4Functions of the TRA
Background
48.The TRA is assigned functions under both the Trade and Customs Bills. These functions are broadly separated between advising and assisting the Secretary of State (Trade Bill) and conducting trade defence investigations (Customs Bill). In this Chapter, we examine how the Bills address the functions of both the TRA and Secretary of State and whether the proposed division of responsibilities adequately guarantees that the TRA will operate independently.
Functions Conferred by the Trade Bill
Advise, support and assist
49.The TRA’s primary function under clause 5 of the Trade Bill is to provide the Secretary of State with “advice, support and assistance” at their request in connection with the performance of certain functions.121 However, before requesting such advice, support and assistance, the Secretary of State must:
- consult the TRA; and
- have regard to the expertise of the TRA and to the need to protect: (i) its operational independence; and (ii) its ability to make impartial assessments when performing its functions.122
50.The Trade Bill does not further clarify what is meant by “operational independence”, nor how the duty to have regard to such independence is intended to operate. The Government has said only that the TRA was intended to be an independent, arm’s-length body.123 Greg Hands further told us that the TRA was set up as a non-departmental public body to “ensur[e] that it has appropriate degree of separation from the Department”.124 According to the Minister, operational independence for the TRA means “operating independently from everybody”; that is, its members must not be seen to be appointed by any particular sector or interest group.125
51.When asked about the duty to have regard to the TRA’s independence witnesses noted it was “slightly difficult to know exactly what that means”.126 George Peretz QC told us:
… ‘have regard to’ is one of those legal phrases that is always slightly difficult to pin down. What it really means is that if you are ever challenged about it you have to prove and explain that you did look at it and think about it but it does not tie you down to going in any particular direction, having thought about it.127
Publication of guidance
52.The Trade Bill also confers a broad power on the TRA to “otherwise provide such advice, support and assistance as it considers appropriate” in relation to international trade and trade remedies.128 The TRA’s discretion in performing this and other functions—including conducting trade defence investigations—is subject to one overarching condition; namely, the duty to “have regard to guidance published by the Secretary of State.”129 The Minister told us that the Trade Bill places “clear limits on the Secretary of State’s ability to issue guidance to the TRA”.130 For example, the Bill prohibits the Secretary of State from publishing guidance “in relation to a specific trade remedies investigation” and requires them to have regard to the TRA’s operational independence.131
53.Notwithstanding these purportedly clear limits, witnesses expressed several concerns about the TRA’s independence arising from this power. The MTRA told us the power to publish guidance “gives the [Secretary of State] a lot of power to influence the practices and procedures of the TRA and potentially make changes which could have a significant impact on the system.”132 Which? likewise said that the “extent to which the TRA can act independently [is] very reliant on the approach of the Secretary of State.”133 Accordingly, we were told that it was “essential that some safeguards are built into the Bill and also adopted as part of the TRA’s procedures to ensure that it can act independently and can voice concerns if it feels that its advice is being misinterpreted.”134 The MTRA even suggested that Parliament could potentially have some role in limiting the ability of the Secretary of State to “produce guidance that makes significant changes to the system”.135 By contrast, Mr Moulis queried whether the publication of guidance was as serious a concern. He noted that, in Australia, the same power had only been exercised once to produce a ministerial determination on “findings of injury and what could constitute a finding of material injury.”136
Functions Conferred by the Customs Bill
Trade defence investigations
54.The TRA’s most significant function under the Customs Bill is conducting trade remedies investigations.137 The TRA may initiate a dumping or a subsidisation investigation if it is requested to do so by or on behalf of a UK industry, or, in exceptional circumstances, by the Secretary of State.138 Before commencing an investigation, the TRA must also be satisfied as to other matters, such as that the complaint contains evidence that dumping or subsidisation has caused or is causing injury to a relevant UK industry.139
55.Once the TRA commences an investigation, it has several options available to it. Subject to regulations, it could terminate an investigation or make no recommendation.140 Alternatively, the TRA can recommend the imposition of a TDM to the Secretary of State if it considers that the conditions for imposition are met. It is then for the Secretary of State to “decide whether to accept or reject the recommendation”, having regard to the economic and public interest tests contained in the Customs Bill (discussed below).141 George Peretz QC explains the division of responsibilities between the TRA and Secretary of State as follows:
[T]he TRA will determine whether the legal conditions for the application of trade remedies are met and calculate the amount of duty that may be imposed […] The TRA will then, if it finds that a remedy can be imposed and unless it finds that the remedy is against the UK economic interest, make a recommendation to the Secretary of State who can then, but only then, impose a trade remedy, but need not do so if he considers that the remedy is against the UK economic interest or the public interest.142
56.We heard from witnesses about the approach of other jurisdictions to the investigation and imposition of TDMs. Mr O’Connor told us that the EU is a “very simple administrative system”.143 Under this system, the Commission conducts the investigation and recommends which measures ought to be imposed. However, the imposition of such measures is approved by the TDI Committee, which is composed of the Member States. We were also told that the Australian system is “quite similar to [the] Trade Bill […] in terms of its set-up and its administrative investigation”.144 The MTRA added that, “in Australia, the Commission is fronted by a single Commissioner who makes the recommendation to the [M]inister based on the technical findings of the Commission staff.”145 The Minister must then be satisfied that goods exported to Australia have been dumped or subsidised, and that dumping or subsidisation has caused, or is threatening, material injury to an Australian industry producing like goods.146 By contrast, Mr Vermulst told us that “[t]he US is probably the most legalised system. There is no political influence whatsoever.”147 Mr O’Connor added that, in the US, “[i]f there is dumping and if there is injury, there is an entitlement to remedies, whereas we have a political process in the European Union to evaluate the advisability or not of it.”148
57.Several witnesses queried the proposed division of responsibilities which leaves the ultimate determination regarding the imposition of TDMs to the Secretary of State. Bernardine Adkins told us that there will be times when politicians should be involved in the trade defence process. However, she said that the proposed system reflected “1970s thinking”.149 Referring to the previous UK Monopolies and Mergers Commission, she added, “[i]t was all behind closed doors, and it was very much lobbying. At the end of that it was like, ‘What was in the head of the Secretary of State?’ We have moved on since then.”150 Edwin Vermulst agreed with Ms Adkins that “the idea of politicising the system to some extent … goes back to the old days”.151 He further told us that this “is [not] a good development” and likened the UK’s approach to that of “some other countries, especially developing countries, that have a system … where you need a Minister, basically, at the end of the day to make a decision. That becomes very politicised […]”.152
58.By contrast, Mr Peretz QC said that the “board structure in the Bill is essentially right”. On this approach, you leave “the more technical tasks, the technocratic tasks, of establishing whether there is dumping or subsidies… to a more technocratic independent body that can reach its own view based on its expertise about whether those criteria are met.”153 The final decision as to whether to impose TDMs is then passed to the Secretary of State. Mr Peretz QC said that this “seems to be right because it is a profoundly political decision” and “politicians [are] accountable to all of you [parliamentarians], to decide and to give their reasons for either doing or not doing it.”154
59.The Government told us that the UK trade remedies framework ensures that “there is ultimately a political decision based on an evidence-based investigation.”155 According to Greg Hands, this approach achieves “the right balance between having both an independent assessment and political accountability at the end of the day.”156 The Minister further told us that the “Secretary of State can only confirm a recommendation to take action; the Secretary of State cannot overturn it if the [TRA] recommends no action”.157 By way of assurance, the Minister said that “[t]his final step is a common factor in other trade remedies systems”.158
Economic interest test
60.The Customs Bill places several limitations on the TRA’s ability to recommend the imposition of TDMs. One of the limitations we heard about was the economic interest test. For example, the Customs Bill provides that the TRA may only recommend the imposition of an anti-dumping or anti-subsidy measure as a definitive measure “if it is satisfied that the application of an anti-dumping amount or a countervailing amount meets the economic interest test”.159 The economic interest test requires that the TRA, in considering whether the application of a TDM is not in the economic interest of the UK, must take account of the following matters, where relevant:
- the economic significance of affected industries and consumers in the UK;
- the likely impact on affected industries and consumers in the UK;
- the likely impact on particular geographic areas, or particular groups, in the UK; and
- the likely consequences for the competitive environment, and for the structure of markets for goods, in the UK.160
61.Witnesses told us that the proposed ‘superadded’ economic interest test was unique to the UK’s trade remedies framework, although the EU’s framework does include a ‘Union interest’ test. The UK’s proposed approach was also said to be unique as it uses a “positive economic interest test”.161 Unlike the EU’s present approach, which we were told adopts a “presumption that measures will be put in place”,162 the UK’s proposed approach effectively adopts a presumption against imposing TDMs unless it is in the UK’s economic interest to do so. Mr Moulis told us that this “could be a first in the sense that … it must be in the economic interest to impose the measures. If you look at the systems in the EU and the way it is worded in the EU, there is a cautionary sentence in their economic interest test”. Mr Moulis suggested that the inclusion of such a test “indicate[d] a more liberal and a more open trading policy”.163 Cliff Stevenson agreed, adding that, having regard to the totality of the framework, “there is potential that this will be the most liberal anti-dumping system in the world”.164
62.We heard differing views as to the appropriateness of the proposed economic interest test, and who should apply it. Which? told us that the test was beneficial as it ensured that “there is full consideration of what the wider impact will be, including on consumers or on other industries or sectors that may then pass any additional costs on to consumers” when considering whether to impose TDMs.165 By contrast, Dr Laura Cohen of the British Ceramics Confederation was critical of the test, but said that “[i]f there is an economic interest test it is really important that the independent body carries it out and it is not repeated by the Secretary of State.”166 Conversely, George Peretz QC said it was “wrong in principle” for the TRA “to call the remedy to a halt on an economic interest test”. While he agreed that “it may be right for the TRA to be able to give its view on economic interest to the Secretary of State”, Mr Peretz QC concluded that it is not “an appropriate decision for a bureaucrat to be asked to make, because it is a political decision.”167
63.In a highly politicised area such as trade defence, separating politics from decision-making can be challenging. However, the credibility of the TRA depends on its ability to perform its functions independently, free from political interference. This principle is inviolable. It is imperative that the Government maintains its commitment that the TRA will be an independent, arm’s-length body, and ensures a clear separation of powers between the Secretary of State and the TRA.
64.The TRA’s independence must be carefully guarded. The Trade Bill, for example, permits the Secretary of State to request assistance from the TRA and publish guidance as to how it is to perform its functions, including conducting trade defence investigations. These functions are conditioned on the Secretary of State having regard to the TRA’s operational independence. Yet, we agree with the evidence we heard that the duty ‘to have regard to’ is a phrase which, legally, is difficult to pin down. In our view, this duty provides insufficient guarantees of the independence of the TRA. Accordingly, the Government should publish guidelines for the Secretary of State to consider which clearly outline the factors which characterise the TRA’s operational independence. In issuing a direction to the TRA or publishing guidance, the Secretary of State should also publish a written summary outlining how he or she took into account the TRA’s operational independence. This requirement should be reflected on the face of the Trade Bill.
65.The issues of independence and separation of powers are particularly germane to trade defence investigations. The Customs Bill essentially 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. Reasonable minds may differ as to whether politicians should be involved in decisions to impose trade defence measures. Accepting that the Government has resolved to involve the Secretary of State, it is critical that the technocratic functions of the TRA and the political functions of the Secretary of State are clearly separated. In our view, the Government has failed to maintain this distinction insofar as it requires the TRA to apply an economic interest test when considering whether to recommend the imposition of trade defence measures. While the TRA could well express a view on the economic interest, it is wrong in principle for it to decline to recommend a measure on this basis as doing so involves making an essentially political decision. Extracting the TRA from this consideration will make it easier for the body to perform its functions independently, and therefore credibly. 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.
121 These are: (i) the conduct of an international trade dispute; (ii) functions of the Secretary of State relating to trade; and (iii) functions of the TRA. Clause 6(2) further provides that “[a]dvice, support and assistance requested [in relation to an international trade dispute] may include, among other things— (a) analysis of trade remedy measures imposed in countries or territories other than the United Kingdom, and (b) analysis of the impact of such measures on producers and exporters in the United Kingdom.” (see Trade Bill, [Bill 122 (2017–19)]).
122 Trade Bill, clause 6(3) [Bill 122 (2017–19)]
123 Department for International Trade, Preparing for our future UK trade policy, Cm 9470, October 2017, p 35
125 Q 6
126 Q 79 [George Peretz QC]
127 Q 79
128 Trade Bill, clause 6(4) [Bill 122 (2017–19)]
129 Trade Bill, Schedule 4, clause 34(1) [Bill 122 (2017–19)]
131 Trade Bill, Schedule 4, clauses 34(3) and (4) [Bill 122 (2017–19)]
136 Q 55
137 See Taxation (Cross-border Trade) Bill, Schedule 4, clauses 8(1), (3) and Schedule 5, clause 6(1) [Bill 128 (2017–19)]
138 Taxation (Cross-border Trade) Bill, Schedule 4, clause 9[Bill 128 (2017–19)]
139 Taxation (Cross-border Trade) Bill, Schedule 4, clause 9[Bill 128 (2017–19)]
140 Taxation (Cross-border Trade) Bill, Schedule 4, clause 10(2)(c) [Bill 128 (2017–19)]
141 Taxation (Cross-border Trade) Bill, Schedule 4, clauses 15(1) and 20(1) [Bill 128 (2017–19)]. The latter provides: “Secretary of State may reject the recommendation only if the Secretary of State is satisfied that— amount to goods in accordance with the recommendation does not meet the economic interest test (see paragraph 25), or (b) it is not otherwise in the public interest to accept the recommendation.”
142 George Peretz QC, Briefing Paper: The Government’s proposed legislation for trade remedies, UK Trade Forum, 22 January 2018
143 Q 43 [Bernard O’Connor]
144 Q 45 [Daniel Moulis]
146 Anti-Dumping Commission, Australia’s Anti-Dumping and Countervailing (anti-subsidy) System, 18 August 2014; Anti-Dumping Commission, Understanding the Anti-Dumping Review Panel Process, June 2013.
147 Oral evidence taken before the International Trade Committee on 29 November 2017, HC (2016–17) 603-I, Q 53 [Edwin Vermulst]
148 Q 43 [Bernard O’Connor]
149 Oral evidence taken before the International Trade Committee on 29 November 2017, HC (2017–19) 603i, Q 40 [Bernardine Adkins]
150 Oral evidence taken before the International Trade Committee on 29 November 2017, HC (2016–17) 603-I, Q 40 [Bernardine Adkins]
151 Oral evidence taken before the International Trade Committee on 29 November 2017, HC (2016–17) 603-I, Q 44 [Edwin Vermulst]
152 Oral evidence taken before the International Trade Committee on 29 November 2017, HC (2016–17) 603-I, Q 44 [Edwin Vermulst]
153 Q 59 [George Peretz QC]
154 Q 59 [George Peretz QC]
155 Q 37 [Greg Hands]
156 Q 37 [Greg Hands]
157 Q 38
158 Q 1
159 Taxation (Cross-border Trade) Bill, Schedule 4, clause 17(5)) [Bill 128 (2017–19)]. With respect to provisional measures, the Customs Bill similarly provides that the TRA may only require a guarantee “if it is satisfied that requiring a guarantee in accordance with its recommendation: (a) is necessary to prevent injury being caused during the investigation to a UK industry in the relevant goods; and (b) meets the economic interest test” (see Taxation (Cross-border Trade) Bill, Schedule 4, clause 13(4) [Bill 128 (2017–19)]).
160 See Taxation (Cross-border Trade) Bill, Schedule 4, clause 25 [Bill 128 (2017–19)]
161 Q 59 [Daniel Moulis]
162 Q 106 [Cliff Stevenson]
163 Q 59 [Daniel Moulis]
164 Q 108
166 Q 106 [Dr Laura Cohen]
167 Q 59 [George Peretz QC]
Published: 10 May 2018