Trade Bill - Second Reading

Part of the debate – in the House of Lords at 3:30 pm on 11th September 2018.

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Photo of Lord Grantchester Lord Grantchester Shadow Spokesperson (Energy and Climate Change), Shadow Minister (Environment, Food and Rural Affairs), Shadow Spokesperson (Business, Energy and Industrial Strategy) 3:30 pm, 11th September 2018

My Lords, I welcome the Minister to her first Bill in your Lordships’ House and I look forward to the maiden speech of the noble Baroness, Lady Meyer. This Second Reading debate offers us an all-too-rare opportunity to consider in detail what should constitute the UK’s future trade policy and what changes to our legislative structures, now and into the future, are required. At the moment there is still huge uncertainty about what relationship the UK will have with the European Union, or about how the Government think that our national trade policy will be built around that relationship. Certainty is what our business community needs.

As the Minister has just explained, the Government believe that all that is needed at this time is a technical Bill, aimed at facilitating our engagement with the government procurement agreement, establishing the Trade Remedies Authority and making sure that the UK can roll over the existing free-trade agreements negotiated by the EU with some 80 third-party countries. On the latter point, Japan and Chile have both indicated that they are not happy to simply roll over their agreements and George Hollingbery, a Minister at the Department for International Trade, said in evidence last week that,

“it is not an absolute given that we can get them all transitioned”.

Is a technical Bill sufficient? What is our trade policy, and who operates and agrees it? What powers lie with the devolved Administrations and how are disputes to be resolved? What impact will these agreements have on ordinary people, on consumers, on companies and businesses up and down the country? How will our trading activities as a nation impact on third countries, particularly developing ones? These issues are still to be determined.

One of the most disappointing shortcomings in the Bill is that it proposes to restrict trade policy almost entirely to the UK Government. In doing so, it ignores the devolved authorities and largely bypasses Parliament. It has no engagement with civic society and, ultimately, fails to offer accountability or to offer opportunities to nations, regions or cities. Even if the right thing to do at this stage, given the massive uncertainties around Brexit, is nothing more than rolling over the trade deals that we currently enjoy as part of the EU, what happens if these trading partners ask to renegotiate? Is it possible that countries such as China and South Korea may wish to change the terms of the agreement when dealing with a market of 65 million people, when the original deal was premised on access to a much more diverse and remunerative market of over 500 million? We must make plans for how the UK will approach such challenges and take into account all the diverse viewpoints and outcomes.

On transparency, the Bill fails to guarantee the disclosure of any information relating to negotiations or to mandate consultation on continuity agreements, while essential scrutiny of secondary legislation is compromised in some of the most crucial areas. It offers few checks and balances—fewer, indeed than those the EU currently routinely guarantees for its trade deals to the European Union Parliament and civic society. It tries to set up the UK’s trade policy as a simple continuation of where the EU has got to, but it ignores the growth in public interest in trade agreements.

The Bill also misses an opportunity to act as a framework for our future trade policy and set out the UK’s pitch as an ethical trading nation right from the beginning. Trade policy should not be pursued only for self-interest but should also be used to shape a world that better reflects our ideals. I refer to advancing human rights, eliminating poverty, promoting sustainable development and reflecting the UK’s concern for high environmental and welfare standards in production methods.

This gives me the opportunity to touch briefly on the issue of tariff rate quotas, which deal with the split quantity of certain goods within the overall EU allocation, which can be traded at reduced tariffs following our departure. A large share of such goods is related to agriculture, so the issue is central, not only to our economic prosperity but to the food we all eat. I am sure many will be aware of the disputes that have arisen as a result of nations such as Canada and the US claiming that plans to divide these quotas will disadvantage them. This is an issue that must be resolved, and it can be examined at later stages to allow the Government to best do so.

The Trade Bill should guarantee that even our continuity agreements promote these principles, and that our trade policy has its sights on goals beyond benefiting our own economy. I am sure the Minister will offer assurances that our trade policy will be principled, but if her Government are serious about this commitment then they should enshrine these ideals in the statute book. The Bill also paves the way for the UK to participate in the government procurement agreement, and we welcome that. However, there is no detail in the Bill about what constraints, if any, will be placed by the UK on third-country companies bidding for UK public bodies contracts. We will be putting down amendments to scrutinise that and making suggestions for how procurement can be used to advance social objectives.

As the Minister said, the key proposal in the Bill is the establishment of the Trade Remedies Authority. Labour recognises that, provided it is set up properly, it is guaranteed independence from the Government and has the right powers to protect UK industries from unfair trading practices. I am sure the House is well aware of the dumping of Chinese steel, where the market has been flooded with goods being sold below the cost of production without profit, leading to dreadful consequences for the UK steel industry. Unfortunately China’s dumping of steel is not an isolated case. Trade dumping has become a major feature of the international trading market. The House also needs only to look towards the aggressive and protectionist trade policies of President Trump to demonstrate the need for strong defences. This is a serious issue with serious ramifications for jobs and the economy. The TRA will need substantial resources if it is going to do the job required. We will be looking carefully at the structure proposed for it and how best to guarantee its independence.

Lastly, I come to the greatest missed opportunity: the chance to settle the question of whether the UK will negotiate a new customs union. One of the many myths peddled by this Government is that the UK is better off outside the customs union with the EU. Surely we can trust businesses to know what is best for them, and the clear majority of them say they are best off in a customs union with the EU. The reason is simple: a customs union could allow for frictionless trade with the EU and offers the best possible basis for dealing successfully with the Irish border issue. It could also pave the way for access to over 50 trade agreements with third countries. Together, these markets accounted for 62% of UK goods and services exports in 2016.

The country was encouraged by the Prime Minister’s recent trip to Africa. We were all pleased to see efforts to expand into these markets. However, it is worth reminding the House that South Africa, the focus of the trip, already has an agreement with the EU, from which both South Africa and the UK greatly benefit. In addition, 34 of the least developed African countries already benefit from tariff- and quota-free access to the EU through the Everything But Arms policy. Nearly all African countries receive preferential access to EU markets. The Prime Minister is right to look to Africa and elsewhere for future trade, but a customs union with the EU is the best way to do so.

With Britain outside a customs union, there seems no remotely realistic scenario in which British businesses would find it easier to sell their goods and services abroad. This is for the simple reason that the UK alone is unlikely to secure trade deals more effectively than it does in the EU. First, there is the question of capacity and experience. While the EU has more than 40 years’ experience negotiating trade deals, the UK would be starting from scratch. Secondly, it is a question of negotiating power. While the EU can offer access to a huge market of more than 500 million people and extract large concessions in exchange, the UK can offer access to a market of merely 65 million people and will have to accept fewer concessions in return. A customs union with the UK at the front and centre is a solution for our future trading policy. This would allow us to broker new trade deals and expand markets through the joint bargaining power of the UK and the EU, while solving the Irish border question. A trading bloc is inherently more powerful than an isolated nation state.

It should be noted that services—on which the customs union has limited impact—must also be protected. We hope to provide for this issue during the later stages of this Bill. The enhanced equivalence provisions on services, set out in the Chequers proposals, are inadequate and erect significant barriers to trade.

Ultimately, this Bill is a missed opportunity to prepare the UK for a new chapter in our trading history. It betrays the principle of accountability and devolution which are so vital for any future trade policy. It creates a Trade Remedies Authority which will be woefully unprepared to fulfil its responsibilities. It misses the opportunity of mandating the Government to remain in a customs union with our major trading partner. The UK’s trade policy should have both our nation’s self-interest and the advancement of our ideals globally at its heart. Unfortunately, this Bill fails to prepare our nation to build a trading policy which can achieve any of this.