Tuesday 27 February 2018

Trade Bill ~ a vague amendment

A number of Bills currently before Parliament are concerned with Brexit and its possible consequences.  The Trade Bill is one of them.  It is a government Bill within the remit of the Secretary of State for International Trade (Dr Liam Fox MP).  Another Bill is the Taxation (Cross-Border Trade) Bill which was briefly considered in this post of 15th January.

An interesting amendment has been put forward to the Trade Bill but first let's delve into a little of the Bill's detail.

Clause 2:

Clause 2 of the Bill is concerned with Implementation of  International Agreements - "An appropriate authority may by regulations make such provision as the authority considers appropriate for the purpose of implementing an international trade agreement to which the United Kingdom is a signatory ...."  

An "appropriate authority" is defined by Clause 4 as a Minister of the Crown or a devolved authority (e.g. Scottish or Welsh Ministers or a Northern Ireland Department).  

The phrase "international trade agreement" means (a) a free trade agreement, or (b) an international agreement that mainly relates to trade, other than a free trade agreement.  The term  "free trade agreement" is further defined as an agreement that is or was notifiable under (a) paragraph 7(a) of Article XXIV of GATT, or (b) paragraph 7(a) of Article V of GATS.

GATT” means the General Agreement on Tariffs and Trade, part of Annex 1A to the WTO Agreement and GATS” means the General Agreement on Trade in Services, part of Annex 1B to the WTO Agreement.   See the WTO's Legal Texts for the detail.

Customs Union:

It has been very clear from the Prime Minister's various speeches (Lancaster House, Florence) that leaving the EU also entails not being part of the "Customs Union" or the "Single Market."  That stance appears to have come from Mrs May alone and also seems to be her interpretation of what the Brexit referendum entails - a "hard Brexit" as it has come to be known.  A "transition period" or "implementation period" is under discussion with the EU and the details of that, assuming one is agreed, remain to be specified presumably as part of the Withdrawal Agreement.  (See EU Guidelines for Phase 2 of the negotiations).

The EU Single Market was largely completed for goods by 1992 but development remains on-going with regard to services.  The Single Market enables free movement of goods but also of people, services and capital.  The EU’s single market is sometimes called the “internal market” and was once called the “common market”.  It is type of enhanced free-trade area in which goods move freely, but so do services, investment and people. To achieve this much more ambitious goal, the EU needs to get involved in harmonising regulations across the single market. This is why there are much-maligned rules on, for instance, the efficiency of vacuum cleaners across the EU. In the absence of such regulations there would be a regulatory race-to-the-bottom: countries would compete to produce the cheapest-possible vacuum cleaner across the EU, sacrificing safety in the process. It also explains why there is free movement of people: this allows for the exchange of typically non-tradable goods, such as plumbing.  This explanation from the BBC is useful - Free Trade Area, Single Market, Customs Union - what's the difference?

Speaking at Lancaster House in 1988, Margaret Thatcher said - "It's ... the job of business, to gear ... up to take the opportunities which a single market of nearly 320 million people will offer.  Just think for a moment what a prospect that is. A single market without barriers—visible or invisible—giving you direct and unhindered access to the purchasing power of over 300 million of the world's wealthiest and most prosperous people.   Bigger than Japan. Bigger than the United States. On your doorstep. And with the Channel Tunnel to give you direct access to it.  It's not a dream. It's not a vision. It's not some bureaucrat's plan. It's for real. And it's only five years away."

The EU is not only a single market - it is also a customs union. The countries club together and agree to apply the same tariffs to goods from outside the union.  Once goods have cleared customs in one country, they can be shipped to others in the union without further tariffs being imposed.

Politically, there are MPs who wish to see the UK remain within either or both of the Single Market or Customs Union though there is talk of "a" Customs Union as opposed to "the" Customs Union."  At least to me, it seems unlikely that the EU will wish to have anything to do with some kind of bespoke customs union with the UK.  It would be "the" customs union or none.

So, let's look at the amendment put forward to the Trade Bill.

The amendment: 

The amendment (as at 26th February) may be read here.  "It shall be the objective of an appropriate authority to take all necessary steps to implement an international trade agreement which enables the UK to participate after exit day in a customs union with the EU on the same terms as existed before exit day."

The government is thought to be far from keen to have a vote in Parliament on this and it is reported in this article in The Guardian that legal advice is being sought - quote - "on whether the amendment is legally binding to assess whether May could accept it without having to fulfil its demands."  Presumably if the answer to that is YES then the government will not oppose the clause thereby avoiding what may be, for Ministers, an embarrassing vote in Parliament.  Sadly, such tactics seem to bedevil the relationship between the executive and Parliament.

It certainly seems very strange to be seeking legal advice as to whether Parliament should be obeyed!  The rule of law requires nothing less than complete obedience by the government to the law and if the amendment becomes law as part of the eventual Trade Act then it would have to be obeyed.  The problem is what would the objective imposed on Ministers actually require them to do. The answer to that is not particularly clear and so we must await developments.

1 comment:

  1. It is a very interesting post. Your insights into the new trade bill are remarkable. Breext will definitely have an impact on trade and the market. These new bills hopefully will bring something good to the country.