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

Peter Dowd Excerpts

Tuesday 30th January 2018 Public Bill Committees

[The Chair]

I remind the Committee that with this we are discussing the following:

Amendment 42, in schedule 4, page 66, line 6, leave out from “dumping” to end of line 7.

This amendment is consequential on Amendment 41.

Amendment 43, in schedule 4, page 66, line 7, at end insert—

“(3A) The provisions of sub-paragraph (3) are subject to the provisions of sub-paragraphs (3B) and (3C).

(3B) If the TRA finds that the dumping has been fully or partially caused by market distortions affecting the prices of raw materials or other industrial inputs paid by the exporting producers, the estimated anti-dumping amount shall be the margin of dumping as determined in accordance with sub-paragraph (3)(a).

(3C) If the TRA finds that there is an inadequate level of social and environmental protection in the exporting country, the estimated anti-dumping amount shall be the margin of dumping as determined in accordance with sub-paragraph (3)(a).”

This amendment provides for the anti-dumping amount to be the margin of dumping in certain specified circumstances.

Amendment 44, in schedule 4, page 66, line 8, leave out paragraph (4) and insert—

“(4) For the purposes of sub-paragraph (3)(b) the TRA shall, in determining the amount which it is satisfied would be adequate to remove the injury described in that provision, take account of all elements of the material injury being caused to the UK industry, including, but not limited to, the impact of reduced sales volumes, price suppression and curtailment of investment.

(4A) Regulations may make further provision for the purposes of sub-paragraph (4).”

This amendment makes provision on the face of the Bill for the main factors to be considered in determining the amount for the purposes of paragraph 14(3)(b).

Amendment 49, in schedule 4, page 69, line 18, leave out from “dumping” to “in” in line 19.

This amendment removes the reference to the amount of the subsidy as an upper limit on the anti-dumping amount in the recommendation under paragraph 18.

Amendment 50, in schedule 4, page 69, line 22, leave out from “dumping” to end of line 23.

This amendment is consequential on Amendment 49.

Amendment 51, in schedule 4, page 69, line 23, at end insert—

“(4A) The provisions of sub-paragraph (4) are subject to the provisions of sub-paragraphs (4B) and (4C).

(4B) If the TRA finds that the dumping has been fully or partially caused by market distortions affecting the prices of raw materials or other industrial inputs paid by the exporting producers, the anti-dumping amount shall be the margin of dumping as determined in accordance with sub-paragraph (4)(a).

(4C) If the TRA finds that there is an inadequate level of social and environmental protection in the exporting country, the estimated anti-dumping amount shall be the margin of dumping as determined in accordance with sub-paragraph (4)(a).”

This amendment provides for the anti-dumping amount to be the margin of dumping in certain specified circumstances.

Amendment 52, in schedule 4, page 69, line 24, leave out paragraph (5) and insert—

“(5) For the purposes of sub-paragraph (4)(b) the TRA shall, in determining the amount which it is satisfied would be adequate to remove the injury described in that provision, take account of all elements of the material injury being caused to the UK industry, including, but not limited to, the impact of reduced sales volumes, price suppression and curtailment of investment.

(5A) Regulations may make further provision for the purposes of sub-paragraph (5).”

This amendment makes provision on the face of the Bill for the main factors to be considered in determining the amount for the purposes of paragraph 18(4)(b).

[Peter Dowd (Bootle) (Lab)]

I will continue not only to move amendment 41, but to look after the interests of parliamentary democracy and British industry. It is good to see you in the chair again, Mrs Main.

I started to talk about the creation of the mandatory lesser duty rule, which instead results in lower duties that in some cases may not reflect the actual injury. It is labour intensive for the investigating authority and it does not reflect the full level of market distortion. It is also worth pointing out that a small minority of World Trade Organisation members use a mandatory lesser duty rule. The EU is moving to a conditional application because it has seen weaknesses in having a mandatory lesser duty rule. If the UK adopts a mandatory lesser duty rule, our trade remedies will be, in effect, an outlier.

The incorporation of amendments 41, 42, 43, 44, 49 and 50, 51 and 52 into the Bill would ensure that UK trade remedies post-Brexit will closely mirror the evolving EU practice, whereby the lesser duty rule will not be applied in anti-subsidy cases, or in fact in anti-dumping cases, where state-distorted raw material markets have been a factor in enabling or aggravating dumping. Reflected in our amendments is the rule that is practised by the EU but not mandatory under the WTO, which states that

“duties should be calculated to remove either the amount of dumping/subsidy found, or the injury found, whichever is the lower.”

The amendments lay out specific circumstances where the margin of dumping would be applied over a lesser duty rule. These circumstances include where the Trade Remedies Authority finds that the dumping of goods is directly linked to market distortions that affect the price of raw materials, for example in the case of Chinese steel, which is heavily subsidised by the state, and where it finds inadequate levels of social and environmental protection in the exporting country. These specific circumstances mirror the current regulation that the EU follows when determining trade remedies. In a sense, the amendments try to be in the spirit of that.

The Government have offered no evidence of why a mandatory lesser duty rule would be beneficial in comparison with the flexibility to exercise a lesser duty rule on a case-by-case basis. We all know from the evidence session that a representative from the trade unions, and others who work in key sectors pointed out that they had seen no evidence that a mandatory lesser duty rule works, is desirable and that the UK needs it. The amendments go to the heart of trying to deal with that particular issue.

Currently, only nine of the 30 remaining anti-dumping users in the WTO have a mandatory lesser duty rule. They include: Australia, Brazil, India, Israel, New Zealand, Turkey and Thailand. Only three have both the public interest test and a mandatory lesser duty rule, which is what schedule 4 proposes. That includes the EU, Brazil and the Eurasian Customs Union. Detailed evidence given by Cliff Stevenson to the Department for Business, Energy and Industrial Strategy using the Eurostat update looked at four cases where the lesser duty rule was applied over the dumping rate. In the case of the dumping of cheap aluminium road wheels from China, to which I referred earlier in relation to TUC evidence, the EU adopted the lesser duty rule in 2010, with the injury margin of 22.3%. It is important to look at that in relation to the amendment.

The dumping margin permitted by the WTO was from 23.8% to 67.7%, meaning that the margin adopted was 1.5% less than the lowest estimation of the dumping margin. According to Stevenson’s study, the EU’s adoption of the lesser duty rule has had no impact on the volume of cheap aluminium road wheels imported into the EU from China. We have tabled the amendments because we do not believe that the framework—skeleton or otherwise—addresses the issue.

In the case of ceramics, the EU introduced trade remedies in late 2010 against the import of continuous filament glass fibre products from China. Again, it chose to adopt a lesser duty rule when investigating the injury level. The injury margin was set between 7.3% and 13.8%, while the dumping margin permitted by the WTO is between 9.6% and 29.7%. The rate adopted by the EU is therefore at least 2.3% below the dumping margin. Stevenson’s research shows that the EU’s trade remedies have had little impact on the importation of continuous filament glass fibre from China; since they were adopted, rates have largely remained consistent. Our amendments are a genuine attempt to deal with that problem.

Some have argued that the adoption of the lesser duty rule protects the consumer against being ripped off when the dumping margin is calculated and added to the price of the products imported. However, the claim that prices do not rise significantly because tariffs are imposed at too high a rate was dispelled clearly, compellingly and authoritatively by Gareth Stace, director of UK Steel, in his evidence to us last week:

“I have an example. In the hot rolled coil case recently—hot rolled flat is used for car bodies…the injury margin was 17.5% and the dumping margin was 29%.”

The lesser duty rule was applied by the EU. Gareth Stace continued:

“That is a difference of 11%...If we think of a luxury car that cost €45,000…if the lesser duty rule was not applied in this case, it would increase the value of the €45,000 car by €16.”––[Official Report, Taxation (Cross-border Trade) Public Bill Committee, 23 January 2018; c. 71-72, Q109.]

Disapplying the mandatory lesser duty and giving the Trade Remedies Authority the flexibility to apply a higher dumping margin if necessary will not mean sudden runaway costs being handed on to the consumer—quite frankly, I consider that a myth that needs to be dispelled, preferably as soon as possible. Importantly, higher dumping margins will be considered only when dealing with heavily distorted economies.

The amendments would ensure that the United Kingdom has trade remedies that maintain free and liberalised trade, as well as providing a safety valve to UK producers and manufacturers. That, in turn, will have a positive impact on consumers. We seek not to introduce protectionist measures, but to ensure a level playing field for UK manufacturers. We want to protect the steel industry, for example; my hon. Friend the Member for Scunthorpe has made that point on many occasions and he is absolutely right, as I know his constituents recognise. Our amendments would provide a remedy to the unfair competition that arises when overseas manufacturers do not play by the same fair rules as UK manufacturers. Giving the Trade Remedies Authority the power to establish the correct level of injury is so important.

I exhort hon. Members to consider our amendments carefully, and the Minister to accept them in the spirit in which they are intended.

[Nic Dakin (Scunthorpe) (Lab)]

It is a pleasure to see you in the Chair again, Mrs Main. In supporting the amendments tabled by my hon. Friend the Member for Bootle, I, too, draw on the evidence of Gareth Stace, director of UK Steel. He was compelling when he said:

“One of the aims of Brexit was to strip things away, make things more simple and have less people employed working on these things”.

If Brexit is about taking the opportunity to get some sort of bounty that makes things better, herein lies an opportunity for us to do that.

Mr Stace went on to say that

“calculating the dumping margin is a really easy process. It can be done fairly quickly. It does not need a lot of people to do it and does not need a lot of work from industry and the Government. Calculating the injury margin does. It is a bit of a black box—you do not know what is going to come out of it—whereas the dumping margin is very transparent.”––[Official Report, Taxation (Cross-border Trade) Public Bill Committee, 23 January 2018; c. 71-2, Q109-10.]

That is why the EU is going for a conditional application of the lesser duty rule, which is the right direction of travel. It makes it slicker and simpler, and still effective. There is an opportunity for the UK to do the same—or even better.

To look at comparators in terms of timeliness, speed and pace of decision making, systems in the US are put in place within 45 days—we all commend the US as a bastion of free trade, yet that is how it ensures its industry is not disadvantaged in particular ways—whereas until recently in Europe it had been after 9 months. There is an opportunity for the UK to get things slicker and faster than for the EU currently, with one such way being to move towards conditional use of the lesser duty rule, as is implicit in the amendments. I hope that the Government are listening and willing to take this opportunity.

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“I could not tell you that if we did not have the lesser duty rule, we would have seen less dumping in recent years. The lesser duty rule has not meant that new cases did not stop dumping.”––[Official Report, Taxation (Cross-border Trade) Public Bill Committee, 23 January 2018; c. 71, Q109.]

[Peter Dowd]

I completely take those points in the spirit of co-operation and conciliation that we are trying to get in the Bill. This is not about one side attacking industry and the other side protecting consumers. It is about the balance. That is the question we have to ask ourselves today: does the Bill give the balance we need? With our amendments, we are trying to say that we believe it will give the balance between producers and consumers. The Minister talked about it being an untested concept, but this whole Bill is an untested concept. This whole experience and journey we are having in relation to Brexit, which we genuinely have to try to make the best of, is the father of untested concepts. This untested concept is just one of the many little ones compared with the totality. We are in a complicated, three-dimensional landscape. That is the nature of the beast and of where we are, and we have to try to make the best of it.

Our amendments are genuinely an attempt to listen to what the witnesses were saying to us. I know we can cherry-pick evidence here and there, but the tone that we got from the witnesses, from those who have subsequently put other evidence in and from our own backgrounds—our knowledge and context of these issues, and the discussions that we have all had outside this room—leads us to believe that the Government, in the round, are perhaps going a step too far. Our amendments are an attempt to bring the balance back. There does not appear to be any significant evidence from what I can see that the producer is in any significant way disadvantaged, because we were clearly told that it was a convoluted and complicated market. I understand where the Minister is coming from, but we have a different perspective.

My final point is that in their evidence many of the witnesses were concerned about the Government not listening to them. They were, in a sense, coming to Parliament as some sort of intermediary, to get Parliament to try to act on their behalf and to be a voice with the Government. That is why they were saying to us that they needed the parliamentary protections. That has been part of our push.

The amendments balance the needs of both producer and industry, and on that basis, while I acknowledge everything the Minister said, I do not think we are able to withdraw them. We have to make that point clearly and unambiguously.

[Graham Stuart]

We have not heard any evidence of the lesser duty rule not working in practice. I have been able to rebut any suggestions. The hon. Member for Scunthorpe said that the US imposes measures in 45 days. As everyone on this Committee who is not as busy as he is will know from reading their papers, that is simply not true. The WTO rules prevent the imposition of provisional anti-dumping and anti-subsidy measures before day 60 of the investigation. The US makes a preliminary injury determination in 45 days, but that does not mean the imposition of measures. That was completely incorrect, and I am sure the hon. Gentleman will want to correct the record. The average time that the US takes to impose provisional measures is just under five months, and in most steel cases it takes around six months.

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[Peter Dowd]

I beg to move amendment 46, in schedule 4, page 67, line 6, at end insert—

‘(6A) For the purposes of this Schedule, references to the “public interest” are to be construed as relating to the security of the United Kingdom and its citizens.”

This amendment provides a definition of public interest for the purposes of Schedule 4.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 60, in schedule 4, page 79, line 15, at end insert—

‘(2A) References in this Schedule to the “public interest” are to be construed in accordance with paragraph 15(6A).”.”

This amendment is consequential on Amendment 46.

Amendment 71, in schedule 5, page 85, line 39, at end insert—

‘(5A) For the purposes of this Schedule, references to the “public interest” are to be construed as relating to the security of the United Kingdom and its citizens.”

This amendment provides a definition of public interest for the purposes of Schedule 5.

Amendment 77, in schedule 5, page 97, line 38, at end insert—

‘(2A) References in this Schedule to the “public interest” are to be construed in accordance with paragraph 13(6A).”.”

This amendment is consequential on Amendment 71.

[Peter Dowd]

The amendment is about the public interest and I think the public have a particular interest here. The amendments to schedules 4 and 5 would define the public interest as referring strictly to the national security of the United Kingdom and its citizens. As drafted, the measures in schedules 4 and 5 would create a public interest test that would allow the Secretary of State to veto any recommendations on the adoption of trade remedies from the Trade Remedies Authority on public interest grounds.

To be clear, the WTO does not require the UK to adopt a public interest test. In fact this would put the UK in an extreme minority, as only other multi-national members of the WTO, such as the EU, and Brazil currently operate a public interest test. If we consider countries operating both a public interest test and a mandatory lesser duty rule, that puts the UK in an even smaller and pretty selective group. All the countries that currently have a form of public interest also clearly define what the public interest actually is. We do not appear to do that.

Several witnesses who gave evidence last Tuesday pointed out that the establishment of a public interest test as outlined in schedules 4 and 5 is overkill at best, and overreach at worst. The representatives of the UK ceramics, steel and chemicals industries were divided on the number of tests the Government have set out in schedules 4 and 5 and which have to be met before trade remedies can be issued. The director of UK Steel counted as many as six in the current provisions, with five economic tests and one public interest test. That is why we want to narrow the focus, as the Government do not appear to have done so, although they might say that they will.

Although there is clearly a case for assessing the economic impact of trade remedies on key sectors of the economy and certain exports, the establishment of an undefined public interest test is more worrying. Currently, schedules 4 and 5 would give the Secretary of State for Trade carte blanche to define what is and is not in the public interest. The lack of a definition means that the public interest is largely subjective. It puts the Secretary of State in a similar position to his opposite number in Australia, where the Trade Minister, according to a report from the Department for International Trade, has “unfettered discretion” to choose not to impose measures. Using those vague new powers, could not the Secretary of State argue that flooding UK markets with cheap chlorinated chicken from the US is in the public interest, or that cheap aluminium wheels from China would lower the cost of cars and therefore also be in the public interest?

It is not only the Opposition who are concerned about the Government’s lack of clarity about what might be considered to be in the public interest. In her evidence to the Committee, Dr Cohen, chief executive of the British Ceramic Confederation, expressed her alarm at the prospect that the test could be used to justify a future free trade agreement with China based on levels of potential inward investment. It appears that an undefined test could lead quickly to a scenario in which the public interest is not only conflated with the interests of consumers, but wholly dependent on the personal perceptions and considerations of whoever holds office in the Department for International Trade. Our amendment therefore tries to define public interest more tightly.

The EU’s anti-dumping regulation defines the public interest as being

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

We think that definition is too broad and open to interpretation. Amendment 46 and the consequential amendments would instead require the Government to adopt a definition of public interest for the purposes of schedules 4 and 5 that relates specifically to national security. Under such a definition, the Secretary of State’s power to veto TRA trade remedy recommendations using a public interest test would be constrained to situations involving harm to national security.

The Opposition consider that in an extreme case, such as the United Kingdom going to war, national security considerations would supersede and far outweigh the arguments for trade remedies. Any discussion of national security would have to involve other Cabinet members, including the Defence Secretary, the Home Secretary, the Foreign Secretary and the Prime Minister. A more consensual approach would have to be reached, either by the Cabinet or by a Cabinet Sub-Committee, to establish whether the suggested remedies would harm national security interests.

Closely restricting the public interest test to issues of national security arguably leaves a broad definition, which some argue the Government could seize on and push to the very limit—for example, the Secretary of State could reject trade remedies on Chinese steel under the guise of national security by claiming that cheap steel from China is needed for energy security and the next generation of nuclear power plants—but I believe that the tight definition outlined in our amendments would limit that ability. Furthermore, I suspect that few Cabinet colleagues would support such a crude interpretation of national security, as it could interfere with their briefs and would only raise further questions.

An undefined public interest test would give the Secretary of State vast powers that could easily lead to abuse. Our amendments therefore seek to define “public interest” sensibly to constrain those powers, to open a wider discussion between the Secretary of State and other Cabinet members, and to limit use of the public interest veto to times of national emergency. However, we are not just pushing on regardless. If the Minister wishes to elaborate on what “public interest” could mean—the extent of it, who decides whether to invoke it, the process and steps for arriving at such a decision, and the checks and balances in place—we will be more than happy to listen.

[Graham Stuart]

As the hon. Member for Bootle has explained so fluently, his amendments would make it clear that the Secretary of State could use public interest grounds to reject the TRA’s recommendations for the imposition of duties only in limited circumstances, namely those in which national security was deemed to be at risk.

It may help hon. Members if I briefly run through the interaction of checks and balances in the trade remedies system. As we have discussed, the TRA is required to conduct an economic interest test when deciding whether to recommend the imposition of measures. There is a presumption in favour of the imposition of duties in respect of anti-dumping and anti-subsidy measures. However, it is not for the TRA to take into account wider public interest considerations such as matters of national security, as the hon. Gentleman mentioned, nor to determine whether the imposition of duties would run counter to wider Government policy.

When the Secretary of State receives the TRA’s recommendations, he will satisfy himself that the TRA has properly weighted the individual elements of the EIT and that imposing duties is in the public interest. Only where there is a strong argument against following the TRA’s recommendations will the Secretary of State reject putting measures in place. In the exceptional case where he does, he will be required to explain his decision to Parliament.

The hon. Gentleman mentioned Gareth Stace of UK Steel and his evidence. It is worth putting on the record that when discussing a public interest test, he said

“you need a public interest test at the end, because there may be those extraordinary circumstances where it is or is not in the public interest to apply or not apply tariffs.”––[Official Report, Taxation (Cross-border Trade) Public Bill Committee, 23 January 2018; c. 73, Q111.]

So in fact, UK Steel gave evidence supporting public interest tests.

Other Governments, including those of the United States, Canada, Australia and New Zealand, and the EU take public interest into account when deciding whether to impose measures, so we are not acting out of step with other countries. I dispute what the hon. Gentleman said.

[Peter Dowd]

Does the Minister at least acknowledge that, notwithstanding what he has said, those countries have a more clearly defined test? Whether he agrees with it or not, their public interest test is a bit tighter and clearer. Ours appears to be rather loose, to say the least.

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[Peter Dowd]

As I said earlier, when we are talking about very important matters, we are prepared not to push amendments to a vote in the spirit of co-operation and conciliation. This is one of those occasions, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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

“will normally be 5 years unless the TRA considers that a shorter period will suffice”.—(Jonathan Reynolds.)

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

Question put, That the amendment be made.

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[Graham Stuart]

The hon. Gentleman is precisely right. As ever, he represents the steel interests in his constituency with assiduity, hard work and focus. He is right to say that we must ensure that measures in place to protect British industry continue smoothly after we depart the EU. That is exactly what the Government intend.

The Trade Remedies Authority will have the important role of reviewing the maintained measures so that they reflect the UK domestic market. The precise timing of reviews being carried out will depend on the terms of any agreement with the European Commission about an implementation period and on the outcome of the call for evidence, which will confirm the number and type of measures that will be maintained.

If the aim is to look again at the general policy to transition the existing EU measures that matter to the UK, that does not need to be revisited. If we take no action to maintain those measures when we leave the EU, they will no longer apply to products arriving into the UK with immediate effect. That would leave important UK industries, including the steel, ceramics and chemicals sectors, vulnerable to dumped and subsidised imports. A review of the policy approach would create uncertainty for UK industry as to whether measures will be maintained. Stakeholders have been clear that it is vital to transition existing measures to maintain protection against injury from dumping.

To return to schedule 4, having an effective trade remedies system in place is crucial to protect our industries from unfair trading practices that cause injury. It is vital to the UK’s interests that the system is transparent, balanced, impartial, efficient and works for the UK as a whole. The system proposed by this schedule and the secondary legislation that will be made under it achieves that, and is the best way to protect UK industries when we are outside the EU. I will respond to new clause 15 when I have heard the arguments made for it by hon. Members.

[Peter Dowd]

I started to listen to the Minister out of a morbid sense of curiosity, but he became far more plausible as time went on. Do I smell a rat? No, I do not at the moment, but there is some concern. The new clause provides for a review of the case for the continued effect on the UK of EU trade remedies after the introduction of the new standard import tariff, and pending full implementation of the new arrangements under schedule 4. It seeks a review of the case for continued use of EU trade remedies between the UK’s exit from the EU and its negotiation of a new relationship.

I am conscious of the statements made yesterday by Michel Barnier. I do not want to poke into that issue—I think hon. Members will be grateful for that olive branch—but there are wider concerns about which EU regulations and rules the UK will follow in the transition period. Will we continue to be a member of the EU in all but name, or will Ministers seek to pick and choose? I will have to look at Hansard, but I got the impression from the reply given to my hon. Friend the Member for Scunthorpe that, unless there are egregious breaches, we will remain for all intents and purposes virtually as we are, which is quite helpful.

Naturally, the outstanding questions about transitional measures are causing great confusion and concern among UK manufacturers currently protected by EU trade remedies. I take some comfort from the Minister’s reassurances, but in evidence to the Committee last week, UK Steel, the British Ceramic Confederation and the Chemical Industries Association were all less than convinced about the Government’s intentions. They all made the case that the trade remedies outlined in schedules 4 and 5 are not only weaker than those currently in place in the EU, but in some instances worse than those used by other WTO countries. It will be important to tease that out a little more in due course.

New clause 15 would require the Government to undertake a review of the advantages and disadvantages of the new trade remedies outlined in schedules 4 and 5. The reality is that such a review may relate to issues of policy or of practice. I am quite flexible about that, as I am sure the Government are—let us have a look at both, if need be, on a case-by-case basis.

Outlining the potential benefits to UK manufacturers of continuing to use EU trade remedies throughout the transition is also crucial. The new clause should not be too controversial, because if the new trade remedies are as robust and thorough as the Minister suggests, a review will show that. However, if the review showed the new trade remedies to be inferior to the current EU measures, that would not be good news. It would clearly show that the Government were content with laxer trade remedies and were not on the side of UK manufacturers, which are some of the largest employers in the country.

I have a number of questions for the Minister about transitional measures. Can he offer assurances to UK manufacturers that the Government will honour the trade remedies currently in place for the UK? He appears to have indicated that—I think that is what he said—but I do not want to put words in his mouth, so I would like to tease that out a little more. Will the Government consider extending the current trade remedies where necessary?

Does the Minister accept that the trade remedies framework outlined in the Bill may not be up and running by the time Britain leaves the European Union? How confident is he that UK manufacturing will be sufficiently protected from state-sponsored dumping throughout the transition period? Have the Government set a date for members of the Trade Remedies Authority to be selected and a date for the TRA to be fully functional? I think the Bill implies that UK trade remedies will apply during the transition period, but how does that fit with the tone of the statement made by Mr Barnier?

It is clear that the Government have huge questions to answer about the effectiveness of the trade remedies in the Bill, and about how they will work throughout the transition period. The devil is in the detail, so I hope that the Government have listened carefully and will try to answer our concerns and those of many people out there.

Question put and agreed to.

Schedule 4 accordingly agreed to.

Schedule 5

Increase in imports causing serious injury to UK producers

[Jonathan Reynolds]

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

This amendment removes the requirement for a preliminary adjustment plan.

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[Kirsty Blackman]

I rise to move amendment 110, but I will mention now that if new clause 6 is moved at the appropriate stage, we will support it, because an enhanced parliamentary procedure seems sensible.

Clause 14 is headed “Increases in imports or changes in price of agricultural goods” and deals specifically with special agricultural safeguards and what can be put in place in relation to them. Our amendment is a very short one, but it is designed to require that the Secretary of State consult with consumer representatives and agricultural producers when making any decisions relating to special agricultural safeguards.

The Minister, when he spoke earlier about safeguarding, said that the decisions taken are about balancing the needs of producers with those of downstream consumers. This is exactly the kind of thing we are trying to do: we are trying to ensure that the Secretary of State, when making the recommendation to the Treasury to exercise the regulations, is doing so after consulting both consumer groups and agricultural producers. That is the only sensible thing to do in this case. The Minister has previously been clear that the Government like consulting with people and tend to try to do so wherever they can, but it would be sensible if it were stated in the Bill that they were required to do so in advance of putting in place, via a relatively unusual process, relatively unusual measures that would have an impact on our agricultural producers and consumers.

That is important because Brexit is looming on the horizon and our farmers do not know how they will be supported financially after 2020. I think Ministers have given undertakings to safeguard the money that comes from the EU until that point, and farmers have no certainty beyond that period of time. The UK Government are looking to make their own trade deals, which may change the agricultural landscape in the UK or result in our taking imports we have not previously because because of the trade deals as part of the EU—we have previously discussed things such as chlorinated chicken. Given all the changes on the horizon, both for agricultural producers and for consumers, who are already finding, for example, that the price of butter is going through the roof because of the increase in sterling, it is difficult for the Government to foresee what may happen in the future. If the Government are going to put in any measures related to increasing imports or the price of agricultural goods, particularly through the safeguarding measures, it would be sensible to consult both agricultural producers and consumers in advance of putting those in place.

[Peter Dowd]

The Minister was getting a little bit tetchy and prickly there. There is a quote from “Henry VIII” which, given that we are talking about Henry VIII powers, seems appropriate today:

“Be advised:

Heat not a furnace for your foe so hot

That it do singe yourself.”

The new clause would establish an enhanced parliamentary procedure in relation to import duties on agricultural goods. During our sittings, the Committee has heard serious concerns expressed by multiple witnesses about the democratic shortcomings of the Bill. The Bill is, first, strikingly light on detail, notwithstanding the Minister’s assurances that things will be put into place and more detail will come in due course. The Government are pushing that detail on to secondary legislation, but the delegated legislation process was designed to make administrative changes to laws—in effect, a rubber-stamping process—not for items that will form the material basis of our trade defence policies and so require proper scrutiny and debate. More worrying are the items to be channelled directly through the Executive in an unacceptable concentration of power, which ought to be subject to scrutiny, with Parliament given a say in holding the Government to account. The amendment is one of several in which the Opposition are calling on the Government to put critical decisions on tariffs, quotas and preferential rates in front of Parliament.

The measures in the Bill are at odds with the greater democratic control persistently promised to voters. Bringing back control, as we have said a million and one times, is about bringing back control to Parliament, not to a cadre of Ministers sitting in their offices in Whitehall. The new clause sets out four steps to enhance parliamentary scrutiny: first, a Minister must come to Parliament to explain the intentions of the draft regulations; secondly, a Minister must tell Parliament the import duty amount, as well as the period and trigger price under the relevant section; thirdly, the House must pass a resolution arising from the Minister’s motion; and, fourthly, regulations must be made to give effect to that resolution—all in the cold light of parliamentary scrutiny and sight. It is not for the Government to make decisions single-handedly behind closed doors, nor for the Secretary of State to steer the process unilaterally. Rather, such decisions must be subject to proper democratic accountability, with the essential checks and balances enshrined in law.

As I have said before, the Opposition recognise that the Government must make necessary preparations to create the UK customs and tariff regime post-Brexit, but they cannot have carte blanche. We should not allow, or be considering, a carte blanche process allowing the Government to concentrate all those new powers in the Executive. The Opposition’s view is that in this instance the interpretation of taking back control— moving it from Brussels to the Executive—is not acceptable. That is not only true of the provision before us today, but evident in the European Union (Withdrawal) Bill and the Trade Bill. The Government are attempting to sidestep parliamentary scrutiny, and that is not acceptable.

In our view, tariffs should undergo the same parliamentary process as taxation, with similar levels of parliamentary scrutiny. We will oppose the Government’s attempts to give the Treasury delegated powers to set future customs duties and tariffs away from the public and parliamentary eye. That is not the way we do things in Britain. New clause 6 outlines an enhanced parliamentary procedure for setting additional import duty on agricultural goods, among others, to bring scrutiny to our customs policy.

Our agricultural sector faces an uncertain future with Brexit ahead. It is distinct from other UK industries in possessing a more interwoven relationship with the European Union, given the existence of the common agricultural policy, which provides subsidies to UK farmers that the Government have indicated they will continue. The common agricultural policy provides critical support to UK farming—for example, the Department for Environment, Food and Rural Affairs estimated in 2014 that such payments represented 55% of farm income. As I said, the Government have promised to maintain those subsidies at the existing level until 2022, which I am sure is a huge comfort to the agricultural sector, but there are no guarantees yet on what will occur after a transitional period. Our step-by-step proposed parliamentary process will hold the Government to account for their policies and import duty proposals on agricultural goods.

Given the reliance in some quarters on subsidies and the fact that our EU counterparts will continue to be in receipt of subsidies across the continent, there will be a number of factors to consider when the UK comes to setting tariffs on agricultural imports. It is worth noting that the value of UK agricultural production at market prices was £25.8 billion in 2014, according to official Government statistics, and the farming sector provides 400,000 jobs in the UK. I accept that not many of them are in the constituency of Bootle, but there we are.

As the National Farmers Union has highlighted, the UK trade balance is negative to the tune of £22.4 billion, which makes the UK a net importer of food. Although there is an ambition for that figure to improve as the UK becomes more self-sufficient in food production, it shows that the UK is quite heavily exposed in terms of import dependency. As the NFU also highlights, the UK will be duty-bound to establish its own set of schedules with the World Trade Organisation, once we leave the EU. Although we know the Government have announced their intention to replicate the existing trade regime as far as possible in those new schedules aligned with existing arrangements, we have no guarantees on that front, and that must also be agreed by the other members of the WTO. Given the broad range of potential outcomes here and the importance of the agricultural sector to the UK economy, it is vital that any decisions made on import tariffs are subject to proper scrutiny and debate.

The amendment proposes that the relevant Minister must lay before the House of Commons full statements and drafts of regulations so that they can be properly scrutinised by Members from around the country who can represent the diverse interests of the agricultural community—the producers—and British consumers. It is almost a binary position.

[Julian Sturdy (York Outer) (Con)]

I draw the Committee’s attention to my entry in the Register of Members’ Financial Interests. I wonder whether the hon. Gentleman should also touch on the impact of standards. He talked about animal welfare standards, as well as genetically modified products that we do not have in the European Union and a number of pesticides that are not now used in Europe but are used around the world. Those issues will all have an impact on future trade deals on food and agriculture, and will affect the consumer.

[Peter Dowd]

I thank the hon. Gentleman for raising that point, which is very important. I know one of my colleagues will be moving an amendment on those issues, and I hope that at that point the hon. Gentleman will be able to join the debate in a little more detail and give his knowledge and expertise on the matter.

I call on members of the Committee to lend their support to the amendment to ensure that democratic safeguards are in place surrounding the future of the UK’s agricultural industry.

[The Financial Secretary to the Treasury (Mel Stride)]

It is a pleasure to serve under your chairmanship, Mrs Main. I begin by thanking the Under-Secretary of State for International Trade, my hon. Friend the Member for Beverley and Holderness, for his spirited Henry VIII- style performance. We are now back to Mr Nice. [Laughter.] I feel bound to inform Members opposite that, although I may take a more gentle route, I will probably arrive at the same destination as my colleague would lead us to.

Clause 14 sets out the necessary provisions required to establish the UK’s independent agricultural safeguards regime. It enables the UK to mirror existing EU arrangements for agricultural standards post-EU exit. In addition to the range of tariff and quota regimes that currently govern imports into the UK, some agricultural imports are governed by special agricultural safeguards. Agricultural safeguards are contingency restrictions on agricultural imports. They permit additional duty to be applied on certain agricultural imports in special circumstances—for instance, if there is a surge in the volume of imports or a sharp fall in import prices that could have an adverse impact on the UK market. The use of agricultural safeguards is permitted under the WTO agreement on agriculture. They can be applied only to goods in the scope of this agreement, but they are specifically designated in a WTO member’s schedule of commitments.

--- Later in debate ---

Reliefs

[Peter Dowd]

I beg to move amendment 126, in clause 19, page 13, line 5, at end insert—

“(6A) No regulations may be made under this section unless a draft has been laid before, and approved by a resolution of, the House of Commons.”

This amendment requires regulations under Clause 19 to be subject to the affirmative procedure.

[The Chair]

With this it will be convenient to discuss the following:

Clause stand part.

Amendment 127, in clause 32, page 19, line 32, after “regulations” insert “under section 19 and”.

This amendment is consequential on Amendment 126.

[Peter Dowd]

We tabled amendment 126, and the consequential amendment 127, to ensure that regulations made under clause 19 are subject to the affirmative procedure.

Clause 19 allows the Treasury to make regulations for full or partial relief from a liability to import duty. The clause sets out a number of factors determining whether a relief can be applied, including the nature or origin of the goods, the purposes for which the goods are imported, the person by whom they are imported and the circumstances under which they are imported. The amendment seeks to provide some parliamentary scrutiny over providing reliefs, which is of course an issue of taxation and would therefore normally be subject to some form of parliamentary oversight.

I have said a great deal about the Bill’s centralisation of powers to the Executive and away from Parliament, and this is yet another example. The Government want their cake and they want to eat it as well. They want to impose taxes with no parliamentary scrutiny, and they want the Bill to be considered a money Bill, thereby avoiding parliamentary scrutiny from the House of Lords. In this particular case, extensive powers are being handed to the Treasury to adjust fiscal policy without reference to Parliament at all. As I have said, that is pretty worrying, and it is a pretty worrying precedent to set as Brexit legislation passes through this place. The Government know what they are doing; otherwise, as I have said, they would not have designated this as a money Bill.

[Graham Stuart]

The hon. Gentleman has referred to this before, so it is worth correcting it for the record. The Government do not designate Bills as money Bills or otherwise; that is done by Mr Speaker. The hon. Gentleman may blame us for many things, but he cannot blame us for that.

[Peter Dowd]

On another occasion—perhaps not here—I am more than happy to debate that issue and have that conversation with the Minister. Indeed, if he wants to have that discussion in the Committee, we are more than happy to do so when we debate another amendment. I am sure that he would be delighted with that.

--- Later in debate ---

[Mel Stride]

I would not describe the clause as creating loopholes. It simply allows us, by regulation, to ensure the kind of importations to which I referred earlier. The authorised use importation, for example, relates to goods coming into the country for a specific process before typically being exported out of the United Kingdom. Levying an import duty on such goods would clearly not be appropriate, since they get exported shortly thereafter.

The measures facilitate those particular circumstances, or indeed the loan of an artwork. We are told that the French President is suggesting that the Bayeux tapestry might come over here; that particular gesture would be another example where no import duty would be appropriate, and that particular item should be able to come in and out of the country without being bothered by Customs and Excise. I would argue that the measures are important facilitations rather than loopholes.

Each relief provided for under this power will be for a particular purpose and set out the detailed requirements—for example, in relation to the origin of goods or the purposes for which they are imported. The power will be necessary in the first instance to replicate existing reliefs within the EU, to give certainty to traders directly following our exit from the European Union. However, as circumstances change it may be necessary to adapt our system of reliefs to give UK businesses and individuals the support they need to flourish, and to do so in a timely and flexible manner. For any future reliefs, the Treasury would follow established processes, consulting on draft legislation.

[Peter Dowd]

The hon. Member for Aberdeen North made some valid points. The reality is that this, to all intents and purposes, is a tax relief. It can be dressed up in whatever way the Minister would like, but it is de facto a tax relief. We already have something like 1,400 tax reliefs, which ordinarily would come to Parliament for their ratification. This seems to be a potential slew of tax reliefs—I will not comment on whether they are good, bad or indifferent—that will be given the imprimatur of a Minister or the Treasury without Parliament having any say whatsoever in that tax raising. That is not a power that Parliament should give away lightly, so I am afraid we cannot accept the Minister’s explanation that these are somehow technicalities and nothing to do with tax and raising money, which is the prerogative of Parliament.

[Kirsty Blackman]

I am concerned that this is a tax relief, and about the unintended consequences that might flow from it. The Minister almost seemed to say that the Government will make decisions on a case-by-case basis, but that should not be their intention. They should lay out the circumstances in which each kind of widget falls into each category. They are not deciding whether the Bayeux tapestry should be exempt from this duty, but whether artworks should be exempt. Those are pretty significant and major decisions, and I do not think they will be made with the frequency that the Minister suggests.

It might be that in 10 years’ time the world will have changed dramatically and we will be quite a different country, importing things that will need relief in a different way. That is fair enough, but the situation will not require regular change. Given that the measure seeks to encourage industry to flourish and to allow artworks to come to this country to be displayed, it will have a real impact on the UK’s future, so it is completely reasonable to ask the Government to allow more scrutiny. Such instances will not be that frequent, and the measure will have a big impact.

--- Later in debate ---

[Kirsty Blackman]

I appreciate the Minister’s clarification and I hope to be able to share that with businesses and organisations that are concerned about the possible change. In that spirit, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 21 ordered to stand part of the Bill.

Clause 22

Authorised economic operators

[Peter Dowd]

I beg to move amendment 128, in clause 22, page 14, line 17, leave out “HMRC Commissioners” and insert “The Treasury”.

This amendment provides for the power to make regulations under Clause 22 to be exercisable by Treasury Ministers rather than HMRC.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 116, in clause 22, page 14, line 36, at end insert—

“(4) Within three months of the passing of this Act, the Chancellor of the Exchequer must lay before the House of Commons a report on the proposed exercise of the power of the HMRC Commissioners to make regulations under subsection (1), including in particular—

(a) the proposed criteria to be applied in determining whether or not any person should be an authorised economic operator,

(b) an assessment of the structure of the authorised economic operator system in Germany, Austria and such other countries as the Chancellor of the Exchequer considers relevant,

(c) the proposed differences between the structure that is proposed to be established by the first exercise of the power to make regulations under subsection (1) and each of those structures described in accordance with paragraph (b),

(d) the level of proposed resources to be allocated by the HMRC Commissioners for the authorisation of new authorised economic operators, and

(e) the target timetable for the authorisation of—

(i) new authorised economic operators in each class, and

(ii) authorised economic operator certification renewals in each class.”.

This amendment requires the Government to report on the proposed operation of the powers of the HMRC under Clause 22, including comparative information.

Amendment 129, in clause 22, page 14, line 36, at end insert—

“(4) No regulations may be made under this section unless a draft has been laid before, and approved by a resolution of, the House of Commons.”.

This amendment requires regulations under Clause 22 to be subject to the affirmative procedure.

Clause stand part.

Amendment 130, in clause 32, page 19, line 32, after “regulations” insert “under section 22 and”.

This amendment is consequential on Amendment 129.

[Peter Dowd]

Amendment 128 would confer powers on the Treasury to act as authorised economic operators instead of HMRC commissioners, for whom the clause currently creates powers.

Clause 22 allows the setting up of an authorised economic operator scheme, which is an internationally recognised quality mark indicating that an operator has met recognised standards of compliance. The status could give special access to some customs procedures and the right, in some cases, to fast-track shipments through customs. Clause 22 gives HMRC the powers to make regulations to not apply sections of part 1 of the Bill to those with such a status, or to ensure that the status is recognised procedurally in other ways.

Once again, this is a very wide power given to HMRC commissioners to ignore large sections of the Bill in relation to certain operators. Under the amendment, we hope to shift the powers from HMRC commissioners to Treasury Ministers. There is a simple reason for that: Treasury Ministers are democratic agents, accountable to the general public. We cannot allow a situation where unelected officials can disapply large sections of parliamentary legislation with no democratic recourse or public oversight. The clause would effectively give HMRC power to refuse to apply all of part 1 of the Bill, from clause 1 all the way to clause 38. Surely this sweeping power, if it has to be created, should be held by a Minister of the Crown—ideally with additional parliamentary scrutiny, as we have tried to ensure throughout other parts of the Bill.

The clause highlights yet another case where democracy is being brushed aside for the purpose of expediency. Our amendment seeks to restore accountability. I hope that members of the Committee will support it today.

Amendment 129 and consequential amendment 130 seek to amend clause 22 and clause 32 respectively. In both cases, the amendments would add a requirement for the Government to introduce affirmative regulations to make further policy. Under clause 22, that is for the purposes of setting up an authorised economic operator scheme.

The use of the negative procedure in that case was commented on in the Lords Delegated Powers and Regulatory Reform Committee report, which addressed the matter of regulations made under the negative procedure under clause 22 as follows:

“Clause 22 allows HMRC Commissioners to make regulations ‘disapplying or simplifying’ any of the law relating to import duty made by or under Part 1 of the Bill (clauses 1 to 38) in relation to “authorised economic operators”, a term that will be amplified in regulations and which essentially covers operators who meet internationally recognised standards of compliance. Bearing in mind that clause 22 covers the other 31 regulation-making powers found in Part 1 of the Bill, its scope is very wide. Given the width of this power enabling HMRC to waive compliance with the law, we consider that these regulations should be subject to an affirmative procedure.”

Again, the Lords are bringing home the point about democratic accountability.

Amendment 129 seeks to amend the Bill, following the advice of that cross-party Committee, because of another example of the Government sidestepping parliamentary scrutiny. We want—we will say this time and again—to reintroduce some measure of scrutiny into the process. Similarly, amendment 130 brings the notes under clause 32 into line with the changes made in clause 22, as I described earlier. It is therefore a consequential amendment in ensuring that the Bill properly reflects the comments made by the Delegated Powers and Regulatory Reform Committee. As I am sure everyone will agree, the proposals are all about parliamentary scrutiny in the important area of customs policy.

[Kirsty Blackman]

It is most unusual to hear the Lords held up as champions of democratic accountability, but the work of the Delegated Powers and Regulatory Reform Committee on the Bill has been incredibly useful, and it has allowed us to have a more knowledgeable debate on the subject. It was quite reasonable of the Opposition to have brought forward their amendments.

I will speak to amendment 116, which I intend to press to a vote. It is about authorised economic operators, which is what the clause covers, because I have real concerns about the system. I am not the only person to have concerns—they have been expressed previously—about how the UK manages the AEO scheme within the UK. The UK scheme is managed dramatically differently from schemes in other countries, which is a real concern for businesses.

The Government’s customs White Paper mentioned that people could be authorised economic operators, and basically suggested that that would solve all their woes. Given how difficult it is for companies to become authorised economic operators, and given HMRC’s shortcomings in overseeing the process and ensuring that it is as smooth and quick as possible, I have real concerns that the system cannot be used effectively by many businesses as a way to ensure—slacker customs procedures is not the right term—slightly different customs procedures that would allow things to move a bit more smoothly.

In the amendment in my name and that of the hon. Member for Dunfermline and West Fife, we are looking for the Government to provide more information. Part of that is about giving businesses certainty further in advance, and part is about ensuring that the Government think about how the authorised economic operators scheme will go forward.

Among the various things we are asking for in the amendment is

“the proposed criteria to be applied in determining whether or not any person should be an authorised economic operator”.

Part of that is to do with the issue that the UK Government and HMRC have had with requiring companies to have someone with three years of customs experience in order to be approved as an authorised economic operator. That is how things have been applied and work now, but if we suddenly include the, I think, 130,000 new companies that have not previously had to do customs checks, we will need a different system, because those companies will not have someone who has been working for three years in a customs-related role. The Government will have to agree that some sort of external company can take on the role of that person, or that the companies can have a differentiated system until they have had that three years of experience in exporting. It is reasonable to expect the Government to be a bit more flexible.

Our proposed new paragraph (b) asks for

“an assessment of the structure of the authorised economic operator system in Germany, Austria and such other countries as the Chancellor of the Exchequer considers relevant”.

Although the scheme is internationally recognised, the way in which it is implemented and the way in which the equivalents of HMRC oversee it varies wildly by country. In some places, the system is much quicker, and it is much easier to get through the process. Companies receive more assistance and guidance to get them through the process, and the officials make a determination about applications more quickly.

It is important for the Government to look at other countries. The British Chambers of Commerce said that Austria and Germany do this in a much smoother way; that is why those countries are included in the amendment, but it would be completely reasonable for the Government to include any other countries that they think are relevant.

Paragraph (c)—

“the proposed differences between the structure that is proposed to be established by the first exercise of the power to make regulations under subsection (1) and each of those structures described in accordance with paragraph (b)”—

would again require the Government to provide us with more information in advance. Paragraph (d), on

“the level of proposed resources to be allocated by the HMRC Commissioners for the authorisation of new authorised economic operators”,

is pretty critical. Given that I assume the Government expect to see a dramatic increase in the number of applicants for authorised economic operator status because of the number of companies that will be exporting for the first time, it is reasonable that they should report on how they intend to ensure that sufficient resources are allocated to seeing the process of authorised economic operators through.

Paragraph (e) is about

“the target timetable for the authorisation of…new authorised economic operators in each class, and…authorised economic operator certification renewals in each class.”

We have heard concerns that the renewal process for an authorised economic operator can take 12 months. If that is so—that may be an outlier—that is a ridiculous length of time for a renewal. The Government may decide that they want a first application to take that long, but I would contend that even that is pretty excessive. It would be incredibly useful for the Government to set out what the targets are, so that companies know, when they are going into the system, how long the Government intend to take in making a decision. When a company is considering, for example, exporting to a new market or changing the way it does it exporting, it should be able to look at the Government’s timeline and plan on the basis of how long it will take them to process the authorised economic operator approval or renewal.

It would be sensible for the Government to come back with all those answers. Businesses would be very happy if the Government gave them more certainty about all those matters. This is a pretty comprehensive amendment, and it relates to a number of aspects of the authorised economic operator scheme that I have concerns about. I hope the Minister will provide a degree of certainty about all of them. If he cannot, I will be keen to press this amendment to a vote.