Trade Bill (Second sitting)

Fleur Anderson Excerpts

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

[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.

[Gareth Thomas (Harrow West) (Lab/Co-op)]

Q Professor Winters, much of the debate so far has focused on continuity agreements, but I want to take you to new free trade agreements, which are another area of contention in the Bill. Will you compare the process for scrutiny of new free trade agreements, for example with the US, under the CRAG process with the processes of scrutiny in other Parliaments, including the US Congress?

Professor Winters: I am not a huge fan of the process that we have under the CRAG, which seems to me to allow the Executive a bit too much scope to do things unscrutinised—

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[Gareth Thomas]

Q As I understand it, a potential deal between the UK and Canada would come within the scope of the Bill as it is currently drafted. If I remember rightly, the National Farmers Union had some concerns about the EU-Canada deal—the comprehensive economic and trade agreement. Could you remind us of them? Could you also give us a clue as to whether you would have similar concerns about a UK-Canada deal?

Nick von Westenholz: Sorry, the sound is not great, but I think that that question was about our potential concerns with the EU’s CETA deal and whether we have concerns about a UK-Canada deal.

Maybe the best answer is that all trade deals, whether they are continuity or future trade agreements, present opportunities for UK farmers. We are very keen to make that clear: we are certainly not opposed to the notion of free trade agreements, and we hope that they might present opportunities to increase our exports of our fantastic food.

At the same time, however, all trade agreements will also look to increase access to UK markets for overseas producers, which will increase competition for UK farmers. Again, that in itself is fine, but we want to ensure that that competition is fair—whether it is Canadian farmers, US farmers or anybody else. The reason why we talk about overseas farmers meeting equivalent standards to UK farmers’ is simply on the basis of fairness; we are certainly not opposed to trade liberalisation, as long as that liberalisation is fair.

[Fleur Anderson]

Q I have two questions. First, on the equivalent standards that you were just talking about, specifically those on animal health and welfare, can you give any more examples of how UK farmers could be undercut or treated detrimentally if that is not explicitly included in the Bill?

Secondly, on trade information, clause 7 provides new powers for HMRC to collect information on the identity and number of UK exporters, but the Government have said that providing that information will be voluntary. What impact would that position have on your members?

Nick von Westenholz: I will answer the second question first because, I am afraid, my answer will be brief. We have members who are exporters as well, but most of our members are probably not directly exporting themselves—they will be at the start of the supply chain; it will probably be their customers who are exporting. We have not yet done any assessment on what the impact of those provisions would be, so I am afraid that I cannot comment directly on that, although I suspect that it would be minimal.

Coming to the first question, the point is that UK farmers—like most EU farmers—operate under high standards of production in terms of the requirements they observe, particularly on animal welfare, for example. That is not to say that there are not farmers around the world who operate high standards of welfare. But in many cases in the UK, those are legal requirements, for example those around stocking densities for poultry, access to light, limitations on veterinary medicines that they can use—antibiotics, for example—and many other things. All those will have a connected direct or indirect cost for farmers, and will increase the cost of production in comparison to farmers overseas, who do not have to meet the same requirements.

For farmers who then have to compete directly against produce that is produced more cheaply because the regulatory burden is lower, it is, for us, a simple issue of fairness. In a way, I am loth to put too much emphasis on the differences of approach, because, as I have said, many farmers overseas will produce to high welfare, but we know that many farmers overseas produce to lower requirements because, very simply, they are not required to by their legal and regulatory structures.

[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.

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[The Chair]

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

[Fleur Anderson]

Q Can I ask you to unpack and give some more examples of the workers’ rights that are at risk, Rosa? You have talked about freedom of association and you have mentioned pay, but could you give us some more examples of workers’ rights that would be at risk overseas and in this country, and of the impact on public services, which you think would be at risk by being included in the Bill rather than being exempt, as you are calling for?

Rosa Crawford: To focus on public services first, we are concerned that the Bill does not provide a guarantee of an exemption for all public services through a positive list, which is what we want to see in the Trade Bill. That is the only way to affirm that public services will be protected in trade agreements to make sure that there is no investor-state dispute settlement.

We are concerned that the trading partners that the UK Government have lined up as priorities for trade agreements once we leave the customs union with the EU are those that have explicitly made it clear that they would seek access to the UK’s public service market as a particular objective in trade negotiations. The US in particular, in its negotiating objectives, made it clear that regulations on drug prices were a barrier to market access which it would seek to overturn in trade agreements.

We know that in all recent US trade deals, such as the USMCA with Mexico and Canada, they have taken the negative list approach, which is where all services are included in the agreement unless specifically exempted. That means that if we had a similar deal with the US, part-privatised public services in the UK would be included in the agreement. If a future Government tried to renationalise them or regulate privatised parts of the public service, such as the provision of pharmaceuticals and medicines, they could be sued by the US Government. If ISDS is in the agreement, they could be sued through an ISDS tribunal. We are concerned that without an explicit commitment in the Trade Bill, as well as in all future trade negotiations, that public services are written out and there is no ISDS, our public services could really be on the line. That is what we need to see, rather than empty assurances from the Government that the NHS is protected.

In terms of workers’ rights, we have particular concerns about the US and the fact that they have ratified only two of the five fundamental ILO conventions. Forms of child labour are still legal in the US and there is legislation against freedom of association in a number of states where right to work laws exist.

It is clear that the US would see many of the employment protections we have in the UK, which we have derived from EU law, such as around working time, discrimination and paid holidays, as barriers to trade. They would say to the UK, “We are signing a deal with you only if you remove those barriers to our businesses being able to make more money, because we want workers to be able to work longer hours, have less holiday pay or be dismissed without any notice, or for agency workers to be fired on the day they are hired if we want to.” That kind of flexibility, we know, is the US approach.

Trade unions in the US have expressed grave concerns about that. The TUC and trade unions in the US have signed a joint statement making it clear that trade deals must protect workers’ rights and expressing concern about the breaches of workers’ rights in the US. With the Trade Bill not providing any affirmation that trade deals with existing countries, through the EU and the continuity group, and new trade agreements will have enforceable protection of workers’ rights, unless we see that kind of language making an affirmation that workers’ rights will be protected and effectively enforced through trade agreements, we know the realpolitik is that the likes of not only the US, but others such as Australia, New Zealand and others in the comprehensive and progressive agreement for trans-Pacific partnership, the CPTPP, are likely to pressure for lower workers’ rights. That will be their objective in a trade agreement; otherwise, the UK is a less attractive option for them.

[The Chair]

Ms Crawford, thank you very much for your time and for assisting the Committee with your evidence. That brings us to the end of the time allotted for this session. We will suspend briefly while we get the next one set up.

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[Gareth Thomas]

Q Presumably there is scope for another nation to challenge Britain’s decision at the WTO?

Simon Walker: Certainly there are arguments that happen at WTO level all the time. One of the realities is that proceedings at the WTO normally take a very long time—I think that is particularly the case at the moment for various internal reasons—in the course of which considerable damage could be done in that case, unless the remedy were applied. That is why it is important that this country has the ability to act in that situation.

[Fleur Anderson]

Q I have two questions. The first is about the membership of the TRA. The Bill sets out that the maximum number will be nine. What do you think would be the optimal number, and what would the considerations for that be? We have heard today from farmers, industry representatives, small businesses and trade unions that they would all like to be members. How will you ensure that it will be fully representative of all stakeholders? That is my first question—maybe I will leave it there and come back for the second.

Simon Walker: I am happy with nine as a target. Three of them are internal, but we are going to want the other five non-executive directors all to be appropriately qualified in some way. I think we will get there. Nine to me feels the right sort of level.

It is important to stress that this is a board and it is fundamentally about governance. I would not want to mislead you about its decision-making capacity. Its role will be to set strategy, to hold the Executive to account, to test the strength of the arguments internally and to maintain the independence of the TRA from any organisation, including the Government. Those are the fundamental roles of the board, and we are going to be needing people who have that governance orientation in particular.

I am not supportive of the principle of representatives of particular organisations as such—to have representatives of industry or trade unions or the devolved Administrations —for a number of reasons. One is that I feel it would compromise the objectivity of the members of the board. The second is that it might reduce the capacity to appoint on merit. Thirdly, I think it would reduce the accountability if someone’s primary reporting back was to a sectoral interest group. To me, that would be a weakness.

Will there be people with trade union or industry experience, with close links with farming or with the devolved Administrations? I absolutely hope so. I very much hope that there will be people in those categories who apply for the board and are appointed, but they will be appointed as individuals who will work together as a board to hold to account the Executive.

I suppose the special skills I would cite that I am quite keen to see in non-executive board members are someone with a strong legal background, so that they can hold the legal team to account; someone with a financial and accountancy background, with real strengths in those areas; and if there is someone who has an investigatory background, perhaps, who could probe into material that is not always going to be easy to extract, that could be a useful facet. I hope they will be people who understand and relate to the devolved Administrations. I hope they will be diverse, because that has always been a goal of the Department and will be of the TRA once it is independent, but they will there as individuals working together on a board that is fundamentally about holding the Executive to account rather than making decisions itself.

[Fleur Anderson]

Q My second question is about the impact on developing countries. What is your assessment of the impact on developing countries of creating the TRA and the new negotiations it will have, and the impact on our poverty reduction commitment as a country? How will you be able to uphold that within the TRA?

Simon Walker: I am not sure that is really in our domain. I am very sympathetic to your point, but I am not sure how much that is in the remit of the TRA as such. Our professional teams will be trying to establish whether there is dumping, for example, from a particular country, and the sale of a product below its cost in that other country. If that is contrary to the economic interests of the UK, the TRA will try to assess that as objectively as possible. It is conceivable—I do not think it likely, but it is conceivable—that that might be from a developing country. There are shields for developing countries against an awful lot of tariffs—that is an element of exports that I hope will help them—and I certainly do not see developing countries being a big part of our focus, but I do not think that our remit is to look specifically at that.

[Matt Western]

Q Mr Walker, some of your opening comments were about just how expensive those sorts of interventions are, because of the amount of legal work involved. What sort of budget will you be working to? Do you think that the scale of the operation needs to be established in terms of the financial basis and the purpose and remit of the organisation? How is that funded and have you looked at relative nations, such as South Korea, to see the scale of their operations and how we compare?

Simon Walker: I have not looked at other nations in that sort of competitive way. I suppose that what I have looked at is, as an organisation of not quite 100 people that might grow to 140 or 150 people—that sort of size—what it will take to run an organisation like that in terms of personnel with professional qualifications. It is not that hard to arrive at a budget for that kind of organisation, because it is not as if we are going to be paying for the submissions that are made to us. We are obviously taxpayer funded and our proposed budget—we are not in existence until the legislation is passed—is laid down by the Department. I think it is pretty much what anyone would expect, within a relatively modest scale, for an arm’s length body. Does that answer your question?