Trade Bill

Written evidence submitted by TheCityUK (TB15)

Dear Sir/Madam,

House of Commons Public Bill Committee: The Trade Bill

I write to provide the Public Bill Committee with Evidence from TheCityUK on the Trade Bill.

TheCityUK is the industry-led body representing UK-based financial and related professional services. In the UK, across Europe and globally, we promote policies that drive competitiveness, support job creation and ensure long-term economic growth. The industry contributes over 10% of the UK’s total economic output and employs over 2.3 million people, with two-thirds of these jobs outside London. It is the largest taxpayer, the biggest exporting industry and generates a trade surplus greater than all other net exporting industries combined.

As part of that work, TheCityUK’s Liberalisation of Trade in Services Committee exists to consider trade and investment liberalisation questions affecting UK financial and related professional services. The Committee brings together individual businesses and representative bodies in the field of financial and related professional services, together with other voices such as the City of London Corporation. The Committee considered the issues raised by the previous Trade Bill (published November 2017) and submitted evidence on it in 2018. The current Trade Bill does not change the provisions of the previous Trade Bill in any substantive way, but the context surrounding the Bill has shifted. We have sought to address the implications of these changes in our new evidence.

Our Evidence focuses on all aspects of the Bill, but particularly on Part 1 of the Bill, dealing with the implementation of certain international trade agreements and the powers required to do so.

Our Evidence also reflects points made TheCityUK’s publications ‘Future UK Trade & Investment Policy: TheCityUK Submission’, which was issued at the start of 2017 and ‘A UK-EU Association Agreement and Future UK Free Trade Agreements’, published in August 2018.

We hope the views of TheCityUK will help the Committee in considering the Trade Bill and would be pleased to provide further insight.

Yours faithfully,

John Cooke

Chairman, Liberalisation of Trade in Services (LOTIS) Committee, TheCityUK

The House of Commons Public Bill Committee: The Trade Bill

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Summary

1. In its evidence to the Committee, TheCityUK welcomes the Trade Bill as a necessary step in advancing the UK’s trade and investment agenda. We draw attention to the TheCityUK’s publication ‘Future UK Trade & Investment Policy: TheCityUK Submission’ [1] (2017) as the basis for some of the views we express. TheCityUK has focussed its attention mostly on matters directly relevant to financial and related professional services. This includes ensuring the UK can operate an independent trade policy, data collection issues, and consultation and accountability mechanisms. We conclude by underlining that the Trade Bill, while important for securing certain objectives, does not cover some issues which may arise in conducting and implementing future trade and investment policy.

Context

2. The Trade Bill’s four Parts cover:

· Powers necessary for the implementation of the WTO Agreement on Government Procurement and for the implementation of any international trade agreements designed to continue to give effect to the provisions of existing EU trade agreements to which the UK will in future no longer be a party.

· The establishment and role of the Trade Remedies Authority.

· The collection and disclosure of trade information by HMRC.

· General provisions on the name of the Bill and its interpretation, extent and commencement.

3. Not all of the matters covered by the Bill are of equal interest to the financial and related professional services industry. For instance, Part 2 of the Bill, dealing with the Trade Remedies Authority, is likely to be mainly relevant to trade in goods, given that it concerns trade remedies, such as anti-dumping and countervailing measures, that will apply to goods rather than services. Parts 3 and 4, while clearly of long-term importance, cover general powers and provisions in relation to trade information and the general operation of the Bill, with few proposals at a sufficient level of detail to allow TheCityUK to offer comment on their bearing in practice on trade in financial and related services. Our main focus with therefore be on Part 1, with some comment on the other Parts.

TheCityUK’s overall view on future UK trade and investment policy

4. TheCityUK’s members are drawn from the entire range of UK-based financial and related professional services. Whilst there is naturally a range of views on many questions, a strong measure of agreement exists on key features that a new and independent UK trade and investment policy would need to include. These were set out in TheCityUK’s publication ‘Future UK Trade & Investment Policy: TheCityUK Submission’, which was issued at the start of 2017. It called for the UK to make the most of the once-in-a-generation opportunity to recalibrate and repurpose its trade and investment policy to benefit the wider economy once Britain had left the EU. TheCityUK’s publication [2] ‘A UK-EU Association Agreement and Future UK Free Trade Agreements’ (August 2018) provided some supplementary detail on these issues, although the context has now changed with the subsequent conclusion of the revised Withdrawal Agreement and Political Declaration.

5. Our publications underlined the potential presented by deals that focus on regulatory coherence and co-operation as well as next-generation international trade and investment agreements which would not only strengthen London’s position as the leading global financial centre, but also bring new growth opportunities to key financial centres across the whole of the country. They highlighted the unprecedented importance for UK policies to relate to global growth trends in both developed and emerging markets. They also called for greater focus on supporting trade in services to reflect its vital contribution to the national economy and underlined the need for Britain to take a global leadership role in twenty-first century issues such as data and data localisation, cyber security and Fintech. They reflected that the decision to leave the EU had led to much debate about the need for the UK to replicate existing policies and international trade and investment agreements, and argued that, while existing key commercial links would need to be maintained, there would be significant new opportunities for trade and investment policy to be varied in innovative ways, breaking away from the legacy of past practice set by the EU.

6. TheCityUK’s publication ‘Future UK Trade & Investment Policy: TheCityUK Submission’ made a particular recommendation on consultation and accountability in relation to the new UK policy. We said (paragraphs 81 and 82):

"Trade and investment barriers in global markets have become more complex – particularly regulatory barriers in other countries. An independent UK trade and investment policy will allow fresh scope for tackling these in ways attuned to the specific interests of UK business. To ensure that this is done effectively, UK trade negotiators will need to draw on the experience of UK businesses competing in global markets. This needs to be done in the most efficient way possible, drawing on the example of other countries’ practices facilitating consultation. There are various models for this. One of the most advanced is the mandatory inter-agency system developed in the United States. As well as providing for mandatory consultation with interested parties and stakeholders, the US system also makes provision for reading rooms for trusted stakeholder representatives to read non-public texts.

"TheCityUK accordingly proposes that a new system of consultation – possibly mandatory – be developed to ensure that UK trade and investment policy is firmly based on consultation with stakeholder interests and answerability to them. A clearer system governing expectations and practice in the UK’s internal consultation processes would represent a vital step towards maximising the UK’s competitive advantage by negotiating market opening trade and investment agreements that play to UK commercial strengths to the maximum possible extent."

We added a Recommendation that:

"A coherent – possibly mandatory – system for consultation on UK trade and investment policy should be developed."

7. The government has since made progress in this area through the establishment of the Strategic Trade Advisory Group (STAG) and the Expert Trade Advisory Groups (ETAGs) that work alongside the STAG. Both groups allow for discussion on the UK’s future trade policy between senior trade officials and a range of private sector trade experts, whether individual businesses, NGOs, business membership organisations, trade unions or other voices such as the City of London Corporation. At the same time, the government has been clear that the STAG and ETAGs will not be the only avenue for the government to interact with stakeholders with an interest in trade and investment policy. This combination of approaches has been valuable in allowing interaction between stakeholders and government to develop on a basis of trust. It remains to be seen whether it can be made to operate as a vehicle for a comprehensive system of consultation with stakeholders and accountability to them, or whether further institutional machinery will be needed.

UK trade and investment policy and the Trade Bill

8. TheCityUK supports the general approach that the government has taken towards operating a new and independent UK trade and investment policy. The government has been successful in its early steps to clarify how, post-Brexit, the UK’s commitments under the WTO Agreements are intended to be treated. In subsequent negotiations in the WTO framework, involving the UK, the EU and other WTO members, the government has also sought to resolve remaining issues flowing from the UK’s new position as an independent WTO member. In addition, the government has taken steps to ensure that that the benefits of existing EU trade agreements to which the UK is a party would continue to be enjoyed by the UK until fresh agreements between the UK and the countries concerned had been negotiated. Again, we welcome and fully support this, even though existing EU trade agreements with third countries have tended to provide only limited extra benefits for financial and related professional services. We also welcome the steps taken towards negotiating new trade agreements, such as the launch of new negotiations with Australia, Japan, New Zealand, and the United States, and the government’s expression of interest in the joining the CPTPP trade agreement. TheCityUK has responded to government consultations on all of these, and is providing input (both through ETAGs and through TheCityUK’s Market and Sector Advisory Groups) to the government on the objectives that are important for financial and related professional services.

Part 1 of the Trade Bill

9. Part 1 of the Trade Bill is the part of greatest interest to financial and related professional services, as Clause 1 would confer on the government the powers necessary to enable the UK to accede to the WTO Government Procurement Agreement (GPA), and Clause 2 would provide powers to bring into operation, on behalf of the UK, arrangements continuing existing EU trade agreements to which the UK is a party. We fully recognise the need for the UK to become a party to the WTO GPA: the GPA binds nineteen parties comprising 46 WTO members (counting the European Union and its current 27 Member States, all of which are covered by the Agreement, as one party). The GPA requires that open, fair and transparent conditions of competition be ensured in government procurement, and establishes general principles and detailed procedural requirements that the GPA parties are obliged to apply in the covered procurement activities, which cover both goods and services.

10. As for the EU’s agreements with third countries, many of these offer only limited advantages to UK financial and related professional services. Nonetheless, to the extent that they so do, it is important to our sector that their benefits continue, post Brexit. Clause 2 of the Trade Bill provides the necessary powers to enable the government to fulfil the UK’s obligations under any EU agreement that continues as envisaged. They are "Henry VIII" powers, operable for only a limited period, and only in relation to existing EU agreements to which the UK is a party. They will not therefore be available for use in connection with any of the new trade agreements that the UK is negotiating with third countries. We look forward to seeing the government’s proposals for the powers that will be needed to bring into operation such new agreements, and which will complement the Clause 2 powers.

Parts 2, 3 and 4 of the Trade Bill

11. TheCityUK has no strong locus for commenting in the same level of detail on the other Parts of the Trade Bill. Part 2 (on the Trade Remedies Authority), as we understand it, relates essentially to trade in goods. Part 3 is dealt with below. Part 4 is mainly technical and procedural.

12. Part 3 (on the collection of exporter information by HM Revenue and Customs) may be designed mainly to cover information on trade in goods collected by HMRC at ports and airports, and confers what appear to be "Henry VIII" powers for information collection and disclosure. It may therefore not be directly relevant to trade in financial and related professional services, which is not subject to the same border controls. However, TheCityUK takes this opportunity to make the point that, in the longer run, the government should continue its efforts to improve systems for collecting and recording information on the UK’s trade in services, whether conducted cross-border, or by commercial presence in other markets, or by the movement and temporary presence of individuals or through services embedded in goods (also known as the "servicification" of goods). Services make up 80% of the UK’s economy. Given the critical importance to the UK of trade and investment in services, and notwithstanding the difficulty of measuring trade in services relative to measuring trade in goods, it is imperative that UK policy be informed by timely and accurate data on the value of services trade. The Office for National Statistics has made significant improvements in this regard in recent years-for example, publishing new data on regionalised exports and imports of services. We applaud these improvements, but note that advances in data quantity and quality must continue, since measuring the extent, pattern and flows of different types of trade and investment will present a more accurate representation of trade and investment relations with major partners. Unless these factors can be established with reasonable certainty, it will be hard to set objectives to be achieved in future trade and investment negotiations.

Conclusion

13. TheCityUK welcomes the Trade Bill as an important step in conferring certain powers, and creating some of the institutional framework, that will be necessary to support the progress that will need to be made in advancing the UK’s trade and investment agenda. But it is only a step, confined to those aspects that require an Act of Parliament to be taken forward in the immediate term. Looking further ahead, the government will need to frame other policy aspects relating to the longer term, particularly as regards new UK agreements with trade partners going beyond continuing existing EU agreements. These aspects are likely to require some further legislation, at least to the extent that fresh powers may be needed to implement new UK trade and investment agreements.

14. As already noted, TheCityUK proposed in 2017 that there should be an agreed framework covering consultation - possibly mandatory - with stakeholders, and a more formal system of accountability; and it remains to be seen how far the STAG/ETAG structure, plus other approaches to consultation, will accommodate this. In addition, a number of longer-term questions remain open. These include some definition of the role of the devolved administrations in trade policy and also the role of Parliament in approval and ratification processes for international agreements, (particularly if these are to be taken beyond the current provisions of the Constitutional Reform and Governance Act 2010 enshrining the Ponsonby Rule that most international treaties have to be laid before Parliament 21 days before ratification). Finally, any external trade and investment policy is inevitably an outward reflection of a country's internal policies in such matters as the form and extent of support for certain sectors (such as agriculture), immigration policy (with its critical links to mobility and access to talent) and attitudes to inward and outward investment and mechanisms for investment protection. All of these will call for still greater coordination within government on trade and investment issues, so that a coherent view can be taken, in consultation with stakeholders, on those further policy steps that at present have still to clarified.

TheCityUK

June 2020