2Capacity and Delivery
Background
18.In this Chapter we consider whether the TRA will have the capacity and capability to perform its functions after Brexit. The date by which the TRA will need to be operational will depend on the nature of any agreement reached between the EU and UK. In a ‘no deal’ scenario, the UK will inherit responsibility for trade defence as of 29 March 2019. However, both parties could agree for the UK to continue to be bound by EU law, including trade defence legislation, during any transition period. In the light of these possible outcomes, we examine two issues that will particularly affect the magnitude of the challenge of creating an operational TRA by March 2019, namely the nature of trade defence investigations and the continuation of the EU’s existing TDMs.
Government’s Policy
19.The Government’s policy is that the UK will “need the Trade Remedies Authority set up and operational by March 2019.”43 The Minister said that the estimated cost for the TRA is “around £15 million to £20 million per annum” and would have approximately 100 staff.44 The Minister nevertheless conceded that the “Trade Bill … is yet to begin its passage through the Lords”,45 and that the Department was yet to recruit people for the body.46 These issues were echoed in a letter from Permanent Secretary for the Department, Antonia Romeo, to Dr Fox on 29 March 2018. She said that DIT “must spend on the TRA before Royal Assent of the Trade Bill” as delaying doing so “would jeopardise the Department’s preparation for the UK’s exit from the EU with implication for our future trade policy.” Accordingly, she sought a direction to spend £8.9 million in advance of Royal Assent on “Board appointments, staff, estates, infrastructure and IT, training, digital, and legal and industry experts to assist with TRA set up and operational process design”.47 The Secretary of State responded the same day, approving the request in a Ministerial Direction.48
Nature of Trade Defence Investigations
20.Witnesses told us that there were two primary obstacles to the TRA having the requisite capacity to conduct trade defence investigations and perform its other functions by March 2019. The first pertained to the nature of trade defence investigations, and thus the expertise required to conduct them. The investigations which the TRA will be required to undertake are inherently complex. As Bernard O’Connor told us, the two key issues for the TRA in any investigation are the existence and occurrence of dumping / subsidisation and the existence and occurrence of injury. Assessing injury requires the investigating authority to “request information from the complaining industry and then … verify it.” Similarly, when considering whether dumping / subsidisation exists, the TRA will “need to ask questions of the exporting producers, then … verify that information in the country of origin.”49
21.Witnesses told us that the process of obtaining and verifying information is “highly resource intensive with lots of moving parts”.50 We were told that “[t]here is a lot of data that has to be disgorged, a lot of various analytical tests.”51 Even where the dumping calculation is straightforward, witnesses appearing before the Public Bill Committee said “it is a massive calculation with thousands of data entries on a spreadsheet or in a model”.52 We were told this process “can take quite a considerable amount of time”, especially where “you have many exporting producers who want to get individual margins”.53 This is because the investigating authority “need[s] to send teams into foreign countries to sit down with the company to look through their records”54 which ordinarily takes several days for each exporter sampled.55 The intensive, complex nature of the exercise is reflected in the time it takes to conduct a new investigation. The maximum time limit for investigating dumping usually varies from 12 to 18 months,56 although some countries, such as the US, set a detailed timetable for each stage of investigation.57
22.We also heard that trade defence investigations are demanding as there are “a lot of people involved and a lot of different specialties”.58 In Australia, we were told that “there are 60 people in the Anti-Dumping Commission, [with a] budget [of] about AUS$15 million per annum”.59 In the European Commission, there are 136 staff, of which about 40 are investigators.60 Staff involved in trade defence investigations also possess a wide variety of expertise, including “economic, legal, specialist skills, [and] language skills”.61 In addition, we were told that because of the ‘superadded’ economic and public interest tests in the Customs Bill, the TRA will likely need “competition expertise … financial analysis […] [and] people who are experts in industry in the broad sense”.62
23.Given the complex nature of investigations and the expertise required, several witnesses doubted whether the Government’s ambition was achievable. Two witnesses rated the possibility of the TRA being operational for March 2019 as “red”.63 Mr Peretz QC identified several key concerns, including that “you cannot seriously start appointing people to head the organisation until you have at least the Trade Bill through”. He also said there was “not very much trade expertise in London to draw on because we have not been doing it for 40 years.”64 Bernard O’Connor further told us that there was “an awful lot of work to do to be able to get a system in place and there will be a rush on day one.”65 By contrast, Mr Moulis was more sanguine, giving an “amber” rating.66He said:
If you are starting off without a lot of existing investigations or without a lot of measures that you have to police, then it is possible to get the thing up and running by that time. Yes, there will be some difficulties in converting the thinking and putting it in place, but I do not think those problems are new ones or that they are insurmountable.67
EU Trade Defence Measures
24.A possible mitigating factor we heard about which may minimise the risk that the TRA will not be operational by March 2019 concerns the continuing application of the EU’s existing TDMs in the UK after Brexit. As a matter of law, it has been argued that an automatic consequence of leaving the EU is that the EU’s TDMs (for example, anti-dumping tariffs) will no longer be applicable.68 Bernardine Adkins, Partner, Gowling WLG, told us that “[o]nce we have left we have left, and we cannot benefit from those [TDMs].”69 However, we heard that it was a separate issue as to whether the UK could elect to continue to apply the EU’s TDMs after Brexit. Mr Moulis said he was “not clear as to whether [the UK is] continuing over the existing anti-dumping measures that are in place in the EU”. However, he told us that this question could affect the TRA’s capacity as the likelihood of the TRA being operational by March 2019 “depends [a lot] on what the opening workload is going to be”.70 He further added that, “i[f] you are starting off without a lot of existing investigations or without a lot of measures that you have to police, then it is possible to get the thing up and running by that time”.71
25.We were told that the uncertainty as to whether the UK could continue (‘grandfather’) the EU’s existing TDMs pertains to the way in which the EU determines whether to impose TDMs. In assessing a proposed TDM, the European Commission considers whether there is injury to an EU industry.72 While a UK domestic industry may, in some cases, form part of the aggrieved EU industry, this is not necessarily the case. Bernard O’Connor told us that “if you are trying to introduce new measures in an area where there are already European measures, theoretically there will not be injury to the United Kingdom market. How then you are going to find, in a rollover situation, injury is going to be difficult.” EU Regulations also require the Commission to consider whether imposing a TDM is against the interests of the EU (‘Union interest test’). While the collective interests of the EU, as 28 Member States, may overlap exactly with the interests of the UK, this is also not necessarily the case.
26.We heard three differing views as to whether the UK could ‘grandfather’ the EU’s TDMs without conducting a new investigation. Gareth Stace told us that doing so “would not be against WTO rules”.73 By contrast, several witnesses said this approach was contrary to WTO rules. Ms Adkins said that “[w]e simply cannot legally cut and paste over what is already in place”; the UK would need to “start out afresh”.74 Mr O’Connor similarly said that “[i]f the United Kingdom wants to maintain trade defence measures in place it will have to start de novo for each one; it will have to start anew to do this sort of thing.”75 Finally, Edwin Vermulst was more circumspect. He told us that “[y]ou have to have UK producers in order to maintain a measure”.76 However, if there is UK production, Mr Vermulst said it may be possible to continue the measure with “a review in order to see, for example, whether the dumping margin that was calculated on an EU-wide basis would be different if it was supplied only for the UK.”77
27.The Department’s policy on whether it can grandfather EU TDMs without re-investigation remains unclear. In November 2017, the Department issued a call for evidence to identify which UK businesses produce goods currently subject to EU anti-dumping or anti-subsidy measures. It further confirmed that if an EU TDM “does not receive an application to be maintained, or does not meet the required criteria, it will be terminated” once the TRA is operational.78 While a welcome step, and one which will minimise the TRA’s workload, it does not clarify the extent of the work that will be required to continue to protect UK domestic industries subject to EU TDMs after Brexit.
28.The TRA is a vital aspect of the architecture of the UK’s future trade policy. With less than 12 months before the UK leaves the EU, it is crucial that the TRA is operational by 29 March 2019, and we require urgent assurance that it will be. If the UK does not reach a deal with the EU, the UK must have a trade defence regime in place as of March 2019 or risk UK businesses being damaged.
29.The Department has taken several recent steps to progress the operationality of the TRA, including issuing a Ministerial Direction to expend £8.9 million on the TRA and undertaking a review of the EU’s existing trade defence measures. However, in retrospect it ought to have been foreseeable that the establishment of the TRA would be comparatively uncontroversial relative to other matters contained in the Trade Bill. By electing not to establish the TRA in a separate Bill, the Government has created a number of obstacles to meet its stated deadline: the Trade Bill is yet to pass the Commons; no executive TRA members have been appointed; and the TRA has no staff in place or trained. In such circumstances, it is difficult to see how, on any view, the TRA can be fully operational by March 2019. If the Government is to have any hope of achieving its objectives, it must progress the TRA’s establishment as a matter of priority. We request that the Government writes to us with its position on whether it can legally ‘grandfather’ the EU’s existing trade defence measures and how it plans to progress its work on the TRA in the light of that position. Failure to resolve this issue could result in either the TRA undertaking extensive, unnecessary work or the UK being subject to dispute settlement proceedings at the World Trade Organization.
30.The Department should write to us with a timeline for the appointment of the Board members to the TRA and how it proposes to have the TRA operational by March 2019. We expect that the Department will report regularly to the National Audit Office on its spending pursuant to the Ministerial Direction.
43 Q 25 [Greg Hands]
44 Q 2 (“The size of the authority is still to be determined but you can get a feel for how large the authority might be by looking at similar authorities or how these things operate elsewhere. For example, DG Trade at the European Commission is obviously a much larger body and considers things far beyond trade remedies. They have about 500 staff across all functions, of which just over 100 work on trade remedies. That will perhaps give you an idea of the size of the authority as it is likely to be.”)
45 Qq 2, 26
46 Q 2 (Mr Hands further told us that “there are very few people currently engaged in the UK on trade remedies”.)
47 Letter from Permanent Secretary to Secretary of State regarding Technical Ministerial Direction, 29 March 2018
48 Letter from Secretary of State to Permanent Secretary regarding Ministerial Direction, 29 March 2018
49 Q 47 [Bernard O’Connor]
50 Q 47 [Daniel Moulis]
51 Oral evidence taken before the International Trade Committee on 29 November 2017, HC (2017–19) 603i, Q 12 [Bernardine Adkins]
52 Trade Bill Committee, 23 January 2018, cols 69–70
53 Q 47 [Bernard O’Connor]
54 Q 47 [Daniel Moulis]
55 Q 47 [Bernard O’Connor] (These teams ordinarily “spend a day, two days, three days, with each exporter that is sampled. It is very intense work that needs to be done.”)
56 Qq 102–103 [Dr Laura Cohen, Cliff Stevenson]. For example, India’s trade defence regime has a time limit for investigations of 12 months, although it can be extended to 18 months; the EU’s time limit is 15 months, although expedited investigations usually take 12 months; and the WTO Anti-Dumping Agreement provides a time limit of 18 months.
57 T.D. Satish, “Time-limit for anti-dumping investigations”, 24 April 2012. See also United States International Trade Commission, Antidumping and Countervailing Duty Handbook, June 2015, pp III-6–III-8.
58 Q 47 [Daniel Moulis]
59 Q 47 [Daniel Moulis]
60 Q 47 [Bernard O’Connor]
61 Q 48 [George Peretz QC]
62 Q 47 [Daniel Moulis]
63 Q 51 [George Peretz QC, Bernard O’Connor]
64 Q 49 [George Peretz QC]
65 Q 50 [Bernard O’Connor]
66 Q 51 [Daniel Moulis]
67 Q 50 [Daniel Moulis]
68 Philippe De Baere, Building a trade defence system in the UK, Paper presented at UCL Seminar
69 Oral evidence taken before the International Trade Committee on 29 November 2017, HC (2017–19) 603i, Q 9 [Bernardine Adkins]
70 Q 49 [Daniel Moulis]
71 Q 50 [Daniel Moulis]
72 See, for example, European Commission, Anti-dumping, 11 April 2018; European Commission, Anti-subsidy, 12 April 2018.
73 Oral evidence taken before the International Trade Committee on 29 November 2017, HC (2017–19) 603i, Q 17 [Gareth Stace]
74 Oral evidence taken before the International Trade Committee on 29 November 2017, HC (2017–19) 603i, Q 9 [Bernardine Adkins]
75 Q 50 [Bernard O’Connor]. See also Q 50 [Daniel Moulis] (“[T]he question of whether material injury is being caused to the industry in this place would be a live question rather than just carrying things over.”)
76 Oral evidence taken before the International Trade Committee on 29 November 2017, HC (2017–19) 603i, Q 14 [Edwin Vermulst]
77 Oral evidence taken before the International Trade Committee on 29 November 2017, HC (2017–19) 603i, Q 21 [Edwin Vermulst]
78 Department for International Trade, Call for evidence to identify UK interest in existing EU trade remedy measures, 28 November 2017
Published: 10 May 2018