Trade Bill (Third sitting)

Bill Esterson Excerpts

Committee stage & Committee Debate: 3rd sitting: House of Commons
Thursday 18th June 2020 Public Bill Committees

[The Chair]

Thank you. I now throw the floor open to questions.

[Bill Esterson (Sefton Central) (Lab)]

Q Thank you, Ms Cummins. Good morning, Tom and David. Tom, you just talked about the chance to redefine trade agreements. For starters, can you talk us through the government procurement agreement and the continuity trade agreements? What is your view of what the Bill does in both areas? Do you have any concerns, and is there anything you would like to add to the Bill in those areas?

Tom West: Sure. I will focus on the continuity trade agreements and what is being done there. It is worth saying at the outset that it is sensible to try to roll over and maintain where we are, as a starting point. It is also important to see that as a starting point as to where we are and where we want to go. The process gone through there demonstrates the need for, first, a better approach to scrutiny and oversight for how we conduct and design our trade policy. Secondly, there is the point about saying, “Let’s review and refresh.” With the continuity agreements in particular, there is a need to put in place mechanisms to review those in due course and to check up on them and say, “Are these delivering the economic things we need from the trade agreements but also, importantly, the environmental issues that we need to deliver on?” If we want to become a global leader in environmental issues, we need to think about what that means for all areas of policy. We cannot simply rely on directly environmental ways to deliver those. Let’s look at those and see: are these the sorts of trade agreements that are working from an environmental point of view? Are they encouraging the right sort of trade and the right sorts of goods and services? And are they allowing us to take the actions we will need to take to fight climate change and reverse biodiversity decline?

[Bill Esterson]

Q Great. Thank you. David Lawrence, could you answer the same question? Perhaps you could share your thoughts on where this relates to the GPA as well as to the continuity agreements?

David Lawrence: Could very quickly remind me what the question was?

[Bill Esterson]

What is your view of the Trade Bill as it is? Do you have concerns about it, and are there any additions you would like to see made to it?

David Lawrence: As I said earlier, parliamentary scrutiny is a big concern for us. When the Trade Bill was first introduced, which was a while ago now, it was billed as an open conversation on scrutiny and a new framework for how trade could be done, but in fact we see nothing new on parliamentary scrutiny, and so far the Government have not seemed to be very open to having that conversation or to listening to proposals for how scrutiny should operate. That is not just our concern; it is shared by a lot of other NGOs and businesses, and indeed by many MPs. The UK currently uses a pretty archaic form of treaty scrutiny that dates back to the first world war. It was designed to deal with secret defence treaties between European powers. Today’s trade agreements are a million miles from that. They cover a huge range of policy areas—from food standards and environmental regulations, to NHS prices and digital services. We think it is completely inappropriate to expect that MPs should have no say in how those deals are made.

It is also worth noting that that is an issue that many members of the general public are concerned about. If you think back to the Transatlantic Trade and Investment Partnership, or TTIP—the proposed EU-US trade deal—you will see that one of the reasons it collapsed was that people were not happy about the idea that these important talks were happening behind closed doors and that their own elected representatives did not have much of a say over them. In Westminster, MPs have less of a say over trade deals than MEPs in Brussels or, indeed, Members of Congress in Washington DC.

If I am honest, I think lots of people would be quite surprised and shocked to learn that their own elected MPs do not have a say over these trade agreements, the new deals we are doing with the EU, the US, Australia and Japan, or the new ones announced yesterday. It is not clear who people are meant to write to or who represents them and their interests when they are concerned about how these deals might affect their livelihoods, the food they buy or, as Tom mentioned, environmental standards and principles.

For us, scrutiny is an absolute priority. We also want to use trade to maintain high standards. We have concerns about the GPA and the way that public procurement works, but scrutiny is absolutely the priority. If we do not have that, there is no way Parliament can make sure that trade in the future meets with those high standards, and there is no democratic representation or transparency.

[Bill Esterson]

Q David Lawrence, you mentioned the GPA briefly at the end. Can you say what those concerns are about public procurement?

David Lawrence: There is a scrutiny concern that is specific to public procurement as well—making sure that Parliament has a role, that there are democratic processes involved—and there is a standards concern to ensure that procurement can be used in a way that maintains standards. The Government have this levelling up agenda and the idea that post-Brexit Britain will support parts of the country that are not doing so well economically. Procurement is an opportunity to support those areas as well. As we have seen with covid, all sorts of big questions are raised around global supply chains. One of the immediate effects of covid was countries putting in place things like export controls and wanting to localise their supply chains. Procurement is one of the many tools that Governments can use to support local industries in that way and to maintain standards. The more that Parliament has a say over that process, the better.

[Bill Esterson]

Q Thank you. Just a follow-up question to both of you: what scrutiny system would you like to see in place?

David Lawrence: From our perspective, there are four elements to an ideal scrutiny procedure. First, before negotiations begin, we think there ought to be a full debate, with a vote on the negotiation objectives, and that ought to be written into law. At the moment, the Government can grant a debate, if they want to—and they have done so, at very short notice, as some of you will remember, I am sure, on the US objectives and the EU objectives—but we want a guaranteed debate and vote on the objectives. Secondly, during negotiations, there should be regular reports back to Parliament on the progress of those negotiations, and, ideally, publication of texts from each negotiation round. That is a practice that is done elsewhere: the EU has updates during negotiations. As I am sure all of you are aware, MPs are very much left in the dark. At the moment, US and EU negotiations are going on, but we rely on leaks, essentially, and reports from Brussels or from DC because there is no formal process for reporting back.

Thirdly, after negotiations there should be a debate and a vote on the final deal to approve it. Again, that is something that happens in the US Congress and in the European Parliament. We do not have that guaranteed. The only way we can get a debate and a vote on a trade agreement is if the Opposition force a debate on it during an Opposition day within a 21-day sitting period. As you all know, it is not guaranteed that there will be an Opposition day that falls in that period, and if there is, the Opposition may decide to use it for other things. The Government are proposing a lot of new trade agreements, so the current system is not reliable in terms of ensuring that debate and vote on the deal.

Fourthly, throughout this whole process we would like to see public consultation and independent impact assessment. There have been some half-hearted attempts at that. I sit on one of the expert trade advisory groups at the Department for International Trade, but there is not a well-established, formal process of consultation with actual trade agreements where businesses and NGOs are brought in to comment on and critique the trade agreements themselves. We have not seen that happen yet. Again, that is something that happens in other countries, but the UK is very much behind on this.

[Bill Esterson]

Q Before I get Tom West to answer, I have a question for David Lawrence. You talked about the importance of the publication of the negotiation text at the end of each round. Why is that so important? Indeed, why is the process you outlined so important? What sorts of things can go wrong if the level of scrutiny you described is not in place?

David Lawrence: It is about public trust. We saw in the TTIP negotiations a lot of distrust that ultimately led to the deal falling apart. If you wanted TTIP to happen—if you want these trade agreements to work—you need the public behind you. If there is not transparency, there will be conspiracy, leaks, theories about what is being discussed, accusations and a lot of uncertainty. That is why it is something that businesses and NGOs are united on: regardless of your view on whether the specific trade deals are good or bad for the economy or society, at least if you have transparency, you know what is being discussed and what is on the table. That is why we are pushing for it, and we have joined the British Chambers of Commerce, the International Chamber of Commerce and the CBI in pushing for that level of transparency. It has been a source of frustration, not just among civil society but also among businesses, that these important deals are supposedly on the way but we do not know what is being discussed at the moment.

[Bill Esterson]

Q Thank you. Tom West, would you like to add to what David Lawrence has said?

Tom West: We are supportive of the asks and processes David outlined. Greener UK, which is a coalition of environmental organisations, is also a signatory to the document David mentioned. I will just add some extra things around the side.

First, once a trade deal is in place and up and running, there is a need for ongoing scrutiny and involvement of civil society in making sure it is being implemented in the right way. That is crucial looking forward. Secondly, to give a bit more clarity as to the value of this, within the environmental sphere, the value—in fact, the necessity —of public participation is long recognised. The Aarhus convention 1998 enshrines in law that the public must be engaged in the design of policies related to the environment. It is true here as much as in other areas: by involving the people affected by the policies, you get better policies and better buy in.

There is another interesting point on the value of this. Last year the US negotiators said, “Look, we can’t refer to climate in our negotiations”. They were able to point to an Act of Congress and say, “Our hands are bound here. It’s impossible for us to do this”. In that way, a steer and an instruction from Parliament can strengthen our negotiating arm. As I have said, our vision is that the UK uses its blank sheet of paper on trade policy to align its trade policy with its global environmental ambition. Let us get that clear and written down so that our negotiators can point to it and say, “The conversation that we want to have—and, in fact, that we need to have—is around robust implementation of the Paris agreement, meeting our environmental goals”.

Lastly, David mentioned the need for public support: this matters to the public and they care. For me, this goes to the question—and annunciating—what are we going to get from these trade deals? What is the benefit and value to people? That is very much part of the question and review of what our trade policy is for. We have seen various estimates of what a US trade deal might get us, for example, from an economic point of view. The figures sometimes are relatively small. I have seen some say that the benefit in reduction in tariffs might amount to £8 per household per year. If that is the case, we need to understand what that will do for us and what other benefits we might be able to get from a trade policy that is more closely aligned with our environmental ambitions.

[David Johnston (Wantage) (Con)]

Q Both of you have talked about the US and the deal we have with them, but this Bill is about the continuity of agreements that we already have through the EU. If I understand your criticisms correctly—you can correct me on this—you are saying, Tom, that the agreements we have had through the EU have not been good enough for you, and David, you are saying that agreements we might do in the future with Australia and the US and so on may not be good enough for you.

First, given that this is about continuing agreements that we already have, if we sought to change them, they would not really be continuity agreements anymore. Secondly, could you both talk about the counterfactual? If we did not have this Bill or the continuity agreements, what would be the consequences for this country and for those countries in the developing world with which we are seeking these agreements?

Tom West: I think it is right to say that the Bill itself is focused on those continuation agreements, but in some ways that is symptomatic of the wider problem I am talking about in terms of the lack of an approach that says, “Let’s review and revisit what our trade policy is for and how it should be designed,” with an eye, in particular from our perspective, on what that means in terms of delivering our climate and environmental goals. As a first step, yes, we need to take those sorts of measures and it is sensible to do so, but that is just a first step. That, in and of itself, cannot be the full range of what we should be seeking to achieve when it comes to our approach to trade. However, taking that more ambitious approach requires putting in place certain mechanisms and frameworks. We are talking about scrutiny processes as a key part of that and, in addition, frameworks that seek to guarantee that, through our trade deals, we will be protecting and supporting our delivery of environmental goals by making sure that we retain our right to regulate in environmental matters and doing that thoroughly; that we have non-regression in environmental standards and a meaningful and enforceable commitment to non-regression; and that our import standards match up to our environmental goals.

--- Later in debate ---

[The Chair]

Thank you, Sam. I call Bill Esterson.

[Bill Esterson]

Q Good afternoon, Mr Lowe. Thank you for giving evidence. Can you talk us through your view of the Bill? Perhaps you could say a bit about the provisions on the GPA and the continuity trade agreements and how you see those provisions, whether you have concerns about them and whether there is anything you would like to see added to the Bill in either of those sections.

Sam Lowe: The first thing that I should say is that I think the Bill is necessary; there is a need for continuity when it comes to the UK’s trade relationships with third countries. Looking at the provisions for the government procurement agreement, I can see why there might be some concerns about the powers given to the Executive to alter things in future, but I also understand why the provisions are there, in that the government procurement agreement will evolve over time, new members will accede to it and there will be a need to update it.

Specifically on the continuity agreements, there are a few points that I would like to make. First, I am not sure that the scope is fully understood, in that it maybe covers more agreements than people think. As well as the ones that we all know about, for example Chile, Jordan and the like, it also covers Singapore and, to my reading, Vietnam, which was signed by the EU in June 2019. That is something that should be considered.

When it comes to the broad categorisation of continuity, I have a few questions. I would probably recategorise the agreements. I would start with category 1, which is the pure continuity agreements where there are just minor changes to be made. I am thinking of Chile, Israel, Jordan, Lebanon, Faroe Islands and the like. I would also include South Korea stage 1 in that box.

My second box would be the agreements that are continuity agreements but will be substantially different from what exists within the EU. Those are the agreements with Norway, Iceland, Switzerland and Turkey, and I would probably add Ukraine to that box as well. Because the existing relationship is so contingent on our EU membership, there is no doubt that the future agreement we have with them will be substantially different from today.

The third category are just new agreements, because we have decided that they cannot be rolled over and we are set to renegotiate them. That would be Japan and Canada. I would also put South Korea stage 2 in that box, in that the South Korean roll-over agreement contains a commitment to consider renegotiating after three years, but it also contains a poison pill that means that we will inevitably have to, because the rules of origin provisions that allow for EU inputs into UK goods to continue to qualify for the agreement’s local content provisions expire after three years. In that case, it will be a renegotiated new agreement.

As to whether I think the Bill is appropriate in its coverage, I think for box 1—pure continuity with minor changes—it is fine. For box 2—continuity but with big changes—I would say that it is probably still fine. There are obviously some concerns that they will change substantially, but those agreements are ones where we probably need to prioritise continuity over all else. In box 3, to my mind, they are new agreements, so I am not sure why they will be covered by a Bill that is focused on continuity—particularly in the case of Japan, where we have seen new objectives and even statements that we want to go beyond the EU’s existing agreement.

I would conclude with the need to consider the counter- factual. What we are discussing here is not necessarily the whole trade agreement; we are discussing how we deal with the implementing legislation accompanying the trade agreement. If we think about what that covers in practice, we are largely just talking about procurement and perhaps some issues on technical barriers to trade—that is it. In practice, we are probably talking about fairly minor changes in this space.

In the grand scheme of things, I suppose the question we are asking ourselves is: would slowing this down for everyone in order to do this via primary legislation add sufficiently extra scrutiny on the whole? I am not convinced it would, considering that it is ultimately still a yes/no decision either way. Parliament is not going to change; it just has to decide whether it wants it. Here is where I think it speaks to the bigger issue, which the Bill does not address but is hard to ignore. I listened to some of the first panel, and they touched on it. Parliament’s role vis-à-vis trade policy is incredibly limited; it is largely an Executive competence. Parliament has very little influence over what trade agreements look like, and very little ability to object to them if it comes to it.

[Bill Esterson]

Q Thank you very much for such a comprehensive opening. I want to ask you about what is and is not a new agreement, but in the context of what has already happened. I think I am right in saying that something like half the agreements covered by the Bill have already gone through. Are there concerns about some of the things that happened in those agreements? As some agreements have already gone through without the Bill, is the Bill needed in order for the remaining agreements to be negotiated and to pass?

Sam Lowe: The question of whether it is needed is a very good one. I am not sure I can actually answer it. You have just acknowledged that some of the agreements have passed. I suppose it is required, in that there might be a need to get some legislation through very quickly at the last minute if some of these negotiations drag on, so there is an issue there. Your first point was about what is in the agreements.

[Bill Esterson]

Q Are there any concerns about what has gone through in the agreements that have passed already?

Sam Lowe: I cannot confess to have looked at the text of every single one, but one of the concerns that had been raised was that there was an issue about whether the tariff rate quotas will have been changed in a specific agreement. When I looked at Chile in this case, the changes that had been made did, to my mind, make sense. For me, the most interesting point about some of the continuity agreements is the approach to rules of origin, which I mentioned earlier. It is the process by which a product qualifies for tariff-free trade under a trade agreement, dependent on the amount of local value added. As the UK has an issue, which is that in many sectors we do not create enough local value added to qualify for free trade agreements under normal rules of origin-type provisions, we have inserted conditions that allow for EU inputs to continue to be accounted for—either indefinitely in the case with Chile, or temporarily with South Korea. That is not necessarily a concern, but it is interesting. It is actually quite a new approach to rules of origin, and the jury is out on whether it is WTO-compliant. I probably lean towards it being compliant, but I have certainly heard counterarguments.

--- Later in debate ---

[The Chair]

Q I am Judith Cummins. I am chairing this session. I will not be asking questions but calling on members of the Committee to do so. We have until 1 o’clock for this session. Please introduce yourself to the Committee.

Nick Ashton-Hart: Thank you. I will try to be brief, because it is important for you to have time to ask me things. I am Nick Ashton-Hart, the Geneva representative of the Digital Trade Network, which is a coalition of industry groups throughout the world. I am the focal point for industry on digital economic policy in Geneva. I have been involved in the trade community for more than a decade and participated for about 20 years in multilateral telecommunications and trade policy as it relates to use of the internet.

I am frequently on national delegations and an adviser to countries or groups of countries that are negotiating economic policy. I am also the special adviser on international internet policy for the International Chamber of Commerce in the United Kingdom, although I am speaking to you today in my personal capacity as a trade expert in the field.

[Bill Esterson]

Q Good afternoon, Nick Ashton-Hart. Thank you for joining us. Give us your impression of the Trade Bill as it currently stands. In particular, please concentrate on the elements on the government procurement agreement and the continuity trade agreements. Do you have concerns or are there areas where you would like to see additions to either of those sections?

Nick Ashton-Hart: Thank you very much for the question. Thank you all for asking me here. It is a great privilege and honour, as an immigrant who arrived here in 1986 with £900 in my pocket, to be heard by Parliament.

With respect to the Bill, many of the comments I made about the Bill in the last Parliament remain true. There are some changes in this Bill, but the core of the issue is the road it sets out in terms of consultation on trade policy with not only Parliament, but industry as a whole. In my work, I see how Trade Ministries worldwide relate to stakeholders and how they choose to involve stakeholders in trade policy-making and negotiating.

I understand the argument that the continuity agreements are intended to be as close as possible to and a simple replication of the provisions of the agreements that you benefited from via membership of the EU, and that consultation is not necessary because of that fact. As I said in 2018—and this remains true—these are not the same agreements. At that time, we did not have any of the agreements rolled over, if you will, so we assumed that they would not be the same agreements. Based on my experience in trade policy, nobody makes exactly the same deal with a smaller party that they did with the larger party, because it is not in their interest to do that. In this case, we have even more reasons.

As an example of how these agreements are not the same, I offer up the Swiss agreement. There are 20 mutual recognition chapters of the Swiss-EU agreement. The UK-Swiss agreement has only three, because Switzerland cannot agree that our regime is equivalent unless we continue to apply the EU regime, as the Swiss-EU agreement requires that. So, 24% of the UK’s exports and 16% of imports in that deal are not covered currently. That is also true in the agreement on customs, so UK goods will not be expedited through the Swiss border in many cases as a result.

Therefore, these are fundamentally not the same agreements, yet they are treated, in terms of consultation with industry and Parliament, as if they are, when they are materially different. It is like anything else—if you start out on a road, you want to make sure that the destination you are heading towards is the destination you want to reach. I think that, as a country, the destination we should want to reach is that the country as a whole buys into the arrangements for trade policy that the country proposes to make.

While I accept that in February 2019 the Government’s roadmap for consultation with Parliament and with civil society and the like began to approach what we would consider a more standard relationship, I offer this comment to Committee members to consider. If you are negotiating with another party about economic affairs, the reason why you want industry to have a close relationship with you when you are doing that is because industry has relationships with industry on the other side—in the country that you are negotiating with. Industry can then help you to gain support from industry in your negotiating partner for the provisions that you are recommending, which are also in the interests of industry in that other country, or negotiating partner. If industry is not a close collaborator with you throughout the negotiating process—not just in setting up the terms that you are looking for before you negotiate, but throughout the negotiation and ratification process—you are robbing yourself of a key element that will help you to negotiate a successful outcome.

That is just as true when you are dealing with issues such as the GPA as it is when you are dealing with regular free trade agreements, or regulatory co-operation agreements, which are not really discussed that often but are fundamentally important—financial technology bridges, or FinTech bridges, and the like.

That is the key thing that I have heard from industry, and the key thing that I have seen is that the continuity agreements are taking longer to reach than had been thought. I wish I had been wrong about some of my predictions back in 2018; unfortunately, pretty much all of them have turned out to be taking place. These agreements have been more difficult, they have been more different and there are gaps in coverage. Of course, all of that is not terribly surprising, but despite the knowledge that industry and other stakeholders were right when they said that more consultation was needed, the Bill still does not provide for that consultation to take place, which is a real lack, and an opportunity that should be seized.

The consultation should not be seen as a negative; it should be seen as a positive. These agreements will last longer than they are expected to, and the successor agreements to them will take longer to negotiate than is estimated, because there is one thing that you can guarantee about a trade agreement negotiation process and it is that the target date for finishing it is not the date you will finish. You will definitely finish at some later point than you predict. That has proven true for us with these continuity agreements, which is not a surprise to anyone in the trade community.

Hopefully, that is not too long an answer.

[Bill Esterson]

Q That was very helpful. You mentioned the Swiss-UK agreement, and the differences in the mutual recognition chapters. Are there other agreements where there are similarly big gaps between the agreement that we are party to as members of the EU and the agreement that we have now signed with a partner?

Nick Ashton-Hart: First, I should say that you will have testimony from other witnesses who will have more knowledge of all the continuity agreements than I do. As you know from our conversations, I am a services guy, so I tend to focus on services and digital services.

As is the case in the Norwegian agreement, we will find that in any third-country agreement we try to make, the EU will quite naturally have made conditions on that country’s negotiations with additional third countries—the regulatory choices that the third country has with other parties with which they negotiate, other than the EU, are constrained by the agreement with the EU.

When it comes to regulatory chapters in trade agreements, there are really three major powers: the US, the EU and China. We do not have the regulatory freedom to determine, on our own sovereign nature, exactly what we do. Ultimately, we will adopt one of these three—we are smaller, and that is how it works. Big blocs carry the weight and tend to get more of what they want than do smaller parties. That is true of negotiating for anything in life. Anyone who has bought a car or a house will realise that those things stay the same. We will find that the choices that other countries are allowed to make in terms of their agreements with us are constrained by their deals with the great powers.

[David Johnston]

Q Nick, could you talk about the importance of the GPA for the digital services sector, and in financial terms?

Nick Ashton-Hart: The GPA is its own special animal. You will already have had descriptions of it, so I will not describe it. The GPA is a pretty loose agreement, and you can decide what you want to include within it and what you want to exclude. In theory—actually, in reality—it offers access to large amounts of potential supplies to Governments around the world, because Governments are major purchasers of everything. There are many conditionalities on that, and we will get less out of it than is suggested by the headline numbers, because of the flexibility of the arrangements and the scheduling. Countries, naturally, often like to sound more open than they are in this area.

I know of a certain European example: a major trading partner of ours in the EU that speaks a language that is not in the world’s top 50 most spoken languages has the same commitments on government procurement as does the EU, in terms of market access to third countries. What is not stated, however, is that you must do all of your bidding, contractual work and work with that party in that language that is not in the world’s top 50 languages, which quite naturally rules out the vast majority of people and companies in the UK, especially small companies. I am sure that a vanishingly small number of people in the UK speak that language.

So yes, the GPA is important, and yes, it does allow our firms access to many other markets but, looking at the fine print, access is not as simple and straightforward as is suggested. The GPA allows you to say to another country, “You—service provider X—can bid on services with my country.” It does not say, “And we will treat you as if you are one of us for regulatory issues.” You still need to be able to meet the regulatory requirements as a service provider that a domestic service provider has to meet. That is understandable and reasonable, but if your regulatory system in the UK is not seen as equivalent by that country, you will have to go through the additional step—if it is a regulated service, and many of them are—of being found to be regulatorily compliant with the regime of the country you are selling into. As we know, services are all heavily sensitive to regulation and to regulatory compatibility in third countries that you are selling into. That is why the single market is such a massive enabler of services trade throughout the European Union and its member states.