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

Debate between Peter Dowd and Nicholas Dakin

Thursday 1st February 2018 Public Bill Committees

[Peter Dowd]

I was trying to show that in this case there is a requirement for a sunset clause. It is absolutely crucial that we have sunset clauses and I am trying to show—I know that you will appreciate this, Mrs Main—that they are capable of being delivered.

[Nic Dakin]

Is not having a sunset clause in place definite evidence of Parliament taking back control, not just now but into the future?

[Peter Dowd]

That is spot on. We have raised that issue time after time. Having sunset clauses and taking control back is a sign of a confident Government who are strong and stable and know their direction of travel. That is why I am sure that every Government Member of the Committee will support the amendment’s specific proposal for a sunset clause.

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

Debate between Peter Dowd and Nicholas Dakin

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

[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.

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

Debate between Peter Dowd and Nicholas Dakin

Tuesday 30th January 2018 Public Bill Committees

[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.

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

Debate between Peter Dowd and Nicholas Dakin

Thursday 25th January 2018 Public Bill Committees

[Peter Dowd]

The Opposition believe that, just as changes to tax are brought in in the form of a money Bill, so should changes to tariffs and customs duty. That is practical, reasonable and very responsible, if I may say so. We are not suggesting that there should be a vote every time that a tariff is raised or lowered; instead we envisage the Government regularly introducing to Parliament a list of changes for Members to scrutinise and vote on.

The alternative to a democratic and open process is the hoarding of power in the Treasury or the Department for International Trade, which alone will set the UK’s future customs tariffs. The workings and logic behind their decisions will be largely unknown, and hidden from the scrutiny of the House. That is the theme of our amendments with regard to the Select Committees. The Minister says that Select Committees will be able to bring the Minister in, question them and have a chat with them, but I am afraid that is not strong enough.

This is the biggest constitutional change we have had for as long as anyone can remember, and it is incumbent on us to ensure that when we have major shifts in power between the Executive and the Commons, we can challenge them. I think a confident Government would acknowledge that. I would not use the word “concede”, but I think a Government, who were confident in their own abilities—

[Nic Dakin (Scunthorpe) (Lab)]

Strong and stable.

[Peter Dowd]

I refuse to use the phrase “strong and stable”, but if the Government had confidence in their policies, they would not shy away, in any way, from the proposals that we have set out. I am interested to hear what the Minister says about them. In the oral evidence sessions, several witnesses expressed concern, and were reluctant to agree that the lines of communication between businesses, between organisations, between agencies and so on were conducive to getting a proper hearing. I think Members most probably got that message from the witnesses. Communication lines are there, but in a sense no one is at home; that is certainly the perception that I got.

Customs tariffs will be unamendable and unchangeable except, in effect, at the whims of the Chancellor and a Trade Secretary. It may well be that those individual Ministers are very open to dialogue and persuasion, and are in listening mode. Then again, they might not be, and this Parliament has always challenged the whim of whoever might be in power. [Interruption.]

--- Later in debate ---

[Nic Dakin]

Does my hon. Friend think that, in line with the Government’s industrial strategy, it would be a missed opportunity if we end up hollowing out UK industry in the way that he describes, rather than securing its future as we all wish to do?

[Peter Dowd]

My hon. Friend makes a very important point. There is a danger that we are walking into this with a bit of a fuzz around us. We just do not know the impact this will have on us. If the Government do not get it right, as in spot-on, it is potentially very dangerous for our industries. That is why we are concerned, which is another of our themes in relation to the Bill: one is about democratic accountability, and the other is about how the Bill will protect our vital industries, from manufacturing right the way through the whole ream.

The scenario I referred to earlier is far from absurd and reflects the reality that, when it comes to negotiating and signing free trade agreements, there are always winners and losers, particularly when negotiating with countries that are larger both in population and economic size.

The free trade agreement negotiated between Australia and the United States in 2004 was negotiated in a relatively quick period, and it was so bad that officials refused to recommend it to the Australian Parliament. John Howard, the then Prime Minister, was forced into signing it by President George W. Bush, who essentially reminded him of the close security collaboration between the two countries. After signing, John Howard was often and repeatedly chided by political opponents who would shout, “Where’s the beef?”—a reference to the failure of the free trade agreement to stimulate beef exports for Australia.

We do not want to be in that situation. The UK could easily find itself in a similar scenario whereby we will offer preferential rates to the USA or China, with little in return. In November, we had Wilbur Ross, the US Commerce Secretary, saying that the UK retaining EU regulations on chemicals, genetically modified crops and food safety would represent “landmines” for a potential deal. The Secretary of State for International Trade is reported to have given him private assurances that this would not be a problem.

Stakeholders could find themselves shut out of the process. The Opposition’s concerns are not scaremongering, particularly when we have a Secretary of State who has already made it clear that he supports a race to the bottom, with cheaper consumer goods and weaker regulations and standards. Again, our witnesses spoke about how it is not consumer against producer—the two are almost interchangeable. If we look at the trade remedies outlined in the Bill, we see the Government have ensured there is a clear economic interest test for the Treasury to follow that does not consider the interests of UK manufacturers or key industries, which is unique among most World Trade Organisation countries.

If this Bill and the Trade Bill remain unamended, the Treasury will have to take the advice only of the Secretary of State in that regard, but it will receive a recommendation from a Trade Remedies Authority that will be appointed by the Secretary of State and no doubt made up only of people he trusts—that does not mean that anyone else does—unless its composition is amended in the Trade Bill. We saw that only yesterday, with a vote in the House of Commons in relation to the Electoral Commission. Parliament is entitled to express a view on such appointments, but in this case I do not think we will get that capacity. It certainly does not seem to be in the Bill. Key stakeholders will therefore bear the brunt of any changes to tariffs and again effectively be shut out of the process.

Those key stakeholders will be at the mercy of a Secretary of State who appears to be desperately attempting to negotiate free trade agreements at any cost and potentially to pay a price that most of us would not be prepared to pay. If hon. Members do not have the ability to challenge it, the Treasury will also have a free hand to introduce regulations that will set the framework for the lowering of tariffs which, if we are not careful, will change the UK economy as we know it. I exhort the Committee to think carefully on the proposals in the Bill and to take into account what we say in our new clause.

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

Debate between Peter Dowd and Nicholas Dakin

Tuesday 23rd January 2018 Public Bill Committees

[Nic Dakin]

Q When the Home Office had its e-border thing, it appeared to fail through lack of engagement with key partners. How much engagement have you had with HMRC on the new CDS system? Are you confident that it is getting to the right place?

Robert Windsor: I will take the lead on that, because the freight borders are heavily engaged in this. CDS has been an ongoing project for about three and a half years. Customs did quite a lot of research with industry on what its requirements were. They have been doing a development stage, which, I have to be honest, is highly technical and way beyond anything that I can understand, although software suppliers and the community service providers have been part of the technical workshops on it. They are now starting to talk directly to us and, as a trade association, we are receiving quarterly updates on the project. I really do not want to comment on whether we think it is going to succeed or be delivered on time, because at the moment it is still under development. Part of the problem that they have, which is not of the team’s making, is that some of the data elements are still to be defined within the Union customs code, such as the format of a unique consignment reference. That matter still needs to be resolved.

Richard Ballantyne: This is a technical area, and Robert and his colleagues will be concentrating on that, but all three of us sit on the Joint Customs Consultative Committee, which is HMRC’s main stakeholder committee, and there are opportunities to get briefings on CDS. I feel personally that if we want the information, it is there.

Tim Reardon: What I would say on CDS is that it is an importers and exporters system. As carriers, we have very little interface with it, but our engagement with Revenue and Customs has been constant and continual since the referendum result, when it became apparent that there was a significant new element of uncertainty about whether the 40% of the UK’s international trade that arrives and leaves in trucks on ferries was going to be able to continue doing as it did.

Richard Ballantyne: Yes, at a very general level, ports touch many Government Departments in terms of policy regulation, and of all the Departments, HMRC has been the most forthcoming since the referendum. The amount of engagement has been quite unprecedented. That is not necessarily to speak negatively about the other Departments, but HMRC has really taken the lead.

[Peter Dowd]

Q I want to talk about the Joint Customs Consultative Committee. I understand that you are all members. How often has it been convened in the past year, for example? Are there any plans to increase the regularity of its meetings in the run-up to Brexit? What sorts of things have you been discussing at those meetings—maybe the last two or three, for example?

Robert Windsor: The Joint Customs Consultative Committee meets three times a year, and it covers areas of strategy that are impacting on importers, exporters, freight forwarders, shipping lines, whatever. Since Brexit, the JCCC has established sub-committees specifically dealing with Brexit as an issue and that group, if I remember correctly, meets about four times a year.

--- Later in debate ---

[Nic Dakin]

Q On timescale, is the current Bill likely to mean that things will take longer to get done than currently with the European regime, or will it make things quicker? I am sure that we want everything to be slicker and easier when we come out of the European Union.

Gareth Stace: The timescales are not set out clearly enough. I do not want to go over old ground, but the hoops to go through at all the different stages will only lengthen that process. I am sure that will happen, calculating injury and dumping, but if was just dumping, that would happen very quickly.

I might have said already that in the US, provisional measures come in after 45 days and in the EU they come after nine months, which is coming down to seven. The UK has the opportunity to say that we will do it at six months, and we always—unless there are circumstances where it is not appropriate—apply retrospective duties of three months. So you get provisional duties coming after three months, which sends a very strong message to the market: do not dump your illegally traded goods here in the UK.

Ian Cranshaw: I think we would all be disappointed if we could not expedite the EU system, when it has to canvass views across 28 member states. We would have to canvass views in just the UK, so if we cannot bring that nine months—soon to be seven months—down further, an opportunity will have been missed.

Dr Laura Cohen: There is a tremendous opportunity here for Brexit. If an industry is suffering injury and dumping, it is really important that it gets sorted out quickly.

[Peter Dowd]

Q What involvement have you had in your respective sectors with the Department for International Trade on the creation of any potential trade remedies in the Bill? We are expecting a Division shortly, so a short answer would be helpful.

Gareth Stace: From my point of view of steel, this time last year we had written five very detailed papers that DIT officials have been very pleased to receive. We have had very good engagement with them, so I could not actually fault that. We probably have had some difference of opinion, so although I heard, “We agree with 95% of what you are putting out,” I said, “That’s fine, but it’s the 5% that is crucial.” Like everything with Brexit, the issue is around that 5% and we do not understand the detail around that.

We continue to engage with DIT, but we have provided all the information we can; there is nothing more we can provide. That is why we are disappointed: in the face of this Bill in primary legislation, we have not seen the detail that the Government had the opportunity to put in.

Dr Laura Cohen: From our sectors, I echo what Gareth has said. As an association, we have had really good engagement with DIT officials. BCC has had four meetings as an association with Ministers or Secretaries of State in the past year. That is really appreciated. However, we have made our case very clearly and I do not know what else we can say. We need to ensure that businesses, investment and jobs get the best possible deal from Brexit.

Ian Cranshaw: As a group, we met Greg Hands. The Minister gave us a considerable amount of time. He had been briefed well and he understood our issues, but he just did not accept them—he had a different view. That is fine; we have to go away and refine our position and give the evidence that was required. Some of the evidence that he called on we would call less than proven.

We know that there was a discussion earlier about the make-up of the TRA and who helped formulate the Government view. They say that for the review on trade remedies they went to a very liberal think-tank and asked what the view is on this, so of course they got a very predictable response. We would have questioned whether they had taken in some of the advice and evidence from business, as they might have got a rounder view of what was required.

Gareth Stace: It was not a liberal think-tank, but a company that represents the Chinese steel sector against the EU. They could have chosen many; why did they choose that company?