Draft Trade Barriers (Revocation) (EU Exit) Regulations 2018

Hannah Bardell Excerpts

Tuesday 27th November 2018 General Committees

[The Minister for Trade Policy (George Hollingbery)]

I beg to move,

That the Committee has considered the draft Trade Barriers (Revocation) (EU Exit) Regulations 2018.

This statutory instrument revokes the European Union’s trade barriers regulation, which sets out a process by which businesses, trade associations and member states can report trade barriers to the European Commission. If a request passes a particular threshold, the regulation obliges the Commission to make a report. It can then take appropriate action, such as raising it in bilateral discussion or at the World Trade Organisation, but it is not obliged to do so. It should be noted that this applies only to unlawful barriers outside the EU.

After we leave the EU, tackling trade barriers will become the UK’s own responsibility, and it is important that we get this right. Trade barriers cost our economy billions of pounds every year, so it is crucial that businesses can continue to report them after Brexit, but that only makes it more crucial that the system for reporting them works as effectively as possible. The current EU system has a number of issues: it is complex and time-consuming and, in practice, has already been superseded. Those issues cannot be resolved without making policy changes to the regulations, which would take them outside the scope of our powers under the European Union (Withdrawal) Act 2018. The only course available to us in this circumstance is to revoke the regulation.

The Government have decided not to replicate the EU’s trade barriers regulation, but to use an alternative, non-statutory system instead. Why is that? First, the process in the regulation is drawn-out and complex. There are five steps: a complaint is submitted; the Commission has 45 days to decide whether to investigate; the Commission announces the decision in the Official Journal of the European Union; the Commission investigates; and a report is submitted to the trade barriers committee. Unsurprisingly, that process takes a long time, during which businesses could be losing exports, thanks to unfair rules. In addition, businesses are required to submit lengthy reports involving complex and often expensive economic and legal analysis. That is a barrier for any business, but particularly for small businesses. I will give an example. In the EU’s own evaluation of the regulation, one organisation said that it had wanted to bring a case but decided not to do so simply because of the amount of information that the Commission had requested—and that was only at the pre-initiation phase.

Secondly, the current process is superfluous. All the regulation does is commit the Commission to writing a report; there is no requirement for the Commission actually to take any action. Unsurprisingly, businesses are already voting with their feet. About 70 new barriers were reported to the EU last year. In only one case did the business involved choose to use the statutory process; the rest of the complaints were submitted informally. There is no evidence that the informal complaints were any less likely to be resolved than those submitted through the regulation. Therefore, in practice, the regulation has been almost entirely superseded. In fact, the process has been used only 28 times in the 25 years for which it has existed, and the majority of those cases were in the first three years. The number declined rapidly thereafter, which speaks volumes about the experience of the process for business. Only one case has been brought in the past 10 years.

Our new, non-statutory process will be an improvement. It will be accessible and user-friendly, with a simple online form at gov.uk for businesses to fill in. The process is already well under way and will be ready for 29 March. Because the process is non-statutory, it will also be flexible. Businesses will be able to tell the Government about the full range of barriers that they face, whether they breach the letter or the spirit of an international agreement. The Government will use the full range of tools available to tackle those barriers—tools ranging from economic diplomacy, to regulatory dialogues, to WTO dispute settlement and committees.

This will be a two-way process: as well as being easier for businesses to use, the new approach has been designed to let the Government better understand the barriers faced by businesses, so that we can target our resources more effectively. Much of this happens already. The Department for International Trade and its posts, our network overseas, are already extensively involved in that sort of activity. The new system is designed to improve on the existing network and formalise it.

We will of course provide reports to businesses and to Parliament, within the bounds of confidentiality. The Government will in due course be able to share information with businesses on where barriers exist or have been removed, to help inform business decisions.

[Hannah Bardell (Livingston) (SNP)]

The position of the Scottish National party is clear—we want to stay in the EU—but, having said that, we recognise that if we are to leave, having regulation is important. Will the Minister speak a little about how the devolved nations and the businesses there will be represented and resourced appropriately so that the interests of all parts of the UK will be properly represented?

[George Hollingbery]

Clearly, under the auspices of the draft regulations, we are looking at trade barriers. The Scottish Government have their own trade policy and trade exporting teams, and I have no doubt that they have a network overseas. Indeed, that network works closely with the UK network. There will therefore be avenues into this process for anyone from any devolved nation who wants to make a representation on any issue about a trade barrier. I hope that satisfies the hon. Lady.

Furthermore, we are expanding the market access team at the Department for International Trade to support that work. Our new Her Majesty’s trade commissioners overseas will spearhead and champion action on market access across our nine overseas regions. We are upgrading our capability to deal with market access barriers, including our IT infrastructure, better to enable collaboration and work not only within DIT and across posts but across all Departments, for which many trade barriers will be relevant.

As the UK delivers an independent trade policy for the first time in 40 years, the Department for International Trade is here to ensure that our businesses have as many exporting opportunities as possible. Part of that is to resolve trade barriers as effectively as possible. I am confident that the Government’s approach is the right one.

[Bill Esterson (Sefton Central) (Lab)]

It is always a pleasure to serve under your chairmanship, Sir David.

What is the objective of the trade barrier system that we should have? Surely it must be to ensure that we have a robust system in place to support our businesses and workers as necessary and as they might expect. Given the new world order in which might is right, where protections and tariffs are rife and we verge on the prospect of very dangerous trade wars, it must be appropriate for UK businesses to expect the absolute best from their Government. What, therefore, have we been presented with?

At present, we are part of the European Commission trade barriers scheme, which operates as a statutory system. Businesses, trade associations and states may complain to the European Commission if they find evidence of a trade barrier in a non-EU state, as is currently the case with United States tariffs. After leaving the European Union, we will not be part of the TBR scheme—that much has been made clear by the Minister—and it will be replaced by a non-statutory system.

I am surprised that the Government did not automatically debate the issue in a Delegated Legislation Committee. Instead, it took the sifting committee to challenge the Government’s decision, and I am glad that it did so. When the Minister said that the system is drawn-out and complex, he rather let the cat out of the bag about how important it is for us to get it right and for Members of Parliament to be able to debate and scrutinise what is happening.

The sifting committee said that the House might wish to explore further with the Minister the Department’s plan for the new non-statutory reporting mechanism. Opposition Members certainly want to do so. As the explanatory memorandum notes, it is correct to say that other avenues are used for complaints to the Commission about trade barriers, but more trade barriers are being created in the new world order. In 2017, 70 new barriers affected EU businesses, and that number appears to be growing. It is true that of those 70 new barriers, only one was reported to the Commission, and the Government think that that proves that there is no need for a statutory system. The Government plan to replace the current system, but what is it about the new scheme that gives the Minister confidence that it will deliver what business needs?

If we examine the examples, we start to see a bit of a pattern. The Confederation of European Paper Industries lodged a complaint that measures imposed by Turkey on the imports of certain varieties of paper were inconsistent with both the WTO and the EU-Turkey customs arrangement rules. Turkey immediately withdrew the unfair measures because the possibility of action through the statutory system was enough. How does the Minister know that his new system will be as effective as the current one, without the back-up of either the Commission itself and the system it operates or a similar UK version? Previously, the threat of the procedure being used has been sufficient, as the paper industry example demonstrates. Did the Government consider that the reason the procedure is so rarely used is precisely that the threat alone is sufficient? Did the Minister consider that soft power is, in fact, extremely effective? Are the Government missing the point that the current system works very well indeed?

I also understand that a number of industry groups involving both UK businesses and those from the rest of the EU, including in ceramics, are at different levels of raising complaints through the existing trade barriers mechanism, so I put it to the Minister that the existing system is used more than might appear at first glance and, perhaps, more than he indicated in his opening remarks. Perhaps the Minister could advise those currently engaged in actions using the existing system as to whether they should continue their complaints using that system or switch to the UK’s new procedure.

The explanatory memorandum claims that there will be no impact on UK businesses. That seems unlikely, given that some may be involved in existing complaints and that others, including through relationships with other EU businesses, are likely to be in the future. I suggest that the Minister should confirm that the change in procedure will have an impact on UK businesses.

The Department has said that feedback on the effectiveness of the trade barriers regulatory system has been mixed? What does “mixed” mean? What was said in the informal consultation, and should there not be a more detailed consultation on the system that will be adopted? If the Minister wants to intervene to explain the rather quizzical look on his face, I will be delighted to give way. He is choosing not to. What is his plan is for the new system? Will it involve the Trade Remedies Authority? How might that work? If the Trade Remedies Authority is to be involved, does that mean that the Trade Bill is to reappear and conclude its remaining stages? It seems to have disappeared mysteriously into the ether.

The hon. Member for Livingston made the point about the nations and regions. We have debated that at length, and the lack of engagement with and involvement of the nations and regions was one of a number of our concerns about the Trade Remedies Authority. The hon. Lady made a good point about that and it applies in this case, too.

[Hannah Bardell]

I know there is support among Opposition Members for having officers for trade remedies, as we discussed in relation to the Trade Bill. Perhaps we could consider that alongside the issues under discussion. I hope we can work together to pursue that.

[Bill Esterson]

I certainly agree that the need for regional engagement and for the nations of the UK to be involved in addressing trade barriers is incredibly important—as it is for large and small individual businesses across the country.

What will the procedure be during the proposed transition period set out in the withdrawal agreement and the political declaration, in the unlikely event of the Prime Minister’s deal surviving? What will happen if, as seems inevitable, the deal is defeated? If, God forbid, there is no deal, what will happen then?

Paragraph 2.3 of the explanatory memorandum states:

“In the EU, the vast majority of trade barriers are raised via the Market Access Advisory Committee”.

Does the Minister propose to replace that committee, which is a non-statutory part of the current arrangements?

To move on to the Minister’s points about the digital service, there are great concerns among smaller firms, and the organisations that represent them, about the Government’s moving to the use of digital systems in a number of places in government. How will the use of the digital route ensure that smaller firms are not disadvantaged? That is of great concern to many small businesses. Should not the arrangement have been sorted out before the revocation of the existing legislation? I note that the Minister said it would be in place by the end of March. Will he confirm whether that digital system has been tested, whether there is awareness of it, particularly among smaller firms, and how he envisages greater access to and use of it by the smaller firms that might be interested in using it at some time in the future, if not today? That is a wider issue, but it is directly relevant.

Paragraph 10.5 of the explanatory memorandum states:

“Stakeholders from across sectors advocated a forum akin to the EU’s Market Access Advisory Committee in which industry associations and government departments can discuss avenues for resolution before initiating enforcement mechanisms.”

That relates to my earlier question, and I want to ask the Minister why it has not been developed yet—or has progress been made towards achieving such a mechanism?

The trade barrier regulation is only one area of the EU legislation that deals with dumping. The SI before the Committee is part of the process of revoking the EU legislation. What is happening to other pieces of EU legislation that deal with dumping? Specifically, what will happen to EU regulation 2016/1036 on protection against dumped imports, and EU regulation 2016/1037 on protection against subsidised imports?

To return to my main points, we have a system—the Minister made the point that there has been a decline in its use over 25 years—in which trade barriers have been addressed through our membership of the EU. It appears that there has not been an evidence-based approach to considering how effective that system has been, and whether something similar would work. May I suggest to the Minister that, rather than revoking the regulation, it might have been a good idea to make a greater effort to investigate whether the current system was effective and whether the fact that its statutory element was not used very often was a sign that it was working successfully, rather than the opposite? I need to hear from him how the alternatives that he proposes will deliver the same level of protection for UK businesses that we have seen under the current system.