Implementation of international trade agreements

Trade Bill – in a Public Bill Committee at 4:30 pm on 18th June 2020.

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Photo of Stewart Hosie Stewart Hosie Shadow SNP Spokesperson (Trade) 4:30 pm, 18th June 2020

I beg to move amendment 30, in clause 2, page 2, line 9, leave out “appropriate” and insert “necessary”.

I will be mercifully brief on amendment 30. The effect of the amendment would be to limit the scope of the powers to be delegated to an appropriate authority to what is actually necessary to achieve the implementation of international trade agreements. Clause 2(1) provides that:

“An appropriate authority may…make such provision as the authority considers appropriate”— to implement a future agreement. However, the word “appropriate” is vague and subjective. A necessity test—I am sure I have heard the Minister make this argument in the past—is clearer and more objective. The power should be limited to making the regulations that are necessary to implement the agreement.

Photo of Gareth Thomas Gareth Thomas Shadow Minister (International Trade) 4:45 pm, 18th June 2020

I hope to be equally brief. I have some sympathy with the amendment. I recognise the appetite of the hon. Member for Dundee East to prevent overreach by the Government in adding to legislation via secondary legislation anything that they think is a “nice to have” rather than a fundamental and necessary consequence of a trade agreement. Our biggest concern is that the Bill will not deliver the effective meaningful scrutiny of either so-called roll-over agreements or the larger agreements to come, such as the US trade deal and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, on which the Government have begun negotiations.

Taken as a package with the Command Paper from February last year on parliamentary scrutiny of future FTAs, the Government’s failure to include in this Bill several amendments that were tabled on Report in the Commons in February 2018, and in the Lords, raises concerns about Government overreach. We hope to tackle those issues with further amendments that we have tabled to clause 2. I recognise that devolved Administrations will worry that the devolution settlements might be further undermined by Government overreach because of the use of the word “appropriate” instead of “necessary”. We have some sympathy with that concern, as indicated by one of our amendments further down the line.

The witness from the CBI made a striking intervention on Tuesday morning when he said that business was desperate for certainty. To get certainty, Parliament needs to have more say and involvement in future trade agreements, otherwise we risk the development of a situation of considerable mistrust, undermining the appetite of business to take up the opportunities offered by new trade agreements. Our amendments seek to prevent that from happening by locking in more opportunities for parliamentary scrutiny. I suspect the hon. Member for Dundee East does not intend to press this amendment to a vote. In that spirit, I have flagged up some of our concerns about the Bill, which we will address in the group that begins with amendment 4.

Photo of Greg Hands Greg Hands The Minister of State, Department for International Trade

Speaking to amendment 30, which was tabled by the hon. Member for Dundee East, I can assure him that all regulations made under the clause 2 power to implement international trade agreements will be both necessary and appropriate. The power is needed to implement obligations arising from continuity trade agreements into domestic law over time and in all circumstances. Our expectation is that the power will be mainly used for obligations relating to procurement or mutual recognition of product conformity assessments. To be clear, it cannot be used to implement tariff-related provisions. Without such an ability to make changes, the UK would be at risk of being in breach of our international obligations. It is the Government’s responsibility to ensure that that does not happen. The proposed amendment would prevent that by constraining the vires or scope of the regulations that can be made under clause 2, particularly when using the concurrent powers to legislate in areas of devolved competence.

I can assure colleagues that the powers in the Bill will be used in a proportionate way and that consultation with colleagues in the devolved Governments and elsewhere is a fundamental part of our approach. The Government view “appropriate” and “necessary” as synonymous, and our intent is only to make use of the regulation power where it is needed to fulfil obligations under agreements. I therefore ask the hon. Member for Dundee East to withdraw his amendment.

Photo of Stewart Hosie Stewart Hosie Shadow SNP Spokesperson (Trade)

I thank the Minister for his response and I will take his assurances at face value. I just say to him that the objective not to use this to change tariffs is not one of the exclusions in clause 2 in relation to the implementation of trade agreements. The Government might want to look again later in our proceedings at how exclusions to the use of this power are documented in the Bill. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Stewart Hosie Stewart Hosie Shadow SNP Spokesperson (Trade)

I beg to move amendment 31, in clause 2, page 2, leave out lines 13 and 14 and insert—

“(b) an agreement between two or more countries aimed at reducing the barriers to trade in goods or services between them”.

Photo of Graham Brady Graham Brady Chair, Conservative Party 1922 Committee

With this it will be convenient to discuss amendment 15, in clause 4, page 3, line 26, at end insert—

“‘international agreement that mainly relates to trade, other than a free trade agreement’ means a strategic partnership agreement or mutual recognition agreement that is ancillary to a free trade agreement, or an investment agreement

Photo of Stewart Hosie Stewart Hosie Shadow SNP Spokesperson (Trade)

The effect of this amendment is clear: to provide a more precise definition of an international agreement and achieve greater clarity in the Bill. The amended wording would provide a clearer definition of an international trade agreement than is currently provided for in the Bill. That is in line with the Government’s own intention, as set out in the explanatory notes. Paragraph 31 states:

“International trade agreements are agreements between two or more countries aimed at reducing the barriers to trade in goods or services between them.”

The principle of certainty is central to good law making. In clause 2(2), an international trade agreement means “a free trade agreement”, but that is further defined in paragraph (7). Subsection (2)(b), as it currently stands, refers to

“an international agreement that mainly relates to trade, other than a free trade agreement.”

We had a discussion on Second Reading about that. These modern trade agreements have little to do with quotas and tariffs and far more to do with other things, as I said in my introductory remarks earlier this afternoon. The phrase “mainly relates to trade” does not grant sufficient certainty in terms of interpretation.

As I have said, the explanatory notes give the following definition:

“International trade agreements are agreements between two or more countries aimed at reducing the barriers to trade in goods or services between them.”

I consider that definition to be clearer than the multi-part definition currently in the Bill. This amendment does not reduce the scope of what might be deemed to be in a trade agreement, but it provides it with a purpose: to reduce the barriers to trade in services and goods. In that sense, I think it a helpful amendment, which I am sure the Government will want to look at positively as we proceed with our deliberations.

Photo of Gareth Thomas Gareth Thomas Shadow Minister (International Trade)

I rise in sympathy with the spirit of the amendment moved by the hon. Member for Dundee East, but I wish to speak specifically to amendment 15, which seeks to insert at clause 4, page 3, line 26:

“‘international agreement that mainly relates to trade, other than a free trade agreement’ means a strategic partnership agreement or mutual recognition agreement that is ancillary to a free trade agreement, or an investment agreement”.

I join the hon. Gentleman in wanting to see good law making and, therefore, proper definitions of what constitutes a trade agreement that would be covered under the Bill. The hon. Gentleman’s amendment refers just to an agreement on trade in goods and services. Our amendment includes the Government’s definition, but expands it to make it crystal clear that it includes a range of other trade related agreements, including investment agreements.

My hon. Friend Barry Gardiner, speaking on an amendment similar to this one at the Committee stage of the Bill in January 2018, noted the lack of detail about what constitutes an international trade agreement and worried about whether trade agreements, or agreements that had substantial trade elements, would be brought to the House for even the limited scrutiny that the Minister proposes.

Mutual recognition agreements are crucial in terms of scrutiny; many of them help to minimise unnecessary regulatory non-tariff barriers. However, they potentially have implications for phytosanitary standards, food standards and environmental obligations. Strategic partnership agreements can add social and political conditionalities to accompany the more commercial aspects of trade agreements. For example, one wonders whether there might be strategic partnership agreements with some developing countries, perhaps to provide aid for trade support as they seek to implement new trade agreements with us.

Investment treaties are returning to being a UK competence, having left our responsibility in 2009. One of the most significant investment treaties that the European Union has been negotiating—the negotiations on it have not yet concluded—is with China, where there have been 28 rounds of negotiations. I suspect that there would be considerable interest in the UK, including within this House, if the Government sought an investment treaty with China. Surely, it is right to make sure that such an agreement would fall within scope, and it would also need to receive proper scrutiny.

Photo of Bill Esterson Bill Esterson Shadow Minister (International Trade)

I am glad that my hon. Friend has mentioned investment treaties; they absolutely should be part of the description given in clause 4. Does he agree that that is not least because of the fact that the 180 bilateral investment agreements that this country is party to have investor-state dispute settlement clauses, some of which are being used right now to prepare legal cases against our own Government?

Such clauses are a particular concern in areas such as construction. I suggest to my hon. Friend that in this crisis, given that they are being used along with construction contracts and procurement, we need to be very careful to ensure full scrutiny of everything of an international trade and investment nature.

Photo of Gareth Thomas Gareth Thomas Shadow Minister (International Trade)

I was moving on to say where there might be concerns about an investment treaty that warranted the type of scrutiny that the Bill allows, and the Bill could allow even more of that type of scrutiny if the Government accepted later amendments. There are absolutely major concerns around the ISDS provisions in some investment treaties; I am sure that we will come to discuss those concerns when we debate other amendments.

The International Trade Committee has highlighted other aspects of investment treaties about which there are concerns, such as the question of sustainable development provisions in investment treaties so that developing countries can postpone investment liberalisation if they need to for various developmental reasons.

There have also been concerns in the past about performance requirements in investment treaties: conditions attached to foreign investors by host states, such as stipulating that a certain quantity of domestic inputs into goods that are being produced have to come from the host country.

For those reasons, therefore, we want to make sure that the Bill allows proper scrutiny in relation to any of those concerns that might or might not be raised by a future investment treaty. I look forward to hearing the Minister’s response.

Photo of Greg Hands Greg Hands The Minister of State, Department for International Trade 5:00 pm, 18th June 2020

Amendment 31, which has been tabled by the hon. Member for Dundee East, seeks, as he pointed out, to modify the definition of an international trade agreement. Our definition of an international trade agreement is drafted so that it will sufficiently capture the range of agreements that we currently access through the European Union. That includes free trade agreements but also stand-alone mutual recognition agreements, or MRAs. By changing the definition, the amendment would limit important elements of trade that businesses and consumers rely on.

As Members know, provisions under free trade agreements are wider than simply goods and services; the point was made by the hon. Member for Dundee East. That is an essential fact of modern trade agreements that the hon. Gentleman’s amendment overlooks. The amendment would create an unnecessary risk that important agreements became out of scope of the powers, leaving us unable to ensure continuity of trading relationships for UK businesses and consumers. He drew attention to tariffs but, legally, we cannot use clause 2 for tariffs, as he knows, because that has to come under the Taxation (Cross-border Trade) Act 2018.

Amendment 15 seeks to limit the range of agreements that the UK will be able to sign outside FTAs. Specifically, again, that would have an impact on our stand-alone mutual recognition agreements. As Members will be aware, the UK has signed agreements that replicate the effects of existing EU arrangements for mutual recognition of conformity assessment. Those arrangements ensure continuity for UK manufacturers and businesses, meaning that they are able to continue having UK testing bodies certify that their products meet the regulations of other countries. The alternative would be to send our products for testing in other countries, significantly increasing costs and making many exports unviable.

The international trade agreement power enables continuity agreements to come into effect. That includes continuity MRAs. Amendment 15 therefore risks the UK being unable to fulfil obligations arising from continuity MRAs. If stand-alone mutual recognition agreements were taken out of the scope of the power, the UK would not be able to amend product-specific UK legislation to ensure that we were able to implement fully our obligations stemming from the continuity MRAs. Not only would that harm the UK’s standing on the international stage but, more importantly, it would materially impact on UK businesses and their employees at a time when they need to be able to maintain and grow their trading relations. No member of the Committee would want to see that.

An example of that power are the Electromagnetic Compatibility Regulations 2016 as covered by the mutual recognition agreement that the EU has with the United States, which reduces regulatory barriers to trade for goods such as microwave ovens. We seek to replicate the effects of that MRA, allowing businesses and consumers to continue to benefit.

I hope that I have been able to reassure the Committee about the reasoning behind the Government’s approach. I ask hon. Members to withdraw their amendments.

Photo of Stewart Hosie Stewart Hosie Shadow SNP Spokesperson (Trade)

May I make an observation? Clearly, my amendment was driven by the lack of clarity on the face of the Bill, compared with the more elegant phraseology in the explanatory notes. The hon. Member for Harrow West spoke about investment treaties and the Minister himself about MRAs, but the fact that investment treaties and MRAs are not included in the definition—although the Minister says that it is wide enough to capture everything—probably tells us that there is an issue of public understanding of the definition of a trade agreement in the Bill.

It might be that better can be done, however it is done, and more clarity provided as to what precisely the Bill intends to cover by way of treaties in the future. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Maria Caulfield Maria Caulfield Assistant Whip

I am sorry, Sir Graham, but what about amendment 15?

Photo of Graham Brady Graham Brady Chair, Conservative Party 1922 Committee

Again, that will come at a later stage in the Bill, so it cannot be moved at this point.

Ordered, That further consideration be now adjourned. —(Maria Caulfield.)

5.4 pm

Adjourned till Tuesday 23 June at twenty-five minutes past Nine o’clock.

Written evidence reported to the House

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