The Trade Bill

Introduction

This Commons Library briefing analyses the Trade Bill. This Bill is one of a series of “Brexit Bills” intended to adjust UK legislation for Brexit, in addition to the European Union (Withdrawal) Bill (EUW Bill, now the EUW Act 2018). Together with the Customs Bill (the Taxation (Cross-Border Trade) Bill), the Bill is intended to allow the UK to continue its existing trade policy as far as possible immediately after Brexit. The Bill is not intended to deal with future trade agreements with the EU or other countries.

The Bill has completed its Committee Stage in the House of Commons. No amendments were made at Committee Stage. No date has been set at the time of writing for Report Stage, although the Bill is expected to return to the House of Commons before the summer recess. A number of further amendments have been tabled, including on the customs union.

Trade agreements Continuity in trade policy

While a member of the EU, the UK is party to trade agreements negotiated by the EU. The Government’s aim is to provide continuity after Brexit in trade relations with those countries with which the EU has a trade agreement. The Government aims to enter into a UK agreement with each of the EU’s partner countries based as closely as possible on the EU’s agreement with that country.

During the transition or implementation phase, the Government is hoping that the UK will be treated as if it were an EU member state, under the terms of the draft Withdrawal Agreement. Beyond that, the Government is seeking to ensure continuity in these international agreements to avoid disruption to trade.

The Bill

The Trade Bill, which follows a Trade White Paper, aims to help with the process of “transitioning” the EU’s trade agreements to UK agreements. Trade agreements may need changes to domestic legislation in order for them to be implemented. The trade provisions of the Bill relate to this domestic implementing legislation rather than the trade agreements themselves. The Bill gives the Government powers to change domestic legislation to fulfil the obligations arising from certain trade agreements.

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 a separate bill – the Taxation (Cross-Border Trade) Bill which has completed its Committee Stage in the House of Commons. A separate Library briefing on this Bill has been published.

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.

Procurement

The Agreement on Government Procurement (GPA) is an agreement between the EU and 18 other countries to open up public procurement above certain levels.

The UK is currently a part of the GPA only through its EU membership. The Government is taking take steps so that the UK continues to be part of the GPA – becoming an independent member – as the UK leaves the EU.[1] As part of this, the Bill would allow legislative changes to be made where necessary for the UK to implement the agreement.

Trade Remedies Authority

Trade remedies – sometimes referred to as “trade defence measures” – allow a country to take steps against unfair competition from dumped or subsidised imports. Dumping occurs where a company exports a product at a lower price than it is sold for on its domestic market.

At the moment, trade remedies are dealt with by the EU. The Bill would establish a new UK non-departmental public body, the Trade Remedies Authority (TRA), to take over such functions.

Concerns were raised during Committee Stage that the Bill lacked detail on how the UK’s new trade remedies system would work.

Trade information

The Bill would give HM Revenue and Customs (HMRC) a new power to ask others for information about the identity and numbers of UK exporters. It would also allow HMRC to share information with other bodies for their public functions relating to trade.

Issues raised by the Bill Delegated powers

The Bill gives the Government power to use secondary legislation, largely using the negative procedure. Clauses 2(1) and 7(3) also include a ‘Henry VIII power’. The Government justifies this on the grounds of “flexibility, transparency and efficiency”[1] and the need to put a framework in place in the short time available before Brexit. It is not unheard-of to use delegated legislation to implement treaty obligations. But this is nevertheless likely to raise questions about whether the powers will be subject to adequate Parliamentary scrutiny, particularly given that the UK trade agreements could be different from the current EU agreements, and their content is as yet unknown.

Devolution

International relations, including treaty-making, is a reserved matter in the UK. The devolved executives and legislatures, therefore, have no formal role in negotiating or approving UK trade or other treaties, but may be involved informally.

As trade treaties are relevant to many areas of devolved responsibility, such as agriculture, the devolved authorities currently have responsibility for implementing EU trade agreements insofar as they concern their areas of competence.

The Bill gives the devolved authorities specific powers (under clauses 1 and 2) to implement the obligations arising from the GPA and the trade agreements falling within the scope of the Bill. However, these powers are subject to several restrictions, set out in Schedule 1.

Both the Scottish and Welsh Governments have recommended that their respective legislatures should withhold legislative consent for the Bill in its current form. Their objections to the Trade Bill are similar to those previously expressed with regard to the EUW Bill. The Welsh Government has since agreed to the passage of the EUW Bill, but only after significant changes were made to its devolution provisions. The Trade Bill’s drafting, at the time of writing, still shadows the approach taken to devolution by the original EUW Bill as introduced, rather than that taken in what is now the EUW Act. Both the Scottish and Welsh Governments are therefore likely to ask that changes are made to the Trade Bill at report stage.

Key concerns raised by the devolved authorities related to the exercise of delegated powers in devolved areas. The two devolved authorities believed that the scheme of concurrent delegated powers in the Trade Bill did not reflect the existing relationship between UK-wide and devolved institutions. They especially maintained that the Bill has inadequate safeguards against the exercise of delegated powers by UK Government ministers in relation to devolved matters. They also objected to certain additional restrictions that would be placed on a devolved authority exercising powers under clauses 1 and 2, which are not imposed on UK Government ministers exercising those same powers.

The Trade Bill does not address what role, if any, the devolved authorities might have in future treaty negotiations.

UK Parliamentary scrutiny of trade agreements compared with scrutiny by the European Parliament and national parliaments

The Bill contains no provisions for greater Parliamentary involvement in trade agreements. The Trade White Paper included a call for views on the Government’s approach to its future trade policy, including scrutiny arrangements, and the Government is continuing to consult on this issue.

Parliament’s role in UK treaties is currently much more limited than the democratic scrutiny currently given to EU trade agreements: it has no formal role in the negotiations and does not have to debate, vote on or approve them.

For EU trade agreements, the Council (composed of subject-area relevant Member State government ministers) gives the European Commission a mandate to negotiate on behalf of the Member States and authorises the signature and conclusion of agreements. The European Parliament does not take part in negotiations, but is kept “fully informed” at all stages, questions the Commission and can issue non-binding but politically important resolutions. The European Parliament’s consent is usually required before trade agreements can be concluded.

National parliaments also scrutinise aspects of EU trade negotiations through their own EU scrutiny processes. In the UK, draft Council decisions on signing, provisionally applying or concluding an agreement are deposited, scrutinised by the EU Scrutiny Committees in both Houses, and may be debated on the Floor of the House or in European Committee.

By contrast, when the UK Government is considering its own treaty negotiations, it has no obligation to inform or consult Parliament. Parliament has no formal role, structures or procedures for scrutinising treaties; and it does not have to debate, vote on or approve treaties. It has a limited and as yet unused power to delay ratification (in addition to passing legislation where needed to implement a treaty). Trade agreements can, however, be scrutinised via the usual Parliamentary means such as Parliamentary Questions, debates and select committee inquiries.

There have been many calls for Parliament to have a greater role in, for example, setting the negotiating mandate for trade negotiations, debating trade agreements and approving their ratification. Many other countries’ Parliaments are more involved in treaty scrutiny, not least because treaties now cover a wide range of important policy areas. Pressure groups have expressed concern that the Bill does not provide for greater accountability to Parliament and the public in the negotiation of trade agreements.

Committee Stage

The Public Bill Committee met on eight occasions between 23 January and 1 February. While a number of amendments were pushed to a vote, none succeeded. The Bill will therefore be reported without amendment. At the end of the Committee Stage, the Opposition spokesperson, Barry Gardiner, said that “lacunae” remained in the Bill and that the Opposition would return to it at Report Stage.

The main issues discussed during the Committee Stage were Parliamentary scrutiny, Henry VIII powers, the role of the devolved administrations and the composition of the Trade Remedies Authority. Provisions not in the Bill, such as arrangements for Parliamentary approval and scrutiny of future trade agreements, were also discussed.

[1] Trade Bill Delegated Powers Memorandum, para 53

[1] Department for International Trade, Preparing for our future UK trade policy, 9 October 2017