This briefing paper sets out the background to the Trade Bill 2019-21. This Bill has its Second Reading in the House of Commons on 20 May 2020.

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Introduction

This Commons Library briefing analyses the Trade Bill, which was published on 18 March 2020. Following Brexit, the UK is moving towards an independent trade policy. The Government draws a distinction between replacing trade agreements the UK had as an EU Member State and “new” trade agreements with countries which do not currently have a trade agreement with the EU (such as the US and China).

This Bill is concerned only with the former and gives the Government powers to implement “rolled-over” trade agreements. The Bill is not intended to deal with future “new” trade agreements.

This Bill follows a very similar Trade Bill introduced in the 2017-19 Session. This had its Second Reading in the Commons in January 2018 and completed Third Reading in the Lords in March 2019. The Bill did not reach the “Ping-Pong” stage and therefore fell. The Bill was amended in both the Commons and the Lords. Most, but not all, of these amendments are not included in the new Bill. This includes some Government amendments.

Procurement

The Agreement on Government Procurement (GPA) is a voluntary (plurilateral) agreement between the EU and 19 countries to open up their public procurement markets to each other, under the World Trade Organization (WTO).

The UK is currently a part of the GPA through its transitional relationship with the EU. It has been agreed that the UK will become an independent member after this. The Bill would allow legislative changes to be made where necessary for the UK to implement the agreement, and to respond to various other circumstances.

International trade agreements

Continuity in trade policy

During the transition period, the UK is effectively still party to the EU’s trade agreements. 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 is therefore seeking to negotiate “roll-over” agreements with the partner countries to ensure continuity in trading relations. The Government view these trade continuity agreements as different to new trade agreements with countries which do not have a trade agreement with the EU (such as the US and China).

The Bill

The Trade Bill 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 these trade agreements. These powers will be exercised by secondary legislation using the affirmative procedure. In most cases, the implementation of these obligations is expected to be dealt with by the European Union (Withdrawal) Act 2018. But this may not cover all cases. The Bill provides powers to cover cases not dealt with by the Withdrawal Act.

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 had 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 separate legislation – the Taxation (Cross-border Trade) Act 2018.

The 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. During the transition period, 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. In advance of the creation of the TRA as an arm’s length body on a statutory basis, the Government has established the Trade Remedies Investigations Directorate as part of the Department for International Trade (DIT). The functions of the TRA are set out in separate legislation – the Taxation (Cross-border Trade) Act 2018.

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 powers to make regulations using secondary legislation. Delegated powers are contained in clause 1 (procurement), clause 2 (trade agreements) clause 7 (collection of exporter information by HMRC) and clause 11 (commencement). Regulations made under clause 1 are subject to the negative resolution procedure. Those made under clause 2 are subject to the affirmative procedure. Scrutiny of regulations made under clause 7 depends on whether an Act of Parliament is being amended/repealed. Clauses 2 and 7 also include a “Henry VIII power” (where delegated powers can be used to modify primary legislation).

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. To the extent that the devolved administrations are involved, it is at the UK Government’s discretion.

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 the provisions of the Trade Bill relating to the GPA (clause 1) and international trade agreements (clause 2).

The devolved authorities have been concerned about their influence (or lack thereof) on UK negotiating objectives in trade negotiations. Both the Scottish and Welsh Governments have expressed concerns that a UK Government-led trade policy could (in practice) lead to new international obligations that restrict policy flexibility in devolved areas. 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.

Parliamentary scrutiny of trade agreements

Parliament’s formal role in UK trade agreements is very limited. Parliament’s role in the ratification of treaties is governed by the Constitutional Reform and Governance Act 2010. Parliament has no formal role in the negotiations and does not have to debate, vote on or approve them. While Parliament can delay ratification (indefinitely, in theory), the Act’s powers have been described by the Lords Constitution Committee as poorly designed to facilitate parliamentary scrutiny of treaties.

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.

The Bill contains no provisions for greater Parliamentary involvement in trade agreements. The previous Bill was amended in the Lords to give Parliament a greater role.

  • Commons Research Briefing CBP-8854
  • Authors: David Torrance, Dominic Webb, Graeme Cowie, Lorna Booth
  • Topics: International trade

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