Trade Bill (Seventh sitting)

Bill Esterson Excerpts

Committee stage & Committee Debate: 7th sitting: House of Commons
Thursday 25th June 2020 Public Bill Committees

[Gareth Thomas]

It is certainly true that in exchanges at the Dispatch Box over the past two weeks, we have been led to believe that these 40-odd agreements will be very easy to complete. Yet only 20 of them have been completed thus far. It looks, to all intents and purposes, as though a number of the agreements are not going to be completed by implementation day—and that, surely, is an extremely surprising eventuality for all of us to contemplate.

[Bill Esterson (Sefton Central) (Lab)]

The point about Lord Price is that what he said has turned out not to be true; that is the reality. My hon. Friend mentions the agreements that have been concluded, but the one with South Korea, for example, is only a temporary agreement with notice for a renegotiation. Listening to what my hon. Friend is saying, I wonder whether the Government have reverted to the five-year period because they realise that they would quite like these provisions still to be in place for the South Korea deal when it comes back for the renegotiation.

[Gareth Thomas]

If my hon. Friend will forgive me, I will come to South Korea in due course.

The five-year point, perhaps, is understandable in the context of South Korea, but it is slightly odd that Ministers think they might not be able to get the South Korea deal done even in five years, and might need another five. One has to ask why we would need 10 years to put together a roll-over agreement that is simply, as my hon. Friend the Member for Warwick and Leamington said, a cut-and-paste job—a matter of just switching “UK” for “the European Union”.

The hon. Member for South Ribble helped throw a little light on the issue during her questions to Mr Richard Warren, the head of policy for UK Steel, in our second sitting. In Question 59, she asked:

“Mr Warren, if there were continuity trade agreements that did not roll over, what would be the consequences for the steel industry?”.

Mr Warren talked initially about the continuity trade agreements with north African nations such as Morocco and South Africa. He then cut to the chase on one of the biggest markets for UK steel exports: Turkey. Talking about the so-called continuity trade agreement, he said:

“Turkey…probably will not be carried over, regardless of the Bill.”

He went on to say that the Bill would allow the continuity and trade agreement to happen,

“but with politics and the complexities of negotiations, I fear, that agreement will not be in place by the end of the year, which would result in 15% tariffs, on average, on UK steel going to Turkey— 8% of our exports. It is an extremely competitive market already; a 15% tariff would pretty much knock that on the head.”

He went on to underline a similarly important point:

“At the same time, because the UK has no tariffs on steel, we would still have up to half a million tonnes of steel coming in from Turkey”.––[Official Report, Trade Public Bill Committee, 16 June 2020; c. 42 to 43, Q59.]

We would not only have an uneven trading relationship when it came to steel exports, given the huge tariffs; suddenly, imports of Turkish steel into the UK would have no tariffs at all, creating even more competition for UK steel to face in the domestic market. That is a profoundly disturbing and worrying situation, and it would be helpful to have a little more clarity from the Minister, when he gets to his feet, about what is going on in those negotiations. As I understand it, negotiations have not even begun between the UK and Turkey, never mind being close to reaching any sort of conclusion.

Let us take the UK-Japan continuity agreement. Again, we are led to believe that this is simply a matter of two very close allies sitting down together briefly and changing the words “EU-Japan” to “UK-Japan”, as well as perhaps changing the odd comma here or there, and dotting the odd i and crossing the odd t. In practice, however, something very different appears to be taking place. Just on Tuesday, the Financial Times carried a story saying that Japanese negotiators have given Britain an ultimatum: “Do the deal with us in six weeks, or we will not be able to get it through our Parliament and there will be no continuity trade agreement in place by 31 December.”

Bear in mind that Professor Winters, in his evidence to the Committee on Tuesday 16 June, at Question 31, said in response to the probing of my hon. Friend the Member for Sefton Central that

“with Japan, we do not really know what the Government intend to discuss with the Japanese Government, but the analysis that we got last month was—what shall we say?—studiously unspecific.”––[Official Report, Trade Public Bill Committee, 16 June 2020; c. 26, Q31.]

Again, when the Minister gets to his feet, it would be helpful if he gave us a little more detail on the substance of what is going on in those negotiations. I thought we were told that when we left the European Union, we would stop being a rule taker any longer, and here it appears that Japanese negotiators are telling us: “Do a deal or you don’t get your trade agreement in time.”

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[Bill Esterson]

My hon. Friend is developing his point extremely well. I think it is fair to remind him that it is not just Canada that puts our deal with the EU ahead of its deal with us; Japan and Turkey want us to do a deal with the EU so that they can base their deal with us on the terms of trade that we have with the EU. That is a whole other set of complexities that go way beyond this being a simple matter of continuity and of changing the letters “EU” to the letters “UK”.

[Gareth Thomas]

Let me chide my hon. Friend for his negativity. We were told at the last general election that an oven-ready Brexit deal would come before us, with a wonderful new free trade agreement, easy to sign, with the European Union. Presumably the scepticism that I have allowed to creep into my remarks about whether the roll-over agreements will be signed by 31 December are entirely unreasonable, and the Minister will say that all the other 20, even the one with Andorra, will be done by 31 December.

I know that the South Koreans want to start completely fresh talks in about 18 months’ time, but surely that will not take five years, or 10 years to complete—or will it? I am an optimist. I take the Minister at his word. He has repeatedly said that roll-over agreements will be simply a matter of rolling over the EU agreements into UK agreements, changing some tiny details, and that they will all be done on time. One wonders, then, why we need the flexibility set out in subsection (7).

Let us remember when the previous Trade Bill was prepared and developed. It probably happened at around the time the right hon. Member for Maidenhead (Mrs May) took over as Prime Minister. Members of the Committee will remember that she decided to sack George Osborne, the then Chancellor of the Exchequer, for gross incompetence. One can imagine that the Cabinet Secretary got on the phone to the permanent secretary at the Department for International Trade and said, “There’s good news and there’s bad news. The good news is that the man who introduced austerity, destroyed our economy and damaged public services has finally left the Government. The bad news is that one of his chief cheerleaders is moving into your Department. Whatever you do, given the way in which they have messed up the economy, don’t let them mess up trade agreements. Write into the Bill a bit of extra time—five or 10 years, or perhaps even longer—so that we can get these trade agreements done.” The Minister may not share my assessment of how this provision got written into the Bill.

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[Bill Esterson]

I have to take the opportunity to congratulate my hon. Friend on the moment in our deliberations. The lines he just delivered cannot be improved on, and I would not wish to do so. Does he remember Nick Ashton-Hart, in giving evidence to us this time, reminding us of his evidence to us last time that trade agreements inevitably take a lot longer than expected, and that trade agreements between parties fall in favour of the bigger party? We are now a smaller party than when, as part of the EU, we made agreements with all the countries he mentions. That is one reason why these things will take a lot longer—those countries want to renegotiate a better deal, which they think they can get because of the power they have.

[Gareth Thomas]

My hon. Friend has always grounded his remarks in reality. Let us remember that Conservative Ministers and Members have always wanted to present trade negotiations as a Christmas sale, where one just turns up and gets a shedload of lovely bargains. They have not, as yet, been open and honest with the British people about the trade-offs that trade negotiations inevitably bring, on which—I suspect this afternoon—more anon.

I gently suggest to my hon. Friend that we are likely to hear the Minister, in his wind-up speech, chastising us again for our lack of belief in the calibre of the Secretary of State himself and the Department to complete these UK-specific trade agreements. If the Committee remembers when the last Trade Bill was discussed, so confident were the previous ministerial team that this power was actually not quite as necessary as first appeared, they agreed to reduce the sunset period from five years to three years. One can only assume that the Cabinet Secretary got back on the phone after the current Prime Minister was selected and said, “I’m really sorry to bring you bad news, but one of the chief acolytes of the little-lamented George Osborne is back in your Department—”

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[Greg Hands]

It is a pleasure to welcome you to the Chair, Ms Cummins. I did not get the chance on Tuesday because the supergroup carried on for the entirety of the morning.

Amendment 16 seeks to remove the power to renew the sunset clause after five years, and I am afraid I cannot support it. It would undermine our ability to implement our obligations from trade agreements beyond the first five years, which risks putting us in breach of the agreements and could open us up to legal challenge. I am sure that is not what the Opposition are seeking to achieve.

[Bill Esterson]

If the Minister cannot support a change to the five-year sunset period, why did he support it in the previous Parliament, when it was three years?

[Greg Hands]

I think the hon. Gentleman’s timeline—or the timeline of the hon. Member for Harrow West—may be a little incorrect. As it happens, I left the Department on 21 June 2018, which predated that amendment being made. In any case, the context then, which I will explain, was rather different from the context now, and I think it is very desirable that it be five years, not three years, for the reasons that I am about to explain.

There is a fundamental misunderstanding in everything that the hon. Member for Harrow West just said. The power is in large part needed to make technical changes that ensure that the agreements remain operable. The fundamental misunderstanding on his part is that it is not five years extra to complete the negotiations, sign the deals or finish the negotiations—no. It is five years that is needed to make sure the agreements remain operable once they have been signed.

Before I come to the real detail, let me give the hon. Gentleman an update on some of the agreements he asked about. It was interesting to hear him focus on Andorra and San Marino. Those countries are, of course, in a customs union with the European Union.

We are in discussions with both countries, but in our view, they are largely dependent on what the future relationship between the UK and the European Union looks like, for those two countries are in a complete customs union with the European Union.

The hon. Gentleman asked for clarity about Turkey. I was surprised by that question, because I checked his Twitter feed, and he does actually follow me on Twitter, which I do not take as a compliment ordinarily. He must have seen what we put out three hours ago from my right hon. Friend the Secretary of State for International Trade:

“Great to see”—

UK and Turkey—

“trade talks progress today. Let’s build on our already strong trading relationship worth £19bn. We are working hard to ensure we can reach a UK-Turkey trade deal at the end of the transition period.”

He has it right in front of him on his own Twitter feed; I urge him to read it. People mock social media—I might have been critical of social media in my time—but they occasionally perform a useful function. Helping us to keep up to date with what is going on in the world is one of the most useful aspects. So there he has it from just three hours ago.

The hon. Gentleman asked about the so-called temporary agreement with South Korea. It is not a temporary agreement. The agreement includes a review clause after two years, which is a standard feature of many international trade agreements. The review clause states—I am paraphrasing slightly—that if the two parties do not believe it is mutually advantageous to continue the agreement, there is the option not to. That does not mean to say that it is a temporary agreement. All international agreements can be cancelled by one party or the other, if they feel the agreement is no longer mutually advantageous. Of course it leaves open the possibility of doing a more extensive agreement in the future, but that is the case with all trade agreements.

When a country signs an agreement, no one is saying that it will stay in place forever. There may be opportunities in future to extend it into areas of trade that had not been thought of when the original agreement was signed. That is an entirely normal phenomenon. For example, the EU and Mexico have done an enhanced agreement based on their original agreement, which dated from about 2000 or 2002, to bring it up to date. New things come along, such as e-commerce and so on, so of course trade agreements are updated, but it is wrong to describe that trade agreement as temporary.

We are in discussions with Canada, but I return to the points that the hon. Gentleman made on Tuesday. He is so against the Canada agreement that, if there were any delay in the discussions with Canada, he should be cheering that not condemning it, because he is opposed to the agreement in the first place. I thought that would update him on where we are with the agreement.

Let me describe what it is all about. In the case of a transition mutual recognition agreement, we may need to change secondary legislation after the point of signing, and after 1 January 2021, to update the names of awarding bodies and third countries so that UK businesses can continue to use such bodies legally. It is not extra negotiating time. It is extra time to ensure that the agreement remains operable.

Alternatively, where our trade agreements reference international standards, such as environmental protection, we may need to update references in domestic legislation to ensure that we remain in compliance with our international agreements. Equally, a potential use of the power could be to upgrade the list of entities subject to procurement obligations to reflect machinery of government changes.

I used the example last week of DCMS changing its name from the Department for Culture, Media and Sport to the Department for Digital, Culture, Media and Sport. That name change might need to be reflected to keep one of those agreements operable, so a change in domestic legislation would ensure that the procurement obligations in the agreement are kept operable. It is not extra negotiating time. The power could also be used to update the list of entities subject to procurement obligations, as I have said.

I think there is a misunderstanding of the nature of the power. If Opposition Members had expressed concerns about the breadth of the power—in other words, the ability to carry on amending legislation for many years afterwards—that would be a much more legitimate concern than the professed concern about extra negotiating time. The Bill has been scrutinised by the Delegated Powers and Regulatory Reform Committee. Its 33rd report on the 2017-19 Bill raised no concerns about the delegated powers in the Bill, including the sunset clause, and welcomed our move to introduce the affirmative procedure for any regulations made. I see no reason why it should reach a different conclusion on this Bill.

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[Stewart Hosie (Dundee East) (SNP)]

I start by addressing new clause 22 in the name of my friends from Plaid Cymru. In one regard, it seeks to do something similar to our amendment 8, which the Committee has already debated: to lay down in statute respect for devolution. We witness that in (c), (d) and (e), which would require motions relating to a ministerial statement to be approved by the Senedd, the Scottish Parliament and the Northern Ireland Assembly prior to regulations being made to implement an international trade agreement. New clause 22 would also, at (a) and (b), empower Parliament by requiring a statement on the terms of such an agreement to be approved in the House of Commons and a take-note motion passed in the other place.

That is eminently sensible. However, I suspect that the Minister will say it is not necessary. He may suggest that it is not necessary because international agreements, including trade agreements, and the decisions to implement them are reserved matters. There is some merit in that. He may also make the case, as he did on Tuesday, that it is better if the UK speaks with a single, if not a united, voice in order to give our negotiating and trading partners certainty about what a deal may or may not deliver.

That, however, is rather to miss the point, as the hon. Member for Harrow West said. We know that some sectors or industries are disproportionately important to the economies of Northern Ireland, Scotland and Wales, compared with their importance to the UK economy as a whole. I cannot remember the precise numbers, but it has been suggested on multiple occasions that the white fish industry is 10 times more important to the Scottish economy than it is to the UK economy as a whole. There are clearly sectors that are vital.

It is equally the case—this is probably accepted now—that modern trade agreements are by and large not about quotas and tariffs; they are about regulation, conformance and product safety. They have the ability to impinge directly on the reserved competencies in Scotland, Wales and Northern Ireland. It is, therefore, sensible that we understand and respect why my friends from Plaid Cymru and others seek not just to empower both Houses of Parliament in the decision-making process on implementing an international trade agreement, but to give statutory voice to the devolved nations to ensure their legitimate interests are properly protected.

I turn to clause 2 stand part. I accept what the Minister said about the Bill being primarily about rolling over the pre-existing trade agreements that we had by dint of our very successful membership of the European Union, but I also take on board the serious point made by the hon. Member for Harrow West. He said that the Queen’s Speech described a Bill to facilitate trade, not just roll-over agreements. He also talked about the long title, which says that the Bill will

“Make provision about the implementation of international trade agreements”.

That is rather wider than negotiating and implementing roll-over arrangements only.

In the previous debate, we began to touch on some of the key flaws in clause 2 that run to the heart of this legislation. As I said on Second Reading and in my introductory remarks last week, clause 2(6)(a) allows for the Government to make provision

“modifying retained direct principal EU legislation or primary legislation that is retained EU law”,

which runs to the heart of people’s concerns. Even if I accept—and, by and large, I do—that the provision is designed to roll over our current deals, the ability to modify in that way may well mean that we end up with an agreement that is substantially different from the one we started with.

That is a concern to me. Although the Minister has said there are restrictions on how the modification process can be used, subsection (6)(a), (b), (c) and (d) allows for the modification of retained EU legislation or primary law. It confers functions on the Secretary of State or any other person, including conferring discretion. It allows for the delegation of function, and for civil penalties to be introduced for failing to comply with regulations. The only restriction in subsection (6) is the restriction on the power to make subordinate legislation. I will have to check Hansard carefully, because I think the Minister spoke about amending secondary legislation in the previous debate. That would not be possible under this restriction, but it is the only restriction in terms of the ability to modify.

That brings us to the other flaw in clause 2—namely, the five-year or 10-year limit. Subsection (7) says:

“No regulations may be made under subsection (1) after the end of…the period of five years”—

so far, so good—

“or…such other period or periods as are specified in regulations made…in accordance with subsection (8).”

Subsection (8) states:

“Regulations under subsection (7)(b) may not extend the initial five year period…by more than five years.”

This is not simply, as the Minister suggests, to ensure that regulations are up to date. This five-year period and the five-year extension—this 10-year period—actually allows for the modification of principal EU legislation or EU laws under subsection (6), with the exception of the power to make subordinate legislation. That is an extraordinarily wide power that the Government have given themselves—a 10-year period. While I accept that the Bill is principally about rolling over existing deals, the ability to modify in a fundamentally unrestricted way for a period of more than two full Parliaments is an extraordinary power for the UK Government to seek to give themselves.

On that basis, if there is a vote on clause 2 stand part, I will certainly vote against the extension of these discretionary powers to the Government.

[Bill Esterson]

It is a pleasure to see you back in the Chair, Mrs Cummins, and we shall continue to enjoy serving under your chairmanship for another 19 minutes. I thank you for your contribution as joint Chair of the Committee.

I rise to speak to new clause 16. I remind the Minister of the point touched on by my hon. Friend the Member for Harrow West on 13 March 2019, when the Minister’s then ministerial colleague—

[The Chair]

Order. I remind Mr Esterson that we are not debating new clause 16 yet.

[Bill Esterson]

Sorry, it is new clause 18 that I rise to speak to. I am grateful for the correction.

On 13 March 2019, an identical amendment was tabled by Baroness Fairhead in the House of Lords. I will just remind the Minister of what she said in her brief contribution:

“I trust that this House will accept this as further evidence that the Government have a strong desire to be transparent with Parliament, businesses and the general public about their continuity programme.”—[Official Report, House of Lords, 13 March 2019; Vol. 796, c. 1060.]

She said that in good faith, because she wanted the amendment to be accepted. It was accepted by the House of Lords and became a substantive part of the Bill, and the Commons would have considered it had the Government brought it back in the time available. There was plenty of time to discuss it then. The Government Whip made a point of order earlier. If the Government have a real problem with timing today, they should think about the problem that was caused by their not bringing back the Bill at any time during the period after March 2019, when an identical amendment, tabled by the Government, was agreed. The Minister has to answer the question why, if this measure was good enough for the Government on 13 March last year, it is not good enough now.

[Greg Hands]

Over the past few days, I have outlined the Government’s position on our approach to clause 2 and I will not repeat that to the Committee. The general point about the continuity powers has been frequently made. I will focus my remarks on the Opposition amendments.

First, I must inform the Committee that the letter I promised the hon. Member for Harrow West on the position of Kenya and Ghana has gone out to all members of the Committee. I pledged that on Tuesday, so I think that is pretty swift. It should be in everyone’s inboxes.