House of Commons Library

The Trade Bill

Published Wednesday, March 7, 2018

This paper on the Trade Bill has been updated to take account of the Committee Stage.

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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). 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 yet for Report Stage. 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.

Transition: Application of existing agreements

The EU has said that during a transition period the UK should continue to be bound by the obligations in existing EU external agreements but may not get the benefits of those agreements. M Barnier, the European Commission’s Chief Negotiator, said on 29 January:

As part of the transition, the UK will remain bound by the obligations stemming from all existing EU international agreements, for instance on trade and aviation. This is crucial for the good functioning of the single market and the customs union. And we can agree on this in the article 50 agreement between the EU and the UK.

But we cannot ensure in the article 50 agreement that the UK keeps the benefits from these international agreements. Our partners around the world may have their own views on this, for instance the 70 countries covered by trade deals.

The UK has proposed that EU agreements with third parties would continue to apply during the transition period.

Transition: Negotiation of new agreements

According to the Council’s January Negotiating Directives for phase two of the negotiations, the UK is precluded from fully developing its own trade policy, as the EU’s trade policy will continue to apply to the UK during the transition. Michel Barnier has accepted that the UK will want to talk to third countries during the transition period but the UK would not be able to implement any agreements during transition, unless the EU gives its approval. The UK has proposed that during the transition period it should be allowed to conclude trade agreements which roll over existing EU trade agreements.

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 EUW Bill. But this may not cover all cases, so another legislative vehicle is required. For example, if implementing legislation for an EU treaty has not been completed by exit day, it would not form part of ‘retained EU law’ in the UK. Also, the new UK agreement may sometimes have to be different from the EU agreement it replaces to ensure it works outside the EU context, and some of these changed provisions will have to be implemented in domestic law, but the EUW Bill powers do not extend to such changes.

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 recently completed its Committee Stage in the House of Commons. A separate Library briefing on this Bill was published before its Second Reading in the House of Commons.

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.

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 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. 

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.

Key concerns relate to the exercise of delegated powers in devolved areas. The two devolved authorities believe that the scheme of concurrent delegated powers in the Trade Bill does not reflect the existing relationship between UK-wide and devolved institutions. They especially maintain that the Bill has inadequate safeguards against the exercise of delegated powers by UK Government ministers in relation to devolved matters. They also object 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.

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.

 

 


 

 

Commons Briefing papers CBP-8073

Authors: Dominic Webb; Lorna Booth; Richard Kelly; Jack Simson Caird; Arabella Lang; Vaughne Miller; Graeme Cowie

Topic: International trade

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