I turn to Amendment 41 in the name of my noble friend Lord Lansley, which seeks to ensure that regulations made under Section 15 of the Taxation (Cross-border Trade) Act 2018 will be made under the affirmative parliamentary procedure. I remind noble Lords that that section allows the Secretary of State to vary the rate of import duty—that is, increase or decrease tariffs—in the context of an international trade dispute.
First, I begin by thanking my noble friend for his commitment to this issue, alongside the correspondence and meetings that we have had on the matter. I hope my noble friend found them at least partly as useful as I did.
Noble Lords may recall that I explained in Committee why I believe that it is imperative that HMG are able to enforce, swiftly and confidently, the UK’s rights under international trade agreements. I explained to the House that the conduct of state-to-state trade disputes is a matter of foreign diplomacy and is covered by the royal prerogative. I also reminded the House that international litigation, including launching and defending international trade disputes, can be extremely sensitive, with far-reaching geopolitical implications. I shall not attempt to justify sensitivity in itself, of course, as a reason for avoiding scrutiny. However, when that sensitivity may give rise to matters that are extremely prejudicial to the UK’s position, it must be absolutely right to take it into account.
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Noble Lords may be relieved to hear that I do not intend to repeat those points at length today. However, it is important that the House fully understands the Government’s reasoning for resisting this amendment so, with the indulgence of the House, I shall explain two scenarios in which the UK may use this power. I hope that it will help the noble Lords, Lord Stevenson and Lord Purvis, to understand better the Government’s position on this important matter.
The first scenario that I want to illustrate is where another country launches a successful dispute against the UK and the UK does not bring itself into compliance within the required period. This could be for the simple reason that legislation is needed to make the change and it is not possible to do that quickly. In this instance, the UK may offer compensation, which may be in the form of lower import duty on certain products. The UK would then use its Section 15 power to vary the rate of import duty on those products. This amendment could mean that the UK’s proposal to lower the rate of import duty on select products was voted down by Parliament. It would leave the UK in breach of its international trade commitments and subject to retaliation measures being implemented by the other country.
A second scenario could be where one of the UK’s trading partners implemented a measure which caused serious harm to UK businesses and the UK launched a successful dispute against that country. If the other party did not bring themselves into compliance within a reasonable period, the UK would assess how it could best exercise its right to retaliate. This would likely involve extensive technical analysis to select a list of products which the UK thought would have the best possible chance of conducing the other country to comply with their obligations and relieve the pressure on UK businesses. These products would be chosen carefully to ensure that their value was within the limits of the retaliation award, or equivalent to the harm caused by the other country’s incompliant measures.
The UK may wish to target certain products for strategic and often sensitive reasons. For example, it may wish to increase tariffs on a product because the
lobby group of those stakeholders has a strong political influence in a third country, or because a product has a strong symbolic or personal connection to the Government in question. This amendment would require the Government to argue and justify in an open forum why they had chosen one product line over another and, in turn, could expose the UK’s strategic decisions and negotiating positions to our trading partners. For instance, the Government may be obliged to justify the inclusion or exclusion of certain products to Parliament. This could create the risk that certain trade dependencies are publicly exposed, which could be exploited by our trading partners. This would undoubtedly cause harm to the UK’s interests, leverage and international reputation.
The Government of course recognise that these tariffs may have an impact on UK stakeholders. I reassure noble Lords that the Department for International Trade will carry out comprehensive engagement with businesses concerned and mitigate the effects where it is possible to do so.
I know that my noble friend recognises that Section 15 of the Taxation (Cross-border Trade) Act is an important tool available for the UK to defend itself when other countries bring disputes against us.
My noble friend also raised the Government’s approach to the Airbus and Boeing trade disputes, and I will comment briefly on that. I reassure him that the Government are serious about de-escalating these long-running disputes. As a gesture of our determination to unlock a deal, we have suspended retaliatory tariffs resulting from the Boeing dispute. This reflects the UK’s continued focus on achieving a swift and balanced settlement, to the benefit of all parties involved. If this is achieved, there will of course be no need to implement retaliatory tariffs. However, we reserve the right to apply independent retaliatory tariffs if sufficient progress is not made in negotiations, and we will not hesitate to exercise our WTO rights in the interests of defending British businesses and industry in all parts of the UK.
I hope that my remarks have provided some solace to my noble friend. The Government recognise that international trade disputes serve different functions and can have wide-ranging impacts. Naturally—I absolutely take this point—some of these impacts will be of interest to Parliament. In recognition of this, the Government will address, I hope as part of the way forward that the noble Lord, Lord Stevenson, was seeking, important considerations around trade disputes within a report that the Department for International Trade will lay before Parliament. On this basis, I hope that my noble friend will be content to withdraw this amendment.