International Trade Committee issues final verdicts on UK trade deals before disbanding

Wed 26 Apr 2023
Posted by: Richard Cree
Trade News

View of Parliament through an arch across the river

The International Trade Committee (ITC), the parliamentary committee responsible for oversight of the former Department of International Trade (DIT), has published a raft of reports on the UK’s planned trade deals.

Due to the reorganisation of government departments, the ITC is being disbanded and has published a wave of reports on its final day.

The reorganisation included the merger of DIT with the Department for Business, Energy and Industrial Strategy into the new Department for Business and Trade (DBT).

GCC risk

On its last day, the ITC published reports on the negotiations underway for a free trade agreement (FTA) with India, the UK’s accession to the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) and negotiations with the Gulf Cooperation Council (GCC).

According to the Independent, the report into the ongoing GCC discussion highlighted the need to stand firm on human rights. The ITC report said the UK should be prepared to walk away rather than compromise on rights.

“We urge the UK to be openly prepared to end the negotiations rather than accept an unsatisfactory agreement.”

India questions

For the India report, the ITC noted it had been forced to terminate its inquiry without taking oral evidence from experts, stakeholders or the government in public.

It nevertheless highlights several key areas of concern, including a potential imbalance in the trade of services, with market access for services being more restricted in India, and no existing UK-India arrangements regarding the mutual recognition of professional qualifications.

The ITC also raised concerns about sanitary and phytosanitary (SPS) standards including India’s rules around the use of pesticides. There were also further concerns about so-called technical barriers to trade (TBT) and the fact that only 30% of India’s standards catalogue is harmonised with international standards.

Industry concerns

When it comes to the liberalisation of trade in goods between the two countries, while the report noted that both sides have plenty to gain, “India is, by far, the more protectionist of the two countries” and thus has more potential upside.

The ITC’s report highlights specific questions and concerns that had been raised to it in written evidence by various industry bodies. These include issues such as the possible removal of the tariff on milled rice, decisions on how rules of origin will allow key UK export sectors (notably automotives and whisky) to take full advantage of preferential tariffs, and safeguards for micro, small and medium-sized enterprises (MSMEs) and rural communities in India.

CPTPP

CPTPP is the trade agreement comprising Australia, Canada, Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Singapore and Vietnam which the UK has agreed accession to. It emerged from the Trans-Pacific Strategic Economic Partnership Agreement—a free trade agreement signed in 2006, which came to be known as the P4, after its four Pacific signatories of Brunei Darussalam (yet to ratify CPTPP), Chile, New Zealand and Singapore.

The ITC report points out that the UK already has trade agreements with nine of the 11 CPTPP countries and had planned to assess the advantages of CPTPP over deals with the remaining two countries.

The FTAs with Australia and New Zealand were the first newly negotiated post-Brexit, although neither is yet in force. The remainder are continuity agreements replicating FTAs, which the UK was party to as a member of the EU.

The UK’s accession to the CPTPP would put the UK on FTA terms with Malaysia and with Brunei Darussalam, when the latter ratifies the agreement.

Enhanced opportunities

The ITC sought to examine where else the CPTPP offers opportunities for the UK above and beyond those in its bilateral agreements.

The report notes that there are important areas where the CPTPP goes further than existing agreements, including more generous rules of origin and ending the requirement to maintain a local presence to deliver services.

But the ITC is clear that there are plenty of unanswered questions, notably on the environmental impact of accession to the CPTPP, particularly with regards to animal welfare and the production standards applied to products entering the UK.

It suggests the government must publish an environmental impact assessment. The MPs on the ITC have also raised the question of exactly how the government plans to make sure traders are best placed to make use of the agreement.

Trade and geopolitics

The ITC also questioned the future of CPTPP and the impact of its potential to change and expand. This, they point out, could bring benefits and challenges. To realise the benefits, say the MPs, it is important that the UK is clear what it wants to achieve through membership.

“While it should look for opportunities to further liberalise tariffs and align regulations, it also needs to consider where its policy leadership could strengthen the rules-based trading system to deliver for British businesses.”

In this, its last report, the MPs on the ITC reiterated their call for the government to deliver “a single, comprehensive trade strategy”, arguing they can’t assess the merits of the accession of new countries without such a strategy.

Commenting on the report, Angus MacNeil MP, chair of the ITC, said:

“The government’s race to join the CPTPP has the potential to bring benefits and challenges to the UK. There are unanswered questions over the degree of new goods and services trade membership of CPTPP will bring, and concerns remain over the environmental impact of the agreement.

“But membership places the UK in a dynamic bloc, which is shaping international trading rules and norms. The key question for the government is how it will ensure that membership delivers benefits for British businesses and consumers.”

Scrutiny

MacNeil added that the winding up of the ITC meant it hasn’t had time to conclude its scrutiny of the CPTPP deal.

He added that their call for the government to produce an overarching trade strategy, setting out what the government wants to achieve multiple trade negotiations, must not be forgotten as the newly formed Business and Trade Committee (BTC) takes up what he called “this vital scrutiny.”

IOE&IT view

Grace Thompson, public affairs lead at the Institute of Export & International Trade, agrees on the importance of continued thorough parliamentary scrutiny of trade deals going forward.

“Parliamentary scrutiny is undoubtedly a vital mechanism for the development of well thought-through trade deals and is necessary to take into account concerns and ideas from the wide variety of sectors that feed into their parliamentary representatives.

“It was encouraging to see that the chair of the reformulated Business and Trade Committee, Darren Jones MP, held a Westminster Hall debate last week on international trade and geopolitics in which he spoke of his desire to see a call to action for 'trade policy strategy' and a 'clearer outlook on the UK’s geopolitical future in relation to trade'. This is hopefully a sign that he intends to fully embrace the trade portfolio of his expanded committee and continue the work of scrutiny that the ITC had previously fulfilled.

“IOE&IT closely follows all trade deal developments on behalf of its members and the wider business community and believes that CPTPP will bring great opportunities for businesses across the UK. Our director general, Marco Forgione, spoke about the opportunities of CPTPP at length on various broadcast interviews in recent weeks.

Badenoch thanks IOE&IT

Thompson also refers to a letter to the Institute from trade and business secretary Kemi Badenoch that reflected “DBT’s desire to engage with industry on free trade agreements”.

In the letter, Badenoch thanked the Institute for its support for the government’s announcement about the UK joining CPTPP.

Badenoch wrote:

“I am always keen to hear about the opportunities that free trade agreements bring to industry, and I know my team look forward to continuing to work with you as we prepare for a signing moment and entry into force of the deal for CPTPP.”