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

Nicholas Dakin Excerpts

Committee Debate: 5th sitting: House of Commons
Tuesday 30th January 2018 Public Bill Committees

[Graham Stuart]

The Bill ensures that the UK customs regime is ready for EU exit. A key part of our readiness for exit day is our ability to operate our own trade remedies system. Trade is good for the UK. It can lead to higher wages, stimulate business efficiency and productivity and improve consumer choice. Analysis by the OECD suggests that a 10% increase in openness is associated with a 4% increase in income per head.

[Nic Dakin (Scunthorpe) (Lab)]

Will the Minister clarify whether the Government have done a comparative impact assessment of the processes involved with the EU and the processes they are trying to put in place in terms of speed and timeliness, which we are all concerned about?

[Graham Stuart]

I am grateful to the hon. Gentleman for that question. I will seek at some point in the debate to address his point.

Free trade does not and should not mean trade without rules. Trade remedies are an important safety net. They can help enforce the rules that make free trade work by addressing injury to a domestic industry caused by unfair trading practices or unforeseen surges in imports. That is why all major WTO members have a trade remedies regime, and why we are taking forward the measures in the Bill. The European Commission currently carries out trade remedies investigations and imposes measures on our behalf. Once we leave the EU, we will need to be able to do that for ourselves. Clause 13, together with schedules 4 and 5, sets up the UK framework to allow us to do just that.

These proposals fall under the international framework set by the WTO. We are legislating for the full suite of powers permitted under that framework, which will enable us to impose additional duties on imports that cause injury to UK industry. The message is clear: free trade and the benefits it brings are welcome, but the UK will act decisively to address trade that causes injury to our domestic industries.

We cannot forget the wider ecosystem of our economy. Tackling injury is the priority, and the Bill makes clear that there is a presumption in favour of imposing additional duties when UK industry suffers injury as a result of unfairly dumped or subsidised imports. In recent years, trade remedy measures have protected UK industry and its employees, particularly in the steel and ceramics sectors but also in the chemicals, biofuels and glass industries. Considering that manufacturing contributes around 10% of UK gross value added and 8% of employment, the need for the UK to have a trade remedies system once we leave the EU is apparent.

Without the ability operate our own trade remedies regime, the UK would be exposed to unfair trading practices and unforeseen surges in imports, with potentially damaging consequences for UK industry and the economy more widely. However, there must also be a mechanism for ensuring that imposing such duties is not contrary to the best interests of the UK as a whole. Duties on imports can increase costs for downstream industries that use those imports to create their products. They can also hit the purses of consumers. That is why the Bill ensures that any duties are set at the level needed to address injury to UK industry and no higher. That levels the playing field without causing unnecessary harm to downstream users and consumers.

We are also building in a safety valve to ensure that measures are not imposed where they are not in the overall interests of the UK. The economic interest test will consider whether duties would have a disproportionate impact on a particular area of the UK or on particular groups in the UK. The test will also consider issues such as the impact on the longer-term competitive environment in the UK.

Businesses can have full confidence that that test, and investigations as a whole, will be objective and impartial. The new Trade Remedies Authority, which will be established through the Trade Bill, will have the independence and technical expertise to determine complex matters of fact. When the authority concludes that measures are justified, it will make independent recommendations to Ministers, who will then reach a final decision. Ministers will be able to reject recommendations to impose duties where they consider they are not in the public interest. Where Ministers do so, they will do so transparently, and they will have to make a statement to Parliament setting out their reasons.

As Monckton Chambers noted in its response to the trade White Paper, that structure ensures that

“the complex judgments made in such cases are, and are seen to be, made independently”.

It strikes a delicate balance between ensuring that the investigation and the calculation of proportionate duties is carried out by impartial experts, and ensuring that there is an opportunity for Ministers to intervene if duties are not in the public or wider economic interest. We believe that these provisions are therefore fundamental to establish a robust but proportionate trade remedies system for the UK.

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In short, can the Minister give the Committee any reason—just one would be helpful—why the Government should not include the standard procedure in the Bill to allow Parliament its proper role of scrutiny? I hope he will be kind enough to respond to each of these questions, as the many great producers in the United Kingdom will no doubt be listening carefully and avidly, hanging on every word he says, hoping he might ease their concerns.

[Nic Dakin]

It is a pleasure as always to serve under your chairmanship, Ms Buck. As my hon. Friend has pointed out, the amendment is about certainty for business and industry. At some point, the Government need to bring detail forward. The longer detail is left, the more problematic it will be for business confidence, particularly in an industry such as steel, which is freely traded. It is a free trade industry, so it needs to ensure fair trade. That is why it is not surprising that steel has such a significant number of trade defence instruments in the European Union. That ensures a level playing field under WTO rules against other parts of the world where people want to trade unfreely.

At some point the Government need to bring forward the detail. The problem with this part of the Bill is that it is just a framework with nothing more to it. I therefore very much welcome the amendments tabled by my hon. Friends, because they would bring some certainty and sense into the area. At some point the Government will have to do that. They may say the amendments are not appropriate now—they are drawn very much from what is already there in the European Union and have been written across—so my challenge to them is to ask why they are not appropriate. When will we have the appropriate provisions in place?

We need to have certainty and confidence. These major foundation industries, such as steel, ceramics, oil and gas, that rely on strong trade defence instruments to ensure that they can trade not only freely but fairly need significant capital investment to stay at the cutting edge of development. To make that capital investment now, they need confidence about the framework of the future. That is why the Government should not dilly-dally. The sooner they can bring things forward the better.

The Opposition are doing their job in trying to be helpful to Government by bringing forward something that is compliant with WTO rules and would give the necessary confidence. We would know more about how investigations would be conducted, how calculations would be made and how remedies would be applied—the sort of detail that industry needs.

In a sense, the challenge to the Government is that we all agree. I welcome the Minister’s robust approach this morning—it is the approach we always enjoy from him—but there has been a clear commitment to speedy, timely and effective protection and relief for businesses that are unfairly competed against by the threat of dumping from abroad. However, we need appropriate mechanisms in place to deliver on that rhetoric. The longer it takes to get that detail in place, the more the hesitation, concern and lack of trust in the Government will grow. It is in no one’s interest that the Government should not be trusted in such a crucial area. Therefore, the Government, by taking steps sooner rather than later, and embracing the Opposition proposals, would be moving briskly in the direction of the Minister’s rhetoric.

[Graham Stuart]

I thank the hon. Members for Bootle and for Scunthorpe for excellent contributions to the debate. I entirely agreed with many of the issues that they highlighted.

The amendments would set out a great deal of the technical detail about the determination and calculation of dumping on the face of the Bill, rather than in secondary legislation, and would require the Government to define the meaning of

“serious injury to UK producers”

affected by unforeseen surges in imports, in accordance with article 4 of the WTO Agreement on Safeguards.

Of course, we accept that it will be necessary to set out further details in legislation. As I and my right hon. Friend the Financial Secretary have said from the beginning, the Bill is a framework Bill. It is intended to provide the framework for the UK’s trade remedy system but, as is normal where there is a great deal of technical detail to be legislated for, that will be set out in secondary legislation.

Industry has contributed its thinking to the detailed technical areas, and we shall engage with all stakeholders with detailed proposals in a series of meetings starting next month. I entirely agree with those who have spoken so far about the need for speed; but they would also agree about the need to get things right. Our aim and the purpose of introducing the Bill is to make sure we have a suitable framework for the long term. That is why we are going to get it right, as well as getting it in place in the appropriate time.

[Nic Dakin]

I very much welcome the Minister’s commitment to engage in a timely way with stakeholders. Can he give us a timescale by which the engagement will be concluded and proposals will come out of it, to give some detail and confidence?

[Graham Stuart]

I shall do so in due course. The detail of the secondary legislation will be constrained by and compliant with the WTO rules, but the rules that we set will be appropriate for the UK. Because they will be set out in secondary legislation there will be the necessary flexibility to allow changes to be made quickly, reflecting developments in best practice and WTO case law. I am sure that the Committee will agree that that is important, and that is why we do not think it is appropriate to include those matters in the Bill.

As to market distortions I reassure the hon. Member for Bootle that the legislation will enable the UK trade remedy system to account for particular market situations in anti-dumping cases. All major economies have a trade remedies framework that allows alternative methodologies to be used in investigations when the normal value of a good cannot be properly determined based on information from exporting countries. The UK will be no different. We have already discussed this with industry and will continue to do so, to get it right.

I recognise the underlying intent of amendment 62, to increase legal certainty for UK industry by including the requirement to act in accordance with the WTO Agreement on Safeguards. However, it is unnecessary. As members of the WTO we will be required to adhere to the provisions of WTO agreements, and we have been clear about the fact that we are committed to developing the detail of the UK’s trade remedy system in a way that is fully compliant with the obligations. By way of further reassurance, clause 28 of the Bill requires the Secretary of State and the TRA to have regard to their international obligations. On that basis I hope that the hon. Gentlemen can see that their concerns will be met by the approach that we shall continue to take, and that the amendment will be withdrawn.

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[Graham Stuart]

It is a framework Bill—skeletal or otherwise—and the detail will come in secondary legislation, as is entirely normal for issues such as this. In response to the question from the hon. Member for Scunthorpe on when we will be ready to bring secondary legislation forward, we will do so as soon as possible. Evidently, that will need to be in time to ensure that the UK system is ready for when we exit the EU. That is the time constraint. We are working on this. We will engage in detail with industry, starting next month. We are bringing this forward as quickly as we can.

If the Opposition decide to press the amendment, that is fine, but cutting and pasting WTO agreements with which we will comply is not the same as having an appropriate system in place for the UK. This is not the right moment or place for these proposals, because this is framework legislation.

On why we should have secondary legislation, we need flexibility to adapt to developments in WTO case law and, if the Committee were to support the Opposition’s amendments, that flexibility would be removed. Changes in WTO case law are frequent: for instance, only last week there was a panel decision on article 2 of the WTO anti-dumping agreement. It is therefore important that we have the flexibility that only secondary legislation provides, so I ask the Opposition to think again.

[Nic Dakin]

Will the Minister confirm once more that the Government intend not to make things any more difficult for producers in terms of trade defence instruments and that, as the detail comes forward, people producing stuff in the UK will not be any worse off in future than under the current EU rules? I think that is what he is saying.

[Graham Stuart]

I would go further than that. By having a system that is entirely aligned with and attuned to the interests only of UK producers, we hope to have a better system than the one we have now. I cannot give firm timelines, because the TRA is not set up yet, but hopefully it will be speedier, more proportionate and balanced, absolutely scrupulous in observing WTO case law, flexible enough to implement it, better attuned to the needs of UK producers, and more effective at averting injury to them.

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[Graham Stuart]

These amendments seek to include specific reference to the relevant WTO agreements in the Bill. As I said in our earlier discussion, the Government have carefully considered the right balance between primary and secondary legislation. Where there are very technical provisions in a regime, those are usually set out in secondary legislation because they are very detailed. That is the case here, so we have taken powers to make the necessary regulations.

As a member of the World Trade Organisation, the UK will be required to abide by the WTO agreements. We intend fully to comply with these obligations, and the regulations will therefore reflect the detail of the WTO agreements. However, as I have said, clause 28 does require the Secretary of State, and the TRA, to have regard to international obligations, which should provide any reassurance needed.

It has been suggested that the injury margin is more complicated and harder to define than the dumping margin. We do not believe that that is the case. Both calculations are based on industry data and export data and involve a number of variables where the TRA would be afforded discretion to use its expertise in determining the appropriate approach.

[Nic Dakin]

Does the Minister recognise that the EU is moving away from that calculation and that, according to the evidence that was presented to us, that calculation involves greater bureaucracy but does not make a great deal of difference in the end, in terms of impact on prices?

[Graham Stuart]

I do not agree with the hon. Gentleman. From a technical point of view, I do not believe that the EU is moving away from its approach to injury. As I say, we are subject to the WTO. The Secretary of State has to have regard to international obligations, and the detail needs to go into secondary legislation. I therefore ask hon. Members to withdraw their amendment.

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[Kirsty Blackman]

I will say just a few things to follow on from the shadow Front Benchers on this. It is strange that market share is being used in this regard as something that will be taken into account. It is almost as if the TRA cannot be bothered to investigate a company if it does not have a certain market share. For that industry, and for manufacturers in particular, it does not matter what their percentage of market share is; what matters is the injury that is being done to them by dumping. Market share is not relevant, and I do not understand why it is included in the Bill. It may be relevant to the Treasury because it affects the tax take it gets from the industry, but it is not relevant to the protection we should be affording to the industry.

This proposal has geographical implications, given that these new goods will be made in the industrial north of the country. Those products may not meet the market share threshold, but they may be incredibly innovative and may improve productivity and make this country a better place to be. Those things will not be taken into account.

I have argued previously that if the fishing industry is decimated as a result of Brexit, that is a geographical issue for the affected communities. It does not have a massive implication for the Treasury’s tax take, but it does for those communities. I fear that this market share test is not only unnecessary, but has implications for the choices that communities make.

[Nic Dakin]

The communities that are the most vulnerable to that disadvantage are often those that voted most strongly to leave because of their fear that they are not getting a fair deal at the moment.

[Kirsty Blackman]

Absolutely, and conversely they are the ones that have been getting the most European funding, so the choice they thought they had to make because of the inequality and uneven economic growth in the United Kingdom will make them lose out in more than one way.

On the issue of new good and fledgling industries, we cannot predict what the world will look like in 20 years’ time. Who could have predicted the rise in the need for electric vehicle charging points, for example? If something suddenly becomes a thing, the effects cannot be predicted. For example, companies making paper straws in the UK are probably seeing their shares going through the roof. We cannot predict the market share of those companies and how quickly it will grow as a result of changes in the culture of the country. I do not think the market share test is appropriate. It is strange to have it in the Bill, and the Government need to rethink it.

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“an appreciation of all the various interests taken as a whole, including the interests of the domestic industry and users and consumers.”

[Nic Dakin]

Can the Minister clarify whether we will have more tests, fewer tests or the same number of tests at the end of the process?

[Graham Stuart]

What I can confirm is that our system will be much more transparent. It will allow those who apply to it, or might be affected by it, to be clearer about how the system will work. That form of transparency is one of the fundamental principles on which we have built this structure.

[Peter Dowd]

That was a valiant attempt to show why the Government are taking a hammer to crack a nut.

[Nic Dakin]

I would appreciate my hon. Friend’s view on whether there are more tests, fewer tests or the same number of tests, transparent or otherwise. The Minister did not answer that question.

[Peter Dowd]

I am not privy to the details, but I believe there will most probably be more tests. I think those tests will be more bureaucratic and will lead to inflexibility. By the time we get around to designing them, they will be more complicated than they need to be. The Government’s position, as I have indicated, is to take a hammer to crack a nut. They are not fleet of foot enough on this issue. I have tried to lay out where we think the Government should give careful consideration. Though I hear what the Minister says, and his concern about transparency, this is so transparent that we can see through the Bill. That is the problem: there is nothing there. Though the Minister has tried to reassure us, I think he has missed the point. The Government are going into potentially dangerous territory and poking their fingers into all sorts of places that they do not necessarily need to poke into. We will therefore push the amendment to a vote.

Question put, That the amendment be made.