Trade Bill (Second sitting)

David Johnston Excerpts

Committee stage & Committee Debate: 2nd sitting: House of Commons
Tuesday 16th June 2020 Public Bill Committees

[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

Q Professor Winters, you were talking earlier about how the procedures, as set up, would allow the Government to set up major changes through secondary legislation without, perhaps, sufficient scrutiny. What powers do you believe Parliament should have in that situation over the Trade Bill?

Professor Winters: I confess that I do not know how to draft it in legislation, but I would suggest that one has something in the Bill that gives concrete form to the statements that we have that the Government expect not to use it to make major changes, and that such changes would come with primary legislation. At a practical level, one would need some sort of early-stage scrutiny to identify issues that were mere technicalities or minor issues, and to flag up larger issues that might require primary legislation.

I am afraid I am not a draftsman. I do not know how to write that, but it seems to me that that is what we require. This is a very sensible, pragmatic tidying-up Bill, but it seems to have loose ends that might, under some circumstances, lead to places other than those that the Bill says it is intended to cover, and more than the House would wish.

[David Johnston (Wantage) (Con)]

Q Mr Riddell, you touched on services. I was thinking about the OECD report on what will happen to the economy. One of the reasons we will be particularly badly hit is the reliance on services, albeit that we will rebound quicker in the second year. I wonder what you think the consequences of not having the Bill would be for the service sector, which you are a member of.

George Riddell: In terms of the service sector, I would say that the two biggest elements are definitely the continuity agreements and the government procurement agreement. The government procurement agreement, although it largely covers goods, has several services provisions in it that are particularly important for small and medium-sized enterprises that operate cross-border government procurement contracts.

On the continuity agreements, it is difficult to say exactly, because there is different coverage in each of the continuity agreements for different service sectors. Broadly speaking, you have the horizontal elements in the more advanced trade agreements, such as that with Korea, which covers investment and establishment for service providers, and additional mobility provisions for short-term business visitors and the suppliers of services.

There are also, in some of those agreements, additional commitments on the digital economy, and how the UK and the third country can co-operate in order to foster more digital trade, which is of growing importance, particularly in the light of the pandemic that we are experiencing. I know that many of the people here have dialled in or participated remotely in these sittings, so it is a very pertinent topic for the service sector.

[Fleur Anderson (Putney) (Lab)]

Q My question is to both contributors; thank you very much for coming. It is about our trade with developing countries. Looking specifically at sanitary and phytosanitary measures, which Professor Winters mentioned and which can be used as trade barriers, but also looking in general, could the Bill be detrimental for developing countries, and how could it be improved to complement our poverty reduction commitments?

Professor Winters: I do not see strong and direct implications for our relationship with developing countries. Most of the countries with which we are signing these continuity agreements are, in fact, developing countries. I think the issue again, essentially, is that the Minister has powers to make regulations concerning non-tariff provisions, and some of those regulations could indeed rebound to the disadvantage of the countries we are dealing with—those on the other side. For instance, if we have issues surrounding conditions of entry for particular goods, the Bill might be used to tighten those up.

Having said that, the agreements we have with the developing countries—the continuity agreements—have genuinely continued, so far as they can, trade relations with those countries. There are some complications that are not in our gift, such as rules of origin, but I understand that the agreements that have been signed already under the heading of continuity trade agreements have made no changes, so far as access to the UK economy is concerned.

There is nothing I have seen in the Bill that is specific to developing countries that raises an alarm, but on the other hand, it is not clear that trade with developing countries is exempt from my residual nervousness about what the Bill might be used for under less satisfactory circumstances.

George Riddell: One thing that I am keen to emphasise is how the UK’s trading relationship with developing countries is split across the continuity agreements contained in the Bill and the customs Act, which gives effect to the generalised system of preferences and duty-free, quota-free access for least-developed-country exporters. You have the continuity agreements under this Bill, but there are also very important trade provisions in the customs Act, and making sure that they are aligned and work together to support developing countries’ trade into the UK is very important.

As for your question about SPS measures specifically, in my experience of working in developing countries and looking at how they trade, one of the biggest things is meeting food standards, health standards and environmental standards. The UK does capacity building very well through DFID—pending recent announcements today—and through programmes such as aid for trade in developing countries, in order to allow businesses and exporters to take advantage of the provisions in the trade agreements and EPAs.

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[Fleur Anderson]

Q Thank you for the examples on animal health. Similarly, for plant health, do you have any examples of how there will be a difference between our farmers and those in other countries, and of what a lowering of those standards might mean?

Nick von Westenholz: The EU—and, by extension, the UK at the moment—operates a plant protection approvals regime that is much more precautionary that in other parts of the world. That means that UK farmers have access to far fewer plant protection products—pesticides, say—than many of their counterparts in other parts of the world. Again, that really comes down to an issue of equity if they are then being asked to compete against those farmers who have access to many more technologies, which UK farmers do not.

We have to distinguish between the issue of fair competition and what those standards would actually be. As I have said, the EU approach is very precautionary and there is—and there should be—an ongoing debate about what sort of standards are required when it comes to plant health and plant protection.

It is not always as easy as saying, “Lower standards or higher standards?” about these things. There is, for example, a long-standing debate about the use of glyphosate, the most widely used weed killer in the world. Although people might prefer less glyphosate use, or even for it to be banned, doing so would probably result in more carbon emissions, because farmers would be required to cultivate more and use more tractors passes. They would use more fuel as they go over the land and release more carbon into the atmosphere as they plant as part of weed control.

These issues are not always straightforward, and there needs to be a proper debate about an appropriate level of protection that also provides farmers with the tools that they need. It is important to take the opportunity to distinguish between debating what our standards ought to be and ensuring fairness and equity in competing with farmers overseas once a decision has been reached about what those standards are.

[David Johnston]

Q Nick, in your first answer you said that even continuity agreements provide opportunities. I wonder what opportunities for farmers these continuity agreements create.

Nick von Westenholz: I guess I am thinking about some of the continuity agreements that are not quite continuity agreements—for example, the Japan agreement, which is being renegotiated. Certainly, we would hope that there is the opportunity for UK farmers to open up more markets in the far east.

Really what I was saying was that, as farmers, we want to be ambitious about increasing the markets, whether at home or overseas, for our produce. If we are going to increase them overseas, we have to recognise that that assumes a degree of free trade, international trade and imports. We certainly want to expand those overseas opportunities, and it may be that some of those continuity agreements, which are being looked at again, provide particular opportunities.

[Matt Western]

Q Hi, Nick. Good to hear from you again. I just want to pick up the point about standards and get your views on mutual recognition agreements and how they will play for the farming sector. Do you have concerns about them? Can they hide a multitude of sins? On the Trade Remedies Authority, do you have any concerns about the Bill? Are there any omissions that might leave the farming and agri-food sector exposed?

Nick von Westenholz: I got the second question. Could you repeat the first question, sorry?

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[Drew Hendry]

Q Mr Cranshaw, on a comment you made earlier about a deal with the EU, including an agreement on data sharing, have you done any work on the implications, resources or costs of a failure to get such a deal?

Ian Cranshaw: In chemicals, the REACH regulation is the key documentation, and that is stored by ECHA. We would accept that if you had to design a system now, it probably would not look a lot like what it does, but here we are 13 years after the ECHA database and the REACH regulations were introduced. UK companies alone have spent upwards of £600 million in furnishing that information on to the database, so you can appreciate the nervousness that, if we do not negotiate a deal with the EU that gives us access to that data, we will be back to a point where UK companies will have to rebuild a new database under UK REACH. There is no suggestion from DEFRA that we would move away from REACH. Globally it is seen as the gold standard for chemical regulation, so it is critical that we secure access to the data.

It is worth pointing out that UK companies are the second largest contributor of data to the information held on the ECHA database. Not only have our companies paid for the ability to use those chemicals, but, through their own innovation, research and capability, they have contributed significantly to the value of that database. It is crucial that we secure access to the data.

[David Johnston]

Q You touched on this, but I want to ask both of you: are there particular countries with which it is very important to you to have continuity agreements, with a financial value? We have talked largely about what the Bill protects, but what do you see as the opportunities of those continuity agreements going forward?

Richard Warren: From our perspective, in terms of continuity—obviously, putting the EU to one side—the most important market is Turkey, with 300,000 tonnes and 8% of exports. It has a value of around £350 million. I can provide further details afterwards, if that would be useful. Without a shadow of a doubt, in terms of carrying over, that is the most important agreement.

There are other important markets, perhaps less for the sector as a whole but for individual companies supplying them. Manufacturing sectors in certain countries are very important, such as South Africa, Mexico and some of the north African countries I mentioned earlier. In terms of opportunity, we are essentially establishing what we already have, so it is difficult to see that there is a brand new opportunity. I wouldn’t say that it isn’t hugely important—we want to continue to trade with these countries and to make sure that we do not have a resumption of tariffs, but fundamentally the position is not going to be any different to what we currently have.

It depends on how you view the question. If you view it as, “If we don’t have this, you will have tariffs,” then there is a huge opportunity, because we would be in a worse situation than we currently are. If you view it from how we currently are, we are looking at exactly the same situation.

[The Chair]

Mr Cranshaw, I think you wanted to answer as well. Mr Cranshaw? We may have lost the line. We only have about three minutes left. Would you like to ask the witness a question, Gareth Thomas?

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[Bill Esterson]

Q I wanted to ask you about the government procurement agreement and some concerns that you put in your written submission. Could you set out what your concerns are about the relationship between the GPA entities and the UK Government’s public contract regulations, which I think you say run out at the end of this year? Where does that leave us?

Rosa Crawford: The TUC has confirmed that the Bill does not give assurance that the UK’s public procurement rules will promote respect for workers’ rights or environmental standards in its accession to the World Trade Organisation’s government procurement agreement. The GPA as it stands has no requirement for members to promote social standards in their tendering process.

The UK’s Public Contract Regulations 2015, which you mentioned, transpose provisions in the EU procurement directive of 2014, which states that Governments must ensure that public contracts uphold international, environmental, social and labour standards. Importantly, those regulations also include provisions about a price-quality ratio, which is intended to ensure that public authorities select tenders on the basis of quality and positive social impact, rather than price alone. We are worried that once we leave any kind of relationship with the EU and we just have to rely on the UK’s public contract regulations, the UK Government may roll back on those commitments to promote social standards through the tendering process.

We know the Prime Minister and members of the Cabinet have talked many times in the past about wanting to repeal EU-derived rights around working time, agency workers directives and other important protections for workers’ rights. We are worried that that may be the direction of travel with procurement as well, which is why we seek an addition to the Trade Bill that states that the GPA schedule that the UK files will make sure that it at least replicates article 18(2) of the EU’s 2014 public procurement provisions, which makes it clear that social standards must be part of the criteria used for settling public contracts, and that contractors must uphold those international labour and environmental standards. We would want the UK to go further than that and actually make it a compulsory criterion that the highest standards are used by contractors who receive public money, because that is the way to ensure that we get the best quality public services and provisions through our procurement arrangements.

We are concerned at the moment that we do not have a rigorous enough process of selecting tenders that always have the highest social standards, and that has had a terrible impact on the quality of services that we get, so it has had real public health implications. With the pandemic that we are facing now, we have had cases such as the Government choosing to import 40,000 protective gowns from Turkey on the basis that they were presumably lower priced than gowns they could get from a country that has higher standards. As we all know, all those gowns had to be impounded, as they did not reach NHS standards for safety. It is worth remarking that, in Turkey, there is extreme repression of workers’ rights.

By choosing the contractor with the lower price and the lower protection for workers’ rights, it leads to a much worse result for the public, and obviously there is a cost as a result. If there were concerted Government support for domestic manufacturing and domestic producers, and a preference was provided through the provisions in the GPA and through domestic legislation for providers who upheld workers’ rights and promoted the higher standards of workers’ rights, we would see more contracts going to UK manufacturers where there are strong trade union agreements, good protection for workers, decent pay and generally better conditions that promote a much more sustainable approach to business. Ultimately, there will be a better product for the public, which meets a public health need.

We think it is very important to send a signal with the Trade Bill that the Government’s accession to the GPA will be linked with making sure that the highest social standards are embedded in our public procurement criteria, and that that will be used as a key component for selecting tenders—not just price, but quality and the overall investment in sustainable development, good jobs and strong protection for workers’ rights.

[David Johnston]

Q I have been trying to get a sense from the sector representatives of the impact of not having the continuity agreements on their sectors. Does the TUC have a sense of how many jobs are reliant on our getting these continuity agreements through the Trade Bill?

Rosa Crawford: As I outlined at the start, the crucial trade relationship that we believe the Government need to secure is that with the EU, which is our closest and most integrated trading partner and where the majority of our exports go. We are crucially reliant on—[Inaudible.] The trade agreements that the UK Government have secured through the continuity agreements do not represent anywhere near the importance to our trade. Although there will be some gains for certain sectors, it is not anywhere near as important for the EU. For us, the crucial thing about the continuity agreements is the lack of engagement with unions on them. They have been agreed on terms that we do not believe are advantageous to workers—for example, they do not have enforceable commitments around workers’ rights in them, which facilitates capital and UK businesses to go to countries such as Colombia, where the respect for worker’s rights is much lower.

For us, the crucial trading focus of the UK Government must be on securing a good deal with the EU. We do not believe that continuity agreements can substitute for those or, indeed, for agreements with the US or Japan, or Australia and New Zealand, which have launched in the last few weeks. We agree that there is a place for agreements—

[David Johnston]

Q I hear what you are saying but my question was, do you have a figure for the number of jobs that the continuity agreements are supporting in this country at the moment that would be at risk without securing them?

Rosa Crawford: It would be hard to make that estimation, because drawing a direct line between how trade agreements facilitate access for our businesses and imports and exports and specific jobs is quite difficult. Unions would treat any figure with some scepticism. We could probably look into which sectors were linked with particular countries. As I say, however, what would come out again and again is the overriding importance of the EU in promoting and supporting jobs in the UK. The continuity agreements do not represent a significant proportion of the jobs that are supported in the UK, if you could draw out some analysis that was credible on that.

[The Chair]

We have only another four minutes, so this is probably the last question.

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[Bill Esterson]

Q That is fine. Turning to the Trade Remedies Authority, which currently operates as the Trade Remedies Investigations Directorate, in evidence we have already heard, a comment was made about industry’s ability to properly fund its contributions to your investigations. Could you say something about ensuring that investigations can be conducted properly? I think there is only one underway at the moment, so that was the one the comment was made in relation to.

Simon Walker: There are two underway at the moment, which are both transition agreements. One is about welded steel and tubes, and the other is about rainbow trout. Those two transition arrangements are in process at the moment. I cannot pretend that it will always be cheap to lodge a claim with the TRA, because it will require quite a lot of legal and technical expertise, so I would not want to over-sell that. It is a very substantial meta-seeking recommendation from us on the base of anti-dumping and fair subsidies or the need for an economic safeguard. It is a major intervention in economic process that I think justifies significant resource going into it.

[David Johnston]

Q Could you give us a hypothetical scenario of something that could happen in the future, which, if we did not have a Trade Remedies Authority, “The consequences would be as follows”?

Simon Walker: I suppose the big worry about anti-dumping in general is that an overseas producer will seek to eliminate domestic competition in a predatory way and then force up prices as soon it has put its UK competitors out of business. That is at the heart of the issue, but there are infinitely more subtle variations of that, particularly if the exports come from countries where there are hidden or perhaps unfair subsidies of different sorts or where there is a disguise. The absolutely crucial thing is that there have to be UK producers of that product. If a product which happens to be massively available in another country is dumped cheaply in the United Kingdom and there are no UK producers, there is no domestic interest in that. That kind of unfairness aspect is fundamental to everything that we are going to be doing.

[David Johnston]

Q In your role, do you see any particularly effective examples around the world of organisation that operate in the way that you hope the Trade Remedies Authority will?

Simon Walker: I think the Canadian, Australian and European Union’s trade remedies authorities operate competently and efficiently. The United States authorities have rather wider powers and a broader, much more variable political remit than this country’s will have, where our role is going to be to implement very strictly what is in the legislation. However, we are going to have to evolve something that is suited to the interests of this country absolutely specifically. That will be a challenge, because it has not been a function that the UK has had for some decades now, but I am confident that we can build up the expertise that will be required in the three basic strands. One is legal, one is analytical and economic analysis, and the third is investigatory, where claims are brought to us that require a detailed investigation. My hope is that over time we will build up the expertise to be recognised as an independent authority operating very much in the interests of this country, but that is an ambition and it will take a while to get there.