International disputes etc

Taxation (Cross-border Trade) Bill – in a Public Bill Committee at 4:00 pm on 30th January 2018.

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Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (Economy), SNP Deputy Leader 4:00 pm, 30th January 2018

I beg to move amendment 111, in clause 15, page 10, line 18, at end insert—

‘(3) Within three months of the passing of this Act, the Secretary of State must make regulations defining “international law” for the purposes of this section.’.

This amendment requires the Government to define international law for the purposes of Clause 15.

With this it will be convenient to discuss the following:

Amendment 112, in clause 15, page 10, line 18, at end insert—

‘(3) In this section, “international law” means—

(a) World Trade Organisation treaties,

(b) rules of international public law explicitly referred to in World Treaty Organisation treaty provisions,

and shall be interpreted in accordance with the customary rules of interpretation of international public law.’.

This amendment defines international law for the purposes of Clause 15.

Amendment 113, in clause 15, page 10, line 18, at end insert—

‘(3) Within three months of the passing of this Act, the Secretary of State must lay before the House of Commons a report on—

(a) the relevant international law authorising the exercise of the powers, and

(b) the circumstances in which the Government considers it appropriate to deal with a dispute by varying the amount of import duty payable.’.

This amendment requires the Government to report prior to implementation on its interpretation of relevant international law and its expectations about the circumstances of a trade dispute or issue giving rise to a variation in tariffs.

Amendment 114, in clause 15, page 10, line 18, at end insert—

‘(3) The Secretary of State must lay before the House of Commons an annual report on the exercise of the powers under this section including information on—

(a) the relevant international law authorising the exercise of the powers in each case, and

(b) the matters in dispute or issues arising in each case.’.

This amendment requires the Government to report on the circumstances of, and international law basis for, each variation of tariffs as a result of a trade dispute.

Clause stand part.

New clause 7—Variation of import duty in consequence of international dispute: enhanced parliamentary procedure—

‘(1) No regulations may be made by the Secretary of State in exercise of the power in section 15(1) except in accordance with the steps set out in this section.

(2) The first step is that the Secretary of State must lay before the House of Commons—

(a) a statement of the dispute or other issue that has arisen;

(b) an account of the reasons why the Secretary of State considers that the condition in section 15(1)(b) has been met; and

(c) a draft of the regulations that it is proposed be made.

(3) The second step is that a Minister of the Crown must make a motion for a resolution in the House of Commons setting out, in respect of proposed regulations of which a draft has been laid in accordance with subsection (2)(c) the proposed variation of import duty.

(4) The third step is that the House of Commons passes a resolution arising from the motion made in the form specified in subsection (3) (whether in the form of that motion or as amended).

(5) The fourth step is that the regulations that may then be made must, in respect of any matters specified in subsection (3), give effect to the terms of the resolution referred to in subsection (4).’.

This new clause establishes a system of enhanced parliamentary procedure for regulations varying import duty as a result of an international dispute, with a requirement for the House of Commons to pass an amendable resolution authorising the variation in the rate of import duty.

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

I rise to speak to amendments 111 to 114 in my name and that of my hon. Friend the Member for Dunfermline and West Fife. I am aware this is a framework Bill, but the clause is particularly short and skeletal. It would have benefited from being a bit longer and fleshed out just slightly, because then the Government could have explained more adequately what they are talking about.

Amendment 111 deals with an issue raised with us by the Law Society of Scotland, which said:

“Clause 15(1)(b) makes reference to international law but it is not clear what is meant by this. It would be helpful were the Minister to explain precisely the circumstances in which the Government would need to deal with a dispute by varying the import duty.”

If would be useful if the Minister, either in summing up or at a later point, could provide a bit of clarity. Amendment 111 would ask the Secretary of State to come back with regulations defining what “international law” is for the purposes of the clause. As has been stated, if the Law Society of Scotland does not think that is clear, perhaps it needs a bit more fleshing out.

Amendment 112 suggests to the Minister what he might mean by “international law.” We tabled the amendment to see if that is what the Government mean. If they do, perhaps they will accept it.

Amendment 113 attempts to do something similar, but we are giving the Government a little more time in which to define what they mean by “international law” in the clause. We ask them to come back within three months of the passing of the Bill, making clear what the relevant international law authorising the exercise of powers would be and the circumstances in which they consider it appropriate to deal with a dispute by varying the amount of import duty. It may be that the Government intend to return to that later anyway but, if they were to accept any of the amendments, they will make their intentions clear at this point.

Amendment 114 has a slightly different purpose: to increase the accountability of Government. The Government have the power on international disputes and the Secretary of State will make regulations in relation to that through the clause, but there does not seem to be any accountability to Parliament about regulations or changes, or ways in which they will deal with international disputes. There seems to be no feedback mechanism to allow Parliament to ensure that the Minister makes the correct decisions or to scrutinise those decisions adequately.

In amendment 114, we have asked the Secretary of State to lay before the House of Commons an annual report on the exercise of these powers, making clear the circumstances in which they have used them, which matters were in dispute and which was the relevant international law in deciding the changes.

Now may not be the time to say this, but I will just make my intentions clear. Depending on what the Minister says about his intentions, it may be that we do not need to press amendments 111 to 113. I would very much like to press amendment 114 when we come to that stage, but on the other three I will wait to see what the Minister says.

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

I will endeavour to follow the good example set by the ever-affable hon. Member for Bootle, who gave not only good content, but brilliant quotes that entirely encapsulated the moment and which we all enjoyed.

Clause 15 enables the Secretary of State to vary the rate of import duty when a dispute or other issue has arisen between the UK Government and the Government of another country, and the UK is authorised to do so under international law. The clause replaces equivalent existing powers available to the European Commission. Under the WTO dispute system, WTO members that have been found to be in breach of their obligations must bring their measures into compliance with WTO law. If they do not do so within a reasonable period, the parties can attempt to agree on compensation. Compensation may take the form of a reduction in the import duty on specified goods from the complaining country, although in practice any such reduction would have to be applied equally to all other WTO members in accordance with the most favoured nation rule.

If the parties fail to agree compensation, the complaining member or members may impose retaliatory measures against the member found to be in breach. Such measures typically involve raising the rate of import duty on specified goods from that country to incentivise it to bring itself into compliance. Free trade agreements with third countries also frequently contain dispute settlement mechanisms, many of which follow similar procedures to those of the WTO. In particular, free trade agreement dispute settlement mechanisms often result in a signatory being required to bring itself into compliance with the terms of the FTA, and often allow retaliatory trade measures to be taken against the offending party if it does not do so, and cannot agree appropriate compensation. Authorisation to implement compensation or retaliation measures may also arise in a number of other specific contexts. For example, a WTO member that imposes a temporary safeguard measure to protect its industry, or that modifies its WTO schedules, must seek to compensate any affected countries, failing which retaliatory measures may be imposed against it.

The ability to vary the rate of import duty in response to disputes and other contentious situations is vital to ensure that the UK can operate an independent trade policy after leaving the EU. In particular, the threat of imposing retaliatory duties following a trade dispute can be an effective means of incentivising other countries to comply with their obligations under international law, and can therefore help to preserve and open up trading opportunities for UK firms.

The European Commission is currently responsible for conducting trade disputes and applying enforcement measures on behalf of the UK. Once we leave the EU, the UK will bring and defend trade disputes in its own right. When such disputes are decided, we will require the powers to be able to take action to enforce and respond to their rulings including, where necessary, varying the rate of import duty. The power in the clause ensures that the UK can do just that.

Amendments 111 and 112 seek to provide a legislative definition of international law in the Bill or in regulations to be made by the Secretary of State, as the hon. Lady set out. Amendments 113 and 114 seek to impose a statutory duty on the Secretary of State to report to the House of Commons on that power, either within three months of the passing of the Bill or annually, providing details of the international legal basis for justifying the use of the power.

As I have explained, there are a number of situations under international law in which countries may be authorised to vary their rate of import duty for the purposes of retaliation or compensation, including in disputes under different types of international agreements and, just to make it even more complicated, in other contentious situations that do not involve a formal dispute. Given the different context in which clause 15 would apply, it is sensible to refer broadly to authorisation under international law. Adopting a narrower approach would risk constraining future action in situations that are not currently foreseeable.

Further, it is anticipated that when the power is exercised, the Government will identify, in explanatory notes or otherwise, the legal basis in international law for any proposed variation of import duty. It would be extraordinary to imagine any Government doing other than that. If Parliament were not satisfied that a proposed variation was authorised under international law, it would have the opportunity to pass a motion to annul the Government’s instrument. That is a more appropriate procedure for parliamentary oversight.

New clause 7 would establish an enhanced parliamentary process for regulations varying import duty as a result of an international dispute or other issue under clause 15. As I set out previously, for indirect tax matters it is common to have framework primary legislation supplemented by secondary legislation. The Bill introduces a comprehensive framework for a new stand-alone customs regime and ensures that the scrutiny procedures that apply to the exercise of each power are appropriate and proportionate, taking into account the technicality of the regulations, the frequency with which they are likely to be made and how quickly the law might need to be changed.

The power in clause 15 is subject to the negative procedure, which is both appropriate and proportionate. The proposed scrutiny procedure would give rise to unacceptable delays that would hamper the UK Government’s efforts to enforce international dispute rulings and to induce other countries to comply with their international obligations. The negative procedure represents a more appropriate balance between the need for parliamentary oversight and the need to act quickly.

Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (Economy), SNP Deputy Leader 4:15 pm, 30th January 2018

I rise to query something the Minister said and to ensure that I heard him correctly. Is it the Government’s intention, at the negative procedure stage, to explain in the explanatory notes the basis in international law and the reason for the measure being introduced?

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

It is our intention that the Government, when they seek to make such a change, and they are doing so under international law, would provide evidence of the law upon which they were relying. If the hon. Lady is happy with that, I will leave it there.

In conclusion, after leaving the EU, the United Kingdom will require the ability to vary the rate of import duty to respond to international dispute rulings and other contentious situations. That will ensure that the Government can continue to protect the UK’s economic interests by putting in place, when necessary, effective retaliatory and compensatory measures against other countries. I commend the clause to the Committee and hope that the amendment is withdrawn or rejected.

Photo of Anneliese Dodds Anneliese Dodds Shadow Minister (Treasury)

I am grateful to the Minister for his clarifications. I know he will regret hearing this, but the Opposition feel that the procedures are, sadly, not appropriate and proportionate. The new clause argues for an enhanced parliamentary procedure if import duties must be varied as a consequence of an international dispute. I will not go through the more rigorous procedure we suggest; it is similar to that described by my hon. Friend the Member for Bootle.

It would help if the Minister answered this initial question: what is the anticipated frequency of this kind of dispute? My view of what has occurred at EU level is that such disputes are not so frequent that appropriate scrutiny would not be possible. Some of us are concerned that a dispute might come sooner rather than later. I understand that experts took different positions in the International Trade Committee on whether the UK’s continuing to apply EU anti-dumping duties would be legal after it had left the EU. That is one of many reasons why it would be helpful to have more explicit mention in the Bill of existing measures being automatically rolled over. But, anyway, that is a caveat.

There are many other reasons why an enhanced procedure is necessary. The first is that the decisions taken in the context of such a dispute would be adopted by the Secretary of State himself, albeit with the advice of the TRA, and they could have a significant impact on UK industry. We have talked about how, in many cases, the supply chains are complex, and we need to talk about a variety of different consumers and business-to-business activity. It is therefore important that Parliament is able to examine a statement of the dispute and what exactly the Government propose should be done in relation to the dispute, such that the House can vote on that matter if necessary. These disputes do not affect just economic policy; they can have a significant impact on other areas of public policy as well. Therefore, it is important that colleagues are able to express a view on them and to consider the Government’s position on them.

The second reason it is important to have an enhanced procedure is that there is a lot of public concern at the moment about international economic disputes and how they tend to be resolved. I served as a Member of the European Parliament for three years, and I received tens of thousands of communications—about 38,000 at the last count—from concerned citizens about the Transatlantic Trade and Investment Partnership deal between the US and the EU. Most of those emails included criticism of the impact of investor-state dispute settlement, predominantly because that method of resolving disputes is not transparent and many people feel it privileges the voice of companies over Governments. We surely should not be putting ourselves in a position where Parliament’s voice would be not just ignored but not even heard when it comes to our Government’s actions in relation to trade disputes. For that reason, I hope the Government will support our amendment.

I hope that I will be permitted one last question, as this matter came up in the Minister’s opening remarks on the clause. Will he tell us where the Government have explicitly given themselves the power to create WTO schedules? I do not know where that is. He mentioned the necessity of producing those schedules, so can we have some clarification on that point?

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

I will deal with the questions as best I can and in order.

The EU has four retaliatory duties in place. It is not really possible to predict how frequently this power will be used. In some ways the question is not really the frequency but whether, when it does happen, we have a procedure in place to allow us quickly and effectively to take action to ensure that we put the matter right. That, rather than the frequency, might be the bigger issue.

Although we will be seeking, and will be prepared to use, the WTO dispute settlement mechanism as a way of ensuring that there is a level playing field for UK business to compete on, and we will have the tools available for us to participate fully in international trade disputes where necessary, we have no particular appetite to be more litigious than is required to protect the UK’s interests.

I will write to the hon. Lady and the Committee on the WTO schedules and the process attached to that.

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

I would appreciate it if the Minister also wrote to me, because I brought that up last week. I am pleased that the hon. Member for Oxford East is pursuing the issue. It is important that the Government have the power to lodge schedules with the WTO and the power to make the technical rectifications that the Minister mentioned—those may or may not end up being technical rectifications to things like quotas, given that some of the countries in the WTO are challenging whether they would be technical rectifications or would constitute modifications.

On our amendments, the Minister has provided some information around how Parliament will be provided with evidence for each of the things that comes up. Therefore, I do not intend to press amendment 111 or amendments 112 and 113, but I do intend to press amendment 114 because I am not yet convinced that the Government will provide enough feedback about how this mechanism is working, and it would be appropriate for them to do so.

Amendment, by leave, withdrawn.

Amendment proposed: 114, in clause 15, page 10, line 18, at end insert—

“(3) The Secretary of State must lay before the House of Commons an annual report on the exercise of the powers under this section including information on—

(a) the relevant international law authorising the exercise of the powers in each case, and

(b) the matters in dispute or issues arising in each case.”

This amendment requires the Government to report on the circumstances of, and international law basis for, each variation of tariffs as a result of a trade dispute.—(Kirsty Blackman.)

Question put, That the amendment be made.

The Committee divided:

Ayes 9, Noes 10.

Question accordingly negatived.

Clause 15 ordered to stand part of the Bill.

Clauses 16 to 18 ordered to stand part of the Bill.

Clause 19