The Trade Bill 2019-21: scope and concerns

“A Bill to make provision about the implementation of international trade agreements; to make provision establishing the Trade Remedies Authority and conferring functions on it; and to make provision about the collection and disclosure of information relating to trade.”
Brexit Analysis

Overview

In March 2020, the UK Government introduced the Trade Bill 2019-21 to provide key measures required for the development of trade policy now the UK has left the EU. This Bill is substantially similar to the Trade Bill introduced in the 2017-2019 Parliamentary session, which fell with the prorogation of Parliament in October 2019.


Key measures

Key measures provided by the Bill include:

  • Powers for the Government to implement “rolled-over” trade agreements. The Government has drawn a distinction between replacing trade agreements the UK had as an EU Member State and “new” trade agreements with countries which do not currently have a trade agreement with the EU. The Government has stated that this Bill is concerned only with the former, i.e. the Bill gives the Government the powers to implement “rolled-over” trade agreements. While the Bill is important in allowing the transitioning of existing EU trade agreements with over 40 countries into UK agreements, it is relatively limited in what it sets out to achieve. The Bill does not intend to cover “new” future trade agreements with the EU or other countries;
  • Powers to allow the UK to become a member of the Agreement on Government Procurement (GPA);
  • Establishment of a Trade Remedies Authority (TRA) which will address injury caused by unfair trading practices, such as dumping and subsidies, and unforeseen surges in imports.

Please see our previous briefing for further background information on the Trade Bill.

The Trade Bill does not address tariff provisions – i.e. provisions that set tax and duties on imports and exports – this is achieved by the Taxation (Cross-border Trade) Act 2018. The Taxation (Cross-border Trade) Act 2018 provides powers for the UK to establish its own customs regime, as well as making changes to VAT and excise duty regimes.

As outlined further below, there has been sustained criticism of the Trade Bill, particularly with regard to its lack of provision for Parliamentary scrutiny of new agreements. In its report of 6 May 2020, the European Scrutiny Committee (ESC), noted the importance of Parliament maintaining its role in safeguarding the UK’s national interests in trade negotiations. Currently, the Bill does not provide for Parliamentary oversight of negotiations. As such, Parliament is simply provided with a “take it or leave it” choice when presented with the full and final text of trade agreements.

To influence the direction of the Bill, we understand that stakeholders and key industry players have lobbied their Government contacts and participated in the Department for International Trade’s (DIT) Expert Trade Advisory Groups (ETAGs). DIT has made recent updates to its stakeholder engagement framework, with the termination of ETAGs and the creation of a cohort of 11 new Trade Advisory Groups. We are following these developments closely.

“The Trade Bill laid in Parliament today will: …enable the UK to become an independent member of the Agreement on Government Procurement (GPA) ensuring UK companies have continued access to £1.3 trillion worth of government contracts and procurement opportunities in 47 countries.”
Source: The Department for International Trade, 7 November 2017

Scope

(i) Trade agreements

As outlined above, the Trade Bill empowers the Government to implement changes to domestic law necessary for the UK to meet its obligations under “rolled-over” trade agreements. The Government’s stated approach is to negotiate agreements that are substantively the same or as similar as possible to the previous treaties, however, in theory, the Bill could be used to implement “rolled-over” agreements with considerable amendments or new legal obligations.

The Bill also provides the Government with the power to implement mutual recognition agreements with countries which had an agreement with the EU on 31 January 2020. These agreements allow the UK to recognise tests and documents provided by expert bodies in other countries. Where these agreements are in place, imported goods do not need to be re-tested to be sold in the UK if they have already been tested in the exporting country (and vice versa).

“What is most vital is what is missing from the bill – the absence of anything to ensure that trade policy is accountable to the public and parliament.”
Source: Trade Justice Movement, 7 November 2017

(ii) Access to public sector markets

The Bill provides powers to ensure the UK can implement procurement obligations arising from its accession to the GPA. The GPA is a plurilateral agreement under the auspices of the WTO and essentially addresses reciprocal rights to access to public sector and in some instances utility markets. The detail regarding coverage including financial thresholds and the relevant classes of contracts depends on individual negotiations on a bilateral basis. One size does not fit all. The UK currently participates in the GPA through its membership of the EU and gives effect to its obligations under the GPA by means of UK procurement regulations giving effect to EU procurement directives for public contracts, utilities, defence and security and concessions. Following the transition period, the UK will become a party to the GPA in its own right.

The Bill will provide the Government with the necessary powers to make legislative changes to implement any obligations arising from the UK becoming a GPA member in its own right. Regulations made under this power are subject to the “negative resolution procedure”. This procedure allows regulations to become law without debate, unless there is an objection from either House of Parliament within 40 sitting days.

There is currently discussion about potential reforms of UK procurement law including the remedies available to aggrieved bidders or would-be bidders wanting to challenge a procurement process – or lack of one. Please see our briefing on this topic here.

(iii) A new remedies body for trade disputes

The Bill will establish a new UK non-departmental public body, the Trade Remedies Authority, with the aim of protecting UK businesses from injury caused by unfair trade practices or unforeseen surges in imports. It will remain in shadow form until the Trade Bill is enacted, with the Trade Remedies Investigation Directorate administering trade remedies functions in the meantime.

The TRA will be able to apply trade remedies, such as additional duties or quotas to specific goods, where imported goods are “dumped” or have benefited from overseas subsidies, or where there is an unforeseen surge in “fairly” imported goods, and UK industry has suffered as a result. If the TRA considers that measures should be applied, it will inform the Secretary of State, who will consider whether to accept or reject that recommendation.

Where any interested parties, such as an overseas exporter or a relevant foreign government, disagree with the methodology or facts used by the TRA or Secretary of State to come to a decision, the reconsideration and appeals process will allow them to challenge that decision. This process is outlined in the Trade Remedies (Reconsideration and Appeals) (EU Exit) Regulations 2019/910 which notes that: (i) all recommendations made by the TRA following the conclusion of an investigation or a review will first be subject to a reconsideration; and (ii) this may be followed by an appeal to the Upper Tribunal (Tax and Chancery Chamber). Any challenge against a decision by the Secretary of State, but not the TRA, is to be lodged directly with the Upper Tribunal.

The Upper Tribunal (Tax and Chancery Chamber) is one of four chambers of the Upper Tribunal which settles legal disputes and is structured around particular areas of law. In determining an appeal, the Upper Tribunal will apply judicial review principles. Where the Upper Tribunal sets aside a reconsidered decision, it must refer the matter back to the TRA or the Secretary of State, as appropriate, with a direction that the TRA or the Secretary of State reassess the reconsidered decision and make a new decision in accordance with its ruling. Generally, a decision of the Upper Tribunal (Tax and Chancery Chamber) can be appealed to the Court of Appeal.

In evidence submitted before the House of Commons International Trade Select Committee, experts in the field have called for appeals to be subject to a full merits review rather than limited to judicial review. It is noted that this would allow significant factual errors and failures of analysis to be corrected without the need to meet judicial review standards such as “irrationality”. Further, it would prevent the decision from being referred back to the TRA or the Secretary of State.

In addition, concerns have been raised in respect of the level of independence and Parliamentary oversight that the TRA will have. In particular, there is no provision for ensuring that industry bodies or trade unions have a voice on the TRA and there is no proposed mechanism for their ongoing consultation on trade practices affecting the competitiveness of UK industries.

(iv) Data collection

The Bill provides for powers for HMRC to collect data relating to UK exporters and to establish a data sharing gateway between HMRC and other public and private bodies to allow them to discharge their public functions.

Concerns

Concerns have been raised regarding the Trade Bill during its journey through Parliament, from both politicians and experts in the field.

(i) Transparency and scrutiny

Serious concerns have been raised in respect of the Bill’s failure to ensure Parliamentary scrutiny of ongoing trade negotiations. Naturally, these negotiations largely take place behind closed doors, with little transparency. The UK Parliament currently has no formal role in scrutinising most treaties while they are being negotiated.

Parliament’s role in the ratification of treaties is governed by the Constitutional Reform and Governance Act 2010 (CRAG). This legislation provides for a process of 21 sitting days in which agreements, and the report and explanatory memoranda published alongside them can be scrutinised by Parliament before they are ratified. The CRAG, however, is poorly designed to facilitate Parliamentary scrutiny as Parliament can only object to ratification of a treaty. Therefore, Parliament is presented with a “take it or leave it” choice – whether or not to withhold its consent to a complex document which may have taken years to negotiate, and the text of which is finalised. In effect, Parliament is precluded from having any influence over the shape of the trade agreements, either before or during the negotiation stage.

The ESC has called for Parliament to have a greater role in setting the negotiating mandate for trade negotiations, debating trade agreements and approving their ratification, and has urged the Government to conduct its negotiations with the fullest possible transparency.

An amendment to the Bill proposed during the Report Stage at the House of Commons on 20 July 2020, would have allowed for greater scrutiny of all future trade agreements. This amendment, which granted Parliament a yes or no vote on the negotiating objectives and final draft of a trade agreement, was ultimately rejected on the basis that (i) the Government had assured that there would be Parliamentary scrutiny for deals with countries such as Japan, the US and China, and (ii) scrutiny of roll-over agreements would impinge on the Government’s prerogative power and limit its flexibility on negotiations.

“You cannot have a position where Parliament can unpick a trade agreement that has been concluded. If Parliament claimed that right, no one would negotiate with us. That means that Parliament and the devolved Administrations need to have an important role in setting mandates, and there need to be consultation and information during the process. Civil society would certainly claim that it, too, ought to be consulted, and I would advocate that, to the extent that one can generate one, there should be a discussion publicly.”
Source: Professor Alan Winters of the Trade Policy Observatory at Sussex University, Public Bill Committee, 23 January 2018

(ii) Delegated powers

The Trade Bill follows the Government’s general approach to Brexit primary legislation, which is to leave substantial detail to secondary legislation. As outlined above, the main clauses of the Bill leave to Government the responsibility for detailed implementation of certain trade agreements and the GPA. In addition, Clauses 2 (trade agreements) and 7 (collection of exporter information by HMRC) include a “Henry VIII power” (where delegated powers can be used to modify primary legislation).

Commentators, such as the Hansard Society, have raised concerns regarding the Bill’s provision for secondary legislation. It is noted that Parliament cannot have meaningful control over legislation made using delegated powers. In addition, the use of Henry VIII powers is particularly controversial as it circumvents Parliamentary scrutiny of amendment of primary legislation.

“Unless strictly incidental to primary legislation, every Henry VIII clause, every vague skeleton bill, is a blow to the sovereignty of Parliament. And each one is a self-inflicted blow, each one boosting the power of the executive.”
Source: Lord Judge, King’s College London “Ceding Power to the Executive; the Resurrection of Henry VIII”, 12 April 2016

(iii) Devolution

There are concerns that the Bill does not provide any role for the devolved administrations or their legislatures before implementing any agreed trade deal. In the Committee Stage Report of the Trade Bill, Stewart Hosie MP noted the importance of giving a statutory voice to the devolved nations to ensure their interests were protected. Nevertheless, the Government noted that negotiating international agreement was a prerogative power of the Government which ensured that the UK spoke a single voice in the negotiations.

Although the Government has no legislative obligation to involve or consult the devolved nations during international negotiations, it nevertheless operates under a Memorandum of Understanding. Under the Concordat on International Relations (part of the Memorandum of Understanding), the Government has made a series of commitments, including the commitment to provide “timely, relevant and comprehensive information and analysis on international developments that may affect [the devolved administrations’] responsibilities or be relevant to their interests”. It is further noted that “[w]here international negotiations bear directly on devolved matters, it may be appropriate for Ministers or officials from the devolved administrations to form part of a UK negotiating team”.

Current status

The Bill is currently being debated in Parliament. Between 16 and 25 June 2020 it was subject to debate by the Public Bill Committee, which passed the Bill without amendments to the House of Commons and House of Lords. The third reading in the House of Commons took place on 20 July 2020.

The first reading of the Bill in the House of Lords took place on 21 July 2020. This stage is a formality only and there was no debate. The second reading – a general debate on all aspects of the Bill, where the Lords can flag concerns and propose amendments – took place on 8 September 2020.

The Bill will now proceed to:

  • the Committee Stage in the House of Lords, where a detailed line by line examination and discussion of proposed amendments will take place;
  • the Report Stage in the House of Lords, where the Lords have a further opportunity to examine and make amendments to the Bill;
  • the third reading in the House of Lords, where the Lords have a chance to “tidy up” the Bill, concentrating on ensuring that the law will be effective and workable; and
  • the House of Commons for the final time, to consider any amendments put forward by the House of Lords.

Once the House of Commons and the House of Lords agree on a final version of the Bill, it will receive Royal Assent and become an Act of Parliament. Only if the two Houses do not reach agreement at this stage will the Bill fail.

We are continuing to monitor developments in this field. Please see our recent briefing on developments regarding the UK Internal Market Bill.

Contact Information
Jane Jenkins
Partner
London
Kate Gough
Counsel
London
Anthony Parry
Senior Consultant
London
Lucy Jones
Associate
London

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