Amendment 78

Trade Bill - Committee (5th Day) – in the House of Lords at 9:15 pm on 13th October 2020.

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Baroness Kramer:

Moved by Baroness Kramer

78: Clause 6, page 4, line 25, leave out from “TRA” to end of line 28 and insert—“(c) protect the TRA’s operational independence and its ability to make impartial assessments when performing its functions.”

Photo of Baroness Kramer Baroness Kramer Liberal Democrat Lords Spokesperson (Treasury and Economy)

My Lords, under the Bill, the UK’s current Trade Remedies Investigations Directorate, part of the Department for International Trade, will be replaced at the end of transition by the Trade Remedies Authority. Responsibilities that fell to the European Commission under the common commercial policy during the years of our membership will be ours to decide, but in this arena no one acts in a vacuum. The TRA powers in the Bill reflect three separate agreements of the WTO: the agreement on the implementation of Article VI of the General Agreement on Tariffs and Trade, commonly known as the anti-dumping agreement; the agreement on subsidies and countervailing measures; and the agreement on safeguards.

However, how we position ourselves is not simple. The EU, for example, has in recent years made its own findings of significant distortions in exporting economies, and those decisions may be challenged in the dispute settlement proceedings of the WTO. Where will we in the UK position ourselves?

Our economy, whether the Government like it or not, is deeply interlinked with the EU economy, so that many actions against the EU will also encompass the UK. Some way will have to be found to co-operate with the EU, and, often, to synchronise trade remedies—or, frankly, businesses will be left in a completely impossible position. The European Commission has ongoing investigations in at least 20 cases, including multiple cases against China, the USA and India on goods ranging from steel and biodiesel to electric bicycles and tableware. It is also a complainant and, in other cases, a defendant in a number of cases in the WTO dispute resolution system that have consequences for the UK.

So it is crucial that the TRA is operationally independent and impartial in its assessments as it deals with complaints brought to it by industry or—I hope rarely—investigates concerns brought by the Secretary of State. But, if it is to have standing and credibility, it must be seen to be above international, electoral and party politics. Under the current Government, this is not easy, as illustrated by the article on “shaking up the state” in last week’s Financial Times. In discussing bodies such as the TRA, one of Boris Johnson’s allies is quoted as saying that

“Labour stuffed these bodies with their people; now it’s our turn.”

That is not an appropriate reputation for a body such as the Trade Remedies Authority.

I have done my best to trawl through this Bill, the Taxation (Cross-border Trade) Act 2018 and the raft of related SIs, but I have yet to find any unambiguous statement that the TRA is required to be operationally independent and impartial in its assessments. The Government might say that both are implied in clauses that deal with the behaviour of the Secretary of State towards the TRA. Those clauses include a “must have regard” in Part 2, and again in the “Guidance” paragraph of Schedule 4. However, |your Lordships will be aware that a “have regard” only sometimes has consequences. I have worked for years now with financial regulators who consider a “must have regard” as pretty light touch.

These concerns sit behind Amendments 78 and 114, and the first paragraph of Amendment 104, in my name and that of my noble friend Lady Bowles. They would make unambiguous the requirement for the TRA to be operationally independent and impartial. Amendment 79 is also in my name and that of my noble friend Lady Bowles. It approaches the issue from a different angle. It seeks to require proper resources and funding for the TRA and thereby assure its independence. My noble friend will expand on this issue.

The second two paragraphs of Amendment 104 tackle a rather different problem. I can read in the Bill that the Secretary of State can accept or reject a recommendation from the TRA on dumping, subsidisation or guarantees, but I am unclear whether the Secretary of State can vary a recommendation or act without a TRA recommendation. Could the Secretary of State accept one element of a recommendation and ignore another part? This is a genuinely probing amendment and I hope that the Minister can provide some absolute clarity, because the issue is fundamental. The role and authority of the TRA will be disclosed by his answer.

I turn to the amendments in the name of the noble Lord, Lord Lansley. I assume that Amendments 104A and 108A are essentially tidying-up amendments—my apologies if that is wrong, but that is how I read them. However, I am grateful to the noble Lord for tabling Amendment 105, which would go some way to deal with a serious flaw in the balance between Parliament and the Executive.

We have no confirmation process in this country for the heads of agencies or authorities, no matter how important their work. I believe that is a serious omission. The amendment tabled by the noble Lord, Lord Lansley, proposes that the Secretary of State must have regard to the views of the International Trade Select Committee of the Commons, following a pre-appointment hearing if the committee so wishes, before appointing the chair of the TRA.

In many ways, this is a constitutional issue and, in such issues, I am on the side of Parliament, as you might imagine. However, there is a practical side as well: no chair who could not command the respect of the committee is going to run this authority successfully or have any credibility in the international community. A pre-appointment hearing would be a meaningful forum to establish those principles of operational independence and impartiality to which I referred earlier. I beg to move.

Photo of Lord Lansley Lord Lansley Conservative 9:30 pm, 13th October 2020

My Lords, at this late hour, I draw noble Lords’ attention to the debate on the predecessor Bill on 4 February 2019, in which I made similar points to those that are reflected in the three amendments in my name in this group. Regarding what the noble Baroness, Lady Kramer, said, I do not think Amendments 104A and 108A are tidying up. They are there to delete the possibility that the chief executive of the Trade Remedies Authority might be appointed by the Secretary of State in the first instance where the chair of the Trade Remedies Authority has not been appointed.

We are in a situation where, if the Bill were to pass into law before the end of the year and if it were to be commenced rapidly, we already have a chair designate of the Trade Remedies Authority. We happen not to have a chief executive designate. We are in the unhappy position where the Trade Remedies Authority has been legislated for for a couple of years but has not actually existed because this Bill was supposed to have become law alongside the Taxation (Cross-border Trade) Act. In that time, it has had a chair designate, who then stood down to be replaced in February this year, and a chief executive designate, who stood down in April this year and has not been replaced, so it is not a happy story so far. We cannot have a situation where the first chief executive of the body proper is not appointed by the chair designate who is in place, and I see no reason why that provision of Schedule 4(2) should not now be taken out and, as a consequence of that, paragraphs 17 to 23 of Schedule 4 can be removed since they all relate to that possibility.

As the noble Baroness, Lady Kramer, said, what is more important is the issue of the appointment of the chair and that, in order to reflect the importance of the role and the impact it can have in the public domain —including, obviously, from a business point of view, the economic domain in particular—and because of the requirement for independence, this should be an appointment where, before it is made, the Secretary of State should seek the views of the International Trade Select Committee in the other place.

Interestingly, I have asked the chair of the International Trade Select Committee in the Commons whether it has seen the chair designate of the Trade Remedies Authority and, as of last week, it had not. It seems to me that the department has been somewhat remiss not to put the chair designate in front of the Select Committee and to seek its views, and, not least because we had this debate back in 2019, it could easily have done it when it came to appoint a new chair designate in 2020. However, it has chosen not to do so. I think that the time has now come for Ministers to agree that this role should be one where the Secretary of State takes the views of the Select Committee before making the appointment.

Photo of Baroness Bowles of Berkhamsted Baroness Bowles of Berkhamsted Liberal Democrat

My Lords, I will speak in favour of Amendments 78, 79, 104 and 114, in the name of my noble friend Lady Kramer and in my name.

Amendments 78 and 114 would amend similar wording in Clause 6 and Schedule 4, where in both places the Bill has the provision that the Secretary of State must

“have regard to the expertise of the TRA and to the need to protect … its operational independence, and … its ability to make impartial assessments when performing its functions.”

We have heard several times in this House, including from the noble and learned Lord, Lord Judge, that “have regard” has no force, so these amendments are intended to get the operational independence and impartial assessments out from governance by the weak words “have regard”. I will not labour the point any further save to say that the independence of the TRA is very important for international credibility, and indeed not only with regard to the Secretary of State.

Amendment 104 also goes to the matter of independence, as my noble friend Lady Kramer has already explained. It would explicitly put into legislation things that have been said, understood or only indirectly recited. I believe that in the other place the Minister, Greg Hands, said that if there was no recommendation, that was the end of the matter. However, it would be good to see it in the Bill. Likewise, I am curious about whether there could be an order for an instant reopening in the event of no recommendation. It seems a good idea to clarify that the end means the end unless circumstances change.

Amendment 79 is a little different in that it relates to funding and inserts into Clause 6 that when the Secretary of State seeks advice, there must also be regard to the capacity and funding of the TRA. Although I regret the omnipresent “regard”, that is important, because TRA funding is determined by the Secretary of State, as is stated in paragraph 29 of Schedule 4. We wanted to probe a little to make sure that the TRA will have sufficient funding.

With trade matters coming under UK control, success and funding are linked. It will be no good if the TRA finds itself in the situation that it cannot do things for fear of cost or the cost of litigation, which has hampered other regulators and authorities. That might please some if they think they come under less scrutiny from a supervisor, but this is not a supervisor but batting for the UK. Will there be a formula that relates to workload, and is it appreciated that workload is not under the control of the TRA? Workload happens because of actions in other countries, and what the TRA does or does not do can be hauled up before the Upper Tribunal as well as the WTO.

I understand that the Secretary of State has shied away from having the arrangements of the CMA, which are seen as much more costly, and I have to say the salaries on offer in the advertisements for TRA posts are low by international standards. Will that be reflected in lack of experience and possibly in staff retention once staff are trained up and the private sector beckons? Will these matters be seriously kept under review or will the TRA just be told to suffer the squeeze? Would the TRA be allowed to raise funds of its own? I have some concerns there around the issue of independence, but I think we ought to know. I appreciate that these probing questions go further than the amendment, but the last thing we want is the TRA explaining to Select Committees or the Upper Tribunal how it has funding for only half the job.

I also agree with the amendments of the noble Lord, Lord Lansley, and although he does not seek a committee approval of a nominee for chair, I have personal experience of holding the power of approval over appointments and reappointments of chairs and chief executives for all the European financial services authorities, and pre and post-appointment hearings for potential candidates for the board of the European Central Bank. Although those powers were resisted in the first instance and my committee had to wring them out of the Commission, the European Council and Eurogroup, almost immediately those bodies decided that these were rather constructive things to have. They were always phoning me up to ask more about what the Parliament thought, and the UK should be brave enough to follow suit.

Photo of Baroness Garden of Frognal Baroness Garden of Frognal Deputy Chairman of Committees, Deputy Speaker (Lords)

The noble Baroness, Lady Noakes, has withdrawn, so I now call the noble Lord, Lord Bassam of Brighton.

Photo of Lord Bassam of Brighton Lord Bassam of Brighton Shadow Spokesperson (Further & Higher Education), Shadow Spokesperson (Digital, Culture, Media and Sport) (Sport), Shadow Spokesperson (Business, Energy and Industrial Strategy and International Trade)

My Lords, this is an important and valuable group of amendments and I congratulate my colleagues on bringing them forward and providing us with the opportunity to shine a bit more light on the Trade Remedies Authority. Labour believes that the creation of the TRA is necessary and welcome, in principle, once the UK has finally left the EU, so that we can protect domestic industries in our own right, investigate allegations of unfair practices by overseas competitors and seek their resolution via the WTO’s dispute settlement mechanisms.

However, we are also worried that the new Trade Remedies Authority lacks the stakeholder engagement, independence and parliamentary oversight and accountability to ensure that it will operate transparently and fairly when investigating and challenging practices that distort competition against UK producers, in breach of international trade rules. It is no secret that similar concerns were shared by your Lordships’ Constitution Committee, which said that

“it is not clear why … the functions and powers of the Trade Remedies Authority cannot be set out in more detail in this Bill”.

Schedule 4 states that the Secretary of State will appoint the chair of the Trade Remedies Authority, who will in turn appoint the chief executive and non-executive members. This process needs to ensure an independence of thought and action at the TRA. The Secretary of State should not appoint someone just in their own image, or necessarily with the same political leanings and economic opinion. We cannot have an unbalanced TRA that looks only at the approach favoured by the Government. The chair must balance interests in exactly the right way to do these things. Can the Minister therefore explain how independence at the TRA will be guaranteed? Can he explain what parliamentary involvement there will be to ensure that independence and that, whoever the chair is, they receive representations from across industry, employers, the unions, consumer groups, and the devolved nations? How will the TRA ensure a wide membership?

It is clear that we need a functioning TRA and a functioning trade remedies system, but that functioning will be undermined if there is no independence. This group of amendments enables us to focus on that important thing. I must say that I am very much drawn to the constitutional innovation of having confirmation hearings, so that at least questions can be asked by parliamentarians of the process and of those involved.

Photo of Lord Grimstone of Boscobel Lord Grimstone of Boscobel The Minister of State, Department for International Trade, The Minister of State, Department for Business, Energy and Industrial Strategy

My Lords, I recognise that the amendments tabled by noble Lords are intended to reinforce the independence and impartiality of the TRA, but I reassure them that this legislation has already been designed with this in mind. Both the Trade Bill and the Taxation (Cross-border Trade) Act have inbuilt protections of the TRA’s impartiality that already address many of these points. I reassure the Committee that we want the TRA to be independent and impartial, because it is the absolute requirement for a body of that sort.

Turning first to Amendment 78, in the name of the noble Baroness, Lady Kramer, it is of course important that the Secretary of State has regard to the operational independence and impartiality of the TRA. But imposing a positive duty may require the Secretary of State to take potentially excessive steps to protect the TRA’s independence, which might prevent her making any requests at all, thereby depriving her of the vital expertise that the TRA holds.

Amendment 79, also in the name of the noble Baroness, Lady Kramer, seeks to ensure that the Secretary of State must have regard for the need to protect the TRA’s capacity and funding when making a request. However, the amendment does not put the Secretary of State under any obligation to weigh up the impact of a request on the TRA’s resources against the efficiency of using it. As noble Lords are well aware, the outcome of a request is often equally as important as the resources required to implement the request and ignoring the outcome when deciding whether to approach the TRA could make it harder for the Secretary of State to justify making requests, or to make a balanced decision on the validity of a request.

On Amendment 104, also in the name of the noble Baroness, the provisions of the Taxation (Cross-border Trade) Act 2018 require the Secretary of State to either accept or reject the recommendations of the TRA. However, this amendment would have the effect of preventing the Secretary of State from exercising her discretion to take certain actions such as retaking her decision following a direction from the Upper Tribunal. I would like to clarify for the noble Baroness that the Secretary of State cannot amend the level of duties that are recommended by the TRA or impose duties if the TRA has not recommended them. If the Secretary of State decides measures are not in the UK’s interests and rejects the TRA’s recommendation, he or she will be obliged to lay a Statement before the House of Commons setting out the reason for her decision.

Amendment 104A, in the name of my noble friend Lord Lansley, would give the chair the sole ability to appoint a chief executive, as well as remove the process for the Secretary of State to appoint a chief executive if there is no chair in post. Let me be clear: the Secretary of State will not be exclusively responsible for appointing members of the TRA’s board. The TRA chair will be responsible for appointing executive members, who will be TRA’s employees. This includes appointing the TRA chief executive, subject to the Secretary of State’s approval—a recognised process and one that is set out in the Cabinet Office guidance for public bodies. If the first TRA chair has not been appointed, then the Secretary of State has the power to appoint the TRA chief executive. However, I would like to reassure my noble friend Lord Lansley that this is purely an operational contingency power, which we do not expect to use now that the Secretary of State has confirmed her intention to appoint Simon Walker as TRA chair.

Amendment 105 would require the Secretary of State to consider the views of the International Trade Committee before appointing a chair for the TRA. I am afraid that I have to disagree with my noble friend Lord Lansley. Requiring consultation with the ITC before appointing a chair is an unprecedented change in the public appointments world. There are clear existing guidelines as to which appointments should be subject to pre-appointment scrutiny and the chair of the TRA does not fall under this requirement.

Amendment 108A, also in the name of my noble friend Lord Lansley, would remove any power of the Secretary of State to set the terms and conditions and salary, or make arrangements for the removal or resignation of a chief executive, should a chief executive be appointed prior to the appointment of the first chair. This amendment will have no effect after the first chair—who has already been identified—has been appointed.

Amendment 114, in the name of the noble Baroness, Lady Kramer, seeks to ensure that the Secretary of State must protect the TRA’s operational independence and ability to make impartial decisions before publishing guidance. Measures within the Bill as it stands already require the Secretary of State to consult with the TRA and have regard to its advice before publishing guidance. These measures also prevent the Secretary of State from publishing guidance in relation to a specific investigation being carried out by the TRA.

The noble Baroness’s amendment would not add to the sum of the protections that we have put in place to guard the independence of the TRA, but it might make it hard to publish any guidance at all, given the range of potential actions that might be required to protect the TRA from external influences and ensure that its operational independence and ability to make impartial assessments were protected. I am sure that is not the noble Baroness’s intention.

Noble Lords also asked about membership of the TRA board. That is covered in a subsequent group of amendments, so, if I may, I shall defer discussion of it until that point.

I hope I have been able to reassure noble Lords that government shares their concerns that the TRA should be an independent body and that the measures necessary to ensure that are already in place. I therefore ask them not to press their amendments.

Photo of Baroness Garden of Frognal Baroness Garden of Frognal Deputy Chairman of Committees, Deputy Speaker (Lords)

I apologise. I think the noble Lord, Lord Lansley, would like to speak after the Minister. I got that message late.

Photo of Lord Lansley Lord Lansley Conservative

I am grateful. Just for the avoidance of doubt, will my noble friend the Minister agree that it is not without precedent for pre-appointment hearings to take place for appointments made by Ministers? I think that under the Cabinet Office guidance there are about 50 of such. I was not proposing that the chair of the Trade Remedies Authority be included, although, frankly, the fact of it having public impact, being important and being required to be independent would justify including it in that list. Will my noble friend go away and consider whether this appointment should be subject to pre-appointment hearing?

Photo of Lord Grimstone of Boscobel Lord Grimstone of Boscobel The Minister of State, Department for International Trade, The Minister of State, Department for Business, Energy and Industrial Strategy

I thank the noble Lord, Lord Lansley, for that question. I have some skin in this game, because I was the author of the public appointments code in which these requirements appear. I shall certainly consider the point that he has raised and write to him about it, but, frankly, with no great confidence that I will agree with him when I do so.

Photo of Baroness Kramer Baroness Kramer Liberal Democrat Lords Spokesperson (Treasury and Economy)

When the noble Lord, Lord Grimstone, drew up that framework for public appointments, there was no way in which he could have anticipated this role, so I hope that he will look closely at the role of the TRA chair and listen closely to the noble Lord, Lord Lansley.

I was delighted to hear from the Minister that the Secretary of State cannot vary duties recommended by the TRA and cannot, without the TRA’s say-so, impose those duties. I appreciate that clarification.

I smiled at the thought that there might be “excessive steps” to protect the independence and impartiality of the TRA. It is hard to think of anything that would be excessive if it were to support those principles of independence and impartiality, so fundamental are they to the role.

Given the lateness of the hour, I beg leave to withdraw my amendment.

Amendment 78 withdrawn.

Amendment 79 not moved.

House resumed.