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

Jonathan Reynolds Excerpts

Tuesday 30th January 2018 Public Bill Committees

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

I beg to move amendment 45, in schedule 4, page 66, line 24, after “must” insert “within two weeks”.

This amendment prescribes a period within which the Secretary of State must decide whether to accept or reject a TRA recommendation.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 47, in schedule 4, page 68, line 42, leave out from beginning to “to” and insert

“will normally be 5 years unless the TRA considers that a shorter period will suffice”.

This amendment creates a presumption that the specified period will be 5 years.

Amendment 48, in schedule 4, page 69, line 7, leave out from “20(4)(c))” to end of line 8.

This amendment removes the provision for the TRA to recommend an earlier date than the day after the day of publication of the public notice.

Amendment 53, in schedule 4, page 69, line 30, leave out from “that” to end of line 34 and insert

“an anti-dumping amount or a countervailing amount should apply to goods from the day after the date of publication of the public notice under section 13 giving effect to the recommendation.”

This amendment removes the provision for the TRA to recommend an earlier date than the day after the day of publication of the public notice.

Amendment 54, in schedule 4, page 70, line 9, after “must” insert “within two weeks”.

This amendment prescribes a period within which the Secretary of State must decide whether to accept or reject a TRA recommendation.

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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.

[Jonathan Reynolds]

I appreciate the Minister’s response but it is our intention to move these amendments to the vote.

In respect of amendment 45, the Minister has already talked about the political pressure that has almost certainly been brought in the event of the TRA making a determination. However, it is also true that there are many examples we could go through of Governments resisting such political pressure. We should bear in mind that, in our discussions earlier, the Government effectively brought back a new constitutional procedure in order to stress the need for speed of announcements. Therefore, it does not seem consistent this afternoon to say that there is very little flexibility offered by the need for speedy resolution of cases.

Amendment 47 offers flexibility where five years would not be appropriate, but as the hon. Member for Aberdeen North just said, given the standard length of time these measures tend to be in place, this is—as industry has told us—a fairly modest measure, making it consistent with industry practice. We will press the amendment to a vote, Mrs Main.

--- Later in debate ---

[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

[Jonathan Reynolds]

I beg to move amendment 65, in schedule 5, page 81, line 31, leave out from “application” to end of line 32

This amendment removes the requirement for a preliminary adjustment plan.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 66, in schedule 5, page 81, line 44, leave out sub-paragraph (3)

This amendment is consequential on Amendment 65.

Amendment 67, in schedule 5, page 82, line 14, leave out paragraph (e)

This amendment is consequential on Amendment 65.

Amendment 68, in schedule 5, page 82, line 21, leave out “(d)” and insert “(c)”

This amendment is consequential on Amendment 65.

Amendment 69, in schedule 5, page 82, line 26, leave out “(d)” and insert “(c)”

This amendment is consequential on Amendment 65.

Amendment 72, in schedule 5, page 86, line 29, leave out from “21)” to end of line 34

This amendment removes the requirement for an adjustment plan to be in place prior to TRA making a recommendation under paragraph 14.

Amendment 73, in schedule 5, page 91, line 8, leave out paragraph (d)

This amendment is consequential upon the removal of reference to an adjustment plan in Amendment 72.

[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.