Trade Bill (Second sitting)

Katherine Fletcher Excerpts

Committee stage & Committee Debate: 2nd sitting: House of Commons
Tuesday 16th June 2020 Public Bill Committees

[Bill Esterson]

Q Thank you for that. To compare what you and Professor Winters said about the update of the entities under the GPA provisions, you referred to what you termed “technical updates” on things like the names of Government Departments, whereas Professor Winters spoke about more substantive areas of change, such as environmental ones. Will you pick up the concern that he raised about the need for additional scrutiny and the expectation that there would be a more detailed approach than mere technical updates?

George Riddell: If I understood correctly, Professor Winters’ point was about the potential for including new entities on the list and going further than the UK’s current commitments with regard to the GPA, leaving the continuity agreements question to one side. There are two aspects here. From my understanding of discussions in Geneva, they have been very focused on understanding what the UK’s current machinery of government looks like and how that could be represented as part of its GPA commitments. Certainly, the Government have said, from my understanding, that they do not intend to change the scope of the commitments, even if technical updates are necessary. I would not want to go further than that.

[Katherine Fletcher (South Ribble) (Con)]

Q Hello, Mr Riddell. Thanks for coming. I hope that the Committee will bear with me, as this is slightly out of the scope of the Bill, but I was particularly intrigued by the point that you made about measuring our trade and exports in services better. You alluded to a way to become a global leader. What would good look like in that space, as we look to get the Bill through and then move on to the next phase?

George Riddell: Two initiatives have been undertaken recently. One is that the Office for National Statistics has launched its experimental trade in services datasets, which it is looking to continually improve. Anything that supported that initiative would certainly look good. For the past Trade Bill, in the previous Parliament, a number of organisations, such as TheCityUK, put forward written evidence with more concrete suggestions. I do not have that with me, unfortunately, but I am happy to share it.

Coming to the point on the data being notoriously unreliable, both the US and the UK claim that they have a trade surplus in services with each other. There have been a number of attempts by statisticians on both sides to try to bottom out why that might be the case. It goes to show that, often, trade in services statistics are indicative and a good rule of thumb, but putting too much faith in them is not necessarily a wise move.

[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

Q Professor Winters, you were talking earlier about how the procedures, as set up, would allow the Government to set up major changes through secondary legislation without, perhaps, sufficient scrutiny. What powers do you believe Parliament should have in that situation over the Trade Bill?

Professor Winters: I confess that I do not know how to draft it in legislation, but I would suggest that one has something in the Bill that gives concrete form to the statements that we have that the Government expect not to use it to make major changes, and that such changes would come with primary legislation. At a practical level, one would need some sort of early-stage scrutiny to identify issues that were mere technicalities or minor issues, and to flag up larger issues that might require primary legislation.

I am afraid I am not a draftsman. I do not know how to write that, but it seems to me that that is what we require. This is a very sensible, pragmatic tidying-up Bill, but it seems to have loose ends that might, under some circumstances, lead to places other than those that the Bill says it is intended to cover, and more than the House would wish.

--- Later in debate ---

[Bill Esterson]

Do you think that it should be covered in the Bill? It is not, as it stands. Do you think that it should be, and why?

Ian Cranshaw: There is an awful lot of work going on in chemicals, and the Government are keen to deliver a chemical strategy. That is something that DEFRA has covered over the past couple of years, and it is right that we have one. We have no issue with the amount of regulation on the chemical industry. We are dealing with sensitive products, and they ought to be regulated in the way that they are. Again, we have had a good hearing from the Government, but it is about the criticality of making sure that any deal with the EU—this is key for us—can include access to data sharing, because we do not need to replicate the testing of individual chemicals to build up a UK database when a perfectly functional database exists at the European Chemicals Agency. There is plenty of provision elsewhere for chemicals and chemicals regulations, and I do not necessarily think that it needs to be in the Trade Bill.

[Katherine Fletcher]

Q I have the same question for both of you, with your respective hats on. You mentioned that the Bill has been knocking around since 2017. What happens to the chemical industry if we do not pass the Bill?

Ian Cranshaw: That is probably me for me, because Richard is focused on steel. It is really important. We want a Trade Remedies Authority to be established, fully functioning and delivering support for UK industry from 1 January next year. Chemicals go into every other manufactured good. There are chemicals in the automotive sector; there are chemicals in chlorination of water; there are chemicals in putting the aroma into the natural gas that we all use in our stoves every evening. Chemicals does have downstream industries that will all be impacted, so we need a strong chemicals sector.

If I am honest, looking at remedies and chemicals, there are not a huge number of current remedies in place in the EU, so when the Department transitioned those remedies that were relevant to the UK, did a call for evidence and assessed exactly which remedies should be brought into the UK, of the 23 remedies that existed in the chemicals sector, only two were transitioned into UK law. I am not suggesting that it is a huge area, but it is a very significant area, and those two remedies that are in place are very important to those companies, and to downstream industries in the UK. One of them is producing fertilizer, and it is the major supplier of that fertilizer in the UK, so you can appreciate that its availability to UK farmers is absolutely crucial to their operations. If they were exposed to unfair trade from external operators, that really would be a significant loss to UK capability, especially when we are looking at supply chains and ensuring that our really critical production is safely onshored at the moment.

[Katherine Fletcher]

Q Mr Warren, if there were continuity trade agreements that did not roll over, what would be the consequences for the steel industry?

Richard Warren: There are a number of agreements that are obviously already in motion to be carried over. One to highlight is that north African nations like Morocco, and South Africa, are important markets for steel. It is a bigger concern that the agreement for one of the biggest markets for our UK exports, Turkey, probably will not be carried over, regardless of the Bill. Whilst the Bill would allow for it to be carried over—the steel element, without getting into too many dull details about the coal and steel free trade agreement between the UK and Turkey—it seems like it is an almost impossible ask now to get that carried over.

So that wider concern, that sits outside the Trade Bill, is a bigger one for us; it is a very important one. The Trade Bill would allow that to legally happen, but with politics and the complexities of negotiations, I fear, that agreement will not be in place by the end of the year, which would result in 15% tariffs, on average, on UK steel going to Turkey—8% of our exports. It is an extremely competitive market already; a 15% tariff would pretty much knock that on the head. At the same time, because the UK has no tariffs on steel, we would still have up to half a million tonnes of steel coming in from Turkey, but it would be a very uneven trading relationship at that point. That is probably our biggest concern at this point, in terms of continuity trade agreements.

[Katherine Fletcher]

Q Understood. So the not passing of the Bill makes the situation impossible, probably, for certain—

Richard Warren: Obviously, yes. If we do not pass the Bill, there is no way that the Turkish agreement can be passed, but there are other complexities on top of that.

[Katherine Fletcher]

Understood; that is something to avoid.

[Matt Western]

Q May I delve a bit further into the Trade Remedies Investigations Directorate? You were explaining, Mr Warren, about the one case going through, and some of the challenges in terms of expertise—that is, resource ability and capacity. To what extent do you think the Bill should be defining the scale of what a TRA should look like, recognising that, post this crisis, and given the economic headwinds globally prior to the crisis, there is a huge amount of pressure on Governments to reshore, with all that that will mean in terms of how Governments adhere to certain agreements? Maybe we can start with steel and go on to chemicals.

Richard Warren: Certainly. As I said, the vast majority of how the trade remedies regime will operate—the responsibilities of the organisation itself, how it reports to the Secretary of State and so on—are dealt with within the Taxation (Cross-border Trade) Bill and the secondary legislation. There were still outstanding issues that we had with that legislation. Obviously, it has passed now, and we are working with the regime as it has been established. If we had an opportunity as an industry—we are talking about a hypothetical now—to strengthen the trade remedies regime, change elements of how it was operated, perhaps be more explicit in legislation about how those investigations are conducted, and change certain elements of the methodology, like dumping and how we treat certain non-market economies, that would be fundamentally best be dealt with in the Taxation (Cross-border Trade) Bill and the secondary legislation that supports it.

This Bill is fairly cursory in what it establishes in the trade remedies regime. Our key request at this point remains the make-up of the non-executive membership, rather than dealing with precisely how that regime operates. It really is the customs Bill that we would look to if we were making changes.