Leaving the EU: Future Trade Remedies

Jack Brereton Excerpts

Tuesday 17th April 2018 Westminster Hall

[Jack Brereton (Stoke-on-Trent South) (Con)]

I beg to move,

That this House has considered future trade remedies after the UK leaves the EU.

It is a pleasure to introduce this debate with you in the Chair, Mr Hollobone. If our future trade proves as free and fair as I know you will be, we will be making progress.

I am grateful for the opportunity to raise the hugely important and wide-ranging issue of the trade remedies that will be employed by global Britain after we leave the European Union. To bring focus to the debate, I will mainly address the position faced by the modern ceramics industry and other advanced manufacturing businesses in Stoke-on-Trent, but I am sure that other Members will be able to draw parallels with relevant trading sectors in their constituencies.

In 2017, the UK’s total trade in goods and services deficit was 1.4% of GDP. Importantly, that looks to be the lowest annual deficit this century. Indeed, I checked the Office for National Statistics historical data series, and it looks to me to be the lowest deficit as a percentage of GDP since 1998 and less than half what it was in Labour’s economic meltdown of 2008. I am not sure whether the Department for International Trade has made much of that fact, but perhaps it should. That, combined with the record foreign direct investment into the UK in 2017, shows that something in our trade policy is strengthening our international position. It is imperative that we identify what that something is—what works in our trade policy while we are an EU member state—and look to continue what works after we leave the EU or replace it with something at least as effective, and preferably even more so.

[Nick Thomas-Symonds (Torfaen) (Lab)]

I congratulate the hon. Gentleman on securing the debate. Does he agree that we need transparency about how we calculate duties, not least in the steel industry, where we could do with great transparency about how we calculate the level of dumping, for example?

[Jack Brereton]

I agree that it is important that we have a transparent and open approach. It is certainly important to ensure that there is transparency through an independent trade remedies authority.

Most pressingly, I seek assurances from the Minister that we will have effective anti-dumping measures which ensure that there is a level and fair playing field on which free trade can be played out. Our job is to embrace the opportunities of Brexit and use Britain’s position as a leading member of the World Trade Organisation to push for free and fair trade globally. We need the same level and fair playing field globally that we pushed for on the regional stage of the single market as a member of the European Union.

Thanks to this Government, global Britain starts from a solid economic base, underpinned by a world-renowned and hugely attractive legal system with sound governance rules that has been hard built over centuries. The UK is a great place to do business. In a competitive world, it needs to be. I do not argue that we should reinvent the corn laws—far from it. British industry must continue its efforts to be more productive and innovative. Although our modern industrial strategy will create an environment from which winners can emerge, it will not pick winners, and it will not prop up or bail out those who fail to satisfy their customer base, diversify their product range or provide the right value for money with products that are worth every penny of their competitive price.

I am hugely encouraged that manufacturing productivity increased by 2.6% in the fourth quarter of 2017, not just because that might be a signal that we are finally resolving the productivity puzzle but because it shows that the renaissance of British manufacturing and export success is, unlike what some people claim, built on more than the current low trading range of the pound. It is true that the lower pound helps with finding new markets in the short term, but achieving longer-term competitiveness will be key to keeping those markets and expanding them when exchange rates change again. Getting domestic policies right, keeping taxes and the regulatory burden down and getting skills and the entrepreneurial spirit high is every bit as important to our future trade as the adoption of remedial measures sanctioned by the WTO.

By getting both domestic policies and international rules right, and having free and fair rules-based markets guiding both, we can continue to boost the number of UK firms that engage in export markets. That is not just theory; it is happening in practice. City A.M. reported only yesterday that, according to Lloyds bank’s latest business barometer, two in five businesses in the UK are planning to export for the first time or enter a new market within six months. The prospect of increased profits and turnover is the main reason why firms are looking to expand their business abroad. Almost one fifth explained that they were looking to export due to existing demand overseas, while only 13% were driven by exchange rates. There are big growth markets out there, and the Prime Minister is right to highlight and drive the amazing opportunities for trade across the Commonwealth.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

I congratulate the hon. Gentleman on securing the debate, but it seems to me that we are entering a global trade war, largely driven by the protectionist policies of the United States. Is it his view that domestic industries are better protected within the EU customs union or outside it?

[Jack Brereton]

I do not think it needs to be. We should pursue opportunities globally. As I said, there are real opportunities out there in the Commonwealth—and, yes, with the United States, too—to improve our trade links and the opportunities of trade for British businesses, such as those in my Stoke-on-Trent constituency.

We need more businesses to be confident exporters. For that, they need the right skills, the right support from DIT, the right trading opportunities and trade agreements negotiated by Britain in the British national interest. We need of course to ensure that, as a nation, we make full use of digital technology and use the internet as a worldwide exports showroom and sales platform. But we also need to guard against material retardation of the establishment of new industries in the UK, either from barriers to entry due to costs or regulation here at home, or from imports that are unfairly and illegally dumped or subsidised by those who wish to nip competition in the bud.

[Nic Dakin (Scunthorpe) (Lab)]

I congratulate the hon. Gentleman on securing this important debate, and I apologise that I have to leave shortly to be on the Front Bench in the main Chamber. Does he agree that it would help to ensure free and fair trade if the calculation of dumping were stated transparently in the Trade Bill, which is due to come back on Report? That would give a lot more confidence to industries that need confidence, such as ceramics and steel.

[Jack Brereton]

As the hon. Gentleman says, there are a number of issues, and I will come on to more of them.

Looking forward to our global future, although there is necessarily some uncertainty about the final Brexit deal because negotiations are still under way, I welcome the Government’s acknowledgement that free and fair trade must operate within a rules-based system and that options must be available for countering those who break those rules. That is to say that fairness means everyone playing by the rules—or, as Nigel Lawson once said, “Rules rule: OK?” However, those rules need to be clear, fair and consistent. If they are not, we risk pent-up grudges feeding economic nationalism, full-scale protectionism and eventual trade decline. I therefore hope that the Minister will give us additional assurances that will soothe industries that look for as much clarity and transparency as possible from the Government when making their investment decisions.

The British Ceramic Confederation, which is a founding member of the Manufacturing Trade Remedies Alliance, is keen to maximise confidence in the sector that the UK’s framework for post-Brexit trade will be effective and open to the full range of remedies allowed under WTO agreements. Those agreements allow for three types of trade remedy: anti-dumping measures, countervailing duties and safeguards. I will focus on anti-dumping measures, because there are genuine concerns among BCC members and others that measures that the UK has previously actively supported may fall short of the proposed new economic interest test. Part of the concern is that it is not clear how that test would apply in practice, because, of course, it seems to be billed as something different from a public interest test; an innovation that goes beyond the public interest test in its calculations. Clarity from the Minister on that would be welcome.

[Nic Dakin]

The hon. Gentleman is being generous. On the point he is making, if we look at the systems of New Zealand, Canada and the US, we do not see additional tests. It would therefore seem perverse for the UK to introduce additional tests, which are not necessary in the best cases we see around the world.

[Jack Brereton]

The hon. Gentleman is right. Some of what has been proposed has not been experienced around the world; we will be testing something out that has not been tried. I will move on now, and I will not take many more interventions as time is short, but it would be particularly helpful to know whether the intention is that trade remedies would be applied before any test or only after the test. As the Manufacturing Trade Remedies Alliance has argued, duties could always be refunded retroactively if any test found that trade remedy measures were not in the public interest.

Current trade rules have served the ceramics sector well against outrageous dumping by countries that have far less regard for the spirit of free trade and the necessary rules underpinning free market economies. For example, just 10 years ago, we saw huge volumes of ceramic tiles, giftware and tableware all made in China being dumped at a price that could not have covered the real cost of production. The investigations into those price anomalies found that they were such clear cut cases of dumping that the EU still imposes remedial duties today.

There are good reasons for maintaining those duties after Brexit. Not least is the fact that since the measures against tile dumping were introduced in 2011, employee numbers in the UK have increased by about 40%. Not every new job will have been created as a result of the anti-dumping duties—the economy recovered substantially and employment grew significantly across many sectors in that time—but it is clear from the evidence that anti-dumping measures underpin the ceramics sector’s ability to take advantage of the Government’s wider pro-enterprise policy agenda, giving breathing space for the industry to invest in becoming more resilient.

Indeed, as recently as 2016, an expiry review of anti-dumping measures in the ceramic tiles market found overcapacity in the Chinese industry equal to six times total EU annual consumption. The anti-dumping duties on Chinese tiles were therefore extended for a further five years. I hope that the Minister will confirm that those measures will apply at least for the rest of those five years once we have left the European Union. Similarly, in the giftware and tableware sector, UK employee numbers have increased by 20% since anti-dumping measures were introduced. Our ceramics manufacturers are currently preparing a complaint for an expiry review. If the complaint is successful, the investigation will take place while we are still in the process of leaving the EU, so for clarity the industry would surely welcome any indication the Minister can give that the continuation of any EU anti-dumping measures that might result from any expiry review will also apply in the UK market.

In addition, the ceramics industry is keen for Ministers to reflect on how difficult it can be to counter dumping if the definition of dumping is too narrow. Unscrupulous actors who seek to dump their goods will be unscrupulous in exploiting any loopholes they see. For example, it may not be appropriate to rely on the price in the home market from which imports come when those imports originate from heavily distorted economies—that is to say from countries where market situations are distorted by the interventions of the state, which is usually an undemocratic state working outside the norms of transparency and governance that we take for granted.

On dumping calculations, I am therefore eager to learn what view the Government take on ensuring that the Taxation (Cross-border Trade) Bill makes it clear that there are circumstances in which the difficulty in determining normal value in the presence of state distortions means that provisions should be made for when it is not appropriate to use the domestic price. By clarifying how the Trade Remedies Authority would, in anti-dumping investigations, calculate the level of dumping for cases in which the domestic price of the alleged dumped imports cannot be used, there will be legal certainty and greater confidence in the ceramics industry.

I also wish to raise the Government’s proposed use of a minimum market share in relation to the acceptance of dumping—or indeed subsidy—complaints. I would be grateful for clarity on their intentions. Will a de minimis level be set and, if so, at what level? What rules for flexibility might there be in that level? For example, will there be flexibility if an industry has evidence that it is being materially retarded from achieving the minimum market share by dumping or subsidies, if previous injury from dumping has reduced an industry to the de minimis level, or if an industry plays a peculiarly important role in a particular area of the UK, though not across the UK economy as a whole?

As we leave the EU, almost everyone now agrees that the Brexit process should not be some sort of sharp shock; it should be a growing opportunity, with a smooth transition period in which to adjust to the new reality of global Britain. Will that transition include the retention of existing trade remedies for the ceramics sector, followed to their full course and renewed if necessary? Such an assurance from the Minister would be extremely welcome.

While the Department for International Trade will rightly be proffering carrots in seeking free trade deals for global Britain, in terms of opening access to the UK market, it should also let it be known that we will keep some big sticks in our trade policy array should tit-for-tat measures prove necessary. Brexit is a great opportunity for us to be a leading independent force in the WTO, and the champion of free and fair trade across the world. It will take time to convince all other members of our case, and in that time we will have to be ready to combat egregious distortions. However, the direction of travel should be clear: freer markets, freer trade, and an empowered and liberated entrepreneurial British spirit, with more of our world-class manufactured goods reaching global markets, all of it underpinned by a sense of enforceable fair play. That is the Brexit that my constituents voted for, and that is the direction in which I hope the Minister will be pleased to travel.

[Mr Philip Hollobone (in the Chair)]

The debate can last until 5.45 pm. I am obliged to call the Front-Bench spokespeople no later than 5.23 pm. The guideline limits are: five minutes for the Scottish National party, five minutes for Her Majesty’s Opposition, 10 minutes for the Minister, and two or three minutes for Mr Brereton to sum up the debate at the end. Until 5.23 pm there is time for other contributions.

--- Later in debate ---

[Jack Brereton]

I would like to thank all Members who have taken part in the debate, and the Minister for his response.

I thank my hon. Friend the Member for Gordon (Colin Clark) for his important responses about industries in his constituency. My hon. Friend the Member for Hornchurch and Upminster (Julia Lopez) also made important points about the challenges of unfair international competition and the setting up of the TRA. I am pleased that the Minister has referenced the importance of the TRA’s objectivity in the actions that it takes.

I do not agree with everything that the hon. Member for Livingston (Hannah Bardell) said, but I certainly agree with her points about the Minister. He is exceptionally diligent and very hard-working.

[Hannah Bardell]

I will just ask the hon. Gentleman this question, as I did not get the chance to make the point to the Minister. I think it is great that the hon. Gentleman secured this debate, but does he agree that we need to have the Trade Bill back on the Floor of the House on Report, to have a substantive debate and get more information on the Trade Remedies Authority as soon as possible?

I love the Library staff and their briefings, particularly when they are as direct as this one. In the “Comment” section, it says:

“The Bill establishes the TRA but says relatively little about its functions or the Government’s approach to trade remedies.”

I could not put it better myself. Does the hon. Gentleman agree that business and all the nations of the UK need more information on this as soon as possible?

[Jack Brereton]

The measures that the Trade Remedies Authority will set out will be set out in the customs Bill, so I encourage the Government to introduce that Bill as soon as possible.

I did not agree with everything that was said by the Labour Front-Bench spokesman, but I agree that it was Conservatives who previously put forward these points in the EU and were the strongest advocates for the current trade remedies. It is about creating that level playing field and not about protectionism. I agree with that.

I thank the Minister for his responses and the clarity he offered about the transitioning. I am very pleased that it will include transitioning measures across from what is in place in the EU to the UK’s trade remedies regime. I also thank him for the clarity around some of the secondary measures.