Trade Bill (Second sitting)

Faisal Rashid Excerpts

Committee Debate: 2nd sitting: House of Commons
Tuesday 23rd January 2018 Public Bill Committees

[The Chair]

I am sorry to interrupt. May I just say that there is a gentleman in the gallery who may not take photographs? Please carry on.

Dr Fowler: If you wanted to take a minimalist view, merely as a bit of constitutional housekeeping, it seems to me that there is scope for at least clarifying how the CRAGA provisions would be used, before possibly going into strengthening the powers.

[Faisal Rashid (Warrington South) (Lab)]

Q May I ask Dr Fowler to expand on a point raised in the Hansard Society paper, “Taking Back Control”, about the issues surrounding Government control of parliamentary time, and any implications this is likely to have for both the trade deals covered in this Bill—including the government procurement agreement membership—and the delegated powers that it grants, especially with regard to the negative procedure?

Dr Fowler: As you will know, under the negative procedure, Parliament has the power to pray against an instrument. In order to do that, first, Members need to use the early-day motion procedure, which is obscure and many Members do not even know about. Secondly, and more importantly, there is the issue of trying to get time on the Floor of the House. There have been cases where Members have wished to pray against a negative instrument and time has not been granted on the Floor of the House within the scrutiny period, so it has simply been impossible to annul a negative instrument before it came into force. That is one problem with the current system.

[Faisal Rashid]

Q So is it fair to say that the Government have the ability to control debate and thus limit—or even totally deny—parliamentary scrutiny of the deals or the secondary legislation?

Dr Fowler: Inasmuch as the Trade Bill provides for use of the negative procedure, yes, that would be fair. I am sure there would not necessarily be any wish to do that on the part of any Government, but as the procedures currently stand, Back Benchers cannot be sure that they can get time on the Floor of the House if they want it.

[Judith Cummins (Bradford South) (Lab)]

Q We have heard a lot today about the importance of societal acceptance in the scrutiny process, and Jude Kirton-Darling certainly explained the scrutiny process for trade agreements currently in place in the EU and the European Parliament. Dr Fowler, could you explain the current parliamentary framework for the signature, ratification and implementation of trade agreements in the UK?

Dr Fowler: At the moment that procedure happens through the European scrutiny system because of the EU’s competence to conduct trade policy. The main instrument is the so-called scrutiny reserve, under which the Government deposits relevant documents with the European Scrutiny Committees in both Houses and they scrutinise them. The relevant Minister is not supposed to sign up to things in the EU Council if the relevant documents are still held under scrutiny. That works every time a new set of documents is tabled along the process.

The system can be quite effective but there is a difficulty about timing, and getting time on the Floor of the House. There is a difficulty if something has to move quickly at EU level, and then the Government quite often uses what is called the scrutiny override where it just says, “We had to go ahead with this.” Then there is also the difficulty about trying to schedule appropriate debates in Committee or on the Floor of the House.

Jude Kirton-Darling: My only addition would be that currently, one of our frustrations as MEPs is about what happens when some things that we have scrutinised heavily at European level, pass to the national level. We see the level of scrutiny in the German Parliament, in the Belgian Parliament, in Scandinavian Parliaments, where there are very detailed scrutiny processes—often going on at the same time as we are scrutinising at European level, so we get feedback from those Parliaments during the process—and we do not feel, in many cases, that same process from Westminster. So, regardless of what happens in terms of Brexit, it is one of the ways in which Westminster could do more to scrutinise trade in any case, and that would be a benefit for everybody.

Dr Hestermeyer: Just as a reminder, the scrutiny override was used for CETA. To compare that, under German law, for example, Parliament gets involved very early on. There was a change in the constitution and then an additional statute was passed, so Parliament gets involved very early on and can make binding statements for the Government, which will then be taken into account by the Government also in the Council. That way, there is a large impact of parliamentary statements in governmental positions, because in the end, the Government will have to defend measures in the Council.

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[Iain Stewart]

Q Do you have any concerns about the practicalities of Her Majesty’s Revenue and Customs operating the system, as envisaged by the Bill?

Professor Winters: I am not sure that I can comment on the practicalities. They certainly want a large amount of information. My general rule would be that that needs to be information that firms collect anyway in the normal course of their business, and that it should be a simple matter to transfer it to HMRC.

[Faisal Rashid]

Q Professor Winters, given what you discuss in the UKTPO paper with the example of South Korea, do you think it is fair to say that what the Government are presenting as bilateral discussions are actually trilateral discussions?

Professor Winters: Yes. I gave the example of rules of origin and tariff-rate quotas. Those very clearly have to be negotiated with the EU, because the EU is intimately involved in them, and they have to be negotiated with the partner. We cannot just arrive in Korea and say, “Here it is. We don’t want to talk about it.” They very clearly have trilateral dimensions, which I guess need to be sequenced and taken seriously.

Remember that there is a further wrinkle: these are going to be new trade agreements and we are going to have to notify them to the WTO. Although the WTO procedure for reviewing regional trading arrangements does not require us to ask permission, the WTO secretariat will make a good deal of information available to members, and other members may wish to clarify things to discuss and even, ultimately, to dispute. It is actually somewhat broader than trilateral, but you cannot avoid a tripartite discussion on quite a lot of aspects.

[Faisal Rashid]

Q Thank you. According to the Queen’s Speech last June, the Bill is meant to set out the legislative framework for our independent trade policy. Do you believe that it establishes a proper framework to deliver what was promised?

Professor Winters: I would not hold myself up as an authority on exactly what was promised, but it does not deliver a satisfactory framework for negotiating new trade agreements. There are many different models, but experience from around the world suggests that one needs a good deal of consultation, input and legislative oversight of trade agreements. You cannot have a position where Parliament can unpick a trade agreement that has been concluded. If Parliament claimed that right, no one would negotiate with us. That means that Parliament and the devolved Administrations need to have an important role in setting mandates, and there need to be consultation and information during the process. Civil society would certainly claim that it, too, ought to be consulted, and I would advocate that, to the extent that one can generate one, there should be a discussion publicly.

Trade policy comes along in treaties. It is intrusive. It affects people’s livelihoods. It is a very good thing that we are talking about trade policy now in a way that we have not for decades—since before the EU existed, in fact.

George Peretz: I would add as a footnote that one of the best short things I have seen written about this is a piece by Stephen Harper, the former Prime Minister of Canada. He is not generally known as a politician who always wanted to do everything by consensus, but it is simply an explanation of how the Canadian side prepared itself for the CETA negotiations. It very much emphasises the need to consult with everybody in Canada, to bring the provinces together as well as all industry, trade unions, all the political parties and other actors to try to get as much consensus as possible on what Canada was trying to achieve at the outset of the process, before it started. It is a very good piece from somebody whose perspective on it is interesting.

[Barry Gardiner]

Q Picking up on both what Professor Winters said about not unpicking—Parliament should not be able to unpick a trade agreement—and what Mr Peretz said about Canada, Mr Clancy, once the UK Government, rather than the EU, set international trade agreements in place, what would be the implications if the devolved Administrations had a consent reserve and could implement some form of veto on internationally agreed obligations? How do you get that whole-of-governance approach where the consensus Mr Peretz was talking about is achieved so we know that what is agreed can ultimately be delivered without introducing an ex post facto power of veto that would stop it being implemented?

Michael Clancy: That is a very difficult question to answer without getting into uncomfortably hot waters.

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[Bill Esterson]

Q Do you think that needs to be appointed independently from the Secretary of State to achieve that?

Tom Reynolds: It is not something that the BCC or the Manufacturing Trade Remedies Alliance has made a submission on; it is something that we would have to consider, and maybe we can write to the Committee.

[Faisal Rashid]

Q The membership of the Trade Remedies Authority, which, according to the Trade Bill, is entirely at the discretion of the Secretary of State: do you think it is appropriate and effective? How does the proposed TRA compare to similar bodies in other countries?

Cliff Stevenson: Obviously, the wording is not effective at the moment in terms of ensuring that there is a balanced composition of those members. If you look elsewhere and compare, the closest major trade remedy regime to the UK’s proposed system is Australia’s. It has a separate anti-dumping commission that works in a similar way to how the Trade Remedies Authority would work, but there is a big difference in the sense that it is headed up by one person, an anti-dumping commissioner: there is not a committee or a group of members in the way that is proposed for the UK.

One concern I slightly have with this is that it is an extra level of decision making. There is no detail on how the members might make a decision—whether they would vote if they disagreed—and that could hold up investigations, which are always subject to very severe time limits given the amount of work that has to be done.

In the US and Canada, for example, there are examples of independent bodies such as the United States International Trade Commission, which does the injury determination for the cases. It is a completely independent body that has six commissioners who vote at the end of the investigation. If there is a positive finding of injury and three out of six vote in favour, it will be an affirmative determination. In that case, where there is a quasi-judicial system where it is completely separate and not under any political control, there are these commissioners taking a vote on the basis of the technical information.

Gareth Stace: You have to look at what the TRA and the whole system is trying to achieve. Why is it being set up? It is being set up because we are leaving the EU. Is that an opportunity to have a system that is fleet of foot, quite simple and employs fewer people than the European Commission does?

That is why a year ago we, as UK Steel, said that actually what this arm’s-length, independent body could be doing is just looking at the dumping margin, because that is a really simple, straightforward—almost—calculation. It is what they do in the US, which is seen as a champion of free trade, and we want to create strong links with the US going forward. There was that opportunity to do that, and so the make-up of the TRA and the committee would not be as important as if it was then doing the injury calculation—that is much more of a black box. You stick a load of numbers in, and you hope that something will come out. You twiddle some dials as well, and the tariffs come out of that. So you probably do then need some independent committee to look at it, but how much are they going to influence—[Interruption.]

[The Chair]

Order. There is a Division in the House, so I suspend the Committee until 10 minutes past 4.

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[Iain Stewart]

Q I would like to put to the panel the same question I asked the previous panel about part 3 of the Bill, which relates to trade information and the collection of exporter information by HMRC in particular. Are you content with the content of the Bill in this part? Is there anything missing or do you foresee any practical difficulties in HMRC collating this information?

Anastassia Beliakova: Not at first glance. However, the wider picture around trade data is that trade data is imperfect. It is particularly lacking when it comes to services, of course, and when it comes to intra-EU trading data. That is where we currently have significant gaps. If, in the future, there can be a more robust collection of data and stronger assessments of UK-third country trade, that would be helpful.

Stephen Jones: I have nothing to add.

Edward Bowles: Obviously, the collection of data is largely in respect of goods that cross borders. It is very difficult to do that for services, so I would have thought that a way of more robustly measuring cross-border flows of services would be quite an important thing to look at, so that you can get a better grip on revenue as much as anything else. Largely, it is more on the goods side than it is on the services side.

[Faisal Rashid]

Q My question is to Mr Bowles: one of your chief economists for the African region noted that African countries such as Kenya were extremely concerned about having to renegotiate trade agreements with the EU and the UK. However, she concluded—her name is Razia Khan—that this process has taken many years already. Can you tell us what your views are on how long these deals will take and what difficulties will be encountered in the negotiations, from your point of view?

Edward Bowles: The great thing about having economists is that they are independent of those of us who do jobs outside of research. Razia is an expert in her own right and would be the best placed person to speak to those issues.

In fact, they are not really trade agreements; they are economic partnership agreements that the EU has with most African, sub-Saharan and, indeed, subcontinent markets. It is certainly true that they have undergone a high degree of revision under the current Commission’s administration. I am not aware, frankly, of any overwhelming dissatisfaction. I attended a recent meeting only two months ago between quite a lot of these markets and Cecilia Malmström, so things do seem to be moving in a good direction. The question is what the UK’s approach would be to that and how much it might be minded to depart, if at all, from the approach. The starting point must be simply to mirror the current arrangements, as was said on Second Reading and in the Government’s response to the consultation on the Trade Bill.

[Faisal Rashid]

Mr Jones, would you like to add anything?

Stephen Jones: No, I have nothing specific to add in relation to Africa in general.

On a more generic point in relation to the Trade Bill, it is obviously focused on existing trade agreements and economic partnership agreements. From a services perspective, we need to look beyond that and reflect on arrangements that exist beyond that, which are critical to the cross-border flow of trade in services, because there are very few provisions and services agreements in trade treaties that relate to services. There are lots of mutual recognitions and memorandums of understanding that relate to infrastructure, to recognition and co-operation between supervisors, to the flow of data and to the recognition of exchanges, but which do not exist within the context of a trade agreement. They nevertheless facilitate cross-border trade in services that already exists between the EU—including the UK—and other jurisdictions. It is very important that we do not lose sight of those specific provisions, but seek to mirror them so far as the financial services industry is concerned, simply because the existing trade treaty provision is so poor in services.

[Bill Esterson]

Stephen Jones, you are the UK Finance representative. Sorry, it has been a long day. Can I ask about the written evidence you gave to the Procedure Committee, where you indicated the benefits of a triage or sifting process and stated how you might apply those when looking at new trade agreements? For the purposes of the phrase “new trade agreements”, given some of the evidence we have heard today, can we include anything that changes the agreements that are part of this Bill? Can you explain what you think the merit of such an approach would be, how you might apply it, and the importance of such a sifting process?

Stephen Jones: Given the time available in the context of Brexit, from the perspective of the financial services industry, clearly continuity, speed and the correct process and scrutiny to transpose the existing trade arrangements that the EU has with the rest of the world to the UK are incredibly important for continuity. That does not directly benefit the financial services industry. It benefits mostly the customers of the financial services industry, but in that context it is very important.

To the extent that your question relates to prioritising whether one should seek to amend the agreements in order to ensure more robust coverage of services within the context of those agreements, I think that in the first phase that is unrealistic. There is not enough time. What we need is as much certainty as we can get. Business in general needs as much certainty as it can get in terms of the transposition of the existing EU arrangements.

In terms of the ongoing amendment of those treaties to seek to extend them and prioritise what should be done—the sifting process, if you like, for services—we can develop a modus operandi in terms of markets that are important. However, as I say, there are significant factors beyond trade agreements that influence the ability to conduct cross-border business between the UK and the rest of the world. Those are a susceptibility to inward investment; strong regulatory and supervisory co-operation; aspects of data protection and the willingness to mutually recognise the cross-border sharing of data; and infrastructure, with the recognition on a cross-border basis of critical market infrastructure in each jurisdiction, such that member firms in each place are able to access and utilise the infrastructure in the other country. To the extent that that can be captured within a trade agreement, that is great.

To date, that has failed and our focus very much is on an ambition for the UK with the EU to seek to build an ambitious free trade agreement that has not been attempted in services anywhere else in the world. But we believe it should be attempted in the current context, simply because of the importance of the cross-dependencies that already exist and the fact that we are starting with a fully converged rulebook, which is extremely unusual in a trade negotiation context. So we believe that there is the prospect of an ambitious mutual recognition-based trade agreement in services between the UK and the EU and that potentially should be the first focus, to the extent that we are talking about prioritisation of negotiation of trade agreements.

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[Barry Gardiner]

Q To follow up, I want to ask you all a question as business people. If someone introduced a break clause in a contract with you or one of your businesses, would you not take the opportunity to renegotiate the deal? Given all that you have said about the importance of clarity, stability, understanding and certainty about the future, which we entirely agree with you on—that is why we need a Bill to do this—do you not think that, if we were seeing changes introduced by these countries because of this opportunity, and some of the changes were substantial, and changed that clarity and certainty, then actually there should be a process of parliamentary scrutiny looking at them?

At the moment, we may not be in control of that process. We know that we would like it to be very simple, but it may not be. Given that, should the scrutiny not be in place for Parliament either to assist procedure or, using some other mechanism, to say, “Yes, this is important, and we need to make sure that we, as Parliament, deal with it in the appropriate democratic way”?

Edward Bowles: I would say be careful what you wish for, and I do not say that completely comedically. It would very much depend upon the scale of the market that you are interacting with, and the significance of it. The experience that I had of TTIP was one where the lack of initial transparency, of engagement with civic sector societies, and of disclosure of the mandate for the first 15 months of the negotiations very much allowed the debate to be run by outside interests that felt disenfranchised. Effectively, that stymied the political will to take the negotiation further forward even before the new President was elected.

It was absolutely clear that there are lessons to be learned from a negotiation of that scale, ambition and impact for the UK’s economy, to make sure that you have the right level of engagement, transparency, scrutiny and so on in an ongoing manner. For a much smaller market, I dare say that, given the time involved, it may not necessarily warrant a full-scale similar application of scrutiny because, frankly, the relative impact for the UK economy, and therefore for consumers, healthcare and so on, would be much less. Judge each of them on their merits.

Anastassia Beliakova: To follow up on what Mr Bowles said, the TTIP example certainly shows us how critical it is to have appropriate stakeholder engagement mechanisms. At the moment, the Bill is meant to deal just with continuity of existing agreements that have already had the relevant scrutiny from the European Parliament and have passed through the European Scrutiny Committee here. However, if there are very substantial changes or if we are talking about completely new agreements, provisions certainly need to be made for appropriate scrutiny in Parliament, and for stakeholder engagement for business, civil society and non-governmental organisations. It might make sense for that to have some form of statutory underpinning so that there is input that is not contingent on the political environment, which may change. As has been said, negotiations take a long time, sometimes even up to a decade, and during those negotiations you still need to be able to test both the public views and the impacts. I would urge for these kinds of mechanisms to be put in place where new agreements are implemented.

[Faisal Rashid]

Q I will put Barry’s point in a different way. You mentioned continuity, which is absolutely fine—the industry needs continuity. You also mentioned that you do not want to see any change, but the Government have already noted that these agreements will be legally distinct and are likely to be different to the corresponding EU trade agreements. Do you believe that it is appropriate for any changes to be waved through using Henry VIII powers? That is one question. For British Chambers of Commerce members, how important is consultation on any elements that might change in these agreements?

Anastassia Beliakova: Consultation is absolutely critical. If there are changes through these agreements that would alter the benefits that businesses currently see, our members would want to be consulted. At the moment, there is a question as to how the UK will set out on having an independent trade policy. We are conducting a study with the London School of Economics on that topic, which I would be happy to share once it is published.

There is a balance of interests between continuation—ensuring that there is no gap between the current benefits and some new measures that will be implemented—and appropriate scrutiny. That has to be considered on a case-by-case basis when it comes to the existing agreements. For any new negotiations, however, there needs to be a more clearly set out process.

William Bain: There are two important points to make. First, if we look at the guidelines adopted by the European Council on 15 December and the drafts that are circulating in Brussels for the draft directive to be adopted next Monday, it is very doubtful that the EU will permit the UK to vary these agreements at all. It will basically be small changes that will require the UK to still be subject to its current obligations under these agreements. That is all that the EU will be prepared to accept.

Another important point is that if the mechanism for the transition is that the UK is under the common commercial policy and the EU common external tariff, the UK will be applying all the EU’s external tariffs vis-à-vis third countries. That means that Canada and South Korea will get the advantage of relatively low-tariff trade into the UK market, but unless we get the EU on board to help us with the transitioning process, we will not get the advantages of access to the Canadian and South Korean markets. That is the absolute imperative of why this task has to be completed—so that we can have certainty and continuity for business.

[The Chair]

The imminence of another Division tempts me to think that we ought to finish, unless it is a very short question.

[Faisal Rashid]

Q A very short one, actually. You mention that obviously the European Union might not let us change anything—it will only roll over the existing deal—so why does this Bill need the Henry VIII powers?

Stephen Jones: It is a rhetorical question, I think.

[The Chair]

A rhetorical question that Hansard will have noted. I thank our four witnesses very much for your evidence. You were very good value for money considering you were not paid to be here. Thank you for taking time out—it was most useful for the Committee.

Ordered, That further consideration be now adjourned. —(Craig Whittaker.)