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

Anneliese Dodds Excerpts

Committee Debate: 5th sitting: House of Commons
Tuesday 30th January 2018 Public Bill Committees

[Anneliese Dodds (Oxford East) (Lab/Co-op)]

I beg to move amendment 32, in schedule 4, page 61, line 20, leave out from ‘minimal’ to end of line 33.

This amendment removes the need for a market share requirement to be met before the TRA may initiate a dumping or subsidisation investigation.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 34, in schedule 4, page 61, line 45, leave out paragraphs (g) and (h).

This amendment is consequential on Amendment 32.

Amendment 35, in schedule 4, page 62, line 1, leave out ‘(d)’ and insert ‘(c)’.

This amendment is consequential on Amendment 32.

Amendment 36, in schedule 4, page 62, line 6, leave out ‘(d)’ and insert ‘(c)’.

This amendment is consequential on Amendment 32.

Amendment 37, in schedule 4, page 62, line 16, leave out ‘(d)’ and insert ‘(c)’.

This amendment is consequential on Amendment 32.

Amendment 38, in schedule 4, page 62, line 37, leave out ‘(d)’ and insert ‘(c)’.

This amendment is consequential on Amendment 32.

[Anneliese Dodds]

We tabled the amendments because the proposed market share requirements will not only put us out of step with comparable nations but stop action being taken to prevent uncompetitive disruption of infant industries. According to the Government’s proposals, applications to the TRA for an investigation will be subject to a UK market share threshold. As with so much in the Bill—as we have been discussing—we do not know how the threshold will be determined nor what its range is likely to be, let alone the actual value for different industrial sectors. The Government have given as their explanation for the measure the filtering out of cases with little chance of success. Yet, as already discussed in Committee, the Government have already set out a range of tests that must be passed before any action can be taken—tests that are already more stringent than is the case under EU legislation, and considerably stronger than those that the EU is moving towards.

I normally agree fully with every word that is uttered by my hon. Friend the Member for Scunthorpe, but I did not completely agree when he said that he was pleased to hear the Government saying, or hinting at least, that we would have a system at least as favourable to British industry as the existing one. With the different tests to do with economic interest or public interest, whether those applied by the TRA or the Secretary of State, that regime is far more stringent than that applied by the EU.

In addition, I am concerned that the measure proposed in the Bill could cause a lot of ambiguity and be problematic for the TRA. We are informed that the TRA must accept an application that meets the UK market share threshold, although of course both it and the Secretary of State can then decide not to proceed as a result of their overly stringent tests once they get into the investigation—but let us leave that aside. If an application does not meet the UK threshold but does meet WTO thresholds, the TRA may use its discretion as to whether to accept it. However, we can legitimately ask why the TRA should be put in a potentially difficult position, especially when legal action could be levelled against it by the company that is deemed to have engaged in dumping precisely because the TRA has used that discretion.

In addition, I do not understand why the UK has decided to adopt an apparently higher threshold of market share before applications may be accepted when, according to the stakeholders I have talked to, no other country seems to have adopted that approach. This is not about criteria within the investigation: it is about the criteria necessary before an investigation is allowed at all. As with the unique electoral system that led to the hanging chad problem in the US, there is a clear reason why this approach is so unique: it is not workable. The Minister rightly referred to learning from best practice, so it would be helpful for us to know which countries have that test in place before an investigation can be started and why it was believed that this is best practice. I have so far not been able to find any countries that operate such a system. If there are some, it would be wonderful to hear about them.

The Minister suggested in his previous remarks that, much of the time, all the Government are doing is simply transposing WTO requirements. However, the terms of the general agreement on tariffs and trade enable countries to take action, particularly to prevent uncompetitive disruption to infant industries. That could be prevented by this kind of test before an investigation can even be started. That process of uncompetitive disruption to infant industries is known as material retardation, which is quite a well-known concept when it comes to trade disputes and is interpreted quite broadly.

Rules within the Mercosur agreement—the South American trade agreement—state that countries can take measures, first, to ensure that infant industries can be established, but also that there can be, without uncompetitive disruption, the establishment of a new branch of production in an existing industry, the substantial transformation of an existing industry or the substantial expansion of an existing industry supplying a relatively small proportion of domestic demand. That is a very wide reading of what measures against material retardation can enable, and a broad reading of the concept of an infant industry as well. Those rules are already in action in the Mercosur agreement, so I hope the Minister will clearly explain why the UK should deny itself those kind of powers that other countries seem keen to avail themselves of.

I hope he will also indicate how he envisages that market share restriction working, which will be used even before investigations start. I read the “Trade Remedies Research” paper, produced by Van Bael & Bellis and Copenhagen Economics, which I am sure other Members have looked at as well. They looked in great detail at some of the methodological issues relating to the use of trade remedies and they indicated in detail the variety of considerations relevant to calculating market share that the EU has used once an investigation has opened—not as part of a test to determine the opening of an investigation but as part of determining the harm caused by dumping.

They indicated the potential drawbacks of, for example, setting a quantitative measure on the evolution of import volumes in relative terms—in comparison with domestic consumption—in order to determine how the market share of foreign exporters against UK industry has changed over time following dumped imports. That is because our market in the UK is small, and so domestic consumption can vary dramatically from year to year because the number of industry operators tends to be more concentrated.

There are some very difficult methodological issues here when it comes to calculations that might be involved in an investigation. We are talking about the TRA having to carry out calculations potentially with a similar level of methodological difficulty, even before an investigation is opened. Will the Minister indicate what kind of methodology he proposes to avoid those problems? Above all, will he please let us know why our country seems to be adopting this approach, which, as I say, I cannot find any analogue for in comparable nations?

[Kirsty Blackman]

I will say just a few things to follow on from the shadow Front Benchers on this. It is strange that market share is being used in this regard as something that will be taken into account. It is almost as if the TRA cannot be bothered to investigate a company if it does not have a certain market share. For that industry, and for manufacturers in particular, it does not matter what their percentage of market share is; what matters is the injury that is being done to them by dumping. Market share is not relevant, and I do not understand why it is included in the Bill. It may be relevant to the Treasury because it affects the tax take it gets from the industry, but it is not relevant to the protection we should be affording to the industry.

This proposal has geographical implications, given that these new goods will be made in the industrial north of the country. Those products may not meet the market share threshold, but they may be incredibly innovative and may improve productivity and make this country a better place to be. Those things will not be taken into account.

I have argued previously that if the fishing industry is decimated as a result of Brexit, that is a geographical issue for the affected communities. It does not have a massive implication for the Treasury’s tax take, but it does for those communities. I fear that this market share test is not only unnecessary, but has implications for the choices that communities make.

--- Later in debate ---

Hon. Members also raised infant industries. The hon. Member for Oxford East suggested that the market share threshold might prevent emerging industries from seeking trade remedies. That is not what the market share threshold is designed to do, so to prevent such a situation, the Bill allows the TRA to choose to waive the market share threshold in special cases. That will help in cases such as those she describes, in which an emerging UK industry struggles to establish itself in the face of dumped or subsidised imports.

[Anneliese Dodds]

I am grateful for the Minister’s comments. The additional information that he provides is useful, but he still has not made it clear whether any other countries operate such a restriction. I appreciate what he says about the potential opacity of other regimes, but we have not had a clear answer to that question. It may well be that some independent actors have written an evaluation of the EU system that says that such an approach should be implemented. However, as I understand it, the EU has not committed to moving towards such a system. It seems to be just the UK that is explicitly adopting it as a policy commitment, unlike any other country.

[The Chair]

Order. The hon. Lady is straying from an intervention into a full speech.

--- Later in debate ---

[Graham Stuart]

For the reasons I have set out, I think the market share test is an eminently sensible part of our regime. I hope the Committee will agree.

[Anneliese Dodds]

I am grateful to the Minister for letting us intervene—he has been very generous in that respect. I say gently that I would have hoped for a little more impact assessment before we signed up to a system that is, to adopt the kind of language he used, unique in the world and a world-beating innovation, if we are indeed doing that.

The hon. Member for Aberdeen North made clear that vexatious complaints will be screened out by the economic and public interest tests, which are more stringent than those in the EU regime that we will take on board under the TRA.

The Minister referred to this process being an indication to firms of whether they have any hope of success, but it is not. We are not talking about a guideline. We are talking about a threshold that is a block. Yes, that block can be disregarded by the TRA, but it cannot be overruled by the complainant. That is the whole point. It is not just an indication. It is stronger than a guideline or a set of theoretical considerations. It is potentially a block on firms trying to seek redress through the TRA, which is unique in the world. I had hoped that we might have more explanation of that, despite the Minister’s valiant attempts.

[Graham Stuart]

Let me try to come back again. The share test comes at the beginning. We have to think about the order. The point is to provide transparency at the beginning of the process and to ensure, exactly as industry has asked, that we do not waste time on complaints, vexatious or otherwise, that have no chance of resulting in measures. That is the whole point of the test. It will be quickly applied and—the Opposition do not seem to have understood this—will have exemptions for infant industries. The system will provide a more transparent form of that which is routinely applied in other countries.

Question put, That the amendment be made.