The Trade Bill - UK trade policy following Brexit

The Trade Bill - UK trade policy following Brexit
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Introduction

The Trade Bill was introduced in the House of Commons on Tuesday 7 November 2017. It will have to be passed by both Houses before it becomes law, and it has to become law before Brexit takes effect, currently set for 29 March 2019.

At present, the vast majority of the UK's trade policy is governed by the EU, which negotiates and implements trade agreements on behalf of its Member States. The Government wants the UK to resume an independent trade policy post-Brexit. The Bill is one of the first steps in putting that independent trade policy into effect.

As currently drafted, the Bill:

  • Creates powers so the UK can roll over free trade agreements (FTAs) that currently exist between the EU and other countries, to which the UK is party through EU membership
  • Enables the UK to have continued access to government contracts and procurement opportunities in 47 countries – by creating the powers needed for the UK to implement the Agreement on Government Procurement (GPA) as an independent member instead of as part of the EU
  • Establishes a new independent UK body, the Trade Remedies Authority, to defend UK businesses against unfair trade practices, and
  • Ensures the UK Government has the legal abilities for gathering and sharing trade information, as evidence to support UK businesses against surges in imports and unfair practices

A separate Taxation (Cross-border Trade) Bill, previously known as the Customs Bill, was introduced in the Commons on 20 November. It will enable the Government to create a standalone customs regime and amend current VAT and excise regimes, and is a further step in implementing an independent trade policy.

Rolling over of current trade agreements

The UK benefits from over 60 FTAs by virtue of its membership of the EU. On leaving the EU, the UK will no longer be a party to these agreements.

To address this gap, the UK Government is intending to roll over (transition) these EU FTAs. The Explanatory Notes to the Bill explain why:

"The Government has committed to providing continuity in the UK’s existing trade and investment relationships with these partner countries. The aim is to establish a UK trade agreement with each partner country based, as closely as possible, on the corresponding trade agreement that country has with the EU."

It is, however, far from certain whether the EU's international partners will agree to this; they may instead wish to renegotiate the substantive terms of the FTA when applied bilaterally to the UK. In evidence to the House of Commons International Trade Committee, Crawford Falconer, Chief Trade Negotiation Adviser at the UK's Department of International Trade, accepted that whilst all third countries with whom the EU has FTAs have agreed in principle to roll over these agreements, such agreements are not guarantees: "what people say today sometimes changes tomorrow". It is also possible that some States may want to wait for the outcome of UK-EU trade negotiations before entering into an FTA with the UK.

The UK is prohibited by EU law from signing any new FTAs until it has left the EU, currently set for 29 March 2019. The Bill thus provides for the domestic implementation, through UK secondary legislation, of the non-tariff provisions of the rolled over EU FTAs, prior to the agreements coming into force after Brexit. Tariff provisions (the setting of import taxes and duties) will be implemented by regulations under the Taxation (Cross-border Trade) Bill.

The Government Procurement Agreement

The GPA is a plurilateral agreement within the framework of the WTO, meaning that not all WTO members are parties to the Agreement. At present, the Agreement has 19 parties comprising 47 WTO members. Another 31 WTO members participate in the GPA Committee as observers. Out of these, 10 members are in the process of acceding to the Agreement.

The fundamental aim of the GPA is to open government procurement markets among its parties. As a result of several rounds of negotiations, the GPA parties have opened procurement activities worth an estimated £1.3 trillion annually to international competition (ie to suppliers from GPA parties offering goods, services or construction services). The UK is currently a member of the GPA as an EU Member State. Post-Brexit, the UK will re-join the GPA as an independent member. The Bill provides that the Government may make provisions as it considers appropriate to implement the requirements of the GPA when the UK re-joins as an independent member. The intention is to maintain UK businesses’ current access to public contract opportunities under the GPA.

Establishment of a Trade Remedies Authority

WTO rules enable members to protect domestic producers from unfair and injurious trading practices through trade remedy measures, such as applying duties or quotas to particular imports. Currently the European Commission undertakes trade remedies investigations, and imposes any remedies, on behalf of Member States, including the UK. Once the UK leaves the EU, it will no longer be part of this process. To ensure that the UK can continue to provide a safety net to domestic industries against unfair and harmful trading practices this Bill will create a new, independent trade remedies body, the Trade Remedies Authority.

Data collection and sharing

The Bill will give HM Revenue & Customs the power to collect data on the number of UK exporters (and their identities), and to share this data with other bodies. This power is required to replace a function currently exercised by the European Commission. Access to this data will allow the Government and its agencies, including the Trade Remedies Authority, to conduct their statutory functions, including developing and monitoring trade policy.

Conclusion

The Government is keen to avoid sudden changes on 29 March 2019 to the terms on which UK businesses trade in countries with which the EU has an FTA. Hence the policy of rolling over the EU FTAs into bilateral FTAs between the country concerned and the UK, with the substance as unchanged as possible.

Achieving this, however, is easier said than done. Volume, time, and the goodwill of the countries in question are the key issues. The volume of EU trade agreements is considerable, and there are only 16 months to negotiate them. It is also highly probable, as we note earlier, that at least some of the countries will want to change the terms of EU FTAs to suit their exporters better.

As a consequence, businesses that currently rely on EU FTAs would be wise to carry out an assessment of the impact of falling back on WTO terms on their supply chains and export markets, as part of their Brexit planning. It is not inconceivable that this will happen, at least in an interim period after the UK withdraws from the EU. The trade team at DLA Piper is helping businesses to carry out such assessments.

It is vital for many UK businesses that rely on the UK's participation in the GPA to tender for government contracts worldwide that the Government ratifies the GPA as a non-EU Member State without a break in UK participation. Businesses will need to watch closely to ensure that this is achieved.

Finally, while it has now been confirmed that a new Trade Remedies Authority will be established, little is known as yet about its policy objectives and how it will balance UK consumer and business interests.