I suppose what I would like to try to get out of this session is whether you feel that any lacunae have been created by Brexit in our system, whether there is appropriate scrutiny and transparency, and whether you feel that there are shortcomings in the Bill that need to be filled. May I start by asking the panel, perhaps beginning with Dr Hestermeyer, for examples of deals that will be the Q same, and of deals that may be different? Are they simply roll-over deals or are they substantively new, distinct legal entities?
The first thing to note—in fact, it is even in the Government’s comments on the Bill—is that the deals will be technically new international agreements, so they will be technically separate. As to their content, first, there are the technical details that will need to be changed—for example, rules of origin, which define when a product benefits from a trade deal. Those are quantities, so they will say, “50% of a car has to be from the EU.” That, of course, no longer fits; it will have to be the UK, and the numbers will have to be changed too, because a UK car is substantially now 44% UK-content. We will not benefit from the deals if we do not change the numbers. Those are technical issues, but they are vital.
There are some deals that are structurally so different that, quite frankly, I wonder whether we really want to reproduce them one-on-one. For example, Norway, Iceland and Liechtenstein are in the European economic area—as was recently explained, in the sidecar to the single market. Do we really want to reproduce those deals by statutory instrument? It seems peculiar to me that we would want that. Turkey, for example, is in a customs union with the European Union. Do we want a customs union with the European Union? We might say yes or no, but I wonder whether a statutory instrument is really the way to take those decisions. Switzerland has a whole number of agreements, some of them linked by what is called a guillotine clause, free movement. Do we want that? That probably could not be reproduced even if we did want it, so that is also a no.
You might say, “All this is insignificant,” but if you add up the numbers, the EEA is 2% of UK trade, according to the Government’s assessment of the Bill; Turkey is 1.3% and Switzerland is 3.1%. That amounts to roughly half the trade we are talking about, or half the 15% that the Government assessment arrived at for those agreements. I do not think that will be rolled over, because I am not sure we would want it, quite apart from the technical issues that will arise and the question of whether other states and our partners will say, “We also want something.”
I would rather focus on the implementation aspects. Obviously, the question of which agreements the Government choose to roll over is a political decision; it depends on negotiations and so on. My reading of the Bill is that it talks about the implementation of those agreements. What is important there is to identify the scope of the agreements that can then be implemented.
One point of interest is that the Bill extends to agreements that have been signed but not ratified as of Brexit day. I think we can safely say that that is likely to be the comprehensive economic and trade agreement with Canada, the agreement with Japan and others as well; and if the EU agreement is provisionally applied at the same time, some might think that they are in force and ratified. In fact, I found the language in some of the documents around this area blurred the point a little bit, but there is a fundamental difference in international law between a signed and provisionally applied agreement and a ratified agreement. The Bill is quite extensive when it comes to signed agreements.
There are other points to do with the definition of the sorts of agreements that are covered here, such as a free trade agreement, which is here defined to include a free trade agreement and a customs union agreement by reference to World Trade Organisation definitions. Then, interestingly, we have in clause 2(2)(b),
“an international agreement that mainly relates to trade, other than a free trade agreement.”
I do not know whether you would like me to say anything about that now. It could be quite broad. I noticed one idea in some of the amendments, which was that it could be further defined as including a strategic partnership agreement, the language used for the framework agreement sitting on top of CETA, and mutual recognition agreements.
I must say that I think the amendment is very comprehensive; for a start, the strategic partnership agreement is not even tangentially about trade, so it could not really be described as an agreement about trade. The point of it is political and human rights conditionality and so on. In that sense, the definition is over-inclusive. It is also under-inclusive, in the sense that mutual recognition agreements are only one type of agreement relating to trade that one might legitimately want to include here. For instance, one would also have customs co-operation agreements as an obvious agreement that should be rolled over and implemented.
The broader point is that, despite what I said about the strategic partnership agreement, it is an outlier in this respect. A lot of agreements have to do with trade. Environmental agreements have trade aspects; the Montreal protocol on substances that deplete the ozone layer is all about banning trade in ozone-depleting substances. The convention on international trade in endangered species is all about trade in endangered species.
Therefore, I think the definition is a little bit unclear. One could say, “Well, it’s agreements that just liberalise trade,” but that is a problem too, because FTAs do not just liberalise trade. They have intellectual property provisions, which might arguably in some way promote trade, but more likely investment. Certainly, they are not the first thing that you think about when thinking about a trade liberalising agreement. There are provisions in the FTAs in addition to intellectual property: competition law, labour and environmental protection provisions are in all the modern EU agreements that we have talked about. Essentially, this gives the Government the ability to implement labour standards provisions, which include not exactly sanctions, but obligations that need to be performed. Frankly, these two Bills strike me as very old-fashioned; they do not seem up to date with the reality of modern trade agreements.
I will follow on directly from that last thought, from my experience inside the European Parliament as an MEP, scrutinising trade policy at EU level. Of course, our MEPs have done that job for the last few decades. From our perspective, what really is missing from the Bill is the parliamentary scrutiny dimension. No-one on the panel has mentioned that so far. In terms of process, compared with the parliamentary scrutiny powers that British MEPs have today in the European Parliament, the Bill is an enormous step back in democratic oversight of trade agreements.
To add to what has already been said from a legal perspective about what these trade deals are, any kind of roll-over is likely to come up against the offensive interests of our trading partners. We have already seen that what was supposed to be quite a technical question of the division of tariff-rate quotas going to the World Trade Organisation has turned into an enormous political issue, with countries who supposedly are our friends and allies defending very actively their offensive interests in relation to tariff-rate quotas.
Once we start opening trade deals up to technical tinkering, whether that is a number here or a point there, our trading counterparts will also use that opportunity to try to get a bit more leeway for their interests. It is likely that these deals will be very different at the end of the process from what we have at the beginning. That parliamentary scrutiny—the role of MPs in ensuring that there is democratic oversight—is absolutely crucial but entirely missing from the legislation.
If the question is which of these agreements will change significantly, my answer is, we do not know that. Other people who are much more expert than me in the details of trade agreements would have better sight of that, but as someone who looks at what is coming to and through the Westminster Parliament, we simply do not know at the moment. On that basis, I make two points.
First, Parliament needs to be happy that it has procedures in place to deal with agreements that might be changed significantly. Even the Government have indicated that that is a possibility—they use language about substantive change in the Bill documents. Secondly is the point about transparency and possibly some kind of reporting function, which does not have to go into the Bill; it could be done through other means. However, I feel that, given the number of these agreements that have to be dealt with in the amount of time that we are talking about, some kind of regular reporting transparency about exactly what is going on would be useful to Parliament.
May I ask DrQ Bartels about the remedies section, in part 2 of the Bill? In your view, how does the legal framework for remedies, particularly if a remedies authority is established, compare with others abroad? What are the strengths and weaknesses?
One of the features of the package that you have been presented with is a split between fiscal and non-fiscal measures that can be adopted. I am not entirely convinced that that is a very sensible division of tasks. For instance, because of that division, what seems to be missing is the ability to impose quotas—not tariff-rate quotas but quantity quotas—as safeguard measures, which is permissible under WTO law and is done. Because of the split, nothing on those measures is set out in this agreement, and the other agreement only deals with duties, so you are limited to tariff-rate quotas. That is one overall observation. I could say other things about the treatment of developing countries in the other Bill, which I find under-complex, to use a German term that my colleague is fond of.
More directly to your question—again, this links to what I am saying about the split—the major issue when it comes to the Trade Remedies Authority here is that we do not have it in a context that enables appeals. I know that in the other Bill there is a reference to the possibility of an appeals mechanism. The United States is very big on appeals—it is very elaborate. Of course, one can disagree with the way in which the United States conducts itself—we have all paid some attention to the Bombardier dispute and the United States’ interpretation of its WTO obligations—but at least formally speaking there is a sequence of decision making that includes a court, appeals and so on established there, and we do not have that here. It is very, let us say, basic at this point.
On the rest of it, reading this together with the other Bill, I would say in general terms it looks fairly standard. There are some choices you can make when setting up a Trade Remedies Authority, such as the duties that can be imposed and whether you go for a lesser duty rule or not—we seem to be doing that here. One can make a political choice on that, but in general terms, other than the point on appeals of decisions, and connected with that the relationship between the authority and the Secretary of State, which here is extremely close and in other systems might be a little more arm’s length, I think the detail of what the authority can do is fairly standard.
I would add one thing. I heard the evidence this morning in which there was quite a lot of discussion of the EU trade defence instruments and the EU system, and some of it was a little bit out of date. During the steel crisis, quite a number of reforms came in to modernise and speed up trade defence inside the EU, mainly led by the European Parliament. That is one of the key elements missing from the Bills: the role of Parliament in terms of oversight and scrutiny.
If I think about the role of MEPs when it comes to trade defence instrument questions, we have the right to veto proposed duties and to scrutinise all of the Commission’s proposals, we have access to all of the documents in relation to investigations, and we can demand closed-door meetings with Commission officials to really get into the detail of those investigations. It seems to me that lots of that scrutiny is missing from the proposals on the table. That scrutiny gives a quality to the process of ensuring balanced trade defence instruments that are effective.
There is a clear role for stronger scrutiny. Inside the legislation, there is no obligation on the Secretary of State or the new Trade Remedies Authority to engage directly with Parliament through, for example, a specific Committee of Parliament. In future, that could be the International Trade Committee—an amendment could be tabled to ensure that link and that scrutiny—but at the moment that is not in the proposals. It is a missing link, if you think about what we already benefit from in the current system, of which we are a member.
I would hate to give the impression that what we have is perfect; that is not what I am trying to say. Today, in the European Parliament’s Committee on International Trade, MEPs have voted on a modernisation package to try to rectify some of the weaknesses in the EU’s regime. If you are thinking about what to improve on, our system is not perfect, but, at the same time, MEPs—your counterparts—have a clear role in the process, which is entirely missing from the proposals tabled.
May I address this question to Dr Bartels? The Government suggest, to justify the absence of any process for parliamentary oversight, transparency and scrutiny, that trade negotiations need to be done confidentially and under some secrecy. What is your feeling about thatQ ?
One can look at what is covered in modern trade agreements according to two poles, and then there is a sort of meeting in the middle. On one side, you have the pure market access issues, where you are reducing duties—you are liberalising trade—in certain economic sectors. Those sectors are going to be affected negatively and are not going to be happy about it, because there is competition that they were not used to. To do that, you need to be able to trade sectors off against one another. There is a reason for confidentiality with that traditional sort of trade negotiation. Not everybody would agree—you might say that someone whose job is at risk should get a right to know what is being negotiated—but there is at least a traditional and strong argument there for confidentiality.
On the other side, you have purely regulatory issues, such as the question of what you think in your system of the precautionary principle for health and safety. That sort of principle would normally be dealt with through the normal democratic process, and I cannot see any reason why that should be changed and negotiators should be given the ability to haggle that away, particularly if they are doing that in secret. In the middle, you have rules that are regulatory but arguably are also protectionist, so the trade negotiators would say, “We should be able to negotiate those away in secrecy.” It is hard to know where to draw the line, but it is certainly useful to conceive of what is in a trade agreement according to those two poles.
None of that means that this should be limited purely to the Executive, even when there is confidentiality on market access. Many other countries have systems where parliamentarians have some rights to see what is being negotiated and to be kept apprised of negotiations as they go. The European Union, for instance, is extremely advanced when it comes to that; there are strict limitations in terms of going into and coming out of the room, no phones are allowed, and so on. The US Congress has similar arrangements. There is a palette of options to enable parliamentary involvement, even within the framework of confidentiality. I am not sure that the Bill is the right place to address that sort of issue, but there is certainly nothing like that in the Bill.
It is true, but it is generally more true in certain sectors. It is true, for instance, in sanitary and phytosanitary standards. It is usually not the standards themselves that are protectionist. There are examples of standards, such as the beef hormone standards, that I can say are protectionist because WTO cases have said they are protectionist—I just need to cite Geneva on those—but it is often done by having overly complicated conformity assessment requirements, and so on. There is definitely room for regulations that purport to be there simply to protect the public also to be protectionist. Usually, you have both aspects in the same regulation. But even in that sort of situation, I still think that the regulatory dimension is sufficient for there to be at least some type of domestic scrutiny over haggling that away.
There are certainly examples of standards being used only for protectionist purposes, but it is far more common for standards that one side sets to be perceived as protectionist by the other. Let us take hormone beef. There is real concern on the part of a lot of European consumers that hormone beef is not healthy. There is no direct scientific evidence to show that that is true, but the concern is nevertheless there. So the standard reflects the democratic choice of the populace—whether we think it is adequate or not. That is important to see. With any standard set, some sides will say, “This is protectionism,” and it is also rhetoric to attack the standard.
I guess the last point missing from that is that if we look at where trade agreements and trade policy have been controversial in recent years, it is when the perception is that standards held very dearly by the public for exactly those reasons are perceived to be negotiated away behind closed doors, with only a certain number of vested interests having access to the process. That is one more reason why having an open process, with parliamentary scrutiny and engagement, gives credibility to any final agreement, which at the end of the day has to have public support, after the negotiations. You build in societal acceptance through the process by engaging Parliament in an active way.
I would very much endorse that. If it is the case that some degree of secrecy or privacy is an advantage in one respect, there is probably a trade-off in terms of not being able to have that societal buy-in that might be wanted at the end of the process. There is a trade-off and losses if it is all done in private.
Quite a bit has been said, not just in this sitting but in the sitting earlier today, on the issue of checks and balances, and scrutiny. Would the witnesses accept that all of these agreements initially, when they were brought into being in the first place, went through an impact assessment process and that, on ratification, they were scrutinised thoroughly by the scrutiny Committees in both Houses? Also, the 2010 CRAG process—under the Constitutional Reform and Governance Act 2010—allows Parliament to pray against a treaty and indefinitely deny ratification, including bringing it to a debate. Do the witnesses recognise that and think it is sufficientQ ?
I will kick off. Yes, I would agree with that, but I would also say that what is important about the Bill is that it gives the Government the power to change those agreements. They are, legally, new agreements, and that is recognised specifically in the Bill and in the explanatory memorandum, where no bones are made about saying that new obligations might be undertaken, so it would not be the same agreement that is subject to scrutiny. What is important here is to work out whether there are any limits on the Government’s ability to undertake new agreements—or new obligations in what are named as existing agreements—and implement those obligations, and if they do that, whether that is then sufficiently being scrutinised by Parliament.
I would like to go back to my first answer and take as an example the Turkey agreement. I do not think that we would want the kind of customs union that Turkey has, but currently the Henry VIII power would allow implementation of any agreement that we then make with Turkey, even if in the end it looked completely different. That is the first problem with this scrutiny process.
The second problem, as Lorand identified at the beginning, is that some agreements have been signed but not ratified, so the scrutiny part of ratification has not yet happened. They have not been fully scrutinised.
The third element is that I do not think that the Ponsonby rule, as qualified, is sufficient because, first, it allows only delay and not a straight up-or-down vote; and secondly, it requires scheduling of an actual debate and vote. With Government control of parliamentary timetables, there is no guarantee that it cannot be indefinitely delayed. Even theoretically, therefore, that is not possible.
I would agree with that. In terms of existing scrutiny through the European scrutiny system, one point is that it is imperfect. As we know, the European Scrutiny Committee here spends a lot of time trying to get time on the Floor of the House and trying to ensure that it sees documents in time and to arrange things so that it can have a meaningful say. Then there is the problem of the agreements that will not have been fully through the European scrutiny process before they come back again. Then there are the CRAGA problems—it seems that no one quite knows how the CRAGA provisions would work. That may be because no one in either House has ever tried to do anything under them, but it seems to me that part of this process ought to be that agreements are going to come before Parliament that it might want to do something about, and merely as a minimalist position—
May I ask Dr Fowler toQ expand on a point raised in the Hansard Society paper, “Taking Back Control”, about the issues surrounding Government control of parliamentary time, and any implications this is likely to have for both the trade deals covered in this Bill—including the government procurement agreement membership—and the delegated powers that it grants, especially with regard to the negative procedure?
As you will know, under the negative procedure, Parliament has the power to pray against an instrument. In order to do that, first, Members need to use the early-day motion procedure, which is obscure and many Members do not even know about. Secondly, and more importantly, there is the issue of trying to get time on the Floor of the House. There have been cases where Members have wished to pray against a negative instrument and time has not been granted on the Floor of the House within the scrutiny period, so it has simply been impossible to annul a negative instrument before it came into force. That is one problem with the current system.
Q So is it fair to say that the Government have the ability to control debate and thus limit—or even totally deny—parliamentary scrutiny of the deals or the secondary legislation?
Inasmuch as the Trade Bill provides for use of the negative procedure, yes, that would be fair. I am sure there would not necessarily be any wish to do that on the part of any Government, but as the procedures currently stand, Back Benchers cannot be sure that they can get time on the Floor of the House if they want it.
We have heard a lot today about the importance of societal acceptance in the scrutiny process, andQ Jude Kirton-Darling certainly explained the scrutiny process for trade agreements currently in place in the EU and the European Parliament. Dr Fowler, could you explain the current parliamentary framework for the signature, ratification and implementation of trade agreements in the UK?
At the moment that procedure happens through the European scrutiny system because of the EU’s competence to conduct trade policy. The main instrument is the so-called scrutiny reserve, under which the Government deposits relevant documents with the European Scrutiny Committees in both Houses and they scrutinise them. The relevant Minister is not supposed to sign up to things in the EU Council if the relevant documents are still held under scrutiny. That works every time a new set of documents is tabled along the process.
The system can be quite effective but there is a difficulty about timing, and getting time on the Floor of the House. There is a difficulty if something has to move quickly at EU level, and then the Government quite often uses what is called the scrutiny override where it just says, “We had to go ahead with this.” Then there is also the difficulty about trying to schedule appropriate debates in Committee or on the Floor of the House.
My only addition would be that currently, one of our frustrations as MEPs is about what happens when some things that we have scrutinised heavily at European level, pass to the national level. We see the level of scrutiny in the German Parliament, in the Belgian Parliament, in Scandinavian Parliaments, where there are very detailed scrutiny processes—often going on at the same time as we are scrutinising at European level, so we get feedback from those Parliaments during the process—and we do not feel, in many cases, that same process from Westminster. So, regardless of what happens in terms of Brexit, it is one of the ways in which Westminster could do more to scrutinise trade in any case, and that would be a benefit for everybody.
Just as a reminder, the scrutiny override was used for CETA. To compare that, under German law, for example, Parliament gets involved very early on. There was a change in the constitution and then an additional statute was passed, so Parliament gets involved very early on and can make binding statements for the Government, which will then be taken into account by the Government also in the Council. That way, there is a large impact of parliamentary statements in governmental positions, because in the end, the Government will have to defend measures in the Council.
Ms Kirton-Darling, you referred to the scrutiny process in, say, Scandinavian Parliaments and the feedback to Brussels and so on. That may be very detailed but, of course, when it gets back to Brussels, Sweden or wherever is just one of 28. Their input in the great scheme of things, eventually, is rather watered down. Wouldn’t you accept the fact that, once Brexit is achieved, the UK, with the scrutiny via the Select Committee and the possible annulment through Parliament and so on, is more powerful than the voice we have at the momentQ ?
Globally, our voice will be very much reduced by Brexit. Currently, we negotiate together with our neighbouring countries and that collective weight is leveraged in negotiations with trading partners, which, unfortunately, we will lose as a result of Brexit. The benefit of that parliamentary engagement from the national level from other countries creates that societal acceptance, in many cases, of European trade deals. We saw that where there is poor parliamentary engagement, societal acceptance is called into question. The biggest example—it may be a very small region of Europe—was the case of Wallonia and the CETA negotiations, where, through the powers they have as a regional Parliament, they were able, even if they were a small region in Europe, to leverage quite significant improvements in the CETA deal to address some of the concerns they had about that deal. That is where the Parliament is working effectively to really ensure they scrutinise trade deals.
After Brexit there will be a case, if there are improved scrutiny powers included in this Bill and in the accompanying measures toward this Bill, that could mean that MPs would be able to be far more effective in terms of trade policy. My basic answer is that we will be weaker post Brexit because we lose our place and we will become, in effect, a rule-taker rather than a rule-maker when it comes to international trade negotiations.
Jude, earlier on, you mentioned tariff-rate quotas and the fact that the whole negotiating process is potentially back up for grabs between the UK, EU countries and the third countries. Going forward, as part of these negotiations, as a politician I would want to know which third parties are advising the Government and what the correct asks are. What impact assessment has been made of getting the desired result and any other trade-off that might be associated with that? How will we make sure that the correct people—the politicians, I would suggest—have approved or ratified the deal? What needs to be done or what amendments need to be made to the Bill to allow such a transparent process and that level of scrutinyQ ?
In my experience of the European Parliament’s level of scrutiny, what we have at European level legally is quite limited. Inside the treaty we have a right to accept or veto trade deals at the end of the negotiations. That is included in the Bill, but the second element which we have which is not included in the Bill, which we use much more effectively, is that we have the right to be kept informed throughout the negotiations. That is a legal obligation inside the European treaties. That effectively then gives Members of the European Parliament a hook on which is placed the whole of parliamentary scrutiny at a European level.
You could amend the Trade Bill to include a hook in the same way, which would then allow you to develop some kind of working statute which could evolve over time. These processes evolve over time—improve, I hope, over time—with more transparency as trust is built between institutions. However, you need that legal hook at the beginning. Within the European Parliament, as a result of the hook, we have monitoring groups on every single negotiation that the EU is undertaking and established trade agreements. We have monitoring groups which meet behind closed doors on a regular basis with the chief negotiators, in which MEPs can scrutinise and ask any question. We have access to the majority of documents. During the negotiations you will have heard about the TTIP reading room. We had access to all the EU side of the negotiation documents. Crucially, in that reading room, we also had the read-outs from the European negotiating team of the process of each round of negotiations. To put it into context, you had the legal text of the EU negotiating position and, through the read-out, you could see where the room for manoeuvre was with the US side of the negotiations. Those documents give you the capacity then really to question.
First, Parliament needs to be very clear whether it is happy that the Bill only covers the replicated agreement. You might want to decide that you are happier with these agreements and then do something stronger for the completely new agreements that the UK will be negotiating. I believe that is something that the Secretary of State has indicated he would be open to, but I suggest that Parliament might want to get that nailed down in some way at this stage.
As I have mentioned before, the main issues are the weakness of the CRAGA procedure at the moment—
For example, you might simply want to have an affirmative motion, a motion for resolution, rather than the negative power that is applicable at the moment. That might be one option that the Government need to bring a motion for affirmative resolution. That is one possibility. Even more important is the preceding stage, which is processes around the signature of the new agreements, particularly where they might have been changed significantly from the existing EU ones. Again, there are things that Parliament could do about transparency, possibly having an approval motion, or recreating some kind of scrutiny reserve, possibly through a Committee. There are all sorts of institutional options, but I think the House might want to look at a set of processes around signature that the House might want to look at.