Summary
As the UK prepares to operate its own independent trade policy for the first time since 1973, the Government has begun considering a crucial component of trade policy: trade defence. The UK’s trade defence framework is presently governed by WTO and EU law. Under EU law, the body responsible for investigating and imposing TDMs is the European Commission. However, once the UK leaves the EU it will cease to be bound by EU trade defence regulations and the Commission will cease conducting trade defence investigations on behalf of UK producers. Accordingly, the Government has proposed establishing the Trade Remedies Authority (TRA) as a new arm’s-length body. Under the Trade Bill, which provides for the creation of this body, the TRA’s primary function is providing the Secretary of State with advice, support and assistance at his or her request in connection with certain of his or her functions. The TRA is also conferred with functions under the Taxation (Cross-border Trade) Bill (Customs Bill), including conducting trade defence investigations and recommending the imposition of trade defence measures (TDMs).
Together, the Trade and Customs Bills represent an important step to establishing the UK’s future trade defence regime. The Secretary of State for International Trade also recently issued a Ministerial Direction permitting the Department for International Trade to expend £8.9 million in advance of Royal Assent on matters such as TRA Board and staff appointments, training and experts to assist with designing the TRA’s set up and operational process. However, the Bills do not yet have sufficient detail pertaining to the UK’s future trade defence framework and the Government should write to us outlining how it consulted with affected and interested industries before publishing the Trade and Customs Bills.
With less than 12 months before the UK leaves the EU, it is crucial that the TRA is operational by 29 March 2019. Two factors, in particular, will affect the magnitude of the challenge of creating an operational TRA prior the UK leaving the EU. First, trade defence investigations are inherently complex, involving resource-intensive, information gathering exercises and massive calculations. Collecting and analysing the required data necessitates a large staff, with economic, legal, competition, financial analysis and language expertise. Witnesses were sceptical about whether the Government could resource and train staff to perform these investigations in less than 12 months. The second factor was whether the UK could legally ‘grandfather’ the EU’s existing TDMs without conducting new investigations, as conducting these new investigations would add significantly to the TRA’s workload. In the light of these issues, we require urgent assurance that the TRA will be operational when the UK leaves the EU. There are a number of obstacles to meeting this deadline and the Government must progress the TRA’s establishment as a matter of priority. It should write to us outlining whether it can legally ‘grandfather’ the EU’s existing TDMs and how it plans to progress its work in the light of that position. The Government should also provide the Committee with a timeline for appointing TRA Board members and how it proposes to have the TRA operational by March 2019.
In preparing its independent trade policy, the UK should aspire to have a world-class trade remedies authority. During the inquiry we heard about several areas in respect of which the TRA’s structure and operation required further consideration. It is easy to underestimate how contentious trade defence may be. In these circumstances, it is imperative that the TRA’s Board appointment process and structure is robustly independent. The Secretary of State presently has a significant role in TRA Board appointments. Witnesses queried whether this role could lead to the TRA becoming ideologically ‘stacked’. We also heard that there was a strong case for the appointments of the Chair and chief executive to be subject to approval of this Committee. On balance, we agree. The Government should amend the Trade Bill to require that appointments of the Chair are subject to the approval of this Committee. The Committee should also conduct a pre-appointment hearing with the proposed candidate for chief executive. While it is imperative to appoint the TRA Board as soon as possible, we note that the Secretary of State plans to appoint the Chair before he has the statutory authority to do so in the Trade Bill. Here the case is particularly strong for Parliament to have a say.
We were told that the complexity of the task confronting the TRA further requires that TRA Board members are impartial, independent and have a range of expertise and backgrounds. The need for a variety of expertise may account for the size of the TRA (nine members). However, compared with other trade defence bodies, nine Board members is a large number and could make decision-making expensive or cumbersome. There is also an argument that particular TRA Board members should be appointed who represent, or have expertise in, the interests of particular groups (for example, consumers or trade unions). The Government should consider whether it is necessary to appoint all nine members initially, and ensure it publishes clear guidance on the independence of the people who are to be appointed and the roles of TRA Board members in the decision-making process.
Considerations of independence are particularly germane to the TRA’s functions and powers, and the way in which it exercises them. The TRA’s statutory functions are broadly separated between advising and assisting the Secretary of State (Trade Bill) and conducting trade defence investigations (Customs Bill). The Government should reflect, in particular, on the division of responsibilities under the Customs Bill in respect of trade defence investigations. In essence, the Bill divides the roles of the TRA and the Secretary of State into investigating and recommending the imposition of measures, and deciding to impose measures, respectively. When deciding whether to recommend the imposition of a TDM, the TRA must apply an economic interest test which concerns matters like the economic significance of, and likely impact on, affected industries and consumers in the UK. This test is then applied again by the Secretary of State when determining whether to accept or reject the TRA’s recommendation(s). Reasonable minds may differ as to whether politicians should be involved in decisions to impose TDMs. However, to the extent they are, a clear distinction should be drawn between ‘technocratic’ decisions of the investigating authority and ‘political’ decisions. The Customs Bill fails to do so insofar as it requires the TRA to apply an economic interest test. This failure, in turn, risks the TRA making essentially political decisions as to what is in the UK’s economic interest. Accordingly, the Government should amend the Customs Bill to remove the obligation on the TRA to apply the economic interest test proposed in the Bill.
Ultimately, the integrity and credibility of the UK’s future trade regime depends on the openness and transparency with which decisions are made. Without a transparent regime, the UK risks having decisions of the TRA being subject to dispute settlement proceedings at the World Trade Organization. Most significantly, it is a requirement under WTO law that Member States have a system for appeals against decisions to impose TDMs. The Bills are presently silent on this issue, save for conferring a power to make regulations for, or in connection with, the review or appeal of the Secretary of State or TRA’s decisions. However, the Minister told us that it intended for interested parties to ultimately have the right of appeal to the Upper Tribunal in respect of any decisions made by the TRA and Secretary of State. Even with this guidance, appeals remains an area in respect of which there is a significant gap in the legislation. With respect to the nature of the mechanism, witnesses strongly favoured the use of a specialist tribunal, as the Government appears to be proposing. We also heard that the standard of review that should be available was merits review instead of judicial review, which only permits the appellate body to review whether the law has been correctly applied, and proper procedures followed. Even with the Government’s indication that it intends to have a right of appeal, it is constitutionally inappropriate for Ministers to determine such a mechanism in regulations without parliamentary scrutiny. These are matters for Parliament to decide in primary legislation. Accordingly, the Government should amend the Trade and / or Customs Bills to provide a right of appeal from decisions of the TRA and Secretary of State to a specialist tribunal, such as the Upper Tribunal sitting with some specialist members. Appeals should be determined ‘on the merits’, with all decisions being appealable.
Published: 10 May 2018