Government lays the groundwork of its future trade policy

On 7 November 2017, the Trade Bill (the “Bill”) was given its first reading in the House of Commons. The Bill introduces a number of measures to build a future trade policy in the UK post-Brexit. Key measures include:

• the implementation of the Agreement on Government Procurement (GPA);
• the implementation of international trade agreements;
• the establishment of a new Trade Remedies Authority to defend UK businesses against injurious trade practices; and
• the power of HMRC to collect and disclose information relating to trade.

In this article, we consider each of the key measures in more detail.

Implementation of the GPA

The GPA is a plurilateral agreement made within the framework of the WTO to mutually open government procurement markets among WTO members who sign up to it. Presently, the GPA consists of 19 parties covering 47 WTO members. Another 31 WTO members participate in the GPA Committee as observers and it is anticipated that, out of these, 10 members are in the process of acceding to the GPA.

The GPA sets out a high level set of rules to ensure fair, open and transparent competition for government procurement covered by the agreement. Through the UK’s current membership, it is estimated that the GPA provides UK businesses with annual guaranteed access to over £1.3 trillion of public procurement opportunities.

At present, the UK participates in the GPA by virtue of its EU membership and gives effect to its GPA obligations in domestic procurement regulations. Under these regulations, contracting authorities and utilities are placed under an express obligation to comply with any obligations contained in those regulations in respect of economic operators from GPA States.

Once the UK leaves the EU, the UK will cease to be a member of the GPA, but will be able to accede to it. Provision is therefore needed to allow the UK to make the necessary legislative changes to reflect being an independent member of the GPA. The Bill addresses this need by providing an “appropriate authority” with the power to implement the GPA obligations as an independent member. Such a power could be used, for example, to amend the existing procurement regulations to take account of relevant changes reflecting the UK’s new status as an independent member. The Bill also permits an “appropriate authority” to make regulations to reflect new parties joining or existing parties withdrawing from the GPA. Again, this power could be used to amend existing procurement regulations to reflect any changes in GPA parties.

The definition of “appropriate authority” has been defined broadly in the Bill to include a Minister of the Crown, a devolved authority or a Minister of the Crown acting jointly with a devolved authority. This is likely to include a number of bodies including the devolved authorities in Scotland, Wales and Northern Ireland, as well as the Crown Commercial Service in England.

Implementation of International Trade Agreements

The UK is currently signed up to many international trade agreements with other countries through its membership of the EU. To ensure continuity in the UK’s existing trade and investment relationships with these partner countries, the Government aims to establish a UK trade agreement with each partner country based, as closely as possible, on the corresponding trade agreement that country has with the EU.

The types of agreement that are in scope are international trade agreements signed by the UK, where the other party was also a signatory to an international trade agreement with the EU immediately before exit. This would include free trade agreements and other international agreements that mainly relate to trade such as mutual recognition agreements.

To ensure that the trade agreements work outside the original EU context and remain operable beyond day one of Brexit, the Bill provides the “appropriate authority” with the powers to make any necessary changes to domestic legislation to ensure that international trade agreements, once signed by both parties, are fully implemented and can be ratified. This power will only be used to implement non-tariff provisions of trade agreements – elements of a trade agreement that are not related to tax and duties. Tariff obligations will be addressed separately in the Taxation (Cross-Border Trade) Bill, which was given its first reading on 20 November.

As above, the definition of “appropriate authority” has been defined broadly to include a Minister of the Crown, a devolved authority or a Minister of the Crown acting jointly with a devolved authority. In this case, there may be a number of relevant authorities, including the Department for International Trade, and other departments such as Treasury and HMRC where customs facilitation is concerned, and DEFRA where matters affecting agriculture are concerned.

The EU is presently party to 36 regional or bilateral FTAs, covering more than 60 countries. According to evidence given to the International Trade Select Committee, those countries together account for approximately between 15% and 17% of UK goods trade with the world. Of the UK’s top 50 export markets for goods in 2015, 10 are covered by EU FTAs, which the UK will cease to be a party to after Brexit. The process of carrying over the EU’s trade agreements will be complex. Although it is understood that all partner countries have informally agreed in principle that they are amenable to continuing the existing arrangements with the UK, there are a number of challenges to be overcome in separating the terms that apply to the EU as whole from those that will apply on a bilateral basis with the UK. For example, there may be quotas that will have to be split, joint committees re-established and rules of origin re-set. This could involve a complex set of negotiations over a lengthy period of time.

Establishment of a new Trade Remedies Authority

The Bill establishes a new Trade Remedies Authority (TRA) to monitor, investigate and take decisions to counter injurious trade practices (such as dumping or subsidies) enacted by foreign entities affecting products that are exported into the UK. Currently, this role is performed by the European Commission on behalf of all Member States. Once the UK leaves the EU, UK companies will no longer be able to request the Commission to investigate claims of dumping or subsidy in the UK. To ensure that UK companies continue to have access to a trade remedies system, the provisions of the Bill will allow the new TRA to carry out investigations, and impose and enforce trade remedy measures.

The measures in the Bill will allow the TRA to provide advice, support and assistance to the Secretary of State, so that the Government can fulfil its obligations relating to decisions on a number of areas including in relation to trade remedies and international trade disputes. It is estimated that the costs of funding the TRA could amount to £15-£20m annually, paid for out of the Consolidated Fund.

On 20 November 2017, the House of Lords EU Internal Market Sub-Committee published a letter from Margot James MP (Parliamentary Under Secretary of State, Minister for Small Business, Consumers and Corporate Responsibility, Department for Business, Energy and Industrial Strategy) which further clarified aspects of the role of the TRA. According to the letter, the remit of the TRA will be based on WTO rules. These rules enable members to create a safety net to protect domestic industry against unfair and injurious trade practices – specifically dumped and subsidised imports. The TRA will be set up at arm’s length to preserve its impartiality and ensure it has the appropriate degree of separation from the Department for International Trade.

The Taxation (Cross-border Trade) Bill contains further details on the processes through which trade remedies will be investigated and applied, including the role of Ministers in the process.

Power of HMRC to collect and share trade information

The Bill gives HMRC a new function to collect data on behalf of the government to confirm the number of exporters of goods and services in the UK and to be able to identify those exporters for trade promotion purposes. The Bill will also allow HMRC to share data with other public and private bodies as necessary, so that those bodies can fulfil their public functions related to trade after the UK leaves the EU.

A Toolkit, Not a Policy

The Bill has been introduced to Parliament as providing continuity for individuals, businesses and international trade partners when the UK leaves the EU. The measures in the Bill are clearly designed to provide the UK Government with the necessary tools to maintain the status quo. What is missing from the Bill is substantive detail on the Government’s actual trade policy. This is probably not surprising given that the Government cannot enter into trade agreements or accede to the GPA on its own behalf until after 29 March 2019, and the purpose of the Bill is to put necessary framework in place to deliver the eventual policy measures.

Clearly, the UK Government is anticipating changes to domestic legislation to implement some of the measures in the Bill. The nature of the changes will depend on the outcome of negotiations with key countries like Switzerland, South Korea and Turkey, who may seek concessions from the UK to facilitate a swift conclusion (or alternatively, the UK may be able to offer incentives to improve trading terms on a reciprocal basis). Here, as in many areas of the UK’s exit from the EU, sequencing is key – the UK’s relationship with the EU will be a determining factor – both in terms of onward market access to the EU for goods and services and the flexibility that the UK will have in negotiating tariff and regulatory barriers.