Trade (Australia and New Zealand) Bill (First sitting)

Gareth Thomas Excerpts

Committee stage
Wednesday 12th October 2022 Public Bill Committees

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

Q Ms Monks, thank you very much for being willing to come in this morning to give evidence to the Committee. Will you just say how you think the deals could have been improved?

Lucy Monks: The entire free trade agreements?

[Gareth Thomas]

The entire deals—or are they so wonderful that they could not be improved in any way?

Lucy Monks: Absolutely not. For a long time, Australia and New Zealand have been areas where UK small businesses have been interested in doing a greater amount of trade, so anything that reduces those barriers and makes those markets more accessible is welcome—not only for access to those markets, but because Australia and New Zealand are useful territories as jumping-off points, especially for smaller businesses that might need to take smaller steps into export support.

The areas in which we would want to see a little more movement have been around the movement of people, in essence. We think that there is scope for further discussions with both Australia and New Zealand about moving skilled workers in and out of the UK—lending our skills to those markets, and vice versa.

[The Chair]

I remind Members that questions must be in scope—they have to be about the Bill, not the general issue of trade.

[Gareth Thomas]

Q Thank you for that opening answer, Ms Monks. On procurement, the Government have sold us the idea that there will £10 billion in new procurement opportunities from the Governments of Australia and just under £800 million or so in new opportunities from Government contracting in New Zealand. Do you think that there will be a huge rush from the British small business sector to take advantage of those opportunities?

Lucy Monks: I think the rush will come as far as people are able to be encouraged into those markets. Again, it is useful progress, but it is the implementation that matters. Small businesses have problems accessing public procurement in the UK as it stands, because they find it technically difficult. They obviously do not have the ability to take the same kind of risks as larger businesses. They might not have the technical departments, lawyers or whoever might support them through that process. That is in the UK, which means that small and medium-sized enterprises are basically underserved in the UK procurement processes as well. Those issues need to be addressed if we are to get UK small businesses into Australia and New Zealand as well.

First, SMEs have to understand the opportunities, which have to be made as clear as possible. The scope of the Bill and of the FTA makes it clear that measures have to be put in place to open up transparency, so that small businesses are more aware of the opportunities in front of them, but we have to wait for those things to happen to know how successful they will be.

I am cautiously optimistic. There are small businesses that are working very successfully, but obviously public procurement is just one part of the regime. There are construction businesses, architects and engineers working very successfully to deliver public projects in both Australia and New Zealand, usually because they have a particularly niche skillset that they can provide to those markets—for example, they are experts in delivering railway stations or bridges, with a particular set of expertise that those countries might not have the skills base for. It is about enabling a bigger basis of those businesses to take advantages of potential opportunities and to understand them.

[Gareth Thomas]

Q I was going to ask whether anyone from the Department for International Trade, straight after the Australian or New Zealand FTA was signed, said, “Okay, we need to sit down with you, Federation of Small Businesses, to work out together how we maximise the opportunities for British businesses.” Have you had those conversations?

Lucy Monks: We have, yes—

[Gareth Thomas]

Or has a unit in the Department for International Trade been set up to support you?

Lucy Monks: We are having those conversations. I think there is more focus on it, because International Trade Week is coming up soon. The Department for International Trade has been talking to us and other bodies about encouraging opportunities. It is an ongoing process, because the Australia and New Zealand deals are very new in the context of the UK, so it has to be an ongoing process in which businesses are also able to feed back and to say, “This is working”, or, “That isn’t working.” There has to be a degree of flexibility, because we do not want to be landed with a product that essentially does not improve with time. But the Department is talking to us lots.

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

Q Thank you, Lucy, for coming here in person and enabling us to keep going. What is the view of the FSB of the fact that implementing legislation is being introduced for the New Zealand free trade agreement before Parliament has had an opportunity to debate the agreement under the Constitutional Reform and Governance Act or CRaG provisions?

Lucy Monks: If it is a matter of process for Parliament, I guess you will have discussions with relevant Ministers about your concerns about scrutiny. There is always a point at which it is useful for us to be able to be part of those conversations. The more information that is available to us and the public, in general, and that we are able to feed into, the better.

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[Lloyd Russell-Moyle]

Thank you.

[Gareth Thomas]

Q I am sure that the three of you have had as much difficulty as I have had in keeping up with the ministerial changes in the Department for International Trade in recent months. One former Exports Minister said that he was unhappy with the level of support given to British exporters by the Department; do you share that assessment, or do you think he was just upset about something else when he made those comments?

Lucy Monks: Basically there needs to be more done to help businesses—especially small businesses—export. There is so much potential with the kind of businesses we have in this country and the kind of markets that might be able to open up to us. We are entering into a new world. We have had conversations with the Department for International Trade over the export support service, which is meant to cover the EU and basically help businesses find their way through the new relationship. Has that worked as well as it could have done? Has it been as targeted as it could have been in the level of support? Not really, but the Department has promised and is in the process of introducing a new system that is supposed to address some of the concerns we have levelled, such as providing detailed information in a way that is accessible to small businesses, rather than just pointing to bits of the Government website, which is what was happening before.

We need to keep working in the direction we are talking about and trying to improve the availability of those kinds of services, while also looking at, for example, new ways of working with the FSB or DIT to encourage more people to understand and to export. We would be happy if that were to continue. There are so many different things that will have to happen to encourage businesses, and especially small businesses, to think about exporting if they are not doing it already, or to export into new markets if they are unfamiliar with exporting to Australia and New Zealand, because the cost and the risk can potentially be so high. We all need to work together to ensure that that can take place.

[Gareth Thomas]

Q Can you flesh that out? It sounds like you think the regime is not very good at the moment. You said that the export support service was just pointing people to a website, and you implied that businesses face a lot of difficulties that are not being picked up and addressed by Government.

Lucy Monks: I am the head of international affairs at the FSB, so I always think that more could be done to help exporters enter into new markets. I do not want to take up the Committee’s time by running through a list of things, because there are so many things—for example, helping businesses mitigate some of the financial risks that they might face, because there are broader benefits to the UK economy if we can get those businesses into those new markets in the first place; providing the right kind of information; encouraging larger businesses to bring smaller businesses along with them; and doing more to allow for market access support. There is so much more that can be done, and we want to ensure that it will be done. If you want to have another conversation about all those things, I would be thrilled to have that conversation with you and with colleagues in DIT.

[The Chair]

May I remind the Committee to make sure that questions are within the scope of the Bill?

[Gareth Thomas]

Q Thank you for getting me back on the straight and narrow, Mr Twigg. In terms of mitigating the risk, one of our later witnesses, Professor Sanchez-Graells, suggested in evidence to the International Trade Committee that there were likely to be some additional legal risks for businesses trying to win Government contracts in Australia and New Zealand. Is that the type of risk that you worry about or not?

Lucy Monks: It is not the only type of risk, but it is a very clear risk—again, especially for smaller businesses that do not necessarily have the experience or the access to the legal departments and trade departments that larger businesses have. The points he raised need to be looked at and addressed for the sake of legal clarity, because he brings up some interesting points.

[Gareth Thomas]

I wonder if Mr Bain or Mr Burwell have a view.

William Bain: In terms of the question about the export capacity of these two trade agreements, we would see the case for a refresh of the export strategy. We think that some elements of it have worked well, so it is a case of examining and rocket-boosting those but also leveraging what business groups and other trade bodies do collectively, in terms of turning what are otherwise dry legal texts into growth-generating instruments for our export companies. In the chambers network we have particular strengths in trade promotion and trade facilitation. We are doing the paperwork that makes international trade happen.

In the other business groups and trade bodies, we all have expertise that can be leveraged with what the DIT is providing, to ensure that we get more exports from agreements such as the two that we are considering today. It is more of a refresh than to discard the export strategy. That seems to us to be the best way forward with both these agreements.

Andy Burwell: I will jump in off the back of that. Thank you for the question, Mr Thomas. I am probably going to have a slightly more positive tone than Lucy and William. The export strategy did take a step forward. The 12-point plan was broadly welcomed by business. If we look ahead for these two agreements and put them in the context of these two free trade agreements, as William said, to a degree it is about utilisation. It is about how industry and Government can work together to really push that utilisation. Due to covid and other reasons, we have had a dearth of trade missions and support from Government for trade missions. There now needs to be a really concerted effort to get out, shout about the UK and excellent goods and services and get British business thinking about travelling overseas.

Under the Trade Act 2021, His Majesty’s Revenue and Customs has an excellent dataset of British exports, which at the moment the Department does not leverage as it could or should. Giving the Department the ability to use that alongside business groups, as part of the approach to encouraging and promoting exports, would be a real opportunity for the Department and industry.

The final point I would make is the importance of continued work between industry and Governments on market access. The issues do not stop at the signing of an FTA and its ratification. There needs to be continual discussion between Departments in the UK and in post about market access issues and non-tariff barriers that we can work on together to further the opportunity for growth.

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

Q I wonder if I can push you, Mr Burwell. The CBI represents some of the biggest businesses in Britain that export to Australia and New Zealand. You will be aware of the evidence given to the International Trade Committee by Professor Sanchez-Graells, suggesting that there were some serious risks of regulatory chill—I think that is the phrase he used—from the remedies available to business if contracts, as they perceived it, were unfairly tendered and put them at risk. Those remedies are not available in quite the same way as they are in the European Union or in other jurisdictions. Do you share that concern, or do you think he is exaggerating?

Andy Burwell: From his perspective, from a technical point of view it is accurate, but it all depends on how the new access is used and what the experience will be. I think we will have to wait and see whether those concerns come to the fore. It is hard for me to judge right now whether they are correct.

[Gareth Thomas]

Q Just to push you a little further, if I may, presumably you are enthusiasts for the WTO government procurement agreement. He appeared to be saying—we will have the chance to push him further on this in the evidence he gives this afternoon—that the UK-Australia FTA appears to undermine the GPA and that the comprehensive and progressive agreement for trans-pacific partnership, which potentially will succeed the piece of legislation that we are debating, will also undermine the GPA. Would that be of concern to the CBI, or are you fairly relaxed about it?

Andy Burwell: The professor will be much more the procurement expert than me. Speaking to members about these two agreements specifically and whether they had any concerns about the Procurement Bill and its powers, in the grand context of the changes that the Procurement Bill is making and the reforms within it, in a way these pale into insignificance. They are very minor in the grand context of that Bill. In broad terms, our members felt that they would be positive for industry.

[The Chair]

If there are no further questions, I thank the witnesses for their evidence. We will move on to the next witness.

Examination of Witness

Leo Verity gave evidence.

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[Drew Hendry]

Q Do you think that has led to a deficit in the ability of organisations such as yourselves and others to communicate with MPs to ensure that issues are raised in a timely manner and through a proper process, so that people can see publicly the scrutiny of such an important piece of legislation?

Leo Verity: I think so, yes. In truth, I think that awareness of the ratification process for Australia among not only the public but parliamentarians was extremely low, given the way it was snuck through, really, before the summer recess without meaningful notice of when it would be coming. I have seen that the new Secretary of State has made a commitment that for future agreements there will be at least 10 sitting days between the Government’s final report on trade agreements—the section 42 report—and the triggering of CRaG. That is less than the ITC requested—they wanted it to be a 15-day period—but at least it is some kind of structure that we can work by, so there is something about how these processes are supposed to work. But given that we saw that the CRaG process for Australia was so unfit for purpose, I certainly think it needs reform for future agreements.

[Gareth Thomas]

Q Just to pursue that area of questioning, we hope to table amendments that will improve the scrutiny of what comes out of the Bill. Talk us through what you understand about the way that both Australia and New Zealand, or other jurisdictions, scrutinise their free trade agreements, which might be an improvement on the process we currently have here in the UK.

Leo Verity: In terms of Australia and New Zealand, I know that in Australia the treaty is in front of joint committees that are constituted to properly scrutinise the agreement line by line, which is certainly more thorough than what we have. I think that is a relevant point about the Australia timeline. It is another question about why CRaG was rushed through for the Australia agreement prior to the summer recess, given that in Australia the treaty is done in front of a committee and then the implementing legislation will come forward, so there was certainly no rush for that happen.

In terms of other scrutiny processes to learn from, it is worth pointing to places such as America and the European Union, where there seem to be more meaningful scrutiny opportunities throughout the whole process of negotiation. For example, in America negotiating objectives come before Congress; that would be something that we would really welcome. As it stands, Parliament has no opportunity to debate the negotiating objectives that negotiators take forward. There are also more meaningful opportunities for legislators to see texts during negotiations; again, at the moment, parliamentarians do not see negotiating texts at any stage of the process. We would argue that it would be beneficial for the International Trade Committee to at least have a view of the negotiating text during the process. Finally, there will be guaranteed votes and debates on the content of trade agreements after signature; that is the big omission that we saw with the Australia CRaG process. The International Agreements Committee was debated in the Lords, but the International Trade Committee and the Liaison Committee pushed extremely hard for an opportunity to debate the Australia agreement, which was not forthcoming. In the end, an MP tabling an urgent question provided the only opportunity to debate the agreement, but there was still no vote on its content, which is something that happens elsewhere.

Finally, and linked to that, CRaG allows for parliamentarians, in lieu of a vote, to pass a motion against resolution. There is no opportunity to amend the text or anything like that. Even that motion, as I understand it, would just delay ratification rather than resolve against it. Given that there is no precedent, it is not completely clear what form that motion would have to take for parliamentarians, so it seems that ultimately there is no meaningful way for parliamentarians to express dissatisfaction with the trade agreements that our negotiators are coming back with. I think that is a problem.

[The Chair]

Can I remind everybody to stick to the scope of the Bill? A lot of the debate is very relevant, but please keep that in mind, in both asking questions and answering them.

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[The Chair]

Order. Sorry, Mr Southworth. This is very useful information and we are very grateful, but we need to move on to questions. I will ask Gareth Thomas to start the questioning, and I am sure you can add what you need to add at that point.

[Gareth Thomas]

Q You have helpfully touched on CPTPP, which is obviously going to supersede the Australia and New Zealand FTAs. Do you have any concerns that the CPTPP might take away things in the Australia and New Zealand FTAs that are good and should therefore stay on the statute book? Or will the CPTPP just allow us to get closer to the Singapore digital agreement vision that you just described?

Chris Southworth: Others may have comments on that. I am looking at this through the lens of the digitalisation of trade, and I do not think there is any conflict there at all. I think the two things are quite complementary, so we are not concerned by that. There has been no discussion raising those sorts of concerns in any of the networks we are involved in. I hope that answers your question.

[Gareth Thomas]

Q Okay. Let me pick up another area. Do you see the Australia and New Zealand FTAs as offering lots of scope for small businesses, or are they to win Government contracts, or are they more likely to be for much bigger businesses to take advantage of?

Chris Southworth: I think we would all hope that it is opening up opportunities for everybody. SMEs are obviously crucial. It is great to have the big companies using these deals, but ultimately most traders are SMEs, and those are either operating within supply chains or operating independently. I hope that small companies across the UK look at this as a great opportunity to increase their trade with another part of the world—Australia and New Zealand in this context.

[Gareth Thomas]

Q One of the former Ministers at the Department for International Trade suggested that the Department was not doing enough to help SMEs to export. Do you share that judgment or is everything rosy?

Chris Southworth: I would not say it is rosy. You only have to look at the trade figures to see that. There is a range of issues here. If you look at it in the context of digitalisation of trade, it is not as simple as just putting an agreement in place and then expecting it all to happen, which is exactly why we have created the Centre for Digital Trade and Innovation. We need to help industry understand what systems and processes they can use to make trade simpler, cheaper and faster. That is the big opportunity in terms of digitalisation, and that has to be a joint effort. The Government are doing a stellar job in that area. In fact, we are leading in the world on that. Lots of other countries are looking at what we are doing. So there is no issue there in my view.

If there is an issue, a question that I would pose is around the practical model of export support. We are the only big nation that delivers B2B support through Government. Every other major exporting economy works in partnership with the likes of chambers of commerce. This is a great point to reflect on whether we have the right model or whether we could be leveraging the private sector far better. I would argue, having been in government myself, in what used to be UKTI, and looked at exactly these issues, that you do not have to spend very long with other countries—Japan, France, Germany or anywhere else—to see that if Government can streamline and really focus where it adds value, which is more in Government-to-Government negotiations, Government-to-business on the big strategic opportunities where the Government are required, and then in partnership with business on the B2B support, that works exceptionally well. It is very efficient. You can mobilise whole value chains into markets on a whole different level than we can in the UK. That is a huge opportunity and is something that should be reflected upon and debated—whether we have got the right model or whether we can do that in a better way.

[The Chair]

It is important that we keep within the scope of the Bill.

[Gareth Thomas]

Q Thank you, Mr Twigg. Mr Southworth, we are obviously interested in the extent to which the Government are going to provide support to businesses to export to Australia and New Zealand. We have been struck by the decision, which you allude to, to take money away from the British Chambers of Commerce to help businesses export to Australia, New Zealand and elsewhere. If we are lucky enough, I hope to table an amendment to allow more debate on that issue. Are you absolutely clear in your mind that it was the wrong decision by the Government to take that money away a year ago, or do you think there were good reasons to do so?

Chris Southworth: Like I say, I have been around this particular discussion for many years now, both in government and outside government. I personally think it was the wrong call. I think we can do it better. There are lessons to learn from others—particularly the Japanese model. The Japanese chamber of commerce operates like we do, with a voluntary membership model, but it has legislation that provides legal certainty, meaning that it can drive in investment over the long term. That is what we too need to do in the private sector, to make sure we have the right capabilities. It has a really effective relationship with METI, its DIT equivalent.

I personally think we can do this better, and we can do it more efficiently. Ultimately, trade is a business activity. Governments do not trade; businesses do. When a company picks up the phone and asks for advice, it wants business advice from people who do this stuff day in, day out, and it wants proper advice quickly on what to do and what not to do. That is a far more efficient way of doing that B2B piece than it is coming from Government, where you are naturally restricted. On top of that, you are constantly chopping and changing with contracts and different approaches. All that does is create more and more uncertainty, and you cannot build for the long term. We need to build for the long term. There is a big opportunity to do this much better, and I would strongly argue that that has definitely got to be the way forward, but it needs more debate from all those involved.

[The Chair]

Can I remind you again that, in both questions and answers, we must stick to the Bill and not debate the wider policy?

[Gareth Thomas]

Q Absolutely—thank you, Mr Twigg.

One of our later witnesses is a gentleman called Professor Sanchez-Graells, who gave evidence to the International Trade Committee on some of the legal issues relating to remedies for businesses that feel they have been unfairly treated in a tendering process. If I have understood his evidence correctly, he argues that the remedies available under the UK-Australia FTA are worse for businesses that have been treated unfairly than those available under deals we have done with similar countries, such as the EU and New Zealand. As a result, there might be regulatory chill—it might put businesses off bidding for Government contracts in Australia. Is that something that you worry about? If his evidence suggests that there is a serious issue, do you think the Government would need to address it quickly?

Chris Southworth: To be honest, I would defer to others to advise on that. Obviously, the trade remedies framework is very important, for all the reasons you have just set out, but I am not in a position to comment as it is not a space that we are focused on. Others are much more into that space than we are and would be better placed to advise on it.

[The Chair]

If there are no further questions, I thank the witness for his evidence.

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[The Chair]

In this session. There are a number of evidence sessions.

John Cooke: Thank you very much. I am John Cooke. I am a consultant with TheCityUK, and I co-chair an expert advisory group at TheCityUK on liberalisation of trade in services.

[Gareth Thomas]

Q Thank you, Mr Cooke, for being willing to give evidence to us, and congratulations on being one of the great survivors of the trade policy world, at least in the UK. Do you think the deals with Australia and New Zealand are as wonderful as the Government would have us believe? Could they have been improved in any way, shape or form?

[The Chair]

In respect of the Bill—we are talking about the Bill.

[Gareth Thomas]

Yes, in respect of the Bill.

John Cooke: One has to remember about the agreements with Australia and New Zealand that, as far as services are concerned—that is my particular area, and financial and professional services within that—they are agreements with trading partners that already had pretty liberal regimes, so there was only a limited amount extra that could be achieved in the agreements. All the same, they are useful agreements to have, and in particular they have provisions in them on regulatory co-operation that provide frameworks for building further points in the future into the relationship between the United Kingdom and the two countries.

[Gareth Thomas]

Q The legislation that we are debating is likely to be superseded by both the Procurement Bill, if it comes into force, and by the CPTPP. Beyond acting as a stepping stone to the CPTPP, is there any residual value to the Australia and New Zealand FTAs in themselves, or is their value purely that they are a way to prepare Britain for the CPTPP?

John Cooke: I think they have value in themselves, certainly on public procurement and Government procurement. The view we have always taken on financial and professional services is that while Government procurement is often thought of in terms of procurement of goods, such as medical supplies and so on, the UK sector in these areas is very keen that it should be absolutely explicit that Government procurement also applies to services.

We look at this globally, not just in relation to Australia and New Zealand. The example I would give is that if, say, a country has a pensions regime that is provided by the state but also has a private sector pillar for extra investment, we would want to be quite sure that that private sector pillar is open to bidding and tendering by UK financial product suppliers. Sometimes there is a tendency in that sort of thing for a Government to feel, “Well, as the pension provision is in the main a state pension that is Government controlled, any private sector pillar should also be somehow confined to the country concerned.” We are very keen to remove any such assumption and make sure there is open competition, so—[Interruption.]

[The Chair]

We have lost the witness, so I will suspend the session until—hopefully—we get Mr Cooke back.

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[The Chair]

I think you were halfway through an answer, or coming to the end of it. Do you want us to move on to the next question?

John Cooke: I do not know at what point I was cut off exactly. The point I was making was that Government procurement is commonly associated with supplies of goods, but we in services, and in financial services in particular, are keen that, where the Government are commissioning the private sector, for example, to provide a private sector pillar of pension provision, UK financial services providers should be in a position to bid for that; it should not be confined just to financial services within the country concerned, or to nationals of the country concerned. That was the point that I was making. We value the public—Government—procurement provisions for their own sake, as well as for whether they prove to be a stepping stone to CPTPP membership.

[Gareth Thomas]

Q A former Exports Minister in the Department for International Trade said that the Government were not doing enough to help exporters. Is that a view you share, or was he just upset about something else?

John Cooke: I am not familiar with that particular comment. I think it depends very much on the context of an observation like that. For us in financial and professional services, we look for particular kinds of help. On the whole, when dealing with financial businesses —with very big businesses—they might need a certain amount of door-opening help from missions abroad, which I think they get. I do not think that we have expressed any discontentment about that. The question may be much more open for smaller businesses, where the Government might be in a position to do much more by way of helping them in particular markets. The other kind of help that is of course very important for all exporters is the implementation of a trade agreement. The making of a trade agreement is not an end in itself; its implementation needs to be carried through. Where the other party might not implement it fully, that needs to be attended to actively.

[Gareth Thomas]

Q As I understand it, one of the key concerns for businesses bidding for Government contracts overseas or domestically—often when they have to invest huge amounts of money in putting a bid together—is that they have confidence that, if they think they have been treated unfairly, remedies are available to them to get the tendering process suspended or compensation for the way in which the process has played out. It is likely to be put to us—it was certainly put to the Select Committee by Professor Sanchez-Graells, an expert in Government procurement—that the UK- Australia FTA includes measures that reduce the remedies available to businesses bidding for Government contracts. Would that be a concern for any of your members, or is it something you are not familiar with?

John Cooke: It is not a point that I have been made aware of, frankly. I will gladly make inquiries and, if appropriate, submit some written evidence to the Committee, but it is not something that has been brought to my attention.

[Gareth Thomas]

Fair enough. Thank you very much, Mr Cooke.

[The Chair]

As there are no further questions from Members, I thank the witness for his evidence.

Ordered, That further consideration be now adjourned. —(Mark Jenkinson.)