Economy and Fair Work Committee

Meeting date: Wednesday, October 5, 2022

Official Report 686KB pdf

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Trade (Australia and New Zealand) Bill

Agenda item 6 is consideration of a legislative consent memorandum?on the UK Parliament Trade (Australia and New Zealand) Bill. This UK Government bill, which was introduced in the House of Commons on 11 May 2022, changes the law on devolved matters.

I welcome back to the meeting the Minister for Business, Trade, Tourism and Enterprise, Ivan McKee, as well as Julie Bain, who is a lawyer, and Alasdair Hamilton, who is procurement policy portfolio manager, all from the Scottish Government. We are joined this time by Leslie Henderson, who is team leader in food and drink regulation and trade at the Scottish Government.

I invite the minister to make a brief statement on the Scottish Government’s position and then we will move to questions from members.

Thank you very much, convener.

The Trade (Australia and New Zealand) Bill is very narrowly focused. Although we have some wider and significant concerns about aspects of the free trade agreements with Australia and New Zealand, particularly with regard to agriculture, the focus of the bill itself is only on the implementation of the Government procurement chapters of those deals.

Amendments are needed to procurement legislation to extend duties of equal treatment to bidders from Australia and New Zealand and to make some minor amendments to procedural rules, and the UK Government has opted to confer a power on ministers to make those amendments. As with the power in the Procurement Bill that we have just discussed, the power is drafted too broadly and will be conferred concurrently on UK ministers as well as Scottish ministers with no requirement on UK ministers to secure the consent of Scottish ministers before exercising it in devolved areas. That is clearly unacceptable.

As I have said, the bill itself is relatively narrow in its focus on the procurement chapters of the two agreements, but it would be remiss of me not to say a few words about the agreements more broadly. The Scottish Government has had no direct role in negotiations, and we are very concerned by the impact of both agreements. Those concerns are particularly acute with regard to agri-food. The potential for imports to increase is huge: Australia currently exports 5,000 tonnes of beef to the UK each year, but the agreement will allow 35,000 tonnes in the first year, with the figure increasing each year after. Of course, Australian producers do not have to adhere to the same animal welfare and environmental standards that Scottish farmers do.

It is a similar story with the New Zealand agreement, as a result of which access to the UK beef market will rise to 60,000 tonnes by year 15. There are almost no benefits in this deal for Scotland’s food and drink sector. All that it achieves is exposure of the Scottish agricultural market to the most export-oriented food producers in the world.

To what end? UK Government analysis shows that the deal with New Zealand will deliver a 0.03 per cent benefit to UK gross domestic product over 15 years, with the Australia deal contributing 0.08 per cent. At the same time, the UK-EU Trade and Co-operation Agreement will lead to a contraction of UK GDP by 4.9 per cent over the same period. Of course, the economic self-harm of leaving the EU should come as no surprise. It is notable and worth highlighting that the EU has secured the same market access to New Zealand for its own exporters as the UK, but at a much lower cost to its domestic producers.

Being outside the EU and tied to a UK Government that is hell-bent on reaching trade agreements at almost any price so that it can pretend that Brexit is working is an invidious position to be in, but it is the position in which we find ourselves, and we must try to protect Scottish interests as best we can. The impact of these agreements will be felt throughout Scotland—

I am sorry for interrupting, minister, but the committee’s focus this morning is on scrutinising the LCM. I appreciate that there are broader issues that you wish to highlight, but I think that the committee is fairly familiar with the political discussion around this.

Absolutely, convener, and it is hugely important.

Thank you very much. I will take questions from members.

Good morning, minister, and thank you for being here this morning. My question is similar to those which we started off with for the other LCMs that we have already discussed this morning. What discussions have you had since 13 June, when the Scottish Government published its LCM with the UK Government, and do you see any progress being made on the areas of concern that you have highlighted?

The areas of concern on this bill are broadly the same as those that we have highlighted on the Procurement Bill, specifically the power that it confers on UK Government ministers in devolved areas. There has been discussion at official level but no discussion at ministerial level on that specific point.

In the same way, do you hope that you will be able to work something out, or do you get the sense that your officials are meeting a group of intransigent UK officials?

I will let officials comment on that, but, as I have said, my experience has been that engagement at ministerial level sometimes resolves things and sometimes it does not, but until you have the conversation, it is difficult to know the UK Government’s position.

The issue with this power is very similar to that with the equivalent power in the Procurement Bill. We have been meeting Cabinet Office and Department for International Trade officials on the matter; they understand our concerns and are thinking about ways in which they can be resolved, but we do not have an agreement yet. It might arise—it might not.

I call Fiona Hyslop.

There is an interplay between this LCM and the one that we have been considering on the Procurement Bill. My colleagues might not want to dwell on the politics of this, but the issue is that, as far as Scottish suppliers are concerned, there is not much gain and, indeed, there is potential vulnerability from this agreement. The issue is about procurement. In a practical sense, the UK Government is clearly responsible for the trade agreements, but the broad powers set out in the Procurement Bill might, in trying to make sure that the trade agreement goes through, undermine Scottish suppliers in comparison with, for example, their New Zealand counterparts. If, under the Procurement Bill, broad procurement powers are given to the UK Government with regard to, say, schools accessing lamb for school meals, that might undermine what we might want to do in Scotland to ensure that local authorities can access and procure local produce to help with sustainability.

I am just trying to make the implications more real. Nobody is disputing the UK Government’s right to do these trade agreements; indeed, it might want to add subsequent ones into the legislation. The issue, primarily, is the interplay with the broad powers of the procurement legislation. Am I correct in my understanding of that? If I am incorrect in thinking that the procurement of Scottish produce for Scottish schools might be undermined by the procurement legislation, please correct me.

You are right in the sense that the trade deal as agreed by the UK Government enables much more produce from New Zealand and Australia to come on to the UK market than is currently the case. Our concern about the Procurement Bill and this bill is the broad-ranging powers that it gives to UK Government ministers on devolved areas without having to seek the consent of the Scottish Government and Scottish ministers. What the UK Government then does with those powers is an open question, but these bills open that door and give it the powers to operate in devolved areas.

I should add that the power in this bill is also a power to implement the Australia and New Zealand agreements as they might change in the future. Clearly we do not know what those changes might be.

I have to say that I am being generous; I do not expect the UK Government to undermine the Scottish supply chain, but without our consent or our being able to monitor and have scrutiny of this, things could happen by accident rather than by design. We in Parliament have a duty to scrutinise these things, and the problem is, if the UK Government can do this sort of thing in future legislation without even having to check with us, the door could be left open to unintended consequences. Is that a fairer representation of the situation?

Yes, that is part of it. If you look back at the process for negotiating trade deals, you will see that, in a paper that we published in 2016 or shortly thereafter, we highlighted how we saw the Scottish Government and other devolved Administrations being involved in defining, negotiating and implementing those trade deals. The UK Government has been very unhelpful with regard to working with us on those aspects, and the opportunities for scrutinising those deals are very, very limited. As you have said, the deals could evolve and change, and how they would then be implemented is something that would have to be taken forward. Through this process, UK Government ministers are giving themselves powers in that area that impinge on devolved aspects.

I have a question that is linked to Ms Hyslop’s. The Delegated Powers and Law Reform Committee has written to the UK Government, and one of its questions is about clause 1 of this bill, which is expected to be repealed once the Procurement Bill comes into force. Can you say more about how the two bills interact? We are spending all this time trying to looking at the changes in this bill, but what bits of it are going to be repealed? Am I correct in thinking that it is the Procurement Bill that will remain and that it is likely that aspects of this bill will be repealed?

Yes, the Procurement Bill will to some extent supersede this bill. Officials can talk about that in a minute, but the fact is that, at this stage, we have the same concerns about both of them. We are not comfortable with either.

Do you know what the timescales are for the provisions in question to be repealed and the Procurement Bill to supersede them?

The Procurement Bill is in the House of Lords at the moment, but I expect this bill to proceed on a faster timescale.

There is a slight difference between the two powers. The power in this bill allows for implementation of the agreements, which is in two parts: the implementation of equal treatment obligations and the implementation of some minor amendments to the procedural rules for procurement. The UK Government plans to repeal that power when the Procurement Bill is enacted, because it will no longer be needed. The alternative power in clause 83 of the Procurement Bill is narrower and allows for only equal treatment obligations, not procedural rule changes. If rule changes were required as a result of other international agreements, primary legislation would be needed again. It all underlines why we are not particularly clear why the power in this bill is needed to cater for future changes when it is possibly going to be repealed within a year.

Thank you. I call Michelle Thomson.

I suspect that this has already been covered, but is part of your concern about getting this on the record now that, even if the power were to be subsequently changed a year down the road, it establishes a precedent that could be used for other potential disbenefits in similar trade deals, given the GDP figures that you outlined at the start of your statement?

Yes. This has come before us for a decision on legislative consent and, as it stands, we cannot agree to it. If the power is superseded by something else in the future, that is as may be, but that does not mean that we going to give consent to something just because it might not be around for very long.

I call Graham Simpson.

Minister, what devolved areas are you concerned about in this respect?

We are concerned about procurement, because, as I have said, the power gives UK Government ministers scope to make changes to decisions taken by the Scottish Government and in Scottish Parliament legislation on procurement.

So it is just procurement.

There might well be broader implications, too.

Our concern with this bill is just about procurement.

If there are no other questions, that brings us to the end of the evidence session, and I thank the minister and his officials for joining us this morning to consider this LCM and the other LCMs that we have discussed.

I now propose a slight change to the agenda. If members agree, we will move into private session for agenda item 8 before we resume the meeting to hear from our final panel of witnesses. Are members happy to do that?

Members indicated agreement.

We therefore move into private session.

10:29 Meeting continued in private.  

11:11 Meeting continued in public.