Guidance

UK trade policy: a guide to new trade legislation

Updated 3 December 2018

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 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 2017, 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) Act, which received Royal Assent on 13 September 2018, establishes a standalone customs regime and ensures that VAT and excise arrangements operate effectively upon Brexit. 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.

Statement by Secretary of State for International Trade and President of the Board of Trade.

Explaining the Trade Bill

The legislation will:

• 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. While the UK is a member of the EU, we 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
• 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

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, 7, 8; Schedules 1, 2, 3
Help to enable the adoption of deals with existing EU third country trade partners	Powers to make regulations to implement some elements of trade agreements (other than tariff-setting), in cases where third countries already have trade agreements with the EU before the date of the UK’s exit. Measures obliging the government to lay reports explaining any significant differences between the existing EU agreement and the proposed continuity agreement	Clauses 2, 3, 4, 7, 8; 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 9, 10; Schedule 4, 5
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 11
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 12

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) Act allows 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 deal.

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 EU trade arrangements

While the UK is in the EU, 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 European Union (Withdrawal) Act 2018, 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) Act; 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. To implement a new trade agreement with a new partner, the government will bring forward a bespoke piece of primary legislation for each new future trade agreement that requires changes to legislation and where there are no existing powers.

The powers to implement transitioned trade agreements and the GPA are held concurrently by the UK government and devolved administrations.

The use of concurrent powers 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 Agreement on Government Procurement (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.

While a member of the EU, the UK 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, using the process provided in the Constitutional Reform and Governance Act 2010. This process requires treaties to be laid before Parliament before they can be ratified.

The Trade Bill 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.

Trade remedies

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’ (that is 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

While the UK is a member of the EU, the European Commission carries out investigations and applies trade remedy measures on behalf of the UK.

Trade disputes

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.

While the UK is in the EU, the active administration of trade disputes and related enforcement action is undertaken by the European Commission on behalf of the UK, and the other EU member states. The Taxation (Cross-border Trade) Act enables 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, while in the EU, 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

The Taxation (Cross-Border Trade) Act 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 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.

Data collection and sharing

The data sharing measure will allow HM Revenue and Customs (HMRC) to share data with bodies that need to have access in order to carry out a range of public functions relating to trade.

The HMRC collects a range of data from import and export declarations which it provides to the European Commission, the UK government departments and agencies for trade related purposes under requirements and information gateways in EU law.

EU law provides gateways for data sharing from HMRC with other departments, agencies and international organisations. These will cease to apply when we leave the EU.

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. Therefore new information gateways are required.

The Trade Bill will give HMRC a new power to ask businesses whether they have exported goods or services over a reporting period. This information will be collected on a voluntary basis. It will allow the Department of International Trade to carry out functions linked to the provision of trade statistics and export trade promotion.

Required legislation

This legislation is required regardless of whether there is a deal or no-deal Brexit.

We want a deep and special partnership with the EU, taking in both economic and security cooperation. The government’s Brexit 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.

A role for devolved administrations

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.

Trade continuity agreements

The government is committed to maintaining our existing trade relationships to provide certainty for businesses and consumers.

While the EU (Withdrawal) Act 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 implemented while the UK is in the EU. 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.

Parliamentary scrutiny

Existing EU-third country agreements which we are proposing to transition have already been scrutinised through the applicable EU and Parliamentary processes.

The implementing power in the Trade Bill will also be subject to the affirmative resolution procedure. As such its use will require the approval of both Houses of Parliament. This is in addition to the existing parliamentary processes governing ratification (under the Constitutional Reform and Governance Act 2010), which will apply to all agreements that require ratification.

The government has amended the Trade Bill to provide even greater transparency to Parliament, businesses and consumers on continuity agreements. If there are significant changes in the effects of our continuity agreements, the government will publish reports on those agreements to explain them. These reports need to be published in advance of using the clause 2 power or before any continuity agreement is ratified.

All future trade agreements will receive the proper degree of scrutiny from ministers and Parliament as they are negotiated.

Future trade agreements

The Trade Bill is about providing continuity in our existing trading agreements. It does not allow for the implementation of any future free trade agreements with countries that have not signed an agreement with the EU before exit day, such as the USA. New trade agreements will be taken forward using the approach set out in the Secretary of State for International Trade’s announcement to Parliament on 16 July 2018.

This includes a robust system for engaging Parliament and stakeholders, including the devolved administrations, businesses, trade bodies and the public, in the process of agreeing any future trade arrangements. These proposals will deliver the scrutiny and transparency that the UK public, expects and deserves. We consulted on potential deals with the United States, Australia and New Zealand, as well as on joining CPTPP.

Parliament will be able to inform negotiations, will be regularly updated as negotiations progress, and will ultimately play its role in the ratification of any new FTA through the process set out in the Constitutional Reform and Governance Act 2010.

High level of standards maintained

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.

DIT

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.

Legal disclaimer

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.

Any enquiries regarding this publication should be sent to us at [email protected].