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A new UK trade policy
Free and fair trade is fundamental to the prosperity of the United Kingdom and the world economy. It leads to higher wages and ensures more people can access a wider choice of goods and services at lower cost, making household incomes go further, especially for the poorest in society. The UK’s trade with the world is equivalent to over half the UK’s GDP.
As we negotiate our exit from the European Union, we have a once in a lifetime opportunity to build a stronger, fairer and more prosperous UK that is more open and outward looking than ever before.
The Trade Bill, introduced on 7 November, represents a significant step in preparing to leave the EU. It will put in place essential legal powers and structures to enable the UK to operate an independent trade policy.
The Taxation (Cross-border Trade) Bill, introduced on 20 November, will establish a standalone customs regime and ensure that VAT and excise arrangements operate effectively upon EU exit. It also contains trade-related tax measures.
This legislation will prepare the UK for all possible outcomes of negotiations and will help to ensure that we are ready for exit, providing continuity for individuals, businesses, and our international trading partners.
Secretary of State for International Trade and President of the Board of Trade.
The aims of the new legislation
- prevent disruption to UK business and consumers by creating powers to make regulations, if needed, to assist in implementing trade agreements that we transition with existing third country trade partners. This will help to ensure continuity of existing trade and investment arrangements across the UK, providing continuity to workers, consumers, businesses and international trading partners
- maintain UK businesses’ access to public contract opportunities worth approximately £1.3 trillion per year, and ensure that we get the best deal for the taxpayer, by making provision for the UK to implement obligations under the World Trade Organization (WTO) Agreement on Government Procurement (GPA) as an independent member. We currently participate in the GPA via the EU
- create a new UK trade remedies framework overseen by a new, independent body, the Trade Remedies Authority. This will enable the UK to secure the benefits of global free trade while providing a safety net for domestic industries against unfair and injurious trading practices, such as dumping or subsidies, or unforeseen and injurious surges in imports
- create a unilateral trade preference scheme which enables the UK to continue to provide preferential access for the world’s poorest countries to help grow their economies and trade their way out of poverty.
- enable HMRC to collect and share essential data on trade. This will enable bodies such as DIT and the new Trade Remedies Authority to perform essential trade functions – such as providing evidence on trade disputes assessed by WTO panels – as well as informing the development of new policy
Explaining the trade bill
The Trade Bill focuses on providing continuity for businesses and consumers. It creates powers to make legislation if necessary for the transitioning of agreements that exist between the EU and third countries into UK agreements with those countries; provides for the UK’s continuing membership of the GPA; establishes a new independent Trade Remedies Authority; and provides for the collection and sharing of data on trade.
|Policy aim||Measure||Relevant clause|
|Maintain membership of the GPA||Powers to make regulations necessary to implement the UK’s GPA obligations as an independent member and to reflect new accessions to, or withdrawals from, the GPA||Clauses 1, 3, 4; Schedules 1, 2, 3|
|Enable the adoption of deals with existing EU third country trade partners||Powers to make regulations to implement the elements of trade agreements (other than tariff-setting) with third countries that have trade agreements with the EU before the date of the UK’s exit||Clauses 2, 3, 4; Schedules 1, 2, 3|
|Establish an independent body to conduct trade remedies investigations||Creation of the Trade Remedies Authority, and powers to enable the Trade Remedies Authority to provide advice and assistance to DIT||Clauses 5, 6; Schedule 4|
|Ensure that DIT has the data it needs to perform its functions and inform trade policy||New data collection powers to build a clearer picture of UK exports||Clause 7|
|Ensure that DIT has the data it needs to perform its functions and inform trade policy||Enabling HMRC to share data with DIT and other bodies carrying out public functions relating to trade||Clause 8|
Trade related tax measures
As the UK leaves the EU, it will also leave the EU Customs Union. Irrespective of any agreements reached between the UK and EU, the UK will need new primary legislation to establish a standalone customs regime, and to amend the VAT and excise regimes so that they can function as required after the UK has left the EU.
The Taxation (Cross-border Trade) Bill will allow the government to create a standalone customs regime. It provides for a range of negotiated outcomes, as well as legislating for a contingency scenario where the UK leaves the EU without a negotiated outcome. Among other things, it ensures that the UK can:
- establish a new UK tariff, charge customs duty on goods (including on goods imported from the EU), set and vary rates of customs duty, and suspend or relieve duty at import in certain circumstances
- define how goods will be classified to establish the amount of customs duty due
- request, collect, store, and share tax-related information
- accommodate the transition to a new customs regime
It also provides for measures to replace existing powers and schemes in EU law that relate directly to the rate of customs duty chargeable. These include:
- a new UK trade remedies framework that can be used to impose additional customs duty in certain circumstances
- the creation of a unilateral trade preference scheme to enable the UK to continue to reduce or remove the tariffs paid on imports from developing countries
- the ability to vary the rate of duty in the event of a dispute between the UK government and the government of another territory or country, where authorised to do so by international law
Explaining trade legislation
Transitioning current trade arrangements
Currently, the EU has competence to negotiate and agree trade agreements on the UK’s behalf. This means that the provisions that underpin the trade agreements that the UK has through the EU take effect through the European Communities Act 1972 (ECA).
The ECA will be repealed by the EU (Withdrawal) Bill, which means that the UK will need another way to ensure that our existing trade agreements are fully implemented within UK law and remain operable over time.
The government aims to transition existing EU-third country trade agreements into UK agreements with those third countries, and has begun to discuss with our trading partners how we might do so to achieve continuity and provide certainty for businesses.
To achieve this, the UK will need to implement any transitioned agreements once they are agreed, and may need to change our legislation to allow this. The Trade Bill gives us the power to make such changes.
Provision on tariffs can be implemented through the Taxation (Cross-border Trade) Bill; this power is to deal with other matters.
Importantly, in the case of free trade agreements (agreements covering substantially all trade between the parties, which must be notified to the WTO), these powers will only be available if the partner country had signed a free trade agreement with the EU before exit day. Decisions have not yet been taken on the legislative framework for the implementation of future agreements.
The legislation creates concurrent powers to enable the devolved administrations and UK government to give effect to elements of transitioned trade agreements (and the GPA) that fall within devolved competence.
This will ensure that, where it makes practical sense for regulations to be made once for the whole UK, it is possible for this to happen. The UK government will not normally use the powers to amend legislation in devolved areas without the consent of the relevant devolved administrations, and not without first consulting them.
Agreement on Government Procurement
The GPA is a plurilateral agreement within the framework of the WTO that aims to mutually open government procurement markets among its Parties. It provides UK businesses with access to public procurement opportunities worth approximately £1.3 trillion per year, and ensures that the UK can continue to secure the best deal for the taxpayer.
The UK currently participates in the GPA via our EU membership, and intends to join as an independent member – on the same terms and with the same level of coverage – to provide continuity as we leave the EU. Parliament will have the opportunity to scrutinise and approve the terms of the UK’s proposed GPA membership before the UK joins as an independent member.
This legislation will enable the UK to make any changes required in domestic legislation as the UK accedes to the GPA. It also allows the UK to be able to reflect new countries joining the GPA and existing parties withdrawing from it.
WTO rules create a safety net by enabling WTO members to protect domestic producers from unfair and injurious trading practices, and unforeseen and injurious surges in imports, through trade remedy measures, such as applying additional duties or (in respect of safeguards only) quotas to particular imports, in the following circumstances:
- anti-dumping measures – these can be applied where imported goods are ‘dumped’ (ie exported at prices lower than the prices of the same goods in the domestic market of the exporter, or less than the full cost of production plus a reasonable profit), and which materially injure the domestic industry of the importing country
- anti-subsidy measures (also known as countervailing measures) – these can be imposed on imports of goods which have benefitted from a financial contribution by a foreign government or public body, and which materially injure domestic industry of the importing country
- safeguards measures - these enable a country to impose additional duties or quotas on products in the event of a surge of ‘fairly’ traded imports which seriously injure the domestic industry of the importing country
Dispute settlement is a key element of the WTO trade system and allows for the enforcement of the WTO agreements. This makes the international trading system more predictable and secure.
Free trade agreements (FTAs) with third countries also frequently contain dispute settlement mechanisms of varying complexity, many of which follow similar procedures to those of the WTO.
Taking appropriate, proportionate action to enforce international trade law can preserve and open up trading opportunities for UK firms.
The active administration of trade disputes and related enforcement action is currently undertaken by the European Commission on behalf of the UK and the other EU member states. This legislation will enable the UK to take action independently to enforce and respond to dispute rulings after leaving the EU.
Unilateral trade preferences
Unilateral trade preference schemes offer non-reciprocal reductions in tariffs to imports from less prosperous developing countries. The UK currently offers trade preferences through the EU under the following tiers:
- Everything But Arms – tariff and quota free access on all goods from 49 Least Developed Countries, with the exception of arms and ammunition
- Generalised Scheme of Preferences (standard GSP) – for the 13 developing countries in the next tier, classed as Lower Middle Income, the EU offers a mix of reductions and full removal of tariffs on around two-thirds of tariff lines
- GSP+ - an enhanced tier for 9 economically vulnerable countries that are implementing 27 international conventions on human and labour rights, environment and good governance; the two-thirds of tariff lines covered by GSP are reduced to zero
This legislation ensures that the UK will be ready to put in place a trade preferences scheme as we leave the EU. As a minimum, this will provide the same level of access as the current EU scheme. This will ensure that the world’s poorest countries can still benefit from tariff-free or reduced tariff access to UK markets and that other developing countries across the globe can continue to export to the UK accordingly.
The data sharing measure will allow HMRC to share data with bodies that need to have access in order to carry out a range of public functions relating to trade.
HMRC currently collects a range of data from import and export declarations which it provides to the European Commission and UK government departments and agencies for trade related purposes under requirements and information gateways in EU law.
EU law currently provides gateways for data sharing from HMRC with other departments, agencies and international organisations. These will cease to apply when we leave the EU. Numerous functions currently carried out by the European Commission will be transferred back to the UK, therefore new information gateways are required.
UK departments and agencies will need to take on a number of trade functions formerly carried out by the European Commission and will require access to record level HMRC data to do so.
Is this legislation introduced in anticipation of leaving the EU without a deal?
No. We want a deep and special partnership with the EU, taking in both economic and security cooperation. The government’s EU exit legislative programme is designed to cater for the full range of negotiated and non-negotiated outcomes.
We have been clear from the start that we will do whatever is necessary to prepare for our exit, including bringing forward further legislation if required. As we leave the EU, we will need to ensure the UK has the necessary legal powers and structures in place to enable us to operate a fully functioning future trade policy.
Why has the Trade Bill been introduced soon after the White Paper consultation period closed?
DIT has undertaken a comprehensive series of engagement activities as we develop our future trade policy. The White Paper published in October is just one part of an ongoing programme of engagement, and the responses to it will help to inform the ongoing development of our future trade policy. We want to ensure that Parliament has enough time to consider the legislation being brought forward to ensure the framework is operational upon the UK’s departure from the EU.
Parliament, the devolved administrations, the devolved legislatures, local government, businesses, trade unions, civil society, and the public from every part of the UK, will have the opportunity to contribute to our future trade policy.
Why does the Bill create concurrent powers to transition existing trade agreements and implement the GPA?
As parts of these agreements will touch on devolved matters, legislation will create powers for devolved administrations to implement them. These powers will be held concurrently by the devolved administrations and the UK government.
This approach will ensure that, where it makes practical sense for regulations to be made once for the whole UK, it is possible for this to happen. The UK government will not normally use these powers to amend legislation in devolved areas without the consent of the relevant devolved administrations, and not without first consulting them.
Why do you need legislation to replicate trade deals we already have?
The government is committed to maintaining our existing trade relationships to provide certainty for businesses and consumers.
While the EU (Withdrawal) Bill will convert EU law into UK law at the point of exit, it will also repeal the European Communities Act 1972, which is the primary means by which our trade agreements are currently implemented. We therefore need to build a new legislative framework to ensure that transitioned trade agreements can be fully implemented within UK law and remain operable over time.
For example, in relation to transitioning existing Mutual Recognition Agreements, the power may be used to amend the definitions of expert bodies in various pieces of UK legislation so that they include expert bodies from any countries that the UK has transitioned a mutual recognition agreement with.
What role will Parliament have in scrutinising trade agreements?
Existing EU-third country agreements which we are proposing to transition have already been scrutinised through the applicable EU and Parliamentary processes. All future trade agreements will receive the proper degree of scrutiny from ministers and Parliament as they are negotiated.
What role will Parliament have in deciding whether the UK should join the GPA?
Parliament will scrutinise the terms of the UK’s proposed membership using the process provided in the Constitutional Reform and Governance Act 2010. This requires treaties to be laid before Parliament before they can be ratified.
Why doesn’t the legislation include powers to implement future free trade deals?
The Trade Bill is about providing continuity in our existing trading relationships. As part of our preparations for operating an independent trade policy, the government wants to consult a wide range of stakeholders on future trade agreements. Decisions have not yet been taken on the legislative framework for the implementation of future trade agreements.
Will future trade deals see a lowering of standards?
As we leave the EU, in line with our WTO commitments, the government will continue to maintain our high level of protections of intellectual property, consumers, the environment, and employees. We will also ensure we protect our ability to maintain control of the provision of public services, like the NHS, in new trade agreements.
The UK’s Department for International Trade (DIT) has overall responsibility for promoting UK trade across the world and attracting foreign investment to our economy. We are a specialised government body with responsibility for negotiating international trade policy, supporting business, as well as delivering an outward-looking trade diplomacy strategy.
Whereas every effort has been made to ensure that the information in this document is accurate the Department for International Trade does not accept liability for any errors, omissions or misleading statements, and no warranty is given or responsibility accepted as to the standing of any individual, firm, company or other organisation mentioned.
© Crown Copyright 2017
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