Trade Bill

Lord Lansley Excerpts

2nd reading (Hansard): House of Lords
Tuesday 11th September 2018 Lords Chamber

[Lord Lansley (Con)]

My Lords, it is a pleasure to follow the noble Lord, Lord Livermore, not least because I did find occasion to agree with him on certain points. I was particularly pleased that he reiterated the metaphor used by the noble Lord, Lord Liddle, because those of us who are gathered here at the moment are all giving up our three-course dinners for the purpose of Brexit.

I join with others in congratulating my noble friend Lady Meyer on her maiden speech. The character of what she had to say, her heritage, experience and proven values all demonstrate what a valuable addition she will be to our debates and to the House. I should like to add from my own point of view that this is the first occasion on which I have spoken this year. My medical treatment made it very difficult for me to participate in debates until now, so I am particularly grateful to colleagues for their many kindnesses over that period. I want to put on the record that this House is a very good place for looking after people. Lastly, I draw attention to my entry in the register of interests, in this instance my co-chairmanship of the UK-Japan 21st Century Group. Six parliamentarians from this House and the other place were in Japan the weekend before last for the annual conference of the group, so perhaps I may return to the issue of Japan. I agree with much of what my noble friend Lord Trenchard had to say; he understands Japan extremely well.

My noble friend Lady Fairhead gave us an excellent introduction to the Bill, and she spoke very well back in December in our previous debate on trade policy. I agree with her that the Bill is necessary to ensure continuity. There is a frustration, made perfectly clear by the noble Lord, Lord Livermore, at the effort that is having to be expended to maintain the status quo. This is part of that effort. However, in this instance, if we go down the path of Brexit—especially if we do not have a withdrawal agreement in place at the end of March next year—the need to have this Bill in place is obvious to all.

Few noble Lords have mentioned the Trade Remedies Authority. It is important that a shadow TRA is in place, even if there is an implementation period and the European Commission continues to exercise those responsibilities during that period. Many years ago, I was responsible for the generalised scheme of preferences in the chemical industry at the DTI and anti-dumping cases. I know that the degree of knowledge one has to acquire of not only the trade environment but the industry to which those remedies are to be applied—internationally, too—is not acquired quickly. It is the product of long and sometimes exhausting work. Getting a Trade Remedies Authority up and running is a priority for us, even if it takes the best part of two years before it is imposing remedies.

My main point concerns the customs union. I will not repeat what was said by the noble Lord, Lord Kerr of Kinlochard— he said it better than I could and I agree substantially with him—but I want to come back to the customs union, which I voted for in the withdrawal agreement legislation. My noble friend Lord Tugendhat said that we asked the Commons to think again and it did, but answered that it did not endorse this point. Of course, the other place was not strong-armed into it, as I think somebody said. I know colleagues there who supported this matter, a significant number of whom did not support that amendment because they supported the Chequers deal and wanted it to go ahead. In a nutshell, if we could get everything that the Government are looking for in the Chequers deal, including no rules of origin, frictionless trade and diagonal cumulation—meaning that in the free trade agreements, local content in the UK is treated as EU content and vice versa—we would be pretty close to what we genuinely need. That is the beauty of the Chequers deal. If the EU sign up to it, all will be well and good. But it may not, and the point at which it may not because it regards the deal as trespassing on too many of its red lines is the point at which colleagues in the other place will have to reconsider whether we should be in the customs union or out, on a no-deal basis. That is a different question, on which they should be asked to think again. Frankly, I suspect that during the passage of this legislation we will have the opportunity and occasion to reconsider the issue in broadly those terms.

As my noble friend Lord Trenchard said on Japan, it is very clear that we should be moving through a sequence and grandfathering the EU-Japan agreement. People are asking whether Japan will do it; the answer is yes, because it does not think that the agreement is long term. It is very pleased about and supportive of us joining the CPTPP, which offers us some advantages. For example, the e-commerce provisions in the TPP 11 agreement significantly benefit our strong digital market offer, relative to what is in the EU-Japan agreement, so there is a reason to transition to that multilateral agreement. As part of talking about our future trade policy, we should look for such opportunities, specifically multilateral trade arrangements. There is a reason why President Trump likes bilateral agreements: in a world of purely bilateral agreements, might is right, and more often than not, he will win on a straight bilateral trade negotiation because of the sheer weight of his economy. Frankly, that is why we are in the EU: to give us the weight in trade negotiations to counterbalance the United States, and now China. He fights those battles thinking that he still has the weight to do so. We should not allow him to go down the path of bilateralism and dismantling WTO machinery, as referred to by my noble friend Lord Tugendhat. That is what he aims to do and we must frustrate him by being advocates of multilateral agreements across the globe.

I have two final points. First, supporting the WTO also means reforming it, which we have not talked about. Perhaps we will be able to introduce some of these issues in debating the Bill. We should be very clear: the WTO should do more on e-commerce, mutual recognition of standards on an international basis—as President Obama set out to do in 2012, although he did not get very far—and developing the General Agreement on Trade in Services, which it is in our interest to push through in that forum. As my noble friend Lord Tugendhat said, we should make sure that the dispute settlement works because at the moment, that is the one bit of the WTO that everybody has to rely on more than anything else and the Americans are trying to dismantle it.

Secondly, I will not reiterate everything that has been said about trade promotion and export support, but FTAs are only as good as the use we make of them.

Many points have been made by my noble friends Lord Lilley, Lord Horam and Lord Cavendish, and others, about the necessity of supporting export promotion. It is not just about government; it is about industry’s capacity to do it. When I was deputy director-general at the British Chambers of Commerce, we introduced the active exporting scheme and ran the Export Marketing Research Scheme. The trade bodies and the chamber of commerce movement could—and should—come in and support the Government internationally. Look at the Handelskammern in Germany and what they are able to do in support of German industries. I encourage us also, in debating this important and necessary Bill, to talk about how we can develop our international trade policy and export promotion effort.

Trade Bill

Lord Lansley Excerpts

Committee: 1st sitting (Hansarad): House of Lords
Monday 21st January 2019 Lords Chamber

Trade negotiation is no longer just a matter of the import and export of widgets. It is about social rights, environmental rights, the provision of healthcare and investment protection. There are trade-offs between dossiers. The public are entitled to know what the Government are doing. We here are duty bound to have a role in scrutinising what the Government intend to do. On Dr Fox’s current negotiations on the 36 or 39 successor agreements or whatever it is that are going to be ready one minute after midnight if the foreigners get their act together and start doing some work, even our closest friends in places such as Australia and New Zealand sense our vulnerability. They are not happy just with the pro rata division of quotas. They see a chance of gaining a concession. That concession will affect interests in this country; for example, the hill farmers or the dairy trade. What do they know about what Dr Fox is planning to do to them? They know nothing. What is our job? It is to pin down the Government on what they are going to do. That seems a reasonable request by Report stage. We should not down tools, but we should vote with the Leader of the Opposition in her amendment.

[Lord Lansley (Con)]

My Lords, the point made by the noble Lord, Lord Kerr, would be valid only if this Bill were designed to give the Government a power to make a free trade agreement with a country such as Australia or New Zealand, but it is not. I participated at Second Reading, as did the noble Lord. Therefore, he will know that the Bill is designed as a continuity Bill. It is not a Bill to provide a power for establishing new free trade agreements, but to give the Government a power to ensure that the existing free trade agreements which the European Union has with third-party countries are able to be continued in law in this country after exit day. Much of that is already able to be incorporated into our law by virtue of the EU withdrawal Act, but some aspects would not. On that basis, this Bill is not, as most people in this debate seem to be saying, a mechanism by which to establish new free trade agreements with lots of new countries and we need therefore to know what the scrutiny process is; it is a continuity Bill and we should see it solely in that context.

[Lord Reid of Cardowan (Lab)]

My Lords, I have only one brief point to make in response to our noble colleague the noble Lord, Lord Strathclyde. He said that this is an extraordinary procedure. That is because we live in extraordinary times. No one in this country would have imagined even two or three years ago that we would be standing on the eve of the biggest act of self-immolation in economic terms in some 80 years and yet have no plans for the future. I was going to say that the continuity of which has been spoken is a vacuum, but that is too substantial a word for it. It is the most extraordinary set of circumstances that we have seen in my memory, having been involved in politics for over 40 or 50 years, and every day it gets more extraordinary.

Quite apart from the Bill, this morning Downing Street was apparently briefing that the solution would be for Downing Street to amend the Good Friday agreement—forgetting that even if that course of action might commend itself to this House, the Good Friday agreement is the product of two sovereign nations in a bilateral agreement, along with an American President and eight parties in Northern Ireland itself. Yet they speak as though they are ordering a pizza—as if they can just phone up and suddenly the order will be changed. If the noble Lord worries about extraordinary measures taken by this House, he should seek to remove the Government from the extraordinary position of incompetence and blindfold Brexit in which they find themselves.

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[Lord Hain (Lab)]

My Lords, I apologise to the Committee for coming into the Chamber just a couple of minutes into my noble friend Lord Stevenson’s speech. I hope that it is in order to continue to make a brief contribution.

I follow the speeches of my noble friend Lord Wigley and the noble Lord, Lord Purvis, as well as that of my noble friend Lord Stevenson, in saying that it is vital that, particularly in respect of the devolved Administrations— I speak as a former Secretary of State for Wales and Secretary of State for Northern Ireland—we do not see an action replay of what we saw earlier in this whole fiasco. I am talking about a power grab by the Government that repatriated to Westminster powers that had already been devolved but were under the European Union’s aegis. That showed a cast of mind in the Whitehall machine of the Government that I encountered as a Secretary of State, whereby the natural instinct of other departments—particularly Defra and the Home Office, although it went more widely—is to centralise, grasp and keep power, not to devolve it. It is essential that, as the amendment seeks, there is a recognition by Ministers that the natural instinct will be to consult the devolved Governments—and in the case of Northern Ireland, whatever is there; maybe senior civil servants, as now. That should be the immediate instinct of every Minister and every senior official in every government department as they process all this.

My second point relates to paragraph (e) in the amendment, which refers to “appropriate consumer groups” and so on. Will the Government consult the CBI, the FSB, the IoD, the TUC and consumer groups, let alone all the other NGOs that might have an interest? Will that be a natural reflex, as in consulting the devolved Administrations, or will they have to come back in right at the end? I hope that the Minister will be able to give us some reassurance on the record about all that.

[Lord Lansley]

My Lords, perhaps I may start with Amendment 3 in this group. I am not sure that I understand why it is necessary to do this, as Parliament is approving our membership of the government procurement agreement by virtue of this legislation. It seems to me that we are going through that process now, and the amendment is therefore unnecessary.

Again, I am not sure that I understand why Amendment 2 is needed. Section 7 of the European Union (Withdrawal) Act makes provision for how legislation can be modified by subordinate legislation. I do not see anything in the Bill that disapplies Section 7 of the withdrawal Act, and therefore it applies. We do not need to say it in order for it to apply.

I think that there is a point in Amendment 1, although the drafting is not quite right. In so far as the regulations would relate to changes to government entities for the purpose of the rules on public procurement or the annexes to the GPA, surely it should particularly draw attention to consultation with those government entities or specifically focus on the business organisations or others that would be affected by that public procurement issue. There is a drafting issue about who is likely to be affected. I know that the amendment states that they should be consulted but we need to focus on the entities concerned and how they are changed by virtue of these regulations.

[Lord Monks (Lab)]

My Lords, perhaps I may interject, having been general secretary of the European Trade Union Confederation for eight years and, during those eight years, having been consulted on the trade arrangements and negotiations being made by the European Union, particularly with Canada, South Korea and, to some extent, Japan. It was a very structured and ordered process, and the logic of it was that free trade generates tremendous wealth and a lot of economic activity but can result in wiping out areas of activity where our industries are less well placed than those in some other countries. So, having a social dimension or some social protection was always our aim in the discussions in the European Union—with mixed success, I might say. The South Korean agreement I am rather pleased with; less so, probably, the Canadian one, surprising as that may seem.

I want to see in the agreements balance between free trade and some protection for the sectors that will be particularly affected. I do not necessarily mean protectionist protections. Welfare state protections, adjustment protections, retraining and redeployment programmes were the kind of things that were encouraged in the trade agreement process. That was because trade unions, employers and others were encouraged to take an active part in the formulation of these agreements. I am looking for assurances from the Government in support of these amendments that, as they approach this new responsibility for a British Government for the first time in many years, they will have that sort of philosophy and approach, and will not simply—desperate as no doubt Dr Fox is to make some agreements pretty quickly—let these be agreements that give up on the need for proper protection for the people who will be adversely affected, as they will be by these agreements.

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Speed is of the essence. Therefore, as the powers in subsections (1)(e) and (f) will be used only to update the list of central government entities, it would be disproportionate to consult local authorities, trade unions, consumer groups, businesses and NGOs on this clause as these would be small technical changes made to the UK’s annexe to reflect machinery-of-government changes. The noble Lord, Lord Monks, raised the issue of trade unions being involved in future policy. They have already been included in the consultation on the future, but this is about the continuity of subsections (1)(e) and (f) of the GPA. As noble Lords will know, the GPA mutually opens up global procurement markets among its parties. It opens up procurement activities for our businesses worth an approximate £1.3 trillion annually. We are seeking to maintain continuity for business by remaining a participant of the GPA. Clause 1 allows for the UK’s independent membership of the GPA rather than its membership through the EU, and that needs to be implemented in domestic regulations.

[Lord Lansley]

I am sorry to interrupt my noble friend. She will know that part of this process is, as she rightly said, the sharing with the WTO of the prospective schedules for our accession to the GPA. Those schedules are about not just which government entities are on the list but also the coverage. Is it the Government’s intention, presumably already shared, that the coverage schedules—for example, and this is something to be particularly aware of, the extent to which health service procurement is covered by the GPA rules—are the same as the EU’s? Could my noble friend share with us by what mechanism a consultation would take place if the Government proposed to change the coverage schedules?

[Baroness Fairhead]

I thank my noble friend for that important question. I think this issue comes later in the amendments, but I can confirm that we intend essentially to take exactly the schedules that currently exist for the UK, as they exist through membership of the EU, and put them into our new independent membership, so that those do not change.

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[Baroness Fairhead]

I can confirm that we are copying the existing schedules directly across. There are no changes, so there is no need for scrutiny of changes, because no changes will be brought across.

[Lord Lansley]

I want to come back to that, because I think there is a point we need to establish. There is no question about the continuity of the existing schedules; the Minister has made that clear. However, if the Government wished to change the coverage at any point in the future, where is the power to do that? It is not clear to me that Clause 1 provides that power. It takes specific power in relation to the list of government entities, but not the coverage schedule. Of course, if there were such a power, we could look at the scrutiny process applied to that power.

[Baroness Fairhead]

I reassert that there is no power in the Bill to make any changes to those GPA schedules. We can come on to future policy, but this Bill is about continuity and making sure they are put in for the UK as an independent member. As the noble Lord will be aware, there are very explicit protections for our National Health Service. They exist as an exemption in our existing GPA; with the schedules being carried over, they will continue to exist as an exemption. We are very clear it is for the UK to look after the NHS and we intend to continue to do that.

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[Lord Stevenson of Balmacara]

My Lords, the previous debate was about process and how approval mechanisms were in play. This amendment has been grouped with Amendment 5, in the name of the noble Lord, Lord Lansley, which I support.

Amendment 4 shows the sorts of arrangements and concerns that we might have in trying to ensure that procurement works more generally in favour of social objectives—a point made earlier by my noble friend Lord Monks about the work he did in Europe in relation to trade Bills and discussions on these areas. We do not need to spend much time on Amendment 4. The list that appears in it is a familiar one to anyone involved in policy on business during the last three or four years. There has been a sense of the Government beginning to emerge from a period of non-engagement with many of these issues into having similar concerns to those on this side of the House about the way in which it is occasionally necessary for government to raise standards, by making it clear that certain behaviour within business is not acceptable. For example, many Members of the House present today will be aware of the long-running saga over the maximum periods for payment of invoices. Over the years, we have tried to get some movement; yes, there has been some, but it would be nice to see the Government pick up and run with this issue for a change.

The list in the amendment is variable in what it does. There are some high-level issues, for example, to do with,

“the transparency of laws, regulations, procedures and practices regarding government procurement”.

I hope that that provision would be unexceptional. The amendment refers to,

“minimum employment standards, rates of pay and similar employment rights”,

which I think feature in the Statement that we are shortly to receive which was made in the other place earlier this afternoon. I have mentioned the payment of invoices and the scandal of late payment; the drag on the economy from that is now worth something like £40 billion. The list also refers to,

“environmental standards … human rights obligations … equalities legislation”,

and all those arrangements have been well worked through in terms of discussion. Would it be so difficult to require that anything done under the GPA in relation to Her Majesty’s Government’s work, or by those devolved authorities which are also involved, tries to ensure that we raise standards in the workplace? These proposals are worthy of consideration and I beg to move.

[Lord Lansley]

My Lords, Amendment 5 is in my name. At the risk of being chided gently by the noble Lord, Lord Stevenson, to an extent I guess it must be regarded as moving from continuity. We will inevitably enter a series of such debates, but this Committee will be none the less useful for at least exposing some of the issues that policymakers will need to consider as they look at using the powers that we propose to give the Government.

Amendment 5 is intended to reflect that under the government procurement agreement, a number of other countries—not the European Union—take the opportunity to put in exceptions to their procurement arrangements that are consistent with pursuing objectives for promoting small and medium-sized enterprises in their own economies. I suppose that the most prominent such example is the Small Business Act in America. Those countries have done this because, in certain circumstances, it can lead to some discriminatory behaviour on the part of government entities undertaking procurement. I freely acknowledge that the European Union does not do this; essentially, because it takes the view that it has created EU public procurement rules that are intended to be wholly non-discriminatory. Those are non-discriminatory between all 28 member states and, by extension, the view the EU took was that it would be unreasonable for it to attempt to discriminate between EU and non-EU countries in taking advantage of the general procurement agreement.

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[Lord Stevenson of Balmacara]

I fully accept what my noble friend has said, and I am sorry if I misrepresented him. I think he has the right point there. It picks up what I was going to say about the point made by the noble Lord, Lord Lansley, that contracting is often seen in terms of large contracts issued by central government to very large manufacturers, and of course it is not like that. The work of the BEIS department in setting up not only the industrial strategy itself but the way it will roll out to the smaller end of the market is a very important element of that. I am sure we all accept that there is a future there for a much broader engagement with big and small projects, but also for a wider range of activity where innovation, skills, flexibility of movement and the ability to adapt to new environments—such a hallmark of SMEs—are used and capitalised on for the benefit of our public good.

In a sense, it is good to hear from the Minister the progress in setting and achieving high standards in our procurement arrangements. The points that need to be brought forward are not just the range and need for these issues to be picked up in all our consideration of contracting; we must not be left behind if other countries are using the GPA, or indeed other measures, to achieve change in their environment and economies, and benefiting from it. We must not miss out on that; we need to have a strategy for it.

The points made about the SME end of the market, particularly in relation to making sure—

[Lord Lansley]

I am sorry for interrupting. It might be helpful to say that one thing it would be useful for the Government to look at is that, other things being equal, we want other countries not to put down exceptions or engage in any discriminatory behaviour and to be as open as we can possibly make them. We should therefore at least look at what a number of other countries seek to do by putting down their own exemptions—such as the US, in relation to the Small Business Act—and from that arrive at an understanding of what position we will be in relative to them. The GPA should be very much about reciprocal openness of markets, rather than discriminatory behaviour.

[Lord Stevenson of Balmacara]

I absolutely agree with that.

My final point is to pick up on the SMEs and the need to consider them not so much as one amorphous group but to try to find ways of reaching out to them in terms of how they operate. I think there is a feeling abroad—it may not be correct—that the Government have a one-size-fits-all approach. That will not work when you are trying to look for innovation, change and the other points I mentioned. So, picking up the points made by the noble Lord, Lord Livingston, we should be very careful about how they can contribute and what will make them engage more than they currently do. The noble Baroness, Lady Neville-Rolfe, said we should make sure we have material help that is actually useful to them, rather than them having to fill in thousands of forms and go through impenetrable websites—I think we are all quite aware that that happens; indeed, we have had examples in this House. I think the point made by the noble Lord, Lord Risby— that there is so much there that can be done—was also well taken. It is an effort we all have to be engaged in if we are going to do it. With that, I beg leave to withdraw the amendment.

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I would like to make a personal point: I hope the Government will not approach the question of to what extent parliamentary scrutiny should be allowed and what sort of procedures would be right— super-affirmative procedures, says the noble Lord, Lord Purvis of Tweed, and I agree with him—too restrictively. I spent my youth in Whitehall. I do not think this is a zero-sum game, where giving the legislature more of a say is damaging to the Executive; it is not like that. I spent quite a lot of time negotiating with Americans. The favourite American argument, when one has defeated them on the substance, is to say, “I hear you, I understand you, but Congress would never buy it”. Having, and being known to have, a thorough legislative scrutiny procedure is an extra card in the Government’s hand and quite a useful one. I suggest that, as the Government make up their mind on these matters before Report, Ministers should encourage officials not to be too cautious and restrictive.

[Lord Lansley]

I would like to say a brief word on this group of amendments. On the latter point made by the noble Lord, Lord Kerr, I entirely agree. He is quite right about the use of, as it were, the scrutiny reserve in negotiations. It is important to have it available. But in these negotiations, of course, one is negotiating to bring in what are effectively new provisions in new agreements. The question is: what is required in relation to existing agreements?

On Amendment 101, I am a bit confused because it refers specifically to free trade agreements and to those which come under Clause 2(3). It seems that we are talking not only about free trade agreements, but about international trade agreements arising under Clauses 2(2) and 2(3). The noble Lord, Lord Purvis of Tweed, might be looking for something slightly wider than what he has put down in his amendment. We will leave that to one side for a moment. The point is this: in the Explanatory Notes, Ministers are quite clear that the intention is to bring existing agreements into effect through the Bill; we are working on that basis. However, there are circumstances in which the substance of an existing agreement, when it is converted into UK law, has to be amended to make it compliant with, or to enter it into, UK law. Paragraph 56 of the Explanatory Notes, for example, says:

“Although the Government’s policy intention is to ensure continuity as far as possible in the effects of the UK’s current trading arrangements, the new UK-partner country agreements that are implemented using”—


if the small typo “of” is deleted—

“this power will be legally distinct from the original EU-partner country agreements on which they are based. It may also be necessary to substantively amend the text of the previous EU agreements … so that the new agreements can work in a UK legal context”.

The point of this paragraph is that trying to achieve the same effect does not necessarily mean that we will not have to amend the agreement; we may have to do that. We are getting ahead of ourselves. Surely the point is that what happens in those circumstances should be covered by Clause 3(3). A specific report must be laid before Parliament for that purpose.

I do not subscribe to the way in which the noble Lord, Lord Purvis, is proposing to go about this but, particularly when we come to talk about Clause 3, we might make sure that parliamentary scrutiny is applied to the differences between the provisions of the existing agreements and the agreement as it will be incorporated into UK law. That is the point we have to look at. Everything else, frankly, has been scrutinised in the way that the Minister made clear.

[Baroness Fairhead]

My Lords, my noble friend Lord Lansley has made a suggestion which I will definitely reflect on, as it is important that these reports give appropriate information. With respect to making the Clause 2 powers super-affirmative, I am concerned that the amendment would damage our ability to deliver the promise of continuity, particularly when time is of the essence. That increases the risk of a cliff-edge. We are trying to offer reassurance by providing these reports; as I said, I will reflect on my noble friend’s comments.

My response to the noble Lord, Lord Kerr of Kinlochard, is that I too am thankful for the conversation we have had. It is exactly the kind of conversation that helps because, given his experience, it aids an informed debate. I want to clarify my response about what we will report back to the Constitution Committee: this will be specifically on the Trade Bill, not on the future. However, I have said on the Floor of the House that we are open to views and we will be coming back with detailed proposals. The noble Lord commented on different ways that one can get negotiating leverage. We are always looking for negotiating leverage; sometimes it is really effective and sometimes not so much. But I take his point that we should be thinking about all the things we can do to add to that.

We have already shared some views with regard to future trade agreements. I am open to hearing views from all Members around the House about what our approach should be. Given all the elements of oversight and scrutiny that we have put in place for these trade continuity agreements, I hope that I can reassure the House and would therefore ask the noble Lord to withdraw the amendment.

Trade Bill

Lord Lansley Excerpts

Committee: 2nd sitting (Hansard): House of Lords
Wednesday 23rd January 2019 Lords Chamber

[Lord Fox (LD)]

My Lords, had we debated this amendment during the last session, the night before last, we would not have had the benefit of yesterday’s report from the IPPR think tank on the subject of state aid. It reinforces the point made by the noble Viscount, Lord Trenchard, that the United Kingdom is a restrained user of state aid when compared to other countries in the European Union. That gives the lie to some of those who believed that the European Union was restricting the UK Government’s decision on the scale of state aid in this country—and that message might be conveyed to some members of other parties in the other place who are alleged to believe that the European Union would continue to restrict industrial support activities.

I was surprised to hear the huge shopping list that the noble Viscount, Lord Trenchard, presented for further state aid—his is not a voice that I had imagined would be making that point. That highlights the need for a state aid strategy. If we have an industrial strategy—which we do, whether some Members opposite like it or not—the purpose of state aid is to find strategic ways of delivering it in the best possible way for the best possible good of this country and its trading environment with the rest of the world.

Whether we trade as an EU nation, through FTAs or, as some people dream of, on WTO terms—which would be a nightmare for the rest of the world—there will still, sensibly, be restrictions and rules affecting what aid we can give and what restraints we have to apply. In spirit, therefore, I support the amendment, and I am interested to hear the Minister’s response.

I have a query that will probably reveal my ignorance of the process of legislation. Paragraph 4(1) of Schedule 2 contains a more general injunction around statutory instruments and consultation. I wonder whether that part of the Bill may pick up, to a large extent, what the noble Lord, Lord Stevenson, seeks to achieve. I would be happy to be wrong about that, but it would be helpful if the Minister, either now or later, would fill us in on that.

[Lord Lansley (Con)]

My Lords, I understand the point the noble Lord is making and exploring on this issue, and when we explore that point, it is worth saying that much depends on our future relationship with the European Union, and how we incorporate state aid into that. If we were in the European Economic Area, we would apply EU state aid rules; that is what EEA members now do. If we were in a free trade agreement with the European Union—as Canada and South Korea, for example, are—we would do something different. State aid provisions are built into those agreements, but they are based not on EU state aid rules but on the WTO Agreement on Subsidies and Countervailing Measures. That will all entirely depend on what the future relationship looks like.

The point has correctly been made that we use state aid proportionately less—about half as much, as a proportion of GDP, as the French do, and a quarter as much as the Germans. So state aid rules themselves have not necessarily restrained us from doing things. The noble Lord will be aware of the report on competition and state aids by the committee of which I have the privilege to be a member—the Internal Market Sub-Committee of the European Union Committee. The Government’s approach is, essentially, that we will replicate EU state aid rules in UK law, but we will, of course, be repatriating them so that they are exercised by our authorities rather than by the European Commission. In that context, it will be the Competition and Markets Authority, rather than any other body, which does that in this country—and it will do so independently.

If I remember rightly from the evidence that we received—I stand to be corrected if not—the Government’s intention is for this to be done by the CMA on a UK-wide basis, and not to be disaggregated to individual nations or regions. Clearly, the state aid rules themselves may have geographical parameters, as ERDF and other EU funding has done in the past, but that is a different matter. The rules on the application of state aid would be applied in this country. So we will have something considerably beyond the WTO requirements. For example—this is probably the best example and the most important for businesses—EU state aid rules would require us to have processes of notification and prior approval whereas, where WTO rules are concerned, if the Government engage in subsidy then they do so at the risk of post-hoc challenge and complaint. That is quite a different structure.

I say all that simply because, while this is an interesting issue, I am not sure whether the amendment does the job. However, I put it to the noble Lord that he might suggest that if future trade agreements of this kind, which are generally with third-party countries, were to apply state aid rules in a UK and third-party country agreement which differentiated from the WTO subsidies and countervailing measures provisions, that should be the subject of consultation and approval in this House. I cannot see why we would want to approve an arrangement for a WTO agreement on subsidies, which would simply be applied in the normal course of events. I hope that those few remarks are helpful.

[Lord Lea of Crondall (Lab)]

My Lords, a couple of the points made in the short debate on this amendment have been very wide and not actually to do with the amendment as such. Perhaps I may add a corrective: we discussed the mergers of railway companies, nuclear power companies and so on earlier today. The fact is that we look at one Chinese company against not one European company but sometimes more than one. Regarding the comment about the EEA, I am sure that the EEA will evolve while recognising that we often need one European company. It could be dressed up as something to do with either the nature of policy on mergers, competition and monopolies or with state aid policy. I put down that cautionary note because, when people say that this amendment does not do those jobs, it is clearly not intended to. However, many such wider commercial questions will have to be faced up to in the future.

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[Lord Purvis of Tweed]

It is. Ultimately, I believe that the choice is going to be that we either stay in the customs union and the single market of the EU or we leave, either with no agreement at all, which I hope is ruled out in short order very quickly, or with some form of government agreement, which did not secure majority support in the other place, where one-third of those voting against it did not believe that it was leaving the EU at all. I think where the people will now be informed in the decision is as I started: many of the issues are now laid bare about the consequences of leaving.

I am very happy to be a co-signatory to this amendment. I am very pleased that we in this Chamber are debating what the consequences of the actions will be. We are also clear that we want to do the least damage to the British economy and to secure for the future all the relationships that we have at the moment without the extra burdens of regulatory addition.

My final point, which the OBR report in October made very clear, is that if we went down the Government’s course and left, then there would be at least five years of adjustment to a worse scenario for GDP, even on the basis of the agreement. I am seeking to avoid that. I hope there will be consensus, at least in the first instance, that a customs union is necessary. There is no doubt of our position on these Benches that the customs union is preferable to all of those. I hope that will ultimately be the future of our country, and I believe that that is up to the people, who ultimately will have to decide this.

[Lord Lansley]

My Lords, I do not want to go on at length about this issue, not least because I agree so wholeheartedly with what my noble friend Lord Patten of Barnes has already said. I am always loath to do it and I hope to make it a very rare event, but I voted for the amendment to the withdrawal Bill last April. To that extent, I think this House has made its view perfectly clear: it thinks, in the context of leaving the EU, that to retain membership of a customs union with the EU would substantially mitigate what would otherwise be the damaging economic effects of withdrawal.

I do not want to get into a debate about “the” customs union or “a” customs union but, on the face of it, if we are negotiating to leave but we are negotiating to have a customs union relationship with the EU, it behoves us to negotiate without necessarily subscribing to the customs union because the customs union is a product of the treaty. We would no longer be bound by the treaty, so we have the flexibility to think otherwise. That does not turn us into Turkey, because we might choose to do things quite differently. The EU has chosen not to have agriculture within the customs union with Turkey because it is in its own interests not to do so. We have very different interests and we might choose to pursue them differently. Indeed, as one can see from the structure of the backstop, we might choose to have an arrangement with the EU that was, as Ministers are fond of saying, a “bespoke arrangement” for the management of a customs union. And why not? If we could have such a thing under the backstop, surely we could have it without the backstop.

I do not want to go on at length. I hope that those in this House and beyond who are thinking next week about what is needed to make progress from the impasse that we appear to be in at present will read this short debate. While it exposes some of the difficulties in negotiating a future customs relationship with the EU, two things should become immediately apparent. First, many of the negative consequences of leaving the EU—most especially, leaving without a comprehensive agreement in place—will be dramatically mitigated by being in a customs union. When I talk to businesses, that is absolutely at the top of their wish list, and it is true for manufacturers as well. Secondly, I hope people will realise that this does not preclude us having a trade policy of our own. What are trade policies nowadays? They are generally called comprehensive economic partnership agreements because by and large they are not about tariffs; they are about broader relationships. Especially for the UK, given that we are predominantly a services economy, for the future those agreements should be about services. We should be negotiating trade agreements about services, the movement of capital and investment, and indeed we should have a negotiation with India that includes a discussion about the mobility of workers between India and other countries. That is happening in a very powerful way: the Indians are exporting skilled young people all over the world very successfully, and we should have that in mind as part of an economic partnership agreement with other major economies. If that is true and it also gets us out of having a hard border between the Republic of Ireland and Northern Ireland, but without creating a new border between Northern Ireland and Great Britain, why would we not want to do this? That is what everyone is trying to arrive at.

For the purposes of next week’s debate there are, therefore, essentially two questions. First: does offering to be party to a customs union with the European Union, as part of the future political declaration, enable us and the European Union to agree in a way that would—as they say in Brussels—have legal force? Would it enable us to put into the political declaration, and have agreed by the European Council, the kind of language and commitments that would allow it to be said that we will not enter into the backstop, if we go down that path in the future treaty? That is what it is all about: not going into the backstop in the first place. We need some reassurance that that will happen. That will automatically solve the essence of the problem associated with the backstop. If we do not have to go into it, we will have solved that issue. We will also have solved the question of unilateral withdrawal or otherwise. If we are in a customs union, we have a right to leave it. If we go into the backstop, we have no right to leave it—as it is currently constructed— and that is a very unhappy place for many who are against the withdrawal agreement at the moment.

The second question is: can we avoid the Turkey situation? It is a bit like when people talk about entering the Norway situation: we do not want to be in a position where we are simply rule-takers. With a customs union, at least we are not rule-takers on financial services and our service industry, but we are none the less rule-takers. We do not want to be in that position. Can we arrive at a customs union where we genuinely have a shared responsibility? I hope we can.

The trouble is, I entirely agree with my noble friend Lord Patten. Nearly a year ago, if only the Government had listened and put into the negotiation—at the time that led up to the White Paper and after it—a discussion about a customs union. Instead they put into the White Paper the suggestion that we could have a customs union, without calling it that, where the rules of origins are effectively waived so that anything that originates in the United Kingdom is treated as if it is European, and anything that originates in Europe is treated as if it is British. This, of course, is a nonsense; the European Union would never accept it. It would never accept that it would raise the money—

[Baroness Kramer]

I am trying to understand the noble Lord. Obviously, the definition of a customs union is quite difficult and I was trying to follow his definition. Does he intend only the narrow definition of a customs union, where it essentially just deals with issues such as tariffs and excise duties, or does he intend it to include the regulatory alignment, as it often does because the terminology gets stretched? If there is not regulatory alignment there still have to be checks, which means we are back to the border problem. Would he explain what he sees as the content of “a customs union” because, if we are not removing the border problem, I struggle to understand his point?

[Lord Lansley]

When I talk about a customs union, I mean—as the WTO would interpret it—where we share a customs territory and an external tariff arrangement, and our tariffs are the same as the European Union’s. A customs union, in my book, does not necessarily imply having the same rules, regulations and standards. If we are in a customs union with the European Union, it does not mean that we do not have a comprehensive partnership agreement with them. I hope we would do and that would embrace everything from data adequacy to having the same standards. Therefore, we would have to work on the basis that we start with and maintain standards at least as good as those inside the European Union, enabling the European Union and ourselves to operate on the basis of open borders. The most important part of that is the absence of a requirement to establish rules of origin, because one is in a single customs territory that allows goods to pass across borders in that way.

I will finish my point. I am losing quite where I was; I think I was just beyond talking about Turkey. We have got to know that we are going to be in a position to be able to negotiate a customs union, that we will be able to withdraw from it in future, and that it will obviate the need for us to have a hard border with the Republic of Ireland. That is a really important position. We need to know these things and we should have had months to negotiate them. As it is, we have to arrive at something in the political declaration in weeks rather than months.

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Lord Lansley Excerpts

Committee: 2nd sitting (Hansard - continued): House of Lords
Wednesday 23rd January 2019 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, I sense there has been a bit of a change in the composition of the House—I cannot imagine why, because we have reached some of the more interesting elements of the Bill. Had the noble Viscount, Lord Ridley, who is absent, been present, he might have learned quite a lot. That will help me avoid the more sharply put questions.

Amendment 27 is a probing amendment in the sense that it is there to invite the Government to set out their plans, should they be necessary, in relation to GSP, the EU’s generalised scheme of preference. It is open to a wider range of issues, and in his dual capacity as Minister responsible for development, the noble Lord, Lord Bates, might well have a view that will add to our overall understanding of where we are. The noble Lord, Lord Lansley, has a similar amendment, although it is much more detailed and sharply drafted than mine is, and I look forward to hearing his comments.

It can be said in very few words that one of the things that one gets by being part of the EU is participation in schemes of the type that is being discussed here, which is an attempt to try to bring some sort of structure and order to the way in which trading relationships can sometimes impact on development activity and vice versa, by recognising that very often a good trading opportunity in a developing country is perhaps going to do more than any amount of aid, however well delivered and whatever focus it has. On the other hand, the impact of either favourable tariffs, reduced costs or support for various aspects of work on the trading side of that relationship can have quite a devastating effect.

It is to the credit of the EU—and I am sure that Ministers have been heavily involved in the shaping of the way this goes—that the GSP arrangement is being set up so that it is constantly monitored. We have recently seen the interim relationship of that. In short, the results are broadly supportive of the way the EU has taken forward this programme, with some reservations in the sense that it is probably too soon to say quite what some of the outcomes will be. It is recognising that there are longer-term benefits that will not be picked up by short-term measuring techniques, and of course there are dangers that come in relation to trying to focus too narrowly on some of the econometric figures without thinking about some of the wider social issues.

The GSP relationship, combined with Everything But Arms arrangements, is a way of seeing development happen in a constructive and progressive way, which is something that we support. In moving this amendment, I invite the Government to respond to the thoughts behind it. I beg to move.

[Lord Lansley (Con)]

My Lords, in following the noble Lord, Lord Stevenson, I am grateful for his kind remarks about my amendment. I was not required to produce any amendments and I produce relatively few but, by virtue of his responsibilities, he has to produce quite a lot of them so I think we will forgive him for the sighting shot that, in a sense, many of these amendments are at this stage.

The generalised scheme of preferences, for those who are reading our debate afterwards—I am sure that many will do so—is about giving preferential tariff reductions to developing countries to stimulate their economies and their exports to the European Union, as one of the world’s largest potential markets. It can be fairly said that it is something that we subscribe to and that we encourage. For that reason, in the Taxation (Cross-border Trade) Act 2018, the Government and Parliament have already legislated for a preference scheme in the future. Therefore, that is not the issue, which is why my amendment is structured in the way that it is. The issue is: how do we go about this? That is the point of Amendment 27. How far should the United Kingdom’s preference scheme—that is, the unilateral preferential tariff rates that we offer to developing countries—be structured in such a way as to correspond directly to what is presently the generalised scheme of preferences as reflected in EU regulations?

The starting point for this is that the EU regulations will last until the end of 2023. For the purposes of this debate, I am going to assume that we are not in a customs union with the European Union, because if we were that would automatically solve this problem. Therefore, we are outside the customs union and we have to make our own decisions about to whom we give a preferential tariff rate and when we vary from it. We did not have a debate here on the Taxation (Cross-border Trade) Act because it attracted financial privilege, so we are getting the benefit of that now. Quite a lot of the debate on the relationship with developing countries focuses on tariff reduction. That is important but, for the least developing countries, the objective is nil tariffs on—as it is expressed—everything but arms and ammunition. That is reflected in Schedule 3 to the Taxation (Cross-border Trade) Act. For the other developing countries—the eligible developing countries, as they are known—there is an objective to try to reduce tariffs to the fullest extent possible. That is already in there.

But of course the issue then is: under what circumstances do we depart from that? The fact that the GSP says nil tariffs does not mean that in all circumstances that is maintained. The European Union has not done this, but the regulation would permit the European Union to suspend the nil tariff, or indeed to withdraw the preferential rate, in respect of transgressions on the part of other states. That is a possibility where a country has flagrantly been abusing human rights. If a country chose to produce large numbers of goods for export to other countries on the basis of a flagrant disregard for child labour laws, for example, should one continue to offer a preferential rate? Many of us would say that we should not necessarily do that. We should then suspend the preferential rate in some circumstances where human rights abuses and the rule of law have ceased. The European Union has not permitted countries to be in the Everything But Arms GSP, so we have to make those judgments under those circumstances.

The point of my Amendment 65 is to say, as we proceed, that we should start with a scheme that conforms to the structure of the EU regulation, because everything is starting from the position of continuity—that happy word—but we would have the ability to move on. We may make our own judgments about the circumstances in which we would suspend or withdraw the preferential rate. It might apply in the circumstances I described. It might equally apply if we had to safeguard the industry of the United Kingdom. The same would be true in the EU, but we might choose to do it in different circumstances. For example, last week the EU applied a safeguard measure in relation to imports of rice from Cambodia and Myanmar. That may not be something that we in the United Kingdom would choose to do because we do not take the same view about rice production in this country as, for example, they do in southern European states. There will be differences and we will have industries to protect, but we do not necessarily have to follow the same approach as the European Union.

As a way of proceeding, my amendment would insert into the Taxation (Cross-border Trade) Act, under those circumstances, that the Government should come forward to Parliament, make a report and seek views before proceeding down the path of suspending or withdrawing this preferential rate, because we should be participants in that discussion.

There should also be an intention before January 2024—when the EU regulation expires—to look independently from the European Union at what our future structure on preferential rates should be. In my amendment I suggest that the Government should report to Parliament by the end of 2022 on their proposals, with a view to legislation being passed by the end of 2023 for introduction from 1 January 2024. Of course, EU competence has dominated this area of policy, but the time will come for Parliament to think about what our trade policy looks like in terms of unilateral preference rates for developing countries.

It is quite difficult even to work out the relationship between our structure of preferential rates and the EU’s. Simply to say continuity is probably misleading because I cannot actually find absolute correspondence between the benefiting countries under the EU’s standard generalised scheme of preferences, or what it calls its GSP+, which is for eight vulnerable countries. I cannot even find that we can correspond between that and what is set out in Schedule 3 to the Act. For Everything But Arms, the list is the same, so we know where we are with that. I think I found 28 EU countries that benefited from the standard GSP or the GSP+, but 43 countries that are intended to benefit from what is referred to in Schedule 3 to the Act as “other eligible developing countries”. The difference is obvious: the EU does not include formally the GSP countries which, by virtue of other agreements, have access to tariff reductions that are at least as good as would be available under the GSP—for example, it has association agreements with Egypt, Tunisia, Morocco and so on.

For us to replicate the EU’s GSP would mean significantly fewer countries having access to the GSP and to those preferential rates than would be the case in the European Union. I just say gently to the noble Lord, Lord Stevenson, that that is another reason why he and I will have to go away and think about our amendments again. It is not about reproducing the GSP regulation or the EU’s list. It is about ourselves arriving at a full list of the developing countries, particularly those which are not the least developing but countries eligible for the GSP that should get preferential rates but at the moment get them through other EU agreements. Those are not necessarily free trade agreements that will get rolled over. I am not aware that this is necessarily the case for all these association agreements; it may be for some, but not necessarily for all of them.

Therefore, I commend Amendment 65 to the extent that it raises the issue of having our own scheme, consulting on it and asking Parliament when we have to change the preferential rates. I do not commend it to the extent that I think it can be adopted at this stage, but I think we should come back to it. I hope Ministers will be willing to look at that and how they would go about managing the preferential scheme in the future.

[Lord Fox (LD)]

My Lords, I thank the noble Lords, Lord Stevenson and Lord Lansley, for bringing this issue to your Lordships’ House. We support greatly the spirit on these Benches. The noble Lord, Lord Lansley, used a contemporary example of rice. In another life a long time ago, I worked in the sugar industry for seven years. Of course, sugar is wrapped into this so deep that it is still embedded in there. On his point about the transition from us being part of a European scheme to going into a wholly United Kingdom scheme, I know that the pressure on that commodity alone would be huge, given the past relationships and previous problems that some sugar-producing countries have had within the European regime. That is just one commodity. His point is clear: that this is not a simple issue but one that requires a great deal of thought, but that thought must be had and is worth having. We support this process and will involve ourselves if necessary in how this gets taken forward. Clearly, we want to be part of a future regime that has these objectives, but the means with which to produce that are not necessarily as simple as they might look on first appearance.

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Lord Lansley Excerpts

Committee: 3rd sitting (Hansard): House of Lords
Wednesday 30th January 2019 Lords Chamber

[Lord Lansley (Con)]

My Lords, if I may add something to this group of amendments, first, I say well done to the noble Lord, Lord McNicol. He passed the first test: one of the Opposition’s central jobs is to know which subjects should be raised in Committee and make sure that they are raised. He has done us a service by doing exactly that.

Turning to these two amendments, neither is practical as drafted, but we can probably leave that to one side and focus on what we want to achieve on rules of origin. The first reason it is not mentioned in detail in this Bill is that Section 17 of the Taxation (Cross-border Trade) Act effectively puts the rules of origin requirements into law. They are the same, as far as I can see, as would apply generically to rules of origin under the revised Kyoto convention. The country of origin must be identified as that country or territory in which the last substantial process took place. But that does not really answer the point.

This is where we come to the existing international trade agreements that we might roll over. They will have been constructed on the basis that any processing that took place in the United Kingdom was processing within the European Union. We cannot assume that, when these international agreements are rolled over—whenever that will be, but a couple of years from now, I hope—products originating in the United Kingdom will be defined as including processing inside the European Union. We will have become a third-party country. That is unless, in the form that they rolled over, the countries with which these agreements have been made, and with which we enter into our future agreement, accept that origination should be cumulated between us and the European Union.

If I am asking a question of my noble friend the Minister it is: can we look to cumulation between the United Kingdom and the European Union as being a feature of the rollover agreements, such that, from the business point of view, what they have understood to be the situation prior to exit day becomes the situation after exit day? That is essentially what we are looking for.

Declaring an interest, 28 years ago I was deputy director-general of the British Chambers of Commerce. That movement was and is responsible for the issuing of certificates of origin, so it understands this rather well. Of course, that applies outside the European Union at the moment. If we are in a customs union, all those problems go away, but we had that debate on day two of Committee.

If we must deal with this issue, I say to my noble friend that I hope the Government’s discussions with the British Chambers of Commerce have been productive. I know that two years ago, the movement said that, given the nature of international supply chains, ensuring that a “Made in Britain” badge can continue to be displayed proudly on products originating in this country will require us to re-enter some complex definitions of the relationship between international supply chains and origination in the United Kingdom. It also said that it was happy to work with government to look at how that might be achieved in future. I hope that this will come forward in our discussions on Report to demonstrate that the Government have an idea of what future trade agreements might say about origination to ensure that the “Made in Britain” scheme is not frustrated in circumstances where we think of a product as British.

[Baroness McIntosh of Pickering (Con)]

My Lords, I add my congratulations to the noble Lord, Lord McNicol, on taking his place and on his performance today. Given his history, I am sure that negotiating procedures in your Lordships’ House will be less turbulent than in other places where he has worked. I thank both him and the noble Lord, Lord Purvis, for giving us the opportunity to, in my case, put questions to the Minister and probe the issue.

In particular, what will be the position in the interim period of our leaving the European Union? My noble friend the Minister pointed out in our debate— on Monday, I think—that there would be a period for these agreements, having been initialled, to be signed and approved by the relevant Parliaments. My understanding is that if we leave under World Trade Organization rules, agreements in this interim period will be on the basis of non-discrimination. So, if we, as a third country—my noble friend Lord Lansley correctly identified that we would be—chose to extend agreements to current European Union members and said, as many noble Lords have suggested, that we wished to impose zero tariffs, those agreements would have to be extended on a reciprocal, non-discriminatory basis. Is my understanding correct? In an interim period of what might be one or two years before such agreements are rolled over, whatever our preference, whatever we offered to our existing European partners would have to be offered to every other country with which we wished to trade, on the basis of non-discrimination. I do not think we have grasped that point. Obviously, it would be helpful to understand the implications for our trading arrangements.

There is deep concern among the farming community that tariffs imposed could be as high as 40% for certain products and 60% for lamb, at a time when we are exporting more meat than we ever have, historically. That would hit our producers particularly hard. It is causing real hardship in the hills because many of our farmers do not know whether to produce lamb; the supply of lamb to the home market could dry up. We would therefore import more lamb, beef and pork at a time when we should be increasing our exports there. I simply want to take this opportunity to seek answers to those queries from my noble friend.

--- Later in debate ---

[Baroness Fairhead]

I hoped and believed that I had addressed that question. The answer is yes: that certification would continue as it currently does. That is the information I have but if the situation is any different, I will write to the noble Lord.

[Lord Lansley]

I hope my noble friend will forgive me for interrupting. Just so that we are absolutely clear on which question we are having answered, it is about reciprocity. If, in relation to these agreements, we in this country are treating EU content as UK content and having it accepted as such, the question that we are looking to have answered is: will the EU’s continuing agreement with that same third-party country mean that UK content is treated as EU content for the purposes of its origination?

--- Later in debate ---

[Baroness Fairhead]

I stress one more time that this legislation is not about no deal. It is about making sure that we have the capability and powers to implement, whatever happens. Plan A is for a deal and the clauses in the Bill aim to achieve the powers and make sure that we can put them into effect. We have to be prepared for no deal. I reiterate that it is not the desired outcome, but we have to make sure that the Bill has the ability to cover both.

I hope that the statement I have made, and my answers to questions, have provided clarification and some reassurance to the Committee, and I therefore respectfully ask the noble Lord to withdraw—

[Lord Lansley]

If my noble friend will permit me, I wanted to ask one question. I know we are not debating future agreements but the manner in which rules of origin are to be established in UK legislation in future. We should work with the chamber of commerce movement to try to make that work with the business community as well.

My noble friend might also like to note that Clause 6, which was new Clause 17 on Report in the other place, was an amendment tabled by Dr Phillip Lee, the Conservative Member for Bracknell.

[Baroness Fairhead]

I thank my noble friend for that clarification. I should have said that it was not a government amendment. But I take the point.

I meant to respond to that question. We are trying to do whatever we can to provide help to SMEs and other organisations to help trade. That includes working with them on procedures and practices which will reduce the cost of, and barriers to, trade. I confirm that we are actively engaging with the chambers. If it is not on this particular point, I will take that back to the department and make sure that we include this too.

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[Viscount Younger of Leckie]

I thank the noble Lord for that. It does indeed take us back to the debate we had last week, and I hope he remembers that I gave certain reassurances on that point. What I can say—without having the details in front of me—is that, as he knows, there is ongoing dialogue with the devolved Administrations to ensure that they are kept fully in touch with what we are doing. That will be the general tenor of the ongoing discussions as we look forward to FTAs.

I would like to pick up on some of the remarks made by the noble Lord, Lord Bilimoria, in the last debate as they are relevant to this point. He asked how our approach differs from the role of the European Parliament in EU trade negotiations. He may well know this but I shall spell it out: the European Parliament’s role operates in relation to EU trade policy. We are offering scrutiny for the UK Parliament at every stage of the process in a way that is appropriate and proportionate to the UK constitutional context. In the UK, the power to make treaties is a power held by government, but the context of the negotiations will be different. The European Commission negotiates free trade agreements representing the interests of the 28 member states. It is given the mandate to do so by the Council, and final agreements are approved by the European Parliament and the Council before they can come into force. UK-only free trade agreements will be negotiated by the elected Government in the best interests of the UK. The Ministers responsible for the negotiations are directly accountable to Parliament.

[Lord Lansley]

My noble friend might also reflect that there is some truth in what the noble Lord, Lord Kerr of Kinlochard, reminded us of in previous debates. American negotiators often find there is significant benefit in having what I think they describe as “Congress reserve” in negotiations—what we might call “parliamentary reserve”. That sense of engagement with Parliament during the course of negotiations is important in itself. What happened last night in another place might give anybody engaged in such negotiations pause for thought; it is important that they know during the negotiations that they can take Parliament with them.

[Viscount Younger of Leckie]

I said at the beginning that this is likely to be a wide-ranging debate; my noble friend’s remarks will indeed be fed into the processes being considered at the moment.

I would like to address a question raised by the noble Lord, Lord Stevenson, who asked what access parliamentarians would have to negotiating texts. We take seriously our commitment to keeping Parliament apprised of the Government’s negotiating intentions. That is for the purposes not just of transmitting information but of inviting scrutiny and allowing Parliament and its committees to take informed views. While we support Parliament’s important scrutiny role, Ministers have a specific responsibility, which Parliament has endorsed, not to release information that could undermine our negotiating position. On transparency more generally, I reiterate our commitment to a transparent approach. We are developing proposals for the release of updates on negotiations; we will bring these forward shortly.

Let me say more about the consultation process, an issue raised by the noble Lord, Lord Stevenson. The amendments also seek to ensure wide consultation on FTAs, which is a good idea; indeed, that is the approach the Government are taking. We conducted one of the largest consultation exercises ever undertaken for the new FTAs we are considering with partners without an existing FTA with the EU—the US, New Zealand and Australia—and for our potential accession to CPTPP. This included a 14-week public consultation open to all businesses, individuals and other organisations in the UK and abroad, and 12 outreach events throughout the UK, including in each of the devolved nations. We have also conducted ongoing engagement with stakeholders on trade policy, including “town hall” style briefings, roundtables with different groups of stakeholders, regular stakeholder briefings and webinars designed to engage with smaller and regional stakeholders.

I would also like to touch on impact assessments. I do not propose to address—

Trade Bill

Lord Lansley Excerpts

Committee: 3rd sitting (Hansard - continued): House of Lords
Wednesday 30th January 2019 Lords Chamber

[Lord Lansley (Con)]

My Lords, I refer to Amendment 62 in my name, which is part of a series of amendments in this group concerning mutual recognition— mutual recognition of good manufacturing practice, in this instance. I was prompted to table the amendment not least because many people in the pharmaceutical industry see this issue as an important part of our future economic partnership arrangements with the European Union, whether we continue to be EU members or in the single market or not.

Like Amendment 42 on the mutual recognition of authorised economic operators, Amendment 62 relates to instances of where the European Union has substantial mutual recognition agreements with third-party countries. In the case of authorised economic operators, those countries include Switzerland, Japan, the United States and similar countries—although not China in the instance of good manufacturing practice. It would be deeply perverse for us to start with standards that align entirely with those of the European Union, whether on authorised economic operators or good manufacturing practice, looking at the two amendments. If we lost that relationship with the European Union, it would make obvious good sense to maintain that mutual recognition.

In that context, the amendments commend themselves to my noble friends on the Front Bench because they are about continuity and trying to maintain the existing structure of agreements. Of course we want mutual recognition of good manufacturing practice with not only the European Union but the United States, Japan and Switzerland because, if we leave the European Union, four of the five largest pharmaceutical companies will be outside the European Union, with two in Switzerland and two in the United Kingdom. This issue matters a great deal to this important industry. Unfortunately, given the uncertainty and the way in which the European Commission sent advice to companies on their responsibility to prepare as if there would be no deal, pharmaceutical companies have, of course, already invested a considerable amount in ensuring that their batch authorisations and conformity assessments—and the authorisations associated with those—can be conducted inside the EU 27. That has cost quite a lot of pharmaceutical companies quite a lot of money already.

The noble Lord, Lord Fox, was quite right: this group of amendments is about the plumbing, the innards, of this issue. I am afraid that day by day, evidence of the enormity of the cost—in time, energy and money—of trying to stay as close as we can to the position we would have been in if we had stayed in the European Union is mounting. It does not do to dwell on that but there we are.

Finally, I am really surprised that some of our Brexit-supporting colleagues are not here to laud Amendment 38—the lead amendment in the group— on the common transit convention, which will assist significantly with customs simplification and the achievement of some reduction in the friction that might otherwise occur in trade. It is achieved with third-party countries and is not something that the EU absolutely has to offer. However—although I stand to be corrected by my noble friends—as the noble Lord, Lord McNicol, has said, it appears to have been agreed not only that we would remain within the common transit convention after exit day but that we would continue to remain in it even if we were to leave without a deal. That is a positive development.

Associated with it is the new computerised transit system which will help us to try to make progress on some of the customs simplifications that, whatever happens, will be important to the reduction of business costs. I commend to my noble friends Amendment 62, which should certainly be an objective of the Government in their current discussions about the future relationship with the European Union.

[Lord Risby (Con)]

My Lords, I will speak to Amendment 48. I am a director of the Horserace Betting Levy Board as a government appointee, and a former Member of Parliament for Newmarket, which, after all, is historically the world headquarters of racing. Equine matters are very dear to my heart.

The situation we have, which is a tripartite deal, developed before the European Union became involved. There is some level of involvement on the part of the European Union and negotiations have been going on in Brussels between the British Horseracing Authority and the Commission. It is important to highlight this because the system has been in existence for many years and has been absolutely seamless. The relationship between the United Kingdom, France and Ireland has flourished. We can think of Irish horses winning in large numbers at Cheltenham, French successes at Ascot and Newmarket, and our own recent victories in the Prix de l’Arc de Triomphe.

The real key is this. The system of horse passports and documentation is managed in the United Kingdom by our highly respected industry bodies: Weatherbys, the Thoroughbred Breeders’ Association and the British Horseracing Authority, with the approval of Defra and the Animal and Plant Health Agency. It works extremely well and is therefore something that should be cherished. It is particularly important to the economy of the Republic of Ireland. People in the equine industry in Ireland are extremely anxious about this situation being damaged in any way.

As a result of the support over the years of our Governments for the equine industry, stretching right across party divides, it has turned into a great success story and is the best-managed and best-organised racing industry in the world. It contributes to the pleasure of millions of people who watch horseracing either at racecourses or on television. All our facilities have been upgraded and the industry should be supported.

I will refer to the comments made by my noble friend Lady McIntosh. If it were somehow possible to retrieve this from where it seems to have landed up and see it go back to its original tripartite status, which was actually free of the European Union, that would be excellent. However, the reality is that for whatever reason there has been a process of greater and greater involvement by the European Union; in which case, I will ask my noble friend two simple questions. What will happen during the transition period in this area of activity which is so important to us? What is our negotiating objective for the longer term as far as the work of the British Horseracing Authority with our own Government is concerned?

I conclude by expressing my admiration for many colleagues both in your Lordships’ House and in another place who have done so much work over the years to keep this industry up to the highest possible standards of governance and popularity. Finally, I will praise one particular individual. When the Single European Act came in and there was a change in the way that VAT was dealt with, we nearly lost the racing industry altogether. We had a huge fight, but it was saved by the former Chancellor of the Exchequer, my noble friend Lord Lamont. For anyone who is interested in and has a passion for racing, he of all people is someone to whom we owe a great deal.

Trade Bill

Lord Lansley Excerpts

Committee: 4th sitting (Hansard): House of Lords
Monday 4th February 2019 Lords Chamber

[Lord Davies of Stamford (Lab)]

My Lords, I think that this is a very good amendment and I will come to the substance of it in a second. I just want to make two points by way of introduction. First, here we are at the beginning of February—a new week and a new month—and we are still in an absolutely ludicrous position, presenting an almost unbelievable picture to the world of a country with a Government doing their best to damage their own economy. Every day we have new evidence of this. Today we had the worrying story from Nissan. Many of us who have focused on the mess the Government are in could speak on the subject for hours.

There is another example from the last few days. We say that when we leave the European Union we want to sign trade agreements with those countries which currently have trade agreements with the EU. One of those countries is Japan. Japan has just signed a trade agreement with the EU. At the very best, I suppose, if the Japanese were to give us exactly the same terms—which is unlikely because our bargaining power vis-à-vis Japan is nothing like the power that the EU has—it would take a minimum of five years, and probably nearer 10, to conclude this deal. So the Government are saying that we are walking away from a trade agreement in order to spend a vast amount of time and money and suffer a lot of uncertainty before perhaps, in many years’ time, finally reaching another trade agreement that may not be as good as the one we now have. I put it to the Government: what kind of reason or logic is that? What a way to run a state. What a way to look after not only this generation but future generations of British people and make sure that they have a viable economy on which they can actually base a reasonable standard of living and a reasonable level of public services.

The Government are already under attack in this place, quite rightly, for their delivery of public services. We had a very interesting series of Questions earlier about the health service. The Government are undermining the future ability of the British economy to deliver the wealth we need to maintain our public services at acceptable international levels. This is quite apart from the impact of their policies on individual wealth and prospects for individuals who want to travel or study abroad or benefit from all the other freedoms we will be giving up. It is a very serious matter. The muddle the Government are in about the damage that is being done makes the whole picture even more disgraceful—that is the only word I can use.

I think my noble friend’s amendment is excellent. I agree with everything he said when he introduced it—and that noble Lords on both sides of the House said—about the importance of services. We all know that they are 80% of the British economy. But I have one question. Why has he not put goods in there as well? It seems to me that exactly the same principles apply to goods. I just looked at the amendment, and if you were to add the words “goods” wherever “services” are mentioned, you would not produce any particular anomalies or logical or linguistic problems. I do not know why goods have been left out of this particular picture. As I said, exactly the same principles apply. We want there to be no new barriers—that sums up everything. “Barriers” includes tariffs, quotas and non-tariff barriers, so the ground would be covered quite well by doing that.

My noble friend rather implied that he was putting forward this amendment in order to have a debate on an important subject—which is a very worthy thing to do in this place. Perhaps I have that wrong, but it sounded as though that was what he had in mind, and we are of course having that debate at the moment. However, it seems to me that it would be even better if we got this proposed new clause on to the statute book. We would be doing a very good day’s work for the country if we could manage to do that. Therefore, I ask my noble friend why he came to his decision. I am sure that there must be a very good reason, which perhaps I am being foolish in not anticipating, but I do not understand why we do not include goods.

These debates are becoming extremely unreal. One likes to think that one’s service in Parliament, whether in the Commons or in the Lords, is based on being clear in one’s mind and discussing and working out with colleagues what is the best policy for this country. But we have a Government who are not pursuing the objective of the best policy for this country. We have a Government who are destroying British industry and commerce where they can—so it is a very unreal situation. I do not know how much longer this country can go on in the hands of people who take that attitude when they have in their charge the very considerable, and in my view very important, responsibility of governing the United Kingdom to the benefit of our citizens both of today and of tomorrow.

[Lord Lansley (Con)]

My Lords, in following the noble Lord’s remarks, perhaps I may say that the unreality of debates in Committee on this Bill will be exacerbated if we not only have amendments that, quite properly, raise relevant issues that are not presently included in the Bill but we then use them as the basis for a wide-ranging debate on every occasion. Let us not do that. On occasion, we in this House look broadly at what the resolution to our current impasse might be, but we also have a responsibility to use our time well on this Bill to try to ensure that it is effective legislation, because we might need it.

In that context, there is a very simple reason why trade in services is not in the Bill: the General Agreement on Trade in Services is multilateral, not plurilateral, so there is no need to legislate for this as it is something we are a party to only by virtue of our membership of the European Union. That is why the government procurement agreement has got into the legislation. If that were true for the General Agreement on Trade in Services, that would have to be included as well, but it is not; every member of the WTO is a member of the GATS.

However, the question is: do we want to legislate to mandate the Government in the negotiation on a future free trade agreement to seek to provide for a continuing and complete reproduction of our current relationship with the European Union, or at least to the extent that the amendment asks for that? As far as I can see, it asks for it up to mode 3—it does not include mode 4 arrangements, which allow for natural persons to be present in other member states—thus excluding the free movement of individuals for the purpose of the delivery of services in other member states. Therefore, it is not a continuity amendment, or at least it cannot be presented as such.

From the point of view of Ministers, broadly speaking at the moment it is important for us to understand to what extent free trade agreements that might be reproduced by way of continuity agreements in the event of a no-deal exit might lead to the perverse situation whereby we have greater service sector access to third countries than we do to the European Union, which would mean considerable dislocation for service industries in this country.

Finally, much as I wish that we were staying in the European Union and continue to argue that we should be in a customs union with a degree of regulatory alignment—we will come on to that briefly later—I certainly would not go as far as the amendment implies, which is that effectively we should be rule-takers on services with the European Union. That could be a very unhappy place for us to be, given that services make up 80% of our economy, as has been said. The fact that we are in a customs union for goods will therefore not preclude us from engaging extensively in discussions on trade in services with third countries, which is where much of the action may well be in future trade negotiations.

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Moved by

[Lord Lansley]

61: After Clause 5, insert the following new Clause—
“Free Zones
(1) Within three months of the passing of this Act the Treasury must launch a consultation on proposals for the establishment in the United Kingdom of Free Zones, as defined by the Customs and Excise Management Act 1979.(2) The Treasury must lay a report of the consultation under subsection (1) before both Houses of Parliament within six months of its launch.(3) The report under subsection (2) must include—(a) proposals for the Free Zones to be established, and(b) an account of the extent to which each proposed Free Zone would allow UK manufacturers to secure an integrated supply and value-added production.(4) Within six months of the report under subsection (2) being laid, a Minister of the Crown must by regulations made by statutory instrument make provision for the establishment of Free Zones as set out in the report under subsection (2). (5) A statutory instrument containing regulations under this section may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.”

[Lord Lansley]

I am grateful for this opportunity to raise the issue of free zones. I thought I was likely to end up moving this amendment at about 10 pm last Wednesday, so it is a pleasure to have it on in prime time but, recognising the value of this time, I will be as brief as I can.

The point about this amendment is that free zones were legislated for way back in 1979. Indeed, they featured, not least during the 1980s, as part of a broader industrial strategy. I do not propose today to debate the merits or otherwise of free zones, because there are arguments that cut both ways. They are, by their nature, a distortion: they distort the customs and regulatory framework in favour of specific geographical locations. None the less, there can be significant benefits associated with that happening in circumstances where one needs to advantage certain geographical areas. That is why, for example, they have been used in the past, and are used widely around the world, in relation to some more disadvantaged economic areas, and specifically in relation to ports of entry—not just seaports but airports and the like. The reasoning there is that the ports of entry to an economy are often in competition not so much with other parts of the geography of that country as with other ports in neighbouring areas.

The European Union has a general disinclination towards free zones because the single market effectively creates one single customs territory. Arguing against myself, if we were to be in a single customs territory with the European Union, the question of free zones would probably not arise at all—but if we are not to be, it ought to arise. Under these circumstances, it would be good to legislate in the Bill to encourage Her Majesty’s Treasury to bring forward both a consultation allowing the merits of free zone designation and its use in this country to be debated, and proposals to Parliament about how that designation might be deployed.

There are ports that are interested in this, and the Treasury’s approach—that it is happy to consider free zone designation under the 1979 legislation—is understandable. But it is for the ports themselves to decide whether they wish to do this. I understand some ports may wish to; Teesport and Humberside are interested, and Associated British Ports is interested. If we leave the European Union and do not form part of a customs territory with it, they may well bring forward proposals. In the interests of the legislative approach to this, we should have something that encourages that to happen as quickly as possible in an ordered way. That is why the deadlines in the amendment are swift: to initiate a consultation within three months, and to report on that consultation within six months. In quite short order after exit day, we in this country could see to what extent our ports would need and benefit from free zone designation to enable them to compete more effectively with other ports—not least those on the other side of the North Sea or the English Channel.

That is the reason we should think about this. Those bringing their goods to Europe have never previously had to think about customs or other formalities, or the imposition of duty on those goods if they are brought to the United Kingdom and then re-exported elsewhere in Europe. Unfortunately, they may have to think about that.

[Lord Davies of Stamford]

I am grateful to the noble Lord for giving way. As he rightly says, free ports are distortionary by definition. If you create a free port close to another port, one will survive and the other will probably disappear altogether. Does he think his Government would be tempted by the thought that they could say, “If we have a local MP who votes for us and supports this Government, we will make the port free; but if we have an MP who dares to vote against us, we will make the port unfree and ruin it”?

[Lord Lansley]

The noble Lord will observe that the amendment seeks a consultation on the part of the Treasury, and that consultation would undoubtedly enable these issues to be explored on an even-handed basis. In the scenario I was describing, any port would be free to come forward and seek designation. It is not something that would be handed out on the basis of any partiality; rather, it would be done by examining the cases made by those ports. The point is that whereas in the past we may have concluded that there was no basis for introducing such a distortion into our economic activity, if and when UK ports are principally having to compete in international trade with other European ports, we may conclude that it is not a distortion to trade inside the United Kingdom. Actually, it is an aid to competitiveness for the United Kingdom in relation to ports elsewhere in Europe. I beg to move.

[Lord Bates]

My Lords, I thank my noble friend Lord Lansley for moving this amendment. He has managed to get on to prime time in this territory. I once represented a seat on Teesside, which is very close to my heart. The idea has been advocated by the excellent mayor there, Ben Houchen, and by some of the local MPs, such as Simon Clarke and Rishi Sunak.

To reassure my noble friend, the Customs and Excise Management Act 1979—CEMA—allows for the designation of free zones, as he mentioned. The Taxation (Cross-border Trade) Act, which the Government passed through your Lordships’ House last September, allows HMRC to make regulations regarding goods kept in a free zone. Under CEMA, operators are free to apply to become a free zone. The Government are open to any ideas that might deliver economic advantages for the UK and will continue to examine the role that free zones may play as part of this. Assuming that we will have an independent trade policy, we will be able to have these types of examinations and innovations.

Existing customs facilitations in the UK offer the same benefits as free zones, but are not geographically limited and can be accessed anywhere across the country, thereby potentially having more widespread benefits for the UK as a whole. For example, a manufacturer could import materials for its products and store them in a customs warehouse anywhere else in the country, without duties being paid on them. The manufacturer or its supply chain could then use those materials in its manufacturing process under inward processing relief and could export the finished goods without any UK customs duty ever having to be paid. Those existing facilitations, therefore, avoid the distortions to which the noble Lord, Lord Davies, referred, which can arise from free zones where a manufacturer or its supply chain would be required to locate on the same site to benefit.

The UK’s ability to formulate a free zone that diverges from the Union customs code will depend on the future relationship with the European Union. The Government have also been clear that it is a commercial decision for operators to make on whether they want to apply for designation of an area as a free zone, and we will review any applications made. I am not able to be more helpful than that to my noble friend at this point, much as I may wish to be.

[Lord Lansley]

Since there is no recent substantial experience of free zones, does my noble friend not think it would be helpful—if we arrive at the point where we exit the Union customs code—for the Government at least to initiate a consultation to look at the criteria that would be applied in examining the designation of free-zone status?

[Lord Bates]

My noble friend will be aware that “consultation” has a specific meaning now in legal terms, which is quite an onerous responsibility of the process. We could seek ways to discuss—perhaps with BEIS as part of the industrial strategy—or to engage with others who are interested. He mentioned Humberside, Teesside and others, and I think we could look at ways in which that could be done. I am very happy to take that thought back to the Treasury and write to him further on that.

[Lord Lansley]

Once again, I am grateful to my noble friend and that is a very welcome comment. I look forward to further discussion about that but, on that basis, I beg leave to withdraw the amendment.

Amendment 61 withdrawn.

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Secondly, what do the Government intend with this Bill? Before we proceed to Report, we need clarity. On that basis, I beg to move my amendment.

[Lord Lansley]

My Lords, I just want to say a word on this. I will not add much, because the noble Lord, Lord Purvis of Tweed, has illustrated the nature of the issues here very well. I would just emphasise that, if the Government are looking to vary Clause 6 as it came from the other place, it is important for them to do so while recognising the importance of seeking to maintain and maximise our co-operation and partnership on medicines and clinical matters across Europe. There are issues such as European reference networks for rare diseases, which are valuable mechanisms for co-operation; there is work together on clinical trials and the implementation of the clinical trials directive.

As far as the European Medicines Agency is concerned, none of us realistically expects that, if we leave the European Union, we will have mutual recognition of authorisations between the Medicines and Healthcare products Regulatory Agency in this country on the one hand and the EU on the other. Even if we were to offer to recognise European Medicines Agency authorisations in this country, I do not think that will be offered, because the European Union will not contemplate a third country providing what it regards as the equivalent of its own authorisations with its own control of data and jurisdiction under the European Court of Justice. That is not going to happen.

However, from early on in the negotiations it was clear that we should aim, if possible, for the scientific evaluations presently carried out by the Medicines and Healthcare products Regulatory Agency, prior to the authorisation process, to continue to be done by the MHRA. That is not presently anticipated by the European Medicines Agency, and that is one of the reasons why the Dutch, Germans, French and others are gearing up their medicines regulatory authorities to do much more of this work. They recognise that—to give perhaps the maximum illustration—over 40% of the work on the authorisation of medical devices across Europe is done by the MHRA, and an even higher percentage for the more complex and significant medical devices. It is far from the case that this can be readily adopted and delivered in other EU member states. It is in their interests and ours to continue to work together—something like 80% of the total work is in the scientific evaluation rather than in the subsequent authorisation process.

I know Ministers are continuing to think about how we can achieve this level of co-operation, and I hope that, in that spirit, even if Clause 6 does not end up providing this mandatory structure for the negotiations, Ministers will be forthcoming none the less about how we might make progress in the direction that the noble Lord in his amendment is aiming for.

[Viscount Younger of Leckie (Con)]

My Lords, I start by thanking my noble friend Lord Lansley, who has paved the way quite well for some of the remarks I will make on this issue. This amendment, spoken to by the noble Lord, Lord Purvis, raises an important issue which the Government are committed to addressing, and that is our future relationship with the European Medicines Agency.

Medicines regulation is inextricably linked to the UK’s fantastic life sciences sector. The UK has one of the most productive health and life sciences sectors in the world. The sector is critical to the UK’s health and economy, contributing over £70 billion a year and 240,000 jobs across the country.

We have been clear since the referendum result that our overarching aim for medicines and medical device regulation is underpinned by three clear principles: first, that patients should not be disadvantaged; secondly, that innovators should be able to get products to the UK market as quickly and simply as possible; and, thirdly, that the UK should continue to play a leading role in promoting public health. This is why the Government, in their White Paper The Future Relationship between the United Kingdom and the European Union, set out their aim to secure active participation in the EMA. The noble Lord, Lord Purvis, used the word “imperative”, and that is very much noted on this side.

However, the clause binds our hands ahead of negotiations with the EU on our future relationship. We have always been clear that continuing to share our skills and expertise is the best outcome for UK and EU patients. The noble Lord, Lord Purvis, cited part of the political declaration; that declaration underlines the UK and EU’s mutual commitment to working together in the future on medicines regulation, and to negotiating the UK’s ongoing co-operation with the EMA. That particular area was raised by my noble friend Lord Lansley, but I will go slightly further, because the noble Lord, Lord Purvis, picked up on the word “co-operation”. I say again that we want to retain a close working partnership with the EU to ensure that patients continue to have timely access to safe medicines and medical devices. The political declaration explicitly makes allowance for a spectrum of outcomes and commits both the UK and the EU to exploring the UK’s relationship with the EMA.

The Government, as I said earlier, set out their ambitions for the future relationship in the July White Paper, making it clear, again, that we are seeking participation in the EMA. I can provide the Committee with some additional detail, however, some of which has been alluded to by my noble friend Lord Lansley. The UK is seeking an agreement that will allow the UK regulator to be able to conduct technical work, including acting as a “leading authority” for the assessment of medicines, and participating in other activities, such as ongoing safety monitoring and the incoming clinical trials framework.

I hope these brief comments provide enough reassurance to the Committee. Given that continued EMA participation is already a negotiating objective of ours, we do not believe that this amendment is necessary. The Government are already committed to ensuring that, after we leave the EU, UK patients can access new medicines at the same rate as they do now.

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[Lord Hain (Lab)]

My Lords, following the excellent speeches we have just listened to, beginning with my noble friend Lord Stevenson, I support this group of amendments and appeal to the Minister seriously to consider reversing the ERG amendments, not just for the detail and well-founded points and reasons that have already been made, but because the Government did not choose to accept them. They were foisted upon them, because of the arithmetic and politics of the situation, and wanting bigger fish to fry. As a result, we have a defective Bill, even by the Government’s own objectives. I ask the Minister seriously to consider on Report, rather than facing a possible vote and even defeat given the cross-party support that exists, getting the Bill back to where it was before the ERG plundered it.

[Lord Lansley]

My Lords, what connects this group of amendments is that they are European Research Group’s amendments in the Commons that were accepted by the Government. I do not think they should be treated by my noble friends on the Front Bench as if they all had the same merit or otherwise.

The single UK customs territory, which is now Section 55 in the Taxation (Cross-border Trade) Act, specifies that there should not be a separate customs territory between Northern Ireland and Great Britain. Frankly, I cannot see the circumstances in which this House or the other place would find this acceptable. That being the case, I cannot see any merit in this House seeking to ask the other place to think again about that issue. I do not think anybody in the other place is proposing to revisit it, so my suggestion is that we do not go down the path of thinking that Amendment 79 has merit.

I do not disagree about Amendment 80. I listened with care, but I would not like to try to explain it to somebody else and I am sure the noble Lord, Lord Hannay, is right about that.

I support Amendment 77 because I cannot see any good grounds for why legislation should require the Government to seek new primary legislation to have a customs union of any character with the European Union in the future. If, for example, we want to have a customs union with the United States of America, it could be done by an Order in Council. There is no basis for a distinction of that kind, other than the politics of the moment, and legislation should not be governed by the politics of the moment. If there is a proper process for the scrutiny and approval of a customs union, it should be set out in legislation and apply to any other country with which we establish a customs union and not discriminate and impose additional requirements specifically in relation to the European Union.

That just leaves Amendment 78. I confess I saw this being slightly of the moment, in that it was intended to entrench into statute the provisions in the Chequers White Paper relating to reciprocity in the collection of import duties on behalf of the European Union by the United Kingdom. But as I understood the White Paper, it did not necessarily mean that the European Union would collect import duties on our behalf. There was some suspicion on the part of our colleagues in another place that the negotiations might lead to such an eventuality, and that we would collect duties for the European Union but they would not collect duties for us, so they put this into the legislation. Frankly, that is not where the negotiations are now. We are either in a customs union or we are not; I do not think we are going to be in some sort of asymmetric customs arrangement of that kind. Nobody is debating that presently.

Amendments 77 and 80 have merit. I hope they are not going to be pressed at this point, but my noble friends should certainly think carefully about amending them when we come to Report to enable the other place to think again.

We discussed the customs union last Wednesday. That was the day before an interesting report was produced, principally by German economists at the Ifo Institute. I was encouraged by it, not least because I agree with it. It basically said that, to break the deadlock, both sides have to move from their red lines. In the United Kingdom’s case, that means no longer excluding the possibility of being in a customs union with the EU. In the European Union’s case, it means not treating such an arrangement necessarily to mean that the United Kingdom has to remain a member of the existing customs union or the Customs Union Code. They therefore propose the establishment of a European customs association, in which both the United Kingdom and the member states of the European Union would have voting rights. As a consequence, in the event that the European Commission operated as the representative of the European customs association, it would do so based on a mandate in which the United Kingdom continued to exercise the same kind of authority it presently exercises on the European Union’s customs arrangements.

This customs union would extend only as far as the present custom union applies inside the European Union. The document Hard Brexit Ahead: Breaking the Deadlock contains precisely the kind of discussion we have been having. It is not about whether we are in the customs union; it is what a customs union between the United Kingdom and the European Union might look like in the future.

It is doubly encouraging to see that not only put forward but put forward by prominent German economists. I hope that Ministers will continue to look at that in the time available before they have to come back and talk once more to the other place about what the next meaningful vote should be on.

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Amendment 110 is a very small amendment, but it removes the Secretary of State’s ability to interfere, as I see it, in the working of the TRA. It allows the TRA to act and deliver its work independently, without there being the possibility of the Secretary of State pushing their will on to the decisions that the TRA would have to make.

[Lord Lansley]

My Lords, if we are going to anticipate the longer group of amendments, which impact on Schedule 4, I will say a word about Amendments 103A and 107A, which are in my name.

I shared, I confess, the view of my noble friend Lady Neville-Rolfe for quite a long time. The conclusion I came to is that we pretty much have to accept the structure which says that we have an independent Trade Remedies Authority, rather than one integral to the Department for International Trade. The analogy is with competition activity. The European Commission runs its own competition regime from a directorate-general of the Commission, with a commissioner in charge. We may think that is right or wrong, but the point is that it is internationally recognised that in that respect, the Commission operates at a significant remove from the day-to-day political pressures in a single country. In this country, we do not operate on the basis that we have a government department providing the competition authority; we do it independently. There is a better analogy there. There is also the analogy of the International Trade Commission in Washington, which is recognised as operating independently of the day-to-day political pressures that otherwise might be exercised in the US Administration or if it were subject directly to Congress. There are analogies that cut both ways, but I am persuaded that having a separate Trade Remedies Authority is best.

It is tricky, because we do not have that many people who are very good at managing trade remedies. We are going to end up with one set of them in the Trade Remedies Authority and another set sometimes in the Department for International Trade having to judge the recommendations being made by the Trade Remedies Authority. I am not quite sure that we shall have enough people to do all those tasks. I hope we do, but it will not be immediately obvious.

Paragraph 2 of Schedule 4 states that a chief executive of the Trade Remedies Authority is to be,

“appointed by the Chair with the approval of the Secretary of State or, if the first Chair has not been appointed, by the Secretary of State”.

My Amendment 107A would simply leave out paragraphs 17 to 23, which all relate to the circumstances where a chief executive is appointed by the Secretary of State. We do not want to leave in statute for the longer term that the Secretary of State may appoint the chief executive. It should be the responsibility of the board. That is generally true for most other independent bodies of this kind. I do not see any reason why we should trespass across that if the independence of the Trade Remedies Authority is integral to its function.

All this seems to have been written in the expectation that it would become law at about the same time as the Taxation (Cross-border Trade) Bill did back in September. Back then, there was not a chair-designate of the Trade Remedies Authority, nor was there a chief executive-designate. We now have both. There is no practical reason why the chair cannot be appointed alongside other members of the board, so that they can take responsibility for the appointment of the chief executive. I see no grounds for leaving in the Bill this statutory provision compromising the body’s independence.

My Amendment 103A would specify that, when the Secretary of State came to approve the appointment of a chief executive as proposed by the chair of the board, that should be subject to a report from the International Trade Committee of the House of Commons. I looked at the January 2019 updated guidance from the Cabinet Office on the 50 leading appointments made with pre-appointment hearings by Select Committees. Back in 2008, when I was Secretary of State in the Department of Health, we had seven such appointments, which I think was the largest number of any single department. The Department for International Trade has no such appointments—it is quite a new department—but this is its principal body. In so far as the Select Committee on International Trade is to have a view, it seems that it should have a view about the chief executive and the chair of the Trade Remedies Authority. To be honest, I may have got the amendment wrong; it may be that it is better that the chair be appointed by the Secretary of State following a report by the International Trade Committee—forgive me if I have got it in the wrong place—as the chair is more likely to be the person who should be the subject of scrutiny by the committee. I may reserve that point, as distinct from what is written in Amendment 103A.

I cannot see a good reason why there should not be such scrutiny. The criteria seem threefold: is it important, does it have impact, and does it require independence? All three seem to apply in the case of the Trade Remedies Authority. The amendment would not require the approval of the Select Committee; it would simply require a hearing to take place and a view to be expressed. We know from precedent that on nine occasions Select Committees have made a negative report on appointments proposed by Ministers. In six of those cases, Ministers have proceeded in any case. The amendment is not to prevent Ministers making the appointment that they wish to make; it is to give the Select Committee in another place an opportunity to make a report on the proposed appointment of a chair.

[Baroness Brown of Cambridge (CB)]

My Lords, I shall speak to Amendments 101A and 103B in my name. I thank my noble friend Lord Kinnoull for adding his name to both amendments and the noble Baroness, Lady McIntosh of Pickering, for supporting 101A. I have two further amendments in the next group—do not worry, I am not suggesting that we amalgamate these, but I will provide some common background that applies to all four amendments before I speak briefly and specifically to Amendments 101A and 103B.

Materials are very important to us. I happen to be a materials scientist, so I would say that. They are important economically and strategically: obviously, they are the start of the supply chain for anything we manufacture. Advances in materials underpin the technologies and devices we depend on, from the structures and blades of wind turbines, to batteries for electric vehicles, to materials which allow the slow release of drugs in the body, to materials that enable faster communication of data—do not worry, I shall not give a long list. While we have world-leading academic expertise in materials, many of our materials industries are under pressure, as the noble Baroness, Lady McIntosh of Pickering, highlighted. Many of these industries share some common features and it is these common features that make the Trade Remedies Authority so important for them.

Many, such as steel and ceramics, are energy-intensive, so as we decarbonise our economy they will increasingly need to invest in new technologies, such as carbon capture and storage, hydrogen-fired kilns and things to drastically reduce or eliminate their CO₂ emissions. They are affected by our very necessary requirements for high environmental standards. Many are located in economically vulnerable parts of the country and, as the noble Baroness, Lady McIntosh, mentioned, many have experienced serious problems in the past arising from dumping and subsidy by overseas Governments. Current world trade issues, such as the US-China trade dispute, resulting in overproduction in many areas in China, and Brexit, are understandably causing concern.

So our materials producers, along with many other industry sectors, welcome the establishment of the Trade Remedies Authority in the Bill. They think the UK needs a strong and independent authority to investigate alleged dumping and subsidy cases and to recommend remedies. Producers need to know that the TRA will be a body that understands the impacts of dumping and subsidy on UK companies, to give them the confidence to continue with their investment programmes—investment that will be critical to delivering the Government’s clean growth strategy. We have already heard a bit about the definition of the membership of the TRA and its governance. Both Clause 10 and Schedule 4 make the independence of the TRA a very clear objective. However we have already heard that this does not sit entirely comfortably with the chair and non-executives being appointed entirely at the discretion of the Secretary of State. By contrast, the TRA will have wide discretion in the way it conducts trade remedy investigations, which is clearly crucial for its independence.

However, in combination, these factors build a degree of uncertainty into the system for manufacturers. A strong message about the composition of the TRA board, giving assurance that individuals with current experience in the manufacturing industry, from both a management and worker perspective, would be there alongside trade remedy experts, economists, academics, legal experts and people with other relevant skills would help remove uncertainty and risk for UK producers. Indeed, as the noble Lord, Lord Lansley, reminded us, because trade remedies have been a Brussels competence, trade remedy expertise is likely to be in somewhat short supply in the UK. It is critical that the TRA board is not made up mainly of theoretical modellers and economists but has a real balance of theory, analysis and practical, hands-on experience. The recent move by the Government to accept the principle of involving those most affected by trade policy in its development—for example, through the recruitment of a diverse stakeholder strategic trade advisory group—is very welcome. Trade remedies should be no exception, with both producers and trade unions involved.

Amendments 101A and 103B would ensure that both manufacturing and trade union experience are present on the TRA board, and that there is consultation with stakeholders before appointments are made. I hope the Minister will be able to confirm that the Government recognise the benefits of this broad approach for the TRA membership.

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[Lord Stevenson of Balmacara]

We can be relatively brief on these amendments; they are substantial in their drafting, and the points have been made so we do not need to repeat them. We have been dealing until now with the procedures and set-up of the new body. These are proposals for guidance on some of the ways in which future policy might be developed and taken forward. Having said that, Amendment 85 follows an exchange in the other place, where it was confirmed that there would be an appeals mechanism, but there is still no reference to that in the Bill, as far as I can see. This is a suggestion for a way in which the appeals mechanism—which should be there or, as agreed in principle, will be there—against decisions by the TRA and the Secretary of State might be set out. I offer it to the Government for their consideration.

[Lord Lansley]

I am not clear. Is the noble Lord’s intention behind the amendment that the Upper Tribunal would look at the merits of the decision or simply at the processes? Are we simply talking about a judicial review process?

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[Lord Stevenson of Balmacara]

I will get through this very quickly and then questions can flow in. Amendment 85, which has already been accepted, therefore sets out an appeals process for the Government to respond to. Amendment 86 relates to how these are disposed of and the procedures for that. The two go together and will be difficult to separate, but again the Government must take that forward.

We have already had reference to how recommendations from the TRA for action or no action would be based on two issues—an economic interest test and a public interest test—but we do not have any definition of those. They are obviously good ideas and sensible approaches, around which decisions can be placed, but the narrow question of what they constitute and, more importantly, how they would be kept in scope with how people’s views change over time, is not dealt with in the Bill. Therefore, Amendment 87, which deals with the public interest test, and Amendment 88, which deals with the economic interest test, set out not so much the detail of what they consist of but the process under which they might be organised.

[Lord Lansley]

I agree that the public interest test is not defined anywhere, but is the economic interest test not defined in paragraph 23 of Schedule 5 to the Taxation (Cross-border Trade) Act?

[Lord Stevenson of Balmacara]

I am grateful to the noble Lord for his interventions, which are always helpful, but I was going on to say that the economic interest test is different from the public interest test because some aspects of it are fleshed out. But the intention of Amendment 88 is to extend that slightly to ensure that two things happen. The first is that there should be a consultation about what the economic interest test is among those whose interests might be affected by it. Those involved in,

“employment, economic health and prosperity, and productivity”,

which includes trade unions, businesses and consumers, should be consulted on how one constitutes the economic test.

Secondly, it is important that the test must reach not just for a national economic view but down to a regional, or even sub-regional, point of view. The suggestion would be for the devolved Administrations and for the various regions of England to be parts of a group that could respond on things. Clearly, an economic test dealing with a small aspect of the ceramics industry based in a particular area will be different from one dealing with a major national employment issue.

Again, these amendments are not meant to be accepted as written, but they are probing suggestions to get the Government to flesh out in more detail their thinking behind this.

We always talk about what is in the public interest but never define what that means. I am not trying to define it. I am saying that it would be useful to have a process under which, from time to time, a Secretary of State who wished to employ that as part of the process for the TRA had to consult and then come forward with proposals through Parliament for what that constituted. That is what these amendments are all about.

Finally, Amendment 89 in my name suggests that TRA investigations can be considered complete only when they involve the devolved Administrations and the devolved authorities. I hope that will also commend itself to the Government. I beg to move.

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[Baroness Neville-Rolfe]

My Lords, I apologise to the noble Lord, Lord Stevenson, for interrupting him. Of course, there is a requirement to have proper appeals, as has just been elegantly explained by the noble Earl, Lord Kinnoull, but I was interested in whether they had to be the subject of special tribunals or whether they could in fact be fitted into the existing court system. My main concern as a former business person is with speed. Sometimes tribunals, public interest tests and so on can be a field day for lawyers and the whole thing can take a very long time. That is not what we want. We want to be able to make sure that the interests of our industries and other players are properly protected.

[Lord Lansley]

The noble Lord, Lord Stevenson, is absolutely right that the economic interest test is present in both Schedules 4 and 5 to the Taxation (Cross-border Trade) Act. As set out there, the test seems to me to be capable of being, and is required under the legislation to be, taken down to the level of individual industries, looking specifically at affected industries and consumers and the likely impact on particular geographic areas or particular groups. It seems to me that the economic interest test is already capable of being disaggregated in the ways that the noble Lord is calling for.

The noble Lord and I have joined together on the issue of the public interest test in the past. I am not sure that you can define it in advance—that is the difficulty with it. Trying to write down what public interest the Secretary of State has to weigh up seems to be intensely difficult, as distinct from the economic interest test. It might include defence industries and security interests, and we see that coming through in relation to competition. We also see it in broadcasting and competition regimes. There are a range of competition-specific public interests, and I do not think that we are necessarily looking to restrict the test in that way in this legislation. Frankly, we might be better off simply looking at it and, if there are particular public interests that have to be protected as time goes on, we should perhaps have the power to add to them by way of regulation, as is the case with competition legislation.

[Baroness Fairhead]

My Lords, I thank the noble Lords, Lord Stevenson and Lord McNicol, and the noble Baroness, Lady Brown, for tabling these amendments. I take the opportunity to clarify initially that the Trade Bill does not set out the policy framework that the TRA will be responsible for operating. These provisions are already set out in the TCBT Act 2018, including the economic interest test, which places a requirement on the TRA to consider the wider economic impacts of imposing measures on other affected groups, such as downstream users and consumers.

The economic interest test provides continuity from the Union interest test in the current EU system. However, we listened carefully to concerns that the Union interest test is, for example, too opaque and does not set out how different interests are to be considered. Therefore, as my noble friend Lord Lansley correctly stated, the Act specifies the economic factors which must be considered under the test, and that will provide businesses with greater clarity over how the test is applied. That is what business has asked us to do. In terms of the public interest test, I can only endorse what my noble friend Lord Lansley said.

In addition, there is an explicit presumption in the Act that, where injury is caused by dumped or subsidised goods, the TRA will make a recommendation to the Secretary of State for the imposition of measures. The Government amended the legislation during its passage to make that absolutely clear. The burden of proof rests on the TRA to show that measures will be detrimental to the wider economic interest; otherwise it must make a recommendation, and any failure to do so will be subject to appeal. I assure your Lordships—particularly the noble Baroness, Lady Brown, who raised this matter—that this presumption will have the effect of ensuring that special consideration is given to the injury caused to UK industry by imports of dumped or subsidised goods. I wanted to say that explicitly in Committee here because I know of some of the concerns in the ceramics industry.

The Act also places the same presumption for the imposition of measures on the Secretary of State and makes clear that the Secretary of State can only reject the TRA’s recommendations for measures on public interest grounds, or where he determines that the economic interest test is one the TRA could not reasonably have made. Any such decision can be appealed by interested parties and must be explained in a Statement to the other place.

With respect to Amendment 87, tabled by the noble Lord, Lord Stevenson, I remind the Committee that we are committed to ensuring that our industry receives protection. That is why we will transition those EU measures that matter to UK industry, including on steel, ceramics and chemicals, into our system once we have our own, independent trade policy. We will monitor the effectiveness of the trade remedies system and, if we find that it is not working as it should, we will of course make any changes necessary.

As I mentioned before, I am sure that the Committee will understand that the public interest issue is not something we can review or consult on. What constitutes public interest will change depending on the economic and geopolitical circumstances of the day, and the Government must have the flexibility to respond to such changes. This is a power that we expect to be used in rare cases and, when it is, again the Secretary of State will be required to lay a Statement before the other place justifying its use.

Your Lordships have raised rightful questions on the role of the devolved Administrations in relation to trade remedies. Importantly, the economic interest test mandates that account must be taken of particular geographic areas, as well as other economic matters that may be considered relevant. This will ensure that the impacts of measures on different regions—including Scotland, Wales, Northern Ireland and regions of England—are given due consideration where appropriate and will include any information that is shared, or issues that are raised, by the devolved Administrations.

Further, regarding Amendment 89, tabled by the noble Lord, Lord Stevenson, I reassure the Committee that any party not defined as an interested party may register its interest in a particular case with the TRA and will then become a contributor. This will include the devolved Administrations. Contributors will be invited by the TRA to submit relevant information, which it will be obliged to take into account in the investigation as appropriate. My officials will advise the devolved Administrations when an investigation is opened by the TRA, which will alert them to the need to take a decision on whether or not to register.

Where the TRA terminates an investigation without recommending the imposition of measures, it is required to publish details of its recommendations and decisions. Contributor status will mean that DAs will automatically be notified by the TRA of actions it has taken. But I recognise that they will also—rightly, in their capacity as devolved government—have an interest in the decision made by the Secretary of State, including in having an opportunity to offer views on relevant public interest considerations which he should take into account when arriving at a decision. I can confirm that my officials will work with their colleagues in the devolved Administrations to put appropriate arrangements in place.

I turn now to Amendment 90B and thank the noble Baroness, Lady Brown, for tabling this amendment. As I have explained, the Taxation (Cross-border Trade) Act has already been considered, and passed, by the other place, which has accepted that the negative procedure is the appropriate scrutiny mechanism, as we discussed earlier.

With regards to Amendments 85 and 86, the noble Lord, Lord McNicol, is right that there should be an appeals process; indeed, this is necessary to be compliant with our WTO obligations. We do not support the amendment, but I assure noble Lords that there are already powers in the Taxation (Cross-border Trade) Act to establish an appeals system for the UK’s trade remedies system, and my officials have been working closely with the MoJ to develop a clear, transparent process. I completely accept the point made by the noble Earl, Lord Kinnoull, about how critical this is. I also agree with my noble friend Lady Neville-Rolfe that speed matters to companies too.

There will be an initial consideration when an appeal is raised by the TRA, followed by a right of appeal to the Upper Tribunal. This ensures that basic administrative errors can be resolved more quickly and effectively than moving straight to the tribunal, so limiting those cases to more substantial issues of law. It combines independence, as required by WTO law, with the advantages of a proportionate and efficient system. As the Secretary of State informed the International Trade Select Committee in his letter of 14 January, the judicial route for appeals will be to the tax chamber of the Upper Tribunal. The Tribunal Procedure Committee, the responsible statutory body, has recently completed a consultation on the rule changes required to allow the Upper Tribunal to hear trade remedy cases. Once that process has been fully completed, the necessary appeals statutory instrument will be laid in due course and scrutinised in the normal way.

Our proposed regime draws on international best practice from comparable WTO members. Its measures provide for the assessment of whether there was an error in law based on the evidence that was available to the decision-maker at the time, and some include processes akin to the TRA’s reconsideration.

I hope my responses have provided reassurance to your Lordships and that the noble Lord feels able to withdraw his amendment.

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[Lord Hannay of Chiswick]

My Lords, I am not sure that the noble Lord, Lord Stevenson, did me a great favour by alleging that I had partial paternity of this amendment, but I will leave that to one side. It is a very simple amendment, setting in statute the view that has been expressed twice by this House, by massive majorities, and once in the House of Commons last week: that leaving the European Union on 29 March by default without an agreement should be excluded. That is what this amendment proposes to do. It does not prevent this Act, as it would be, coming into effect in the event of the meaningful process being successfully completed in the other place. Nor does it do so if the other place should, in the extraordinarily unlikely circumstances, actually decide that we should leave without a deal. However, it rules out leaving by default as a condition for the entry into force of the provisions in this Act. No more needs to be said, and I have a feeling that we may wish to debate that rather more decisively on Report.

[Lord Lansley]

My Lords, I am speaking on behalf of my noble friend Lady Altmann, who is unable to be here and asked me to extend her apologies. I think she would have shared the view of the noble Lord, Lord Hannay, that Amendment 98 would not prevent our exit without an agreement, which is the default situation under the statute law as it remains, but it would certainly enable one to put into the equation consideration of the damage and chaos that would result if one were to leave by default without an agreement and without the statute book and continuity agreements being in place. Both Houses would have to think hard about that. It is a contest between different visions of what kind of chaos might ensue. Unfortunately, that is essentially where we are.

My noble friends on the Front Bench have done a grand job, not least in keeping us on track, wherever possible, in understanding the importance of getting this legislation into the right structure rather than being distracted too often and too far into discussion of Brexit. I think we agreed at Second Reading that the Bill is occasioned by Brexit but is not really about it; nor, technically, is it about the future processes and structures of free trade agreements. Their approach has enabled us to have what I think will be some interesting, positive and constructive discussions on Report, arising out of this Committee, when we can really focus on one or two specifics. My noble friends will have been given an indication of what kinds of considerations will be important to the House in thinking about free trade agreements as they come along.

[Lord Hain]

My Lords, I realise that the hour is late, but I rise to support Amendment 98, which would make it much more difficult for the Government to preside over a default no-deal Brexit, and to encourage the development of alternative strategies.

Due to the failure of the Government to develop a credible Brexit strategy, there is now a grave danger of the UK crashing out of the European Union on 29 March—in just over 50 days’ time—as the default option. This would have truly devastating consequences. However, because of the Brexit-related legislation already on the statute book defining exit day as 29 March 2019, it is possible that Parliament will not have the powers to stop it happening.

The amendment would therefore put a limitation on the commencement of the Trade Bill and provide that Clause 2(1), which gives the Government powers to implement international free trade agreements, can be implemented only on the condition that either: Parliament has approved a negotiated deal; the Government have requested an extension of Article 50; Parliament has approved a no-deal departure; or Parliament has voted for a second referendum. It would also offer your Lordships’ House a chance firmly to reject the possibility of the UK crashing out of the EU in a no-deal scenario.

The hard Brexiteers of the European Research Group, who assert that no deal would be an acceptable option, argue that Britain’s trade outside the EU is increasing at a much faster rate than trade with EU countries. However, this ignores the fact that measuring growth starting from a much lower base is always higher in percentage terms. They also fail to mention that trade with non-EU countries is not a binary choice and has been boosted by the EU’s own trade agreements with those countries, from which the UK benefits as an EU member—witness Germany’s spectacular trade increases with China, for instance. If noble Lords have any doubt about this, they should look at the website of the Department for International Trade. In the case of the recent trade agreement between the European Union and Canada, we read:

“UK trade with Canada up 14% since new free trade agreement introduced”.


This is a reference to CETA, the Comprehensive Economic and Trade Agreement between the EU and Canada, which was signed in 2017 after seven years of negotiations. EU free trade agreements with non-EU countries such as Canada, South Korea and Japan were negotiated with the leverage and weight of the 500 million-strong market of the whole EU, which the UK will lose after Brexit. Brexiteer fantasies about WTO rules ignore the complexity of the necessary reallocation of the UK’s share of EU tariffs and quota schedules, which will require difficult negotiations. They also disregard the application of rules of origin to UK goods trying to enter the EU market, which the Government have previously estimated could cost firms between 4% and 15%.

Trade Bill

Lord Lansley Excerpts

Report: 1st sitting: House of Lords
Wednesday 6th March 2019 Lords Chamber

[Baroness Fairhead]

I understand the point that the noble Lord is making. As we have always said, we will seek to balance the protection of our consumers and downstream users from the possible price impact of no deal. The tariff regime will be subject to the approval of the House, and secondary legislation to give effect to the tariff will be laid in line with the Taxation (Cross-border Trade) Act 2018. The Government aim to secure a deal, so we hope that that announcement will not be required.

[Lord Lansley (Con)]

Before my noble friend sits down, I draw the attention of the House to Amendment 10, in my name and that of the noble Lord, Lord Stevenson, which relates to tariffs. It permits a debate of the kind that I think the noble Lord, Lord Kerr, was hinting that he wanted. It seems to me that we do not start on 29 March without a schedule. We have notified a schedule to the WTO, and it is in line with the EU’s external tariff. On that basis, we should talk about it later rather than now. We know where we start from. The issue is to what extent we might vary—that is, apply a rate of duty lower than the EU’s external tariff at some point after 29 March were we to leave without a deal.

[Baroness Fairhead]

I thank my noble friend for his clarification. That is indeed true but I think he will also accept that, if we were aiming to have a deal, we would not need to publish. If we got to a stage where no deal looked likely, clearly we would have to provide the information that he and the noble Lord, Lord Kerr, mentioned.

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[Baroness Henig (Lab)]

My Lords, I have put my name to Amendments 3 and 4 and speak in support of the noble Baroness, Lady Jones. We had a wide-ranging debate in Committee about standards and Members from across the House argued that we should not allow standards to fall in a whole range of important areas, as outlined in the amendment. The Government’s reply was to agree in principle. The Minister said at the time that the Government were committed to high standards and that they were the right policy for the country, but that they should not be written in the Bill. When asked why not, she was unable to give a convincing reply.

It is essential that we take this opportunity to ensure that existing standards in a number of areas cannot be lowered as a result of the Bill and that that is made explicit in the Bill. One reason for that comes down to the issue of trust. In 2017, the Trade Secretary promised that the United Kingdom would not lower the standards. He said:

“We have made very clear we are not going to see reductions in our standards as we move forward, partly because British consumers wouldn’t stand for it”.


But at the same time, the self-same Trade Secretary has prioritised a trade deal with the United States. It is no secret that the prime aim on the United States’ side will be to negotiate lower food standards with the United Kingdom to enable their food products to flood in to the UK. There is no secret that that is their ambition.

Asked about this last weekend, when asked about food standards, the Trade Secretary replied:

“The question is not about safety”.


This is a bigger issue than the safety or not of a way of preparing food, which is also subject to rules at the World Trade Organization: it is about the decisions we make between the EU and United States approach to regulation. It is about the barriers to trade that that may impose, the impact on our producers and, most of all, the level of trust over trade policy.

The absolute worst way to make significant changes would be through the power under the Bill, because that would cause huge resentment and distrust of United Kingdom trade policy, which would damage our long-term prospects of achieving consensus and wide support for trade deals in future. As the noble Baroness, Lady Jones, points out, under the Bill, the Government could make any change they liked to any regulations as long as it was relevant to implementing a trade agreement and that tariff changes are handled by another piece of legislation. Let us take the much cited chlorinated chicken, which she mentioned, beloved of the United States.

[Lord Lansley]

My Lords, surely the point is that the Bill relates only to agreements in place before exit day. There is no agreement on chlorinated chicken or with the United States, so any such argument is irrelevant to the Bill.

[Baroness Henig]

The noble Lord is clearly prescient, because I am just about to cover the very point he raises. As I said, let us take the question of chlorinated chicken. There is nothing to stop Ministers making that change in implementing existing trade agreements. For example, perhaps Mexico would want us to declare that we will accept chlorinated chicken in return for continuing our trade agreement. There is nothing to stop a country with which we have an existing agreement asking for that in future as a part of the rollover, which is what I think he was asking about. Slightly more far-fetched, perhaps, there may be a change of Minister. Perhaps the current Secretary of State for Transport takes over at trade and makes the change by mistake. Who knows?

That is why it is so important to agree the amendment. Major changes in standards in all these important areas should not be covered under the Bill: they need to be fully discussed in terms of our future trade relationship with the United States and the EU in the light of the terms under which we depart from the European Union and with the involvement of a wide range of businesses, trade associations, producers, consumers and local communities. The Bill should not allow a departure from standards, and that is why I put my name to the amendments.

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[Lord Purvis of Tweed]

My Lords, in Committee there were a number of amendments, including one in my name, which sought to make the case that some of the agreements that we are party to by virtue of our membership of the EU are significant for the economy as a whole and certain sectors of the economy. Some have a greater impact on some of the nations and regions of the UK and, therefore, to understand the impact of our trading policy it is necessary to have the report. So I welcome the Government’s position, as outlined by the Minister.

However, there are a couple of areas where I would wish to press for further information. One area relates to comments I made earlier about the status of the vast majority of the agreements to which we are party and have signed prior to exit day but which we are looking to replicate or agree after exit day. These will not necessarily be considered as continuity agreements—a point made by the noble Baroness, Lady Neville-Rolfe.

The agreement with Japan is a good example. It has been in force since 1 February and, given all the powers under this Bill, is a candidate to be considered as a continuity agreement. The Japanese Government have said that they do not wish it to be a continuity agreement but a new trade agreement. Under the Government’s amendment, how would that be reported on? It would not come under its remit. That is one of many examples.

[Lord Lansley]

I declare an interest as the UK co-chair of the UK-Japan 21st Century Group. My understanding of the Japanese Government’s position is that they have made it clear that the procedures that are required by the Japanese Diet for a treaty would make it impossible for them to bring this forward as an agreement between the United Kingdom and Japan in the event of a no-deal exit. They would require it to be considered as a new treaty because we were no longer members of the European Union or covered by the withdrawal agreement. Were we, however, to sign the withdrawal agreement and to have a transition period, the Japanese Government, in their view, could consider it to be a rollover agreement during the transition period.

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Moved by

[Lord Lansley]

9: After Clause 5, insert the following new Clause—
“Preferential trade schemes: parliamentary approval
(1) The Taxation (Cross-border Trade) Act 2018 is amended as follows.(2) In section 32 (regulations etc)—(a) after subsection (3)(a) insert—“(aa) the first regulations under section 10 (preferential rates given unilaterally),”,(b) in subsection (3)(b) omit “that section” and insert “section 8”.”

[Lord Lansley]

I am glad to have the opportunity to speak to Amendment 9 in my name and that of the noble Lord, Lord Stevenson. Amendment 9 follows our constructive discussions in Committee and outside the Chamber with the noble Lord, Lord Bates, and his colleagues on the question of the trade preference scheme, typically referred to as the generalised scheme of preferences in the European Union context.

A generalised scheme of preferences or the trade preference scheme established by this country would be one intended to give unilateral access to our markets for the products of some of the least and less-developed economies, assisting in their economic progress.

In so far as we have been discussing continuity, the intention is for the United Kingdom to maintain some continuity between the European Union preference scheme and a future preference scheme in the United Kingdom. However, I want to talk about where there may be scope for differences. If noble Lords want to look at the measure, it can be found in Schedule 3 to the Taxation (Cross-border Trade) Act 2018. That is why the amendment amends that Act, not to interfere with its revenue-raising functions but in relation to the scrutiny to be applied to regulations to establish a trade preference scheme.

Under that Act, when the Government bring in a trade preference scheme, the first such regulations will be subject to an affirmative procedure. As I understand it, the scheme may be established in line with the existing European Union preference scheme. However, it will be helpful for me to raise a number of issues with the Minister to give him a chance to put the Government’s intentions on record—as he helpfully did on the last group—about the character of the regulations and the extent of detail to be provided.

First, when we looked at Schedule 3 to the Taxation (Cross-border Trade) Act, we found it very difficult to relate that directly to what is in the EU’s preference scheme. That is mostly because the EU’s preference scheme does not include those countries with which it has association agreements that effectively supersede and replace the unilateral preferences. They have entered into bilateral or multilateral arrangements.

Whereas “least-developed countries” corresponds directly and derives from a UN classification, the list of “other eligible developing countries” is referenced to a World Bank classification, “among other things”. It is not the same as the classification by the World Bank. In particular, it would be helpful if my noble friend would confirm whether it is the Government’s intention to follow the EU practice and to identify in that category a sub-category of “vulnerable developing countries”. I think the intention of the unilateral scheme of preferences is to support economic development in circumstances where they are not the poorest countries of the world but none the less have significant issues—often they are structural or governance issues—that require additional preferential support.

Secondly, can access to preferences be suspended or withdrawn, as Section 10 of the Taxation (Cross-border Trade) Act makes clear, in recognition of or in consequence of human rights abuses in those countries or in relation to United Nations sanctions? Will the regulations make that clear?

Thirdly, what is the situation where the availability of this unilateral system of preferences none the less gives rise to dumping? I remember way back in 1981 that I was responsible in the Department of Trade and Industry for the generalised scheme of preferences as it applied to chemical products. The dumping of petrochemicals produced in Middle Eastern countries illustrated this point: the fact that one is a developing country does not necessarily mean that one does not have the ability to have serious competitive issues with producers in this country.

Where preferences might lead to dumping, or to subsidy, or to an increase in imports that could give rise to injury to markets and producers in this country, will the Secretary of State under the regulations be required to ask the Trade Remedies Authority to investigate any such complaint? As is the case elsewhere in the Act, will the Secretary of State be required only to act and to implement remedies in so far as the Trade Remedies Authority itself determines that there is a need to act and in line with its recommended remedy? It is not clear in the 2018 Act that the Trade Remedies Authority is required to be used by the Secretary of State in relation to the preference scheme.

Will the first set of regulations make clear the overall structure of the preferences scheme? Will it also make clear the structure in relation to specific products from developing countries, which are not to have the unilateral nil duty of tariff but are to be treated as graduated products? This sometimes happens for reasons of relative competitiveness or due to the need to protect industries in this country—as might, for example, be the case with textile imports from India or Bangladesh. Will the availability of the preferences for those graduated products be specified in the regulations, so that the two Houses can look in detail at the way in which the preference scheme is to vary in relation to certain sectors and certain countries, which might give rise to differences between the EU scheme and our scheme? Clearly there are graduated products, particularly in the agricultural sphere, where the protection afforded is to southern European producers for certain agricultural products that have no relevance in the United Kingdom. This could be true for industrial products as well.

As was said in the previous group of amendments, that is my list. I hope the regulations will include—but not necessarily be limited to—those details. There may be other issues that noble Lords will want to make sure are set out by the first regulations. It will be helpful for us to have an idea because, depending on circumstances, it may not be long before the shape of the trade preference scheme becomes clear in detail, not just in its overall application, as was set out in the 2018 Act.

[Lord Stevenson of Balmacara]

I rise briefly to support the amendment in the name of the noble Lord, Lord Lansley, which I have signed up to. The meeting that he referred to was extremely helpful in drawing out some of the confusion that emerged during our first debate in Committee. The issues of how countries get on to the lists, how the lists get managed and shaped, and how the changes might come forward were all explored carefully; we now have a much better understanding. In these lists, there are bound to be curious decisions which do not seem to match up to one’s perspectives. I was in Tanzania on holiday recently and it certainly did not come across as one of the least-developed countries, although clearly there are issues around how it will progress and develop its own trading arrangements.

The point behind the amendment is to get on record some further points that have emerged. The noble Lord was kind enough to suggest that we might have further questions, but his all-encompassing knowledge and brilliant, incisive questions are quite enough for me.

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There will be an opportunity to look at how we should respond to and reform the generalised scheme of preferences going forward, but this will be a matter for future negotiations. In the trade White Paper, we invited people to make representations, and a number of representations were received on areas in which the GSP could be improved and these included areas such as rules of origin, which could be considered. As I have said, we believe that there are opportunities to look at ways in which the scheme of preferences could work better for the world’s poorest countries going forward, but our first priority is to ensure that the preferences which exist already—helping approximately 70 developing countries to export to the UK—are maintained; that is the objective of this Bill.

[Lord Lansley]

I am grateful to my noble friend the Minister and indeed to the noble Lord, Lord Stevenson, for their contributions to this short debate, and for the discussions that we had, which were not so short but were extremely helpful in clarifying many of the issues; they have enabled us to be brief today. I am grateful to my noble friend for his responses to my questions, which were very satisfactory.

I have two things to say. First, what he described as the role of the Trade Remedies Authority seems an appropriate one and mirrors what would be the case with other countries who are not part of the GSP scheme. I hope he implied that the Secretary of State would follow the TRA’s recommendations on the extent to which the preferential access is suspended or withdrawn; this can lead to a rate of duty that lies between nil and the standard rate—the most favoured nation rate. It is not necessarily in excess of the most favoured nation rate, as my noble friend said, but might fall somewhere between the nil rate and the MFN rate.

On the second point, I completely understand that noble Lords might expect us to start with a preference scheme that mirrors the European Union scheme and then consider the extent to which we can, or need to, change it in order to improve it—to address both the different circumstances of EU industries relative to those of developing countries and some characteristics of the scheme itself. Given that the legislation is structured so that the first regulations get affirmative processes and subsequent regulations do not, I hope that that will not inhibit Ministers from trying to consult proactively, as they have done through the White Paper and otherwise, on how the preference scheme could be improved if and when—there is definitely an “if” as well as a “when”—we come to establish a trade preference scheme that is the UK’s own scheme, rather than one which simply reflects the EU scheme. However, on the basis of the very helpful response from my noble friend, I beg leave to withdraw the amendment.

Amendment 9 withdrawn.

Moved by

[Lord Lansley]

10: After Clause 5, insert the following new Clause—
“The customs tariff: parliamentary approval
(1) The Taxation (Cross-border Trade) Act 2018 is amended as follows.(2) In section 32(3)(b) (regulations etc)—(a) leave out “an increase in” and insert “to vary”, and(b) after “section)” insert “from that which is in the United Kingdom’s Schedule notified to the WTO”.”

[Lord Lansley]

Amendment 10 stands in my name and that of the noble Lord, Lord Stevenson. In Committee, we did not discuss what tariffs the United Kingdom would apply if we were to leave without a deal with the European Union. Since Committee, although Ministers have not published a proposal—notwithstanding some hints that they would—we are told something about it by virtue of reporting by Sky News. I do not know whether that is true or not; I tend not to rely on media reports for these purposes. As it happens, I tabled Amendment 10 before Sky News started reporting anything of this kind, because it seemed that noble Lords would want to talk about what such a tariff structure might look like.

This amendment relates to the implementation of import duty under Section 8 of the Taxation (Cross-border Trade) Act 2018. There are regulation-making provisions in Clause 32 of that Act, which specify that the first regulations under the Act require an affirmative procedure in this case, and that the affirmative procedure should also be used when there is an increase in duty in the standard case. For these purposes, “standard case” means when there is not a preferential rate or a tariff-rate quota, or when something is not subject to trade remedies. In that sense, it is what my noble friend referred to in the last group as an “MFN rate”. That is the standard case for these purposes.

The provision currently says it would be an affirmative procedure when there is “an increase in” that duty. The effect of Amendment 10 is to change that, so that it would be an affirmative procedure for any regulation that sought “to vary” the rate from the rate set in the schedule notified to the WTO. One of the points I hope to make is that this enables us to say something about the shape of how we might approach the situation if there is no deal. If we remain in the transition or implementation period, we will clearly abide by the EU external tariff. Depending on the nature of the future relationship with the EU, we may continue to be within a single customs territory and, by implication, within a single EU external tariff. That does not necessarily reflect the Government’s point of view, because they appear to want to be able to reduce tariffs below the EU rate, even though we remain in a single customs territory. This is a debatable proposition, which we will perhaps debate later but not on this group.

In this amendment, there is an expectation that, if we leave without a deal, we will start with our schedules to the WTO being those that we have notified—as I said right at the beginning of our proceedings today, in response to the noble Lord, Lord Kerr. They are essentially in line with the EU external tariff. My proposition is that there is no need for this; indeed, there would be significant detriment if we did not maintain those schedules. Under the WTO rules, we should have what is known as a bound rate, which is in line with the EU external tariff. The bound rate is the one that we are, in this sense, bound not to exceed. However, that does not mean that that is the rate that is applied. It is not widespread, but it is entirely normal practice under the WTO rules to have not only free trade agreements of the kind which are contemplated under Article XXIV, which lead to preferential arrangements, or the kind of preference scheme that we were just talking about for the less developed countries, but also to apply a rate of duty that is lower than the rate which one is bound to under the schedules for the WTO.

The proposition I put to your Lordships is that we should be thinking constructively about how to use the flexibility under the WTO rules to vary the applied rate of tariff from the bound rate, if we were in the unhappy circumstances of leaving without a deal. We would leave the bound rate, the WTO schedule and the EU external tariff where they are, in the expectation that, even if we leave without a deal, we may enter into a relationship with the European Union with a customs relationship which might require us not to vary from the EU’s external tariff—we would just leave that alone for the time being. In the short term, this would enable us to reduce tariffs on products from around the world which are presently subject to a higher tariff or to tariff-rate quotas. It would enable us to offset what is otherwise a significant risk of overall price increases for UK consumers.

The reasoning of course is that the EU will not change its external tariff. If we leave without a deal, we will be subject to the EU’s external tariff. Roughly half of our imports come from the European Union; a significant proportion of those—for example, cars—will have a 10% tariff applied. To turn it the other way round, UK producers would be in the unhappy position of being subject to increased costs when they try to sell. What we do not want to happen is that, simply by virtue of leaving, we impose high tariffs, leading to higher costs for UK consumers.

When people have speculated about what the tariff on a no-deal basis might look like, in some quarters they have tended to say, “We cannot lower our tariffs because the consequence of that is that we will have given something away unilaterally, which would prejudice our ability to enter into bilateral trade deals with other countries”. This is not the case. If we proceed by having an applied rate that is lower than the bound rate, first, it will become apparent to us and other countries to what extent liberalised, lower rates of duty stimulate imports from those countries, in some cases in competition with the EU at a level of duty which it has not been able to match in the past. It will begin to tell countries, and us, what the impact of lower rates of duty might be on trade between those countries.

Secondly, those countries would know that, if no bilateral deal was brought to a successful conclusion which then gave a preferential rate of duty to the United Kingdom under a free trade agreement, we could restore our applied rate back to the bound rate. They would then lose the benefit we had given them in the short run. In a nutshell, the short-run benefit of lowering tariffs not only potentially offsets what might otherwise be price increases but enables us to demonstrate to other countries what the benefits of a bilateral deal in the long-run might look like.

My expectation, and the expectation of most developed economies, is that the bound rate and the applied rate will converge in the long run. They are generally the same thing, but we are not required to have them as the same thing. It gives us an opportunity to vary rates and see what the future might look like. In the short run, it also gives us the opportunity to vary the rates of duty from those in the EU tariff to give specific benefits on things such as agricultural products or some industrial products where the protection that is required for European producers does not apply to UK producers. In that way, we can start to benefit from lower rates of duty where the European Union does not currently offer that option to us.

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[Lord Bates]

I thank my noble friend for moving the amendment. The noble Lord is right: my noble friend has raised, effectively, three issues that need to be examined. One is the level of tariffs. In that regard I will probably disappoint my noble friend by referring back to my noble friend Lady Fairhead’s response from the Ministers’ Bench to the invitation of the noble Lord, Lord Kerr, to set out a timetable for when those tariffs might become known. She made her points and they stand on the record; I probably do not need to repeat them. I also draw to the attention of the House The Implications for Business and Trade of a No Deal Exit on 29 March 2019, which was published on 26 February. On this occasion I draw my noble friend Lord Lansley’s attention to the section on tariffs, beginning at paragraph 31 and continuing into paragraph 32, which explores some aspects of the setting of tariffs.

Those are two aspects on the level of tariffs, but I now turn to some of the specifics to which my noble friend referred. He asked about the status of the common external tariff applied by the WTO. The noble Lord is correct that we have notified our bound tariff schedule to the WTO. Our bound schedule represents the upper limits of what tariffs the UK could apply on imports. If, for example, our bound schedule says 10% for product X, we could choose to apply 9%. The Government have yet to announce their applied tariffs for a no-deal scenario, but the noble Lord, Lord Lansley, is correct to say that on leaving the EU we will be free to set out tariffs within the parameters of the bound schedule that we lodged last year.

The EU’s common external tariff—as referred to by the noble Lord, Lord Lansley—is the EU’s version of its applied tariff schedule. These are the tariffs that will apply to UK exports to the EU in a no-deal scenario. My noble friend also referenced the Taxation (Cross-border Trade) Act, which states that the first time a tariff is set, and whenever an import duty rate increases, the made affirmative procedure will apply; otherwise the negative procedure will apply.

These amendments would make the made affirmative procedure apply in different circumstances. In the case of Amendment 10, that would be any time the rate of import duty diverged from the bound commitment made by the UK to the WTO; in the case of Amendment 14 the made affirmative procedure would apply in all circumstances. However, under both amendments it is currently stipulated that the setting of the tariff would remain a matter for the other place. The Act ensures that the scrutiny procedures applied to the exercise of each power are appropriate and proportionate, taking into account the extremely detailed nature of the tariff and the frequency with which it may be changed. The tariff is long and complex; it currently contains 17,000 types of goods and is more than 1,000 pages long. The EU tariff is subject to regular, almost daily, amendment, so the current balance of the chosen procedure reflects that understanding.

Once again, I express the Government’s appreciation to my noble friend Lord Lansley for moving this amendment, giving us the opportunity to expand on our positions and put those additional remarks on the record. I hope that is helpful and reassuring to him, and that he feels able to withdraw his amendment at this stage.

[Lord Lansley]

I am grateful to my noble friend, and to the noble Lord, Lord Stevenson of Balmacara. This debate has been very helpful, and the takeaway from this—one I am grateful to my noble friend for confirming—is that the bound schedule has already been notified to the WTO. People need to be very clear about the fact that if we leave without a deal and the Government come forward and say, “These are the tariffs that we intend to apply”, they are not varying the WTO bound rate but saying that, on a most favoured nation basis, they will apply these rates. That provides a basis for negotiations on preferential schemes that could emerge over time. I read the document about the implications of no deal for tariffs, and it is correct: the Government must balance the desirability of supporting liberalised trade, with benefits for consumers through price and choice, with protection for producers in this country. That will be a delicate balance to strike. If people are aware that we can behave in this way with an applied rate that varies from the bound rate, it removes the argument that by applying a lower rate in the short run we have prejudiced our ability to conduct trade negotiations with other countries in the future—we have not done that. If we get rid of that argument, it helps to shift the balance in many cases in favour of lower rates in the short run, rather than higher rates. I am most grateful to my noble friend for his response. On that basis, I beg leave to withdraw the amendment.

Amendment 10 withdrawn.

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[Viscount Hailsham (Con)]

My Lords, I rise briefly simply to explain why I do not feel I can support the proposed new clause, although generally speaking I agree with the views that have been expressed in its support. I shall indicate what I could support with some changes to the new clause. I shall deal first with proposed new subsection (9), which makes the ratification of the agreement subject to approval by resolution of both Houses. This provision, in fact, goes much further, as the noble Lord will appreciate, than the procedure set out in the 2010 Act with regard to the approval of treaties, but I welcome the principle and I have no difficulty with it. However, I have a question which I hope the sponsors of the proposed new clause will address. I may have overlooked the answer—it may be staring me plain in the face. What happens if the Lords decline approval but the Commons approve the trade agreement?

There is no provision in the Bill to deal with that situation, and it would be profoundly unattractive if the House of Commons were to approve the trade agreement and the House of Lords were to refuse it, the result being that the trade agreement could not pass. This is actually dealt with specifically by Sections 20(7) and 20(8) of the CRaG Act of 2010, but there is no similar provision in the new clause. Because the procedures between the new clause and CRaG are fundamentally different, I do not think you could simply import the procedures in CRaG to the new clause. Perhaps I might seek guidance from the mover of the amendment on how to resolve a difference of opinion between the two Houses.

To move very quickly to proposed new subsections and (1) and (4), so far as the former is concerned it is very good idea that the negotiating mandate should be placed before an appropriate committee and discussed in both Houses of Parliament. It is a splendid idea, and I also agree with the supporting procedure set out in the proposed new clause. The one thing I do not agree with is that the negotiating mandate should be made subject to approval of the committee or the House. That is an undue restriction on the ability of the Executive to negotiate. I would say yes to consideration and discussion, but no to express approval.

The same point relates to proposed new subsection (4). I see no reason why the agreement of the appropriate committee should be obtained before the matter is put to a vote under subsection (9), because that subsection is already a parliamentary lock on the agreement. Why, therefore, should there be a pre-agreement by the appropriate committee before it goes to both Houses of Parliament? It seems to me that that restricts the ability of Parliament to do that which it thinks is right, and it is unnecessary because the parliamentary lock already exists.

To summarise, I cannot agree with this new clause, but I could agree with it if the principle of consideration and discussion were substituted for that of express approval in subsections (1) and (4).

[Lord Lansley]

I thoroughly agree with my noble friend Lord Hailsham in his argument. I will add one thing. The Commonwealth Parliamentary Association just a few weeks ago brought together people from across the Commonwealth to discuss a number of issues. The meeting I attended was a discussion on the ratification of treaties. It was clear that Australia and New Zealand—which of course have a long continuing history of negotiating their own trade agreements—still use the prerogative power as the basis on which the Executive enter into a trade agreement, but they do it in the context of continuing scrutiny, oversight and an approval process following implementation of legislation.

What I read in the White Paper last week went a long way towards replicating that in a very satisfactory way—that is, we would do those things in a similar way to Australia and New Zealand such as the outline approach being presented, reports on rounds and negotiations being reported back to Parliament and of course an approval process. It is perfectly reasonable to wait on the two Houses of Parliament to tell the Government what they think should be the committee processes by which these are considered. Australia, for example, has a joint standing committee on treaties, which looks at the way treaties are ratified. I do not think it is the case that mandates are being taken all over the world; some of the countries that have the greatest constitutional consistency with us do not have a mandate. The noble Lord, Lord Hannay, was right about scrutiny and oversight, but he elided them with the necessity for Parliament to issue a mandate. Under our constitutional processes we should not be issuing a mandate, and the proposed new clause falls on that count.

[Lord Bilimoria]

My Lords, at the heart of this is Parliament taking control. What has been a problem for the past two and two-third years is that the Executive have continually tried to bypass and bully Parliament, whether with Article 50 or the statutory instruments that are going through now. This is really frightening. I am sorry to say to the noble Lords, Lord Lansley and Lord Hannay, and the noble Viscount, Lord Hailsham, but there is a big difference between Australia and New Zealand, and, for example, the United States of America. Not only does that country undertake a meaningful public consultation before negotiating, but it releases all the negotiating text to a large representative panel and subjects the deals to an affirmative vote by Congress, which is also entitled to amend deals unless it waives its right. That is Parliament having a say. That is transparency. The European Union, with its mostly mixed agreements, needs ratification by member states. It is crucial that we accept these amendments, to make sure, in the words of the Brexiteers, that we take back control.

Trade Bill

Lord Lansley Excerpts

Report: 2nd sitting (Hansard): House of Lords
Wednesday 13th March 2019 Lords Chamber

[The Earl of Kinnoull (CB)]

My Lords, I added my name to these two amendments and I will be brief. I agree with every word that my noble friend Lady Brown just said. I add my thanks to Ministers and the Bill team, who have been very gracious and given of their time generously to discuss these issues. I have nothing to add to what my noble friend Lady Brown said about Amendment 31, about which I wholly agree.

I also agree with what she said about Amendment 32, but I have one more point to add. It arises out of the report of the Constitution Committee into the Trade Bill. Talking about the formation of the Trade Remedies Authority, it states:

“While we recognise the pressing timescales and uncertainties concerning Brexit, in constitutional terms, creating and empowering an important public body in such a manner is inappropriate”.


I very much agree with that assertion. I therefore regard Amendment 32 not only as a mechanism for debate but as a partial cure for the problem that the Constitution Committee has unearthed in its report. I therefore see it as being an attempt to try to somewhat address that problem. Can the Minister comment on that and, if she feels the amendment should not be agreed, how we should address the itch that the Constitution Committee identified?

[Lord Lansley (Con)]

My Lords, I will make three very quick points. First, we need to be clear that Amendment 31 simply tries to attach the words “special consideration” rather than “take account”. It is not that all the factors are not there; they are, and they will be considered. The point is that special consideration should be given to this. It is not necessary to do that, because the nature of the structure in Schedule 4 would suggest that that precisely would be the case. I cannot therefore support the amendment. Temperamentally, I want to support Amendment 32, but I fear that in practice there will be many such regulations and it would not be the best use of time for this House and the other place repeatedly to engage in approving regulations of this kind.

I am interested in whether the Minster has anything to add on the potential announcements today on tariffs, which we foreshadowed last week. It is said that all the existing remedies presently imposed by the European Union would be continued, even under a no-deal scenario, by the United Kingdom. I want to inquire—the Minister might choose to reply by letter—to what extent it will be sustainable for us to do that when the remedies will have been assessed in relation to the European Union as a whole, rather than to the United Kingdom itself. For example, an increase in imports leading to injury to an industry might well be applied by the European Union in relation to an industry in Italy or Spain, but it would not be appropriate for such a remedy to be applied in the United Kingdom. That would very rapidly be open to challenge if we do not get the Trade Remedies Investigation Directorate, which is up and running in the Department for International Trade, on the case, so that we can, if we have to—I hope we do not—apply remedies on the basis of an investigation with UK, rather than EU, data.

[Baroness Fairhead]

My Lords, I thank the noble Baroness, Lady Brown of Cambridge, and the noble Earl, Lord Kinnoull, for tabling their amendments and clarifying in advance their concerns with me and the ministerial team.

Before I respond fully to the amendments, I will take the opportunity to draw your Lordships’ attention to the steps that the Government have taken to ensure that the UK is ready to deliver a fully operational trade remedies system by exit day. The Government have brought forward legislation under the Taxation (Cross-border Trade) Act 2018 to establish the UK’s trade remedies system in the event that we leave the EU without a withdrawal agreement. These regulations also temporarily confer trade remedy functions on the Secretary of State until the Trade Remedies Authority, the TRA, is legally established.

Staff already recruited to DIT with the intention of transferring to the TRA on Royal Assent of the Bill, including those trained as investigators—the key function of this body—will carry out their functions as the Trade Remedies Investigations Directorate within the department. The directorate started work on 6 March and will deliver trade remedies functions in house pending legal establishment of the TRA.

Let me repeat that this arrangement will only be temporary. As noble Lords will appreciate, this is a necessary and pragmatic operational contingency to ensure continuity of protection for UK businesses. This must remain the Government’s priority. It is right that we plan for all eventualities, including where, for whatever reason, the TRA is not legally established under the Bill by 29 March.

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[Lord Lansley]

My Lords, I profoundly believe that we should not leave the European Union without a deal in place, but making this amendment to the Bill would not prevent that. Such an outcome would have to be stopped in another place with legislation or through the revocation of Article 50, and this amendment does not bear on that. Unfortunately, in that unhappy event, the amendment would remove from us the power to implement, for example, the agreement that has been reached with Switzerland. It is not ideal, but it is there. It has been entered into in good faith by us and by the Swiss on the basis that, in the event of no deal, we have to have that measure available.

I am afraid that it is also not true, as the noble Lord, Lord Purvis of Tweed, suggests it is, that the Bill is entirely occasioned for the eventuality of no deal. It enables us, for example, to establish the Trade Remedies Authority—we have just heard about the valuable work that it is doing—and it implements the Agreement on Government Procurement, which is a very large-scale issue for British services companies and others which want to be able to bid internationally under the WTO for such contracts. The amendment would stop this Bill coming into force, and we would therefore be unable to ratify the international Agreement on Government Procurement in the way that we were intending, and it would deprive businesses of the opportunities that that would provide. Much as I heartily concur with the intention behind the amendment, it would not have the effect that is sought.

[Lord Purvis of Tweed]

I just want to make a point about the ability to have the regulations on the Swiss agreement. The Government are not using the likely regulatory powers under this Bill to ratify the Swiss agreement, so I do not think that the noble Lord is accurate on that point. They are using the CRaG process, not this Bill.

[Lord Lansley]

My noble friend the Minister may know what their intentions are but, as I understand it, in a number of instances—and I think the Swiss are among them—they will use what are effectively not just bilateral agreements with the Swiss but the opportunity to roll over the EU-Swiss agreements into UK-Swiss agreements, and the power here is available for that purpose.

[Lord Mackay of Clashfern]

My Lords, it is also worth pointing out that, in the event of an accidental no deal—which I hope will not happen—the amendment moved by the noble Lord, Lord Hain, this afternoon would be relevant as well.

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Moved by

[Lord Lansley]

59: Schedule 4, page 19, line 27, at end insert “following a report from the International Trade Committee of the House of Commons”

[Lord Lansley]

My Lords, it is a pleasure to be the back-marker on Report. Amendment 59 inserts text into the schedule that sets up the process for appointments to the Trade Remedies Authority, so that the chair can be appointed by the Secretary of State,

“following a report from the International Trade Committee of the House of Commons”.

In effect, this includes the chair of the Trade Remedies Authority in the list of appointments that are subject to pre-appointment scrutiny.

I do not do this lightly. There are about 1,000 senior public appointments, only 50 of which are subject to pre-appointment hearings by Select Committees. The Cabinet Office guidance on this was amended then reissued in January. Paragraph 8 sets out three criteria, the first of which says that such appointments should be for,

“posts which play a key role in regulation of actions by Government”.

This clearly must be satisfied as it determines one of the essential roles of the Department for International Trade in investigating and recommending trade remedies. Secondly, the appointments must be,

“posts which play a key role in protecting and safeguarding the public’s rights and interests in relation to the actions and decisions of Government”.

This instance may not be about the public, but certainly it ticks the box for the business community, which would regard the TRA as one of the most important bodies impacting on its interests in relation to the actions of the Government. Thirdly, the guidance says that appointments subject to pre-appointment hearings must be,

“posts in organisations that have a major impact on public life or the lives of the public where it is vital for the reputation and credibility of that organisation that the post holder acts, and is seen to act, independently of Ministers and the Government”.

Noble Lords will recall that, at a much earlier stage, we debated whether this body should be independent. The Government, having looked around the world, decided that the Trade Remedies Authority should be independent, and seen to be independent. We have three ticks in the box. This is clearly an important appointment; for the Department for International Trade, it must be regarded as the most important appointment. I do not know of any other posts that it is presently asked to scrutinise prior to appointment. This seems a perfectly reasonable way to proceed; nor does it constrain Ministers too far, as we have discovered. Ministers have to consult and liaise with Select Committees, respond to them and take account of what they have said, but they do not have to do what a Select Committee says and in quite a number of instances have not done so. Ministers can still make the appointments that they consider to be the right ones. I do not feel that I am holding the Government back from doing what they need to do. I am just encouraging them to include this appointment in that list. I beg to move.

[Lord Stevenson of Balmacara]

I support the noble Lord, Lord Lansley, and congratulate him on the succinctness with which he has made his point. I have been confused for some time as to why the department might resist this. He has made the points exactly as I would have done. This is a key role with a public-facing responsibility and will hold the Government to account on issues of great importance. Indeed, it is the only body that the DIT will have as a marker; it behoves the department to raise the TRA to the appropriate level so that it is seen to have the importance that the department claims for it. For these reasons, it is absolutely right that we have an established routine that the person selected by the Minister to be the chair of this body—we are not expecting the same to happen for the chief executive or more junior staff, just the chair—should be seen by the International Trade Committee. As he says, it is a courtesy in some senses because the Minister can still appoint should they wish to do so. I support the amendment.

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[Baroness Fairhead]

My Lords, I thank noble Lords for their continued engagement with the work to establish the Trade Remedies Authority. I trust that I am able to provide reassurance that we are taking proper steps to set up this important body in the right way.

I turn first to Amendment 59, tabled by my noble friend Lord Lansley and the noble Lord, Lord Stevenson of Balmacara. We listened carefully to the points made by them and other noble Lords in Committee about how best to ensure that the senior leadership is as independent as possible. This includes the appropriate role for the International Trade Committee. That is why I am pleased to announce that the Secretary of State is content for the International Trade Committee to conduct a pre-commencement hearing of the TRA chair. This hearing will take place after the Secretary of State has appointed the TRA chair, but before the chair has taken up their position. I further reassure the House that this offer of a pre-commencement hearing by the International Trade Committee will apply to all future TRA chairs, not just the first one. We hope that this will ensure that the ITC has the appropriate role in scrutinising any individual appointed to that position.

I turn now to Amendment 60, for which I thank the noble Baroness, Lady Brown of Cambridge, and the noble Earl, Lord Kinnoull. There are three key issues at hand that I would like to address. The first point is independence. Having had discussions with the noble Baroness and the noble Earl, I will say that independence really matters. We are committed to creating an independent TRA that all our stakeholders can trust and that will be seen as an independent body by third countries. We have taken clear steps to achieve this, including establishing it as a non-departmental public body in the first place, which is different from other organisations around the world, and giving it the appropriate separation from Ministers. We are ensuring that it has an independent board. That is why the Secretary of State will be required to follow the tried and tested Cabinet Office Governance Code on Public Appointments when appointing all non-executive TRA board members.

As this House will be aware, that code enshrines the independence of those members by explicitly stating:

“All public appointments should be governed by the principle of appointment on merit”.


TRA board members must be appointed based on their ability, not the stakeholder group or interest that they represent. The Commissioner for Public Appointments will regulate all non-executive appointments to the TRA, providing independent assurance that the Secretary of State follows the code’s strict rules on making such appointments based on merit and the public interest. While TRA non-executives may well have had experience representing certain stakeholders, we believe that that alone cannot be the reason why they are appointed. To do otherwise would jeopardise the true independence of the board, particularly as this is an investigative body.

The noble Baroness, Lady Brown, referred to the Higher Education and Research Act 2017. We do not feel that it is appropriate to draw parallels between the TRA and the Office for Students. The primary function of the Office for Students is to protect the interests of students, whereas the TRA has been set up to protect UK industry from unfair trading practices, which it will do by undertaking independent and impartial technical investigations into whether these practices have occurred. While this will ensure that manufacturers are protected against unfair trading practices, the TRA has not been set up specifically to protect the interests of those manufacturers or other groups.

The second point relates to skills and experience. I assure your Lordships that we are committed to making sure that the members are best placed to oversee this new function. That is why, when appointing the non-executive members of the TRA, the Secretary of State will have regard to ensuring that the board has the right balance of skills and range of experience. I will do more than pause, as requested by my noble friend Lady Neville-Rolfe. She has wide experience of sitting on boards in both the public and private world, and it is having that right balance and mix of skills and experiences that is most important. Moreover, this process does not happen behind closed doors. To ensure transparency, the requisite skills and experience for each non-executive appointment will be set out in individual TRA job descriptions that will be published in accordance with standard practice.

The noble Earl, Lord Kinnoull, raised a question about the TRA having regard to guidance, and we have included clear statutory restrictions on the Secretary of State’s ability to issue guidance to the TRA. That includes setting out specific circumstances in which the Secretary of State can publish guidance. For example, they cannot publish guidance in relation to a specific case. That is also why the Secretary of State must consult the TRA before publishing guidance, and explicitly have regard to its independence, impartiality and expertise.

These skills and experience requirements include, among others, strong and effective leadership, astute business awareness and an understanding of the complex domestic and international trading environment which the TRA will be operating in. However, we believe that specifying a detailed list of desired experience in statute risks restricting the Secretary of State’s ability to appoint individuals, and the chair and the board’s ability to appoint executives with other relevant experience not detailed here. It suggests that only those criteria listed in legislation are desirable, and may inadvertently displace others. That could create a problem if, in the future, a TRA non-executive was needed to fill a skills or experience gap not covered on the list.

On stakeholders, let me reassure the House that we understand the need to ensure that stakeholders’ interests are accounted for properly. We have also taken clear steps to ensure this. That is why the TRA chair’s job description, and terms and conditions, make clear that he or she will be expected to communicate with stakeholders and incorporate their perspectives into TRA board discussions where appropriate.

We specifically recognise the importance of the devolved Administrations in building the UK’s independent trade policy. That is why we have made several key commitments to ensure they, too, have an appropriate relationship with the TRA and DIT. These include sharing the TRA’s annual report with each devolved Administration, seeking suggestions for the optimal way to recruit TRA non-executives, and suggesting to the TRA chair that the board undergoes specific devolution-focused training. The Welsh Government of course have passed a supplementary legislative consent Motion in the Welsh Assembly, indicating their support for the TRA provisions in this Bill.

As we are reaching the end of Report, I will make some concluding remarks. This stage has provided us with a valuable opportunity to test and improve the detail of this important Bill. I thank your Lordships for that and look forward to Third Reading next week. Having said that, I respectfully ask the noble Lord to withdraw his amendment.

[Lord Lansley]

My Lords, I am most grateful to the Minister for her response to this short debate. It is fitting that we have further evidence in her response of the constructive and positive way in which Ministers have listened to the debate and sought to meet the concerns raised. That has been evident throughout our discussions.

I apologise—I should have declared an interest. I am the UK co-chair of the UK-Japan 21st Century Group, and in that context Sir David Wright, who is the chair-designate of the Trade Remedies Authority, was a member of that board and a former ambassador to Japan, so I know him. It will be evident from those who know him that the purpose of this discussion is not in any way to question his suitability for the post—far from it—but rather the process by which his successors are to be appointed in years to come. In that context I was grateful for the specific nature of the assurance my noble friend was able to give.

The difference between a pre-appointment hearing, in circumstances where the Secretary of State is minded to appoint somebody who is then seen by the Select Committee, and a pre-commencement hearing, where the Secretary of State has appointed somebody but the post has not been taken up, is a distinction without a difference in circumstances where the Secretary of State could proceed in any case. There is a benefit in such appointments being taken up by those seen by Parliament as well as by the Executive, not least having been seen positively in the context, not of trying to second-guess the Secretary of State’s choice of the right person but of understanding at the outset, before somebody takes up the post, how they propose to approach it, their suitability for the tasks, and what objectives they are looking for—what kind of outcomes they are hoping to achieve. In that respect, what my noble friend was able to say adequately and fully meets the purposes that I was raising in my amendment, so I beg leave to withdraw it.

Amendment 59 withdrawn.