Conclusions and recommendations
An Overview of Trade Defence
1.Establishing a trade defence regime is critical to protect UK domestic industries from injury from adverse trading practices. The Trade and Customs Bills are important, necessary steps in this respect, and we welcome the Government’s attention to this subject. (Paragraph 16)
2.The Bills do not yet have sufficient detail pertaining to the UK’s future trade defence framework. The Government should write to us outlining how it consulted with affected and interested industries before publishing the Trade and Customs Bills. The Government should ensure that Parliament has adequate opportunity to scrutinise trade defence regulations. The Government should set out why it believes that the negative procedure is preferable for scrutiny of trade defence regulations. (Paragraph 17)
Capacity and Delivery
3.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. (Paragraph 28)
4.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. (Paragraph 29)
5.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. (Paragraph 30)
TRA Appointments and Structure
6.It is easy to underestimate how contentious trade defence may be. Even where the decision to impose a trade defence measure follows a rigorous process, the consequences of a measure can place the interests of producers, consumers and workers in conflict, as well as having wider economic and diplomatic consequences. Managing these competing demands requires a trade defence regime which is robustly independent, and which protects the interests of the UK economy as a whole. Robust independence can only be ensured through an appointment process which is fair and open, and is seen to be so. There is a strong argument that the TRA’s independence would best be ensured by removing the appointment process for TRA Board members from the sole discretion of the Secretary of State. We consider that appointments of the Chair of the TRA should be conditional upon the approval of this Committee, and that this should be set out in statute. We consider that appointments of the Chair of the TRA should be conditional upon the approval of this Committee, and that this should be set out in statute. We would also expect to conduct a pre-appointment hearing with the proposed candidate for chief executive of the TRA. (Paragraph 43)
7.We accept that for the TRA to be operational by March 2019, it is necessary to appoint its first Chair as soon as possible and welcome the Secretary of State’s announcement that he will do so. However, we note that he is doing so without the statutory authority that would be conferred upon him by the Trade Bill because it is not yet law. In these circumstances, Parliament must have a say and there is a particularly strong argument for the appointment to be conditional on a resolution of this Committee that it approves the appointment. There may also be an argument for the appointment of the Chair to be for a short, fixed term so that it can be reviewed soon after the Trade Bill receives Royal Assent, although we also recognise that this could have a disruptive effect on the body at a critical time. (Paragraph 44)
8.Diverse representation is also vital to ensuring that the TRA is viewed, both domestically and internationally, as credible and transparent. In circumstances where the Government has proposed appointing as many as nine TRA Board members, there is a strong case for requiring that some TRA Board members be appointed to represent the interests of particular groups (for example, consumers and trade unions) or that appointees to the TRA have expertise which would enable them to understand one of these groups’ interests in detail. In any event, the Department should publish guidelines as to the independence of the people who are to be appointed. (Paragraph 45)
9.Compared to trade defence bodies in other jurisdictions, the TRA is very large with up to nine members. We are concerned that this could make decision-making cumbersome. It may also be unduly expensive. To avoid unnecessary complexity in decision-making which could result from such a large body, the Department should publish clear guidance on the roles of the TRA members in the decision-making process for recommending the imposition of trade defence measures. We further recommend that the Department consider whether it ought to appoint fewer TRA members, at least initially, to progress the operationality of the body. Nine members is a maximum, not a quota. (Paragraph 46)
10.We consider that, on balance, the proposed ‘unified’ investigative structure for the TRA is the correct one. While a bifurcated approach may offer benefits in terms of objectivity of decision-making, we do not consider that these benefits outweigh the efficiencies created by a unified approach. This approach must not, however, be used as in such a way as to politicise the decision-making process of the TRA and to compromise its operational independence. (Paragraph 47)
Functions of the TRA
11.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. (Paragraph 63)
12.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. (Paragraph 64)
13.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. (Paragraph 65)
Transparency and Review
14.The integrity and credibility of the UK’s future trade regime depends on the quality and fairness of the decisions it makes. Openness and transparency are both important in ensuring confidence in decision making, and to avoid unnecessary dispute settlement proceedings at the World Trade Organization. Failure to reflect this could have international ramifications for the UK, including making it more likely that decisions of the TRA will be subject to dispute settlement proceedings at the World Trade Organization. We have heard about several key areas for improvement in the Trade and Customs Bills with respect to the transparency of decision-making. One critical issue is the lack of clarity around how the TRA is to calculate the existence of both dumping and injury. The Department should accordingly publish detailed guidelines as to how these assessments are to be undertaken to ensure maximum transparency of the UK’s future trade defence regime. (Paragraph 82)
15.Further to this, it is paramount that the TRA is a body of public record. The TRA should publish a written summary of its advice to the Secretary of State outlining its reasons for recommending, or declining to recommend, the imposition of measures. In the event that the TRA is still bound to apply an economic interest test, it should provide additional details outlining its assessment of the economic interest and how it determined whether the imposition of measures served or detracted from the UK’s economic interest. (Paragraph 83)
16.The appeals process is an aspect of trade defence in respect of which legislation is both required, as a matter of law, and comparatively simple. In these circumstances, it is troubling and perplexing that the Government included nothing of substance in either the Trade or Customs Bills about the future appeals mechanism for decisions of the TRA and / or Secretary of State. We appreciate the indication we received from the Minister that there will be some form of appeal from decisions of both the TRA and Secretary of State to the Upper Tribunal. However, it is constitutionally inappropriate for Ministers to determine such a mechanism in regulations without parliamentary scrutiny; questions of who exercises judicial power over the executive and what type of judicial power is exercised are ones for Parliament to decide in primary legislation. (Paragraph 84)
17.In these circumstances, 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, including decisions not to investigate or impose trade defence measures. The Government should have regard to comparable legislative provisions on appeals, such as sections 192 and 195 of the Communications Act 2003, in legislating for an appellate mechanism (Paragraph 85)
Published: 10 May 2018