Background briefing on the Trade Bill

This Commons Library briefing analyses the Trade Bill, which was published on 7 November 2017. The Trade Bill is one of a series of “Brexit Bills” intended to adjust UK legislation for Brexit, in addition to the European Union (Withdrawal) Bill. 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.

Trade agreements

Continuity in trade policy

As 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.

However, there may be limits to how far the UK can go with these agreements while it is still an EU Member State. Issues such as the EU duty of “sincere cooperation” may prevent the UK from negotiating and concluding any trade deals until it has left the EU. This is, however, likely to be more of a problem in negotiating new agreements than continuing existing ones (which is the focus of this Bill). Further, the other countries involved may not necessarily follow the UK’s wishes, and in any case some changes may well be needed to make the new UK agreements work.

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. These powers will be exercised by secondary legislation using the negative procedure. In most cases, the implementation of these obligations is expected to be dealt with by the European Union (Withdrawal) Bill. But this may not cover all cases, so another legislative vehicle is required.

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 immediately 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 was published on 21 November 2017. A separate Library briefing will be published on this Bill before its second reading in the House of Commons on 8 January 2018.

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 agreement only as an EU Member State. The Government intends to take steps to ensure that the UK continues to be part of the agreement – now as an independent member – as the UK leaves the EU. This Bill would allow changes to be made by secondary legislation as part of this. The Bill would also allow changes to be made if another country joined the agreement, or withdrew from it.

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.

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” 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 administrations, therefore, have no formal role in negotiating or approving trade (or other) treaties, but are involved informally.

As trade treaties are relevant to many areas of devolved responsibility, such as agriculture, the devolved administrations currently implement EU trade agreements in their areas of competence.

The Bill gives the devolved administrations some powers to implement the obligations arising from the GPA and the trade agreements in the scope of the Bill. However, these are subject to a number of restrictions, set out in Schedule 1. The Government has said it will seek legislative consent for certain provisions of the Trade Bill.

The Bill says nothing about how the devolved authorities might be involved in future treaty negotiations, but there have been many calls for greater involvement given the significance of trade to Scotland, Wales and Northern Ireland.

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 (Member State governments) 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 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.