Trade Bill (Second sitting)

Iain Stewart Excerpts

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

[Anna McMorrin]

Q To follow up quickly, perhaps addressing Michael Clancy directly, what role do you believe the devolved Governments would have in trade negotiation prior to agreements being concluded? Do you think the Bill sets out suitable frameworks within which matters of devolved competence can be represented?

Michael Clancy: Under the Scotland Act 1998, paragraph 7 of schedule 5, international agreements, including trade agreements, are not within the competence of the Scottish Parliament. In that sense there is no formal role in agreeing international agreements. That being said, one of the things we have sought to promote throughout this process, with the European Union (Withdrawal) Bill, this Bill and associated measures, is that there should be some form of whole-of-governance conversation about getting things right. As we know, this Bill will affect the competence of Scottish Ministers and allow orders to be made that may amend, for instance, Acts of the Scottish Parliament, and measures from Wales and Northern Ireland too.

There is clearly an issue about how the Sewel convention or legislative consent convention is interpreted in respect of that. Under devolution guidance note 10, any proposals in UK Parliament legislation that seek to alter the legislative competence of the Parliament or of Scottish Ministers require the consent of the Parliament. That also applies to the National Assembly for Wales and the Northern Ireland Assembly. Therefore, there is an issue. Today in the Scottish Parliament there is a debate about legislative consent in respect of the European Union (Withdrawal) Bill, and the Finance and Constitution Committee of the Scottish Parliament is currently consulting on the legislative consent memorandum on this Bill, where the Scottish Government have indicated that they would not recommend that the Parliament pass it.

It is a matter of political debate and discussion, and something that I know both the Scottish and UK Governments have in their sights in the concordat they are thinking about. That includes a framework for dealing with trade matters. There is a role, but I do not know it yet, because neither the Scottish nor the UK Government have told us what it is.

[Iain Stewart (Milton Keynes South) (Con)]

Q I would like to ask Professor Winters a question about part 3 of the Bill, which concerns trade information. Would you agree that the information that this Bill enables will help the Government to shape their export support programme? Are there any additional powers that you would like to see this part of the Bill contain?

Professor Winters: Information is very important, not least in my trade, for analysing what goes on. The case for collecting reasonable amounts of information, as long as it is cheap to do so, is very strong indeed, subject to the standard confidentiality requirements. I confess, on reading the Bill it did not strike me that there were obvious things that were missing, but I would not want to assert that I read it sufficiently carefully to say that nothing is missing. It is important that the Government have the right to collect information, and that information should be made as widely available as possible. The Government clearly need to make policy, but there needs to be public debate, too; it is not just the Government who need to discuss policy issues. I did not interpret this as being part of the Bill, but in general, information other than private or commercially confidential information really should be made available to a wide community of people to enable them to analyse policy.

[Iain Stewart]

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

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

[Faisal Rashid]

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

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

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

--- Later in debate ---

[Barry Gardiner]

Q I will kick off, then, with the British Retail Consortium. [Laughter.] I am just keeping you on your toes!

The BRC has identified, among others, the agreements involving Norway and Turkey as the most significant of our EU FTAs. Of course, the Government have already indicated that there will be an end to free movement, which rules out simply replicating the Norway model, and that we will leave the customs union, which rules out simply rolling over the Turkish model, so what elements of the agreements—not just those two, but the others—do you consider it most important to replicate on substantially the same terms?

William Bain: The key provisions are those on tariffs, because if the UK leaves the European Union, it is not part of the EU’s common external tariff system, and we could then face higher tariffs on imported goods. A great deal depends on the kind of transitional arrangements that are adopted, but the kind of additional MFN tariffs that would apply would be 12% in relation to clothing from Turkey, 13% in relation to soft fruit from Chile and Peru and 27% on imported processed canned tuna from the Seychelles. Those would, I think, lead retailers and consumers to face considerable price pressures, so the main element that we would want to see is replication of the zero-tariff or low-tariff provisions on imports.

The other key areas that are very difficult in terms of replication and, we believe, may require a degree of assistance from the European Union are in relation to rules of origin. For example, with the Canada trade agreement, there is a complex rule of origin. The same is true in relation to South Korea. I think that diagonal cumulation is involved in the rules of origin in respect of the CARIFORUM trade agreements.

These are areas where it seems that time is running out, the clock is ticking, and a solution needs to be found if British business and British consumers are not to face a large cliff edge in March 2019.

Anastassia Beliakova: Absolutely. Rules of origin are a headache for businesses, and if we consider that there is the likelihood, in the roll-over of existing trade agreements, that they may have to comply with tougher rules of origin or that some of the benefits that they currently get by counting both EU and UK origin as single origin might be lost, that is very concerning. For about one in seven of our members, the existence of a free trade agreement is the determining factor in whether they export to or import from a country. I urge the Government to give stronger assurances for those agreements, as Mr Bain has mentioned, that already provide for, or have clauses mentioning, diagonal cumulation, but also to look at all the EU trade agreements and particularly those that have the greatest economic significance for the UK, and open up those discussions to provide for that as they are rolled over into UK-third country FTAs.

[Iain Stewart]

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

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

Stephen Jones: I have nothing to add.

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

[Faisal Rashid]

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

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

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