Chapter 1: Agreements reported for information
Trade Agreement between the United Kingdom of Great Britain and Northern Ireland, of the one part, and the Republic of Colombia, the Republic of Ecuador and the Republic of Peru, of the other part1
1.The UK-Andean Countries Trade Agreement was laid on 14 June 2019, and the scrutiny period is scheduled to end on 22 July. It was considered by the EU External Affairs Committee at its meeting on 27 June.
2.The precursor agreement to the UK-Andean Countries Trade Agreement is the EU-Andean Countries Trade Agreement,2 which has been provisionally applied by Peru and Colombia since 2013, with Ecuador acceding to it in 2017. Bolivia, while a member of the Andean Community, has not sought accession. The UK-Andean Countries Trade Agreement seeks to ensure continuity of effect with the EU Agreement by incorporating it mutatis mutandis,3 with only a small number of modifications. Consequently, the UK Agreement has been published in short form.
3.The UK’s combined trade with Colombia, Peru and Ecuador (‘the signatory Andean countries’) accounts for less than 0.3% of total UK trade. In 2017, UK services exports were worth £0.5 billion and UK goods exports accounted for £0.7 billion. Main UK goods exports include machinery and mechanical appliances, mineral fuels or oils and vehicles. Main UK goods imports from the Andean countries include fruits and nuts, mineral fuels or oils and machinery and mechanical appliances.
4.The Agreement—like other trade agreements previously considered by the Committee—introduces an extended cumulation of origin. This allows both parties to recognise materials from the EU as originating in the UK or a signatory Andean country in exports to one another. EU processing can, under certain conditions, also be recognised in UK exports to signatory Andean countries and vice versa.4 The Government notes that, without these provisions, products from the UK or signatory Andean country using EU content would no longer meet the origin requirements for preferential treatment by the other party.5 The EU Agreement also contains Origin Quotas. These allow a specified volume of listed product lines (e.g. swimwear) to be exported under more lenient rule of origin criteria, by lowering the percentage of originating content. Origin Quotas have been retained in the UK Agreement, although they have been resized to reflect the UK’s smaller market size compared to the EU28.
5.While tariff levels in the UK Agreement will remain the same as in the precursor EU Agreement, tariff rate quotas (TRQs) have been resized to reflect trade flows between the UK and the Andean countries. The UK Government based the resized TRQs on customs, trade flow and usage data. To maintain market access, both sides agreed to provide a minimum level of access by basing TRQs on a proxy measure where data showed historic trade as being very low or non-existent.
6.The precursor EU Agreement allows Andean countries to impose higher duties on specific agricultural products if the import volume exceeds a certain trigger level. This has been rolled over, but the trigger points have been resized to reflect the import of UK goods into Andean countries.
7.The EU Agreement included a commitment to review in 2019 the tariff liberalisation of bananas. This commitment has been replicated, but with a modified date for review—no later than two years after entry into force of the UK Agreement. Should the scheduled review be completed and adopted by the Trade Committee (the EU Agreement’s governance body) while the EU Agreement still applies to the UK, then it will be incorporated into the UK Agreement under Article 6. This Article states that any decisions taken by the Trade Committee while the EU Agreement still applies to the UK are deemed to have been adopted mutatis mutandis by the Trade Committee established under the UK Agreement.
8.Protections afforded to the geographical indications (GIs) of all Parties under the EU Agreement have been retained. Additionally, UK-Irish cross-border GIs (e.g. Irish Whisky and Irish Cream) have been included in the UK Agreement. There are currently 14 GI applications that Andean countries have lodged with the EU and that are pending. A joint declaration in the UK Agreement sets out the Andean countries’ intention to deliver these 14 applications to the UK on the date of its exit from the EU, or when the GI scheme of the EU ceases to apply to the UK, whichever comes later. The Agreement includes a commitment by the UK to process these applications “in a transparent and efficient manner”.6
9.Both the Explanatory Memorandum (EM) and the Parliamentary Report accompanying the Agreement contain detailed information about the process for making future amendments to the Agreement. This is a welcome development, given that previous Committee reports have repeatedly called on the Government to spell out more clearly the process for future amendments and the circumstances under which these would be subject to the scrutiny processes under the Constitutional Reform and Governance Act 2010 (CRAG).7
10.Under Article 334 of the EU-Andean Countries Trade Agreement, as incorporated by the UK-Andean Countries Trade Agreement, the Parties may mutually agree in writing to amend the text of the Agreement. The explanatory materials confirm that amendments made via this Article would engage the process of parliamentary scrutiny under CRAG.
11.The Trade Committee may also make modifications to the Agreement and the explanatory materials cite the acceleration of tariff reductions as an example. To have effect, any such modifications would be adopted subject to the respective applicable legal procedures. Department for International Trade (DIT) officials have confirmed that, in such cases, the CRAG Act would not be engaged. Only if implementing domestic legislation was required would the relevant amendments be subject to parliamentary scrutiny. This could leave a scrutiny gap in those circumstances where amendments would not require changes to domestic law. As set out in our report, Scrutiny of international agreements: lessons learned,8 to support appropriate scrutiny in future, the Government should report regularly to Parliament on changes to international agreements, including matters such as decisions by Joint Committees operating under those agreements.
12.Parts of the Agreement also apply to Gibraltar, the Channel Islands and the Isle of Man. Article 3 states that the Agreement will apply to these territories to the same extent as the EU Agreement had applied to them. We regret that the explanatory materials do not expand on this, resulting in a lack of clarity over which parts of the UK Agreement apply to the Channel Islands, the Isle of Man and Gibraltar. In some recent agreements, and at the request of the Committee, Parliamentary Reports provided more detailed information. For example, the Parliamentary Report on the CARIFORUM Agreement9 laid out that, in general, the territorial application provisions work as follows:
(a)Crown Dependencies (Isle of Man, Jersey, Guernsey): broadly, trade in goods provisions and tariffs will apply
(b)Gibraltar: provisions not relating to goods and customs will apply
(c)Other Overseas Territories: specific provisions on cumulation and rules of origin will apply.
DIT officials have confirmed that the same principles apply in respect of this Agreement, with the qualification that this particular Agreement does not extend to the Other Overseas Territories. We ask the Government to revert to providing more detailed information on the geographical extent of agreements in future.
13.Finally, the EM indicates that the Government is engaging with and has consulted the devolved administrations, Gibraltar and the Crown Dependencies. However, while the EM states that DIT can confirm that the draft agreements “once stable, are shared with DAs”, it does not make clear whether the text of this specific Agreement was shared with them prior to signature. Following an exchange with officials, we confirmed that the Agreement was shared when it was initialled. We ask the Government to ensure that, in future, where specific agreements have been shared with the DAs, this is explicitly stated in the consultation section of each EM.
14.We report the UK-Andean Countries Trade Agreement to the House for information.
1 Trade Agreement between the United Kingdom of Great Britain and Northern Ireland, of the one part, and the Republic of Colombia, the Republic of Ecuador and the Republic of Peru, of the other part, CP 122, 2019: https://www.gov.uk/government/publications/ms-no222019-trade-agreement-between-the-united-kingdom-of-great-britain-and-northern-ireland-of-the-one-part-and-the-republic-of-colombia-the-r [accessed 20 June 2019]
2 Council Decision of 31 May 2012 on the signing, on behalf of the Union, and provisional application of the Trade Agreement between the European Union and its Member States, of the one part, and Colombia and Peru, of the other part, OJ L 354 (21 December 2012) [accessed 20 June 2019]
3 The Latin term mutatis mutandis is used when comparing two or more things to say that, although changes will be necessary in order to take account of different situations, the basic point remains the same. For more detail, see our report Scrutiny of international agreements: treaties considered on 26 February 2019 (31st Report, Session 2017–19, HL Paper 300)
4 More detail on cumulation of origin is available in Box 2 of our report Scrutiny of international agreements: treaties considered on 26 February 2019 (31st Report, Session 2017–19, HL Paper 300)
5 Department for International Trade, Continuing the United Kingdom’s trade relationship with the Republic of Colombia, the Republic of Ecuador and the Republic of Peru, (June 2019) para 80: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/808947/UK-Andean_countries_trade_agreement_parliamentary_report.pdf [accessed 20 June 2019]
6 Modifications to Annex XIII, lists of geographical indications.
7 A point first made in our European Union Committee report, Scrutiny of international agreements: treaties considered on 26 February 2019 (31st Report, Session 2017–19, HL Paper 300).
8 European Union Committee, Scrutiny of international agreements: lessons learned (42nd Report, Session 2017–19, HL Paper 387) para 68
9 Department for International Trade, Continuing the United Kingdom’s trade relationship with the CARIFORUM States, (April 2019) paras 52–53 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/803587/CARIFORUM-UK-EPA.pdf [accessed 27 June 2019]