Trade Bill
Wednesday 23rd January 2019
(5 years, 10 months ago)
Lords ChamberTrade Bill 2017-19 View all Trade Bill 2017-19 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 127-II(Rev)(a) Amendment for Committee, supplementary to the revised second marshalled list (PDF) - (23 Jan 2019)
“UK participation in EU’s Generalised Scheme of Preferences
It shall be the objective of an appropriate authority to take all necessary steps to implement international trade agreements which enable the United Kingdom, after exit day, to fully participate in, or replicate the objectives of, the European Union’s Generalised Scheme of Preferences (GSP) for low-income and lower-middle-income countries.”
Lord Stevenson of Balmacara (Lab)
My Lords, I sense there has been a bit of a change in the composition of the House—I cannot imagine why, because we have reached some of the more interesting elements of the Bill. Had the noble Viscount, Lord Ridley, who is absent, been present, he might have learned quite a lot. That will help me avoid the more sharply put questions.
Amendment 27 is a probing amendment in the sense that it is there to invite the Government to set out their plans, should they be necessary, in relation to GSP, the EU’s generalised scheme of preference. It is open to a wider range of issues, and in his dual capacity as Minister responsible for development, the noble Lord, Lord Bates, might well have a view that will add to our overall understanding of where we are. The noble Lord, Lord Lansley, has a similar amendment, although it is much more detailed and sharply drafted than mine is, and I look forward to hearing his comments.
It can be said in very few words that one of the things that one gets by being part of the EU is participation in schemes of the type that is being discussed here, which is an attempt to try to bring some sort of structure and order to the way in which trading relationships can sometimes impact on development activity and vice versa, by recognising that very often a good trading opportunity in a developing country is perhaps going to do more than any amount of aid, however well delivered and whatever focus it has. On the other hand, the impact of either favourable tariffs, reduced costs or support for various aspects of work on the trading side of that relationship can have quite a devastating effect.
It is to the credit of the EU—and I am sure that Ministers have been heavily involved in the shaping of the way this goes—that the GSP arrangement is being set up so that it is constantly monitored. We have recently seen the interim relationship of that. In short, the results are broadly supportive of the way the EU has taken forward this programme, with some reservations in the sense that it is probably too soon to say quite what some of the outcomes will be. It is recognising that there are longer-term benefits that will not be picked up by short-term measuring techniques, and of course there are dangers that come in relation to trying to focus too narrowly on some of the econometric figures without thinking about some of the wider social issues.
The GSP relationship, combined with Everything But Arms arrangements, is a way of seeing development happen in a constructive and progressive way, which is something that we support. In moving this amendment, I invite the Government to respond to the thoughts behind it. I beg to move.
Lord Lansley (Con)
My Lords, in following the noble Lord, Lord Stevenson, I am grateful for his kind remarks about my amendment. I was not required to produce any amendments and I produce relatively few but, by virtue of his responsibilities, he has to produce quite a lot of them so I think we will forgive him for the sighting shot that, in a sense, many of these amendments are at this stage.
The generalised scheme of preferences, for those who are reading our debate afterwards—I am sure that many will do so—is about giving preferential tariff reductions to developing countries to stimulate their economies and their exports to the European Union, as one of the world’s largest potential markets. It can be fairly said that it is something that we subscribe to and that we encourage. For that reason, in the Taxation (Cross-border Trade) Act 2018, the Government and Parliament have already legislated for a preference scheme in the future. Therefore, that is not the issue, which is why my amendment is structured in the way that it is. The issue is: how do we go about this? That is the point of Amendment 27. How far should the United Kingdom’s preference scheme—that is, the unilateral preferential tariff rates that we offer to developing countries—be structured in such a way as to correspond directly to what is presently the generalised scheme of preferences as reflected in EU regulations?
The starting point for this is that the EU regulations will last until the end of 2023. For the purposes of this debate, I am going to assume that we are not in a customs union with the European Union, because if we were that would automatically solve this problem. Therefore, we are outside the customs union and we have to make our own decisions about to whom we give a preferential tariff rate and when we vary from it. We did not have a debate here on the Taxation (Cross-border Trade) Act because it attracted financial privilege, so we are getting the benefit of that now. Quite a lot of the debate on the relationship with developing countries focuses on tariff reduction. That is important but, for the least developing countries, the objective is nil tariffs on—as it is expressed—everything but arms and ammunition. That is reflected in Schedule 3 to the Taxation (Cross-border Trade) Act. For the other developing countries—the eligible developing countries, as they are known—there is an objective to try to reduce tariffs to the fullest extent possible. That is already in there.
But of course the issue then is: under what circumstances do we depart from that? The fact that the GSP says nil tariffs does not mean that in all circumstances that is maintained. The European Union has not done this, but the regulation would permit the European Union to suspend the nil tariff, or indeed to withdraw the preferential rate, in respect of transgressions on the part of other states. That is a possibility where a country has flagrantly been abusing human rights. If a country chose to produce large numbers of goods for export to other countries on the basis of a flagrant disregard for child labour laws, for example, should one continue to offer a preferential rate? Many of us would say that we should not necessarily do that. We should then suspend the preferential rate in some circumstances where human rights abuses and the rule of law have ceased. The European Union has not permitted countries to be in the Everything But Arms GSP, so we have to make those judgments under those circumstances.
The point of my Amendment 65 is to say, as we proceed, that we should start with a scheme that conforms to the structure of the EU regulation, because everything is starting from the position of continuity—that happy word—but we would have the ability to move on. We may make our own judgments about the circumstances in which we would suspend or withdraw the preferential rate. It might apply in the circumstances I described. It might equally apply if we had to safeguard the industry of the United Kingdom. The same would be true in the EU, but we might choose to do it in different circumstances. For example, last week the EU applied a safeguard measure in relation to imports of rice from Cambodia and Myanmar. That may not be something that we in the United Kingdom would choose to do because we do not take the same view about rice production in this country as, for example, they do in southern European states. There will be differences and we will have industries to protect, but we do not necessarily have to follow the same approach as the European Union.
As a way of proceeding, my amendment would insert into the Taxation (Cross-border Trade) Act, under those circumstances, that the Government should come forward to Parliament, make a report and seek views before proceeding down the path of suspending or withdrawing this preferential rate, because we should be participants in that discussion.
There should also be an intention before January 2024—when the EU regulation expires—to look independently from the European Union at what our future structure on preferential rates should be. In my amendment I suggest that the Government should report to Parliament by the end of 2022 on their proposals, with a view to legislation being passed by the end of 2023 for introduction from 1 January 2024. Of course, EU competence has dominated this area of policy, but the time will come for Parliament to think about what our trade policy looks like in terms of unilateral preference rates for developing countries.
It is quite difficult even to work out the relationship between our structure of preferential rates and the EU’s. Simply to say continuity is probably misleading because I cannot actually find absolute correspondence between the benefiting countries under the EU’s standard generalised scheme of preferences, or what it calls its GSP+, which is for eight vulnerable countries. I cannot even find that we can correspond between that and what is set out in Schedule 3 to the Act. For Everything But Arms, the list is the same, so we know where we are with that. I think I found 28 EU countries that benefited from the standard GSP or the GSP+, but 43 countries that are intended to benefit from what is referred to in Schedule 3 to the Act as “other eligible developing countries”. The difference is obvious: the EU does not include formally the GSP countries which, by virtue of other agreements, have access to tariff reductions that are at least as good as would be available under the GSP—for example, it has association agreements with Egypt, Tunisia, Morocco and so on.
For us to replicate the EU’s GSP would mean significantly fewer countries having access to the GSP and to those preferential rates than would be the case in the European Union. I just say gently to the noble Lord, Lord Stevenson, that that is another reason why he and I will have to go away and think about our amendments again. It is not about reproducing the GSP regulation or the EU’s list. It is about ourselves arriving at a full list of the developing countries, particularly those which are not the least developing but countries eligible for the GSP that should get preferential rates but at the moment get them through other EU agreements. Those are not necessarily free trade agreements that will get rolled over. I am not aware that this is necessarily the case for all these association agreements; it may be for some, but not necessarily for all of them.
Therefore, I commend Amendment 65 to the extent that it raises the issue of having our own scheme, consulting on it and asking Parliament when we have to change the preferential rates. I do not commend it to the extent that I think it can be adopted at this stage, but I think we should come back to it. I hope Ministers will be willing to look at that and how they would go about managing the preferential scheme in the future.
Lord Fox (LD)
My Lords, I thank the noble Lords, Lord Stevenson and Lord Lansley, for bringing this issue to your Lordships’ House. We support greatly the spirit on these Benches. The noble Lord, Lord Lansley, used a contemporary example of rice. In another life a long time ago, I worked in the sugar industry for seven years. Of course, sugar is wrapped into this so deep that it is still embedded in there. On his point about the transition from us being part of a European scheme to going into a wholly United Kingdom scheme, I know that the pressure on that commodity alone would be huge, given the past relationships and previous problems that some sugar-producing countries have had within the European regime. That is just one commodity. His point is clear: that this is not a simple issue but one that requires a great deal of thought, but that thought must be had and is worth having. We support this process and will involve ourselves if necessary in how this gets taken forward. Clearly, we want to be part of a future regime that has these objectives, but the means with which to produce that are not necessarily as simple as they might look on first appearance.
Baroness Neville-Rolfe (Con)
With the GSP, the key thing is who benefits. In the past, some quite surprising people have benefited who perhaps do not benefit any longer, such as Mexico, Chile, South Korea and so on, which are now very rich countries. India was in there for a long time. It is important who is on the list.
I have some sympathy with the points made by my noble friend Lord Lansley. If we leave the EU, I believe that we should have more choice in which countries we help with tariff preferences. We should be able to take a more independent view, with an eye to our own history—for example, of the Commonwealth—and not necessarily just copy out the EU list. Obviously it depends on where we finally end up in our relationship with the EU, and I do not want to go into that, but if we end up having a certain amount of independence, that should apply to GSPs. I am not sure that this amendment should be in the Bill, but it is very good that we are taking this opportunity to talk about this useful vehicle for helpful the poorest developing countries that we all want to see develop.
The Minister of State, Department for International Development (Lord Bates) (Con)
My Lords, it is welcome to move from the group of amendments that caused maximum divergence to the group of amendments after dinner where there is maximum convergence. I think we all side with the way that the noble Lord, Lord Stevenson, led this debate by pointing to the immense benefits in achieving sustainable development goal 1, the eradication of extreme poverty by 2030. We are not going to do that by aid—aid is around £1.5 billion a year. It requires significant trade flows and therefore this is crucial.
I will make some very brief general remarks. Around £20 billion of goods a year are shipped to the UK from developing countries, accounting for around one-third of our clothing, one quarter of our coffee and other everyday goods such as cocoa, bananas and roses. This trade also creates jobs, helping people to work their way out of poverty. Consequently, I am pleased to confirm to the Committee that this has already been legislated for in the Taxation (Cross-border Trade) Act. My noble friend Lord Lansley might still have been on vacation when on 4 September I took that Bill through this House. Although the debate on it was brief, it was very good. I shall come back to that point later.
The trade White Paper confirmed the Government’s intention to provide, as a minimum, the same level of import duty reductions to all current beneficiaries of the EU’s GSP scheme as we leave the EU. I am also pleased to assure the Committee that Section 10 of the Taxation (Cross-border Trade) Act enshrines in UK law the obligation to provide duty-free and quota-free trade access for least developed countries. The Government will lay secondary legislation to set out these details of the scheme before we leave the EU if needed by March 2019, or at the end of the implementation period. In the future, we will look to improve the UK’s trade preference scheme by making it even more generous, simpler to attain and capable of working better for the poorest people around the world. Alongside this, our aid spending will continue to provide support and expert advice to help break down barriers to trade and to promote investment so that developing countries can take better advantage of these arrangements.
As the noble Lord, Lord Stevenson, mentioned, I also have the privilege of being the Minister with responsibility for economic development in the Department for International Development. It may be of interest to my noble friends Lord Lansley and Lady Neville-Rolfe and the noble Lord, Lord Fox, that in that context I am undertaking a review of how we might approach the opportunities to look at more beneficial trade and tariff-reduction packages and economic partnership agreements in future as we leave the EU. I would be delighted to take this conversation into the Department for International Development, for those who are interested, to meet officials so that we can delve more into some of the great expertise and ideas that we have heard today.
Lord Purvis of Tweed (LD)
The Minister’s commitment is very welcome. We know that we can take him at his word on that because he is very open and a very responsive Minister who is respected across the House. I will follow up a point made by the noble Lord, Lord Lansley. With regard to the 49 countries under the EU Everything But Arms policy and, according to the OBR, the 27 other low-income countries that the EU has defined, if on exit we are going to replicate the EU system we would also have to replicate the rules of origin system that comes with GSP+. GSP+ has distinct EU rules of origin requirements for those countries that are part of it. Is the Government’s intention to replicate the rules of origin criteria that the EU currently operates for them?
Lord Bates
I am grateful for the noble Lord’s question. His precise point is that we are aiming to replicate what currently exists, so we would take across the current applicable rules of origin into what we would be laying in secondary legislation before we leave the European Union. Once we have left—without a deal or, we hope, after an implementation period—we could devise our own scheme during that implementation period and be aware of the EU’s thinking. I know from serving on the Foreign Affairs Council that it has done some tremendous development work, particular with the post-Cotonou negotiations, as to how we fit. The current plan is that what is presently the case will initially also be the case for these countries.
Baroness Neville-Rolfe
Before my noble friend sits down, could he give me some reassurance about the wealthier countries on the list? Have they actually come off the list or is it our plan to make sure that the benefit of tariff-free trade is given to those who are worse off?
Lord Bates
Yes, and my noble friend Lord Lansley touched on this point. He talked about the treatment of different countries. We work from a World Bank list and an OECD DAC list of the least developed countries. As countries graduate—which is a normal procedure—they need to move to other agreements as well.
Lord Stevenson of Balmacara
My Lords, I am grateful to the Minister for his full response. We would welcome the opportunity to meet up with him.
We are converging on this point, though the noble Baroness, Lady Neville-Rolfe, is coming from a slightly different direction. She is hoping to see some quite quick change towards—I cannot think of the right word—a family relationship, involving Commonwealth and other markers which are not a feature of the other lists we have been talking about. It might make sense to try to work out where this is going.
We are among friends, so I can confess that I tried to do exactly what the noble Lord, Lord Lansley, did, which was to go back to the Taxation (Cross-border Trade) Act 2018 and try to work out where we were. I gave up, but he did not. I could not make out the list markers. The confusion comes because we are working from two different directions, as the Minister said. One is from a World Bank list of economic measures and the other is from a trading and development list which gives a different feel. Clearly, you get a different group of countries if you look at different indicators—not just poverty but the potential to export, the development status of their industrial arrangements and their other markets. We would have to think hard about all these. This does not vitiate the main point that it may not be necessary to put an amendment into this Bill, but it would be quite useful to have something where we, on all sides of the House, roughly understand the basis on which the Government are progressing. The Minister did say rather remarkably—but I hope it is true—that, whatever the timing, even if it were 29 March, they would be ready to make sure and clarify full details of what would be available to all the countries in scope on the GSP and on the Taxation (Cross-border Trade) Act approach. If that is true, he is obviously ready for the meeting and we are too. I beg leave to withdraw the amendment.
Lord Grantchester
“UK support towards an Environmental Goods Agreement
It shall be the objective of an appropriate authority to take all necessary steps to enable the United Kingdom, after exit day, to fully participate in and fully support negotiations towards an Environmental Goods Agreement at the World Trade Organisation.”
Lord Grantchester (Lab)
My Lords, I rise to move Amendment 28 in the name of my noble friend Lord Stevenson of Balmacara. I declare my interests, as noted in the register, on this amendment and on Amendment 30.
Amendment 28, which proposes a new clause, is a probing amendment to better understand the Government’s intentions in transposing or rolling over current EU trade agreements into UK law. Behind EU directives are policies and aspirations. Following on from the previous amendment, how far do these necessarily transfer over with this legislation? I point to the intentions specified under Clause 5(2) and Clause 3(3) that these trade agreements will mirror the existing EU agreements and that, where differences may occur, they will be specified. The relevant words are “any significant differences”, on page 4, line 26, and page 3, line 37. I ask the Minister to give the Committee a definition of “significant differences” and how we should interpret this. It is pertinent to many businesses and regions within the UK, as I shall draw attention to when we discuss Amendment 30 on geographical indicators. The Government may have a different interpretation that a trade agreement could affect existing and future trade.
One such issue relates to an environmental goods agreement, one of the ethical themes drawn attention to in our debate on Monday on Amendment 8 concerning international obligations. If the UK is to begin an independent trade policy, it is vital that sustainability is at the forefront of our intentions and agreements, including through a renewed commitment to the environmental goods agreement. It is important at this stage that everyone is familiar with the concept of environmental goods. They are not any particular product as such but more like a public benefit, in the same terms as the concept in the Agriculture Bill of “public goods”—not necessarily a profit-and-loss item to be bargained with. It is important that such environmental goods, as a policy background already in EU thinking to be transferred over on exit, do not get squeezed out of trade talks. At the very least it should be recognised that the EU has been a very good international forum for initiating these developments.
Although talks are currently on hold, the EU and 17 other participants of the WTO have indicated a willingness to negotiate an agreement to abolish tariffs on items used to achieve environmental and climate-protection goals. The idea, which unfortunately has lain dormant since 2016, has great potential and, despite the reluctance of some of the world’s key players to take the ambition seriously, there is hope yet that the agreement can be revitalised. Even in recent months we have seen positive signs that talks can return. In July last year, a white paper from the Chinese Government used previous talks on the issue as evidence of their commitment to sustainability. If talks are eventually going to be successful, and there is good reason to believe that they will be, an agreement would reduce and remove tariffs on environmental goods, including those aiding and abetting efforts to control air pollution, generate clean and renewable energy, improve resource efficiency, and manage and treat water waste and waste of all kinds. Such components aid our efforts at home to be more sustainable but will also help us to meet targets, ranging from the UN sustainable development goals to the Paris climate change accord.
Talks relating to the environmental goods agreement have stumbled, in part due to the lack of enthusiasm from some of our allies, but the core principle is one that the UK should get behind and re-energise. The UK should present itself as a champion of the negotiations, using our influence on the world stage to persuade those who seem reluctant to re-engage in negotiation. As the UK evolves into a separate entity from the EU, we should focus efforts on playing a central role in future negotiations with the vision to fully participate. I hope the Minister will agree and will assure the Committee that this is within the Government’s intentions. More specifically, I ask the Minister to tell us how the Government interpret “significant differences” and to assure us that the transposition of EU law will include the approach initiated at EU level towards trade agreements. I beg to move.
Baroness Young of Old Scone (Lab)
My Lords, I support my noble friend Lord Stevenson’s Amendment 28. The main objective of reducing tariffs on environmental goods in an accelerated manner is environmental, particularly the need to address climate change and the sustainable development goals, but an EGA also makes good economic sense. Among the benefits are reduced consumer prices for environmental goods. EGA tariff elimination can spur the uptake of energy-efficient goods, resulting in energy savings. I am sure the Minister will tell us that the EGA regulations at the WTO are not currently in a great place—or, indeed, in any place at all. We are told by those who espouse Brexit that we can and will show global leadership as a stand-alone nation. We would have been among those nations which support an EGA as part of the EU. Surely if we leave the EU, this is a good cause on which to start to show this global leadership role.
Viscount Younger of Leckie (Con)
My Lords, the UK Government support an ambitious environmental goods agreement. We believe that a high-standard environmental goods agreement would have three effects. First, it would enhance global access to clean technologies. Secondly, it would advance environmental protection. Thirdly, and not least, it would benefit UK workers, businesses and consumers.
Negotiations on the environmental goods agreement began in 2014 but stalled in 2016 due to disagreements over the scope of products to be liberalised and increasing global trade tensions. While the UK supports the objective of having an environmental goods agreement—and we have been a particularly active supporter in the WTO negotiations—I understand why the noble Lords, Lord Stevenson of Balmacara and Lord Grantchester, have proposed this amendment. I took note of what the noble Lord, Lord Grantchester, said. However, there is a reason we are not able to take this forward: it is already the objective of the UK to continue to support and participate in the negotiations on this agreement. That position will not change. It is not clear what “all necessary steps” in the amendment are, who would decide what those steps are, or what benchmark would be used to decide whether these legal conditions had been met.
I will attempt to answer the noble Lord’s question about significant differences. In our reports under Clause 3, we will be giving details and explaining reasons for all differences that have an effect on trade. There is no official definition, in fact. The noble Lord said that he is talking about the differences—let us be clear about this—in rolling over continuity agreements set out in reports which are prepared under Clause 3. If that does not satisfy the noble Lord, I am very willing to write a letter with the necessary legal ins and outs on this particular matter, but I hope with that explanation the noble Lord will be prepared to withdraw his amendment.
Lord Grantchester
I thank the Minister for his suggestions. It might be very useful to have a look at those, so that they are more widely known. I do not know how far they are already known or not, but I was unaware of them, so if he could write on that detail it would be significant. I thank him. I am pleased to have it confirmed that the intention and ambitions of the Government include the very point we wished to make with this amendment. With that, I am happy to withdraw the amendment.
“Involvement of judicial systems in trade disputes
(1) A trade agreement is not eligible for signature or ratification by the United Kingdom unless the agreement includes the provision in subsection (2).(2) Legal proceedings brought against the United Kingdom under investment protection provisions included in a trade agreement will be heard by the courts and tribunals system of the United Kingdom.”
Lord Stevenson of Balmacara
My Lords, in speaking to Amendment 29 in my name I will also speak briefly to the amendment with which it has been grouped: Amendment 56 from the noble Baroness, Lady Kramer.
At the forefront of my amendment is whether we should retain the rather disputed separate mechanism for resolving investor settlement disputes—this applies to rollover and new FTAs. The concept of ISDS is not new; it certainly predates us joining the EU in 1972. Over the years, we have had a very large number of trade agreements—some several hundred—which Members of the House will be aware of, and many of these contain clauses under which the ISDS was created. In the early days, it was done with some justification in some countries to try to ensure that investment from third parties—particularly private investment, which was obviously necessary to unlock the activity that was the focus of the trade agreement—could be protected in situations where political issues or other issues intervened. Given that the legal systems in some countries will not be regarded as being as well-developed as in other countries such as ours, it is not unreasonable to therefore concede that some sort of special protection was required. That is really where it came from.
I do not think that there is very much more to say about it, except that our argument is that these ISDS schemes are of a bygone age. They relate to a situation in the world that does not really exist anymore. It certainly does not apply to many of the countries with which we will be creating free trade agreements or rolling over existing arrangements. In so far as they have legal systems that we can respect, there should be no question that we should work with our own legal system and with theirs to reflect any requirement for the need to ensure that parties to the agreement can pursue the establishment of a tribunal and appellate mechanism for the resolution of investment disputes.
I should wait for the noble Baroness, Lady Kramer, to introduce her amendment, but in case she has any doubt at all, I do not support where she is coming from. I want to make it very clear that I am not alone in this: the most numerous of the very large number of submissions we received on the Bill were on ISDS. I am sure the Ministers are aware of that. It is worth thinking about the role that civil society more generally will play, but if just about everybody is saying that the Government should move away from these as a model and should think, as the EU is doing, about moving to a system that relies on existing tried and tested systems in the countries, this is something we should bear in mind. I beg to move.
Baroness Kramer (LD)
My Lords, I share one point with the noble Lord, Lord Stevenson, on this issue: many of the various systems for investor and trade dispute resolution are broken. A search is on for new, more effective mechanisms to deliver much more satisfactory resolution, particularly as trade arrangements become far more complex and encompassing, and disputes have much greater significance for the global economy.
The Committee will be aware that the WTO’s arbitration system is on the verge of collapse. It relies on a panel that includes a minimum of three judges and a maximum of seven. The panel, through death and retirement, is now down to three. The United States has made it clear that one further death or retirement will mean the end of the WTO’s arbitration mechanism—it will not agree to replace any retired or dying judges. That mechanism is now effectively teetering on the verge.
Many will also have been involved in the debates around TTIP when that was active in this House and will understand that the resolution methods contemplated under it created a great deal of concern that private companies—specifically American companies—would be able to use the mechanism to wade in and counter local law and local decisions. The structure under TTIP relied on arbitration panels chosen specially for the purpose, against which there was no appeal. They were not part of a traditional judicial system.
We do, however, have an example of a system that works exceptionally well for trade resolution: the European Court of Justice, working for the currently 28 members of the European Union. As Trade Minister, when I talked with the Chinese, the Japanese and a number of other countries with which we were trying to build trade relationships, it was very often in the casual relationships that the issue of dispute resolution would come up. They all spoke, with sad envy, of the system we had in the European Union, known to be incorruptible, fair and efficient, and to have judging panels of real intelligence that were then supported by the collective Governments. They kept wistfully saying what a pity it was that, on a global level, there is nothing that mirrors that.
This is why I differ from the noble Lord, Lord Stevens, who is basically saying that a British company with a complaint will go to the British courts, an American company will go to the American courts and a Japanese company will go to the Japanese courts. It would be hard to persuade anybody that they would be justly treated under those circumstances and that there would not be national bias. I can see this becoming an inhibitor to trade. I also believe that on trade issues generally we need to look to international co-operation and shared sovereignty solutions. We need to recognise that, frankly, the best example we have of trade resolution is the ECJ, and see what lessons and mechanisms we can pick out of that. This is relevant in discussing the continuity agreements as well as future agreements. As this House and the Minister will know, the European Union is now making dramatic changes to the way it structures dispute resolution, recognising the problems and criticisms around the existing system.
The noble Lord, Lord Stevenson, referred to the investor-state dispute settlement system. That is largely an ad hoc arbitration system, but it is in many of the EU’s various trade agreements. He will know, or certainly the Minister will know, that the EU is now migrating from that. In CETA, we have an example of the first new version of the European system: the investment court system. It is a permanent standing court with a panel of judges; it is not ad hoc; and it is two-tier, so there is an appeal mechanism. Interestingly, under CETA, the EU and Canada will collectively appoint 15 judges—five from the EU, five from Canada and five third-country nationals—who will hear cases on a rotational basis. It is therefore bringing in a much more multilateral dispute resolution system with a great deal of independence and the opportunity to create a much more broad template. There is an intention to migrate many of the existing EU trade agreements on to this system over the coming years, which is why the continuity arrangements pose real questions that have to be answered. In the continuity arrangements, are we copying over the rather unsatisfactory investor-state dispute settlement system? Are we going to try to migrate? It is going to be difficult. Look at the EU and Canada. You can see that the capacity to create a panel of 15 judges might be a little tricky if you were trying to do it simply between the UK and Canada. I do not know what sort of system the UK is looking at as it tries to establish a continuity agreement with CETA, but we need some answers on all this.
Lord Taylor of Goss Moor (LD)
If my noble friend will allow me to intervene, there is a really important point here. Many Members of both Houses have assumed that the WTO can be relied on as a backstop arrangement. But the Americans’ unwillingness to appoint new judges means that the WTO mechanisms are effectively being brought to an end, and that no reliance can be placed on the WTO as an alternative to the European Union mechanisms that she is describing.
Baroness Kramer
My noble friend is absolutely right. One of the frustrations when people talk so blatantly about WTO rules is that the United States is working very hard to undermine the entire structure of the WTO and is threatening to leave. Talk about timing: they hold up and pray in aid a system that is on the verge of crumbling. It is hard to see how the WTO rules will have ongoing force and substance when there is no dispute resolution mechanism available. It could happen any day; with elderly judges, all it takes is one death or retirement. This issue will not stretch out into the future; it is a current and immediate problem that has to be dealt with. In this House we often try to explain that the WTO has severe limitations and real risks, but apparently Brexiteers’ ears are closed to those concerns. I very much agree with my noble friend.
The Minister of State, Department for International Trade (Baroness Fairhead) (Con)
My Lords, first, I reassure your Lordships that the powers in the Bill will not be used to implement investment protection provisions, because such provisions in trade agreements do not require domestic legislation. I am grateful to the noble Lord, Lord Stevenson, for his explanation of the rationale behind Amendment 29, in his name. However, it would mean that no future free trade agreement could be signed or ratified unless any claims brought by foreign investors against the UK were heard by UK courts or tribunals.
The amendment overlooks the fact that foreign investors already have significant rights to legal redress in the UK—for example, through domestic law and normal procedures such as judicial reviews or commercial arbitration. As I think noble Lords would agree, UK courts are regarded internationally as reliable and independent. The amendment would preclude the possibility of disputes being resolved through ad hoc international arbitration tribunals, which is the internationally and currently accepted means of investor-state dispute settlements—ISDSs—in any future free trade agreement. So requiring investment disputes to be heard by UK courts or tribunals in all instances could undermine a framework that has successfully supported UK investors in many countries worldwide for, as the noble Lord said, a long time. In fact it has done so for the past 40 years.
The ISDS system does not allow other countries’ courts to have jurisdiction over matters that UK courts could determine themselves. Instead, it is independent of both states’ legal systems. It is important for foreign investors to have an independent means of redress, as they may be more susceptible to certain risks such as discrimination, as the noble Lord, Lord Stevenson, said. ISDSs allow claims to be brought for potential breaches of obligations of the type that the noble Baroness referred to—expropriation and discriminatory practice, et cetera.
The UK expects other countries to treat British businesses operating abroad as we treat investors in the UK. Although I do not believe that this was intended, it is likely that if this amendment were adopted, any future partners would insist on reciprocal provisions, meaning that any disputes brought by UK investors against a host state might also be required to be heard in that host nation’s courts.
I turn to Amendment 56, tabled by the noble Baroness, Lady Kramer. Accepting this amendment would mean that for any future trade agreements to be signed and ratified, they would have to contain an agreement on the parties pursuing a multilateral investment tribunal system and an appellate mechanism for the settlement of investor-state disputes. Before I go on, there is an issue with the WTO appellate court; I think that the members of the WTO are trying to resolve it. It is not directly relevant to the ISDS as it is a different system, so in the interests of time I will stick to ISDS.
Not all trade agreements cover investor protection and dispute settlements. We therefore do not think it appropriate to require all trade agreements to include a commitment to pursue a multilateral investment tribunal system. In fact, to introduce such a requirement might hinder the development of our trade policy. As I mentioned, ISDSs have provided UK investors overseas with a means of redress which is independent of and outside the host state’s national courts. The UK has over 90 bilateral investment treaties which include these provisions.
The noble Baroness, Lady Kramer, is absolutely right that reform of ISDS is under scrutiny. It has taken centre stage in recent years, frankly, with many international fora taking a keen interest. The UK supports the reform agendas which, as she said, focus on ensuring: fair, efficient and cost-effective outcomes of claims; high ethical standards for arbitrators; and increased transparency of hearings. We in the UK have supported the EU’s mandate to open negotiations to establish a multilateral investment court, or MIC, which would be a permanent body created to hear investment disputes. The CETA with Canada is currently the only EU FTA containing that investment court system. We are working with our Canadian partners on its provisions as part of the broader work on trade agreement continuity. This includes the question of our future approach to investor-state dispute settlements.
Lord Purvis of Tweed
The Minister mentioned Canada and it was interesting to hear that. May I seek clarification? I raised this issue on Monday in Committee with regard to Singapore. As a consequence of the court of justice judgment in May 2017, the Singapore agreement was made into two: a stand-alone free-trade agreement and a separate investment protection agreement. These draft trade and investment agreements were signed on 19 October last year. What is our position in the UK on seeking to roll them over? I think the Government have stated clearly that they will roll over the free trade agreement. Do they intend to roll over the investment protection agreement also, which is quite distinct?
Baroness Fairhead
My understanding is that it does not require any further domestic legislation. I will write to the noble Lord if that is in error, but I understand that it is already in domestic legislation. If that is incorrect, I will write to him and put a letter on file in the Library.
Baroness Kramer
I understand what the Minister is saying, but as she addresses that issue, would it be possible to understand what will happen with the other continuity agreements? Singapore is just the beginning. We will be seeing others moving over to this split—a free trade agreement here, a dispute resolution system there—and it is unclear whether we will have negotiated to follow that pattern and to mirror that split of the new structure, or whether we will remain tied into the old structure while the EU moves on to the new one. There must have been an internal decision somewhere in government on how we deal with this.
Baroness Fairhead
I am happy to meet the noble Baroness and the noble Lord with officials to go through the detail of this, and then we will prepare a letter for the Committee if required. The discussions on whether the UN Commission on International Trade Law—UNCITRAL—should seek to establish a multilateral investment court are in their preliminary stages; there are no firm proposals on the structure, governance or cost. We are actively engaged. However, discussions on that possible reform are at an early stage. We should not prejudge the outcome of that process, because to do so could preclude the UK from making a later judgment when proposals are more advanced. We look forward to working with international partners. In addition to the discussion I offered, I welcome discussing this topic further. There are a range of views on this question. At this stage, should the UK require a universal commitment to pursue a multilateral investment court in all future agreements, that could result in the loss of our negotiating space.
In respect of the true aims of this Bill and the resolution systems that are already in place, and given our commitments to discuss MICs, I ask the noble Lord to withdraw his amendment.
Lord Stevenson of Balmacara
I am grateful to the Minister for her full discussion of these issues. As she started I was thinking that we could have got a better result if we had drafted Amendment 29 in the positive rather than negative tone—to make it optional in, rather than to restrict out, which was the main complaint she had about it. As the argument has extended, I can see there is a lot more going on here than we were aware of at the time we drafted it. I am sure that I share with the noble Baroness, Lady Kramer, the idea that if we can have a discussion about all the various things going forward, we might be able to have a better understanding of where, if at all, there is any need to move on that.
Having said that, the Minister mentioned that there was a lot of interest in it. I stress again that this is the one single issue that I have had the most correspondence about. Just about every group involved in trade and development has picked this as its number one issue. It is good that work is being done on it, in the sense that one is not trying to constrain good and effective systems that arrive at having a fair, efficient and highly regarded court that will have all the details and be able to deal with the various aspects of it. Clearly, we do not want to disadvantage other countries in relation to anything we might be doing. These are the pieces in play, as it were, and it is a question of trying to get confidence from Ministers and officials that things are moving forward.
In some ways—although this may be the wrong line to follow—it is quite like the discussions on the Unified Patent Court. There is a person not too far away from the noble Baroness who has quite a lot of detailed experience of that. That is an ad hominem—I do not know what the Latin is—but it relates to a particular issue: patentem. It has a link into but is not part of the European Court of Justice, which would play back to the noble Baroness, Lady Kramer. It might be too elegant a solution, but I wonder if that might be something we might also pick up, because there is something in there that might square all the circles. With that, I beg leave to withdraw the amendment.
Lord Grantchester
“Geographical Indications
It shall be an objective of an appropriate authority to take all necessary steps to implement an international trade agreement which ensures mutual recognition of Geographical Indications in the United Kingdom and the European Union.”
Lord Grantchester
Amendment 30 is a probing amendment. It may not be of great intent but it is of wide importance to rural areas and the food chain in general. Following on from my earlier amendment which sought to understand the rollover nature of EU trade agreements into UK law, this involves the protection of geographical names designating agricultural products that have been in existence for more than 100 years. This is where the Minister’s definition of “significant differences” will be most helpful.
At present, as an EU member state, the UK falls under three specific geographical product designations. The first is the protected designation of origin—PDO—such as that for Stilton cheese, of which I know the Minister is well aware, which is designated to cheese-making dairies in three east Midlands counties. Secondly, there is the protected geographical indication framework, such as for West Country beef and lamb. Thirdly and lastly, there is the traditional specialities guaranteed framework, such as for traditionally farmed Gloucestershire Old Spot pork. These co-ordinated efforts have given some of the UK’s most well-respected and internationally renowned produce the legal protection it deserves. From each corner of the UK, British produce of world-class quality with links to a certain area or using certain traditional methods has had its reputation enshrined, preventing outside manufacturers reproducing or passing off the product and selling it as a regional one. There is great concern that these protections will be lost post Brexit.
I ask the Minister: what is the status of the recent EU-Canada trade agreement that has been mentioned throughout our proceedings? The noble Lord, Lord Purvis, brought up this issue under Amendment 18, and the noble Baroness, Lady Jones, did so under other amendments. Under the Comprehensive Economic and Trade Agreement—CETA—no UK geographical indicator was given protection and only two European indications were included. What was the role of the UK Government in negotiating this EU agreement? Will it be included in the rollover of EU agreements, or will it be challenged or disagreed to by Canada as a counterparty in any rollover? The ink is barely dry on this new agreement. What the Minister has said so far needs to be clarified further in this respect.
With the UK leaving the EU, the position of the food chain, including retailers, in rollovers, and the relative importance given to the issue by the UK Government, these matters will impact on the ability of UK products to be designated foodstuffs under the GI schemes. I understand that the Government wish to set up a UK register of designations after exit. Will these be exclusively British? Will it include the register under the EU scheme, including those products registered by non-EU producers who also use the scheme as a marketing tool, aiding their promotion within the EU? How comprehensive will this register be? It is important to recognise the high percentage of UK trade that goes to the EU. Will the UK Government seek to enable products designated on the UK register to be considered for inclusion on an EU register? Will the Minister confirm that reciprocal arrangements will be maintained without any sunsetting? She will recognise the importance of Welsh lamb exports to the economy of north Wales and the whole of Wales.
If I may, I have some further issues about which I would be happy for the Minister to write to me. First, there will be various transitional costs, such as branding and labelling. As changing labels is a resource-heavy activity, can she give reassurances that changes will be considered together in future regulations? Secondly, can she say what will be the resolution scheme or body that hears disputes? Will the future TRA adjudicate immediately on these PDO issues or will there be a role for the First-tier Tribunal, which presently presides over branding issues? These and other issues are not important for the proceedings tonight, but I merely flag up how essential it is to businesses, especially SMEs, to be aware and informed of the changes happening, even on transition.
The Minister will be aware of the wide benefits that these designations bring to the food chain—the reduction of food waste, the provenance and security for consumers, and the quality of the product—and export markets across the world, as well as the obvious financial and employment benefits. I would welcome confirmation that this amendment is among the objectives of the Bill and future trade arrangements, taking at face value the task of the Bill merely to transfer existing EU agreements into UK law. I beg to move.
Lord Tyler (LD)
My Lords, I am a signatory to this new clause and I am delighted to endorse everything that the noble Lord, Lord Grantchester, has already said. By way of background, I was responsible for my party’s policy when some of these issues were addressed in the other place when I was responsible for agriculture, food and drink. I also represented a Cornish constituency and I shall come back to that in a moment.
It is very dear to my heart, as I know it is to the Government’s Chief Whip, that we should recognise the particular contribution of the agriculture industry in this country and that we should recognise that it is going to go through some very difficult times in the near future if what is projected comes to pass. In those circumstances, it is extremely important to address the issues to which the noble Lord has already referred.
Protected geographical status was introduced throughout the EU in 1993, when I had that responsibility in the Commons. I was especially delighted when the schemes were updated under Regulation 1151/2012 during the coalition Government. This has been a great success by Ministers of all three major parties—we should recognise that. It is instructive to see how influential UK Ministers have been on an issue such as this when they have played a full part in the EU. It has also been a very interesting example of how the EU has provided essential trading encouragement and protection for uniquely significant food and drinks products from all parts of the United Kingdom.
This is not nostalgic parochialism, as I think the noble Lord has emphasised. It has real economic marketing benefits, as well as protecting our producers from cut-price and inferior competitors. The UK could never have achieved anything like this benefit without the support of our European partners.
There are 65 products with protected status under this scheme in the UK. They are designated to protect the reputation of regional products, to promote traditional and agricultural activity and to eliminate non-genuine products of inferior or different character that may mislead consumers—I will come back to that point. Obviously, I will not go through all 65 products at this time of night, but I will take one or two examples: the traditionally farmed Gloucester Old Spot pork, which I know extremely well because I have neighbours who produce just that, introduced by the coalition in 2010, West Country lamb and beef, Dorset Blue cheese, Single Gloucestershire cheese and Export Jersey Blue. There were very significant improvements to the marketing opportunities for those products, but also, much more generally, for West Country farmhouse cheddar, Cornish sardines—again, dear to my heart—and Fal oysters in 2013.
However, we have to be very careful about the use of these descriptions. As the noble Lord said, one of the particular characters is protected geographical indication. It happens that in my constituency we had one of the best vineyards in the whole of the United Kingdom, the Camel Valley vineyard. That is not in England, it is in Cornwall—and as all Members will know, Cornwall is not part of England, it is not an English county. I have a particular attraction to the wines from that vineyard, not just because it was local to my constituency but because one of the partners of that extremely enterprising vineyard was Annie Lindo, who stood for the Labour Party against me in a general election. She did not win, but the Guardian said that the wake would be one of the best in the country—and it certainly was. The vineyard now produces an excellent rosé as well as sparkling wine.
Cornish clotted cream was another big issue—and I will come to another very important dish in a moment. I remind the House that the difference between Cornish and Devon clotted cream is that Cornish clotted cream is so good that you must have it on top of the jam, while in Devon you can put the jam on top—otherwise, you do not get enough.
Cornish pasties were another big issue. My noble friend the then honourable Member for Truro will recall that it was on St Piran’s Day, I think, that one of our coalition colleague Ministers announced that the Cornish pasty was to be protected. That is a classic example, because of course the recipe for a Cornish pasty is quite precise. It is not permitted to add carrots or peas, let alone minced beef or lamb; it must be skirt of beef. I have had pasties in different parts of the world. Indeed, a part of Lithuania produces its own pasty, originating in the Middle East—but it is not a Cornish pasty. This is a serious issue. I ask noble Lords to recognise that this can be of huge importance to not just small enterprises but substantial ones, too.
Lord Taylor of Goss Moor
I think that Stilton is wonderful, but the Cornish pasty is much more important. The issue is that these protected designations are often extraordinarily important to some of the poorest rural economies in the country, as they are in other parts of Europe. At a time of enormous uncertainty for such economies over how Brexit will progress, whatever one may think about it, I think my noble friend would agree that it is extraordinarily important that we ensure that the protections for these specific local and regional products, which underpin those regional and very poor economies, are maintained. That is at the heart of this proposal.
Lord Tyler
My noble friend is absolutely right. The important point is simply this: here is a truly successful scheme where UK Ministers have taken the initiative and grabbed the opportunities in the EU. We cannot allow it to disappear. The threat to a large number of enterprises would be disastrous. It would set such a bad example to the agricultural and food industry if we allowed the scheme to be diluted or dissolved in any way.
As we know, the Bill and the proposed new clause are caught up in the rather absurd contingency planning for the crash-out, no-deal scenario that the Government now insist Parliament must play with, despite the dire warnings about how awful such a result would be. If we are not careful, not carrying forward this very good scheme would be disastrous. Indeed, it would be tragic if this excellent scheme, in which successive Governments have invested so much energy, initiative and political capital and on which so many UK producers rely, were lost in the wash. The threat is there.
Of course, the ideal solution would be for it to continue exactly as it is now, with full UK membership of the EU—but I suppose we have to admit the possibility that the ideal will have to give way to the best available replication: hence the proposed new clause. In the words of the 20th century’s most authoritative actuary, Frank Redington, we are faced at the moment with an “expanding funnel of doubt”. We cannot afford for there to be any doubt about the success of this scheme and the necessity of its continuation. The best we can do is to insist, through the amendment, that we do not throw out this precious baby with the bathwater.
Baroness Kramer
My Lords, my son lives in Kent. I enjoy giving sparkling English wine from an excellent local vineyard as a present to various people, so I am slightly put out to understand that some local campaigners for Brexit have been urging vineyard owners to look forward to the day in late March when they will be able to call their product “champagne”—apparently with the Government’s backing, they have been assured. It is important that we understand the reciprocal nature of an arrangement like this. Therefore, to feed the expectation that we will keep our designation but remove it from other people is highly dangerous, and I suspect that the Minister sitting on the opposite Bench will have heard some very similar language.
Baroness Fairhead
My Lords, the Government see GIs as extremely important, and we are working to ensure that existing UK GIs will continue to be protected in future. I note the comments of the noble Lords, Lord Tyler and Lord Taylor, about the importance to specific rural economies. I could not agree more. They play a really important role in some very remote economies. For example, lest Scotland be forgotten, I know that the Scottish salmon industry directly supports 8,800 people, mainly in coastal locations. I hope my words today will offer noble Lords significant reassurance on a number of the points raised.
Baroness Kramer
I will be asked this question by the sparkling wine producer. Will Champagne, for example, need to apply to the UK for protection of its name, or will this carry over?
Baroness Fairhead
I was just coming on to that point: the future protection of UK GIs in the EU and then the reciprocal. We have heard loud and clear the desire of UK GI producers, and I can assure noble Lords that we are seeking to make this happen. At the time of this amendment being tabled, I believe there was no public statement from the EU on the future of existing GIs after exit. Since then, the European Commission has publicly stated, in November 2018, that:
“EU-approved geographical indications bearing names of UK origin … remain unaffected within the EU and therefore continue to be protected in the EU”.
This is consistent with what has always been the UK’s understanding. We expected that existing UK GIs would enjoy continued protection even after exit, because the current legislation means that the protection is indefinite unless specific grounds for cancellation are met. These grounds do not include removal from the EU. UK GIs will therefore continue to have the same level of protection as other third-country GIs protected in the EU. They are protected by virtue of being on the register, having earned that right by successfully passing the EU scrutiny processes. That protection will remain unless the relevant entries can justifiably be removed.
Lord Tyler
The Minister has been very kind in giving us so much detail. Do I understand that the EU has guaranteed that the reciprocal arrangement will continue if by any chance there is no agreement? What happens if one of the other countries challenges that designation—that protected status—and we are no longer a member?
Baroness Fairhead
As I stated, the protection is indefinite unless there is a justifiable challenge, which would take an enormous amount of time—and that does not include leaving the EU.
The EU needs to comply with the TRIPS agreement in relation to how it handles GIs, and the EU member states are also bound by the European Convention on Human Rights. In terms of future protection of the GIs in the rest of the world, we are currently working with global trading partners to transition those EU FT agreements, which also include obligations on the protection of GIs.
Regarding the protection of EU GIs in the UK—I think the noble Lord was talking about reciprocal arrangements—should we reach a withdrawal agreement with the EU, existing EU GIs will be provided with the same level of protection as now until the future economic relationship agreement between the UK and the EU comes into force or becomes applicable and supersedes. The potential long-term protection of EU GIs in the UK would therefore be determined as part of the negotiations under the future economic partnership. It is key for the Government to retain different options to give the flexibility needed successfully to conclude these negotiations.
Baroness Kramer
I did not understand this: so if there is no deal, the EU has given a guarantee that it will protect UK GIs—and its system would require it to do so—but the UK has given no guarantee that it will protect EU GIs or those of any other country. Is that correct, unless it goes forward into the continuity agreement?
Baroness Fairhead
The departure from the EU is just between the EU 27 and the UK. It is true that, legally, UK GIs are protected under EU law indefinitely and in the UK the matter is subject to negotiation under the FEP.
I have assured your Lordships that we understand the desires of UK GI producers for continuity. We will continue the protection in the UK, and the public statements of the European Commission give us assurance. If this amendment passes, it would remove the flexibility necessary for the UK’s negotiating position to successfully build new trade relationships with the EU. I believe that a number of my answers addressed the questions raised by the noble Lord, Lord Grantchester. If he feels that they have not, I am happy to write to him, but I ask him to withdraw his amendment.
Lord Grantchester
Following up on the assiduous questioning by the Liberal Democrat Benches, I entirely understand what the Minister is saying about the EU and the UK and that the position will be maintained indefinitely going forward. However, can she clarify the situation of the two registers and how reciprocal they will be? Will it involve two applications from a UK producer, one to the UK register and one to the EU register, or will reciprocity maintain throughout, such that when they appear on the UK one, they will necessarily appear on the EU one at the same time? Will there be one system with two applications, as it were, both inside the EU when the UK is within it and outside the EU when the UK leaves? I hope I have made myself clear on that point.
Could the Minister say anything at all about the appeal process—the dispute mechanism—or will that be included in her letter to me on the more erudite questions I have asked her?
Baroness Fairhead
My answer on the application procedure is that there will be a very similar procedure of application when the UK leaves the EU. There will be two processes that are very similar, but equally the UK will have to comply with TRIPS and with the European Court of Human Rights.
I just wanted to add a word about the CETA agreement without taking too much time. There are no UK GIs recognised in the CETA agreement. That was because Scotch whisky already had protection in Canada. The final decision on which GI products were submitted in the trade deal negotiations was made by the EU in an agreement negotiated with all parties. On leaving the EU, the UK will be able to take back that decision-making, but I am happy to confirm that and I will write to the noble Lord on that subsequent point. On that, I invite him to withdraw the amendment.
Lord Grantchester
I thank the Minister for all her clarifications. They have been very helpful. I also thank the noble Lord, Lord Tyler, and his colleagues on the Liberal Democrat Benches. I realise that Cornwall is a very long way away from Merseyside and Cheshire, but I will have to check my passport arrangements. I do know that Cornish people are always very eloquent, and I thank him for all his comments. Having said all that, and understanding the utmost importance and gravity in which this subject is held dear to the Government’s heart, I beg leave to withdraw the amendment.