Taxation (Cross-border Trade) Bill (Sixth sitting)

Anneliese Dodds Excerpts

Tuesday 30th January 2018 Public Bill Committees

Division 18

Ayes: 9

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Labour: 7
Scottish National Party: 2

Noes: 10

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Conservative: 9

[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.

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[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.

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[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.

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[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.

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[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.