Good afternoon. We will now hear oral evidence from the Trades Union Congress, Unite, GMB and the Public and Commercial Services Union. We have until 2.45 pm for questions to these witnesses, whom I welcome. I will give them a few minutes to introduce themselves before they answer Members’ questions.
Thank you, Mrs Main. My first question is a general one. I would like a view from the coalface, so to speak. If the Bill is passed in its current form, will it offer adequate protections to the UK economy against dumping, for exampleQ 43?
Our view is that, particularly in the scenario we will move into after Brexit, having an effective trade remedies regime for the UK is vital to protecting our manufacturing industries and the members we represent in those industries.
One of the major problems we have with the Bill is that, because so much of the crucial detail is being put into regulations, it is hard to assess properly at this stage whether it gives adequate protections. Certainly, from reading the Bill as it is now, our view as Unite is that it does not appear to give even the same protections as we currently enjoy in the EU regime, and we want to see a stronger trade remedies regime introduced in the UK in future.
Kathleen Walker Shaw:
I work for the GMB, which has a number of members across a number of manufacturing sectors. I have to say that when I read the proposals in the Bill, I was extremely alarmed by how weak the remedies were in terms of anti-dumping cases. This is a complex area of trade law, and we know from the European experience, where there is a very robust system, that you cannot take your eye off the ball when you are pursuing those cases. They are very data, document and resource-heavy cases to bring forward.
I just feel that the provisions in the Bill do not fulfil the promise we were given that British jobs, British industry and the British economy would thrive post-Brexit. I feel that huge risks would be taken with our ability to protect and promote British industry and British jobs if the proposals were not amended.
If I could add some specific concerns that we have, there is a compulsory lesser-duty rule in the Bill, which would mean that anti-dumping measures were not adequate. There is ample evidence that the lesser-duty rule is not efficient. Indeed, at EU level, the rules have been reformed to take away compulsory use of the lesser-duty rule, yet it is in the Bill, which would not provide adequate protection against dumping. There is also an economic interest test and a public interest test in the Bill. Those would allow the Secretary of State to veto recommendations by the trade remedies authority that trade remedies should be applied. We regard that as an overreach of the Secretary of State’s power that will not lead to an effective trade remedies mechanism being established.
Also, building on what Ben from Unite was saying, we are seeing a whole area of trade remedies in the Bill left to secondary legislation. China, a non-market economy, has clearly been one of the worst offenders in the last few years and has affected steel and other sectors in which we have significant numbers of members. There has been a real negative impact on jobs, and there is nothing in the primary legislation about how they will be dealt with. Again, for that we would need to see there being an effective trade remedies mechanism post-Brexit.
Q Let us stick with that theme. What assessment have you made, or are there any assessments that you might be aware of, regarding industries that are most vulnerable to losses caused by dumping, for example? You referred to steel. Could we just tease that out?
One of the things that we have been doing, as Unite, with the GMB, the TUC and our sister union, Community, is working very closely with employer organisations from a number of key sectors, in forming the Manufacturing Trade Remedies Alliance. That is in industries such as paper, steel, chemicals, tyres and in a number of other industries as well.
What is clear in our experience, certainly from Unite members, is that we have just gone through the steel crisis, which immediately threw up a crucial or fundamental issue for the UK’s manufacturing industries, but it feeds into many other areas. Our members in the paper industry are particularly concerned. There are also the rubber tyre and ceramics industries as well as many others, which are represented not only by Unite but by the GMB, Community and many other TUC unions.
The first question is about Border Force. Do you think that Border Force will be able to cope with the increased customs volume that it will need to deal with, and if not how do you think the Government can fix that?Q
My specific area of expertise is Her Majesty’s Revenue and Customs, but I do know a little about Border Force, which has suffered cutbacks in staffing over the period. I am also aware that Border Force is the first line, as it were; if you go through a port or airport, you will see Border Force there. I used to work for HM Customs and Excise, actually, but transferred into that. Certainly there are now huge areas of the coastline that do not have any protection, effectively, by the civil service.
The other major concern for us is that Border Force is the first line of defence but its powers are limited; for many things, it then has to contact HMRC staff, which it calls in to take the next step, as it were. The clock is already ticking under the Police and Criminal Evidence Act 1984, once Border Force has made some sort of intervention.
One of the major issues that we are facing now is that HMRC is already under quite considerable pressure because of the staff cuts over the last decade. However, just as Brexit is happening, the Department is planning to shrink back from its current estate into just 13 regional centres and five specialist sites, leaving the majority of the ports and airports very large distances indeed from the nearest HMRC office. The time that it would take to travel—if you are called out, any time of day or night—to assist Border Force in dealing with smuggling, interventions and that kind of thing will clearly be a major issue for delivery of working between HMRC and Border Force.
For example, there will be no HMRC office north of Glasgow and Edinburgh—nothing in Scotland except Glasgow and Edinburgh. There will be no HMRC office in the south-west other than in Bristol, which in fact is hardly the south-west; if any of you know the south-west, you will realise that. There will be no HMRC office along the south coast dealing with this kind of intervention. So HMRC is closing offices in places such as Southampton and so on—indeed it is closing this work on the east coast around the ports of Felixstowe and Harwich, with the closure of the Ipswich office.
So we think that there will be a real struggle to deliver the work that HMRC does with Border Force in that situation. My union believes that HMRC should pause the office closure programme until it is clear what the Government will need HMRC to do in a post-Brexit situation.
Clause 31 allows for the UK to enter into a customs union with another territory. Do your members feel that a customs union with the EU would be positive or negative for jobs?Q
First, I need to say that my union does not have a position in principle on whether the country should leave or remain and specifically does not have a position on whether we should remain in the single market or the customs union. We are neutral on those questions. In terms of the impact on jobs, we are concerned about the uncertainty of the position and what the future might hold. Are you talking specifically about jobs in the civil service, or jobs in general across the economy?
As far as the economy is concerned, I would defer to my colleagues here on that position. The position in the civil service is clearly going to be massively impacted depending on whether Britain remains in the customs union or joins a customs union, or what the terms might be if there is no customs union. That is a huge period of uncertainty as far as we are concerned. The jobs and delivery impact of that from my union’s point of view is that it is impossible to say what would be needed.
At the moment, HMRC are actually making people redundant. As offices close, staff are being laid over and years of experience are being lost, at a time when our chief executive is forecasting that we might need to recruit 3,000 to 5,000 extra people. It is complete madness as far as we are concerned to make experienced staff redundant because they are not in the “right area”, when we might need to recruit people. So there is a jobs impact within HMRC. In terms of the wider economy, I defer to my colleagues from the other trade unions.
Kathleen Walker Shaw:
A major concern of a lot of unions involved in manufacturing, as well as the concerns about properly protecting and supporting industries in terms of remedies, is that so many of our industries that export or import components or elements of their production are reliant on just-in-time processes. With many products, the margins are so tight that even the slightest delay or friction in terms of the movement of goods will put us out of competition.
As Alan rightly pointed out, we do not know what the Government’s objectives are in terms of future customs relationships with the EU or beyond. In our conversations with other unions that work on borders or in shipping, we are trying to get a picture of where the lock points are. In terms of policy, we are pushing to guarantee smooth administration and as little friction as we can in terms of the movement of the goods, to preserve the just-in-time production processes that so many industries rely on. That is not just about being competitive—in the food sector for instance, it is about getting food there in a state in which it can be sold. We cannot give fixed numbers because we are dealing with the unknown, but it is important not to underestimate the multi-chain effect of things going wrong and policy not being the right one in terms of border administration.
Some of you may have already seen that some groupings of German and French federations have done assessments of what various types of Brexit might cost. Some of the figures from the German employers federations in terms of the added costs of a not positive Brexit agreement are eye-watering. We wish that we had a little bit more of that investigation going on at Government level as well. We have to know what we are facing. At the moment we are living with the fear of what we know through working at hands-on level with the production structures across a number of industries.
Can I just add a perspective from across the union movement, because obviously the TUC represents a majority of trade unions in the UK? Our position is that any future deal with the EU must protect jobs and must protect rights. We have said that the Government were acting recklessly to take a customs union and single market membership off the table at this early stage in the negotiations. We know that it is important to protect rights and to ensure that UK workers do not fall behind those in the EU. We should have single market membership as an option on the table, because that provides an assurance of rights backed by the European Court of Justice.
Ensuring barrier-free, frictionless trade is a very important part of our position and our statement of intent for any post-Brexit deal. Customs union membership is one way of achieving that, but what we see in the legislation is only the possibility under clause 31 of joining a customs union. The terms are not clear and we would need to see the detail. While we are clear that there are risks in not having a relationship that ensures tariff-free, barrier-free, frictionless trade and great costs associated with adding customs checks, which my colleagues have talked about, we have not seen any detail of what the Government are offering. We need to see that detail to protect jobs and our members’ livelihoods going forward.
We represent members in the transport industry. In its current form, it is very hard to know whether the Bill will prevent excessive delays in importing freight, simply because we see so much of the detail being pushed to secondary legislation. That is where we would want to have these sorts of conversation to give evidence and have the discussion. One of our major concerns is that the real crux of the detail of our future system is being left to secondary legislation, where we and you will not have the opportunity to engage in detailed debates about exactly those issues.
It goes back to what Rosa was just talking about with the need to have a frictionless aspect to trade. That may be through a type of customs union arrangement, but in the Bill as it stands it is simply not clear. It is very hard to say whether this is the right or wrong way, but we know that with the automotive industry, in which we have tens of thousands of members, on average each part in a car built in the UK crosses a European border and our border anywhere from five to six times. Even a delay of five or 10 minutes added into the just-in-time production systems could create significant problems for such industries.
Briefly, on processing, my union is unable to say whether the new Customs Declarations System will be able to cope with the vast increase in the volume of declarations that would come under one of the scenarios we have, because we do not know that it will be that scenario. Similarly, some scenarios will require a big increase in staffing, as has already been mentioned, and those people have to be trained as well. Nobody knows yet what the rules will be. There is a great uncertainty about that position, and that means we have to be very concerned about whether HMRC could cope with the new situation to assist with frictionless trade.
This is specifically for Rosa. You mentioned that you had concerns over the lesser duty rule. I wonder whether you could give us some specific examples of where you feel the lesser duty rule currently is not workingQ .
This is something that the trade remedies alliance, which Ben from Unite mentioned, has been working on with manufacturers associations. We have produced evidence on that and we could supply it to the Committee.
I know there has been specific research on the use of the lesser duty rule in the case of solar panels. We have been in discussion with officials on that. There is an argument that the lesser duty rule applied to the import of solar panels allowed a balance with affordable solar panels. The specific discussion was on social housing and allowing those panels to be provided to social housing, but there was also a measure of action taken against unfair trade practice. Talking to colleagues working in the glass associations and other manufacturer associations, they saw those solar panels as being of a lower quality. I am not speaking from a technical point of view, but they had enough information to judge that those solar panels were of a lower quality.
When we think about the importance of using high-quality materials in social housing—obviously in the shadow of the Grenfell disaster—with solar panels just one aspect of that, that judgment always needs to be made about the low price and the quality of the product. Obviously, there is an implication for support for British industry and what you do to the British industry that could have made a higher-quality panel, and for investment around skills and training to bring in those panels.
On specific cases, that is why we are working collectively with the employers organisations. The trade unions and employers are working together because our interests are combined here. Particularly in relation to the lesser duty rule, it is very interesting that very few other World Trade Organisation members use such a rule as this. Indeed, the European Union in its trade remedies regime is moving towards making the use of the lesser duty rule much more conditional, because it has seen weaknesses in having a mandatory lesser duty rule. In the changes that are taking place at the moment in the EU trade remedies regime, there are some important developments in relation to the lesser duty rule over there.
Kathleen Walker Shaw:
May I add a supplementary point on the concern for the lesser duty rule? The problem with that particular form of remedy, because you are creating a sort of cap on the level of remedy, is that it is based on the assessment of injury, which is a difficult thing to do accurately. The difficulty that we have, as I say, particularly with industries that are working on moderate profit margins, is that those industries could be put out of business by the fact of the injury being assessed at a perhaps inaccurate level.
A lot of these fledgling industries that we are looking at, such as clean energy—solar panels is a good example—are new forms of industry that we want to see develop in the UK, and the Government have on more than one occasion identified them as being great growth industries. However, China also likes the look of that market, as does Vietnam. If we are not prepared to protect British industry to grow those new industries, then by overuse of the lesser duty rule we are cutting them up before the roots have started to take in the ground. It is a consideration for us more widely to look at the lesser duty rule in terms of our economic ambitions for UK manufacturing industry into the future, because we are in a position of “cake and eat it” there on a lot of young industries.
Q Thank you very much for your contribution so far. In the previous sitting, we had a witness representing consumers—from Which?—and she made the point that she would be concerned if there were no lesser duty rule. She was concerned that consumers would be unduly damaged by any trade remedies that we might undertake under those circumstances. Do you recognise, as a panel, that there are risks to consumers in solely relying on remedial action, which takes a view on the dumping margin, which may be very significant but is equally in excess of those changes required to remedy the injury being incurred by producers? Or do you think that consumers are always going to be safe under an arrangement without a lesser duty rule?
Kathleen Walker Shaw:
My union is of a school that believes that, in terms of remedies, we should be looking to a much broader assessment of what is taken into consideration, so we have welcomed the recent movement at the European level on trade defence measures and consideration of environmental and social issues. That is a bit of progress. We would have liked more of that progress. What we do not want to see is a narrowing of trade defence instruments that cut out the scope for that. Guaranteeing consumers good prices is one thing, but keeping the quality of good manufacturing in the UK is something very close to home for our members—obviously not just of our union, but all colleagues here. It is an issue of getting that balance.
The EU trade defence mechanisms and its anti-dumping rules are still within the WTO rules. For us to be going bargain basement on WTO is perhaps not the safest bet for dealing with a post-Brexit economy. We would like to see robust trade remedies that protect our industries from unfair competition, rather than working on the margins of the risk of putting good, competitive industries in the UK out of business.
Q I totally accept the argument that if a lesser duty rule is not fit for purpose, it is not fit for purpose—if it is not operating as you would want it to, that is a problem. However, setting that to one side, if you have a lesser duty rule that does what it is meant to do and the injury that producers have suffered has been remedied as a consequence of the lesser duty rule changes, I cannot understand why those producers should be concerned and why you would want to remove that—and, in certain circumstances, have additional remedial punitive tariffs or duties apply over and above those that would meet the injury suffered by the producer. That would be simply at the expense of the consumer, and indeed other companies that were relying on the use of those imports in their production processes. That is the bit I do not quite get.
Q If we could assess it accurately and make it fit for purpose in that sense, you would not object to the lesser duty rule? Your objection is to do with how it is framed rather than the principle? Would that be right?
Kathleen Walker Shaw:
Our great concern with the Bill in its current form is that the provisions are not there to guarantee that. As our colleagues have said, the resources in terms of Government trade experts are not there to guide us through. For the best part of more than 15 years, we have not dealt with trade. You will need the resources to get those injury claims accurately assessed, and we have no confidence that the provisions are there in the Bill to guarantee that.
I think this links with the issue of who is making the assessment. We have a concern about the parallel Bill to the one we are considering here: the Trade Bill, which sets out the provisions to create the Trade Remedies Authority. There is nothing in that Bill that indicates who will be on that authority. For trade unions, it is important that we have equal representation of trade unions and employer representatives, because we are directly involved in those sectors and we believe that trade remedies should be assessed using the insights of those directly affected in those sectors. It is unfortunate that from the Trade Bill we do not have confidence that we will have that representation, but we hope that we will see it developing in the legislation.
If trade unions were asked honestly to assess the lesser duty rule—if we had that discussion and we were genuinely taken into the process—that would be a very different conversation. At the moment, through this Bill we are being given a compulsory lesser duty rule without having seen any evidence that suggests that we need it and it is desirable. I would flip it round and say, why do we need the lesser duty rule and how are trade unions involved in the assessment of its effectiveness? Consumers are also workers who are employed in some of these industries, and they will not benefit from having unfair trade practice disadvantage them and the quality of their goods. That is something we must bear in mind.
Q A final question to Rosa, which goes back to Mr Menzies’s question. What is the specific trade case you can cite where the application of the lesser duty rule has failed?
On the lesser duty rule, as a result of things such as the steel crisis, the EU is moving to be exception-based, in line with Canada, Australia and others. Is there a lesser duty rule anywhere else in the world that will operate like this one?Q
Not that I am aware of, and I think that what happened with that steel crisis is one of the reasons our members do not have confidence in what is in the Bill at the moment. Even with the reservations that we have about the way EU trade remedies worked, as Kathleen spoke about, the EU was trying to deal with that situation. Unfortunately, our members felt that it was their own Government that were holding back the process of imposing sufficient remedies at a European level to deal with the situation of Chinese steel dumping.
Q Can I come to Kathleen? The lady from Which? did not actually refer to the lesser duty rule with respect to the Minister. She did refer to the economic test. Of course, everybody recognises that there should be an economic test, but there are a number of tests—public interest tests, and tests by various people. I noted that you, Kathleen, said that you were alarmed by the state of the current proposals. What needs to change in them to remove your alarm?
Kathleen Walker Shaw:
The introduction of the economic interest test in itself, and then a further public interest test that the Secretary of State would then make a final decision on, is a confusion. First of all, the economic interest test is not defined clearly enough in our view, in terms of what it is assessing. The public interest test is just not defined at all. We have to assume that that would be an issue of national security, but a concern that we have about the economic interest test in terms of the procedure as laid out—it is still very vague in some of these areas—is that it would come before interim measures. If you are an industry that is suffering from anti-dumping, you do not want to be waiting for the conduction of an economic interest test—we still do not know the nuts and bolts of how that will happen—while somebody is roasting your fingers in an anti-dumping case. By the time you get to the interim measures, said British company may not be there anymore. Having that where it is in the process is very flawed. Having it at all has a serious question mark over it, in terms of its broadness and definition. It is something that you cannot pin down.
Another concern that I have is the—
Thank you, Mrs Main, for chairing the session. I share concerns that there is very little in the Bill on the issue of distorted economies. It would be helpful if you could indicate what provisions you think might be necessary to remedy that current deficiency.Q
A step forward would be to use as a baseline the new rules that the EU has adopted, whereby non-market economies are not regarded as reliable in having a price indication for the goods that they export. Rather, an analogue country of a similar level of development would be used to judge whether an unfair pricing practice was used. We hope that that will allow the EU to take stronger measures against countries—not just China, but Vietnam and other countries that are using undue levels of Government influence to set prices at a low level.
In the current UK legislation, we do not see any approach like that. Indeed, we know that the UK Government have been holding back EU attempts to take stronger measures against China and other non-market economies. I think we can be forgiven for not quite believing it when we are told that in the secondary legislation we will have adequate measures to deal with non-market economies. We do not have an indication that the Government are likely to introduce secondary legislation on that.
A key new development within the European Union is that, when they are assessing an analogue country, where there is more than one, they can now also take social and environmental factors into account. That is obviously absolutely crucial, because if a country is abusing labour rights or environmental regulations, that is also trade distortion, and should be taken into account in our trade remedies regime.
Kathleen Walker Shaw:
There are two more points that are vital in terms of dealing with the distortions in the UK within the Bill framework, the first of which is the timing of it. To expedite these procedures at a time when they can actually help the companies while they remain competitive and able to see off the challenge was a problem that we had in the steel crisis, as some of you will be aware. Even the EU timetables at that time were dragging too long and exacerbating some of the problems that we had across the steel industry, so the speed with which we can move the procedures is vital. The placing of the economic interest test in there makes me doubt that we will be able to do that.
Again, setting the tariffs at a level at which they will have the effect of adding the effective protection that we need was something that we struggled with agreement on at European level. The European Commission was going to set the levels on certain types of steel much higher than the UK Government. In the end, it became a political process rather than an economic process of what was required to protect and maintain the competitiveness of British industries and other European industries in that case.
During the steel crisis, I sat in this very room as a member of the Business, Innovation and Skills Committee taking quite a lot of evidence from some of you as well. It is clear that if this bit on trade remedies is got wrong, the consequences will be severe.Q
My worry on the public and economic tests is that, even in something like the steel crisis, there were people arguing for the benefits of very cheap steel coming into UK for construction and so forth. If those tests are not drafted correctly, frankly, we do not have any trade remedies at all. If we are going to have them in the Bill, how can we draft them to ensure that they are robust and fair? Who should be involved in the Trade Remedies Authority to ensure that that is the case?
We need an opportunity to have that debate, which we will not have at all with the Bill as it is currently drafted. It will simply be written into secondary legislation—we will not have that ability. We have four or five minutes left to have a discussion about how it should be drawn up. It would take us another couple of hours. That is what we want, as a trade union movement: an involvement in these discussions and debates.
We have huge concerns about the way in which the appointments are being made to the Trade Remedies Authority. In effect, in the way that the Bill is currently written, we are not seeing one economic interest test but three. To give you a one-sentence answer about how it should be is very difficult: we want to engage in that debate. We want to have a role in that process in the future to ensure that our members are confident that those decisions are being taken with their interests in mind.
Kathleen Walker Shaw:
On the Trade Remedies Authority, its structure is very important. We would like to see it set up in line with the Health and Safety Commission, where we have three employers, three trade unions and three other interests. I am a bit concerned that we are limiting that to nine, because I have a strong concern that devolved Administrations need to be involved in that process as well.
I would also like to see the Bill developed to give a role for parliamentary scrutiny—for the TRA to be liaising with structures within wider parliamentary scrutiny—on the European economic area IT, and on the decisions of the TRA, and to remove the power of the Secretary of State to veto a decision of the collective scrutiny of Parliament and the TRA on remedies. In that way, we might be some way to getting to the bottom of a justified and effective remedy.
Everybody in the Committee shares concerns about democratic oversight, industry protection, consumer protection, worker protection, the whole question of resources for HMRC, and sunset clauses or the lack of them. Taken together, it is of concern—not just at an individual level. In relation to your role in all this, I do not get the sense that you have had any substantive or significant consultation with the Government as a legitimate group of organisations. Is that a fair assessment of the situationQ ?
Kathleen Walker Shaw:
You are picking at a wound there. I was the poor person that drafted our response to the trade White Paper. I spent a lot of evenings doing that and I was more than a little concerned when I submitted that paper—less than eight hours later, the Bills were published. For people who take policy and their engagement with Government and Parliament very seriously, it was difficult not to feel the contempt with which that response that I spent hours sweating over to place before Parliament was received.
Consultation over the trade and customs Bills is vital because the Government have to get this right. There is no margin for getting this wrong. The future of Brexit hangs on these two bills: trade and the taxation cross-border. That is what our success or failure post-Brexit will hang on. I am very nervous about it, but I am more nervous about the fact that the Government are pretending that they are consulting us and they are not. We are very serious people and we want to be taken seriously. We want to help you to get the trade Bill and the cross-border trade Bill right, but we can do that only if we are a serious part of the process.
We have been engaging, but we have not been listened to. It is not enough for the Government to say, “We have consulted”, because if you miss off, “But we haven’t listened to a word you’ve said”, the quality and the integrity of that consultation is brought into severe question. It will not stop us from being delighted at being invited to come and have these conversations with you—we are not making this up, particularly Alan, who works for HMRC.
On delivery, my union wrote to Jon Thompson, the chief executive of HMRC, immediately after the referendum result to say that it was a game changer, that he needed to pause the office closure programme, stop making people redundant and evaluate this new situation. We have not even mentioned, and we will not get to, the issue of import VAT for business and for delivery. As well as customs duties, there will be a big increase in import VAT transactions. They will need to be processed, and staff will need to run a compliance regime under the new situation, to counter evasion and avoidance.
We also feel that we have not been properly consulted. We have been trying to engage the Department in serious talks about delivery, how staff can be recruited and trained and how we can retain the existing skills. We most definitely feel that we have not had those serious discussions about how HMRC can be made fit for purpose in the new Brexit position.