Examination of Witnesses

Taxation (Cross-border Trade) Bill – in a Public Bill Committee at 4:09 pm on 23rd January 2018.

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Gareth Stace, Ian Cranshaw and Dr Laura Cohen gave evidence.

Order. We are quorate. As has been explained, Mr Stace is giving evidence at another Committee and will be joining us somewhat later. We will now hear oral evidence from UK Steel, the Chemical Industries Association and the British Ceramic Confederation. This sitting will finish at 5 o’clock. Can I ask the witnesses who are here to introduce yourselves for the record?

Dr Laura Cohen:

I am Laura Cohen, chief executive of the British Ceramic Confederation. I also chair the Manufacturing Trade Remedies Alliance, a group of seven manufacturing associations, three trade unions and the TUC with an interest in trade remedies.

Ian Cranshaw:

Good afternoon. I am Ian Cranshaw, from the Chemical Industries Association. I am the head of international trade and the head of business development.

Photo of Peter Dowd Peter Dowd Shadow Chief Secretary to the Treasury

Q For the benefit of the Committee, can you briefly explain the current trade remedies in place and managed by the European Union?

Dr Laura Cohen:

The EU has a number of trade remedies in place, the transition of which is being considered by the Department for International Trade at the moment. In the ceramics sector, which I am probably best placed to talk about, we have two measures in place, in tableware and in tiles. These are EU anti-dumping tariffs against Chinese-manufactured products. In tableware, until 2004, Chinese imports had been fairly steady, at around £20 million a year. They then rocketed to £160 million a year. The anti-dumping tariff was introduced in 2013. The Chinese imports have held steady, but even that has allowed our members to stabilise and invest, and employment has increased by 20% to 5,000 UK jobs since 2013.

On tiles, there were about £2 to £4 million of imports in 2004, and that increased pretty rapidly to £30 million. Anti-dumping duties started in 2011, and they have now fallen back to about half that. Please note, we have just had a renewal in Europe of the measures, on 22 November 2018, following an expiry review. The dumping margin had increased during that period. UK manufacturing employment has increased by 40% to 1,000-plus UK jobs since 2011, so that is good news for UK jobs, but both measures really benefited the UK supply chain, not least the kaolin and ball clay industry in Devon and Cornwall, which employs about 1,500 people. That is part of the 2,500 jobs in the materials supply section of our membership.

Just to bring this example to life, the Minister, Mel Stride, met British Ceramic Tile in his constituency, which has about 400 manufacturing jobs, last week, and it reinforced the message. The Minister also has two Imerys clay quarries at Newbridge and Ringslade in his constituency, which supply the sector.

I just wanted to point out something about the renewal. The Chinese spare capacity increased between 2011 and 2016 by more than four times the entire European Union consumption. The European Commission was very concerned by this development. The extra capacity is propped up by state distortion. I do not say that lightly, because the evidence is quite clear. In December 2017, the European Commission produced a report on the Chinese economy which found gross subsidies and state interference in the manufacturing industry. I quote from the report. The first parts show:

“The overall picture that emerges concerning the framework in which economic activity takes place in China is one where the State continues to exert a decisive influence on the allocation of resources and on their prices.”

The second part of the almost 500-page report says:

“The analysis shows that the allocation and pricing of the various factors of production is influenced by the State in a very significant manner. The third part…examines a number of sectors. These include steel, aluminium, chemicals and ceramics. The sectors have been selected because they are the ones that have featured most in the EU’s anti-dumping investigations since the conclusion of the Uruguay Round. Taking the perspective of individual sectors allows a closer look at the specific rules and dynamics in that sector, but this examination also echoes the findings in the preceding two parts, i.e. the significant distortions resulting from the specific features of the Chinese economy and those found in relation to the various factors of production.”

The report noted that the State Council in China combines the implementation of the belt and road strategy, to actively conquer markets such as Europe. Therefore, anti-dumping remedies are there when competitors do not play by the rules.

That was a very comprehensive answer. I hope we can condense further answers slightly.

Photo of Peter Dowd Peter Dowd Shadow Chief Secretary to the Treasury

Q It sets the scene and gives really good context to my next question. Can you explain the importance of strong trade remedies and the difference between having those strong trade remedies and what some might call “protectionist measures”? Can you give the Committee a feel for that? It has been touched on today that, somehow, if you have remedies it is protectionist.

Ian Cranshaw:

I may not go into the same detail that Laura did—I am sure I will receive some encouraging signs.

Just looking at some of the bigger numbers so that we all know how many trade remedies we are talking about, I think the EU has something like 130: 50-plus in steel alone; 27 in chemicals; and I think Laura mentioned a couple in ceramics. Again, you need to drill down and understand what the UK’s standing is in those 27 in chemicals across Europe. I believe there is just one where we have gone out, and I know there is a call for evidence by the Department for International Trade of all UK standing in all of the wider remedies in place. That puts it into context.

Again, I would hold my hand up and say that we are all on quite new ground in this area, apart from UK Steel, which has been incredibly active over the past couple of years. I held a roundtable with some member companies a year ago and got all of the major players in the UK chemical industry. That is interesting, because more than 70% of UK production is by companies headquartered overseas—so that was not necessarily UK companies.

It was very interesting that, when I talked to one of the German companies about trade remedies and trade defence instruments—I will not mention the name, but you will probably work it out—its perspective was, “Well, we have no trade remedy experience or personnel in the UK at all.” Nor did the trade association. We have happily contributed to EU development of policy, but actually, in leading on this, we had no expertise.

The German company pondered for a moment and said, “Actually, if in the future we had to raise a trade issue with the EU—us accusing it or it accusing us of dumping or subsidy—the UK transplant would have to ask our headquarter operation for advice and policy in the expertise in which to raise a concern or complaint to the WTO.” That was quite interesting. I am not sure if I answered the question, but that was a specific example.

Photo of Peter Dowd Peter Dowd Shadow Chief Secretary to the Treasury

Q Okay. Let us try to tease that out, because that touches on something Dr Cohen alluded to. Let us try to get the difference between what you consider to be a remedy and protectionism. They are becoming interchangeable in some people’s minds.

Dr Laura Cohen:

A remedy is addressing unfair competition when overseas manufacturers are not playing by the rules. The ceramics industry and the tiles industry, such as in the Minister’s constituency, has invested very heavily in state-of-the-art, energy-efficient manufacturing with digital printing technology. Given a level playing field, it can take on the world. All we want is a level playing field, and trade remedies allow us to ensure we can get that free trade.

Before we go any further, I would like to welcome Mr Gareth Stace, director of UK Steel. I know that you have been very busy on another Committee, so I am glad you have joined us. Do you want to come in on this? You got the drift of the question.

Gareth Stace:

Yes. Apologies for arriving late, and thank you.

I would like to look at it from a different angle in terms of using what is the trade remedy and what is protections. The steel sector thrives on free, liberalised trade. A third of all steel produced in the world is traded across borders. We actually have zero tariffs—that is, zero customs tariffs—for steel between developed countries. What does that do? It enables us to be even more liberalised in our free trade. Trade remedies is a safety valve to enable that free trade to take place. I would say that, without trade remedies, we will actually see a rise in protectionism—it is not that with trade remedies we will see a rise in protectionism. Trade remedies allow for free trade to take place; it is not the other way round.

Ian Cranshaw:

Within the Manufacturing Trade Remedies Alliance, which we are a member of, we actually do not use the phrase “protection”. There is a global rule-kit of trade, and all we are asking for is that people play by those rules and, if they do not, remedies come in. I was here listening to some of the earlier evidence and there was a balance of the consumer or the producer. Our view has always been that it is in the interests of all parties that inappropriate trade practices are removed—just play by the rules.

Photo of Peter Dowd Peter Dowd Shadow Chief Secretary to the Treasury

Q What assessment have you made of any trade remedies outlined in the Bill, or that you might be aware are going into the Bill, and their effectiveness to combat the dumping of goods from countries with heavily distorted economies?

Dr Laura Cohen:

We have three major concerns with the Bill that we think, taken together, will give much lower duties than the EU, and that will attract dumped products from around the world. Those three main concerns at a high level are: first, the measurement of the dumping margin—the calculations and the methodology —particularly where there are distorted economies, and the absence of a methodology in the Bill; secondly, the combinations of various economic interests tests and public interests tests, and I will go into more detail on those; and thirdly, this lesser duty rule, and that is very much an alliance position. Overall, the effectiveness of trade remedies depends so much on the detail of the legislation that is completely absent in the Bill.

Much detail may be in secondary legislation eventually, as we heard from the Hansard Society, but that may be without much parliamentary input: it is likely to be a negative procedure. Even worse, much may be in guidance written by officials with hardly any parliamentary scrutiny at all. Important changes going through the European Parliament and the EU in trade remedies legislation have had extensive scrutiny, and important amendments have been made by MEPs and ex-MEPs, often working across parties. We need a similar level of political oversight in the UK system, but to do that the Bill needs alterations in those three areas. We are concerned because businesses, jobs and investment are at stake. I can go into more detail on those, or my colleagues can.

We have quite a few questions, so maybe somebody can come back to you on that point if they need to. Mr Stace, did you wish to come in at this point?

Gareth Stace:

There is a lost opportunity in the Bill in terms of looking at what is happening in the EU, which Laura has highlighted, particularly on changes that are taking place at EU-level on how it tackles the lesser duty rule—the UK Government have firmly said, “No, we are not going to follow that; we are going to do something different”—and how it treats non-market economies or economies that subsidise their industries. The Government are saying, “Yeah, we will follow that,” but because the detail is not really there, as Laura said, are they going to follow it to the letter, which would be great, or just broadly in principle? That is that whole thing of everything—I am sure you had already heard that before I arrived.

The problem with this Bill, and also with the Trade Bill, is that the proof will always be in the pudding. The Government can promise anything they like, but more than a third of all tariffs in place affect the steel sector and it hits us hard, therefore, if this system, when it comes out, is not appropriate for what it is trying to do. That is why we, in this primary legislation stage, are putting that in so much detail. Why are we doing that? Because we just do not know whether it will be in the secondary legislation or the guidance. That is not our fault; we have to set out our case in full now, at this stage. If the Government said to us, “Honestly, trust us completely and utterly. It will be in secondary or it will be in guidance, to the letter of what you are asking for,” then great, but at the moment we are sitting here very much in the dark. When we talk about day one from when we leave the EU, is that day one next year or day one in 2021? We do not know. If it is next year, we should be planning right now for doing something very different very soon.

Ian Cranshaw:

One of the issues is the fact that these things cannot be rushed. We know that they are very complicated. The trade defence instruments modernisation programme in Europe took more than four years, and that is just in modernising a regime that has been in place for 40 years. One of the important concessions we got out of the EU somehow in the chemical sector, which we refer to as an enabling industry or a foundation industry, was about the importance of raw materials. On raw materials, the EU said, “Okay, if the raw material cost is 17% of the overall product cost, we will take in the raw material cost because we are aware of distortions that take place across many markets.”

We have one UK producer, which is specific in the UK, for which the energy cost is 40% of the total costs of the individual company, so it is hugely important. Its remedy is against Russia and gas coming out of Russia. Russia not only subsidises that industry, but does not observe the same environmental standards as we do. It has had every opportunity to do so, but it does not. There is a wider responsibility at play and that goes back to the comment earlier about it being in everyone’s interest to get this right.

Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (Economy), SNP Deputy Leader

Q I have two questions. On the first, I am quite happy with a one-word answer if that is how you feel. Do you feel that the balance between primary and secondary legislation is right in this Bill?

Gareth Stace:

No.

Dr Laura Cohen:

No.

Ian Cranshaw:

No.

Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (Economy), SNP Deputy Leader

Q The other one is about the trade remedies that are in place. On the trade remedies that we have by virtue of being a member of the EU, is it your view that they will definitely roll over and continue to be applicable, or is it your view that they might be challenged when the UK leaves the EU and is no longer part of that kind of conglomerate which has put those remedies in place? I have heard conflicting evidence and information about that.

Gareth Stace:

Those remedies might well be challenged, in the sense that anyone can challenge anything, but that does not mean that they should not be rolled over. It is our firm view that the UK Government can roll over all the remedies that are applicable to the UK within World Trade Organisation rules, and we have set that out very clearly to the UK Government.

We have heard lawyers. I gave evidence to the International Trade Committee, and there was a lawyer saying that it could not happen, but when we explained it to her she thought, “Ah yes, actually it could happen.” We need to remember that if they could not roll over from the EU to the UK because the calculations were wrong, because it is just the UK and not the EU, they would also all be invalid in the EU, because they are based on 28 member states and there would be only 27. I think they can easily roll over and will then be reviewed when those cases expire after five years.

Dr Laura Cohen:

In our association, we appreciate the way in which the Department for International Trade is going about the consultation at the moment, just checking UK interest. Certainly, we are gathering evidence from our members on tiles and tableware, but the consultation is also forcing us to check the three or four other sectors where we think there could be some UK manufacturing interest. That is particularly in the technical ceramics and refractory areas, which are quite diverse and complex, and we need to take enough time to explore those properly.

Photo of Nicholas Dakin Nicholas Dakin Opposition Whip (Commons)

Q How does the UK’s proposed system of public and economic interest tests compare with elsewhere, and are you happy about the proposals as they currently are?

Dr Laura Cohen:

I want to explain that the EU uses a Union interest test as a sanity check, to balance the possible conflicting interests of member states. The wording of the rules around that test are crucial. For example, in the tiles renewal that I just talked about, the Official Journal text says:

“In weighing and balancing the competing interests, the Commission gave special consideration to the need to eliminate the trade distorting effects of injurious dumping and to restore effective competition.”

It is essential, if the UK is doing that sort of test, that such clarity of purpose is in the Bill that you are considering. It is not at present.

I would argue, as my colleagues said earlier, that addressing dumping is always in the long-term consumer interest because it restores a competitive market. We would expect the Competition and Markets Authority to take strong action if UK companies were not playing by the rules. In the absence of international competition laws, strong trade remedies are the best we have. The EU is only one of five countries or areas out of 32 main anti-dumping users in using that type of test. In Brazil and Canada, it is a conditional test used in certain circumstances only.

What is the UK proposing? First, I want to state that the WTO does not require a public interest test. It appears in the Bill as if the UK is proposing something very new to replace the Union test. That seems to run counter to the principle that global free trade cannot mean trade without rules. As some of the previous witnesses said, three opportunities are provided to stop remedies against rule breakers. The text in the Bill suggests the three stages, the first of which is an economic interest test by the TRA. The research commissioned by the Department for International Trade strongly hints that that may contain a cost-benefit analysis and/or an economic model. No other country uses that approach. The USA tried it and stopped. The Union interest test is just a sanity check. Secondly, if the Secretary of State does not like the result by the TRA, he or she may overrule it with their own economic interest test. Finally, that may be overruled again by the Secretary of State’s public interest test. A recent article in The Telegraph—we can provide a link if the Committee wishes—alluded to the implications of a potential UK-China free trade agreement and inward investment being weighed up in such a test. If true, that would be highly alarming.

Those second and third tests are not carried out in the EU. They add a lot of uncertainty to the process, particularly with a very unclear presumption at present in favour of adoption of duties in the Bill text. No wonder some UK manufacturers are scared witless by this. I think you heard similar emotion from the unions. Manufacturers have enough uncertainty around Brexit to cope with, without the fear that if they bring a case, despite dumping and injury being found there will be three chances for that ruling not to be implemented, and they might have all sorts of legal challenge. We heard this morning that the Bill is not even clear if we can do that.

Photo of Mel Stride Mel Stride Financial Secretary to the Treasury and Paymaster General

Q Thank you very much. It is very good to see you again—I know we had a very recent meeting, Laura. Just for clarity, because I do not know whether this suggestion was being made or not, from the Government’s point of view we do not equate sensible, proportionate trade remedies with protectionism at all. We see the value of those, just as everybody else on the Committee, and indeed yourselves, does.

Can I just go into the area of the lesser duty rule in a little more detail? To the extent that the lesser duty rule functions as proposed, and it does provide remedy for injury caused through dumping to those producers who have been affected, why would you want to go further than that in terms of a potential remedy? Why would you want to go beyond that particular threshold? The argument from consumer groups is that that will then start disproportionately to damage consumers and those businesses that use those imports within their own production processes.

Dr Laura Cohen:

I am going to let Gareth answer first. Then I will come back and refer to what the unions were talking about; I have some evidence from the alliance.

Gareth Stace:

It seems that we are constraining ourselves in the UK when we do not need to. One of the aims of Brexit was to strip things away, make things more simple and have less people employed working on these things; much of what we have seen in both Bills seems to add layer upon layer that is probably not needed. The lesser duty rule is used quite a lot in various different regimes, but it is not used in the US at all. We want to create strong links with the US in terms of trade, so that seems a bit odd.

We could say yes, but I could not tell you that if we did not have the lesser duty rule, we would have seen less dumping in recent years. The lesser duty rule has not meant that new cases did not stop dumping. The point I would like to make is this: we are always told that the lesser duty rule ensures that the consumer is not ripped off—that prices do not rise significantly because tariffs are imposed at too high a rate.

I have an example. In the hot rolled coil case recently—hot rolled flat is used for car bodies and washing bodies, but I am using the example of the car—the injury margin was 17.5% and the dumping margin was 29%. That is a difference of 11%. So the 17.5% was applied, not the 29%. If we think of a luxury car that cost €45,000, because this is a European example, if the lesser duty rule was not applied in this case, it would increase the value of the €45,000 car by €16. We are not suddenly going to see runaway costs and the poor old consumer having to pay lots and lots more. We are going to have a robust system that ensures that we have free liberalised trade continuing as a safety valve. In that case, it increases the cost by €16 on €45,000.

Photo of Mel Stride Mel Stride Financial Secretary to the Treasury and Paymaster General

Specifically, what is the justification for going beyond in your trade remedy measure that which puts right the injury to the producer? What is the argument as to why you should go even further still?Q

Gareth Stace:

One of the things that we were talking about right from the beginning of this process was 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.

We said right from the beginning that if you have a clean sheet of paper, why not just go for the easiest and quickest system, so that you could get provisional measures in place very quickly? In the US, they get them in in 45 days, whereas in Europe until very recently, it has been after nine months. There is a really good opportunity to do that. I am not sitting here saying that we have to have 29%, not 17.5%—the point is that it is not a huge difference.

If the Trade Remedies Authority did the dumping calculation and then said, “Well, actually, it is 29%; we think it could probably be effective at perhaps a bit less,” it has the flexibility to do that—you would have the economic interest test and the public interest test to weigh that up—rather than having a fixed system that says, “I do not care what the dumping margin is; we are going to ignore it and are only going to go for the injury margin.”

Mr Cranshaw wants to come in at this point. I have five or six other people who want to ask questions. I ask Committee members to make their questions as condensed as possible, but still factual. I call Mr Cranshaw.

Ian Cranshaw:

The chemicals sector exports a massive proportion of our product. We are an import-export business, so free trade is something that we have always encouraged. We are free traders: 60% of our product goes to the EU, 75% of raw materials come in—it is products that cross borders multiple times, and integrated supply chains. We do want that. Sorry, I had not actually got to my point. Can I come back on that?

Dr Laura Cohen:

I want to support what Gareth said. These are subjective and time-consuming calculations. As we heard from the unions, these will require stipulating what profits industries should make. They can only underestimate injury because they do not cover, for example, whether there is a general subsidy in the country that is doing the dumping.

It is not compulsory in the WTO: only nine out of 32 main anti-dumping—AD—users have them. Australia and, imminently, the EU will have conditional use. The UK has no such provision and is not even thinking about pasting it into the Bill. Out of 32 main AD users, only three—the EU, the Eurasian Economic Commission and Brazil—have both a public interest test and a lesser duty rule. The EU is moving to a conditional lesser duty rule, and Brazil has a conditional public interest test. Why does the UK want to be such an outlier?

Photo of Mel Stride Mel Stride Financial Secretary to the Treasury and Paymaster General

Q On the public interest test, are you saying that there are no circumstances whatever under which the Secretary of State might legitimately be concerned about the remedies being taken—for example, on the grounds of national security where particular components might need to come into the country but would otherwise be choked off as a result of recommended measures?

Gareth Stace:

Picking up on Laura’s earlier points about the economic interest test and public interest test, at the moment there are six tests. Six! You only need two: an economic interest test that a TRA does, which the Secretary of State looks at and takes note of; and, I agree, you need a public interest test at the end, because there may be those extraordinary circumstances where it is or is not in the public interest to apply or not apply tariffs. But we only need two, not six—not five economic interest tests and one public interest test. That would speed up the process.

I am going to Anneliese Dodds next. We must finish at 5 o’clock and I am conscious that there are several people wanting to get in.

Photo of Anneliese Dodds Anneliese Dodds Shadow Minister (Treasury)

Q I will be brief. That has been enormously helpful for clarifying some of the situation. One of the issues that came up in the previous panel was around the lack of measures in the Bill generally relating to the distorted economies. Obviously, they would be covered by some of the measures that we have been talking about to a lesser or greater degree, but I wondered whether you had any suggestions about whether there should be more explicit recognition of the problem of distorted economies within the Bill or any measures taken beyond those that we have just been talking about.

Dr Laura Cohen:

Particularly on the methodology, I will suggest two provisions that are not mutually exclusive; the UK needs to alter the Bill to include them both. The first provision is how the dumping margin will be calculated in highly distorted economies such as China. The UK should be stating clearly that there should be a special methodology for non-market economies. That would allow the UK to keep that option open for China until the WTO jurisprudence is clear. Indeed, that needs to be in place anyway for countries such as Tajikistan and Vietnam.

The second provision is a methodology that constructs what is called a normal value wherever price distortions occur. That is the EU’s new approach, which takes into account a number of price distortions, including several non-market economy indicators and an absence of labour or environmental standards. That can be used against a country, including former non-market economies such as Russia, which I know has been a problem in the chemicals sector. Indeed, the pasting in of EU legislation is an important principle of Brexit, as is being done in the EU (Withdrawal) Bill, and this part should be done as a default.

Gareth Stace:

In the EU, that became law on 20 December. The UK Government are saying that they will broadly follow it. It would be the easiest thing to say, “That is what happens in the EU on those sorts of economies, and we will do the same”—done! They do not need to invent anything else.

Ian Cranshaw:

It is a theoretical debate that we have been having with the DIT about where the risk is. Is the risk in following the new methodology that the EU is introducing or in the approach that the DIT are now taking in going with something that we have been delivering for x number of years, so that they believe they are following something we already have? The EU is moving in a different direction. From our industry the concern was that many of our companies here are EU-based or EU-headquartered, so they want something consistent. Then you have the political debate that we are leaving the EU because we want more flexibility. That is more of a political decision.

Photo of Emma Hardy Emma Hardy Labour, Kingston upon Hull West and Hessle

Q This is more of a clarification question, so forgive me if you have answered it in other ways and I have not taken in all the information you have just given me. You are talking about the economic test and the public interest test. How would you propose improving those systems of tests as is set out in the legislation at the moment?

Dr Laura Cohen:

First, do you need them at all? It is not compulsory under the World Trade Organisation. Secondly, we should definitely have the text that is in the EU: weighing and balancing the competing interests, and special consideration to the need to eliminate the trade-distorting effects of injurious dumping and to restore effective competition. That would help.

Dr Laura Cohen:

Into the Bill. Can I give an example on the tiles review? This goes back some of the evidence given this morning. The European Commission contacted more than 1,000 known importers and users of tiles. Only 11 companies replied to the sampling form. No user or user association came forward. After the review was published, the Tile Association, which includes UK retailers and tilers as well as overseas manufacturers, published in its magazine an article saying that when they had surveyed their members a year ago,

“A sizeable majority of respondents were in favour of the tariffs continuing and also believed that the level of tariff was about right.”

The EU—an example similar to Gareth’s—as part of its calculation had said that this would add about €1 to a square metre of tiles. It is not a large amount.

Gareth Stace:

We do not have any detail of what that economic interest test is going to be. It could be there on the face of the Bill in primary legislation; it could be wishful thinking that it might be elsewhere. It cannot be that the Government do not know what that might be. We set out in July in a paper here exactly what we felt the economic interest test should be and the weighting it should apply to producers, users and importers and so on. We set it out in firm detail there, so there is no reason why it could not have been in the primary legislation.

Photo of Graham Stuart Graham Stuart Assistant Whip, Parliamentary Under-Secretary (Department for International Trade)

Q Laura, thank you for your evidence; it has been helpful. You said definitively that we will have much lower duties than the EU.

Dr Laura Cohen:

We could have much lower duties.

Dr Laura Cohen:

Given that the lesser duty rule in the EU is becoming conditional, that is one strand of it and may give rise to lower duties. We have no clarity about the methodology for working out the dumping margin, particularly where there are distortive economies, and the EU has that clarity. The triple test—the economic interest test by the TRA followed by the economic interest test by the Secretary of State, followed by the public interest test, actually may result in no duties. It is very unlikely that the duties are going to be higher than the EU and quite likely, given what is in the Bill at the moment, that they will be lower.

Photo of Graham Stuart Graham Stuart Assistant Whip, Parliamentary Under-Secretary (Department for International Trade)

Q You are suggesting that we could end up in a situation where we have had an investigation, it has been found objectively to require imposition of duty, but because of the number of tests they are not going to happen. Are you seriously suggesting that that is because there are these tests in place? Are you not rather exaggerating and doing a disservice to your members by suggesting that?

Dr Laura Cohen:

We do not know what the economic interest test is going to be, but there are two further opportunities over and above what is currently in the EU for overruling it. We have had some concerns, which we shared with Government, about the economic research published by the Department for International Trade on Friday 5 January, which could help determine how that is carried out. We can share that with the Committee after this meeting if that would be helpful.

Photo of Graham Stuart Graham Stuart Assistant Whip, Parliamentary Under-Secretary (Department for International Trade)

Q I am not clear: what tests do you think would be appropriate? Earlier, Gareth was clear that it was entirely appropriate that there should be a public interest test. Laura, you sound as if you do not want any.

Dr Laura Cohen:

We do not need one under the WTO, but if we do, it is about keeping it really simple, with a presumption in favour of eliminating the trade-distorting effects of injurious dumping, and restoring effective competition.

Photo of Graham Stuart Graham Stuart Assistant Whip, Parliamentary Under-Secretary (Department for International Trade)

Q The TRA has that presumption in favour of imposing those duties. Do you welcome that in the Bill?

Dr Laura Cohen:

All three tests should have that presumption.

Ian Cranshaw:

The specific issue is the language: there is not that specific phrase. There is a presumption in favour of duties written into the Bill, and we would like to see that specifically written much clearer than it currently is. That would reassure many of our companies.

Photo of Nicholas Dakin Nicholas Dakin Opposition Whip (Commons)

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.Q

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.

Photo of Peter Dowd Peter Dowd Shadow Chief Secretary to the Treasury

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?

That is not for me to answer. There are no further questions from Members, so I thank the witnesses for their very comprehensive evidence this afternoon.

Ordered, That further consideration be now adjourned. —(David Rutley.)

Adjourned till Thursday 25 January at half-past Eleven o’clock.

Written evidence to be reported to the House

TCTB01 Chartered Institute of Taxation (CIOT)

TCTB02 British International Freight Association (BIFA)

TCTB03 Fairtrade Foundation

TCTB04 Traidcraft

TCTB05 PCS

TCTB06 British Retail Consortium