P U B L I C A T I O N R E F : E D 0 0 2
The All-Party Parliamentary Group Trade & Export Promotion
C h a i r s : L o r d W a v e r l e y & G a r y S a m b r o o k M P
REVIEW OF UK TRADE STRATEGY
S E C R E T A R I A T : I C C U N I T E D K I N G D O M
A P P G T R A D E . U K
All-Party Parliamentary Groups are informal groups of Members of both Houses with a common interest in particular issues. This is not an official publication of the House of Commons or the House of Lords. It has not been approved by either House or its committees. This Report was researched by the named organisations of each contribution and funded in-line with House rules.
2 Content
The APPG would like to thank the organisations and individuals for their contribution of written evidence:
Page 3: APPG Trade & Export Promotion Background
Page 4: Foreword from Session Chair: Lord Lansley
Page 5: Executive Summary and Recommendations
Page 7: Written Evidence - The Association of the British Pharmaceutical Industry (ABPI)
Page 10: Written Evidence - The Institute of Export & International Trade
Page 14: Written Evidence - The IP Federation
Page 21: Written Evidence - The Trade Justice Movement
Page 27: Written Evidence - The Federation of Small Businesses (FSB)
Page 29: Written Evidence - The Law Society of England and Wales
Page 32: Written Evidence - Greater Manchester Chamber of Commerce
Page 36: Acknowledgements 3 Background
Founded in September 2020, the APPG for Trade & Export Promotion brings together the experience of parliamentarians from all political persuasions supported by business, unions, consumers, academics, NGOs and civil society. We are working to promote an inclusive, sustainable approach to global trade involving all aspects of the trade agenda.
If you are interested in supporting the work of the APPG for Trade and Export Promotion please contact us: [email protected]
Mission and Purpose
Work for a comprehensive strategy to global trade
Bring the voice of prospects and prosperity to the heart of the national debate
Encourage an inclusive and sustainable environment
Foster dialogue between parliament, business, unions, consumers, academia, NGOs and civil society
Our Officers
LORD WAVERLEY GARY SAMBROOK MP LORD LANSLEY CBE BARONESS MOBARIK CBE
LORD RISBY BARONESS RITCHIE OF DOWNPATRICK LORD PURVIS OF TWEED LORD MANN
SIR JEFFREY DONALDSON MP JACK DROMEY MP CHRIS ELMORE MP 4 Foreword
In the wake of leaving the European Union, the UK has concluded 61 agreements to maintain the continuity of our trade as well as the Trade and Cooperation agreement with the EU. The Trade Act 2021 has stimulated wide debate about the future governance of our trade policies. The APPG on Trade and Export Promotion, seeking to promote successful trade, has brought interests and parliamentarians together to discuss trade issues.
In our second evidence session, we focused on the UK‘s trade strategy. As we move from the roll-over agreements to new bilateral deals such as with Australia and New Zealand, or accede to the Trans-Pacific Partnership ( CPTPP), so we will increasingly need to set out our strategy for trade.
The UK’s approach is to build trade opportunities within on open, rules-based trading system. But the task of reviving the WTO is a tough one. The restoration of its’ complaints and appellate functions is a priority, but the work on trade in services, on e-commerce and on trade in environmental goods are all key areas for British industry and there is an immediate need for clarity in the UK’s approach with international partners.
Is it to build the regional agreements? To work with like-minded partners, such as Japan? Can the US be re-engaged in multilateral institutions? Is the Agreement on Climate, Trade and Sustainability, led by New Zealand, a means to deliver our trade and environment objectives? How will the U.K. use its’ chair of the G7 and COP 26 this year to shape and move forward this trade and sustainability agenda?
The world economy post -pandemic desperately needs to rebuild supply chains and confidence. In the absence of an effective trading system, pressures for “ strategic autonomy”, as the EU calls it, will lead to less open trade and slower recovery.
Our APPG is using our independent non-partisan role to push for Britain to be clear and active in shaping the strategy for sustainable trade.
Lord Lansley Chair of Evidence Session Two 5 Executive Summary
As a major, outward facing trading nation, the United Kingdom requires a strategic framework for trade that reaches beyond free trade agreements to include all aspects of the international trade agenda; trade policy, trade promotion, investment and trade finance. Despite progress being made in building out trade relations, too often there is a lack of clarity on what the strategic framework is. As a result, trade can feel disconnected from other policy priorities where trade plays a vital role such as climate, environment, sustainability or industrial growth. Recommendations
As the UK begins to chart a path outside the EU, now is the time to put in place a comprehensive trade strategy and ensure all stakeholders play a role in helping to make the UK a success. A framework should include:
1. The socio-economic case for trade and how it contributes to economic prosperity and well-being across all four nations of the UK.
2. The role government will play at international level to improve the trading environment and promote the rules-based trading system, particularly at G7, G20 and the World Trade Organization.
3. How the government proposes to mobilise its trade relations to affect positive change on the global trading system, particularly in working intelligently with fellow mid-tier economies such as Japan, Canada, Australia and Singapore.
4. How the UK will work with its considerable Commonwealth connections to double intra-Commonwealth trade, ensure no economies get left behind and bridge the dialogue between the needs of developed and developing economies.
5. A clear statement of intent on how the government will promote a race to the top on standards, particularly in key areas such as labour, human rights, public services and environment. 6
6. Connectivity with the levelling up and industrial growth strategies identifying where investment is needed most and how export capabilities will be built and expanded across the nations and regions.
7. A coherent sub-strategy on trade in services covering the spaces in which the government is expecting to play an active role in further trade liberalisation.
8. The digitisation of trade including government processes, systems, legal barriers, standardisation of data usage to ensure goods, services and information can flow seamlessly across borders, between government systems and with the private sector.
9. The role of trade in delivering national commitments to the UN Sustainable Development Goals and the Paris Climate Agreement including how trade and climate and environment rules will align.
10. The role of development funding in helping to build sustainable trade capabilities in the emerging economies, particularly in relation to tackling the digital divide and building climate resilience.
11. The role of trade finance and specifically how the government will address the trade finance gap and lack of short-term working capital for SMEs.
By incorporating these recommendations into a single framework document, the government will help communicate a clearer message on trade and foster more buy in to help make UK trade a success. Using the United Kingdom’s leadership of both the G7 and COP26, the Government should seize the opportunity to clarify how our trade strategy supports the Government’s broader objectives and the desire to be one of the world’s leading nations in protecting the environment.
Evidence Session Two & Webinar: 23rd February 2021
The APPG would like to thank The Lord Purvis of Tweed, Liberal Democrat Lords Spokesperson (International Trade) & Lord McConnell of Glenscorrodale for their opening contributions
And our panel members for the insightful discussion that followed:
The Rt Hon. The Lord Lansley CBE (Session Chair) His Excellency Mr Bede Corry (The High Commissioner of New Zealand) Steve Varley (Global Vice Chair of Sustainability at Ernst & Young LLP) Tim Runacre (Commercial Director at Crown Agents) Juergen Maier CBE (UK Industrialist & Business Advisor) 7 ABPI Response to UK Trade Strategy
About the ABPI
The ABPI exists to make the UK the best place in the world to research, develop and use new medicines and vaccines. We represent companies of all sizes who invest in discovering the medicines of the future.
Our members supply cutting edge treatments that improve and save the lives of millions of people. We work in partnership with Government and the NHS so patients can get new treatments faster and the NHS can plan how much it spends on medicines.
Every day, we partner with organisations in the life sciences community and beyond to transform lives across the UK.
Summary of key evidence points
Outside of the EU, the UK needs a strategic trade policy that supports the government's vision to cement the UK as a ‘science superpower’, creating jobs and boosting the UK economy. This should be built upon three core pillars: (i) protecting UK scientific innovation in export markets, (ii) increasing regulatory coherence, and (iii) streamlining the life sciences supply chain; making it easier for UK companies to manufacture and export their goods around the world, and enabling patient access to high-quality medicines in a safe and timely manner.
Free trade agreements (FTAs) are one of a number of mechanisms available to bring about benefits to the UK life sciences sector and economy. FTAs present a means to explore potential trade policy tools, such as mutual recognition agreements and bilateral governmental discussions, that can help to dismantle non-tariff barriers to open, fair trade and increase the immediate value and opportunity for UK life science exports.
FTAs provide a framework to protect and promote UK scientific innovation in exports markets. A robust IP framework in the UK and its export markets can ensure a fair return on development costs for manufacturers of medicines and vaccines, allow for fair competition, and put in place a level playing field in partner trade markets.
Regulatory cooperation should be used as a way to increase pharmaceutical regulatory coherence and pioneer innovative new pathways. A strong regulatory framework encourages life science companies and investors to continue to invest in pharmaceutical R&D and manufacturing in the UK, creating highly-skilled and productive jobs across the country, and making a valuable contribution to the economy.
The WTO framework — including the Pharmaceutical Tariff Elimination Agreement and Government Procurement Agreement — is an opportunity for the UK to champion the removal of tariff and non-tariff barriers for trade in pharmaceuticals, which will help boost UK life science exports.
To support the fight against COVID-19 now, and prepare for pandemics of the future, the UK should focus on a trade policy approach that helps to deliver innovative treatments to patients without delay. 8
Is the focus on free trade agreements enough to drive growth, innovation, investment, and jobs?
No. For life sciences a number of mechanisms ought to be used to drive growth, innovation, investments, and jobs in our sector. To achieve the government’s ambition for the UK to thrive as a life sciences superpower, beyond FTAs, the ABPI sees three other mechanisms available to promote and champion a UK trade policy for life sciences. These include:
Unilateral policy in the UK: Now the UK has exited the EU, there are an array of policy decisions the UK can make for its own framework, that will underpin and advance its performance as a life sciences superpower. For example, the UK can set its general external tariff at the appropriate level to ensure competitive costs for manufacturing inputs, and continue to strengthen its robust framework for protecting IP and scientific innovation, to enable timely patient access to new, life-changing medicines.
Regulatory and IP leadership: Given the sector is one of the most heavily regulated in the world, the conditions of life sciences regulation in export markets are a key determinant of UK export success. Regulatory leadership should focus on leveraging the UK’s acknowledged credibility as a world-leading medicines regulator and producer of life sciences policy. Fostering collaboration between UK regulators and their peers can support convergence and coherence in regulatory practice, aligning approaches to emerging regulatory questions and formally recognising UK or partner countries’ ‘gold standard’ approaches. Such cooperation frameworks can help to prevent unhelpful domestic and international divergence or duplicative process in life sciences regulation, and pioneer innovative regulatory pathways in areas of emerging technology. Correspondingly, IP leadership should be a core part of the UK’s international regulatory and standards strategy in global fora. This should include active promotion of UK IP standards and engagement by UK embassies in key export markets.
The WTO framework: There is an urgent need to update a number of elements specifically targeted to trade in pharmaceuticals in the WTO framework, in order to reflect technological change and medical advancement — specifically the WTO Pharmaceutical Tariff Elimination Agreement. Unlike finished form pharmaceuticals, active pharmaceutical ingredients (APIs) and chemical components used in the production of finished pharmaceutical products are only covered by the Agreement for zero duty if they are listed in the Annexes, and have to go through an evaluation process before being included. Members of the pharmaceutical initiative have agreed to periodically update the list of items eligible for duty elimination as new pharmaceutical products and chemical components, such as intermediates and starting materials, are developed. However, this has not been done since 2010 and due to the trade policies in some member countries, it is not likely to be updated in the foreseeable future.
For non-signatory countries, tariffs can apply on any APIs, intermediates, and some starting materials.
The globalisation of life science production means that it is often intra-company transfers of these products that are dutiable. The UK can and should advocate for much-needed changes to the Agreement, and encourage adoption of, and adherence to, important international rules on public procurement, technical regulation of pharmaceuticals, and IP. By doing so, this improves the efficiency of manufacturing, supply, and value chains, making it easier for UK companies to export their goods around the world and ensure medicines are developed at a competitive cost. 9
We believe in some areas these mechanisms are being used/considered, but it is not clear what the overall UK trade strategy seeks to do to enable and empower the life sciences sector to bring in much-needed imports, and attract the talent and capital it needs for world-leading science and manufacturing, and ensure the sector can export UK life science innovation easily, and compete fairly, in export markets across the globe. A conducive trade ecosystem will enable the UK life sciences sector to prosper as a major exporter of life-changing medicines to patients worldwide. Over £21 billion worth of medicinal and pharmaceutical products were exported around the world from the UK in 2020,1 with medicinal and pharmaceutical products ranked as the UK's second largest category of goods exports, accounting for 6.8% of total goods exports.
Is there a consistent approach being taken to negotiations covering data, IP, finance and digital?
Out of these four topics, the ABPI can only comment on the approach taken to IP.
Effective IP and enforcement is essential to develop new medicines for patients. It provides innovative companies researching and developing new medicines the certainty they need to invest in the long, complex, risky, and costly process of developing new medicines and launching them. As such, it will be critical to ensure that the UK’s trading partners provide robust levels of IP protection to avoid undermining the value of UK innovation and reduce incentives for UK innovators to develop new medicines.
At the moment we can only comment on the UK’s negotiating objectives for the Australia, New Zealand, and the US FTAs. Across these three negotiations it is not clear what the UK strategic approach is to IP and trade.
We believe that at a minimum there should be an overarching ambition to ensure that UK trading partners provide the same level of protection that the UK offers foreign life science innovators.
Such ambition is not reflected in the published negotiating objectives and furthermore, there does not appear to be consistency between set of objectives. For example, in contrast to the objectives published for the UK’s negotiations with Australia, those for New Zealand do contain a commitment to “ensuring adequate protection of undisclosed test data submitted during the marketing approval process for new pharmaceutical products, agri-chemicals and biologics”.
Are there sufficient resources going into multilateral trade priorities at the World Trade Organization, The Commonwealth, COP, G20...?
The ABPI believes that the UK continues to provide a constructive and balanced voice in discussions that have and continue to take place at multi-lateral issues. We do however believe that there is an opportunity to increase the UK’s share of voice independent from the European Union.
Key to this will be to ensure that is a clear mechanism to engage with business to understand mutual priorities for such fora. At the moment this is lacking which makes it difficult to assess if there is sufficient resource going to multilateral trade priorities as this work simply isn’t as visible as it could be.
We do believe the UK’s G7 agenda provides a key opportunity for the UK to clearly lay out its multilateral trade priorities and we look for support in securing commitments from governments across the world to liberalise trade of healthcare products, an issue that has become even more pertinent during the COVID-19 pandemic. 10 The Institute of Export & International Trade
UK Trade in 2021
The UK is embarking on a truly independent trade policy for the first time in over 45 years. Having regained control of the whole range of policy levers that can support export performance and its contribution to national prosperity, the UK faces important choices and opportunities. It is the moment to take stock of past policy and performance, and to plan how to use the UK’s fundamental strengths and new flexibilities to succeed over the next decade.
Even before the pandemic, the pace of global trade liberalisation was slowing amid tensions between the major trading nations and blocs and a trend towards economic nationalism. Rapid technological change is altering the nature of trade, presenting previously unimagined opportunities but also calling for new regulation and creating potential barriers. Now that the UK has left the EU, businesses face new challenges in a less open trade relationship with our nearest and largest market. But with this comes a once in a generation opportunity to lead by example in rebuilding support for multilateral trade rules, resisting protectionist impulses and using trade policy to support environmental, health and social goals.
Looking ahead, the UK needs to forge greater coherence between its domestic and international aims. Trade and export policy should become an integral consideration in domestic economic strategy, so that businesses see a clear direction of travel, understand the priorities, know where they can get effective and well-resourced support, and have confidence in a stable policy and regulatory environment. There are many questions. A lively debate has started on which markets to prioritise, the UK’s role in reforming the WTO, how to achieve first rate technological trade facilitation and how to minimise red tape. The political and economic choices involved in trade, which were often distant and abstract during our EU membership, are now more immediate for parliamentarians, businesses and the public. Through close collaboration between government and business there is an opportunity to build broad political, industry and public support for an ambitious new agenda.
Embracing Global Britain -Government’s Priorities and the Free Trade Agenda
The UK’s new trading independence presents some pivotal choices. They include FTA targeting and strategy, how best to support export promotion and inward investment, and domestic policy options. The UK can now tailor its approach more closely to national needs. There are real benefits to be secured but the choices will involve trade-offs.
The Government wants a Global Britain, with a wide international trading agenda, prioritising our most valuable markets and those with the highest growth potential and making optimal use of historical and diplomatic relationships.
The Government should build on the current FTAs with 60 countries to achieve its commitment to have 80% of international trade covered by FTAs within three years and its aim of having the value of exports equivalent to 35% of GDP. The focus should be on markets where the UK has high volumes of trade with room for further expansion, and markets where the UK has particular strategic or historical advantages. 11
Elements of UK Trade Policy
Steps already taken at home and abroad include:
The early decision to create a trade department (DIT), bringing under one roof trade policy and trade promotion, and building trade policy expertise.
Action to roll over all EU FTAs regardless of value. DIT has done well to ratify deals with South Korea and Japan, as well as signing agreements with Mexico, Canada, Turkey, Vietnam and Singapore which can be provisionally implemented prior to ratification.
Maintaining generous EU preference programmes for the poorest developing countries, with the intention of adjusting them in future.
The start of FTA negotiations with the US, Australia and New Zealand. Initial steps towards accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
Accession to the Government Procurement Agreement (GPA) and progress to finalise national commitments at the WTO.
Strengthening overseas networks through the appointment of Regional Trade Commissioners, to establish senior presence in key markets and join up trade promotion and policy work. Introducing a Trade Bill to establish a Trade Remedies Authority (TRA), to police unfair trading practices which affect UK producers.
Setting a new UK Global Tariff which seeks to simplify the system and liberalise for environmental goods, but also maintains negotiating leverage.
New Whitehall governance and consultation arrangements with business.
Openness about Choices
The UK has been a consistent advocate of trade liberalisation and its openness to foreign direct investment has yielded economic benefits. But during EU membership some sectors have been sheltered behind the EU’s external barriers while trading freely within the EU. As UK businesses become exposed to a wider range of global factors, a political pricing exercise is beginning on trade to establish where the balance of public, business and political opinion will lie.
The debates over chlorinated chicken and ‘selling-off’ the NHS reveal how quickly trade can become politicised. It will take skilful handling to balance the pursuit of economic advantage with legitimate sovereignty, security, social and environmental concerns. The Government has not yet made clear how far it means to go. In establishing an arms-length Trade Remedies Authority, it retained the power for ministers to reverse certain decisions for reasons of national interest. It has refrained from almost total liberalisation of import tariffs, although its new Global Tariff regime is relatively liberal and will provide UK industry with lower, simpler, more streamlined rates.
The initial FTA targets (the US, Australia and New Zealand) are likely to push for greater liberalisation, especially in agriculture. The headline GDP gains from the proposed FTAs look quite small and will take time to be realised, as is normal between economies that are already relatively open. The early FTA agenda and wish to join CPTPP are seemingly more designed to signal global political and strategic intent than achieve rapid economic gain. The Institute welcomes the drive and energy, though many of these early targets reflect the opportunity of low hanging fruit. We call for a clear strategy that focuses effort on how and where trade benefits can best be secured. 12
To build a long-term trade agenda the Government will need to increase trust with business, Parliament and the public. On sensitive issues of food standards and animal welfare, ministers have tried to allay concerns without binding their hands. To date, consultation of business has felt superficial and compares unfavourably for example with the way the US Trade Representative (USTR) involves US companies throughout negotiations. Neither the criteria used to determine the UK’s top targets, nor the evidence behind decisions about negotiating objectives, have been sufficiently clear. The role of Parliament should also be clarified. MPs will wish to assert their views and represent constituency interests. The present light-touch approach to transparency, scrutiny and ratification does not match up to best practice in either the US or EU. Strong scrutiny and ratification requirements can also increase negotiating leverage.
Working through multilateral forums
In the current trade environment, and linked to the weakening of the WTO, the imposition of unilateral tariffs is a growing problem. These affect many UK goods exports, for example for the automotive and whisky industries in markets such as India and the US. On the other hand, where the COVID-19 pandemic has led countries to liberalise some import tariffs, there is an opportunity to make this permanent. The UK should continue to use all its tools, unilateral, bilateral and multilateral, to improve access and predictability for exporters.
Non-tariff barriers are far more restrictive to global trade than tariffs. FTAs and work in the WTO have had some success in removing these, but we need to do far more. Nontariff barriers often affect services providers and are rooted in domestic regulations, with strong political lobbies behind them. On-the-ground support to navigate them is strong in some markets, but remains patchy, particularly for less experienced exporters, and it can require sustained senior-level intervention. Having left the EU, UK importers and exporters now face a wider array of NTBs at EU and Member State level and in the UK. It is important that a political focus on full FTA agreements does not squeeze out other, lower-profile but potentially more productive routes to improving access, for example through negotiating mutual recognition of standards or qualifications
Strong trade defence and dispute settlement mechanisms are vital to protect businesses from unfair and illegal practices. As a new player in trade disputes after EU exit, the UK should have a clear voice in defence of UK export interests in the WTO, and help restore the WTO’s ability to arbitrate and enforce rules. It is also important that the UK has effective resources and systems for trade remedies at a national level. The Government should work to understand the most significant competition issues facing UK businesses, for example in steel production, so that it can prioritise trade defence action based on value and deliverability.
Promoting UK exports
FTAs and multilateral agreements bring many increased opportunities for exporters but Government can deploy a wider trade tool kit – at home and abroad – to boost exports. This includes practical steps to promote export opportunities in specific markets and narrower sectoral or regulatory deals to remove local barriers. Although good in parts, trade promotion support to business has lacked consistency and continuity. The 2018 Export Strategy aimed to link government support at home and abroad as the first step in a renewed focus on improving export performance. The Government aims to invest £20bn in high-growth businesses by 2027 and has increased investment in Growth Hubs and directly to SMEs through the British Business Bank. The HMRC-backed UK Customs Academy, delivered by the IOE&IT, provides a blueprint that supports and encourages those new to international trade. The business community has welcomed the Strategy, but it has not yet delivered the step change they were hoping for. 13
Many UK firms, particularly SMEs, do not export because they are not aware of opportunities, are risk averse or find the bureaucracy off-putting. SMEs that do export have concentrated heavily on Europe – the destination for 83% of SME exporters – and now face increased obstacles. The Government has recognised that SMEs will play an important role in reaching the 35% trade intensity goal and DIT has pledged to include specific SME chapters in FTAs. Government and SMEs should work together to identify the main barriers and develop the UK’s approach.
In DIT’s 2017 national survey of exporting behaviours, 30% of SMEs cited lack of knowledge as a key barrier to exporting. The 2018 survey found that 27% UK businesses did not know where to go for advice and support, with only 6% saying they would go to a government department or DIT. Several initiatives have been launched, such as a 2019 financial package supporting exporters and businesses in their supply chains, and the 2020 Export Growth Plan that established a £38m Internationalisation Fund for SMEs and appointed 64 new DIT Trade Advisers.
But resources remain stretched given the ambitious agenda, and the Government’s Export Growth Plan recognises that more is needed. Business and government can do more together to strengthen support and eliminate duplication.
HMG’s online offer is not sufficiently coherent. The websites of the Department for Business, Energy and Industrial Strategy (BEIS) and DIT offer advice from different perspectives. Similarly, a business must engage with HMRC for one type of rules of origin certificate and DIT for another. The Government should work to streamline and unify these efforts alongside those of trade associations, chambers of commerce and Local Enterprise Partnerships (LEPs).
Technological facilitations
Take-up of trade opportunities by UK businesses is linked to their ability to overcome practical barriers and handle paperwork. The Government aims to deliver ‘the world’s most effective border’ by 2025, and yet global progress in easing trade facilitation is slow. The UK should become a leader in using technology to remove obstacles for firms, many of whom are now engaging with customs processes for the first time.
The Trader Support Scheme (TSS), which facilitates trade between Great Britain and Northern Ireland, and in which the IOE&IT is a partner, is a good example of such innovation. 14 IP Federation response
Introduction
1. The IP Federation represents the views of UK industry in intellectual property rights (IPR) policy and practice matters within the UK, Europe and internationally. We believe that a cost effective, high quality IPR framework is a critical component in industry’s present and future successes in the global economy. Our membership of 45 influential IP-intensive companies has wide experience of how IP works in practice to support the growth of technology-driven industry and generate economic benefit. Details of the IP Federation membership are given at the end of this submission.
2. The IP Federation welcomes the opportunity to respond to the All-Party Parliamentary Group for Trade and Export Promotion on its Call for Evidence on UK Trade Strategy. Our evidence will reflect our core expertise and focus primarily on IP aspects of trade strategy.
Innovation and IP
3. The UK is one of the most innovative and creative nations in the world, ranked in the top four of the Global Innovation Index 20201. It also has one of the most well-developed and respected IP systems. IP suffuses every aspect of industry, commerce, and everyday life, and the IPR system is a crucial driver and enabler of progress and prosperity. It is no coincidence that IP provisions are almost universal in trade agreements. Yet IPRs are too often overlooked, treated as second order, or even misunderstood in debates on all these subjects. An example might help explain what IPRs are.
4. If you are reading this submission on a tablet or smartphone, you are engaging with and benefitting hugely from IPRs. For a start, how your device works – including speed, graphics, connectivity – depends on hundreds of thousands of patents which protect the inventions relating to its component parts and processes. The shape and how it looks, key to many consumer purchasing decisions, are protected by registered designs. Your device will undoubtedly carry a trade mark, which signifies its manufacturer, carries their reputation and is a powerful marketing tool. And the content you consume on that device, be it music, video or text, will be protected by various copyrights. There are other IPRs that arise in more specialist areas; they may be less obvious, but are no less important. One such is the Supplementary Protection Certificate, which plays a key role in the pharmaceutical innovation life cycle.
5. The contribution of IP to innovation and creativity in the British economy is massive. Firms in the UK market sector invested £134bn (6.8% of GDP) in knowledge assets in 2016, about half of which were protected by IP rights.2 The UK is one of the top 10 countries as a base for global R&D performing companies, especially for US, Japanese and EU firms, with UK R&D valued at £25 billion in 20183. Foreign innovative companies have chosen the UK owing, in part, to the substance of its IP law, the availability of high-quality IP professionals, access to the European (non-EU) patent system, a commercial and rigorous legal enforcement system, and pro-innovator tax incentive schemes (including patent box).
1 https://www.wipo.int/global_innovation_index/en/2020/ 2 Intellectual Property Office Innovation and growth report 2019-20, https://www.gov.uk/government/publications/promoting-innovation-and-growth-the-ipo-at-work-2019-20/innovation-and-growth-report-2019-20 3 The European Patent Convention and its Economic Impact 15
Vision in support of the UK Government’s Trade Strategy
6. With the world on the cusp of a 4th Industrial Revolution promising emerging technologies such as Internet of Things, autonomous vehicles, quantum computing, AI and genomics, it is critical to get the IP aspects of trade deals right. In view of the speed of progress, any obstacles to innovation and IP will damage the UK’s economy for decades. The profound global challenges posed by the Covid-19 pandemic make successful outcomes from trade negotiations even more important.
7. The IP Federation’s vision is that the overarching UK strategy should actively promote trade, IP and innovation, and improve market competitive-ness. The UK should aim to have an outward looking, prosperous and inclusive economy that actively promotes innovative business and sustainable jobs, and is strongly aligned with UK’s ambitions to be a science superpower and innovative powerhouse on the global stage. With the UK chairing the G7 and hosting the UN COP26 climate summit later this year (2021), there is a golden opportunity for the UK to lead on trade strategy for the global community.
Trade Policy Objectives
8. Policy needs to be joined up in support of the trade strategy, with trade policy working to support policy agenda in different areas, for example from IP and innovation, industrial, finance and digital data strategy, to inter-national development, health and environment. Government initiatives should be properly coordinated across departments and agencies, and supported by economic impact assessments. They should support the wider UK prosperity agenda across strategic sectors.
9. It is essential that trade policy in general, and negotiating objectives with individual countries and regions in particular, are developed in close col-laboration with industry. Corporates play a key role in supporting the growth of small innovative business4 and the network of our world class universities and academia. This vital contribution provided by large businesses should be recognised, celebrated and incentivised in the UK trade policy. In 2016-18, large businesses were more likely to have innovated than small and medium enterprises: 50% of large businesses were innovation active, compared to 37% of SMEs5. The IP Federation continues to support the development and main-tenance of business innovation/IP-friendly policies in support of the UK trade agenda – Patent Box and R&D expenditure credits are good examples of this.
10. A system of IPRs which is robust, balanced, understood, and enforce-able is essential in providing incentives for research, frameworks for fair and trusted collaboration, and mechanisms for knowledge transfer and commer-cialisation. The UK’s IP system is widely recognised as being among the best in the world, for example by the US Chamber of Commerce, which places the UK alongside the US as a global leader of its International IP Index6. That situation must be preserved. But innovative businesses base their strategy on a global view, taking account of the IP environment in all the states which their operations will touch, be that for R&D, production, or sales, for example. That is why it is important for the UK to be an active player in established multilateral processes, such as that aimed at bringing greater harmonisation to international patent law. The UK government should also intercede with the authorities in other states when their laws and practices fail to provide sufficiently secure or well-enforced frameworks for UK businesses to operate with confidence.
4 Large Businesses and SMEs: Exploring how SMEs interact with large businesses https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/34639/12-1196-exploring- how-smes-interact-with-large-businesses.pdf 5 UK Innovation Survey 2019, https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/903582/UK_Innovation_Survey_2019_Main_Report.pdf 6 US Chamber International IP Index 2020 at https://www.theglobalipcenter.com/wp-content/uploads/2020/02/023881_GIPC_IP_Index_2020_FullReport_A_04b.pdf 16
Ambition
11. The IP Federation notes that the UK Government’s published IP-related objectives for trade negotiations, such as with Australia and New Zealand, are almost entirely defensive in that they seek merely to protect existing UK IP standards. It is a notable feature of successful trading nations that maintaining and exporting strong IP regimes are central to their trade strategies. However, it is disappointing that there is no indication that the Government will aim to export the UK’s IP system by pressing these trading partners to introduce IP standards largely equivalent to the world-class standards of the UK.
12. We are concerned that an opportunity might be missed to improve the ecosystem for innovation which is so important to the world economy and the UK’s innovative businesses, however large or small. Improved IP standards in markets outside the UK promote access for innovative British products to those markets, and should be prominent in UK negotiating objectives.
13. Specific measures will vary according to the design and operation of the IP system of the negotiating partner. However, forefront for consideration should be improvements in measures to compensate for the delay in the use of a patented invention if it protects a pharmaceutical or plant protection product which needs regulatory approval before it can be sold, and to protect investments in clinical trials by preventing third parties from referencing clinical trial data to obtain regulatory approval. Protection of well-known marks and enforcement of IP rights are other examples of important provisions for consideration.
14. We further believe that ambition in trade negotiations should not be limited at the level of wanting only to raise IP standards in other countries to those currently existing in the UK. The IP system is a key enabler for innovative and wealth-creating businesses, small and large, and the UK should strive for the best regime to promote British innovation and smooth its export worldwide. This means the UK government should be open to negotiating partners’ requests if they would result in better support for innovation in the UK’s own regime in those limited areas where it does not meet the global best. For example, if the UK is to keep pace with the rest of the world, it is absolutely necessary that UK copyright law be amended to expressly allow for the reproduction of lawfully accessed works to facilitate text and data mining, for commercial or non-commercial purposes7. Another area is legal professional privilege, where UK law should be amended to improve the position in US and other courts of those relying primarily on UK IP advisers, and in particular the commercial prospects of UK-made inventions. Benefits would also flow for justice in UK courts with no disadvantages in public policy terms. 17
Multilateral v Bilateral Trade Agreements
15. The IP Federation firmly believes that some IP issues are best addressed not in bilateral trade agreements but in multilateral treaties and initiatives for harmonising IP. One such issue concerns the nature and length of the so-called “grace period”, during which an invention can be disclosed without preventing it from being patented. An agreement on IP between two states has no effect beyond those states. While the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is a multilateral agreement, it is not able to harmonise IP across all the jurisdictions key to industry. Businesses must devise their strategies taking a truly global view, not merely a trans-Pacific one, so the CPTPP would not provide a solution that would meet their needs. For example, a provision on grace period in a bilateral or limited multilateral trade agreement would be hollow, as it would not prevent the disclosure of an invention made during the grace period from disqualifying patent protection in any and all countries not having the same provision. There are well-established and broader multilateral processes for IP harmonisation involving, among others, the UK, the US and EU member states, and these are already addressing issues such as grace period and other issues to enhance international harmonisation. This mechanism offers the most effective solutions from the perspective of business.
16. Such an approach would be entirely consistent with that of the UK/Japan Agreement for a Comprehensive Economic Partnership. The IP Federation would warmly support a provision like that which the government has already agreed in the Article 14.38.4 of which reads, “The Parties shall continue to cooperate to enhance international substantive patent law harmonisation, inter alia on grace period, prior user rights and publication of pending patent applications.”
The Value of Existing Agreements
17. Many aspects of IP law are aligned by over-arching international treaties. These impose minimum standards on their members, allowing them to implement additional measures in their own national laws. To secure the best suite of trade deals, the UK will need to ensure that an agreement with one nation does not come at a cost in negotiation with another or in continued membership of an over-arching treaty. In particular, it is important that the value of the UK’s continued membership of the non-EU European Patent Convention (EPC)8, dating from 1973, is not underestimated.
18. The IP Federation is pleased that the UK Government, in its published strategic approaches to various free-trade agreements, such as with Japan, Australia and New Zealand, has explicitly stated its intention to secure patents, trade marks and designs provisions that are consistent with the UK’s existing international obligations, including the European Patent Convention, to which the UK is party. This is in the interests of innovators in potential trading partners, as well as those in the UK.
19. There is a risk that agreeing, as part of a trade deal, provisions which are inconsistent with other established international treaties, such as the EPC, could call its membership of those treaties into question. For example, provisions in the CPTPP relating to grace period, and others which provide for possible lengthening of the term of a patent which is granted late because of patent office delays, are not present in UK patent law or in the EPC. The very existence of a question of the UK’s membership of a vital treaty like the EPC would lead to many years of uncertainty, weakening of the IP system and a permanent loss of international innovative businesses in the UK. This is not a theoretical concern, or one which has not been publicly recognised. For example, the IAM business magazine carried an article in its issue published on 4 February 2021 entitled “UK plan to join CPTPP raises questions about European Patent Organisation membership”. 18
20. In the context of the contemplated CPTPP negotiations, it is very important that there is clear purpose, transparency and strategic focus in regard to the UK Government proposals, supported by impact assessments and meaningful consultation with business. We are therefore very concerned that, when the Government formulates and publishes its negotiating objectives for accession to the CPTPP, it makes a clear commitment for the terms of ac-cession to be compatible with continued membership of the EPC. More than that, active negotiation to secure this commitment should be a priority, and derogations relating to patent grace period and extending patent term for patent office delays should not be regarded as second-order demands to be set aside at the least resistance in a rush to accede. Of course there will be a number of issues of national interest which the Government will need to weigh. But a primary purpose of the IP system is to serve and support innovative business, and the terms of CPTPP accession should take full account of their impact on British industry. It would be wrong to think that this is a minority view among those who create wealth through ingenuity and investment in it. Representatives of the UK creative sector recently gave oral evidence to similar effect to the House of Lords Select Committee on the European Union International Agreements Sub-Committee in regard to general FTA provisions 9.
21. Leaving the EPC would incur a number of quantifiable and unquantifiable losses, undermining the UK’s attractiveness as a centre for the innovation industry with severe consequences for the future of UK innovative economy10:
(a) Relocation of R&D, European IP management and supply chain from the UK, damaging domestic IP support and loss of high value jobs.
(b) Weaker IP support in the UK, especially to SMEs and young innovative businesses, adding at least 150% to their IP costs. The UK is currently the most successful European generator of high growth firms which make the transition from small/medium to capitalisation approaching £1 billion, but the UK’s departure from the EPC would hamper growth especially for SMEs, tech start-ups and research institutions.
(c) An immediate increase in business costs, around £400 – £800 million per year for firms seeking to protect inventions in both the UK and remaining EPC countries. US companies would be most affected.
(d) Significant impact on the UK’s world class IP professional services base, upon which UK innovative industries depend for the timely creation of IP assets and strategies. UK IP professionals are used by foreign companies across the globe, most notably the US, to file and prosecute a high proportion of all patent applications at the EPO, generating fees of over £970 million a year, and exports of £740 million. If the UK were not a member of the EPC, much of this work would go to IP professionals in other European countries.
(e) An erosion of the UK’s influence in establishing global IP policy. 19
22. These consequences would be detrimental not only to UK and European businesses, but also to those in the US and across the globe. Most innovators use the EPC to secure patent protection across Europe, very often using the UK IP professional service as gateway into Europe. For example, the US is the top country of origin for filings at the EPO: over 25% of applications are filed by US applicants, and around 55% of UK patent attorney filings at the EPO originate from inventors based in the US. Removing the UK from that network for patent protection, especially if it were to destabilise the patent frame-work that would remain, would be heavily against American business interests, among others.
World Trade Organisation
23. The IP Federation recognises that certain IP issues are already dealt with in the multilateral trading system. The World Trade Organisation (WTO), as well as other bodies such as the World Intellectual Property Organisation, have key roles to play in this context.
24. Through the Trade Policy Review Mechanism, all WTO members undergo a comprehensive review of their national trade policies. The Trade Policy Review provides transparency over a WTO member’s trade policies and practices to ensure smooth functioning of the multilateral trading system. The frequency of each country’s review varies according to its share of world trade. The UK has an opportunity to ask specific questions of the member being reviewed and policy areas under review, including (but not limited to): duties/other charges affecting imports, technical barriers to trade, sanitary measures, taxes, government procurement, IP rights, and border measures. The IP Federation welcomes the opportunity to provide inputs to the UK Government under this review.
Conclusion
25. Having a world class IP framework and improving IP frameworks in other countries to provide improved foreign market access to UK innovators and exporters will be central to the UK’s efforts to build a global Britain and shape a competitive, dynamic, and modern economy on the world stage.
26. The IP generated by businesses and others has been a foundation in having industry positioned just right to address the Covid-19 pandemic, and it will be a foundation to address other current and future challenges. These will include: economical clean energy; global health; sustainable cities; access to clean water, sanitation and air; food security; securing cyberspace; dwindling resources; applications of AI and automation … the list is almost endless. But it is also true that these are global challenges.
27. Optimising the IP ecosystem, as appropriate through multilateral harmonisation treaties or in trade agreements, is therefore vital for the UK if its businesses are to continue to attract investment, generate and exploit new ideas, and compete successfully. It is crucial that in negotiating new trade agreements the UK Government consults closely with industry, and is sufficiently ambitious in seeking alignment of IP standards of trading partners with those of the highly respected UK system, reducing trade barriers and boosting competitiveness. In doing so, it should be seeking a win-win outcome which delivers substantial benefits without relinquishing critical aspects of the UK’s existing and highly rated IP framework, including its existing treaty obligations such as the EPC. 20
IP Federation members 2021
The IP Federation membership comprises the companies listed below. The UK Con-federation of British Industry (CBI), although not a member, is represented on the IP Federation Council, and the Council is supported by a number of leading law firms which attend its meetings as observers. The IP Federation is listed on the joint Transparency Register of the European Parliament and the Commission with identity No. 83549331760-12.
AGCO Ltd Airbus Arm Ltd AstraZeneca plc Babcock International Ltd BAE Systems plc BP p.l.c. British Telecommunications plc British-American Tobacco Co Ltd BTG plc Canon Europe Ltd. Caterpillar U.K. Ltd Cummins Ltd. Dyson Technology Ltd Eisai Europe Limited Eli Lilly & Co Ltd Ericsson Limited Ford of Europe GE Healthcare GlaxoSmithKline plc Hitachi Europe Ltd HP Inc UK Limited IBM UK Ltd Johnson Matthey PLC Merck Sharp & Dohme (UK) Ltd Microsoft Limited Nokia Technologies (UK) Limited NEC Europe Ocado Group plc Pfizer Ltd Philips Electronics UK Ltd Pilkington Group Ltd Procter & Gamble Ltd Reckitt Benckiser Group plc Renishaw plc Rolls-Royce plc Shell International Ltd Siemens plc Smith & Nephew Syngenta Ltd UCB Pharma plc Unilever plc Vectura Limited Vodafone Group 21 Trade Justice Movement
Evidence from the Trade Justice Movement February 2021 David Lawrence
1.The Trade Justice Movement is a UK-wide network of sixty civil society organisations, with millions of individual members, calling for trade rules that work for people and planet. Our members include trade unions, NGOs, consumer groups and faith organisations. Together we are calling for trade justice, where the global system of trade ensures sustainable outcomes for ordinary people and the environment.
The need for a Trade Strategy
2. TJM believes that the UK’s post-Brexit trade policy lacks an overarching strategy. Nearly five years since the Brexit referendum, it is still unclear what the Government hopes to achieve from an independent trade policy; particularly in terms of jobs and prosperity, environmental protection, social welfare and citizens’ rights. Brexit has resulted in the UK leaving the world’s largest and most prosperous trading bloc to pursue new Free Trade Agreements, often with far smaller or less important partners. A detailed strategy from the Government about the benefit of these deals is long overdue.
3. However, Brexit does provide an important opportunity for ambition in the UK’s trade strategy, as Britain adopts an independent trade policy for the first time in nearly 50 years. There is a once in a lifetime chance to develop a trade policy which is environmentally and socially just: putting people and the planet before private profit, protecting global human rights, maintaining high standards and supporting sustainable development. TJM welcomes the APPG’s inquiry on this important topic and the following evidence outlines three main areas for reform of the UK’s trade strategy: (1) the environment, (2) human rights and (3) democracy.
1. The Environment
4. The UK claims to be a world-leader in the fight against climate change, and was the first major economy to set a carbon-zero target of 2050. This year, the UK will host the G7 and the COP26 Climate Conference, which hopes to build on the Paris Agreement to set new, ambitious targets for global emissions reduction. In 2019, Prime Minister Boris Johnson pledged that his government would make Britain the “cleanest, greenest country on Earth”, and has announced investment in green tec2hnologies, regulations towards decarbonisation and the maintenance of high environmental standards after Brexit.
5. Despite this, there is a concerning disconnect between the UK’s climate ambition and its new trade policy. The Department for International Trade has been given free reign to negotiate new FTAs with countries which have far lower environmental standards than the UK, including the US, Australia and various countries in the Trans-Pacific bloc. ‘Rollover’ FTAs with existing partners have not been reformed to account for climate change, and the Government refused to accept amendments to the Trade Bill which would have maintained high standards.
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6. A particular area of concern is Investor-State Dispute Settlement (ISDS), which can have disastrous effects on the environment and a ‘chilling’ effect on regulation designed to combat climate change. ISDS allows firms to sue governments for policies which harm their profits. While the aim is to mitigate against unreasonable and unpredictable government behaviour, in practice ISDS has been used to challenge all sorts of important environmental regulations, including: water pollution controls in Germany, a ban on fracking in Canada, and various regulations on mining in East Asia and South America. There is a risk that ISDS is used to challenge new regulations which are essential for fighting climate change.
7. The UK Government has remained committed to ISDS and is expected to seek new investment agreements with Japan and Canada as part of their respective rolled-over FTAs. The UK still has over 100 Bilateral Investment Treaties with partners including China, Russia and various other fossil-fuel producing countries in the Middle East. These provide any existing investors from these countries with protection for their investments in the UK, and make it harder for governments in the UK and abroad to transition economies towards greener alternatives.
8. Another concern is that trade agreements encourage a race to the bottom on standards, which severely hampers environmental regulation. This can happen through multiple avenues: first, trade negotiations may put pressure on the UK to reduce its product standards or allow imports of goods made using practices banned in the UK, as part of seeking a trade agreement. For instance, many campaigners have highlighted the risk of the UK reducing or removing standards based on the EU’s precautionary principle, in a bid to increase trade with the US or other countries. One example is a potential lifting of an EU ban on palm oil, which leads to deforestation and therefore an increase in greenhouse gasses.
9. Second, trade rules at the World Trade Organization make it difficult for countries to ban products on the basis of process and production methods (PPMs), as shown by a number of WTO cases, even if other countries’ PPMs are harmful for the environment. For instance, imported goods may be produced in carbon-intensive ways which are either banned or uncommon in the UK. Trade deals may make these products even more competitive through the removal of tariffs.
10. Third, trade deals themselves increasingly contain regulatory cooperation chapters, which encourage regulators in each country to discuss, assess and harmonise regulations. Since this cooperation is geared towards increasing trade rather than tackling issues like climate change, it is likely to lead to a reduction in standards rather than a shared raising of standards.
11. As the UK takes back control of trade policy after Brexit, there is a unique opportunity to build safeguards into new trade deals to protect the environment and help in the fight against climate change. The UK’s new trade strategy must take seriously the threats posed by ISDS and low standards, as the UK seeks to be a world leader on climate action. This means introducing reforms in legislation, such as some of those proposed in the ongoing Trade Bill, and also ensuring that Free Trade Agreements are legally inferior to international agreements on climate, such as the Paris Agreement. As things stand, trade deals have a far higher degree of enforceability than international environmental agreements, which needs to change.
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2. Human rights and development
1. There is cross-party agreement that the UK must champion global human rights, especially as liberal democratic values are at threat from autocrats and belligerent states all over the world. UK politicians have rightly condemned recent reports of human rights abuses in China, Russia, Saudi Arabia, Cambodia and elsewhere, as well as standing up for democratic freedoms in Hong Kong, Myanmar and elsewhere.
2. However, there is once again a noticeable gap between the UK’s human rights rhetoric and its trade policy. Evidence shows that Western multinationals are often indirectly implicated in human rights abuses: for example, recent research identified 83 well known brands which benefit from the use of Uyghur workers caught in potentially abusive labour transfer programs, including Nike, Adidas, Google and Marks & Spencer. Similar concerns have been raised about labour rights in supply chains across Asia, Africa and South America.
3. Meanwhile, the UK continues to have Bilateral Investment Treaties with countries which have perpetrated human rights abuses, including China, Russia and various Middle Eastern countries. There has been no announcement of any review of these treaties, or any other proposals to join together trade and human rights. Amendments to the Trade Bill designed to protect against trade with countries accused of genocide, and provide full human rights impact assessment, have been consistently resisted by the Government.
4. Human rights are also intrinsically connected to sustainable development. As the world reels from the economic and public health impact of the Covid-19 pandemic, and prepares to confront the catastrophic impacts of climate change, developing countries are by far the most vulnerable. The UK has long been a global leader in international development, which plays an important role in the UK’s soft power and strategic interests abroad, and Brexit could be an opportunity to build on this.
5. Despite this, the government has dismantled the Department for International Development and reduced the UK’s commitment to spend 0.7% of GNI on foreign aid. These actions not only damage the UK’s reputation and strategic influence abroad, but more importantly, will hit the most vulnerable the hardest and risk undermining key human rights.
6. There is a close relationship between trade and development policy. In addition to abuses in supply chains, trade deals can hinder the ability of governments to raise standards in areas such as labour rights, gender rights, economic justice and public health. ISDS cases have been used to challenge minimum wage rises and health measures such as bans on plain packaging for cigarettes and the introduction of a sugar tax. Provisions in areas such as services and procurement tend to be blind to the different impact of changes in those areas on men and women. Liberalisation of services can lead to increased privatisation or reduced provision of ‘less lucrative’ services or in poorer areas, which can in turn lead to increases in cost or a requirement for greater care in the home, the burden of which is more often borne by women.
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7. The UK has rolled over the EU’s preference scheme for the world’s poorest countries, which should help to provide continuity as the UK exits the EU. However it has not taken the opportunity to improve these schemes, for example by offering more generous rules of origin to help support regional trade. It has also agreed trade deals with Kenya and Cote d’Ivoire, a move which risks disrupting trade in the EAC and ECOWAS regions. The UK has also not yet clarified whether it will seek to pursue negotiations on issues beyond goods, something that most developing countries have long resisted.
8. The UK must put human rights and sustainable development at the heart of its post-Brexit trade policy. In practice, this will require a number of changes: first, trade negotiations with developing countries must prioritise the countries’ development objectives and be done in such a way as to facilitate regional trade; for instance, the UK should offer the same preferences and opportunities to all countries in the East Africa trade bloc, rather than negotiate separate agreements which have the potential to lead to a ‘race to the bottom’ on standards and tariffs. In order to achieve this, the Department for International Trade needs to continue to operate in partnership with former DfID staff in the newly formed Foreign, Commonwealth and Development Office (FCDO).
9. Second, the UK must build in transparency and civil society engagement at all stages of negotiations with developing countries, including trade unions, NGOs and businesses from partner countries to ensure a broad range of interests are represented. This is discussed further in the ‘democracy’ section of this response.
10. Third, prioritising human rights will require looking beyond trade agreements. The UK should support recent efforts at the UN for a Binding Treaty on Business and Human Rights, and consider primary legislation to enforce compliance amongst British companies operating overseas, as well as bilateral action with the EU. As things stand, human rights chapters in trade agreements tend to be unenforceable, and the UK is very willing to conduct trade with countries whose leaders have been accused of gross human rights abuses, such as Saudi Arabia. As with climate change, enforceable chapters in trade deals as well as rights-based conditionality for trade will be essential for ensuring that our trade policy protects human rights.
3. Democracy
1. As highlighted in response to a previous APPG inquiry, the UK’s current trade governance model fails to provide businesses, the public and civil society organisations with transparency and predictability. This makes it difficult for organisations to know what the government’s plans are, and how post-Brexit trade policy might impact on the economy, jobs, regulation and social welfare.
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2. A key weakness in the UK’s trade strategy is the lack of transparency and parliamentary scrutiny of trade agreements. A lack of democratic oversight can lead to bad trade deals, as new FTAs are unlikely to have popular support, and without transparency, businesses and other organisations are not well-prepared for regulatory and cross-border changes. When it comes to transparency and parliamentary scrutiny, the UK lags behind international counterparts, including many of our most important trading partners - notably the US, the EU and Japan.
3. Under the existing scrutiny system, set out in the Constitutional Reform and Governance (CRAG) Act (2010), MPs have very little say in the development of trade policy. Parliament is not involved in setting a mandate for trade agreements, is excluded from the negotiation process and there are no guaranteed votes or debates on new trade agreements. It is very difficult for MPs to secure a debate on a new deal under the CRAG processes. Although the government has made some steps to update Parliament before and during negotiations, these provisions are not guaranteed in legislation, and depend on goodwill from the government.
4. Despite the rhetoric of “taking back control”, the government has done very little to empower British MPs, or indeed British civil society and ordinary citizens, to influence trade policy after Brexit. This risks creating a culture of mistrust between the public, businesses, MPs and government, and a lack of transparency about what is on the table in trade agreements. The absence of an overarching trade strategy from the Department for International Trade, with clear objectives and principles, also means that businesses and civil society are left in the dark about the government’s objectives for new deals.
5. The UK would do well to learn lessons from TTIP - the proposed EU-US mega trade deal - which was met with significant opposition from European citizens, leading to its eventual collapse despite years of negotiations and political will from Brussels and Washington DC. TTIP collapsed in part due to public anger about the lack of transparency in the negotiation of the deal, as well as frustration that their own elected representatives could do little to scrutinise or stop the deal. The lack of transparency also meant that politicians struggled to assuage citizens’ concerns about US food standards, the impact of TTIP on public services including the NHS, and ISDS.
6. Ultimately, this meant TTIP caused a breakdown in trust between citizens and government officials who were in charge of negotiating trade deals. We should not be surprised that trade deals create a lot of anxiety among ordinary citizens, whose lives are touched in all sorts of ways by FTAs - from the food on supermarket shelves to the provision of health services to the protection of personal online data. Trade agreements can also lead to dramatic economic shifts and privilege certain industries over others, leading to economic uncertainty which so often hits the poorest the hardest. These are all reasons for why it is essential that our post-Brexit trade policy builds consensus and commands democratic support.
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7. Polling shows that British voters have particular concerns about the impact of trade deals on food and environmental standards, as well as concerns about public health and protecting the NHS. 80% of voters would not accept chlorine-washed chicken or hormone-fed beef, and a majority of voters in areas which supported leaving the EU in the 2016 referendum - including those on lower incomes - support regulation on businesses to maintain high standards. Polling also shows that consumers do not want animal welfare standards lowered and this is consistent across regions, age and socio-demographic groups, including 76% of C2DEs and 74% of ABC1s, showing that even consumers with lower incomes still value high standards.
8. In order to build consensus and ensure that the UK’s post-Brexit trade policy is fully transparent and democratic, the government should set out legislation which includes:
Before negotiations: Publication of the government’s negotiation objectives and a guaranteed debate and vote for MPs on these objectives.
During negotiations: A high level of transparency, with regular release of negotiating texts after each round.
After negotiations: A guaranteed debate and vote for MPs on the final deal.
Throughout the process: Regular engagement with civil society, including environmental groups, businesses and trade unions, and the publication of an independent Sustainability Impact Assessment.
9. The process set out above would put democratic values at the heart of the UK’s trade policy after Brexit. Other trade policy concerns - ranging from the environment and data to development and human rights - can be dealt with far more effectively if the underlying framework is democratic, open and transparent. This should be a key strategic priority for the government as it embarks on a new chapter in Britain’s long trading history.
For more information, please visit the Trade Justice Movement website, or contact:
David Lawrence, Senior Political Adviser [email protected] | 07769 665187
27 Federation of Small Businesses (FSB)
1. The Federation of Small Businesses (FSB) is the UK’s leading business organisation representing small businesses. Established over 45 years ago to help our members succeed in business, we are a non-profit making and non-party political organisation that is led by our members, for our members.
2. FSB welcomes the opportunity to submit written evidence to the Trade & Export Promotion APPG review of UK trade strategy. We would be happy to provide further detail on any of the issues raised.
Is the focus on free trade agreements enough to drive growth, innovation, investment and jobs?
3. Smaller businesses are disproportionately affected by tariff and non-tariff trade barriers, and free trade agreements remain one of the most effective means of removing these barriers on a bilateral and plurilateral basis. However, negotiations for Free Trade Agreements should not take place in a vacuum – trade policy must be complemented by domestic level changes to ensure that firms have the right ecosystem and capabilities to capitalise on the opportunities of cross-border trade.
4. For example, digital skills and reliable digital infrastructure are essential to small businesses’ ability to unlock the opportunities presented by e-commerce and digital trade. However, FSB research has found that poor broadband and mobile coverage is damaging to small businesses, hampering their ability to operate day-to-day let alone consider international trade.
Is the current strategy too focused on trade agreements at the cost of wider trade priorities; policy, investment and finance?
5. FTAs play an important role in tackling the barriers that deter small businesses from participating in international trade, but FTAs must be complemented by business support services that help small businesses to maximise the opportunities available to them. In particular, Government should ensure small businesses can effectively access support mechanisms such as UK Export Finance products, advice from International Trade Advisors, and initiatives such as the Tradeshow Access Programme (TAP).
Are there clear strategies on trade in services, digital trade and the use of bilateral negotiations to raise global standards?
6. FSB supports Government’s clear ambition to set high standards around digital trade. For example, provisions to prohibit unjustified data localisation requirements as set out in the UK- Japan CEPA reflect the goal of the Government’s National Data Strategy to secure a pro-growth and trusted data regime which removes barriers to international data flows, raises standards and drives interoperability. 28
7. In other areas, particularly relating to trade in services, FSB would encourage Government to set out clearer strategies and objectives. In particular, FSB would welcome greater ambitions to reduce the barriers to the provision of services by independent professionals and contractual service suppliers, including mobility or local presence requirements as well as the mutual recognition of professional qualifications. This can often represent the largest barriers to self-employed small business owners when exporting services.
Is there a consistent approach being taken to negotiations covering data, IP, finance and digital?
8. FSB welcomes the ambitious approach taken by UK Government to data, digital and intellectual property. In particular, the e-commerce and data provisions in the UK-Japan CEPA demonstrate a clear commitment to promoting innovation and digital trade and should be seen as a benchmark for the UK’s ongoing and future trade agreements. As noted above, the UK’s approach reflects the ambition set out in the Government’s National Data Strategy.
Are there sufficient resources going into multilateral trade priorities at the World Trade Organization, The Commonwealth, COP, G20..?
9. In FSB’s experience of collaborating with Government on multilateral issues, sufficient resources are being dedicated to working with the World Trade Organisation and we have a close and productive working relationship with the UK Mission in Geneva. We would support a greater focus on multilateral issues in public communications from the Department for International Trade to further raise awareness among stakeholders of important WTO activities, such as the Joint Statement Initiative on E-Commerce.
Is enough being done for SMEs to help them navigate new rules and benefit from the trade deals in place?
10. Historically, UK small businesses have underutilised preferential terms available to them in FTAs and require tailored support to meet their needs. The inclusion of SME chapters in FTAs, and the roll-out of SME contact points that help businesses understand the terms of FTAs and how to use them are therefore essential. Awareness-raising programmes, such as roadshows organised to promote particular FTAs, are a good example of how governments can help SMEs understand and benefit from trade agreements. This is something that the Canadian government has done very well, for instance following the successful negotiation of CETA. 29 The Law Society of England and Wales
1. The Law Society of England and Wales (The Law Society) is the independent professional body that works globally to support and represent 190,000 solicitors, promoting the highest professional standards and the rule of law.
2. Services, and in particular legal services, play an important role in facilitating the globalised market, both directly and indirectly. Latest figures show that legal services contributed £60bn to the economy in 2018 and represents the highest balance of trade among professional services in the UK. The concentration of legal and financial services in the City is a key factor to the UK's economic prosperity.
Are there clear strategies on trade in services, digital trade and the use of bilateral negotiations to raise global standards?
3. Regarding UK trade negotiations, the Law Society recommends:
That legal and other professional services be at the forefront of forthcoming trade discussions, in order to ensure that the UK is negotiating on its areas of strength and securing ambitious deals for its leading sectors.
Trade negotiations on legal services should seek the ability for UK legal professionals to do the following:
Advise clients on home-country laws and public and private international law to the extent that they are entitled to practise in their home jurisdiction; Provide advice through commercial presence for firms, temporary practice (fly-in fly-out), establishment rights for individuals, as well as digital provision; Have a clear, transparent and proportionate path to requalification into the host state profession; Represent and advise their clients in arbitration, conciliation and mediation in international proceedings; and act as arbitrators, mediators and conciliators; and Partner with, employ and be employed by local lawyers
That the UK Government utilise the mechanisms available, including regulatory cooperation and domestic regulation provisions, to secure these rights and support frameworks that encourage ongoing development in legal services within its free trade agreements (FTAs).
That all negotiations should be complemented with market access discussions. Trade negotiations may provide a catalyst for change outside of the text of a FTAs, particularly if both governments give impetus to relevant authorities to progress these.
That the UK Government continue its strong relationship with stakeholders and open conversations with the private sector, with a view to working collaboratively.
That the UK Government continue to recognise that trade goes hand in hand with respect for the rule of law and consider human rights clauses in line with previously negotiated FTAs. 30
4. We also support a clear definition of legal services that recognises the specificities of home title practice in international legal practice without the need for mutual recognition procedures and/or requalification in the host title.
5. An example of this was agreed in the EU-UK TCA, with the general principle of market access for UK lawyers in the EU (and EU lawyers in the UK) under their home title practice, including advice on home country and public international law, as well as arbitration, conciliation and mediation, being set out in the legal services chapter. This was accompanied by a revised schedule of reservations which provided greater clarity as to the restrictions applicable. We believe this approach not only provides transparency but also reflects the importance of the sector, in itself and as an enabler of cross-border trade in other sectors.
6. It is recognised that both the timeframes and the practicality of addressing regulatory issues prevented legal services being addressed in great detail in the UK-Japan Comprehensive Economic Partnership Agreement (CEPA). However, not all future trade negotiations will be subject to the same time pressures. Sufficient negotiation time and resource should be allocated to minimising reservations scheduled in the annexes of FTAs, so that meaningful new liberalisations negotiated in the main portion of agreements can actually be achieved and implemented.
7. The Law Society believes that it is vital for our trade negotiators to put legal and other professional services at the forefront of forthcoming trade discussions due to the economic importance of the sector, both in its own right and in its role as a facilitator of all international business transactions. In future, the UK should ensure that it is negotiating on its areas of strength and so secure ambitious deals for its leading sectors, even if this lessens chances of securing a future agreement quickly.
8. For service sectors, trade agreements can be limited in what they achieve in practice as many of the barriers occur behind-the-border, such as domestic regulation in licensing, certification requirements and requalification conditions. Therefore, all key asks in these negotiations must be complemented by continued market access discussions to address these difficulties in practice.
Are there sufficient resources going into multilateral trade priorities at the World Trade Organization, The Commonwealth, COP, G20..?
9. In our view, addressing market access and national treatment limitations at multilateral level provides a necessary minimum level playing field that can then be built upon in bilateral negotiations. Both bilateral trade agreements and multilateral discussions play an important and complementary role in achieving greater liberalisation of trade in legal services internationally.
10. Currently, provisions on legal services in General Agreement on Trade in Services (GATS) do not sufficiently reflect the complexity of the cross-border provision of legal services and does not address the multiplicity of national regulatory regimes. 31
11. We believe that that the multilateral system has the capacity to provide a common baseline for cross-border trade in services and therefore also facilitate the provision of legal services. We welcome the UK’s engagement on the WTO negotiations on domestic regulation, e-commerce and investment facilitation.
12. Multilateral action is particularly important for barriers that are cross-border in nature. These include barriers that arise as a result of technological development/digital provision of services and regulatory divergence. For lawyers and law firms, these barriers translate into uncertain regulation of some services that are delivered internationally and the enforcement of these rules by domestic and international courts; and the need to deal with a regulatory patchwork of domestic provisions. These lead to higher compliance costs, uncertainty for businesses and often conflicting positions and protections for individuals.
For more information please contact:
Sam Lamont Public Affairs Adviser [email protected] T: 02080 493805 M: 07391 499343 32 Greater Manchester Chamber of Commerce
Greater Manchester Chamber of Commerce is the largest in the UK with over 4600 businesses as members who between them employ over 1/3 of the total Greater Manchester workforce.
In addition to offering members a range of services to develop and grow their businesses we also offer a comprehensive range of international trade services through our award-winning trade team.
In the 2019/20 Financial Year, our trade team processed over 37,000 documents which supported £787m of international trade in the region. From April 2020 to January 2021, our team had processed 22,714 documents (28% down compared to the same period the year before) supporting trade of just over £510million, which is 15% down compared to the same period the year before. It is worth noting that even before COVID and the most direct impact of Brexit, the North West region was already underperforming in terms of exports compared to other UK Regions. In the 2016-19 period, the NW region was the only region which registered a decline of 2%, when most regions registered a 2-digit growth.
We run training sessions for members, work with a growing network of overseas chambers and, increasingly, a range of strategic partners to make sure businesses in Greater Manchester get the right information, access, and training to maximise their overseas growth.
Since the start of 2021 the Chamber has received hundreds of queries from businesses around the new process and procedures for trading with the EU as well as a range of queries looking for direct help and assistance from our experts in ensuring that goods already in transit reach their final destination.
Some of the issues our members have reported include:
Rules of Origin, cumulation and the loss of EU VAT triangulation are placing a lot of businesses in very difficult situations as they need to re-assess completely their business models at considerable expense and potentially with extra resources and some may just end up out of business unable to sustain the demand.
Many traders have expressed concern in their ability to produce all the relevant evidence of origin– this can be by not having enough technical staff to understand and manage the process, or the ability and willingness of their suppliers to produce the relevant ‘manufacturing’ evidence as this could threaten their commercial position. (Cont).
Triangle Business Models which are currently facing additional duty and VAT taxation if they continue their existing ways of operating, making their business unsustainable in the medium to long term. We have had companies having to ship goods to their EU sister company to avoid customs issues with their end EU customers, but they know this cannot be sustained long term.
o Some mid-size and larger companies are considering moving operations to the EU which will take revenues away for the country. However, this is not an option for many small traders who lack the human and financial resources. 33
Documentation related issues:
We have seen numerous instances of channel disruption and goods being held at ports and in customs pending minor errors in documentation being corrected.
UK & EU Traders not doing the proper checks on the goods they are shipping and getting those stuck in customs either in UK or EU as they have not produced Export licences, Certificates or permits
Logistic Issues:
Companies are having issues in terms of delivery with their own fast parcel operators (e.g. Fedex, DHL, etc) as they have imposed restrictions in the ability of UK companies to use some of the services (e.g., express next day service) which are vital for their business and putting them at a clear disadvantage against their EU competitors.
Companies understanding the new requirements for ‘Transit’ when moving goods via road. The requirement for a T1 and the comprehensive financial guarantee have added to the additional complexity that traders are facing. Many traders have contacted us, sometimes in sheer desperation, to help them get the T1 as their transport/logistic operators do not seem to be able to offer them one.
New rules Interpretations: Customs Authorities in some EU States are doing their ‘own interpretation’ of the rules and thus having a direct impact on UK Traders (e.g., charging them import duty on the grounds of UK exporters not providing the ‘right’ proof of origin – even though in theory they have done so in line with what has been outlined in the EU-UK TCA)
UK Government Guidance & Tools:
`The government website is confusing and HMRC advisors can only give broad answers not related to specific queries from business and in many instances, companies are referred back to the same guidance they found confusing in the first place causing a lot of frustration. Whilst the various government campaigns appear attractive, they lack substance leaving the Chamber and others with ‘real-life’ experience to pick up the pieces.
HMRC / DIT new online tools (e.g. How to Export and Trading with the UK for imports) are not as useful as they could be to support exporters/importers. The tools come across so generic that are not providing the answers they need in terms of: Are their goods meeting or not the rules of origin? What specific documents they need, and many companies are facing EU customs issues due to ‘missing docs’ which the tools are not flashing up as clearly as it could be done. It would perhaps be useful if the Export tool considered adding a similar feature as the EU Access Database does on Rules of Origin (ROSA section) – where businesses are asked a series of questions to determine if the goods they are shipping meet or not the rules and provide them with an very specific answer on whether the goods are or not subject to preferential duty. Or maybe making a differentiation between Country of Export, Country of Origin and Country of Import!. 34
Also, recently the UK Trade info site changed and now unless we have a special analytical or database software to download big bulks of information, we can no longer conduct comparative trade analysis in a friendly and quick manner as we used to (e.g., it used to take 1 hr or less). Before we were able to access an overview of trade across all UK Regions, all SITC Codes and Key Country Groups without having to rely in a specialised software – which only but adds costs and time. The new tool is not user friendly, restrictive and at best confusing to use despite all ‘the guidance on how to use it’. This is supposed to aid how, organisations like ours can provide support to companies seeking to grow their exports and imports, but in the current format, simply is no longer an ‘aid’.
Northern Ireland:
Guidance: This is another area where we are seeing a surge in queries as they find the online guidance, training and webinars are not answering their specific business models. (e.g., UK Trade Schemer for ‘At not risk’ goods, XI EORI number for trading with EU, customs processes between GB-NI and viceversa when using special customs procedures, etc).
Customs Declarations: The ChamberCustoms is our customs declaration brokerage service and 7 weeks into the 2021 our system has yet to be linked to CDS to enable us to help businesses with their customs declaration via NI.
Since we started tracking all cases in mid-January when there was an upsurge in queries, to the date of this letter we have dealt with nearly 300 individual queries with no immediate sign of the demand decreasing.
Our Brexit Hub has also seen a surge in visitors in the last 90 days going up a total of 133% (1,336 visitors), total of 2,432 sessions (up by 144%) and more than 5,000 page views (up by over 50%) compared to the previous 3 months. Most of our visitors have been referred by our own website, direct referrals, and search engines.
Our experience of dealing with the above, coupled with that of some experienced members has led us to highlight the issues above as being of concern and which will need immediate solutions if this situation is not to become increasingly worse.
We are also concerned that funding is being routed through Business Growth Hubs instead of Chambers of Commerce or Sector Trade Associations who many businesses (including those not currently exporting) associate with international trade expertise. This has resulted in dilution of funding to business and uncertainty in the mind of many businesses. We believe that funding should be directed to the most obvious point of contact for business.
We also have concerns that the use of some of DIT’s grants to fund activities including training are in direct competition to activity run through Chambers and other private sector providers. This model also creates the issue that Chambers, and other providers cannot strengthen their own in- house expertise which is what is much needed for the long-term sustainability of these organisations and forging less reliance of businesses in grants to trade globally. We will be dealing with business queries as ‘first responders’ and this knowledge is vital. 35
Lastly, we also want to know what the plans are regarding increasing the HMRC Grant aimed at customs intermediaries and traders who are seeking to complete customs declarations? We have understood the grant is almost depleted, not to mention the grant management system is extremely slow in all sense of the word, from getting someone to answer questions about the process, status of applications or other issues post grant allocation. The system is not user friendly and takes considerable amount of time to submit an application.
State Aid and De Minimis continue to be of concern, and would be good to see what else can be done so organisations like ours are not limited by this to draw on much needed funding to:
Continue to expand our capacity by increasing staffing levels On-going and continuous training for our staff so they are not just able to complete customs declarations but understand the wider range of export/import customs processes behind and thus being in a better position to advice companies. Being able to acquire hardware to support all the above.
We have also welcomed the news of the launch of a £20million fund to support companies to deal with the aftermath of Brexit, however, the fact this fund will also be managed by PwC as the HMRC Grants for customs, is really concerning. If we, as a chamber, with experience in submitting grant applications are finding it difficult and frustrating, imagine what it would be like for SMEs with no experience on this?
In any new system there will be initial teething troubles that are soon ironed out, however from mine and my team’s experience there is very real danger that without immediate solutions these issues will become compounded and create deep problems within the wider economy.
For many businesses coming out of Covid with increasing challenges around cashflow the ongoing impact of Brexit related issues – many of which are solvable and avoidable – may prove an insurmountable problem.
SUSANA CORDOBA Head of International Trade E: [email protected] 36 Acknowledgements
The Officers of the APPG for Trade & Export Promotion would like to extend their thanks to everyone who partook in the gathering and dissemination of the evidence contained in this report. They would further like sto thank our speakers and panellists for the insightful discussions that took place in our webinar and evidence gathering session.
An extended thanks to our network of supporters for making the work of this APPG possible.
The APPG for Trade and Export Promotion is always on the lookout for new partners and supporters. If you would like to get involved with the work of the APPG please email: [email protected]
The Secretariat of the APPG for Trade and Export Promotion is facilitated by ICC United Kingdom.
CHRIS SOUTHWORTH TAHIR RAUF JORDAN MEADE FRSA APPG DIRECTOR SECRETARIAT COORDINATOR PARLIAMENTARY COORDINATOR
P U B L I C A T I O N R E F : E D 0 0 2
The All-Party Parliamentary Group Trade & Export Promotion
C h a i r s : L o r d W a v e r l e y & G a r y S a m b r o o k M P
S E C R E T A R I A T : I C C U N I T E D K I N G D O M
A P P G T R A D E . U K
All-Party Parliamentary Groups are informal groups of Members of both Houses with a common interest in particular issues. This is not an official publication of the House of Commons or the House of Lords. It has not been approved by either House or its committees. This Report was researched by the named organisations of each contribution and funded in-line with House rules.