Taxation (Cross-border Trade) Bill (Sixth sitting)

Graham Stuart Excerpts

Tuesday 30th January 2018 Public Bill Committees

[Nic Dakin (Scunthorpe) (Lab)]

It is a pleasure to see you in the Chair again, Mrs Main. In supporting the amendments tabled by my hon. Friend the Member for Bootle, I, too, draw on the evidence of Gareth Stace, director of UK Steel. He was compelling when he said:

“One of the aims of Brexit was to strip things away, make things more simple and have less people employed working on these things”.

If Brexit is about taking the opportunity to get some sort of bounty that makes things better, herein lies an opportunity for us to do that.

Mr Stace went on to say that

“calculating the dumping margin is a really easy process. It can be done fairly quickly. It does not need a lot of people to do it and does not need a lot of work from industry and the Government. Calculating the injury margin does. It is a bit of a black box—you do not know what is going to come out of it—whereas the dumping margin is very transparent.”––[Official Report, Taxation (Cross-border Trade) Public Bill Committee, 23 January 2018; c. 71-2, Q109-10.]

That is why the EU is going for a conditional application of the lesser duty rule, which is the right direction of travel. It makes it slicker and simpler, and still effective. There is an opportunity for the UK to do the same—or even better.

To look at comparators in terms of timeliness, speed and pace of decision making, systems in the US are put in place within 45 days—we all commend the US as a bastion of free trade, yet that is how it ensures its industry is not disadvantaged in particular ways—whereas until recently in Europe it had been after 9 months. There is an opportunity for the UK to get things slicker and faster than for the EU currently, with one such way being to move towards conditional use of the lesser duty rule, as is implicit in the amendments. I hope that the Government are listening and willing to take this opportunity.

[The Parliamentary Under-Secretary of State for International Trade (Graham Stuart)]

It is a pleasure to serve under your chairmanship, Mrs Main, and to be in this reassembled Committee, probing and holding the Government to account on this excellent framework Bill. The amendments in the group look to set the parameters around what the TRA can recommend by way of anti-dumping and anti-subsidy measures. I begin by reassuring the Committee that the UK trade remedies system will provide robust protections for UK industries where they are suffering injury because of dumped or subsidised imports, or because of unforeseen surges in imports.

Amendments 41 and 49, and their consequential amendments, would remove the requirement that provisional anti-subsidy measures recommended by the TRA must not exceed the subsidy margin. WTO rules clearly provide that anti-dumping measures cannot exceed the margin of dumping and anti-subsidy measures cannot exceed the amount of subsidy. That is a strict requirement, applying to both provisional and definitive measures, which is reflected in schedule 4. Let me clarify that our policy intention is simply to incorporate those WTO rules and not to provide that the amount of subsidy somehow offsets the dumping margin, or vice versa—I think there may have been some misunderstanding of the Bill’s phrasing.

Schedule 4 relates to both anti-dumping and anti-subsidy investigations, which are largely identical. That is why the provisions refer to both the margin of dumping and the amount of subsidy. By removing the requirements around the maximum amount of anti-subsidy measures, the amendments would mean that the Bill would not be compatible with WTO rules. I am sure that was not the intention.

Amendments 43 and 51 would restrict the application of the lesser duty rule in cases of raw material distortions and when the exporting country does not respect adequate levels of social and environmental standards. The lesser duty rule achieves our objective of protecting UK industry by ensuring that it can operate on a fair playing field without causing unnecessary injury to UK consumers and downstream industry.

The evidence shows that trade remedy measures are effective and have a lasting impact even with a lesser duty rule in place. Anti-dumping duties on a range of important steel products determined under the lesser duty rule have been very effective in curtailing dumped imports from China. For example, in the year to August 2017, UK imports from China of rebar hot-rolled and cold-rolled flat products were down by more than 90% compared with the year leading up to their respective anti-dumping investigations. There is, therefore, no evidence of a need to remove the lesser duty rule in the case of raw material distortions. Measures are already clearly effective in addressing the injury caused by those practices.

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[Peter Dowd]

I completely take those points in the spirit of co-operation and conciliation that we are trying to get in the Bill. This is not about one side attacking industry and the other side protecting consumers. It is about the balance. That is the question we have to ask ourselves today: does the Bill give the balance we need? With our amendments, we are trying to say that we believe it will give the balance between producers and consumers. The Minister talked about it being an untested concept, but this whole Bill is an untested concept. This whole experience and journey we are having in relation to Brexit, which we genuinely have to try to make the best of, is the father of untested concepts. This untested concept is just one of the many little ones compared with the totality. We are in a complicated, three-dimensional landscape. That is the nature of the beast and of where we are, and we have to try to make the best of it.

Our amendments are genuinely an attempt to listen to what the witnesses were saying to us. I know we can cherry-pick evidence here and there, but the tone that we got from the witnesses, from those who have subsequently put other evidence in and from our own backgrounds—our knowledge and context of these issues, and the discussions that we have all had outside this room—leads us to believe that the Government, in the round, are perhaps going a step too far. Our amendments are an attempt to bring the balance back. There does not appear to be any significant evidence from what I can see that the producer is in any significant way disadvantaged, because we were clearly told that it was a convoluted and complicated market. I understand where the Minister is coming from, but we have a different perspective.

My final point is that in their evidence many of the witnesses were concerned about the Government not listening to them. They were, in a sense, coming to Parliament as some sort of intermediary, to get Parliament to try to act on their behalf and to be a voice with the Government. That is why they were saying to us that they needed the parliamentary protections. That has been part of our push.

The amendments balance the needs of both producer and industry, and on that basis, while I acknowledge everything the Minister said, I do not think we are able to withdraw them. We have to make that point clearly and unambiguously.

[Graham Stuart]

We have not heard any evidence of the lesser duty rule not working in practice. I have been able to rebut any suggestions. The hon. Member for Scunthorpe said that the US imposes measures in 45 days. As everyone on this Committee who is not as busy as he is will know from reading their papers, that is simply not true. The WTO rules prevent the imposition of provisional anti-dumping and anti-subsidy measures before day 60 of the investigation. The US makes a preliminary injury determination in 45 days, but that does not mean the imposition of measures. That was completely incorrect, and I am sure the hon. Gentleman will want to correct the record. The average time that the US takes to impose provisional measures is just under five months, and in most steel cases it takes around six months.

[Nic Dakin]

The Minister is absolutely right that, after 45 days, an interim decision is made. That essentially gives confidence to the industry. The amendments are an opportunity for the Government to take measures quicker. At the height of the steel crisis, the lesser duty rule did not help. It took a long time for things to come in. The problem is time and space. The other thing is that the UK will be one of very few countries in the world that apply the lesser duty rule without exception if it goes ahead in this way—out of step and out of place. This is an opportunity to be in the right place.

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[Graham Stuart]

The hon. Gentleman accepts that measures are not imposed in 45 days. He presented no evidence—I believe there is none—to suggest that the lesser duty rule in any way slows things down, so the slowness of the process in the EU responding to the steel crisis is an entirely separate element. I know he is scrupulously fair and always seeks to be, so he would recognise there is no linkage, although he may have wished there to be one to bolster an argument that has otherwise turned out to have no basis whatsoever. On that basis, I ask for the amendments to be withdrawn.

Question put, That the amendment be made.

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[Jonathan Reynolds]

It is a pleasure to serve under your chairmanship, Mrs Main. I will speak to amendments 45, 47, 48, 53 and 54, relating to time periods. I draw the Committee’s attention in particular to amendment 45, which prescribes a period within which the Secretary of State must decide whether to accept or reject the TRA recommendations—in this case the recommended period is two weeks—and amendment 47, which corrects the presumption that the specified period will be five years. That relates to the amount of time for which special measures regarding TRA recommendations will be enforced.

The general principle of the amendments we seek today is to provide greater clarity and certainty to UK industry about the terms of engagement with the new TRA. As I believe we have placed on the record, this is a framework Bill—it is a piece of legislation where many key details for the trading regime in future are unidentified. Therefore, we remain somewhat vague about what the modus operandi of the TRA will be. Too much is being left to the whims of that authority and the Secretary of State. We believe it is important to set out guidelines at this stage that give greater clarity to the role and scope of TRA activity.

One way to achieve certainty is to bring an easily-observed, enforceable time limit on the activities both of the TRA and the Secretary of State and their relationship with each other. These amendments have been brought forward in consultation with the Manufacturing Trade Remedies Alliance, which has significant insight into what UK industry needs from future trade defence policy.

Amendments 45 and 54 would mandate the Secretary of State to make a decision on TRA recommendations within two weeks. As the MTRA highlights, although there is provision in the Bill for a deadline to be brought on the TRA through secondary legislation at various points in an investigation, there are none specified for the Secretary of State. In theory, that would allow decisions to be delayed indefinitely. Let us imagine a situation in which the UK is led by such an indecisive Government that members of the Cabinet could not agree with each other on our future trading relationships—that would be a problem. The scenario is hard to envisage, but we should surely safeguard against it.

In today’s globalised economy, markets and events can move much faster than we would ever have anticipated. In a short time, key UK markets could suffer serious injury if appropriate remedial action were not taken quickly. In fairness to Ministers, we have heard that speed of decision-making is something they are looking to achieve. This is surely the rationale behind the Government’s decision to stipulate deadlines on TRA investigations, to prevent time lags occurring which could bring that about. In the Opposition’s view, it seems ineffective to include these requirements but not mirror them for the Secretary of State in accepting the recommendations of TRA investigations. That raises a concern that there could be an option simply to kick the can down the road when a politically difficult decision presents itself. We believe that the MTRA recommendation of a two-week deadline in which the Secretary of State must reach a decision is reasonable and would protect against such abuses.

In a similar vein, the Bill specifies a maximum five-year period but no minimum with regard to the time considered necessary for duties to be imposed, where that forms part of the TRA’s recommendations. It merely states that duties should be imposed for such a period as the TRA considers necessary. However, as the MTRA points out, it is considered normal practice globally for anti-dumping and anti-subsidy measures to last for a minimum of five years, including within key partner markets in the EU and the US. The alliance suggests, therefore, that the default duration of duties should be five years, starting from the date of definitive measures. The Opposition agree.

It is vital to add certainty where we can for UK industry and that we align with our global trading partners to gain consensus and be as consistent as possible on the universally accepted World Trade Organisation principles. I therefore call on the Committee to support the amendments.

[Graham Stuart]

Three groups of amendments need a response. I will start with amendments 45 and 54, which seek to impose a two-week time limit on the Secretary of State’s decision to accept or reject the TRA recommendation. I will then turn to amendment 47, which seeks to create a presumption of five years as the normal, rather than the maximum, duration of definitive measures. Finally, I will address amendments 48 and 53, which seek to ensure that the duration of definitive measures is not affected by the length of any provisional measures that might have been applied against the same imports.

On amendments 45 and 54, on receipt of the TRA recommendation, it is the responsibility of the Secretary of State to respond in a timely manner, while ensuring that the public interest aspect of their role is given due weight. We fully recognise that a swift response is crucial to UK industry, as the hon. Gentleman said, so that the injury being caused by unfair trade practices can be halted. However, in some cases there will inevitably be difficult matters that the Secretary of State will need to reflect on. Although we expect that such matters will be rare, it is important that he has full opportunity thoroughly to consider the issues in making his decision. That might lengthen the process, but it is important to do the job well rather than quickly. To place an arbitrary two–week time limit on the Secretary of State is, therefore, not appropriate. Even though that duration might be sufficient in most cases, the legislation must provide flexibility for cases in which complex considerations must be made in the public interest.

As the hon. Gentleman is aware, once the investigation has been concluded and measures have been proposed by the TRA, the pressure on the Secretary of State quickly to come forward with the adoption of the measures to protect British industry will be great. I perhaps lack the hon. Gentleman’s imagination, but I find it hard to imagine a situation in which the pressure on the Secretary of State to get on with it would not be much greater than a pressure to delay and put it into the long grass, as the hon. Gentleman said. I think we can be confident that any Secretary of State under any Government would wish to make the decision as quickly as reasonably possible.

For those reasons, I do not agree with an arbitrary two-week limit. I understand why the hon. Gentleman has tabled the amendment and I hope it is a probing one. I understand what lies behind it, but I hope I have reassured him.

On amendment 47, it is important to note that the WTO agreements set out that measures may remain in force for up to five years. They do not provide that five years is the default. In fact, they specifically set out that measures should remain in force only for as long as, and to the extent, necessary to counteract the dumping or subsidisation that is causing injury. The TRA analysis may suggest that a period shorter than five years will be sufficient to counteract injury, and in such cases the TRA should set an appropriate duration accordingly.

On request, the TRA will initiate an expiry review before the termination of any measures, provided that UK industry can demonstrate that injury would continue or recur if the measures were to expire. If the review finds that continued application of measures is required to maintain sufficient protection for UK industry, the measures will be continued. I assure the hon. Gentleman that industry is adequately protected without the need for the amendment and I ask him to consider withdrawing it.

Finally, on amendments 48 and 53, I understand the hon. Gentleman’s concerns, but I have to reassure him that that which he fears is not the intention of the provisions. The WTO agreements allow in certain circumstances for trade remedies to be applied from a date prior to the date of the application of definitive measures. The purpose of the provisions is to allow us to reflect that in secondary legislation, not to shorten the duration of definitive measures. We are not seeking to shorten the duration of definitive measures, but are seeking to allow trade remedies to be applied from a date prior to the date of those measures.

The unintended consequence of the Opposition amendments would be to prevent the TRA from collecting duties for a period before the date of the section 13 notice, even though this is permissible under the WTO agreements in limited circumstances. I entirely understand why the hon. Gentleman tabled the amendment and what he was seeking to probe. I hope my explanation has been sufficient to make him see that that which he desires will not be delivered by the amendments.

We believe that this is a necessary provision. We have been clear that we want to incorporate all of the protections permitted under WTO rules into the UK’s trade remedies framework. Removing the ability to do that could be detrimental to the protections available to UK industry. It is on that basis that I ask him to consider withdrawing the amendment.

[Kirsty Blackman (Aberdeen North) (SNP)]

I express the Scottish National party’s support for the Opposition amendments. It is sensible that we are asking the Secretary of State to make a decision within a relatively short time period because, as has been stated, we do not want that to be dragged out for any significant length of time. It is reasonable that, after a significant investigation has taken place—and the TRA’s investigations will be significant—the Minister will quickly review the evidence presented and make a decision in the shortest possible time.

On amendment 47 and the five-year period, I have the Department for International Trade call for evidence on the current EU trade remedy measures. I can see possibly one that is in place for less than five years. In fact, many have been place for over a decade because they have been renewed. It is very unusual in that document, which lists all the trade remedy measures currently in place, for any of them to have a review date of less than five years. It is completely reasonable that the Opposition are asking for the starting period default to be five years, and for the TRA to decide on a lesser period in compelling circumstances. Given the number of these measures that have been extended and how few of them have fallen at the five year period, I suggest that five years is likely to be a reasonably short period for trade remedies to be in place, and that it is sensible for them to extended as a result.

We are talking about the trade remedies body doing substantive investigations and coming up with a huge amount of evidence. Asking it to do so on more than a five-yearly basis would probably be adding to their workload unnecessarily. The Opposition’s suggestion is incredibly sensible in that regard. The presumption should be five years, and the TRA should make decisions for it to be less if it believes that that would be appropriate.

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[Peter Dowd]

The amendment is about the public interest and I think the public have a particular interest here. The amendments to schedules 4 and 5 would define the public interest as referring strictly to the national security of the United Kingdom and its citizens. As drafted, the measures in schedules 4 and 5 would create a public interest test that would allow the Secretary of State to veto any recommendations on the adoption of trade remedies from the Trade Remedies Authority on public interest grounds.

To be clear, the WTO does not require the UK to adopt a public interest test. In fact this would put the UK in an extreme minority, as only other multi-national members of the WTO, such as the EU, and Brazil currently operate a public interest test. If we consider countries operating both a public interest test and a mandatory lesser duty rule, that puts the UK in an even smaller and pretty selective group. All the countries that currently have a form of public interest also clearly define what the public interest actually is. We do not appear to do that.

Several witnesses who gave evidence last Tuesday pointed out that the establishment of a public interest test as outlined in schedules 4 and 5 is overkill at best, and overreach at worst. The representatives of the UK ceramics, steel and chemicals industries were divided on the number of tests the Government have set out in schedules 4 and 5 and which have to be met before trade remedies can be issued. The director of UK Steel counted as many as six in the current provisions, with five economic tests and one public interest test. That is why we want to narrow the focus, as the Government do not appear to have done so, although they might say that they will.

Although there is clearly a case for assessing the economic impact of trade remedies on key sectors of the economy and certain exports, the establishment of an undefined public interest test is more worrying. Currently, schedules 4 and 5 would give the Secretary of State for Trade carte blanche to define what is and is not in the public interest. The lack of a definition means that the public interest is largely subjective. It puts the Secretary of State in a similar position to his opposite number in Australia, where the Trade Minister, according to a report from the Department for International Trade, has “unfettered discretion” to choose not to impose measures. Using those vague new powers, could not the Secretary of State argue that flooding UK markets with cheap chlorinated chicken from the US is in the public interest, or that cheap aluminium wheels from China would lower the cost of cars and therefore also be in the public interest?

It is not only the Opposition who are concerned about the Government’s lack of clarity about what might be considered to be in the public interest. In her evidence to the Committee, Dr Cohen, chief executive of the British Ceramic Confederation, expressed her alarm at the prospect that the test could be used to justify a future free trade agreement with China based on levels of potential inward investment. It appears that an undefined test could lead quickly to a scenario in which the public interest is not only conflated with the interests of consumers, but wholly dependent on the personal perceptions and considerations of whoever holds office in the Department for International Trade. Our amendment therefore tries to define public interest more tightly.

The EU’s anti-dumping regulation defines the public interest as being

“based on an appreciation of all the various interests taken as a whole, including the interests of the domestic industry and users and consumers”.

We think that definition is too broad and open to interpretation. Amendment 46 and the consequential amendments would instead require the Government to adopt a definition of public interest for the purposes of schedules 4 and 5 that relates specifically to national security. Under such a definition, the Secretary of State’s power to veto TRA trade remedy recommendations using a public interest test would be constrained to situations involving harm to national security.

The Opposition consider that in an extreme case, such as the United Kingdom going to war, national security considerations would supersede and far outweigh the arguments for trade remedies. Any discussion of national security would have to involve other Cabinet members, including the Defence Secretary, the Home Secretary, the Foreign Secretary and the Prime Minister. A more consensual approach would have to be reached, either by the Cabinet or by a Cabinet Sub-Committee, to establish whether the suggested remedies would harm national security interests.

Closely restricting the public interest test to issues of national security arguably leaves a broad definition, which some argue the Government could seize on and push to the very limit—for example, the Secretary of State could reject trade remedies on Chinese steel under the guise of national security by claiming that cheap steel from China is needed for energy security and the next generation of nuclear power plants—but I believe that the tight definition outlined in our amendments would limit that ability. Furthermore, I suspect that few Cabinet colleagues would support such a crude interpretation of national security, as it could interfere with their briefs and would only raise further questions.

An undefined public interest test would give the Secretary of State vast powers that could easily lead to abuse. Our amendments therefore seek to define “public interest” sensibly to constrain those powers, to open a wider discussion between the Secretary of State and other Cabinet members, and to limit use of the public interest veto to times of national emergency. However, we are not just pushing on regardless. If the Minister wishes to elaborate on what “public interest” could mean—the extent of it, who decides whether to invoke it, the process and steps for arriving at such a decision, and the checks and balances in place—we will be more than happy to listen.

[Graham Stuart]

As the hon. Member for Bootle has explained so fluently, his amendments would make it clear that the Secretary of State could use public interest grounds to reject the TRA’s recommendations for the imposition of duties only in limited circumstances, namely those in which national security was deemed to be at risk.

It may help hon. Members if I briefly run through the interaction of checks and balances in the trade remedies system. As we have discussed, the TRA is required to conduct an economic interest test when deciding whether to recommend the imposition of measures. There is a presumption in favour of the imposition of duties in respect of anti-dumping and anti-subsidy measures. However, it is not for the TRA to take into account wider public interest considerations such as matters of national security, as the hon. Gentleman mentioned, nor to determine whether the imposition of duties would run counter to wider Government policy.

When the Secretary of State receives the TRA’s recommendations, he will satisfy himself that the TRA has properly weighted the individual elements of the EIT and that imposing duties is in the public interest. Only where there is a strong argument against following the TRA’s recommendations will the Secretary of State reject putting measures in place. In the exceptional case where he does, he will be required to explain his decision to Parliament.

The hon. Gentleman mentioned Gareth Stace of UK Steel and his evidence. It is worth putting on the record that when discussing a public interest test, he said

“you need a public interest test at the end, because there may be those extraordinary circumstances where it is or is not in the public interest to apply or not apply tariffs.”––[Official Report, Taxation (Cross-border Trade) Public Bill Committee, 23 January 2018; c. 73, Q111.]

So in fact, UK Steel gave evidence supporting public interest tests.

Other Governments, including those of the United States, Canada, Australia and New Zealand, and the EU take public interest into account when deciding whether to impose measures, so we are not acting out of step with other countries. I dispute what the hon. Gentleman said.

[Peter Dowd]

Does the Minister at least acknowledge that, notwithstanding what he has said, those countries have a more clearly defined test? Whether he agrees with it or not, their public interest test is a bit tighter and clearer. Ours appears to be rather loose, to say the least.

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[Graham Stuart]

It is not really a test. It is a final common-sense check that the measures will not run against our national security interests or wider Government policy, as the hon. Gentleman set out—all the pressures that we discussed in a previous debate. The pressure will be on the Secretary of State. Industry will call for the inquiry and participate in the TRA’s investigation, then the TRA will come out and say that the economic interest test and the market share threshold have been passed and that it has decided that we need to impose these measures. After that, the Secretary of State will give it a sense check, and in extraordinary circumstances might say no.

In his recent article for UK Trade Forum, George Peretz QC said that such decisions are

“best made by politicians who can, and will have to, defend those decisions in the political arena.”

It is right that there is a role for Ministers to take those public interest considerations into account and intervene if imposing measures is not in the UK’s wider interest. It is also right that they are accountable to Parliament if they do so. The system that we have proposed, whereby an independent body carries out the investigation and makes recommendations, but Ministers ultimately have responsibility for acting in the country’s best interest, is the right one. I hope hon. Members agree and that the hon. Gentleman will agree to withdraw the amendment.

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[Anneliese Dodds]

I am grateful to the hon. Lady for the SNP’s support. The amendments focus on trying to provide the certainty that the Bill lacks but which is present in other trade remedies systems. Will the Minister indicate whether the Government have considered inserting such a provision in the Bill, in line with international practice? If not, will he say why not, given that no other country seems routinely to allow a review before a year has passed?

[Graham Stuart]

Amendment 55 seeks to provide a timeline in relation to reviews of continuing application of an anti-dumping amount or countervailing duty amount. Amendment 56 asks that definitive anti-dumping and countervailing duties will continue to be applied during the investigation process of any review.

On amendment 55, let me start by explaining that there are a number of different types of reviews of definitive anti-dumping and countervailing duties, which apply in different circumstances—for example, to reflect the appearance of a new exporter, to address evidence that measures are being circumvented, or to review measures that are due to expire, to determine whether it is necessary to extend them. Reviews ensure that measures can be changed where and when appropriate. I recognise the desire for clarity regarding timelines in the review’s framework, but as demonstrated by the WTO agreements and EU rules, there is no uniform timeline that is appropriate for all review types.

The amendment is unnecessary, as it appears to apply to all review types, irrespective of the lack of uniform timelines currently applicable under the EU system. For example, it would not be beneficial to UK industry if it is required to wait 12 months before a circumvention review may be carried out. On amendment 56, paragraph 21(4)(b) already allows us to provide in secondary legislation that measures may be extended beyond five years where a review is being undertaken. However, an extension is not appropriate in every type of review—for example, the WTO specifically sets out that duties may not be applied during a new exporter review. Therefore it is more appropriate for this to be provided for in secondary legislation. The development of the review’s framework is still ongoing. It is intended that there will be targeted stakeholder engagement across the UK industry to discuss this issue in more detail, prior to setting out the details of the various review processes in secondary legislation. It is a complicated area, as my explanation of the unintended impact of these amendments shows. I therefore ask the hon. Member to withdraw these amendments.

[Anneliese Dodds]

I am grateful to the Minister for that explanation. My concern is that the fact that that period is not set within the Bill could lead to a situation where there is no certainty for producers about the length of time during which a remedy would remain in place. I take on board the Minister’s comments. I hoped that they would reduce some of those concerns at least, and I hope that he will accept the concerns we have been suggesting, given that, for certain types of review, other regimes have at least a year’s threshold before decisions can be reconsidered. I am sure the Minister understands that, without having such a set period, we have these concerns. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Anneliese Dodds]

I beg to move amendment 57, in schedule 4, page 74, line 1, leave out “request” and insert “consider a request for”.

This amendment provides for the TRA to seek to apply price undertakings in response to a request to do so.

This is a tidying-up amendment. It provides for the TRA to seek to apply price undertakings in response to a request to do so. Our amendment seeks to clarify the precise role of the TRA within the process of application of undertakings. I should mention that this process can be complex and some stakeholders have understandably drawn attention to the problems of ensuring compliance with price undertakings. However, that is not exactly the focus of the amendment. Rather, we are concerned that the Bill seems to suggest that the TRA would be proffering different alternative undertakings.

International practice indicates that authorities arbitrate the different options for undertakings that are presented not by the authorities themselves, but by exporters. That is in line with WTO practice. Article VI of the general agreement on tariffs and trade 1994 and the agreement on the implementation of article VI—the “anti-dumping agreement” that we have referred to in Committee—explicitly authorise the imposition of anti-dumping measures by WTO members, as we know. Article 8 of the anti-dumping agreement includes the set of rules governing undertakings. It refers to the offering and acceptance of undertakings from any exporter—not by authorities themselves—to revise their prices or cease exports at dumped prices. The action is from the exporter, not from the authority.

However, the language in schedule 4 gives the active role to the TRA, referring to regulations giving the authority the ability to request an undertaking. From what I can see, this contradicts the language earlier in part 5 of the schedule that rightly refers to overseas exporters and relevant foreign Governments rather than the TRA offering undertakings. Our amendment would offer a helpful clarification about the role of the TRA, and help to prevent confusion. I hope the Minister will take this in the constructive way in which it is intended.

[Graham Stuart]

The amendment would mean that the use of undertakings would rely solely on an undertaking being offered by an exporter or a foreign authority, and would deny the TRA the ability to prompt the offering of an undertaking, as the hon. Lady set out in her speech. Our aim is to provide the TRA with the full suite of tools available under the WTO agreements. We must ensure that the TRA is equipped to deal with every possible future scenario.

The Government understand industry’s concern that it is more common practice—the hon. Lady rightly laid this out and is right to probe—for a foreign authority or an exporter to offer an undertaking than to be prompted into giving one by request. None the less, this power to request undertakings is not unusual, as it is set out in a WTO agreement, and adopted in EU regulations. This power is required to cater for certain situations that may arise. For example, the TRA may need to request an undertaking following a review where the level of undertaking needs to be varied, or where the UK is committed to seeking constructive remedies with a trading partner as part of a trade agreement. Therefore, removing this power would serve to undermine the TRA and the discharge of its functions, which I know is the exact opposite of what the hon. Lady would wish.

We would expect that the TRA will exercise this power only where necessary, which we envisage to be rarely. The secondary legislation under this power will outline these circumstances, and we will engage with stakeholders as we develop proposals going further. I hope that, by doing so, we will be able to answer any remaining concerns the hon. Lady has.

It is also worth stating that, as per the WTO agreements, following a request from the TRA, there will be no obligation for an exporter or a foreign authority to enter into such an undertaking that will further limit the power. Once a request has been made, and if an undertaking is subsequently offered, the TRA will still need to conduct an assessment of the undertaking and its terms and conditions to decide whether accepting it would be appropriate and whether it would be in the UK’s economic interest. The fact that the TRA requested the undertaking in the first place will not predetermine this assessment in any way. For these reasons, I ask the hon. Lady to consider withdrawing the amendment.

[Anneliese Dodds]

I beg to ask leave that the amendment be withdrawn.

Amendment, by leave, withdrawn.

Question proposed, That the schedule be the Fourth schedule to the Bill.

[The Chair]

With this we will consider:

New clause 15—Review of transitional measures—

“(1) Within three months of the passing of this Act, the Secretary of State shall undertake a review of the advantages and disadvantages of making provision under section 51(1) to secure that transitional measures are applicable on the same day that the tariff provided for in section 8 first has effect.

(2) For the purposes of this section, “transitional measures” are those anti-dumping duties, or anti-subsidy duties, or undertakings, as the case may be, that were applicable in the European Union on the day preceding the day referred to in sub-paragraph (1) to which subsection (3) does not apply.

(3) This subsection applies to any goods in respect of which the TRA has made a recommendation, prior to the date referred to in subsection (2), that injury to a UK industry in the goods would not be likely to occur if a transitional measure were not applied.

(4) The Secretary of State shall, as soon as reasonably practicable after the completion of the review under this section, lay a report of the review before the House of Commons.”

This new clause provides for a review of the case for the continued effect of EU trade remedies after introduction of the new standard import tariff and pending full implementation of the new arrangements under Schedule 4.

[Graham Stuart]

We have had a useful and interesting discussion about many of the elements in schedule 4. As I have said, the trade remedy system that we operate when we leave the EU will be fully compliant with our WTO obligations. The WTO agreements on anti-dumping, subsidy and countervailing measures set out the requirements that all members must meet to be able to impose either anti-dumping or countervailing measures. This schedule enshrines the key principles of both agreements into UK law. Further detail will be set out in secondary legislation.

I have already explained that this will be technical in nature. Indeed, amendment 25 is a good indication of the level, and amount of detail, that will need to be included, and it would not be appropriate for this to be in the Bill.

Schedule 4, therefore, provides power to the Secretary of State to set out in secondary legislation detailed provisions regarding how to establish dumping, subsidisation, injury and how to calculate those. The schedule includes technical provisions regarding the thresholds that must be met before the TRA may initiate an investigation, including the WTO criteria of what constitutes negligible and minimal. The Secretary of State can also set out detailed provisions about the conduct of investigations, including the information that is required, and of oral hearings; about the different types of reviews the TRA may undertake and their conduct and potential outcomes; about undertakings; about the suspension of measures where market conditions have temporarily changed; and about when and how particular measures may be reviewed and appealed. They are technical, as I said.

It is necessary to set all that out in secondary legislation so that the system is flexible enough to adapt should WTO case law or international best practice move on. I reassure hon. Members that the system will be fully WTO compliant. We will continue to engage with stakeholders as it is developed.

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[Nic Dakin]

Am I right that the Minister is essentially saying that current trade remedies will stay in place unless there is a very strong reason for them not to?

[Graham Stuart]

The hon. Gentleman is precisely right. As ever, he represents the steel interests in his constituency with assiduity, hard work and focus. He is right to say that we must ensure that measures in place to protect British industry continue smoothly after we depart the EU. That is exactly what the Government intend.

The Trade Remedies Authority will have the important role of reviewing the maintained measures so that they reflect the UK domestic market. The precise timing of reviews being carried out will depend on the terms of any agreement with the European Commission about an implementation period and on the outcome of the call for evidence, which will confirm the number and type of measures that will be maintained.

If the aim is to look again at the general policy to transition the existing EU measures that matter to the UK, that does not need to be revisited. If we take no action to maintain those measures when we leave the EU, they will no longer apply to products arriving into the UK with immediate effect. That would leave important UK industries, including the steel, ceramics and chemicals sectors, vulnerable to dumped and subsidised imports. A review of the policy approach would create uncertainty for UK industry as to whether measures will be maintained. Stakeholders have been clear that it is vital to transition existing measures to maintain protection against injury from dumping.

To return to schedule 4, having an effective trade remedies system in place is crucial to protect our industries from unfair trading practices that cause injury. It is vital to the UK’s interests that the system is transparent, balanced, impartial, efficient and works for the UK as a whole. The system proposed by this schedule and the secondary legislation that will be made under it achieves that, and is the best way to protect UK industries when we are outside the EU. I will respond to new clause 15 when I have heard the arguments made for it by hon. Members.

[Peter Dowd]

I started to listen to the Minister out of a morbid sense of curiosity, but he became far more plausible as time went on. Do I smell a rat? No, I do not at the moment, but there is some concern. The new clause provides for a review of the case for the continued effect on the UK of EU trade remedies after the introduction of the new standard import tariff, and pending full implementation of the new arrangements under schedule 4. It seeks a review of the case for continued use of EU trade remedies between the UK’s exit from the EU and its negotiation of a new relationship.

I am conscious of the statements made yesterday by Michel Barnier. I do not want to poke into that issue—I think hon. Members will be grateful for that olive branch—but there are wider concerns about which EU regulations and rules the UK will follow in the transition period. Will we continue to be a member of the EU in all but name, or will Ministers seek to pick and choose? I will have to look at Hansard, but I got the impression from the reply given to my hon. Friend the Member for Scunthorpe that, unless there are egregious breaches, we will remain for all intents and purposes virtually as we are, which is quite helpful.

Naturally, the outstanding questions about transitional measures are causing great confusion and concern among UK manufacturers currently protected by EU trade remedies. I take some comfort from the Minister’s reassurances, but in evidence to the Committee last week, UK Steel, the British Ceramic Confederation and the Chemical Industries Association were all less than convinced about the Government’s intentions. They all made the case that the trade remedies outlined in schedules 4 and 5 are not only weaker than those currently in place in the EU, but in some instances worse than those used by other WTO countries. It will be important to tease that out a little more in due course.

New clause 15 would require the Government to undertake a review of the advantages and disadvantages of the new trade remedies outlined in schedules 4 and 5. The reality is that such a review may relate to issues of policy or of practice. I am quite flexible about that, as I am sure the Government are—let us have a look at both, if need be, on a case-by-case basis.

Outlining the potential benefits to UK manufacturers of continuing to use EU trade remedies throughout the transition is also crucial. The new clause should not be too controversial, because if the new trade remedies are as robust and thorough as the Minister suggests, a review will show that. However, if the review showed the new trade remedies to be inferior to the current EU measures, that would not be good news. It would clearly show that the Government were content with laxer trade remedies and were not on the side of UK manufacturers, which are some of the largest employers in the country.

I have a number of questions for the Minister about transitional measures. Can he offer assurances to UK manufacturers that the Government will honour the trade remedies currently in place for the UK? He appears to have indicated that—I think that is what he said—but I do not want to put words in his mouth, so I would like to tease that out a little more. Will the Government consider extending the current trade remedies where necessary?

Does the Minister accept that the trade remedies framework outlined in the Bill may not be up and running by the time Britain leaves the European Union? How confident is he that UK manufacturing will be sufficiently protected from state-sponsored dumping throughout the transition period? Have the Government set a date for members of the Trade Remedies Authority to be selected and a date for the TRA to be fully functional? I think the Bill implies that UK trade remedies will apply during the transition period, but how does that fit with the tone of the statement made by Mr Barnier?

It is clear that the Government have huge questions to answer about the effectiveness of the trade remedies in the Bill, and about how they will work throughout the transition period. The devil is in the detail, so I hope that the Government have listened carefully and will try to answer our concerns and those of many people out there.

Question put and agreed to.

Schedule 4 accordingly agreed to.

Schedule 5

Increase in imports causing serious injury to UK producers

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[Jonathan Reynolds]

Amendments 65 to 69 and amendments 72 and 73 have been grouped together as they all refer to the removal of the preliminary requirement for adjustment plans. It states in the Bill that the Trade Remedies Authority may only make a recommendation if it is satisfied that there is an adjustment plan in place setting out how the UK producers of the relevant goods intend to adjust to the increased importation of goods affecting their industry. In addition, it stipulates that the TRA may only initiate a safeguarding investigation in relation to goods where the application for it is accompanied by a preliminary adjustment plan. As is explained in the Bill’s explanatory notes, this is to ensure that producers have a plan to improve their competitiveness alongside any measures which may be imposed, so that measures are not only a temporary solution.

The amendments tabled by the Opposition would remove the need for such adjustment requirements. The reasons behind this are numerous. It seems counter-intuitive to make it incumbent on industries to draw up their own adjustment plans. Surely if an application is being made to the TRA then this is already a measure of last resort for an industry. It may also provide an easy exit for the TRA to avoid opening an investigation if it is perhaps resource-constrained, by pointing instead to the measures that the producer has drawn up as an alternative to remedies being imposed. Equally, given that time is of the essence—that seems to be a point of agreement between both sides of the House—mandating producers to include adjustment plans before a recommendation can be made risks adding a delay to a process that is already time-sensitive.

Kathleen Walker-Shaw of the GMB, who gave evidence to the Committee on 23 January, said that she was

“extremely alarmed by how weak the remedies were in terms of anti-dumping cases.”

She pointed out specifically that they

“are very data, document and resource-heavy cases to bring forward.”

It therefore makes little sense for us to add to that burden by putting another barrier in place for UK industry to jump over right at the outset by drafting an adjustment plan.

This is not simply the view of the Opposition. Representatives of industry have also argued that these requirements are likely to be problematic. The Manufacturing Trade Remedies Alliance has explained that there is absolutely no requirement in the WTO agreement for an adjustment plan at any of these early stages, either prior to an investigation being opened or when measures are being considered for extension. As the MTRA highlights, the only stipulation from the WTO is that there must be evidence of the industry adjusting if the relief is to be extended beyond four years, and they point out that the EU follows the same approach.

The Manufacturing Trade Remedies Alliance also believes that the requirements as laid out in the Bill are disproportionate, and conflict with the provision allowing safeguarding measures to be entered into in the case of a threat of serious injury. It also highlights the risk that these measures could reduce the Government’s options for tackling aggressive trade protectionism by foreign countries. It notes that the EU has in the past introduced safeguard measures to temporarily protect the steel industry from the side effects of WTO-incompatible tariffs imposed by the US pending resolution of the dispute.

It is surprising that—for a Bill which is so light on detail—this is the one area in which the Government have decided to provide some certainty that flies in the face of expert advice to the contrary. Given the historical context and the anxieties of UK industry, these concerns are understandable. All members of the Committee will be familiar with the implications of what will happen if we do not get this right, as was illustrated catastrophically by the impact of cheap Chinese steel imports.

It is important that the Government give confidence to the UK industry at this stage that they are not anti-protection in principle. This amendment would demonstrate that the Trade Remedies Authority is supportive of this notion, and would streamline the process towards remedies where they are necessary. It would not preclude the development of an adjustment plan on a longer term basis by the industry or producer in question, but would simply prevent a more restrictive process being in place that is out of step with the one being followed by our global partners.

I conclude by returning to Kathleen Walker-Shaw’s testimony of 23 January on those anti-dumping rules. She said,

“I just feel that the provisions in the Bill do not fulfil the promise we were given that British jobs, British industry and the British economy would thrive post-Brexit.”—[Official Report, 23 January 2018; Vol. 635, c. 36, Q43.]

This Committee is now in its third day of investigating ways to try and do this, and can get us closer to that outcome.

[Graham Stuart]

The hon. Gentleman keeps referring to and giving evidence of anti-dumping. These amendments affect adjustment plans that apply to safeguards—so not anti-dumping.

[Jonathan Reynolds]

I said in my introduction that this is about the hoops that have to be jumped through before the Trade Remedies Authority can take action. As I was just coming to my conclusion, I now appeal to the Minister for greater certainty for industry and greater authority so that they can plan for going forward, by adding more clarity at this stage and not introducing things that are not replicated in our closest trading partners.

[Graham Stuart]

The amendment would provide that in safeguard investigations UK complainant producers are not required to provide adjustment plans outlining the steps they intend to take to adjust to increased imports in their market. That would be out of step with our objective to create a balanced and proportionate trade remedies system for the UK. It is noticeable that the only detail given in the hon. Gentleman’s presentation was not do with safeguards, but with anti-dumping. It was not clear from his response whether that was due to confusion or because there simply was not enough information to back up what he was saying about safeguards.

There are many benefits to requiring adjustment plans and the need to promote adjustment is implicit in the WTO agreement. Adjustment plans serve to reinforce the rationale for applying safeguard measures and ensure that measures are used fairly. Unlike anti-dumping and countervailing measures, safeguards relate to perfectly fair trade and apply globally. Therefore it is especially important that those measures balance the interests of producers and downstream consumer industries. Having listened to the speech just given, one would be forgiven for thinking that those issues were not true.

Having a plan for adjustment helps to ensure that measures protect producers from injury, while giving them time to adjust to increased imports. It provides precisely the certainty which, in his peroration, the hon. Gentleman called for. However, though we have put that on the face of the Bill, because of the nature of safeguards —which have got nothing to do with dumping—we have a peroration that asks why we do not provide certainty. It is exactly the certainty that we need to provide. We have spelt it out; we have taken the principle implicit in WTO agreements and put it in the Bill, so that we can improve on existing operations—stick conceptually to the existing rules but do so in a better way, which gives exactly the certainty that the hon. Gentleman talked about wanting to provide.

As so often in our debates in this Committee—which has been a stimulating and fantastic experience so far—amendments tabled by the Opposition have exactly the opposite effect to the ones that they claim. They say they want to do one thing, but when one bothers to read their amendment, look at the Bill and put the two together, one sees that the effect is the exact opposite. It is fascinating to see how, in almost all cases, the Scottish National party supports the Opposition, even when it is clear that the amendments are technically flawed—they do not do what the Opposition think they are doing, let alone achieve the end policy result. Perhaps that is a sad reflection on the state of the Opposition today.

Our intention is not to create additional burdens on business but to ensure a light touch approach which means that industry is able to compete without the need for protection as measures are rolled back. As such, it is undoubtedly in the interests of UK producers to use these plans and to be thinking about adjustment as early as the initiation stage of an investigation. Furthermore, the steps outlined in an adjustment plan provide a useful tool for determining the suitable pace of liberalisation, tailoring measures where appropriate. In drafting our secondary legislation, the Government intend also to build in flexibility to account for scenarios where different levels of detail would be appropriate in the plans.

In terms of whether they would be overly burdensome on business, we will ensure that the process is both flexible and proportionate, in order to serve the needs of business in the most appropriate way possible. It is for those reasons—although I can provide others—that I ask the hon. Gentleman to withdraw the amendment.

[Jonathan Reynolds]

In my experience as an admirer of the Minister, whenever he gets somewhat tetchy it is perhaps to disguise from the House his own shortcomings. I am not satisfied with his response and nor, I believe, is British industry. Therefore I wish to press the amendment to the vote.

Question put, That the amendment be made.

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[Anneliese Dodds]

I will not speak on this for long. We have much else to get through this afternoon, and maybe I am about to be surprised, but I anticipate that we may have a similar result to one we just had, particularly given that many of the same issues come up in relation to this amendment as to that just moved by my hon. Friend. It would be interesting if we had a plurality of views; maybe that day will come eventually.

As with many of our other amendments, this amendment clearly aims to increase the predictability for British business in the Bill. In particular, we think it is important to make provision in the Bill about exactly how a safeguarding remedy could be extended, to expand the considerations taken on board in that process.

With this amendment, the TRA would only recommend extending a safeguarding remedy beyond four years if the authority were satisfied that there was evidence that UK producers were adjusting to the importation of the goods in increased quantities—so not a plan, actual evidence of that adjustment would be necessary. The total duration of any such extended remedy would be only be another four years, so eight years in total. As with many other elements of the Bill, more clarity is needed here and our amendment would deal with that deficiency.

[Graham Stuart]

Schedule 5 sets out the provisions that will apply in cases where UK industry finds itself being harmed by unforeseen surges in imports. The WTO agreement on safeguards set outs the requirements that must be met for the UK, as for other members, to be able to impose safeguard measures. Through this schedule, we are adopting the key principles into UK law and setting out the broad elements of the safeguard process that will be operated by the TRA.

As we have already discussed, there will be a need for more detail. This will, rightly, be set out in secondary legislation. The schedule also provides the necessary powers for the Secretary of State to make regulations to do this, including, for example, to define what is meant by “increased quantities”, “UK producers” and “like goods”. Paragraph 19 of schedule 5 provides that regulations can be made to set out the process for reviewing safeguard measures. The regulations will set out, among other things, the circumstances in which measures can be continued.

Amendment 74 seeks to require UK producers to provide evidence that they are adjusting to increased imports before a safeguard measure can be extended beyond four years. It also aims to add into primary legislation that safeguard remedies may only be in place for a maximum of eight years. As I explained earlier, once we leave the EU, the UK clearly needs to be able to take action where our industry is being harmed by unfair trade from other countries, whether that is by dumped or subsidised goods, or as a result of fairly traded but unforeseen surges in imports. The safeguard provisions set out in schedule 5 achieve this. Unlike anti-dumping and countervailing measures, safeguards relate to fair trade and apply globally. Therefore, it is especially important that these measures balance the interests of producers and downstream consumer industries by facilitating adjustment.

We have already discussed adjustment plans when considering the previous group of amendments. As I said, these are a vital tool in ensuring that safeguard measures not only provide protection, but allow those affected the opportunity to make necessary adjustments. It is not appropriate to introduce a requirement for producers to provide evidence of adjustment when seeking to extend measures beyond four years.

I ask the Committee to consider for a moment that we have measures in place—a safeguard—because of a massive surge on imports. The TRA has done its work. In an entirely novel process—I am aware of no parallel anywhere—Her Majesty’s Opposition, doubtless supported by their allies in the Scottish National party, want to impose a bureaucratic and burdensome measure—[Interruption.] I notice that the SNP Members are shaking their heads. For once, perhaps, they will strike out and not support something that is so clearly damaging to the interests of Scottish producers. Why on earth would the producers have to provide evidence of their adjustment when the main issue should be other aspects and criteria? It is a strange innovation that the Labour party has put forward.

Introducing a requirement for producers to provide evidence of adjustment when seeking to extend beyond four years would undermine the need for flexibility in our approach, which recognises—this is worth reflecting on—that adjustment is not always dependent on a producer’s own efforts. Yet, under the amendment, protection measures would cease if producers were not able to provide evidence that they were adjusting. Adjustment plans are a more suitable way of building in that flexibility and ensuring that there is a commitment to adjustment from as early as the initiation stage. Finally, with regard to the eight-year rule, the Government intend to be WTO-compliant by setting that out in secondary legislation.

[Kirsty Blackman]

I would appreciate it if the Minister let us know where it says that UK producers are supposed to produce that evidence. My reading is that the TRA has to find the evidence rather than the producers submitting it.

[Graham Stuart]

The hon. Lady will find that the evidence of adjustment by UK producers is unlikely to be provided by anyone other than UK producers. It is a rather strange innovation to insert that into legislation for the continuation of measures that are put in place because of the injury caused and the massive surge on imports. It is an entirely novel concept. I am not aware of its being anywhere in WTO schedules although, admittedly, after so little time in the job I cannot claim to know them inside out. If any Member of the Opposition, who after all came up with the extraordinary innovation, has evidence of a basis in WTO law or anywhere else, I would be fascinated to hear it. Perhaps the hon. Lady will support the amendment anyway, even though there is no evidence for it, legally or otherwise but I hope that she, like me, will oppose the amendment if it is pressed to a vote.

--- Later in debate ---

[Kirsty Blackman]

I rise to speak to amendments 111 to 114 in my name and that of my hon. Friend the Member for Dunfermline and West Fife. I am aware this is a framework Bill, but the clause is particularly short and skeletal. It would have benefited from being a bit longer and fleshed out just slightly, because then the Government could have explained more adequately what they are talking about.

Amendment 111 deals with an issue raised with us by the Law Society of Scotland, which said:

“Clause 15(1)(b) makes reference to international law but it is not clear what is meant by this. It would be helpful were the Minister to explain precisely the circumstances in which the Government would need to deal with a dispute by varying the import duty.”

If would be useful if the Minister, either in summing up or at a later point, could provide a bit of clarity. Amendment 111 would ask the Secretary of State to come back with regulations defining what “international law” is for the purposes of the clause. As has been stated, if the Law Society of Scotland does not think that is clear, perhaps it needs a bit more fleshing out.

Amendment 112 suggests to the Minister what he might mean by “international law.” We tabled the amendment to see if that is what the Government mean. If they do, perhaps they will accept it.

Amendment 113 attempts to do something similar, but we are giving the Government a little more time in which to define what they mean by “international law” in the clause. We ask them to come back within three months of the passing of the Bill, making clear what the relevant international law authorising the exercise of powers would be and the circumstances in which they consider it appropriate to deal with a dispute by varying the amount of import duty. It may be that the Government intend to return to that later anyway but, if they were to accept any of the amendments, they will make their intentions clear at this point.

Amendment 114 has a slightly different purpose: to increase the accountability of Government. The Government have the power on international disputes and the Secretary of State will make regulations in relation to that through the clause, but there does not seem to be any accountability to Parliament about regulations or changes, or ways in which they will deal with international disputes. There seems to be no feedback mechanism to allow Parliament to ensure that the Minister makes the correct decisions or to scrutinise those decisions adequately.

In amendment 114, we have asked the Secretary of State to lay before the House of Commons an annual report on the exercise of these powers, making clear the circumstances in which they have used them, which matters were in dispute and which was the relevant international law in deciding the changes.

Now may not be the time to say this, but I will just make my intentions clear. Depending on what the Minister says about his intentions, it may be that we do not need to press amendments 111 to 113. I would very much like to press amendment 114 when we come to that stage, but on the other three I will wait to see what the Minister says.

[Graham Stuart]

I will endeavour to follow the good example set by the ever-affable hon. Member for Bootle, who gave not only good content, but brilliant quotes that entirely encapsulated the moment and which we all enjoyed.

Clause 15 enables the Secretary of State to vary the rate of import duty when a dispute or other issue has arisen between the UK Government and the Government of another country, and the UK is authorised to do so under international law. The clause replaces equivalent existing powers available to the European Commission. Under the WTO dispute system, WTO members that have been found to be in breach of their obligations must bring their measures into compliance with WTO law. If they do not do so within a reasonable period, the parties can attempt to agree on compensation. Compensation may take the form of a reduction in the import duty on specified goods from the complaining country, although in practice any such reduction would have to be applied equally to all other WTO members in accordance with the most favoured nation rule.

If the parties fail to agree compensation, the complaining member or members may impose retaliatory measures against the member found to be in breach. Such measures typically involve raising the rate of import duty on specified goods from that country to incentivise it to bring itself into compliance. Free trade agreements with third countries also frequently contain dispute settlement mechanisms, many of which follow similar procedures to those of the WTO. In particular, free trade agreement dispute settlement mechanisms often result in a signatory being required to bring itself into compliance with the terms of the FTA, and often allow retaliatory trade measures to be taken against the offending party if it does not do so, and cannot agree appropriate compensation. Authorisation to implement compensation or retaliation measures may also arise in a number of other specific contexts. For example, a WTO member that imposes a temporary safeguard measure to protect its industry, or that modifies its WTO schedules, must seek to compensate any affected countries, failing which retaliatory measures may be imposed against it.

The ability to vary the rate of import duty in response to disputes and other contentious situations is vital to ensure that the UK can operate an independent trade policy after leaving the EU. In particular, the threat of imposing retaliatory duties following a trade dispute can be an effective means of incentivising other countries to comply with their obligations under international law, and can therefore help to preserve and open up trading opportunities for UK firms.

The European Commission is currently responsible for conducting trade disputes and applying enforcement measures on behalf of the UK. Once we leave the EU, the UK will bring and defend trade disputes in its own right. When such disputes are decided, we will require the powers to be able to take action to enforce and respond to their rulings including, where necessary, varying the rate of import duty. The power in the clause ensures that the UK can do just that.

Amendments 111 and 112 seek to provide a legislative definition of international law in the Bill or in regulations to be made by the Secretary of State, as the hon. Lady set out. Amendments 113 and 114 seek to impose a statutory duty on the Secretary of State to report to the House of Commons on that power, either within three months of the passing of the Bill or annually, providing details of the international legal basis for justifying the use of the power.

As I have explained, there are a number of situations under international law in which countries may be authorised to vary their rate of import duty for the purposes of retaliation or compensation, including in disputes under different types of international agreements and, just to make it even more complicated, in other contentious situations that do not involve a formal dispute. Given the different context in which clause 15 would apply, it is sensible to refer broadly to authorisation under international law. Adopting a narrower approach would risk constraining future action in situations that are not currently foreseeable.

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[Kirsty Blackman]

I rise to query something the Minister said and to ensure that I heard him correctly. Is it the Government’s intention, at the negative procedure stage, to explain in the explanatory notes the basis in international law and the reason for the measure being introduced?

[Graham Stuart]

It is our intention that the Government, when they seek to make such a change, and they are doing so under international law, would provide evidence of the law upon which they were relying. If the hon. Lady is happy with that, I will leave it there.

In conclusion, after leaving the EU, the United Kingdom will require the ability to vary the rate of import duty to respond to international dispute rulings and other contentious situations. That will ensure that the Government can continue to protect the UK’s economic interests by putting in place, when necessary, effective retaliatory and compensatory measures against other countries. I commend the clause to the Committee and hope that the amendment is withdrawn or rejected.

[Anneliese Dodds]

I am grateful to the Minister for his clarifications. I know he will regret hearing this, but the Opposition feel that the procedures are, sadly, not appropriate and proportionate. The new clause argues for an enhanced parliamentary procedure if import duties must be varied as a consequence of an international dispute. I will not go through the more rigorous procedure we suggest; it is similar to that described by my hon. Friend the Member for Bootle.

It would help if the Minister answered this initial question: what is the anticipated frequency of this kind of dispute? My view of what has occurred at EU level is that such disputes are not so frequent that appropriate scrutiny would not be possible. Some of us are concerned that a dispute might come sooner rather than later. I understand that experts took different positions in the International Trade Committee on whether the UK’s continuing to apply EU anti-dumping duties would be legal after it had left the EU. That is one of many reasons why it would be helpful to have more explicit mention in the Bill of existing measures being automatically rolled over. But, anyway, that is a caveat.

There are many other reasons why an enhanced procedure is necessary. The first is that the decisions taken in the context of such a dispute would be adopted by the Secretary of State himself, albeit with the advice of the TRA, and they could have a significant impact on UK industry. We have talked about how, in many cases, the supply chains are complex, and we need to talk about a variety of different consumers and business-to-business activity. It is therefore important that Parliament is able to examine a statement of the dispute and what exactly the Government propose should be done in relation to the dispute, such that the House can vote on that matter if necessary. These disputes do not affect just economic policy; they can have a significant impact on other areas of public policy as well. Therefore, it is important that colleagues are able to express a view on them and to consider the Government’s position on them.

The second reason it is important to have an enhanced procedure is that there is a lot of public concern at the moment about international economic disputes and how they tend to be resolved. I served as a Member of the European Parliament for three years, and I received tens of thousands of communications—about 38,000 at the last count—from concerned citizens about the Transatlantic Trade and Investment Partnership deal between the US and the EU. Most of those emails included criticism of the impact of investor-state dispute settlement, predominantly because that method of resolving disputes is not transparent and many people feel it privileges the voice of companies over Governments. We surely should not be putting ourselves in a position where Parliament’s voice would be not just ignored but not even heard when it comes to our Government’s actions in relation to trade disputes. For that reason, I hope the Government will support our amendment.

I hope that I will be permitted one last question, as this matter came up in the Minister’s opening remarks on the clause. Will he tell us where the Government have explicitly given themselves the power to create WTO schedules? I do not know where that is. He mentioned the necessity of producing those schedules, so can we have some clarification on that point?

[Graham Stuart]

I will deal with the questions as best I can and in order.

The EU has four retaliatory duties in place. It is not really possible to predict how frequently this power will be used. In some ways the question is not really the frequency but whether, when it does happen, we have a procedure in place to allow us quickly and effectively to take action to ensure that we put the matter right. That, rather than the frequency, might be the bigger issue.

Although we will be seeking, and will be prepared to use, the WTO dispute settlement mechanism as a way of ensuring that there is a level playing field for UK business to compete on, and we will have the tools available for us to participate fully in international trade disputes where necessary, we have no particular appetite to be more litigious than is required to protect the UK’s interests.

I will write to the hon. Lady and the Committee on the WTO schedules and the process attached to that.

[Kirsty Blackman]

I would appreciate it if the Minister also wrote to me, because I brought that up last week. I am pleased that the hon. Member for Oxford East is pursuing the issue. It is important that the Government have the power to lodge schedules with the WTO and the power to make the technical rectifications that the Minister mentioned—those may or may not end up being technical rectifications to things like quotas, given that some of the countries in the WTO are challenging whether they would be technical rectifications or would constitute modifications.

On our amendments, the Minister has provided some information around how Parliament will be provided with evidence for each of the things that comes up. Therefore, I do not intend to press amendment 111 or amendments 112 and 113, but I do intend to press amendment 114 because I am not yet convinced that the Government will provide enough feedback about how this mechanism is working, and it would be appropriate for them to do so.

Amendment, by leave, withdrawn.

Amendment proposed: 114, in clause 15, page 10, line 18, at end insert—

“(3) The Secretary of State must lay before the House of Commons an annual report on the exercise of the powers under this section including information on—

(a) the relevant international law authorising the exercise of the powers in each case, and

(b) the matters in dispute or issues arising in each case.”

This amendment requires the Government to report on the circumstances of, and international law basis for, each variation of tariffs as a result of a trade dispute.—(Kirsty Blackman.)

Question put, That the amendment be made.

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[Peter Dowd]

We tabled amendment 126, and the consequential amendment 127, to ensure that regulations made under clause 19 are subject to the affirmative procedure.

Clause 19 allows the Treasury to make regulations for full or partial relief from a liability to import duty. The clause sets out a number of factors determining whether a relief can be applied, including the nature or origin of the goods, the purposes for which the goods are imported, the person by whom they are imported and the circumstances under which they are imported. The amendment seeks to provide some parliamentary scrutiny over providing reliefs, which is of course an issue of taxation and would therefore normally be subject to some form of parliamentary oversight.

I have said a great deal about the Bill’s centralisation of powers to the Executive and away from Parliament, and this is yet another example. The Government want their cake and they want to eat it as well. They want to impose taxes with no parliamentary scrutiny, and they want the Bill to be considered a money Bill, thereby avoiding parliamentary scrutiny from the House of Lords. In this particular case, extensive powers are being handed to the Treasury to adjust fiscal policy without reference to Parliament at all. As I have said, that is pretty worrying, and it is a pretty worrying precedent to set as Brexit legislation passes through this place. The Government know what they are doing; otherwise, as I have said, they would not have designated this as a money Bill.

[Graham Stuart]

The hon. Gentleman has referred to this before, so it is worth correcting it for the record. The Government do not designate Bills as money Bills or otherwise; that is done by Mr Speaker. The hon. Gentleman may blame us for many things, but he cannot blame us for that.

[Peter Dowd]

On another occasion—perhaps not here—I am more than happy to debate that issue and have that conversation with the Minister. Indeed, if he wants to have that discussion in the Committee, we are more than happy to do so when we debate another amendment. I am sure that he would be delighted with that.