Trade Bill (Third sitting)

David Johnston Excerpts

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

[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.

[David Johnston]

Q For absolute clarity, would you say that the EU falls down on those areas at the moment?

Tom West: I think that the EU’s approach to trade needs improvement, yes. This is not just about trying to replicate what the EU is doing in any of these areas. There is scope to do things better, to use this new power to conduct our trade policy in new ways where we can be a world leader and use our seat at the WTO to say, “There is a better way to do these things,” and that is a great opportunity.

David Lawrence: Can I just add to that? There are issues around the substance of the agreement, but you can improve the scrutiny processes without necessarily changing the substance of the roll-over agreements, while recognising the importance that those deals are rolled over the before the transition period ends. We work closely with Fairtrade and Traidcraft, which are two of our members. They have direct links to lots of the countries that have the EPA trade agreements—economic partnership agreements—with the EU that are being rolled over. There is a tension because a lot of countries want to change those EPAs—they see Brexit as an opportunity to renegotiate those deals—but there is also a desire for those to be done in time. Our hope is that those things are not completely incompatible and that you can have a new Bill, like the Trade Bill, that implements these agreements while also having a process of scrutiny and an opportunity for countries to reform EPAs where necessary.

In terms of the scope of the Bill, the Bill is about roll-over agreements. It is also about the creation of a Trade Remedies Authority and acceding to the government procurement agreement. Both of those latter two things are about future trade policy. They are not just backward looking—"We need to make sure those things are rolled over”. They are also about the UK’s new trade policy. That is why, for the previous version of the Bill, a number of amendments that were ruled in scope, both in the Commons and in the Lords, were about why the scrutiny process is not just for roll-over agreements but for new agreements as well. Indeed, some of those amendments were successful in the Lords. There is an element of, “If not us, then who, and if not now, then when?” about it as well, because the Government are not proposing any alternative trade legislation at the moment.

This is the only legislative opportunity, as far as we know, to put in place these scrutiny provisions. If the Government want to bring forward a trade framework Bill, or something else where there is an opportunity to have a proper conservation about scrutiny, then fine, but in the absence of that, this Bill should be used to put in place those scrutiny procedures, as with the previous Trade Bill.

Tom West: If I may add to that quickly, this lacuna that David and I are both describing, in terms of where is this bigger picture of trade policy, comes through in the conversations on the Agriculture Bill as well, where the issue of food import standards is, quite rightly, an important topic for debate. We are saying that what we do around our import standards is going to matter. It will matter for British farmers, but for our environmental impact and overseas footprint too.

Our view is that the Government clearly need to act to put in place those manifesto commitments to not compromise on environmental, animal welfare and food standards. We have seen statements in the media in the past around the Trade Bill being the right place to do this, but at the moment there is nothing in the Bill about it. The Agriculture Bill provides that opportunity as well. Clearly, there is a need to do something on import standards. That is true of food import standards, but it is true more widely as well. It is not just food that we are looking to import, and we need to make sure that that approach is compatible with our domestic environmental ambition and our global environmental ambition too.

[David Johnston]

Q Could I just push you quickly on the second part of my question, which was on the consequences of not having these continuity agreements? I have heard all the things you would like to see in the Bill and all the future standards. I accept those points from you. What would happen if we did not achieve these continuity agreements that the Bill is designed for?

[The Chair]

Q Can I ask the witnesses to be concise? I have quite a few Members who have declared that they want to ask a question.

Tom West: We have not run the counterfactual of saying what would happen if these had not gone in there. Overall, the idea of continuing those agreements for now, and then looking at them in the round later on, is an approach that makes sense.

David Lawrence: Yes, I agree with that. The Bills both need to pass before the end of the transition period in order for the deals to be rolled over. We are in agreement on that. The question is whether you can do that, while also having better scrutiny and setting in stone better standards for the future.

--- Later in debate ---

[The Chair]

We have until 12.35 pm for this session, and three other Members want to ask questions, so it would be good if we could keep questions and answers quite concise.

[David Johnston]

Q Sam, this is a question I asked some of the witnesses earlier in the week, when we heard from representatives of the steel and chemical sectors and elsewhere. Do you think there are there particular countries with which it is especially important that we achieve continuity agreements, and particular sectors for which it is particularly important we achieve them?

Sam Lowe: Yes. In terms of countries that require continuity, Turkey is quite a good example: we currently have supply chains that run out of the UK into Turkey and back. I think particularly the automobile industry has some exposure here. This is a really tricky one, in that we are currently in a customs union with Turkey via our membership of the EU and, unless we are in a customs union with the EU, which is obviously not Government policy, we are going to be unable to replicate that relationship with Turkey. When it comes to the future trade agreement with Turkey, at least on the tariffs level, the most we can expect is for it to match what we have agreed with the EU. That, of course, would be better than not having a trade agreement; but the benefit of being in a customs union is you do not need to worry about rules of origin. So all of a sudden this becomes a slight issue with Turkey, and it is why I put it in my second box earlier, of being a continuity agreement but with big changes.

Of course the other ones that really do, probably, matter are Switzerland and the EEA countries—Norway, Iceland—in that we have quite deep trade relations with them now, as we are part of the single market. That will obviously, again, change quite substantially because of our decisions over our relationship with the EU.

Another country that does matter, and I believe it has been resolved—I do not want to say certainly, because I do not have a list up in front of me—is South Africa, in that we actually have automobile supply chains that run through South Africa. There we have a different problem, in that it does not achieve the same for the companies as now; we currently export products to South Africa—inputs to South Africa under the EU-South Africa agreement— that are put into, say, a car there and then sold back into the EU under the preferences of the agreement, because the UK-based inputs can qualify as local to South Africa under something called bilateral cumulation. That will cease to exist under the new agreement.

The point I would make is that all the agreements are going to change. I have just, in my head, got three different categories.

[Matt Western (Warwick and Leamington) (Lab)]

Q On the TRA, what is your view in terms of what structure it should be—you mentioned the two chairs that we have lost in a fairly short period of time—in terms of the make-up and the origin, and who approves their appointment?

Sam Lowe: Having read the Trade Bill, I think the approach seems broadly sensible. I do not have it in front of me at the moment, but I believe the Secretary of State approves the chair; and then the chair makes a recommendation on the chief executive, subject to sign-off of the Secretary of State, unless the chair is not there, in which case the Secretary of State does it. I understand it is an independent body to the Government, but it obviously needs to have close ties with the Department for International Trade.

--- Later in debate ---

[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.

[David Johnston]

Q In conclusion, despite what you see as its limitations, you would rather see us accede to it than not do so.

Nick Ashton-Hart: Certainly.

[Matt Western]

Q Nick, I just want to concentrate on the digital sector and e-commerce. Do you think there any omissions from the Bill in those areas? I am thinking particularly about what has happened in the last 24 hours with regard to the US pulling back, and about some of the challenges being faced by the WTO on this front. Should there be something in the Bill on that?

Nick Ashton-Hart: We are, as you know, one of the world’s powerhouses in services. Part of the reason we are a powerhouse in services is because, in the digital realm, we are also a great power in terms of innovation and firms that have had a lot of international success. Something like 60-plus per cent. of UK trade is underpinned in one way or another by digitalisation, so we are highly sensitive to any barriers to services through regulation, as well as through things such as the free flow of data and data protection.

We know that the agreements will not be duplications, because they are already not exactly the same. To the extent that we can, we should try to ensure that there are liberalising measures associated with at least the fundamentals of digital trade—some arrangements on data protection and on mutual recognition. Of course, that would also require us to stay quite close to the EU regime on data protection, which I and the industry have strongly argued in favour of. It is difficult, because if you are a negotiator and say, “I want to replicate this agreement, but I want to change one thing,” the other side is quite naturally incentivised to say, “Okay, then I want to change another thing.” The reality is that everyone will come to this with some changes, because—for many reasons, only one of which I covered—you cannot just copy and paste.

To the extent that we can put in digital measures, we should. It should be a part of the negotiating mandate for those agreements. It may be; I speak to DIT people quite frequently and have not heard whether it is, so I would not like to say whether it is, one way or the other.