Trade Bill (Second sitting)

Anna McMorrin Excerpts

Committee Debate: 2nd sitting: House of Commons
Tuesday 23rd January 2018 Public Bill Committees

[Mr Prisk]

Q So you do not think that having Question Time and a Select Committee on trade is adequate.

Jude Kirton-Darling: There is a clear role for stronger scrutiny. Inside the legislation, there is no obligation on the Secretary of State or the new Trade Remedies Authority to engage directly with Parliament through, for example, a specific Committee of Parliament. In future, that could be the International Trade Committee—an amendment could be tabled to ensure that link and that scrutiny—but at the moment that is not in the proposals. It is a missing link, if you think about what we already benefit from in the current system, of which we are a member.

I would hate to give the impression that what we have is perfect; that is not what I am trying to say. Today, in the European Parliament’s Committee on International Trade, MEPs have voted on a modernisation package to try to rectify some of the weaknesses in the EU’s regime. If you are thinking about what to improve on, our system is not perfect, but, at the same time, MEPs—your counterparts—have a clear role in the process, which is entirely missing from the proposals tabled.

[Anna McMorrin (Cardiff North) (Lab)]

Q May I address this question to Dr Bartels? The Government suggest, to justify the absence of any process for parliamentary oversight, transparency and scrutiny, that trade negotiations need to be done confidentially and under some secrecy. What is your feeling about that?

Dr Bartels: One can look at what is covered in modern trade agreements according to two poles, and then there is a sort of meeting in the middle. On one side, you have the pure market access issues, where you are reducing duties—you are liberalising trade—in certain economic sectors. Those sectors are going to be affected negatively and are not going to be happy about it, because there is competition that they were not used to. To do that, you need to be able to trade sectors off against one another. There is a reason for confidentiality with that traditional sort of trade negotiation. Not everybody would agree—you might say that someone whose job is at risk should get a right to know what is being negotiated—but there is at least a traditional and strong argument there for confidentiality.

On the other side, you have purely regulatory issues, such as the question of what you think in your system of the precautionary principle for health and safety. That sort of principle would normally be dealt with through the normal democratic process, and I cannot see any reason why that should be changed and negotiators should be given the ability to haggle that away, particularly if they are doing that in secret. In the middle, you have rules that are regulatory but arguably are also protectionist, so the trade negotiators would say, “We should be able to negotiate those away in secrecy.” It is hard to know where to draw the line, but it is certainly useful to conceive of what is in a trade agreement according to those two poles.

None of that means that this should be limited purely to the Executive, even when there is confidentiality on market access. Many other countries have systems where parliamentarians have some rights to see what is being negotiated and to be kept apprised of negotiations as they go. The European Union, for instance, is extremely advanced when it comes to that; there are strict limitations in terms of going into and coming out of the room, no phones are allowed, and so on. The US Congress has similar arrangements. There is a palette of options to enable parliamentary involvement, even within the framework of confidentiality. I am not sure that the Bill is the right place to address that sort of issue, but there is certainly nothing like that in the Bill.

[Anna McMorrin]

Q Some claim that non-tariff barriers to trade, such as regulations on standards, are protectionist. What is your opinion? Do you believe that is true?

Dr Bartels: It is true, but it is generally more true in certain sectors. It is true, for instance, in sanitary and phytosanitary standards. It is usually not the standards themselves that are protectionist. There are examples of standards, such as the beef hormone standards, that I can say are protectionist because WTO cases have said they are protectionist—I just need to cite Geneva on those—but it is often done by having overly complicated conformity assessment requirements, and so on. There is definitely room for regulations that purport to be there simply to protect the public also to be protectionist. Usually, you have both aspects in the same regulation. But even in that sort of situation, I still think that the regulatory dimension is sufficient for there to be at least some type of domestic scrutiny over haggling that away.

[The Chair]

Q Do others have a view on that?

Dr Hestermeyer: There are certainly examples of standards being used only for protectionist purposes, but it is far more common for standards that one side sets to be perceived as protectionist by the other. Let us take hormone beef. There is real concern on the part of a lot of European consumers that hormone beef is not healthy. There is no direct scientific evidence to show that that is true, but the concern is nevertheless there. So the standard reflects the democratic choice of the populace—whether we think it is adequate or not. That is important to see. With any standard set, some sides will say, “This is protectionism,” and it is also rhetoric to attack the standard.

Jude Kirton-Darling: I guess the last point missing from that is that if we look at where trade agreements and trade policy have been controversial in recent years, it is when the perception is that standards held very dearly by the public for exactly those reasons are perceived to be negotiated away behind closed doors, with only a certain number of vested interests having access to the process. That is one more reason why having an open process, with parliamentary scrutiny and engagement, gives credibility to any final agreement, which at the end of the day has to have public support, after the negotiations. You build in societal acceptance through the process by engaging Parliament in an active way.

Dr Fowler: I would very much endorse that. If it is the case that some degree of secrecy or privacy is an advantage in one respect, there is probably a trade-off in terms of not being able to have that societal buy-in that might be wanted at the end of the process. There is a trade-off and losses if it is all done in private.

--- Later in debate ---

[The Chair]

We have half an hour left. Incidentally, Mr Peretz’s evidence is available in written format in the Committee Room.

[Anna McMorrin]

Q The Government claim that the process of replicating the trade agreements to which we are currently party as EU member states would be a simple roll-over process. Do you foresee any complications?

Professor Winters: Yes, I’m afraid that I do see complications of a technical nature and, in a sense, of a political nature as well. The technical complications concern rules of origin to begin with. Every trade agreement essentially has rules of origin that determine whether a good qualifies for zero-tariff entry. A typical rule of origin says that 50% of the value must be contributed from the country claiming the duty-free access. If we take a good that is exported to Korea that is made in the UK but with a 40% input from the EU and 30% input from the USA, it gets into Korea tariff-free because the UK plus the EU27 contribution is at 70% larger than the rule of origin requires. If we are outside and by ourselves we have only 30% of the content—the value of that good—and we would not get into Korea tariff-free if the Koreans applied the same rule.

Equally, there are cases coming the other way of goods that are exported to the EU where, for instance, Korea could export a good directly into the EU27 because it has a free trade agreement for a good produced in Korea. But if they send it into the UK and we insert it into something that we then seek to send to the EU, then it might not get in because Korean content will not count towards the UK content to meet the EU’s rule of origin.

What do you do about all this? You essentially have to do something called diagonal cumulation. Korea, the UK and the EU essentially have to agree that each of them retreat from its rule of origin the content of the other two as the defining origin. In that specific case, it would restore the status quo. That needs to be negotiated with the Koreans and the EU.

Other places where we have technical problems are in the splitting up of tariff-rate quotas. For instance, there are tariff-rate quotas in the agreement with Canada: that is an agreement to import a particular volume of goods tariff-free. This has to be settled on an EU28 basis, and now it has to be divided between the UK and the EU27. On occasions, there are clauses of these agreements that refer back to a body of law in the parties. In the financial services agreement with Korea, there is a reference to accepting goods into the Korean market that were introduced into the European market without asking any further questions as long as they are consistent with existing law and do not entail a modification of existing law. That existing law—if that clause makes any sense at all—was law when the agreement was signed; it is EU law. If we tried to introduce even an equivalent law, we would have to argue the case that it needs to be treated as such for us to get access to Korea for financial services. Those are the technical reasons why there are serious problems.

Politically, we need a deal. If the transition is handled in any way that is fairly straightforward—although George has a proposal that is complicated but perhaps gets around it—it is possible that the transition will allow Korean goods into the UK tariff-free, but not UK goods into Korea tariff-free. Therefore, we really need a deal, and if you really need a deal, that is not the time to be negotiating.

[Anna McMorrin]

Q To follow up quickly, perhaps addressing Michael Clancy directly, what role do you believe the devolved Governments would have in trade negotiation prior to agreements being concluded? Do you think the Bill sets out suitable frameworks within which matters of devolved competence can be represented?

Michael Clancy: Under the Scotland Act 1998, paragraph 7 of schedule 5, international agreements, including trade agreements, are not within the competence of the Scottish Parliament. In that sense there is no formal role in agreeing international agreements. That being said, one of the things we have sought to promote throughout this process, with the European Union (Withdrawal) Bill, this Bill and associated measures, is that there should be some form of whole-of-governance conversation about getting things right. As we know, this Bill will affect the competence of Scottish Ministers and allow orders to be made that may amend, for instance, Acts of the Scottish Parliament, and measures from Wales and Northern Ireland too.

There is clearly an issue about how the Sewel convention or legislative consent convention is interpreted in respect of that. Under devolution guidance note 10, any proposals in UK Parliament legislation that seek to alter the legislative competence of the Parliament or of Scottish Ministers require the consent of the Parliament. That also applies to the National Assembly for Wales and the Northern Ireland Assembly. Therefore, there is an issue. Today in the Scottish Parliament there is a debate about legislative consent in respect of the European Union (Withdrawal) Bill, and the Finance and Constitution Committee of the Scottish Parliament is currently consulting on the legislative consent memorandum on this Bill, where the Scottish Government have indicated that they would not recommend that the Parliament pass it.

It is a matter of political debate and discussion, and something that I know both the Scottish and UK Governments have in their sights in the concordat they are thinking about. That includes a framework for dealing with trade matters. There is a role, but I do not know it yet, because neither the Scottish nor the UK Government have told us what it is.

[Iain Stewart (Milton Keynes South) (Con)]

Q I would like to ask Professor Winters a question about part 3 of the Bill, which concerns trade information. Would you agree that the information that this Bill enables will help the Government to shape their export support programme? Are there any additional powers that you would like to see this part of the Bill contain?

Professor Winters: Information is very important, not least in my trade, for analysing what goes on. The case for collecting reasonable amounts of information, as long as it is cheap to do so, is very strong indeed, subject to the standard confidentiality requirements. I confess, on reading the Bill it did not strike me that there were obvious things that were missing, but I would not want to assert that I read it sufficiently carefully to say that nothing is missing. It is important that the Government have the right to collect information, and that information should be made as widely available as possible. The Government clearly need to make policy, but there needs to be public debate, too; it is not just the Government who need to discuss policy issues. I did not interpret this as being part of the Bill, but in general, information other than private or commercially confidential information really should be made available to a wide community of people to enable them to analyse policy.