
In our view, tariffs should undergo the same parliamentary process as taxation, with similar levels of parliamentary scrutiny. We will oppose the Government’s attempts to give the Treasury delegated powers to set future customs duties and tariffs away from the public and parliamentary eye. That is not the way we do things in Britain. New clause 6 outlines an enhanced parliamentary procedure for setting additional import duty on agricultural goods, among others, to bring scrutiny to our customs policy.
Our agricultural sector faces an uncertain future with Brexit ahead. It is distinct from other UK industries in possessing a more interwoven relationship with the European Union, given the existence of the common agricultural policy, which provides subsidies to UK farmers that the Government have indicated they will continue. The common agricultural policy provides critical support to UK farming—for example, the Department for Environment, Food and Rural Affairs estimated in 2014 that such payments represented 55% of farm income. As I said, the Government have promised to maintain those subsidies at the existing level until 2022, which I am sure is a huge comfort to the agricultural sector, but there are no guarantees yet on what will occur after a transitional period. Our step-by-step proposed parliamentary process will hold the Government to account for their policies and import duty proposals on agricultural goods.
Given the reliance in some quarters on subsidies and the fact that our EU counterparts will continue to be in receipt of subsidies across the continent, there will be a number of factors to consider when the UK comes to setting tariffs on agricultural imports. It is worth noting that the value of UK agricultural production at market prices was £25.8 billion in 2014, according to official Government statistics, and the farming sector provides 400,000 jobs in the UK. I accept that not many of them are in the constituency of Bootle, but there we are.
As the National Farmers Union has highlighted, the UK trade balance is negative to the tune of £22.4 billion, which makes the UK a net importer of food. Although there is an ambition for that figure to improve as the UK becomes more self-sufficient in food production, it shows that the UK is quite heavily exposed in terms of import dependency. As the NFU also highlights, the UK will be duty-bound to establish its own set of schedules with the World Trade Organisation, once we leave the EU. Although we know the Government have announced their intention to replicate the existing trade regime as far as possible in those new schedules aligned with existing arrangements, we have no guarantees on that front, and that must also be agreed by the other members of the WTO. Given the broad range of potential outcomes here and the importance of the agricultural sector to the UK economy, it is vital that any decisions made on import tariffs are subject to proper scrutiny and debate.
The amendment proposes that the relevant Minister must lay before the House of Commons full statements and drafts of regulations so that they can be properly scrutinised by Members from around the country who can represent the diverse interests of the agricultural community—the producers—and British consumers. It is almost a binary position.
Julian Sturdy (York Outer) (Con)
I draw the Committee’s attention to my entry in the Register of Members’ Financial Interests. I wonder whether the hon. Gentleman should also touch on the impact of standards. He talked about animal welfare standards, as well as genetically modified products that we do not have in the European Union and a number of pesticides that are not now used in Europe but are used around the world. Those issues will all have an impact on future trade deals on food and agriculture, and will affect the consumer.
Peter Dowd
I thank the hon. Gentleman for raising that point, which is very important. I know one of my colleagues will be moving an amendment on those issues, and I hope that at that point the hon. Gentleman will be able to join the debate in a little more detail and give his knowledge and expertise on the matter.
I call on members of the Committee to lend their support to the amendment to ensure that democratic safeguards are in place surrounding the future of the UK’s agricultural industry.
The Financial Secretary to the Treasury (Mel Stride)
It is a pleasure to serve under your chairmanship, Mrs Main. I begin by thanking the Under-Secretary of State for International Trade, my hon. Friend the Member for Beverley and Holderness, for his spirited Henry VIII- style performance. We are now back to Mr Nice. [Laughter.] I feel bound to inform Members opposite that, although I may take a more gentle route, I will probably arrive at the same destination as my colleague would lead us to.
Clause 14 sets out the necessary provisions required to establish the UK’s independent agricultural safeguards regime. It enables the UK to mirror existing EU arrangements for agricultural standards post-EU exit. In addition to the range of tariff and quota regimes that currently govern imports into the UK, some agricultural imports are governed by special agricultural safeguards. Agricultural safeguards are contingency restrictions on agricultural imports. They permit additional duty to be applied on certain agricultural imports in special circumstances—for instance, if there is a surge in the volume of imports or a sharp fall in import prices that could have an adverse impact on the UK market. The use of agricultural safeguards is permitted under the WTO agreement on agriculture. They can be applied only to goods in the scope of this agreement, but they are specifically designated in a WTO member’s schedule of commitments.
Julian Sturdy
For my clarification, is the Minister saying the UK Government can act much quicker if there is a disease outbreak in a country from which we import food or meat products that would ultimately affect UK agriculture and the UK consumer?
Mel Stride
My hon. Friend is probably raising an issue that would be outside the context of the agricultural safeguarding regime. The regime relates to sudden drops in the price of goods, and indeed certain increases in the volume of goods that are being imported, as opposed to the kind of issues he raises. Phytosanitary issues are outside the context of the Bill but will be subject to the kind of negotiations and measures that we bring into effect in that particular regard.
The Bill introduces a comprehensive framework for a new stand-alone customs regime, which will be underpinned by detailed and technical secondary legislation. The Bill ensures that the scrutiny procedures that apply to the exercise of each power are appropriate and proportionate, taking into account the technical detail of the regulations and how quickly they need to be changed.
As I set out in addressing amendment 110, the effectiveness of the agricultural safeguards regime relies on its responsiveness. The proposed additional procedure would give rise to unacceptable delays, which would not allow the Government to respond quickly to changes in circumstances or to update the measures in a timely manner. The power in the clause is subject to the negative procedure. Given the technical nature and frequency of changes, the Government consider that appropriate and proportionate. I hope the Committee will agree that the clause should stand part of the Bill.
Kirsty Blackman
The Minister made a relatively good point in relation to how many technical changes there may be. I will look into the frequency at which changes are likely to occur. If they will be frequent, I will not bring this matter back on Report, but if they will be infrequent, I will consider tabling an amendment. At this stage, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 14 ordered to stand part of the Bill.
Clause 15
International disputes etc
Kirsty Blackman
I beg to move amendment 111, in clause 15, page 10, line 18, at end insert—
‘(3) Within three months of the passing of this Act, the Secretary of State must make regulations defining “international law” for the purposes of this section.’.
This amendment requires the Government to define international law for the purposes of Clause 15.
The Chair
With this it will be convenient to discuss the following:
Amendment 112, in clause 15, page 10, line 18, at end insert—
‘(3) In this section, “international law” means—
(a) World Trade Organisation treaties,
(b) rules of international public law explicitly referred to in World Treaty Organisation treaty provisions,
and shall be interpreted in accordance with the customary rules of interpretation of international public law.’.
This amendment defines international law for the purposes of Clause 15.
Amendment 113, in clause 15, page 10, line 18, at end insert—
‘(3) Within three months of the passing of this Act, the Secretary of State must lay before the House of Commons a report on—
(a) the relevant international law authorising the exercise of the powers, and
(b) the circumstances in which the Government considers it appropriate to deal with a dispute by varying the amount of import duty payable.’.
This amendment requires the Government to report prior to implementation on its interpretation of relevant international law and its expectations about the circumstances of a trade dispute or issue giving rise to a variation in tariffs.
Amendment 114, in clause 15, page 10, line 18, at end insert—
‘(3) The Secretary of State must lay before the House of Commons an annual report on the exercise of the powers under this section including information on—
(a) the relevant international law authorising the exercise of the powers in each case, and
(b) the matters in dispute or issues arising in each case.’.
This amendment requires the Government to report on the circumstances of, and international law basis for, each variation of tariffs as a result of a trade dispute.
Clause stand part.
New clause 7—Variation of import duty in consequence of international dispute: enhanced parliamentary procedure—
‘(1) No regulations may be made by the Secretary of State in exercise of the power in section 15(1) except in accordance with the steps set out in this section.
(2) The first step is that the Secretary of State must lay before the House of Commons—
(a) a statement of the dispute or other issue that has arisen;
(b) an account of the reasons why the Secretary of State considers that the condition in section 15(1)(b) has been met; and
(c) a draft of the regulations that it is proposed be made.
(3) The second step is that a Minister of the Crown must make a motion for a resolution in the House of Commons setting out, in respect of proposed regulations of which a draft has been laid in accordance with subsection (2)(c) the proposed variation of import duty.
(4) The third step is that the House of Commons passes a resolution arising from the motion made in the form specified in subsection (3) (whether in the form of that motion or as amended).
(5) The fourth step is that the regulations that may then be made must, in respect of any matters specified in subsection (3), give effect to the terms of the resolution referred to in subsection (4).’.
This new clause establishes a system of enhanced parliamentary procedure for regulations varying import duty as a result of an international dispute, with a requirement for the House of Commons to pass an amendable resolution authorising the variation in the rate of import duty.
Kirsty Blackman
I rise to speak to amendments 111 to 114 in my name and that of my hon. Friend the Member for Dunfermline and West Fife. I am aware this is a framework Bill, but the clause is particularly short and skeletal. It would have benefited from being a bit longer and fleshed out just slightly, because then the Government could have explained more adequately what they are talking about.
Amendment 111 deals with an issue raised with us by the Law Society of Scotland, which said:
“Clause 15(1)(b) makes reference to international law but it is not clear what is meant by this. It would be helpful were the Minister to explain precisely the circumstances in which the Government would need to deal with a dispute by varying the import duty.”
If would be useful if the Minister, either in summing up or at a later point, could provide a bit of clarity. Amendment 111 would ask the Secretary of State to come back with regulations defining what “international law” is for the purposes of the clause. As has been stated, if the Law Society of Scotland does not think that is clear, perhaps it needs a bit more fleshing out.
Amendment 112 suggests to the Minister what he might mean by “international law.” We tabled the amendment to see if that is what the Government mean. If they do, perhaps they will accept it.
Amendment 113 attempts to do something similar, but we are giving the Government a little more time in which to define what they mean by “international law” in the clause. We ask them to come back within three months of the passing of the Bill, making clear what the relevant international law authorising the exercise of powers would be and the circumstances in which they consider it appropriate to deal with a dispute by varying the amount of import duty. It may be that the Government intend to return to that later anyway but, if they were to accept any of the amendments, they will make their intentions clear at this point.
Amendment 114 has a slightly different purpose: to increase the accountability of Government. The Government have the power on international disputes and the Secretary of State will make regulations in relation to that through the clause, but there does not seem to be any accountability to Parliament about regulations or changes, or ways in which they will deal with international disputes. There seems to be no feedback mechanism to allow Parliament to ensure that the Minister makes the correct decisions or to scrutinise those decisions adequately.
In amendment 114, we have asked the Secretary of State to lay before the House of Commons an annual report on the exercise of these powers, making clear the circumstances in which they have used them, which matters were in dispute and which was the relevant international law in deciding the changes.
Now may not be the time to say this, but I will just make my intentions clear. Depending on what the Minister says about his intentions, it may be that we do not need to press amendments 111 to 113. I would very much like to press amendment 114 when we come to that stage, but on the other three I will wait to see what the Minister says.
Graham Stuart
I will endeavour to follow the good example set by the ever-affable hon. Member for Bootle, who gave not only good content, but brilliant quotes that entirely encapsulated the moment and which we all enjoyed.
Clause 15 enables the Secretary of State to vary the rate of import duty when a dispute or other issue has arisen between the UK Government and the Government of another country, and the UK is authorised to do so under international law. The clause replaces equivalent existing powers available to the European Commission. Under the WTO dispute system, WTO members that have been found to be in breach of their obligations must bring their measures into compliance with WTO law. If they do not do so within a reasonable period, the parties can attempt to agree on compensation. Compensation may take the form of a reduction in the import duty on specified goods from the complaining country, although in practice any such reduction would have to be applied equally to all other WTO members in accordance with the most favoured nation rule.
If the parties fail to agree compensation, the complaining member or members may impose retaliatory measures against the member found to be in breach. Such measures typically involve raising the rate of import duty on specified goods from that country to incentivise it to bring itself into compliance. Free trade agreements with third countries also frequently contain dispute settlement mechanisms, many of which follow similar procedures to those of the WTO. In particular, free trade agreement dispute settlement mechanisms often result in a signatory being required to bring itself into compliance with the terms of the FTA, and often allow retaliatory trade measures to be taken against the offending party if it does not do so, and cannot agree appropriate compensation. Authorisation to implement compensation or retaliation measures may also arise in a number of other specific contexts. For example, a WTO member that imposes a temporary safeguard measure to protect its industry, or that modifies its WTO schedules, must seek to compensate any affected countries, failing which retaliatory measures may be imposed against it.
The ability to vary the rate of import duty in response to disputes and other contentious situations is vital to ensure that the UK can operate an independent trade policy after leaving the EU. In particular, the threat of imposing retaliatory duties following a trade dispute can be an effective means of incentivising other countries to comply with their obligations under international law, and can therefore help to preserve and open up trading opportunities for UK firms.
The European Commission is currently responsible for conducting trade disputes and applying enforcement measures on behalf of the UK. Once we leave the EU, the UK will bring and defend trade disputes in its own right. When such disputes are decided, we will require the powers to be able to take action to enforce and respond to their rulings including, where necessary, varying the rate of import duty. The power in the clause ensures that the UK can do just that.
Amendments 111 and 112 seek to provide a legislative definition of international law in the Bill or in regulations to be made by the Secretary of State, as the hon. Lady set out. Amendments 113 and 114 seek to impose a statutory duty on the Secretary of State to report to the House of Commons on that power, either within three months of the passing of the Bill or annually, providing details of the international legal basis for justifying the use of the power.
As I have explained, there are a number of situations under international law in which countries may be authorised to vary their rate of import duty for the purposes of retaliation or compensation, including in disputes under different types of international agreements and, just to make it even more complicated, in other contentious situations that do not involve a formal dispute. Given the different context in which clause 15 would apply, it is sensible to refer broadly to authorisation under international law. Adopting a narrower approach would risk constraining future action in situations that are not currently foreseeable.
Kirsty Blackman
I rise to query something the Minister said and to ensure that I heard him correctly. Is it the Government’s intention, at the negative procedure stage, to explain in the explanatory notes the basis in international law and the reason for the measure being introduced?
Graham Stuart
It is our intention that the Government, when they seek to make such a change, and they are doing so under international law, would provide evidence of the law upon which they were relying. If the hon. Lady is happy with that, I will leave it there.
In conclusion, after leaving the EU, the United Kingdom will require the ability to vary the rate of import duty to respond to international dispute rulings and other contentious situations. That will ensure that the Government can continue to protect the UK’s economic interests by putting in place, when necessary, effective retaliatory and compensatory measures against other countries. I commend the clause to the Committee and hope that the amendment is withdrawn or rejected.
Anneliese Dodds
I am grateful to the Minister for his clarifications. I know he will regret hearing this, but the Opposition feel that the procedures are, sadly, not appropriate and proportionate. The new clause argues for an enhanced parliamentary procedure if import duties must be varied as a consequence of an international dispute. I will not go through the more rigorous procedure we suggest; it is similar to that described by my hon. Friend the Member for Bootle.
It would help if the Minister answered this initial question: what is the anticipated frequency of this kind of dispute? My view of what has occurred at EU level is that such disputes are not so frequent that appropriate scrutiny would not be possible. Some of us are concerned that a dispute might come sooner rather than later. I understand that experts took different positions in the International Trade Committee on whether the UK’s continuing to apply EU anti-dumping duties would be legal after it had left the EU. That is one of many reasons why it would be helpful to have more explicit mention in the Bill of existing measures being automatically rolled over. But, anyway, that is a caveat.
There are many other reasons why an enhanced procedure is necessary. The first is that the decisions taken in the context of such a dispute would be adopted by the Secretary of State himself, albeit with the advice of the TRA, and they could have a significant impact on UK industry. We have talked about how, in many cases, the supply chains are complex, and we need to talk about a variety of different consumers and business-to-business activity. It is therefore important that Parliament is able to examine a statement of the dispute and what exactly the Government propose should be done in relation to the dispute, such that the House can vote on that matter if necessary. These disputes do not affect just economic policy; they can have a significant impact on other areas of public policy as well. Therefore, it is important that colleagues are able to express a view on them and to consider the Government’s position on them.
The second reason it is important to have an enhanced procedure is that there is a lot of public concern at the moment about international economic disputes and how they tend to be resolved. I served as a Member of the European Parliament for three years, and I received tens of thousands of communications—about 38,000 at the last count—from concerned citizens about the Transatlantic Trade and Investment Partnership deal between the US and the EU. Most of those emails included criticism of the impact of investor-state dispute settlement, predominantly because that method of resolving disputes is not transparent and many people feel it privileges the voice of companies over Governments. We surely should not be putting ourselves in a position where Parliament’s voice would be not just ignored but not even heard when it comes to our Government’s actions in relation to trade disputes. For that reason, I hope the Government will support our amendment.
I hope that I will be permitted one last question, as this matter came up in the Minister’s opening remarks on the clause. Will he tell us where the Government have explicitly given themselves the power to create WTO schedules? I do not know where that is. He mentioned the necessity of producing those schedules, so can we have some clarification on that point?
Graham Stuart
I will deal with the questions as best I can and in order.
The EU has four retaliatory duties in place. It is not really possible to predict how frequently this power will be used. In some ways the question is not really the frequency but whether, when it does happen, we have a procedure in place to allow us quickly and effectively to take action to ensure that we put the matter right. That, rather than the frequency, might be the bigger issue.
Although we will be seeking, and will be prepared to use, the WTO dispute settlement mechanism as a way of ensuring that there is a level playing field for UK business to compete on, and we will have the tools available for us to participate fully in international trade disputes where necessary, we have no particular appetite to be more litigious than is required to protect the UK’s interests.
I will write to the hon. Lady and the Committee on the WTO schedules and the process attached to that.
Kirsty Blackman
I would appreciate it if the Minister also wrote to me, because I brought that up last week. I am pleased that the hon. Member for Oxford East is pursuing the issue. It is important that the Government have the power to lodge schedules with the WTO and the power to make the technical rectifications that the Minister mentioned—those may or may not end up being technical rectifications to things like quotas, given that some of the countries in the WTO are challenging whether they would be technical rectifications or would constitute modifications.
On our amendments, the Minister has provided some information around how Parliament will be provided with evidence for each of the things that comes up. Therefore, I do not intend to press amendment 111 or amendments 112 and 113, but I do intend to press amendment 114 because I am not yet convinced that the Government will provide enough feedback about how this mechanism is working, and it would be appropriate for them to do so.
Amendment, by leave, withdrawn.
Amendment proposed: 114, in clause 15, page 10, line 18, at end insert—
“(3) The Secretary of State must lay before the House of Commons an annual report on the exercise of the powers under this section including information on—
(a) the relevant international law authorising the exercise of the powers in each case, and
(b) the matters in dispute or issues arising in each case.”
This amendment requires the Government to report on the circumstances of, and international law basis for, each variation of tariffs as a result of a trade dispute.—(Kirsty Blackman.)
Question put, That the amendment be made.
Peter Dowd
I beg to move amendment 126, in clause 19, page 13, line 5, at end insert—
“(6A) No regulations may be made under this section unless a draft has been laid before, and approved by a resolution of, the House of Commons.”
This amendment requires regulations under Clause 19 to be subject to the affirmative procedure.
The Chair
With this it will be convenient to discuss the following:
Clause stand part.
Amendment 127, in clause 32, page 19, line 32, after “regulations” insert “under section 19 and”.
This amendment is consequential on Amendment 126.
Peter Dowd
We tabled amendment 126, and the consequential amendment 127, to ensure that regulations made under clause 19 are subject to the affirmative procedure.
Clause 19 allows the Treasury to make regulations for full or partial relief from a liability to import duty. The clause sets out a number of factors determining whether a relief can be applied, including the nature or origin of the goods, the purposes for which the goods are imported, the person by whom they are imported and the circumstances under which they are imported. The amendment seeks to provide some parliamentary scrutiny over providing reliefs, which is of course an issue of taxation and would therefore normally be subject to some form of parliamentary oversight.
I have said a great deal about the Bill’s centralisation of powers to the Executive and away from Parliament, and this is yet another example. The Government want their cake and they want to eat it as well. They want to impose taxes with no parliamentary scrutiny, and they want the Bill to be considered a money Bill, thereby avoiding parliamentary scrutiny from the House of Lords. In this particular case, extensive powers are being handed to the Treasury to adjust fiscal policy without reference to Parliament at all. As I have said, that is pretty worrying, and it is a pretty worrying precedent to set as Brexit legislation passes through this place. The Government know what they are doing; otherwise, as I have said, they would not have designated this as a money Bill.
Graham Stuart
The hon. Gentleman has referred to this before, so it is worth correcting it for the record. The Government do not designate Bills as money Bills or otherwise; that is done by Mr Speaker. The hon. Gentleman may blame us for many things, but he cannot blame us for that.
Peter Dowd
On another occasion—perhaps not here—I am more than happy to debate that issue and have that conversation with the Minister. Indeed, if he wants to have that discussion in the Committee, we are more than happy to do so when we debate another amendment. I am sure that he would be delighted with that.
Mel Stride
Clause 19, as the hon. Member for Bootle pointed out, allows for a full and partial relief from import duty. The EU customs regime provides for a relief from import duty on the basis of various factors, including the nature of the goods, their quantity and their value. Those reliefs support trade and address unintended outcomes. They can also be used to address situations in which a change to import duty would have negative consequences, whether for a specific entity or for UK interests as a whole. A relief may relate to a temporary movement, such as a visiting exhibition, or a permanent movement, such as the return of UK materials that were previously exported.
The circumstances in which goods will be eligible for a relief from import duty are carefully defined in EU law. They rely on conditions that ensure that they apply only to achieve the intended outcome. Examples include: where items are imported for scientific, educational or cultural purposes or research; where items are samples, whether for testing or to encourage future trade; where goods are donated or inherited; and where private individuals import goods upon transfer of residence to the United Kingdom due to marriage or for a period of study. The clause also covers goods imported for a specific authorised use that are placed on the home market—aircraft parts, for example, and goods that are temporarily imported, such as those for an art exhibition. Those are dealt with in more detail in the special procedures section.
Reliefs may apply to specific bodies or types of body. For example, reliefs support the operation of organisations such as charities, museums and galleries, as well as private individuals not trading. The changes made by clause 19 will allow the UK to provide full or partial relief from import duty.
Amendments 126 and 127 seek to apply the draft affirmative procedure to regulations made under clause 19. As I have set out and the Committee has had occasion to debate, the Bill ensures that the scrutiny procedures that apply to the exercise of each power are appropriate and proportionate. For the powers under clause 19, the negative procedure is both appropriate and proportionate, given the technicality of the regulations and the frequency and speed with which they may need to be made.
The hon. Member for Bootle raised the House of Lords report. The Government are looking at this issue not just in terms of the scope of the matters at hand and the power that is appropriate on that basis, but from a trading and customs point of view. We are considering the frequency with which we are likely to have to make changes and, accordingly, the ways in which the Treasury and Her Majesty’s Revenue and Customs will have to work.
Kirsty Blackman
Clause 19, in effect, gives the Government power to create loopholes—tax reliefs—in the legislation. Given that this is a tax Bill, does the Minister not feel that it would be better for the tax reliefs it creates to be subject to more scrutiny, not less, so that they do not have unintended consequences?
Mel Stride
I would not describe the clause as creating loopholes. It simply allows us, by regulation, to ensure the kind of importations to which I referred earlier. The authorised use importation, for example, relates to goods coming into the country for a specific process before typically being exported out of the United Kingdom. Levying an import duty on such goods would clearly not be appropriate, since they get exported shortly thereafter.
The measures facilitate those particular circumstances, or indeed the loan of an artwork. We are told that the French President is suggesting that the Bayeux tapestry might come over here; that particular gesture would be another example where no import duty would be appropriate, and that particular item should be able to come in and out of the country without being bothered by Customs and Excise. I would argue that the measures are important facilitations rather than loopholes.
Each relief provided for under this power will be for a particular purpose and set out the detailed requirements—for example, in relation to the origin of goods or the purposes for which they are imported. The power will be necessary in the first instance to replicate existing reliefs within the EU, to give certainty to traders directly following our exit from the European Union. However, as circumstances change it may be necessary to adapt our system of reliefs to give UK businesses and individuals the support they need to flourish, and to do so in a timely and flexible manner. For any future reliefs, the Treasury would follow established processes, consulting on draft legislation.
Peter Dowd
The hon. Member for Aberdeen North made some valid points. The reality is that this, to all intents and purposes, is a tax relief. It can be dressed up in whatever way the Minister would like, but it is de facto a tax relief. We already have something like 1,400 tax reliefs, which ordinarily would come to Parliament for their ratification. This seems to be a potential slew of tax reliefs—I will not comment on whether they are good, bad or indifferent—that will be given the imprimatur of a Minister or the Treasury without Parliament having any say whatsoever in that tax raising. That is not a power that Parliament should give away lightly, so I am afraid we cannot accept the Minister’s explanation that these are somehow technicalities and nothing to do with tax and raising money, which is the prerogative of Parliament.
Kirsty Blackman
I am concerned that this is a tax relief, and about the unintended consequences that might flow from it. The Minister almost seemed to say that the Government will make decisions on a case-by-case basis, but that should not be their intention. They should lay out the circumstances in which each kind of widget falls into each category. They are not deciding whether the Bayeux tapestry should be exempt from this duty, but whether artworks should be exempt. Those are pretty significant and major decisions, and I do not think they will be made with the frequency that the Minister suggests.
It might be that in 10 years’ time the world will have changed dramatically and we will be quite a different country, importing things that will need relief in a different way. That is fair enough, but the situation will not require regular change. Given that the measure seeks to encourage industry to flourish and to allow artworks to come to this country to be displayed, it will have a real impact on the UK’s future, so it is completely reasonable to ask the Government to allow more scrutiny. Such instances will not be that frequent, and the measure will have a big impact.
Mel Stride
I point the hon. Member for Aberdeen North to my earlier remarks. We believe that the measure is proportionate, particularly taking into account the frequency of the relevant changes. She is absolutely right about the Bayeux tapestry and the import of artworks; the measure sets the regulations by which those kinds of items will come in and go out of the country. There is no doubt that, in this arena of imports and these kinds of facilitations, changes are certain to occur through time, often of a highly technical nature and on a fairly frequent basis. On that basis, in terms of proportionality, there is a strong argument that we should stick with what is in the Bill.
Question put, That the amendment be made.
Kirsty Blackman
I beg to move amendment 115, in clause 21, page 14, line 15, at end insert—
“(9) Within three months of the passing of this Act, the Chancellor of the Exchequer must lay before the House of Commons a report on the proposed exercise of the power of the HMRC Commissioners to make regulations under subsection (7), including in particular—
(a) the proposed criteria for appointment of Customs agents, and
(b) the proposed standards which persons must meet to be approved for appointment.”
This amendment requires the Government to report on the proposed use of regulations to prescribe standards for Customs agents.
Kirsty Blackman
This is another amendment to try to get the Government to provide more information on the framework of the Bill. As I have said, I understand that it is a framework Bill, but more information could have been provided, particularly in the context of companies already having to contend with the move from CHIEF to CDS and the massive changes in customs that will be introduced. It would be good for companies to have an understanding—sooner rather than later—of customs agents and the hoops that those agents will need to jump through to be approved.
The amendment asks for the Government to produce a report in relation to
“the proposed criteria for appointment of Customs agents, and…the proposed standards which persons must meet to be approved for appointment”
within three months of the passing of the Bill. That will provide a level of certainty to companies about what criteria customs agents will be expected to meet in future. It is an incredibly uncertain time for businesses that export; they do not know what will happen next. This would give them a bit more understanding about the landscape that they will face.
Mel Stride
Clause 21 allows importers to appoint an agent to act on their behalf in respect of their import obligations. Currently, there is widespread use of customs agents who act on behalf of importers and exporters of goods, including by submitting customs declarations on their behalf. They provide a valuable service to importers and exporters.
There are two types of agent—direct and indirect, which are treated differently to represent the different relationships between them and those who appoint them. Direct agents make declarations on behalf of the importer, whereas indirect agents make declarations in their own name. Direct agents make their declaration using the importer’s identifier and they more often represent a domestic importer against whom any debt can be enforced. Indirect agents often represent overseas importers against whom any debt cannot easily be enforced. The changes made by clause 21 will allow the two classes of agent to be appointed.
The clause allows HMRC to make regulations about how the appointment is notified as well as withdrawn, which may be as little as confirming the appointment on the declaration. It also sets out the circumstances in which the agent is jointly liable for import duty.
Amendment 115 seeks to commit the Chancellor of the Exchequer to produce a report for the House of Commons regarding the introduction and regulation of customs agents under clause 21(7) within three months of the Bill’s enactment.
Clause 21(7) seeks to allow HMRC to introduce formal regulation regarding customs agents over and above the current requirement for them to adhere to customs procedures. The UK has authority to further regulate customs agents under the existing customs regime. There are currently no plans to introduce such additional regulation on customs agents, so requiring a report to be produced is unnecessary and will impose an administrative burden at a time when the UK is focusing on its future relationship with the EU. I would hope that the hon. Lady might reflect on my comments about no plans for change and withdraw the amendment.
Kirsty Blackman
I appreciate the Minister’s clarification and I hope to be able to share that with businesses and organisations that are concerned about the possible change. In that spirit, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 21 ordered to stand part of the Bill.
Clause 22
Authorised economic operators
Peter Dowd
I beg to move amendment 128, in clause 22, page 14, line 17, leave out “HMRC Commissioners” and insert “The Treasury”.
This amendment provides for the power to make regulations under Clause 22 to be exercisable by Treasury Ministers rather than HMRC.
The Chair
With this it will be convenient to discuss the following:
Amendment 116, in clause 22, page 14, line 36, at end insert—
“(4) Within three months of the passing of this Act, the Chancellor of the Exchequer must lay before the House of Commons a report on the proposed exercise of the power of the HMRC Commissioners to make regulations under subsection (1), including in particular—
(a) the proposed criteria to be applied in determining whether or not any person should be an authorised economic operator,
(b) an assessment of the structure of the authorised economic operator system in Germany, Austria and such other countries as the Chancellor of the Exchequer considers relevant,
(c) the proposed differences between the structure that is proposed to be established by the first exercise of the power to make regulations under subsection (1) and each of those structures described in accordance with paragraph (b),
(d) the level of proposed resources to be allocated by the HMRC Commissioners for the authorisation of new authorised economic operators, and
(e) the target timetable for the authorisation of—
(i) new authorised economic operators in each class, and
(ii) authorised economic operator certification renewals in each class.”.
This amendment requires the Government to report on the proposed operation of the powers of the HMRC under Clause 22, including comparative information.
Amendment 129, in clause 22, page 14, line 36, at end insert—
“(4) No regulations may be made under this section unless a draft has been laid before, and approved by a resolution of, the House of Commons.”.
This amendment requires regulations under Clause 22 to be subject to the affirmative procedure.
Clause stand part.
Amendment 130, in clause 32, page 19, line 32, after “regulations” insert “under section 22 and”.
This amendment is consequential on Amendment 129.
Peter Dowd
Amendment 128 would confer powers on the Treasury to act as authorised economic operators instead of HMRC commissioners, for whom the clause currently creates powers.
Clause 22 allows the setting up of an authorised economic operator scheme, which is an internationally recognised quality mark indicating that an operator has met recognised standards of compliance. The status could give special access to some customs procedures and the right, in some cases, to fast-track shipments through customs. Clause 22 gives HMRC the powers to make regulations to not apply sections of part 1 of the Bill to those with such a status, or to ensure that the status is recognised procedurally in other ways.
Once again, this is a very wide power given to HMRC commissioners to ignore large sections of the Bill in relation to certain operators. Under the amendment, we hope to shift the powers from HMRC commissioners to Treasury Ministers. There is a simple reason for that: Treasury Ministers are democratic agents, accountable to the general public. We cannot allow a situation where unelected officials can disapply large sections of parliamentary legislation with no democratic recourse or public oversight. The clause would effectively give HMRC power to refuse to apply all of part 1 of the Bill, from clause 1 all the way to clause 38. Surely this sweeping power, if it has to be created, should be held by a Minister of the Crown—ideally with additional parliamentary scrutiny, as we have tried to ensure throughout other parts of the Bill.
The clause highlights yet another case where democracy is being brushed aside for the purpose of expediency. Our amendment seeks to restore accountability. I hope that members of the Committee will support it today.
Amendment 129 and consequential amendment 130 seek to amend clause 22 and clause 32 respectively. In both cases, the amendments would add a requirement for the Government to introduce affirmative regulations to make further policy. Under clause 22, that is for the purposes of setting up an authorised economic operator scheme.
The use of the negative procedure in that case was commented on in the Lords Delegated Powers and Regulatory Reform Committee report, which addressed the matter of regulations made under the negative procedure under clause 22 as follows:
“Clause 22 allows HMRC Commissioners to make regulations ‘disapplying or simplifying’ any of the law relating to import duty made by or under Part 1 of the Bill (clauses 1 to 38) in relation to “authorised economic operators”, a term that will be amplified in regulations and which essentially covers operators who meet internationally recognised standards of compliance. Bearing in mind that clause 22 covers the other 31 regulation-making powers found in Part 1 of the Bill, its scope is very wide. Given the width of this power enabling HMRC to waive compliance with the law, we consider that these regulations should be subject to an affirmative procedure.”
Again, the Lords are bringing home the point about democratic accountability.
Amendment 129 seeks to amend the Bill, following the advice of that cross-party Committee, because of another example of the Government sidestepping parliamentary scrutiny. We want—we will say this time and again—to reintroduce some measure of scrutiny into the process. Similarly, amendment 130 brings the notes under clause 32 into line with the changes made in clause 22, as I described earlier. It is therefore a consequential amendment in ensuring that the Bill properly reflects the comments made by the Delegated Powers and Regulatory Reform Committee. As I am sure everyone will agree, the proposals are all about parliamentary scrutiny in the important area of customs policy.
Kirsty Blackman
It is most unusual to hear the Lords held up as champions of democratic accountability, but the work of the Delegated Powers and Regulatory Reform Committee on the Bill has been incredibly useful, and it has allowed us to have a more knowledgeable debate on the subject. It was quite reasonable of the Opposition to have brought forward their amendments.
I will speak to amendment 116, which I intend to press to a vote. It is about authorised economic operators, which is what the clause covers, because I have real concerns about the system. I am not the only person to have concerns—they have been expressed previously—about how the UK manages the AEO scheme within the UK. The UK scheme is managed dramatically differently from schemes in other countries, which is a real concern for businesses.
The Government’s customs White Paper mentioned that people could be authorised economic operators, and basically suggested that that would solve all their woes. Given how difficult it is for companies to become authorised economic operators, and given HMRC’s shortcomings in overseeing the process and ensuring that it is as smooth and quick as possible, I have real concerns that the system cannot be used effectively by many businesses as a way to ensure—slacker customs procedures is not the right term—slightly different customs procedures that would allow things to move a bit more smoothly.
In the amendment in my name and that of the hon. Member for Dunfermline and West Fife, we are looking for the Government to provide more information. Part of that is about giving businesses certainty further in advance, and part is about ensuring that the Government think about how the authorised economic operators scheme will go forward.
Among the various things we are asking for in the amendment is
“the proposed criteria to be applied in determining whether or not any person should be an authorised economic operator”.
Part of that is to do with the issue that the UK Government and HMRC have had with requiring companies to have someone with three years of customs experience in order to be approved as an authorised economic operator. That is how things have been applied and work now, but if we suddenly include the, I think, 130,000 new companies that have not previously had to do customs checks, we will need a different system, because those companies will not have someone who has been working for three years in a customs-related role. The Government will have to agree that some sort of external company can take on the role of that person, or that the companies can have a differentiated system until they have had that three years of experience in exporting. It is reasonable to expect the Government to be a bit more flexible.
Our proposed new paragraph (b) asks for
“an assessment of the structure of the authorised economic operator system in Germany, Austria and such other countries as the Chancellor of the Exchequer considers relevant”.
Although the scheme is internationally recognised, the way in which it is implemented and the way in which the equivalents of HMRC oversee it varies wildly by country. In some places, the system is much quicker, and it is much easier to get through the process. Companies receive more assistance and guidance to get them through the process, and the officials make a determination about applications more quickly.
It is important for the Government to look at other countries. The British Chambers of Commerce said that Austria and Germany do this in a much smoother way; that is why those countries are included in the amendment, but it would be completely reasonable for the Government to include any other countries that they think are relevant.
Paragraph (c)—
“the proposed differences between the structure that is proposed to be established by the first exercise of the power to make regulations under subsection (1) and each of those structures described in accordance with paragraph (b)”—
would again require the Government to provide us with more information in advance. Paragraph (d), on
“the level of proposed resources to be allocated by the HMRC Commissioners for the authorisation of new authorised economic operators”,
is pretty critical. Given that I assume the Government expect to see a dramatic increase in the number of applicants for authorised economic operator status because of the number of companies that will be exporting for the first time, it is reasonable that they should report on how they intend to ensure that sufficient resources are allocated to seeing the process of authorised economic operators through.
Paragraph (e) is about
“the target timetable for the authorisation of…new authorised economic operators in each class, and…authorised economic operator certification renewals in each class.”
We have heard concerns that the renewal process for an authorised economic operator can take 12 months. If that is so—that may be an outlier—that is a ridiculous length of time for a renewal. The Government may decide that they want a first application to take that long, but I would contend that even that is pretty excessive. It would be incredibly useful for the Government to set out what the targets are, so that companies know, when they are going into the system, how long the Government intend to take in making a decision. When a company is considering, for example, exporting to a new market or changing the way it does it exporting, it should be able to look at the Government’s timeline and plan on the basis of how long it will take them to process the authorised economic operator approval or renewal.
It would be sensible for the Government to come back with all those answers. Businesses would be very happy if the Government gave them more certainty about all those matters. This is a pretty comprehensive amendment, and it relates to a number of aspects of the authorised economic operator scheme that I have concerns about. I hope the Minister will provide a degree of certainty about all of them. If he cannot, I will be keen to press this amendment to a vote.
Mel Stride
Clause 22 provides the framework under which the UK can set up its version of an authorised economic operator. AEO schemes give compliant traders who meet certain criteria access to simplified customs arrangements. The AEO concept is well known in international trade. A total of 41 customs territories, including the 28 EU member states, have introduced a version of an AEO scheme. Providing authorised traders with simplified customs arrangements is encouraged under the World Trade Organisation trade facilitation agreement.
AEO status operates as a quality mark. It indicates that a business’s role in the international supply chain is secure, and that its internal systems are compliant with HMRC customs controls. AEO status is not mandatory. However, in general AEO schemes enable traders to access customs facilitations and simplifications and undertake customs activities with only light-touch oversight from customs authorities. They allow customs authorities to distinguish between lower and higher-risk movements of goods, avoid unnecessary targeting of resources, and provide customs simplifications and facilitation of legitimate trade.
Clause 22 allows HMRC to set out what customs requirements or procedures can be simplified for AEOs, sets out where HMRC must take account of AEO status when administering the customs system, and gives the criteria or conditions that a business must meet before AEO status is granted. The clause also provides for the creation of different classes of AEO status, which enables the Government to develop simplification schemes appropriate to different types of business, and to match them with robust but achievable criteria and application procedures, thus avoiding a one-size-fits-all approach.
Amendment 128 seeks to ensure that the Treasury, rather than HMRC commissioners, exercises the power to make all regulations under the clause.
Kirsty Blackman
The amendment does not call for a review at all; it calls for a report to be provided. It is not about concerns being raised about the current operation of the scheme, but about how HMRC will look at the scheme going forward.
Mel Stride
I thank the hon. Lady for that clarification. She is right: I said “review”. However, my comments are equally relevant to a report on how it is going and thoughts on how we move forward.
The inclusion of clause 22 reflects the feedback from businesses enjoying the benefits of the current AEO regime. In responding to calls for continuity in that regime, it will help to minimise any potential disruption. What is more, HMRC has already committed to improving the authorisation process for traders and has been meeting with businesses, as I outlined, since last autumn to consider practical improvements to the process. The process is ongoing and includes drawing on the best practice of other countries.
On the amendments, the draft regulations will make clear what the authorisation criteria for AEO status will be. It will largely be the same as the current EU criteria. Those regulations will also set out the details of AEO status, which will largely be the same as the current system.
Kirsty Blackman
It would be very useful to know whether the Minister has any idea when the regulations will come forward. Part of my concern was the lack of advance notice for businesses.
Mel Stride
That will be determined to a large degree by the negotiation that is in play with the European Union and by whether we have an implementation period. We are hopeful that such a period will be seen to be in our interest and that of the European Union. The measures will be brought in at the appropriate time, as and when we require our own stand-alone system, so that we are ready on day one and have the regulations that will allow us quickly and effectively to introduce AEO status. It is not about having a one-size-fits-all model. It is about having different classes so that we are able to be helpful in particular to the small and medium-sized enterprises that we recognise may benefit from a different approach from that for larger businesses.
Amendments 129 and 130 would apply the draft affirmative procedure to all regulations made under clause 22. The Bill ensures that the scrutiny procedures that apply to the exercise of each power are appropriate and proportionate considering the nature, length and technicality of the regulations and the frequency with which they are likely to be made. The Government believe that using the negative procedure under clause 22 provides a sufficient level of parliamentary scrutiny, while having regard to the technical nature of the regulations. The regulations may, for example, be used to specify the criteria and processes that HMRC uses when determining whether a business can be authorised as an AEO. Regulations may also set out where and when HMRC must take account of AEO status when administering the customs system. Adopting the draft affirmative procedure for these types of regulations will affect the expediency and efficient administration of the customs regime. For those reasons, I urge the hon. Lady to withdraw the amendment.
Anneliese Dodds
I do not want to try the patience of the Committee—I know we have been here for three hours—but I hope it is acceptable to push a little on one element of amendment 116 that the Minister did not address explicitly. The amendment, which was tabled by the SNP, demands that there should be a report on
“the level of proposed resources to be allocated by the HMRC Commissioners for the authorisation of new authorised economic operators”.
The Committee still lacks clarity on how many of the new processes will be delivered in taxes.
I was grateful to the Minister for responding to a parliamentary question that I laid just before Christmas on the comparative strength of the UK in customs officers as compared to other nations. His response suggested that it was not possible to have a comparative analysis. He said that the European Commission collated figures, but they were not directly compared and would not be comparable.
I have since looked at the World Customs Organisation’s annual report for 2016-17, which compiles information given to it directly by customs organisations. What came out of that is concerning. It suggests that we have about 5,000 customs officers, and there is a commitment from the Government that we might have an additional 3,000 to 5,000, although it is unclear when that will be decided. Those customs officers currently process 77 million declarations for import and export—that number could go up substantially if we shift out of the EU customs union—so each customs officer has to process about 15,400 declarations per annum. According to the report, that is 10 times as many as every US or Canadian customs officer. It is 15 times as many as German customs officers, more than 30 times as many as Australian customs officers and about three times as many as customs officers in Hong Kong, Norway and Switzerland. There may be issues with comparability with some of those data sources, but they must be pretty big issues if that large gap can be accounted for just through different reporting processes. The SNP is absolutely right to call for more clarity on how exactly the new procedures will be resourced adequately.
Mel Stride
I thank the hon. Lady for her intervention, which was characteristically acute and well informed. I hope I can reassure her that we take the resourcing of Her Majesty’s Revenue and Customs in this context extremely seriously. It is one of the critical elements that HMRC is looking at. On a number of occasions when I have met with Jon Thompson, the head of HMRC, it is very high up on our agenda as a very important issue that we are tracking on a regular basis. HMRC carried out a detailed review of resources required to manage an upturn in authorised economic operator applications, including a review of lead times and dealing with an increase in applications as we approach March 2019.
Initially, the UK may wish to follow the current Union customs code approach to the AEO programme, depending on the outcome and the progress of the negotiations. If that were the case, it would simplify matters quite considerably, at least in the near term. In the longer term, HMRC has carried out extensive discussion with stakeholders, as I mentioned earlier, to identify ways in which the application process might be streamlined. That will inform the development of future schemes.
On the general points that the hon. Lady understandably made about staffing levels and the large number of additional declarations that will potentially come our way on day one, depending on the outcome of the negotiations, she is right that HMRC has indicated that 3,000 to 5,000 would be about the range of additional staff that we will be looking at. The Chancellor made it clear in his recent Budget that £3 billion will be made available—£1.5 billion per year—across all Departments, including HMRC, to make sure that appropriate requests are met. We are not only very close to the requirements, but very much engaged in ensuring that they are appropriately resourced.
In terms of increasing the volume of declarations that we will be handling, we are working on the IT side and on the custom declarations service system. Our commitment in that area is important.
Question put, That the amendment be made.