International disputes etc

Part of Taxation (Cross-border Trade) Bill – in a Public Bill Committee am 4:00 pm ar 30 Ionawr 2018.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Graham Stuart Graham Stuart Parliamentary Under-Secretary (Department for International Trade) 4:00, 30 Ionawr 2018

I will endeavour to follow the good example set by the ever-affable hon. Member for Bootle, who gave not only good content, but brilliant quotes that entirely encapsulated the moment and which we all enjoyed.

Clause 15 enables the Secretary of State to vary the rate of import duty when a dispute or other issue has arisen between the UK Government and the Government of another country, and the UK is authorised to do so under international law. The clause replaces equivalent existing powers available to the European Commission. Under the WTO dispute system, WTO members that have been found to be in breach of their obligations must bring their measures into compliance with WTO law. If they do not do so within a reasonable period, the parties can attempt to agree on compensation. Compensation may take the form of a reduction in the import duty on specified goods from the complaining country, although in practice any such reduction would have to be applied equally to all other WTO members in accordance with the most favoured nation rule.

If the parties fail to agree compensation, the complaining member or members may impose retaliatory measures against the member found to be in breach. Such measures typically involve raising the rate of import duty on specified goods from that country to incentivise it to bring itself into compliance. Free trade agreements with third countries also frequently contain dispute settlement mechanisms, many of which follow similar procedures to those of the WTO. In particular, free trade agreement dispute settlement mechanisms often result in a signatory being required to bring itself into compliance with the terms of the FTA, and often allow retaliatory trade measures to be taken against the offending party if it does not do so, and cannot agree appropriate compensation. Authorisation to implement compensation or retaliation measures may also arise in a number of other specific contexts. For example, a WTO member that imposes a temporary safeguard measure to protect its industry, or that modifies its WTO schedules, must seek to compensate any affected countries, failing which retaliatory measures may be imposed against it.

The ability to vary the rate of import duty in response to disputes and other contentious situations is vital to ensure that the UK can operate an independent trade policy after leaving the EU. In particular, the threat of imposing retaliatory duties following a trade dispute can be an effective means of incentivising other countries to comply with their obligations under international law, and can therefore help to preserve and open up trading opportunities for UK firms.

The European Commission is currently responsible for conducting trade disputes and applying enforcement measures on behalf of the UK. Once we leave the EU, the UK will bring and defend trade disputes in its own right. When such disputes are decided, we will require the powers to be able to take action to enforce and respond to their rulings including, where necessary, varying the rate of import duty. The power in the clause ensures that the UK can do just that.

Amendments 111 and 112 seek to provide a legislative definition of international law in the Bill or in regulations to be made by the Secretary of State, as the hon. Lady set out. Amendments 113 and 114 seek to impose a statutory duty on the Secretary of State to report to the House of Commons on that power, either within three months of the passing of the Bill or annually, providing details of the international legal basis for justifying the use of the power.

As I have explained, there are a number of situations under international law in which countries may be authorised to vary their rate of import duty for the purposes of retaliation or compensation, including in disputes under different types of international agreements and, just to make it even more complicated, in other contentious situations that do not involve a formal dispute. Given the different context in which clause 15 would apply, it is sensible to refer broadly to authorisation under international law. Adopting a narrower approach would risk constraining future action in situations that are not currently foreseeable.

Further, it is anticipated that when the power is exercised, the Government will identify, in explanatory notes or otherwise, the legal basis in international law for any proposed variation of import duty. It would be extraordinary to imagine any Government doing other than that. If Parliament were not satisfied that a proposed variation was authorised under international law, it would have the opportunity to pass a motion to annul the Government’s instrument. That is a more appropriate procedure for parliamentary oversight.

New clause 7 would establish an enhanced parliamentary process for regulations varying import duty as a result of an international dispute or other issue under clause 15. As I set out previously, for indirect tax matters it is common to have framework primary legislation supplemented by secondary legislation. The Bill introduces a comprehensive framework for a new stand-alone customs regime and ensures that the scrutiny procedures that apply to the exercise of each power are appropriate and proportionate, taking into account the technicality of the regulations, the frequency with which they are likely to be made and how quickly the law might need to be changed.

The power in clause 15 is subject to the negative procedure, which is both appropriate and proportionate. The proposed scrutiny procedure would give rise to unacceptable delays that would hamper the UK Government’s efforts to enforce international dispute rulings and to induce other countries to comply with their international obligations. The negative procedure represents a more appropriate balance between the need for parliamentary oversight and the need to act quickly.