Amendment 41

Trade Bill - Report (3rd Day) – in the House of Lords at 7:45 pm on 6th January 2021.

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Lord Lansley:

Moved by Lord Lansley

41: After Clause 10, insert the following new Clause—“International disputes In section 32 of the Taxation (Cross-border Trade) Act 2018 (regulations etc), subsection (3), at the end insert—“(d) regulations under section 15 (international disputes etc).””Member’s explanatory statementThis new Clause would amend the Taxation (Cross-border Trade) Act 2018 to require that, where the Secretary of State proposes tariff increases in pursuance of an international dispute (not as a trade remedy), such a regulation must be made subject to an affirmative procedure.

Photo of Lord Lansley Lord Lansley Conservative

My Lords, Amendment 41 in my name relates to the powers in the Taxation (Cross-border Trade) Act 2018, under which Ministers can impose import duties. Section 15 of that Act gives the power to impose tariffs in furtherance of an international dispute. Amendment 41 would require that a statutory instrument made under Section 15 of that Act be subject to the “made affirmative” procedure.

We had a debate on this in Committee. When the original Taxation (Cross-border Trade) Act went through, Section 15 was wrapped together with a number of others in the argument made by the Government—and, indeed, set out in the Explanatory Memorandum—that there would be frequent changes of detailed tariffs. While that is generally true in other sections of that Act, it carries no weight in relation to tariffs applied in international disputes, which are and should be few in number.

The Government should therefore not rest on the fact that the Delegated Powers Committee did not raise this as an issue back then, not least because it passed through as a money Bill at that time and we did not have substantive debate at length in this House. Indeed, in my view the Government made assertions in the Explanatory Memorandum about the powers in Section 15 that would not prove to be true.

I am grateful to my noble friend the Minister for subsequent correspondence, but I do not think the Treasury armed him with a more credible case. To be fair to him, he has made an effort to justify the negative rather than the affirmative procedure on grounds different from those presented when the original legislation went through—that these are diplomatic negotiations in an international dispute and that the choice of products to which tariffs are to be applied is a sensitive matter. I do not doubt that it is, but these are also important matters deserving scrutiny in this House.

We do not really need to speculate too much about the nature of such disputes. On 1 January we took on responsibility for our external tariff. This includes the consequences of the disputes between the European Union and the US over, for example, Airbus and Boeing. When these amendments were first tabled, we did not know what the Secretary of State’s approach to that international dispute would be. As it happens, she has chosen not to impose tariffs on US products in the way the European Union announced in November that it had chosen to do. No tariffs, so no statutory instrument.

I hope the Secretary of State’s choice and the intention that it de-escalate the dispute between the European Union and the US will work. It has not yet. Last Wednesday the US trade representative announced additional tariffs on EU products from 12 January, although of course that does not apply to UK products. In so far as we have taken up a position, I hope it works to some resolution, but if it does not and if at any future time we were to reimpose tariffs on US products as a matter of necessity, such a strategic decision should be a matter for affirmative debate in this House and the other place, to give not only scrutiny but backing to any decision the Government made.

Indeed, that is not the only potential such dispute. Steel and aluminium duties in the United States, imposed by the Trump Administration nearly two years ago on national security grounds, have been the subject of a dispute with the WTO. They have been referred to a panel, which was expected to report by the end of 2020 and has not yet done so. If it were necessary for us to take countervailing measures, in that respect too the importance of the issue would and should require that they be the subject of an affirmative debate on the statutory instrument in both Houses.

Just to finish, in the recent past, we have had a number of occasions when matters of urgency have bypassed the normal scrutiny of this House. I hope we do not arrive at the point where matters that are sensitive should also escape scrutiny in this House. Matters which are important and, indeed, matters which are sensitive seem to me to deserve proper scrutiny. I beg to move Amendment 41.

Photo of Baroness Noakes Baroness Noakes Conservative 8:00 pm, 6th January 2021

My Lords, I am sorry to have to say to my noble friend Lord Lansley that I believe that your Lordships’ House should have nothing to do with this amendment. When the Taxation (Cross-border Trade) Act 2018 was brought to this House, it arrived as a Supply Bill. There was much huffing and puffing by noble Lords on the Benches opposite at the time, but, of course, the House accepted it. The effect was that there was no Committee stage of the Bill and no opportunity to make any amendments. While the Companion is silent on the subject, it seems to me that if we were unable to amend a Bill during its passage through your Lordships’ House, that should also extend to any amendments to the resulting Act, as its nature relating to supply cannot have changed simply as the result of Royal Assent. I therefore hope that my noble friend Lord Lansley will withdraw his amendment.

Photo of Lord Purvis of Tweed Lord Purvis of Tweed Liberal Democrat Lords Spokesperson (International Trade)

My Lords, I am less squeamish that the noble Baroness about the amendment of the noble Lord, Lord Lansley, and I am grateful to him for bringing it forward. As our discussion about the Trade Remedies Authority demonstrated, the framework for how the UK, now outside the European Union, will approach trade remedies on disputes where we believe that another country is acting beyond WTO standards and principles, is much more to do with public debate and full, wide parliamentary scrutiny than whether the parent legislation involved financial privilege. Our debates about the Trade Remedies Authority lead naturally to asking what is going to provide a framework of accountability for any decisions taken as a result of its recommendations.

I have only one issue to raise with the Minister. I was not satisfied with the response in Committee to a matter I raised. One of the justifications for not supporting the amendment was that, as the noble Lord, Lord Lansley, said, the Minister said that there is sensitivity to some of these aspects. Of course there is sensitivity: that is true by definition. In any trade dispute, there will be sensitive aspects; I do not think that is denied. The noble Lord, Lord Lansley, is absolutely right: we were discussing a previous version of this Bill on Report when the WTO authorised the United States to impose $7.5 billion-worth of tariffs on the EU. The WTO subsequently authorised the EU to impose countermeasures of $4 billion and, as the noble Lord said, from the United States’ point of view, the question whether to make a recalculation for the EU 27 is now being reviewed.

The most important element, to my mind, is that the WTO authorised it. I do not think anybody on any side of this House is proposing that the UK should act illegally in a trade dispute in which we are then seeking to be on the right side, inasmuch as we would not use WTO procedures. The WTO procedures are quite clear: you cannot put forward countermeasures which will include tariffs unless they have gone through the due process in the WTO.

Therefore, the notification of the WTO, with the tariff measures as part of the countermeasures, will be in the public domain. It will be debated. It is therefore nonsense to think that there will be scrutiny, transparency and a public debate regarding our measures to the WTO, but not in Parliament. Many sectors will be involved, as we saw with the US measures. I do not need to go into the detail, but be it whisky, textiles or the metal industry, these measures and potential countermeasures have an impact domestically on certain sectors, regions and nations of the UK. Therefore, it is right that, if we are to make a measured and targeted response to a third country that we believe has acted against its obligations, we ensure that we are not acting in self-defeating self-interest, and a degree of accountability is thus required.

I simply cannot understand why the Government believe that measures that have been made public cannot then be approved by Parliament. I continuously support the efforts of the noble Lord, Lord Lansley, in this regard.

Photo of Lord Stevenson of Balmacara Lord Stevenson of Balmacara Opposition Whip (Lords), Shadow Spokesperson (Digital, Culture, Media and Sport), Shadow Spokesperson (Business, Energy and Industrial Strategy and International Trade)

My Lords, the noble Lord, Lord Lansley, has raised a very interesting question. We need to think a bit harder about it than we did when we first looked at this in Committee.

The issue is not so much with the powers split between the Commons and Lords in relation to financial matters, which I think was the point made by the noble Baroness, Lady Noakes. It is more to do with—as the noble Lord, Lord Purvis, was trying to get us on to—the reality of the grounds on which we have to consider more widely and the relationship between a pure measure, such as tariffs, and the way in which it might be used in any trade dispute, or any day-to-day consideration of our trading relationships. Out of that comes a consideration about whether this is an executive issue or there are also parliamentary concerns.

Taking it from the other end, the fact that the powers enshrined in the original legislation are for a negative instrument suggests that the Government have taken the view that this needs the very lowest level of parliamentary scrutiny. As the noble Lord, Lord Purvis, pointed out very well, this cannot be right. These areas often deal with very important and quite meaty issues to do with industrial policy, employment and the whole economy. There seems to be a distortion being built up between the particular issue in hand, the remedies available and the role of Parliament in considering it.

Surely it would be wrong if we ended up in a situation where the only parliamentary process was consideration of a negative statutory instrument when, in truth, the effects it was trying to ameliorate were causing concern on quite a large scale in the country. I do not have a solution to this. I do not think this Bill is going to provide us with an outlet. I wonder whether the Minister might consider taking this away. Perhaps a more considered review is needed in a couple of years’ time, when we have had experience of how it works in practice.

Without wishing to put words in his mouth or ask him to commit to something he cannot commit to, can he give an assurance that this is something the Government will keep a close eye on? Should issues arise during the next year or so, an appropriate way forward would be to take this as an issue and see whether, as a result of the scale of the penalties, the style of the approach being taken through Parliament and the impact this is having on the economy more widely, it might be best dealt with through a review process.

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 turn to Amendment 41 in the name of my noble friend Lord Lansley, which seeks to ensure that regulations made under Section 15 of the Taxation (Cross-border Trade) Act 2018 will be made under the affirmative parliamentary procedure. I remind noble Lords that that section allows the Secretary of State to vary the rate of import duty—that is, increase or decrease tariffs—in the context of an international trade dispute.

First, I begin by thanking my noble friend for his commitment to this issue, alongside the correspondence and meetings that we have had on the matter. I hope my noble friend found them at least partly as useful as I did.

Noble Lords may recall that I explained in Committee why I believe that it is imperative that HMG are able to enforce, swiftly and confidently, the UK’s rights under international trade agreements. I explained to the House that the conduct of state-to-state trade disputes is a matter of foreign diplomacy and is covered by the royal prerogative. I also reminded the House that international litigation, including launching and defending international trade disputes, can be extremely sensitive, with far-reaching geopolitical implications. I shall not attempt to justify sensitivity in itself, of course, as a reason for avoiding scrutiny. However, when that sensitivity may give rise to matters that are extremely prejudicial to the UK’s position, it must be absolutely right to take it into account.

Noble Lords may be relieved to hear that I do not intend to repeat those points at length today. However, it is important that the House fully understands the Government’s reasoning for resisting this amendment so, with the indulgence of the House, I shall explain two scenarios in which the UK may use this power. I hope that it will help the noble Lords, Lord Stevenson and Lord Purvis, to understand better the Government’s position on this important matter.

The first scenario that I want to illustrate is where another country launches a successful dispute against the UK and the UK does not bring itself into compliance within the required period. This could be for the simple reason that legislation is needed to make the change and it is not possible to do that quickly. In this instance, the UK may offer compensation, which may be in the form of lower import duty on certain products. The UK would then use its Section 15 power to vary the rate of import duty on those products. This amendment could mean that the UK’s proposal to lower the rate of import duty on select products was voted down by Parliament. It would leave the UK in breach of its international trade commitments and subject to retaliation measures being implemented by the other country.

A second scenario could be where one of the UK’s trading partners implemented a measure which caused serious harm to UK businesses and the UK launched a successful dispute against that country. If the other party did not bring themselves into compliance within a reasonable period, the UK would assess how it could best exercise its right to retaliate. This would likely involve extensive technical analysis to select a list of products which the UK thought would have the best possible chance of conducing the other country to comply with their obligations and relieve the pressure on UK businesses. These products would be chosen carefully to ensure that their value was within the limits of the retaliation award, or equivalent to the harm caused by the other country’s incompliant measures.

The UK may wish to target certain products for strategic and often sensitive reasons. For example, it may wish to increase tariffs on a product because the lobby group of those stakeholders has a strong political influence in a third country, or because a product has a strong symbolic or personal connection to the Government in question. This amendment would require the Government to argue and justify in an open forum why they had chosen one product line over another and, in turn, could expose the UK’s strategic decisions and negotiating positions to our trading partners. For instance, the Government may be obliged to justify the inclusion or exclusion of certain products to Parliament. This could create the risk that certain trade dependencies are publicly exposed, which could be exploited by our trading partners. This would undoubtedly cause harm to the UK’s interests, leverage and international reputation.

The Government of course recognise that these tariffs may have an impact on UK stakeholders. I reassure noble Lords that the Department for International Trade will carry out comprehensive engagement with businesses concerned and mitigate the effects where it is possible to do so.

I know that my noble friend recognises that Section 15 of the Taxation (Cross-border Trade) Act is an important tool available for the UK to defend itself when other countries bring disputes against us.

My noble friend also raised the Government’s approach to the Airbus and Boeing trade disputes, and I will comment briefly on that. I reassure him that the Government are serious about de-escalating these long-running disputes. As a gesture of our determination to unlock a deal, we have suspended retaliatory tariffs resulting from the Boeing dispute. This reflects the UK’s continued focus on achieving a swift and balanced settlement, to the benefit of all parties involved. If this is achieved, there will of course be no need to implement retaliatory tariffs. However, we reserve the right to apply independent retaliatory tariffs if sufficient progress is not made in negotiations, and we will not hesitate to exercise our WTO rights in the interests of defending British businesses and industry in all parts of the UK.

I hope that my remarks have provided some solace to my noble friend. The Government recognise that international trade disputes serve different functions and can have wide-ranging impacts. Naturally—I absolutely take this point—some of these impacts will be of interest to Parliament. In recognition of this, the Government will address, I hope as part of the way forward that the noble Lord, Lord Stevenson, was seeking, important considerations around trade disputes within a report that the Department for International Trade will lay before Parliament. On this basis, I hope that my noble friend will be content to withdraw this amendment.

Photo of Baroness Watkins of Tavistock Baroness Watkins of Tavistock Deputy Chairman of Committees 8:15 pm, 6th January 2021

I have received a request to ask a short question from the noble Lord, Lord Purvis of Tweed. I call the noble Lord to ask a short question of elucidation.

Photo of Lord Purvis of Tweed Lord Purvis of Tweed Liberal Democrat Lords Spokesperson (International Trade)

My Lords, I apologise for detaining the House; I know the hour is late. I am grateful to the Minister for outlining those examples. He gave the impression that Parliament should not necessarily have the ability to approve any of these measures, but that this should be Government to Government, prerogative to prerogative. However, the legislation provides for parliamentary approval if it is through a negative procedure. So Parliament could still annul this, which would bring about all the issues he warns against. He seems to be making the case that Parliament should not even have the ability to annul some of these measures. If Parliament ultimately has the ability to approve or not to approve, we are in a different realm. I hope that, as the noble Lord, Lord Stevenson, indicated, the Government could at least reflect on this debate and the points that have been made on the benefit of having a wider degree of scrutiny, or at least public debate, of some of these aspects.

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 for those comments. The Government will of course reflect on this debate. I perfectly understand the requirement for the annulment power, but I believe that both Houses of Parliament would wish to use that annulment power sensibly and sensitively, in light of the circumstances which might underlie it.

Photo of Lord Lansley Lord Lansley Conservative

My Lords, I am most grateful to all those who contributed to this short debate. It demonstrated the value, even at this late hour, of some of the additional issues brought out in the context of the scenarios and specific instances that my noble friend put in his response to the debate.

I think I have been inadvertently responsible for misleading the House. I intended to talk about parliamentary approval, but in doing so got carried away and talked about this House. Of course, this House would have no role. The regulations made under the Taxation (Cross-border Trade) Act, if “made affirmative”, would be subject to the approval only of the House of Commons.

Therefore, in response to my noble friend Lady Noakes, I make two points. First, we are accustomed, from time to time, to making amendments to Bills that run the risk of being declined by the other place on grounds of financial privilege. However, that does not mean that we never make such amendments and invite the Commons to think again. The second point that I should make to her is that, in this instance, the effect of the amendment would be to give the House of Commons—but not our House—the right to consider regulations made under this power.

That said, I do not resile from the view that sensitive matters can, none the less, be debated in Parliament, and it is not beyond the wit of Ministers and civil servants to ensure that, in explaining the choices that have been made in the regulation, they do not disclose information of value to those who would do us harm. That happens on many occasions and, in fact—even in the scenarios to which my noble friend refers—the choices we have made and why we have made them would very often not have been lost upon other parties in trade disputes. I do not resile from the view that because something is sensitive and important it should be debated in Parliament—in this instance, because it relates to what are effectively attacks, only in the other place.

None the less, the helpful response from my noble friend —who genuinely tried to explain why the Government took the approach they did, rather than what was set out originally in the Explanatory Memorandum—took us some way towards thinking about this matter in a way described by the noble Lord, Lord Stevenson of Balmacara. We may yet come back to this matter, but not during the passage of the Bill. I beg leave to withdraw the amendment.

Amendment 41 withdrawn.

Clause 11: Interpretation