Dumping of goods or foreign subsidies causing injury to UK industry

Taxation (Cross-border Trade) Bill – in a Public Bill Committee at 9:45 am on 30th January 2018.

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Photo of Peter Dowd Peter Dowd Shadow Chief Secretary to the Treasury 9:45 am, 30th January 2018

I beg to move amendment 23, in schedule 4, page 58, line 2, after “consumption”, insert “by independent customers”.

This amendment requires the comparable price for the purposes of determining the normal value to be assessed with respect to consumption by independent customers.

With this it will be convenient to discuss the following:

Amendment 24, in schedule 4, page 58, line 4, at end insert “sub-paragraphs (2A) to (2L) and with”.

This amendment paves the way for Amendment 25.

Amendment 25, in schedule 4, page 58, line 6, at end insert—

“(2A) For the purposes of sub-paragraph (2) the following shall apply.

(2B) Where the exporter in the exporting country does not produce or does not sell the like goods, the normal value may be established on the basis of prices of other sellers or producers.

(2C) Prices between parties which appear to be associated or to have a compensatory arrangement with each other shall not be considered to be in the ordinary course of trade and shall not be used to establish the normal value unless it is determined that they are unaffected by the relationship.

(2D) Sales of the like goods intended for consumption in the exporting foreign country or territory shall normally be used to determine the normal value if such sales volume constitutes 5% or more of the sales volume exported to the United Kingdom, but a lower volume of sales may be used when, for example, the prices charged are considered representative for the market concerned.

(2E) When there are no or insufficient sales of the like goods in the ordinary course of trade, or where, because of the particular market situation, such sales do not permit a proper comparison, the normal value shall be calculated on the basis of—

(a) the cost of production in the country of origin plus a reasonable amount for selling, general and administrative costs and for profits, or

(b) the export prices, in the ordinary course of trade, to an appropriate third country, provided that those prices are representative.

(2F) Sales of the like goods in the domestic market of the exporting foreign country or territory, or export sales to a third country, at prices below unit production costs plus selling, general and administrative costs shall be treated as not being in the ordinary course of trade by reason of price, and disregarded in determining the normal value, if it is determined that such sales are made within an extended period in substantial quantities, and are at prices which do not provide for the recovery of all costs within a reasonable period of time.

(2G) The amounts for selling, for general and administrative costs and for profits shall be based whenever possible on actual data pertaining to production and sales, in the ordinary course of trade, of the like product by the exporter or producer under investigation.

(2H) When it is not possible to determine such amounts on the basis prescribed in sub-paragraph (2G), the amounts may be determined on the basis of—

(a) the weighted average of the actual amounts determined for other exporters or producers subject to investigation in respect of production and sales of the like product in the domestic market of the country of origin,

(b) the actual amounts applicable to production and sales, in the ordinary course of trade, of the same general category of products for the exporter or producer in question in the domestic market of the country of origin,

(c) any other reasonable method, provided that the amount for profit so established shall not exceed the profit normally realised by other exporters or producers on sales of products of the same general category in the domestic market of the country of origin.

(2I) If the TRA determines that it is not appropriate to use domestic prices and costs in the exporting country due to the existence in that country of significant distortions, the normal value shall be constructed exclusively on the basis of costs of production and sale reflecting undistorted prices or benchmarks, subject to the following provisions.

(2J) “Significant distortions” for this purpose means distortions which occur when reported prices or costs, including the costs of raw materials and energy, are not the result of free market forces because they are affected by substantial government intervention.

(2K) The TRA shall use the corresponding costs of production and sale in an appropriate representative country with a similar level of economic development as the exporting country, provided the relevant data are readily available; and, where there is more than one such country, preference shall be given, where appropriate, to countries with an adequate level of social and environmental protection;

(2L) If such data are not available, the TRA may use any other evidence it deems appropriate for establishing a fair normal value, including undistorted international prices, costs, or benchmarks; or costs in the exporting country to the extent that they are positively established not to be distorted.”

This amendment makes further provision on the face of the Bill about how the normal value and the comparable price are to be determined in certain circumstances.

Amendment 26, in schedule 4, page 58, line 6, at end insert—

“(2M) A fair comparison shall be made between the export price and the normal value.

(2N) The comparison for the purposes of sub-paragraph (2M) shall be made at the same level of trade and in respect of sales made at, as closely as possible, the same time and with due account taken of other differences which affect price comparability.

(2O) Where the normal value and the export price as established are not on such a comparable basis, due allowance, in the form of adjustments, shall be made in each case, on its merits, for differences in factors which are claimed, and demonstrated, to affect prices and price comparability.”

This amendment provides for fair comparison between the export price and the normal value.

Amendment 27, in schedule 4, page 58, leave out lines 8 to 15 and insert—

“(a) to provide guidance with respect to the application of sub-paragraphs (2) to (2O).”

This amendment replaces the provision for definitions of key terms and the determination of related matters in individual cases with guidance about the application of the existing provisions and those contained in Amendments 25 and 26.

Amendment 62, in schedule 5, page 80, line 5, at end insert—

“and shall be determined in accordance with Article 4 of the WTO Agreement on Safeguards.”

This amendment provides that the meaning of serious injury for the purposes of Schedule 5 shall reflect the relevant provisions of WTO Agreement on Safeguards.

Amendment 63, in schedule 5, page 80, line 6, after “make” insert “further”.

This amendment is consequential on Amendment 62.

Amendment 64, in schedule 5, page 80, line 9, after “make” insert “further”.

This amendment is consequential on Amendment 62.

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

Clearly, being tiresome is my role in life, as far as the Minister is concerned.

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

I do it very well. I will make sure I have five Weetabix on Thursday.

I am glad to turn to some of the very substantial amendments that we seek to demonstrate to the Committee are essential for the proper operation of our customs regime and to provide a level playing field for vital British industries. We want to ensure that British industries do well. We wish them the best and we want to set the framework for them to do well. I say gently to the Minister that the only political points being made are from him. We all want British industry to do well; we all have industry and businesses in our constituencies—I have a huge port in my constituency. Frankly, the idea that Labour wants businesses to do well simply because of parliamentary democracy is nonsensical.

The amendments clarify a number of important points about constructing a functional trade remedy mechanism that will not be open to challenge in the courts and will not slow the process down. The Government seem to have completely missed that. The amendments will establish a level playing field for the purpose of promoting and encouraging free trade across UK borders, ensuring that British producers are not unfairly disadvantaged.

It is important at this stage to remind ourselves of the comments made at the Bill’s evidence session on this particular point, to briefly set the context for the amendments. Dr Cohen from the British Ceramic Confederation pointed out last week that a remedy is not a matter of protectionism, but is simply a means of addressing “unfair competition” when overseas manufacturers are not playing by the internationally agreed rules. Dr Cohen made it clear, by using the example of the ceramics industry in the Minister’s constituency, that it is not the case that our producers have skimped on investment or have failed to seek out productivity enhancing measures, because they take every opportunity to compete. Indeed they have made very heavy investment in

“state-of-the-art, energy-efficient manufacturing with digital printing technology.”

Given a level playing field, this industry can, in Dr Cohen’s words,

“take on the world. All we want is a level playing field” ––[Official Report, Taxation (Cross-border Trade) Public Bill Committee, 23 January 2018; c. 67, Q104.]

and trade remedies that allow us to ensure the greatest level of trade.

Amendment 23 seeks to add a few additional words to the definition of the “normal value” of goods. That is to ensure that the comparable price for the purposes of determining normal value of a good would be assessed with respect to independent consumers, rather than consumption by anyone in the exporting country or territory. That is a point of clarification, to provide legal certainty as to the definition of normal value. It would give producers peace of mind that they will not be unfairly disadvantaged by comparison with supposedly normal prices, that are in fact subject to subsidy. I would hope that this amendment would cause little concern to members of the Committee and that it will be supported, and I am sure that the Minister will comment on that in due course.

Amendment 24 is consequential to amendment 25, the latter being a substantive amendment seeking to introduce proper detail to the procedure for determining the value of goods, and therefore to the understanding of comparable prices for the purposes of assessing market distortions. Again, that goes to the heart of what we want to do: we want to give a certain amount of certainty and clarity, and we have not had that. There is nothing wrong with us wanting that, and there is nothing wrong with us wanting to scrutinise that in future. This detail should already be on the face of the Bill rather than kicked into regulations. The Manufacturing Trade Remedies Association has been clear with us that the lack of detail is the cause of a great deal of uncertainty for their members. That can be fatal to businesses—not just delay, but uncertainty. They will be left in the dark until the Government come forward with the numerous outstanding regulations.

As they stand, the three related Brexit Bills will entail vast quantities of expected secondary legislation: without which it will not be possible to begin to adapt to a new system for creating a level playing field for our own producers, and for the benefit of consumers as well, which are interchangeable as we heard from representative witnesses last week. Amendment 25 would therefore put in place several safeguards to ensure that such a playing field would be achieved. It would do so by explicitly excluding prices where compensatory arrangements are in place in an exporting country from determining the normal value of a good. It would ensure that the normal value represented the value of the majority of similar goods exported to the UK, not a minority. It would make provision for situations in which a normal value was more difficult to determine because of insufficient sales of like goods. Amendment 25 would also give powers to the TRA to make a judgement call on whether value had been distorted when it was making its assessments, or use evidence from an appropriately representative country with similar levels of economic development and adherence to social and environmental factors and protections.

Amendment 26 follows from the detail added in amendment 25, and would ensure that once a proper procedure for determining normal value had been conducted in the manner I outlined, the value would be compared with the export price in a fair manner. Amendment 27 is consequential to the two before it, and would ensure that regulations made thereafter could add further guidance to the application of the provisions contained in the previous amendment, offering the Secretary of State some flexibility should additional changes be necessary. We accept that flexibility is needed in situations.

Amendments 62 to 64 would ensure that the definition of the term “serious injury” corresponded to the agreed terminology of the World Trade Organisation. Broadly, all the amendments would do little more than establish Trade Remedy Authority compliance with World Trade Organisation standards in calculating dumping margins and subsidies, and in assessing injury. In some sections, the language is derived directly from existing EU regulations: that would give the added advantage of maintaining alignment during the transition period, and potentially thereafter if desirable. Given that they are already in use throughout the globe, it is obvious that these are not unreasonable procedures to apply here in primary legislation. One would hope that the Government would bring forward similar proposals if the unfortunate outcome arises whereby they are left to regulations. The fact that these amendments constitute such normal procedures simply begs the question of why such large gaps have been left in the Bill, and highlight the uncertainty they cause.

We are still not getting answers from the Government on the fundamental issue. This is a mañana Bill: we will leave it till tomorrow. Why not simply add the necessary procedures to the primary legislation, as the amendment would do? That would give peace of mind to our fine and fantastic producers that they will be able to play on a level playing field, whatever happens. Certainty, certainty, certainty—that is what we want.

Will the Minister outline how he envisages the procedure for assessing normal value being different from the one I have set out? Will he detail which particular provisions of our amendment the Government do not wish to include and set out the reasons why? That would be helpful. Will he give specific examples of where the Secretary of State might wish to use the vast untrammelled powers he or she will be handed to alter the arrangement or take a different approach?

In short, can the Minister give the Committee any reason—just one would be helpful—why the Government should not include the standard procedure in the Bill to allow Parliament its proper role of scrutiny? I hope he will be kind enough to respond to each of these questions, as the many great producers in the United Kingdom will no doubt be listening carefully and avidly, hanging on every word he says, hoping he might ease their concerns.

Photo of Nicholas Dakin Nicholas Dakin Opposition Whip (Commons) 10:00 am, 30th January 2018

It is a pleasure as always to serve under your chairmanship, Ms Buck. As my hon. Friend has pointed out, the amendment is about certainty for business and industry. At some point, the Government need to bring detail forward. The longer detail is left, the more problematic it will be for business confidence, particularly in an industry such as steel, which is freely traded. It is a free trade industry, so it needs to ensure fair trade. That is why it is not surprising that steel has such a significant number of trade defence instruments in the European Union. That ensures a level playing field under WTO rules against other parts of the world where people want to trade unfreely.

At some point the Government need to bring forward the detail. The problem with this part of the Bill is that it is just a framework with nothing more to it. I therefore very much welcome the amendments tabled by my hon. Friends, because they would bring some certainty and sense into the area. At some point the Government will have to do that. They may say the amendments are not appropriate now—they are drawn very much from what is already there in the European Union and have been written across—so my challenge to them is to ask why they are not appropriate. When will we have the appropriate provisions in place?

We need to have certainty and confidence. These major foundation industries, such as steel, ceramics, oil and gas, that rely on strong trade defence instruments to ensure that they can trade not only freely but fairly need significant capital investment to stay at the cutting edge of development. To make that capital investment now, they need confidence about the framework of the future. That is why the Government should not dilly-dally. The sooner they can bring things forward the better.

The Opposition are doing their job in trying to be helpful to Government by bringing forward something that is compliant with WTO rules and would give the necessary confidence. We would know more about how investigations would be conducted, how calculations would be made and how remedies would be applied—the sort of detail that industry needs.

In a sense, the challenge to the Government is that we all agree. I welcome the Minister’s robust approach this morning—it is the approach we always enjoy from him—but there has been a clear commitment to speedy, timely and effective protection and relief for businesses that are unfairly competed against by the threat of dumping from abroad. However, we need appropriate mechanisms in place to deliver on that rhetoric. The longer it takes to get that detail in place, the more the hesitation, concern and lack of trust in the Government will grow. It is in no one’s interest that the Government should not be trusted in such a crucial area. Therefore, the Government, by taking steps sooner rather than later, and embracing the Opposition proposals, would be moving briskly in the direction of the Minister’s rhetoric.

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

I thank the hon. Members for Bootle and for Scunthorpe for excellent contributions to the debate. I entirely agreed with many of the issues that they highlighted.

The amendments would set out a great deal of the technical detail about the determination and calculation of dumping on the face of the Bill, rather than in secondary legislation, and would require the Government to define the meaning of

“serious injury to UK producers” affected by unforeseen surges in imports, in accordance with article 4 of the WTO Agreement on Safeguards.

Of course, we accept that it will be necessary to set out further details in legislation. As I and my right hon. Friend the Financial Secretary have said from the beginning, the Bill is a framework Bill. It is intended to provide the framework for the UK’s trade remedy system but, as is normal where there is a great deal of technical detail to be legislated for, that will be set out in secondary legislation.

Industry has contributed its thinking to the detailed technical areas, and we shall engage with all stakeholders with detailed proposals in a series of meetings starting next month. I entirely agree with those who have spoken so far about the need for speed; but they would also agree about the need to get things right. Our aim and the purpose of introducing the Bill is to make sure we have a suitable framework for the long term. That is why we are going to get it right, as well as getting it in place in the appropriate time.

Photo of Nicholas Dakin Nicholas Dakin Opposition Whip (Commons)

I very much welcome the Minister’s commitment to engage in a timely way with stakeholders. Can he give us a timescale by which the engagement will be concluded and proposals will come out of it, to give some detail and confidence?

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

I shall do so in due course. The detail of the secondary legislation will be constrained by and compliant with the WTO rules, but the rules that we set will be appropriate for the UK. Because they will be set out in secondary legislation there will be the necessary flexibility to allow changes to be made quickly, reflecting developments in best practice and WTO case law. I am sure that the Committee will agree that that is important, and that is why we do not think it is appropriate to include those matters in the Bill.

As to market distortions I reassure the hon. Member for Bootle that the legislation will enable the UK trade remedy system to account for particular market situations in anti-dumping cases. All major economies have a trade remedies framework that allows alternative methodologies to be used in investigations when the normal value of a good cannot be properly determined based on information from exporting countries. The UK will be no different. We have already discussed this with industry and will continue to do so, to get it right.

I recognise the underlying intent of amendment 62, to increase legal certainty for UK industry by including the requirement to act in accordance with the WTO Agreement on Safeguards. However, it is unnecessary. As members of the WTO we will be required to adhere to the provisions of WTO agreements, and we have been clear about the fact that we are committed to developing the detail of the UK’s trade remedy system in a way that is fully compliant with the obligations. By way of further reassurance, clause 28 of the Bill requires the Secretary of State and the TRA to have regard to their international obligations. On that basis I hope that the hon. Gentlemen can see that their concerns will be met by the approach that we shall continue to take, and that the amendment will be withdrawn.

Photo of Peter Dowd Peter Dowd Shadow Chief Secretary to the Treasury 10:15 am, 30th January 2018

I thank the Minister in good faith for his explanation. None the less, the Opposition take the view that there is a cumulative effect to the proposals. It is okay for the Minister to say that this is a framework and that we will add all the detail later, but there is a difference between a framework and a skeleton. This is not a framework but a skeleton. We must add meat to the bones of the skeleton, but we have not got that here today.

While I accept what the Minister is saying in good faith, we need to press this issue. We must make the point that we need more detail and more certainty. Of course, he might not be the Minister in the not-too-distant future—we do not know who the Minister might be. Therefore, while I have every faith in him, I am not sure whether I can say that about the future Minister.

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

It is a framework Bill—skeletal or otherwise—and the detail will come in secondary legislation, as is entirely normal for issues such as this. In response to the question from the hon. Member for Scunthorpe on when we will be ready to bring secondary legislation forward, we will do so as soon as possible. Evidently, that will need to be in time to ensure that the UK system is ready for when we exit the EU. That is the time constraint. We are working on this. We will engage in detail with industry, starting next month. We are bringing this forward as quickly as we can.

If the Opposition decide to press the amendment, that is fine, but cutting and pasting WTO agreements with which we will comply is not the same as having an appropriate system in place for the UK. This is not the right moment or place for these proposals, because this is framework legislation.

On why we should have secondary legislation, we need flexibility to adapt to developments in WTO case law and, if the Committee were to support the Opposition’s amendments, that flexibility would be removed. Changes in WTO case law are frequent: for instance, only last week there was a panel decision on article 2 of the WTO anti-dumping agreement. It is therefore important that we have the flexibility that only secondary legislation provides, so I ask the Opposition to think again.

Photo of Nicholas Dakin Nicholas Dakin Opposition Whip (Commons)

Will the Minister confirm once more that the Government intend not to make things any more difficult for producers in terms of trade defence instruments and that, as the detail comes forward, people producing stuff in the UK will not be any worse off in future than under the current EU rules? I think that is what he is saying.

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

I would go further than that. By having a system that is entirely aligned with and attuned to the interests only of UK producers, we hope to have a better system than the one we have now. I cannot give firm timelines, because the TRA is not set up yet, but hopefully it will be speedier, more proportionate and balanced, absolutely scrupulous in observing WTO case law, flexible enough to implement it, better attuned to the needs of UK producers, and more effective at averting injury to them.

Photo of Grahame Morris Grahame Morris Labour, Easington

I thank the Minister for giving way and hope he will bear with me. Given the emphasis he is placing on the importance of secondary legislation, and the fact that, as he said a moment ago, the TRA has not been set up yet, has he had a chance to reconsider putting trade union representatives on the TRA?

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

It took the hon. Gentleman’s contribution finally to silence the hon. Member for Scunthorpe, who normally heckles throughout everyone’s address—[Interruption.]. As has rightly been said, that is harsh but fair.

I thank the hon. Gentleman for his question. The aim is that this should be an expert body, that the normal, rigorous civil service appointments process should be observed in its appointment and that we should have an organisation that has impartiality and effectiveness as its primary concerns, rather than being driven by political or indeed representative considerations. That is what we are planning to do.

Question put, That the amendment be made.

The Committee divided:

Ayes 9, Noes 10.

Question accordingly negatived.

Amendment proposed: 24, in schedule 4, page 58, line 4, at end insert

“sub-paragraphs (2A) to (2L) and with”—(Peter Dowd.)

This amendment paves the way for Amendment 25.

Question put, That the amendment be made.

The Committee divided:

Ayes 9, Noes 10.

Question accordingly negatived.

Amendment proposed: 26, in schedule 4, page 58, line 6, at end insert—

“(2M) A fair comparison shall be made between the export price and the normal value.

(2N) The comparison for the purposes of sub-paragraph (2M) shall be made at the same level of trade and in respect of sales made at, as closely as possible, the same time and with due account taken of other differences which affect price comparability.

(2O) Where the normal value and the export price as established are not on such a comparable basis, due allowance, in the form of adjustments, shall be made in each case, on its merits, for differences in factors which are claimed, and demonstrated, to affect prices and price comparability.”—

This amendment provides for fair comparison between the export price and the normal value.

Question put, That the amendment be made.

The Committee divided:

Ayes 9, Noes 10.

Question accordingly negatived.

Photo of Jonathan Reynolds Jonathan Reynolds Shadow Economic Secretary (Treasury)

I beg to move amendment 28, in schedule 4, page 58, line 33, after “contribution”, insert

“within the meaning of Article 1 of the WTO Agreement on Subsidies and Countervailing Measures”.

This amendment provides a definition of financial contribution by reference to the WTO Agreement on Subsidies and Countervailing Measures.

With this it will be convenient to discuss the following:

Amendment 29, in schedule 4, page 59, line 24, at end insert—

“and shall be determined in accordance with Article 3 of the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994.”

This amendment provides that the meaning of injury for the purposes of Schedule 4 shall reflect the provisions of the relevant article of the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994.

Amendment 30,in schedule 4, page 59, line 25, after “make” insert “further”.

This amendment is consequential on Amendment 29.

Amendment 31, in schedule 4, page 59, line 31, after “make” insert “further”.

This amendment is consequential on Amendment 29.

Amendment 33, in schedule 4, page 61, line 20, at beginning insert

“having regard to the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 and the WTO Agreement on Subsidies and Countervailing Measures”.

This amendment requires regulations determining what constitutes “negligible” and “minimal” to have regard to relevant WTO provisions.

Photo of Jonathan Reynolds Jonathan Reynolds Shadow Economic Secretary (Treasury)

This is the second group of amendments on today’s amendment paper relating to schedule 4, on injury caused by dumping. Amendment 28 provides a definition of financial contribution by reference to the WTO agreement on subsidies and countervailing measures. Amendment 29 provides that the meaning of injury for the purposes of schedule 4 shall reflect the provisions of the relevant article of the agreement on implementation of article VI of the general agreement on tariffs and trade 1994. Amendment 30 is consequential on amendment 29, as is amendment 31. Finally, amendment 33 requires regulations determining what constitutes “negligible” and “minimal” to have regard to relevant WTO provisions.

I recognise that in the previous debate the Minister moved a little toward us in acknowledging some of the shortcomings of the Bill and the areas where there will eventually have to be clarity. These amendments concern one of the central issues regarding how we construct our future trade defence policy. In last week’s evidence session, it was made clear by representatives of UK industries that Brexit represents a potential opportunity for the UK to expedite its remedial processes when it comes to dumping and calculating injury—something that has already been referenced by all sides in the discussion today and by the Minister.

Industry also emphasised that, while assessing dumping margins can be relatively easy and straightforward, calculating injury margin needs much more involvement from industry and Government, and the results are not always so obvious. My hon. Friend the Member for Scunthorpe has again mentioned the steel crisis, and I would direct Members to read the Business, Energy and Industrial Strategy Committee’s transcripts from the previous Parliament on the crisis, which articulate very clearly the issues involved. It is of great concern to the Opposition that manufacturers and British industry are telling us that the Bill is seriously lacking in the detail they need to plan effectively for the future.

Members of this Committee, as well as its witnesses last week, have spoken at some length on the shortcomings of the proposed approach, not least that UK industry will be in the dark until all the statutory instruments that are required have been promulgated. As industry and those in many parts of the parliamentary process have repeatedly emphasised—in contrast to the Minister’s comments—it is highly unusual that secondary legislation is considered the appropriate means through which to establish the central tenets of our future trade defence policy. Indeed, it is considered normal practice by most of our major trading partners for these issues to be dealt with in primary legislation. Equally, because of the way in which the statutory instruments will be considered, this forum might well be the only opportunity to debate these measures and give them the proper scrutiny they demand.

The point of the amendments is to bring some of the detail and certainty that UK industry is seeking. Understandably, members of UK industries feel anxious voyaging into the unknown with only vague reassurances from Government. As my hon. Friend the Member for Bootle has said, there is no certainty about this Government’s future or that of the individual Ministers concerned. As the Manufacturing Trade Remedies Alliance has made clear—

Order. Can I encourage the hon. Gentleman to be specific in relation to his amendments, as far as possible?

Photo of Jonathan Reynolds Jonathan Reynolds Shadow Economic Secretary (Treasury)

I will be, Ms Buck.

The package of amendments offers a relatively straightforward solution to these issues by using a pre-existing, widely accepted set of terms to define injury. As referred to in amendment 29, the agreement on implementation of article VI of the general agreement on tariffs and trade 1994 is a set of World Trade Organisation rules, which already provides a blueprint to many major global economies. That will form a solid basis, which UK industry can use to start planning how it will adapt to the new post-Brexit landscape.

Complying with the requirements in the amendments will help to provide consistency following our exit from the European Union, and align us with existing trading standards in economies we seek to trade with globally. It makes little sense to delegate this decision to secondary legislation when we are already in a position to opt for a widely accepted and road-tested definition that would keep us aligned with potential trading partners. That would also have the major advantage of offering certainty to UK industries today—not years from now—on how the trading landscape will look post-Brexit, and allow them to plan accordingly.

I urge the Ministers to support this amendment. It is a relatively small commitment, which would help to bring consensus and certainty to the British economy.

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

These amendments seek to include specific reference to the relevant WTO agreements in the Bill. As I said in our earlier discussion, the Government have carefully considered the right balance between primary and secondary legislation. Where there are very technical provisions in a regime, those are usually set out in secondary legislation because they are very detailed. That is the case here, so we have taken powers to make the necessary regulations.

As a member of the World Trade Organisation, the UK will be required to abide by the WTO agreements. We intend fully to comply with these obligations, and the regulations will therefore reflect the detail of the WTO agreements. However, as I have said, clause 28 does require the Secretary of State, and the TRA, to have regard to international obligations, which should provide any reassurance needed.

It has been suggested that the injury margin is more complicated and harder to define than the dumping margin. We do not believe that that is the case. Both calculations are based on industry data and export data and involve a number of variables where the TRA would be afforded discretion to use its expertise in determining the appropriate approach.

Photo of Nicholas Dakin Nicholas Dakin Opposition Whip (Commons)

Does the Minister recognise that the EU is moving away from that calculation and that, according to the evidence that was presented to us, that calculation involves greater bureaucracy but does not make a great deal of difference in the end, in terms of impact on prices?

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

I do not agree with the hon. Gentleman. From a technical point of view, I do not believe that the EU is moving away from its approach to injury. As I say, we are subject to the WTO. The Secretary of State has to have regard to international obligations, and the detail needs to go into secondary legislation. I therefore ask hon. Members to withdraw their amendment.

Photo of Jonathan Reynolds Jonathan Reynolds Shadow Economic Secretary (Treasury) 10:30 am, 30th January 2018

I am grateful for the Minister’s response, which gave us some degree of detail that we have not had to date, but I think that there is a difference of opinion on some of the evidence we heard last week. In my notes, the Manufacturing Trade Remedies Alliance made it clear that the methodology of the assessment on how to decide appropriate trade remedies was, in its words, a key detail that it is missing. It said that that was relevant in particular to the application of the lesser duty rule and that it would welcome further clarity and legal certainty. With that in mind, I will press the amendment to a vote.

Question put, That the amendment be made.

The Committee divided:

Ayes 9, Noes 10.

Question accordingly negatived.

Photo of Anneliese Dodds Anneliese Dodds Shadow Minister (Treasury)

I beg to move amendment 32, in schedule 4, page 61, line 20, leave out from ‘minimal’ to end of line 33.

This amendment removes the need for a market share requirement to be met before the TRA may initiate a dumping or subsidisation investigation.

With this it will be convenient to discuss the following:

Amendment 34, in schedule 4, page 61, line 45, leave out paragraphs (g) and (h).

This amendment is consequential on Amendment 32.

Amendment 35, in schedule 4, page 62, line 1, leave out ‘(d)’ and insert ‘(c)’.

This amendment is consequential on Amendment 32.

Amendment 36, in schedule 4, page 62, line 6, leave out ‘(d)’ and insert ‘(c)’.

This amendment is consequential on Amendment 32.

Amendment 37, in schedule 4, page 62, line 16, leave out ‘(d)’ and insert ‘(c)’.

This amendment is consequential on Amendment 32.

Amendment 38, in schedule 4, page 62, line 37, leave out ‘(d)’ and insert ‘(c)’.

This amendment is consequential on Amendment 32.

Photo of Anneliese Dodds Anneliese Dodds Shadow Minister (Treasury)

We tabled the amendments because the proposed market share requirements will not only put us out of step with comparable nations but stop action being taken to prevent uncompetitive disruption of infant industries. According to the Government’s proposals, applications to the TRA for an investigation will be subject to a UK market share threshold. As with so much in the Bill—as we have been discussing—we do not know how the threshold will be determined nor what its range is likely to be, let alone the actual value for different industrial sectors. The Government have given as their explanation for the measure the filtering out of cases with little chance of success. Yet, as already discussed in Committee, the Government have already set out a range of tests that must be passed before any action can be taken—tests that are already more stringent than is the case under EU legislation, and considerably stronger than those that the EU is moving towards.

I normally agree fully with every word that is uttered by my hon. Friend the Member for Scunthorpe, but I did not completely agree when he said that he was pleased to hear the Government saying, or hinting at least, that we would have a system at least as favourable to British industry as the existing one. With the different tests to do with economic interest or public interest, whether those applied by the TRA or the Secretary of State, that regime is far more stringent than that applied by the EU.

In addition, I am concerned that the measure proposed in the Bill could cause a lot of ambiguity and be problematic for the TRA. We are informed that the TRA must accept an application that meets the UK market share threshold, although of course both it and the Secretary of State can then decide not to proceed as a result of their overly stringent tests once they get into the investigation—but let us leave that aside. If an application does not meet the UK threshold but does meet WTO thresholds, the TRA may use its discretion as to whether to accept it. However, we can legitimately ask why the TRA should be put in a potentially difficult position, especially when legal action could be levelled against it by the company that is deemed to have engaged in dumping precisely because the TRA has used that discretion.

In addition, I do not understand why the UK has decided to adopt an apparently higher threshold of market share before applications may be accepted when, according to the stakeholders I have talked to, no other country seems to have adopted that approach. This is not about criteria within the investigation: it is about the criteria necessary before an investigation is allowed at all. As with the unique electoral system that led to the hanging chad problem in the US, there is a clear reason why this approach is so unique: it is not workable. The Minister rightly referred to learning from best practice, so it would be helpful for us to know which countries have that test in place before an investigation can be started and why it was believed that this is best practice. I have so far not been able to find any countries that operate such a system. If there are some, it would be wonderful to hear about them.

The Minister suggested in his previous remarks that, much of the time, all the Government are doing is simply transposing WTO requirements. However, the terms of the general agreement on tariffs and trade enable countries to take action, particularly to prevent uncompetitive disruption to infant industries. That could be prevented by this kind of test before an investigation can even be started. That process of uncompetitive disruption to infant industries is known as material retardation, which is quite a well-known concept when it comes to trade disputes and is interpreted quite broadly.

Rules within the Mercosur agreement—the South American trade agreement—state that countries can take measures, first, to ensure that infant industries can be established, but also that there can be, without uncompetitive disruption, the establishment of a new branch of production in an existing industry, the substantial transformation of an existing industry or the substantial expansion of an existing industry supplying a relatively small proportion of domestic demand. That is a very wide reading of what measures against material retardation can enable, and a broad reading of the concept of an infant industry as well. Those rules are already in action in the Mercosur agreement, so I hope the Minister will clearly explain why the UK should deny itself those kind of powers that other countries seem keen to avail themselves of.

I hope he will also indicate how he envisages that market share restriction working, which will be used even before investigations start. I read the “Trade Remedies Research” paper, produced by Van Bael & Bellis and Copenhagen Economics, which I am sure other Members have looked at as well. They looked in great detail at some of the methodological issues relating to the use of trade remedies and they indicated in detail the variety of considerations relevant to calculating market share that the EU has used once an investigation has opened—not as part of a test to determine the opening of an investigation but as part of determining the harm caused by dumping.

They indicated the potential drawbacks of, for example, setting a quantitative measure on the evolution of import volumes in relative terms—in comparison with domestic consumption—in order to determine how the market share of foreign exporters against UK industry has changed over time following dumped imports. That is because our market in the UK is small, and so domestic consumption can vary dramatically from year to year because the number of industry operators tends to be more concentrated.

There are some very difficult methodological issues here when it comes to calculations that might be involved in an investigation. We are talking about the TRA having to carry out calculations potentially with a similar level of methodological difficulty, even before an investigation is opened. Will the Minister indicate what kind of methodology he proposes to avoid those problems? Above all, will he please let us know why our country seems to be adopting this approach, which, as I say, I cannot find any analogue for in comparable nations?

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

I will say just a few things to follow on from the shadow Front Benchers on this. It is strange that market share is being used in this regard as something that will be taken into account. It is almost as if the TRA cannot be bothered to investigate a company if it does not have a certain market share. For that industry, and for manufacturers in particular, it does not matter what their percentage of market share is; what matters is the injury that is being done to them by dumping. Market share is not relevant, and I do not understand why it is included in the Bill. It may be relevant to the Treasury because it affects the tax take it gets from the industry, but it is not relevant to the protection we should be affording to the industry.

This proposal has geographical implications, given that these new goods will be made in the industrial north of the country. Those products may not meet the market share threshold, but they may be incredibly innovative and may improve productivity and make this country a better place to be. Those things will not be taken into account.

I have argued previously that if the fishing industry is decimated as a result of Brexit, that is a geographical issue for the affected communities. It does not have a massive implication for the Treasury’s tax take, but it does for those communities. I fear that this market share test is not only unnecessary, but has implications for the choices that communities make.

Photo of Nicholas Dakin Nicholas Dakin Opposition Whip (Commons)

The communities that are the most vulnerable to that disadvantage are often those that voted most strongly to leave because of their fear that they are not getting a fair deal at the moment.

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

Absolutely, and conversely they are the ones that have been getting the most European funding, so the choice they thought they had to make because of the inequality and uneven economic growth in the United Kingdom will make them lose out in more than one way.

On the issue of new good and fledgling industries, we cannot predict what the world will look like in 20 years’ time. Who could have predicted the rise in the need for electric vehicle charging points, for example? If something suddenly becomes a thing, the effects cannot be predicted. For example, companies making paper straws in the UK are probably seeing their shares going through the roof. We cannot predict the market share of those companies and how quickly it will grow as a result of changes in the culture of the country. I do not think the market share test is appropriate. It is strange to have it in the Bill, and the Government need to rethink it.

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

I thank hon. Members for their contributions. I hope I can reassure them about the issues they raised. Perhaps there has been some misunderstanding, which I can clear up.

Amendment 32 and its consequential amendments 34 to 38 seek to eliminate a market share threshold that we have designed to make sure businesses have a transparent benchmark for judging whether their complaint is likely to be successful. On the question of why we have the threshold, an independent evaluation of the EU system suggested that the system should focus on producers’ market share as a way of informing inquiries.

I was also asked which other countries have the threshold. We understand that other countries consider whether cases are likely to result in measures at the point of applications, but they tend to use rather opaque systems. The market share threshold is intended to give industry greater certainty in a more transparent way about how the system will operate in this country. We are learning from experiences in other countries and are seeking to improve on them to the betterment of our system.

The provisions for the market share threshold fit with the industry’s calls for the TRA to focus on the cases that matter most. For instance, the British Ceramic Confederation said in its response to our White Paper that the TRA

“should not spend its time investigating vexatious complaints and needs to focus on cases where there is a real UK manufacturing interest.”

The market share threshold will be part of providing that.

Hon. Members asked about the methodology behind the market share threshold. We are working closely with industry and producers as we develop our secondary legislation, including on methodology. Let me explain the value of the market share threshold, which amendment 32 and its consequential amendments propose deleting. It will enable UK industries, and the Trade Remedies Authority, to avoid spending time and resources on a lengthy investigation process unlikely to result in measures being imposed. For example, a company could be the only producer of widgets in the UK and therefore meet the WTO requirements to bring a case, but if that company has a de minimis share of the UK market as a whole, putting duties in place would have a disproportionate effect on the rest of the market. I am pleased to clarify, however, that the Government recognise that there are some cases in which such an approach would be inappropriate, so the Bill provides that the TRA may waive the market share threshold.

Hon. Members also raised infant industries. The hon. Member for Oxford East suggested that the market share threshold might prevent emerging industries from seeking trade remedies. That is not what the market share threshold is designed to do, so to prevent such a situation, the Bill allows the TRA to choose to waive the market share threshold in special cases. That will help in cases such as those she describes, in which an emerging UK industry struggles to establish itself in the face of dumped or subsidised imports.

Photo of Anneliese Dodds Anneliese Dodds Shadow Minister (Treasury) 10:45 am, 30th January 2018

I am grateful for the Minister’s comments. The additional information that he provides is useful, but he still has not made it clear whether any other countries operate such a restriction. I appreciate what he says about the potential opacity of other regimes, but we have not had a clear answer to that question. It may well be that some independent actors have written an evaluation of the EU system that says that such an approach should be implemented. However, as I understand it, the EU has not committed to moving towards such a system. It seems to be just the UK that is explicitly adopting it as a policy commitment, unlike any other country.

Order. The hon. Lady is straying from an intervention into a full speech.

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

I thank the hon. Lady for that comprehensive intervention. As I said in reply to the hon. Member for Bootle, our aim is to make improvements. We want a better system that provides greater certainty for UK industry, and one that makes the TRA focus, as the industry has requested, on the cases of greatest import, not an opaque system as in other countries. The TRA may quickly respond to someone with a de minimis market share who comes forward with no real case and tell them that they have no chance, but what we are doing is creating a system that is much easier to understand and more transparent.

I hope the secondary legislation we implement will include other world firsts, too. So long as what we do is based on a proportionate, balanced approach that is fully compliant with the WTO and better tailored to the needs of British industry, I shall be proud to see us innovate. I am not afraid to innovate if it is in the interests of British industry and a better system. We should aspire to doing that.

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

The Minister argues that, in the case of a producer with a small market share in the UK, there may be a disproportionate effect on UK consumers. Given that an economic interest test takes into account the impact on consumers, is the market share test necessary?

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

For the reasons I have set out, I think the market share test is an eminently sensible part of our regime. I hope the Committee will agree.

Photo of Anneliese Dodds Anneliese Dodds Shadow Minister (Treasury)

I am grateful to the Minister for letting us intervene—he has been very generous in that respect. I say gently that I would have hoped for a little more impact assessment before we signed up to a system that is, to adopt the kind of language he used, unique in the world and a world-beating innovation, if we are indeed doing that.

The hon. Member for Aberdeen North made clear that vexatious complaints will be screened out by the economic and public interest tests, which are more stringent than those in the EU regime that we will take on board under the TRA.

The Minister referred to this process being an indication to firms of whether they have any hope of success, but it is not. We are not talking about a guideline. We are talking about a threshold that is a block. Yes, that block can be disregarded by the TRA, but it cannot be overruled by the complainant. That is the whole point. It is not just an indication. It is stronger than a guideline or a set of theoretical considerations. It is potentially a block on firms trying to seek redress through the TRA, which is unique in the world. I had hoped that we might have more explanation of that, despite the Minister’s valiant attempts.

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

Let me try to come back again. The share test comes at the beginning. We have to think about the order. The point is to provide transparency at the beginning of the process and to ensure, exactly as industry has asked, that we do not waste time on complaints, vexatious or otherwise, that have no chance of resulting in measures. That is the whole point of the test. It will be quickly applied and—the Opposition do not seem to have understood this—will have exemptions for infant industries. The system will provide a more transparent form of that which is routinely applied in other countries.

Question put, That the amendment be made.

The Committee divided:

Ayes 9, Noes 10.

Question accordingly negatived.

Photo of Jonathan Reynolds Jonathan Reynolds Shadow Economic Secretary (Treasury)

I beg to move amendment 39, in schedule 4, page 64, line 21, at end insert—