Trade Bill passes House of Commons with amendments

MPs have approved the Trade Bill - the companion bill to the Taxation (Cross Border Trade) Bill – which covers non-tariff barriers in relation to ‘transitioning’ the EU’s trade agreements to UK agreements.

The Bill passed its report stage and third reading on Tuesday 17 July 2018. A cross-party bid to make customs union membership an objective if a free trade area for goods cannot be agreed, failed by just six votes. However an amendment to make it a negotiating objective for the UK Government to continue to participate in the European medicines regulatory network passed by three votes, as did a number of government amendments to improve the transparency of the scrutiny of the process of transitioning trade agreements.

The Bill gives the government powers to change domestic legislation to fulfil the obligations arising from certain trade agreements, a briefing from the House of Commons library explains. While the Bill is important in allowing the transitioning of existing EU trade agreements, it is relatively limited in what it sets out to achieve. It covers only agreements with countries with which the EU has signed a trade agreement before exit day – it does not cover “new” trade agreements. The Bill also only contains provisions relating to non-tariff barriers (these may be requirements on labelling or product specifications, for example). Tariff barriers (customs duties on imports and exports) are the subject of the Taxation (Cross-Border Trade) Bill.

While the government has said that the purpose of the Bill is to roll over existing trade agreements, the Bill itself does not limit the use of these powers only for these purposes. In legal terms, this means that the powers could be used to implement significant changes to existing agreements, even if the government has said that it does not intend to use the powers in this way.

The new clauses and amendments were debated in three groups.

Group One: New clauses, new Schedules and amendments relating to scrutiny of proposed international trade agreements, or to scrutiny of the making of regulations

Debate was opened by International Trade Minister George Hollingbery who explained that clause 2 of the Bill creates “a power to help with the implementation of obligations of the trade agreements that we are seeking to transition into UK-only agreements as we leave the EU.” Recognising that MPs are seeking reassurance that the government will be transparent about the content of these transitioned agreements and about what might need to change to deliver this continuity, the government have tabled a number of new clauses and amendments to help that transparency (see below).

For Labour Bill Esterson said his party had raised concerns in Committee about the Government’s “power grab” in the Bill. “For 40 years, we have subcontracted our responsibility for trade agreements to the EU, while scrutiny has been delivered through the European Parliament and by our own European Scrutiny Committee, yet the Government are not proposing any equivalent scrutiny processes for agreements that will replace those we currently have through our membership of the EU. This lack of scrutiny is a major issue,” he said. He added that Labour would support cross-party new clause 3, which replicates amendments tabled by Labour in Committee.

Gillian Keegan (Conservative) said she supported the “pragmatic” approach to goods set out in the Chequers White Paper.

Caroline Lucas (Green) said her new clause 3 “essentially seeks to remedy the Bill’s failure to provide for a proper role for parliamentarians in the scrutiny and approval of trade agreements. At present, trade agreements can be negotiated, or renegotiated as is likely to be the case with many of the existing EU trade deals covered by this Bill, entirely under royal prerogative powers… That not only sidelines Members of this House, ​but it also prevents valuable input by civil society organisations and the wider public.”

Jonathan Djanogly (Conservative) had tabled a number of amendments under this group but recommended that MPs did not vote for them, and rather voted for the alternative government amendments. “If the government amendments pass, Henry VIII will have been banished from this Bill and a sensible compromise scrutiny system will have been inserted,” he said.

Stewart Hosie (SNP) spoke to new clause 20-24, tabled by him as an attempt to “ensure that the devolved nations are respected, consulted and fully ​engaged in trade deals, and that their voices and national interests are properly reflected in trade deals, from determining the negotiating mandate right through to reviewing progress on deals after ratification and implementation.”

Richard Graham (Conservative) wanted us to “seize the opportunities that leaving the customs union will offer us”.

Geraint Davies (Labour) said the bill was “the latest part of the Brexit fantasy built on the illusion that the trade we lose from the EU will be made up by the US and, in particular in this Bill, by the continuation, without any change, of the existing 14% of our trade with third countries.” He spoke in support of new clause 16, which he had tabled, which “simply ask[s] that MPs have information about the countries that ask for changes in [new] agreements. The current Minister and previous Ministers have claimed that no one is asking for any changes, but we already know that both Chile and South Korea are asking for such changes,” Davies said.

Jeremy Lefroy (Conservative) said he had put his name to a number of amendments on the transparency and scrutiny of free trade agreements. He asked the government to look at the European Free Trade Association (EFTA), saying it would “provide the ideal vehicle for both the withdrawal agreement and the transition arrangement of 21 months, during which time we will be members of the EEA, and for the association agreement thereafter.”

Chris Leslie (Labour) highlighted that this was the day that the EU was signing its free trade agreement with Japan. “The UK is now benefiting, by virtue of our membership of the EU customs union, from a free trade zone with Japan that covers a third of the world’s GDP,” he said. “By taking some of the decisions we might be taking to leave a customs union, we are putting at risk our stable and frictionless trade capacity with the EU, and now also with that wider part of the world. I hope we can stay in that arrangement and protect the jobs and livelihoods of our constituents.”

Greg Hands (Conservative), a former international trade minister, spoke in support of the government’s approach.

Wera Hobhouse (Lib Dem) said she was pleased “that the government have recognised that Parliament needs some say in the matter [of re-implementing existing trade deals] by tabling amendment 75 and accepting my amendment 4. However, the government’s understanding of parliamentary democracy remains pretty poor. Amendment 75 allows MPs to approve, by affirmative statutory instrument, any changes in the law required by one of these continuity deals. It is a take-it-or-leave-it vote. It is not amendable and it is not meaningful. That is why the Government need to meet the concern raised in new clause 3… which I support.”

The minister, George Hollingbery, summed up the debate, saying he was “very disappointed that Labour Front Benchers could not welcome what is undeniably a good and robust scrutiny arrangement. We have hugely improved the position. The House will now have adequate and deep opportunity to challenge the government’s proposals on any transitioned free trade agreement”.

Votes on group one

New clauses 12-14 and amendment 79 (Government) were passed without a vote. These require a Minister to lay a report before Parliament before the UK ratifies a new free trade agreement with a country that (before exit day) had a free trade agreement with the EU. The report must explain any significant differences between the proposed new agreement and the existing agreement with the EU. The duty to lay a report does not apply if a report on the agreement has already been laid under the new clause in NC14. NC13 provides that the reporting requirement does not apply if a Minister takes the view that, exceptionally, the agreement should be ratified without the reporting requirement being met.

Amendments 4, 36-39, 42 and 71-75 (Government, though amendment 4 was tabled first by the Lib Dems) were passed without a vote. These provide for regulations under clause 2(1) of the Bill (implementing international trade agreements) to be subject to the affirmative procedure in Parliament when made by a Minister of the Crown, and in the relevant devolved legislature when made by a devolved authority. Where the regulations are made jointly by a Minister and a devolved authority (by virtue of paragraph 5 of Schedule 1) they are required to be approved in draft by both Parliament and the devolved legislature in question.

New clause 3 (cross-party, led by Caroline Lucas (Green)) was rejected by 314 votes to 284. This would have ensured that all new free trade agreements are subject to parliamentary scrutiny and consent.

New clause 20 (SNP) was rejected by 316 votes to 37. This would have ensured that any negotiating mandate is first approved by the devolved legislatures and creates a joint ministerial committee to encourage co-operation between the devolved administrations and the UK Government in drafting the negotiating mandates. It imposes a duty of co-operation on all parties in the preparation of the negotiating mandate.

Amendment 19 (Labour frontbench) was rejected by 315 votes to 285. This would have required the government to have published the text of each UK free trade agreement and opened it to consultation with business, trade unions, the devolved administrations and other parties prior to its ratification.

Group Two: New clauses, new Schedules and amendments relating to devolution 

Shadow International Trade Secretary Barry Gardiner opened the debate on this group of amendments, saying the extent to which the Bill “encroaches on matters of devolved competence and undermines the power of devolved authorities is of particular concern”. He said the provisions in clauses 1 and 2 of the bill would allow the government in Westminster “to use Henry VIII powers to modify primary legislation or retain direct EU legislation in areas of devolved competence, such as procurement, agriculture and food standards, without the consent of the relevant devolved authority - even without any consultation.” Labour’s new clause 4 would rectify this “by setting out that normally the government must seek the consent of the devolved governments before making such regulations, ensuring that the convention is protected in the Bill, while similarly allowing the government to use existing powers where a devolved government act or – importantly - fail to act in such a way that ensures the UK is in compliance with its legally binding obligations arising from an international trade agreement.”

However Stewart Hosie, for the SNP, said Gardiner was “getting this completely wrong. The Scottish government do not want a veto; the Scottish National party does not want a veto. We recognise that trade is a reserved matter. Our amendments simply say that Scottish Ministers should be consulted, or their consent sought, when UK policy intersects with devolved policy.” He pointed out that the reverse is true, that Scottish Ministers are required to consult or seek consent when Scottish parliamentary responsibilities intersect with UK ​responsibilities.

Kirsty Blackman (SNP) said that, until she was an MP, she “genuinely thought that the UK Government were, at times, probably trying their best. When I got elected to this place, I discovered that when the UK Government propose legislation and we say to them, “Have you thought about how this will affect Scotland?” the answer is not that they are trying to do anything bad, it is just that they forget we exist. They just do not even consider the views of Scotland or the differences in Scotland.” She cited the common fisheries policy as an example.

Angus MacNeil (SNP) imagined “a situation in which the UK Government find themselves in a trade negotiation with somebody who says, “Do you know what? See if you could let us have some access to your market for our lamb and we’ll give you something else.” Wales would lose out. The aggregate gain to UK GDP would be increased… but there would be a loss to Wales and there would be resentment in the UK to fiscal transfers back to Wales, which had sacrificed and given up things for the aggregate gain of the UK as a unit.” This was why subnational governments need to have a voice at the table, he said.

The minister, George Hollingbery, replied to the debate, saying that the government have “publicly and repeatedly committed to not normally use the powers in the bill to amend legislation in devolved areas without the consent of the relevant devolved administrations - and not without first consulting them.” Thus new clause 4 was unnecessary. Barry Gardiner said that could not be equated with having the security of that commitment in the Bill. The minister said the government would continue to “engage actively with the devolved administrations to achieve the agreement of a legislative consent memorandum.”

Votes on group two

New Clause 4 (Labour frontbench) was rejected by 315 votes to 248. This would have ensured that regulations made by a Minister of the Crown within devolved competence require the consent of Ministers in devolved authorities in accordance with the convention about Parliament legislating on devolved matters while making clear that this does not alter the current powers of Ministers of the Crown in respect of international agreements.

Amendments 25-26 (SNP) were rejected by 318 votes to 37. These would have sought to ensure that regulations cannot be made without consent from devolved Ministers.

Amendments 49-50 (Government) were passed without a vote. These make clear that a Minister of the Crown and a devolved authority cannot make regulations under Clause 1 or Clause 2 jointly (except as required by paragraph 5 of Schedule 1).

Amendments 61-62 (Government) were passed without a vote. These make clear that the usual rule on ultra vires provision in devolved SIs applies: if one provision is ultra vires it does not follow that the entire instrument is ultra vires.

Amendment 63 (Government) was passed without a vote. This provides that the devolved authorities may not make provision under Clause 1(1) or 2(1) that: (a) modifies retained direct EU legislation or anything which is retained EU law by virtue of section 4 of the European Union (Withdrawal) Act 2018; and (b) would breach the relevant devolved competence restriction in the devolution settlements (as amended by that Act).

Amendments 64-65 (Government) were passed without a vote. These provide that the devolved authorities need only consult with a Minister of the Crown before making regulations that are to come into force before exit day.

Amendments 66-67 (Government) were passed without a vote. These provide that the devolved authorities need only consult with a Minister of the Crown before making regulations about, or which are incompatible with, quota arrangements.

Amendment 68 (Government) was passed without a vote. This removes an unnecessary reference to subsection (5) of section 57 of the Scotland Act 1998.

Amendment 69 (Government) was passed without a vote. This removes an unnecessary reference to subsection (4) of section 24 of the Northern Ireland Act 1998.

Amendments 76-78 (Government) were passed without a vote. These update the numbering of the inserted text, following changes to text added by the European Union (Withdrawal) Act 2018

Group Three: New clauses, new Schedules and amendments relating to the Trade Remedies Authority; Remaining new clauses, new Schedules and amendments; remaining proceedings on Consideration 

The minister, George Hollingbery, said the government were committed to creating “a world-class Trade Remedies Authority. That is why Government have already begun recruiting TRA staff into the Department for International Trade, so that they can be properly trained before the TRA becomes fully operational. Once the TRA is legally established, staff who have been recruited into the Department will be transferred over to the TRA. Government new schedule 1 and Government amendment 58 are crucial to ensuring that this transfer can take place.” He briefly outlined the government’s amendments in this area (see below).

Judith Cummins (Labour) reiterated that Labour’s policy is for a new customs union with the EU to protect jobs and the economy, and to avoid a hard border in Northern Ireland. The party would be supporting amendments designed to deliver this, she said. In particular, amendment 5 would require that any international trade agreement must not stop the UK participating in a customs union with the EU. She said the Trade Remedies Authority had received “unanimous criticism” from business, trade unions and experts in the Bill Committee, but the government had made no major improvements.

Stephen Hammond (Conservative) said “the Common Market principles are the best way to leave the EU. The Common Market principles that I am referring to are the removals of barriers for trade between the United Kingdom and the EU and the protection and development of complex supply chains across the continent”. He said EEA-EFTA was “something the EU is familiar with and which we could engage with. I accept, however, that the White Paper sets out a different direction, and I want to make sure we keep the White Paper and the plan negotiated and moving forwards.” The minister said it was his intention to bring forward an amendment in the Lords that “takes in the essence of [Hammond’s] new clause 18 but removes the defective element relating to the customs union”. Hammond suggested he could accept new clause 18 today and amend it in the Lords.

Paul Williams (Labour) spoke in support of new clause 17, saying NHS patients will not be helped if we leave the European Medicines Agency. “Being part of the EMA means that when a new drug is developed, a common set of protocols is followed to get that medicine approved… We have already lost the EMA to Amsterdam, but although we have lost it geographically, we still have the chance to be part of the European medicines regulatory network partnership, and continue to benefit from the work of the EMA.”

Phillip Lee (Conservative), lead sponsor of new clause 17, said remaining part of the European medicines regulatory network partnership was vital for patients and also important for the UK’s pharmaceutical sector.

Dr Sarah Wollaston (Conservative), chair of the Health and Social Care Committee, said that evidence to that committee “overwhelmingly showed the importance to patients of our maintaining close regulatory alignment not only here, but across the EU.”

Gareth Snell (Labour) spoke to his new clause 11 which asks the Secretary of State to make an assessment of slavery and servitude as part of any new trade deals. “Most people in this room will be wearing an item of clothing that has been made by a slave, and we ​should be using our international prowess and purchasing power to try to deliver a reduction in slavery and servitude,” he said.

Kenneth Clarke (Conservative) said he would be voting for new clauses 9, 17 and 18.

Chris Leslie (Labour) described new clause 17 as a “no-brainer”.

John Redwood (Conservative) said that, “every day, a large number of components come into our country from outside the EU and they meet the deadlines of the just-in-time systems, as do the components from the EU… You cannot send a car out with only 79% of its components assembled because they are the ones that came from the EU.”

Nicky Morgan (Conservative; chair of the Treasury Committee) said what is proposed in new clause 18 “is eminently sensible. We want to give the Prime Minister space for the negotiations, and it is clear that there is a majority in this House for a customs union to safeguard business, jobs and our constituents’ future financial security.”

Votes on group three

New Schedule 1 and amendment 58 were passed without a vote. These introduce a new schedule on Transfer Schemes which provides that the Secretary of State can make a scheme providing for the transfer of staff from the Secretary of State to the Trade Remedies Authority.

Amendment 80 (Labour frontbench) was rejected by 314 votes to 295. This would have ensure that the Trade Remedies Authority includes, among its non-executive members, representatives of producers, trade unions, and each one of the devolved administrations.

New Clause 17 (cross-party, led by Phillip Lee (Conservative)) was passed by 305 votes to 301. This ensures that it is a negotiating objective for the UK Government to secure an international agreement through which the UK may continue to participate in the European medicines regulatory network partnership between the EU, EEA and the European Medicines Agency, ensuring that patients continue to have access to high-quality, effective and safe pharmaceutical and medical products, fully aligned with the member states of the EU and EEA.

New clause 18 (cross-party, led by Stephen Hammond (Conservative)) was rejected by 307 votes to 301. This would have made it a negotiating objective of the UK to establish a free trade area for goods between the UK and the EU, and if that cannot be agreed, then it would be the objective of the UK to secure an agreement to enable the UK’s participation in a customs union with the EU.

Amendments 34, 40, 41 and 48 (Government) were passed without a vote. These clarify the scope of the powers in clause 1 and 2. Amendment 34 makes clear that the power in clause 1 can be exercised to modify retained direct EU legislation. Amendment 40 makes clear that the power in Clause 2 can be exercised to modify retained direct EU legislation. Amendment 41 makes clear that the power in Clause 2 cannot be exercised to confer a power to make subordinate legislation. (Amendment 55 includes a definition of subordinate legislation.) Amendment 48 puts beyond doubt that amendments purporting to modify retained EU law (which, under the European Union (Withdrawal) Act 2018, will come into being on exit day) can be made before exit day so long as they come into force on or after exit day.

Amendments 31-32 (Government) were passed without a vote. These allow Agreement on Government Procurement, or GPA, power to reflect updates to the list of government entities in the UK’s GPA schedule.

Amendment 33 (Government) was passed without a vote. This provides that regulations implementing a modification of Annex 1 can only come into force on or after the day that the modification becomes effective.

Amendments 35 and 53 (Government) were passed without a vote. These define “international trade agreement” for the purposes of Part 1.

Amendments 43 and 52 (Government) were passed without a vote. These define “free trade agreement” for the purposes of Part 1.

Amendments 44-47 (Government) were passed without a vote. These reduce the sunset period and renewal periods from five to three years.

Amendment 51 (Government) was passed without a vote. This omits the definition of “exit day”, which is no longer needed now the relevant amendments to the Interpretation Act 1978 made by the European Union (Withdrawal) Act 2018 are in force.

Amendment 54 (Government) was passed without a vote. This omits the definition of “retained EU law”, which is no longer needed now the relevant amendments to the Interpretation Act 1978 made by the European Union (Withdrawal) Act 2018 are in force.

Amendment 56 (Government) was passed without a vote. This provides for references in Part 1 to being a “signatory” to an international trade agreement to be read as covering doing anything that would amount to a consent to be bound by the agreement as a matter of international law. It also provides for references to “ratifying” an agreement to be read as doing an act that establishes consent to be bound as a matter of international law.

Amendment 57 (Government) was passed without a vote. This provides for references in Part 1 to anything which is retained EU law by virtue of section 4 of the European Union (Withdrawal) Act 2018 (directly effective Treaty rights etc) to catch modifications of the rights etc concerned, as well as the rights etc themselves.

Amendments 59 and 60 were passed without a vote. These update references to data protection legislation.

Third reading debate

International Trade Secretary Liam Fox said that the bill was about “continuity for the taxpayer, businesses, consumers and our international partners… [and] not about signing new trade agreements or making substantial changes to existing ones.” “Despite many misleading claims to the contrary, the Government will not use measures in the Bill to implement substantially different agreements with existing partner countries,” he promised. Fox said the bill included measures to allow HMRC to collect more detailed information on trade and share it with appropriate bodies, primarily the Department for International Trade.

Barry Gardiner, Shadow International Trade Secretary, praised the expert witnesses who had appeared before the bill committee. “It is one of the great features of the innovations over the past 15 to 20 years in this House that expert witnesses now give their testimony to Committees at the beginning and inform our procedures. We certainly benefited hugely from all they said. Of course, I wish that the Secretary of State and the Minister had taken a little more notice of what they said, because they were often extremely critical of the Government, but that was not to be.”

The Trade Bill passed its third reading by 317 votes to 286 and now moves to the House of Lords. Unlike the Taxation (Cross Border Trade) Bill, the Trade Bill is amendable in the Lords.

George Crozier
CIOT Head of External Relations

Posted in: Customs, Indirect Taxes
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