Trade Act 2021 (Power to Implement International Trade Agreements) (Extension to Expiry) Regulations 2025
(1 day, 20 hours ago)
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Lord Stockwood
That the Grand Committee do consider the Trade Act 2021 (Power to Implement International Trade Agreements) (Extension to Expiry) Regulations 2025.
Relevant document: 37th Report from the Secondary Legislation Scrutiny Committee
The Minister of State, Department for Business and Trade and HM Treasury (Lord Stockwood) (Lab)
My Lords, these draft regulations authorise the enactment of Section 2(10)(b) and Section 2(11) of the Trade Act 2021 and extend the power within Section 2(1) for a further period of five years. I was pleased to see the SI pass through the other place, and I look forward to this debate.
The extension is not just a procedural necessity; it is a strategic imperative that will ensure that the United Kingdom remains agile and responsive in its trade relationships with key global partners. It will enable the Government to continue with their ambitious trade programme with minimal disruption and ensure that key trade agreements that bring jobs and growth to all parts of the UK can be implemented in a timely manner.
Before going any further, I will take this opportunity to provide some further context, for which I turn back to Royal Assent of the Trade Act on 29 April 2021. As noble Lords will no doubt remember, this was a landmark piece of legislation that included a power for the UK to domestically implement trade agreements that it signs with economies that had a trade agreement with the EU before exit day. The power enables Government Ministers, the devolved Governments, Scottish and Welsh Ministers or a Northern Ireland department to make regulations via secondary legislation to implement non-tariff provisions for these types of trade agreements.
The original breadth of this power prompted rightful concern from the House, resulting in the Government at the time eventually conceding a number of safeguards. One of these was to include a sunset provision that would cause the power in Section 2(1) to expire at 11 pm on 31 December 2025 unless it was extended for a further period of five years via an affirmative statutory instrument.
Since taking office, this Government have made great strides in negotiating several agreements that require the implementation power of Section 2(1) beyond the expiry date. The power may also be needed for the ongoing management of existing arrangements, an example of which is to facilitate changes to the wholesale rates set out in an annexe to the EEA EFTA-UK free trade agreement.
The importance of being able to implement the finalised outcome from negotiations cannot be stressed more highly. Not only is it essential for businesses that operate and trade under the newly negotiated terms, but it is important that the UK is seen as a reliable trading partner that upholds its commitments. Without Section 2(1), this becomes increasingly difficult. Furthermore, Section 2(1) has been used to domestically implement such agreements and in future may be used for the ongoing maintenance of existing agreements.
Given the various ways in which it is likely to be needed, extending the power of Section 2(1) is the most prudent approach. We have deemed it necessary for a five-year period, not only to maximise cover but to militate against unforeseen issues that might need correcting via domestic legislation during the ongoing management of our negotiated agreements.
In practical terms, we anticipate that the extension of this power may be used to enable the effective implementation of forthcoming trade agreements with key partners such as Switzerland, covering £45 billion-worth of trade, and Turkey, for £28 billion in trade. These deals, when they enter into force, are poised to deliver further significant economic benefits to the United Kingdom by unlocking new markets, supporting jobs and driving growth across the country. This power will allow for the swift implementation of aspects of trade agreements with countries that had a trade agreement with the EU prior to the UK’s exit from the EU.
Before I conclude, I will offer some reassurances around this power. Any agreement implemented with this power and within scope of the Constitutional Reform and Governance Act 2010 would still be required to complete the usual pre-ratification scrutiny, as well as the non-statutory parliamentary scrutiny and transparency commitments that this Government have put in place. Furthermore, all the safeguards put in place in the original Act will continue to be maintained. We will maintain our safeguards of ensuring that the power cannot be used to reduce UK standards in the fields of the protection of human, animal or plant life, or animal welfare, environmental protection, employment and labour, data protection, and the protection of children and vulnerable adults online. Regulations concerning healthcare services must be consistent with maintaining a publicly funded healthcare service. For these reasons, I hope colleagues will be supportive of this measure. I beg to move.
Lord Lansley (Con)
My Lords, I thank the Minister for introducing these regulations. This is my opportunity to express a personal welcome to him on his new ministerial responsibilities. I hope he enjoys them. For those of us who are veterans of the Trade Act 2021, such as the noble Lord, Lord Fox, and I—perhaps the noble Baroness, Lady Bennett, also counts in that category—the abstruse nature of the debates that we take part in can always be characterised as having a certain fellow feeling and enjoyment. This debate will doubtless be one of them.
As veterans of the Trade Act 2021 will recall, Section 2(10)(b) confers the power to extend the operation of the Act by a period of up to five years from IP completion date—31 December 2020—and, on more than one occasion, as specified under Section (2)(11). The Act provides for the powers to implement “an international trade agreement” or “a free trade agreement”, but it applies only to agreements to which the European Union and a counterparty were signatories prior to exit day—31 January 2020—so it applies only to those agreements that we referred to at that time as continuity agreements.
Those involved in the original legislation will recall that the regulations were expected to apply principally to procurement agreements and mutual recognition agreements for conformity assessments, as well as similar agreements known as agreements on conformity assessment and the acceptance of industrial products. That was in reference to what my noble friend Lord Grimstone—he of the famous Grimstone rule—enunciated in the passage of that legislation on 29 September 2020. I think it is correct to say that, since the passage of the Procurement Act 2023, further powers are available separately to the Government to include further countries to have access to the government procurement agreement by adding to the list in Schedule 9 to the 2023 Act, so there should be no further need for regulations under the Trade Act 2021 in relation to procurement.
I do not believe the same is true for mutual recognition agreements. One can see that powers in the Act have been used for this purpose. I found three: SI 2021/730, which was the mutual recognition agreement for the USA, Australia, New Zealand, Canada, the Republic of Korea and Japan; SI 2021/1332, which extended the Canadian agreement to construction products; and SI 2022/1400, which applied to Switzerland. Are those powers still needed? I conclude yes, in so far as I can see there are three continuity agreements that include the potential for a mutual recognition agreement or an ACAA, but where such agreements have not been concluded between the European Union and those counterparties. They are the association agreements between the European Union and Ukraine, Moldova and Georgia respectively. Will the Minister say what, if any, ongoing work is being conducted to reach any agreement with any of those three states, or am I correct in thinking that we would implement such an agreement only if or when an MRA or ACAA is concluded between the European Union and one of those states?
I have one further question. Is it the Government’s intention to legislate for a power to implement mutual recognition agreements in free trade agreements in the future? The Trade Act applies to continuity agreements only, and clearly there is a wider question. Will the Minister explain what we might agree with Switzerland or Turkey that is covered by the Trade Act 2021 and regulations under that Act? I am not sure I understand what that would be.
Going outside continuity agreements, the UK-India agreement includes commitments to work on the joint development of technical regulations and can include the acceptance of conformity assessments, but it is not a full mutual recognition agreement. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership states, at Articles 8.5 and 8.6, that each party shall give positive consideration to accepting the results of conformity assessment procedures conducted in the territory of another party and may do so through a mutual recognition agreement; and that, at the request of another party, a party shall enter negotiations for the conclusion of agreements for the mutual recognition of the results of conformity assessment procedures. Among the member states of the CPTPP, Japan, Canada and New Zealand already have mutual recognition agreements in place with us, but other countries may request them. I take this opportunity to ask whether they have done so. On the assumption they have not, were they to do so, would the Government consider implementing legislation for the purpose of bringing mutual recognition agreements into force through statutory instruments, rather than waiting for primary legislation for the purpose?
The conclusion I reach is that these regulations may be needed, if for no other purpose than that the European Union might fast-track agreements with Ukraine and Moldova, although probably not Georgia for the time being. If they are fast-tracked towards EU membership and would be compliant with conformity assessments for industrial products, we may arrive at a situation where we could extend our continuity agreements with them in like fashion. I therefore see the purpose, potentially, for an extension for the next five years.
Baroness Bennett of Manor Castle (GP)
My Lords, I join the noble Lord, Lord Lansley, in thanking the Minister for the introduction and repeat his welcome. It is a great pleasure to follow the noble Lord, Lord Lansley, who led us so skilfully and bravely through some truly obtuse bits of the Trade Act in 2021, including questioning his Front Bench very strongly. I will aim not to be obtuse and to be brief. Just the existence of this SI reraises some of the big questions that we discussed in 2021 in the context of what has happened since then.
Lord Fox (LD)
My Lords, on the point made by the noble Baroness, Lady Bennett, about not being obtuse, it is compulsory to be obtuse on this subject.
I again welcome the Minister to the Dispatch Box, with him having made a very accomplished maiden speech on the previous occasion which I boldly attempted to interrupt. This job may not have taken much selling to him by the Government, but I hope they told him, as I said to his predecessor, “What you’re really going to have to do is statutory instruments with a group of people who contracted Stockholm syndrome having been in the same room with the Conservative Front Bench literally for weeks”. I congratulate him and welcome him to his first statutory instrument on this.
As we have heard, the purpose here is to continue to extend the powers of the Trade Act 2021 beyond the end of the year. Why would you let a power lapse when you could keep it going? The answer I would infer is “just in case”. I am sure that no government would accidentally let go of powers, so that is perhaps the motivation. However, it is with these powers that the Executive partially exercise the royal prerogative which they use to maintain control over trade deals—what we sign, what they contain and how they are implemented.
Having happily spotted that the noble Lord, Lord Lansley, would speak, I did not prepare a whole bunch of detailed questions on this statutory instrument. I did, however, prepare a broader critique of the scrutiny process that exists for trade deals and their like.
As the noble and learned Lord, Lord Goldsmith KC, who chairs the International Agreements Committee, remarked in the front piece of a recent report on trade scrutiny,
“Treaties have the potential to raise matters of very great public importance”,
including trade agreements, but also other treaties such as the Rwanda treaty and the Chagos Islands agreement. He went on:
“Government has the power to negotiate and conclude treaties but it is important that Parliament can hold it to account effectively for its actions”.
That is where I am going to focus my speech; I am not going to challenge the validity of this statutory instrument, but I want to look at the scrutiny gap a little more, because it is a way of welcoming the Trade Minister to a really important matter. I hope that he will see the need for helping to improve Parliament’s grasp on what is happening.
When this statutory instrument was debated in the Commons, my friend the MP for Richmond Park—that is the Richmond in Surrey—Sarah Olney, gave the process a clinical demolition. She noted up front:
“The Liberal Democrats strongly opposed the Trade Act 2021, as it failed to provide sufficient parliamentary scrutiny of future trade agreements and risked weakening the UK’s high standards on health, food, labour and the environment”,—[Official Report, Commons, Second Delegated Legislation Committee, 4/11/25; col. 5.]
and we heard a little of that just now.
The then Bill passed through the House of Commons in 2020 without amendment, despite cross-party efforts to introduce greater transparency and accountability. I tabled quite a few amendments in the Lords, as did others, but Sarah tabled amendments requiring transparent investment courts for investor disputes. This was to ensure human rights considerations in trade negotiations and to mandate assessment of trade agreements. Those, along with other opposition amendments—such as protections for the NHS and food standards—were voted down by the then Government.
We believe that trade deals have been weaker without these imperatives. We warned that the omission could lead to deals that lower standards or allow foreign influence over our public services. Now, as then, we believe that the 2021 Act grants excessive powers to Ministers, excluding MPs and your Lordships from meaningful involvement. It also provides no guarantee that UK standards, public services or democratic accountability will be protected.
The Lib Dems are not unique in calling for greater scrutiny. The most recent report from your Lordships’ International Agreements Committee—the one on which the noble and learned Lord, Lord Goldsmith, commented —is entitled Treaty Scrutiny in Westminster: Addressing the Accountability Gap. The news release for the report states that it
“concludes that the current statutory process for parliamentary scrutiny of treaties under Part 2 of the Constitutional Reform and Governance Act 2010”—
or CRaG, as it is affectionately known by its devotees—
“is a weak and insufficient mechanism for securing meaningful accountability. The process has not changed significantly since the 1920s”.
Indeed, the Grimstone undertaking is about the most significant change that has happened since 1920. That is not hyperbole; it is a fact. Of course, in the 1920s, treaties had rather less impact on domestic affairs—they did not reach into public services or domestic standards in the way they do now—so we believe that too much discretion is given to the Government to act in ways that enable them to evade detailed scrutiny.
The news release further states that the report
“acknowledges that there is a balance to be struck between the flexibility the Government needs to negotiate and conclude treaties in the national interest and the transparency and scrutiny which the public interest requires. However, while the treaty scrutiny procedure codified in the 2010 Act”—
that is, CRaG—
“places some limits on the autonomy which the Government enjoys in international relations, the legislation tilts the balance too far in the Government’s favour. The report finds that the UK scrutiny process is weak in comparison with most other countries … The report concludes there is a powerful case for legislative reform and calls on the Government to engage seriously in a dialogue with Parliament … about this. Recognizing that legislative reform will take time, however, the report also recommends steps to make scrutiny under the current framework more effective provided the Government shows sufficient … will”.
I commend the report to the Minister; he should have a look at it because it is, obviously, very important to the portfolio that he now holds.
We Liberal Democrats will not vote against this draft statutory instrument, of course, but we will continue to call for reforms to ensure transparency and fairness in, and public scrutiny of, future trade policy. I look forward to the Minister’s reflections, as a newcomer, on trade policy and its scrutiny.
Lord Hunt of Wirral (Con)
My Lords, I join noble Lords in welcoming the Minister. I too participated in the debate on the steel industry, mentioned by the noble Lord, Lord Fox, where we had the benefit of two maiden speeches from the two new Ministers, the noble Baroness, Lady Lloyd, and the noble Lord, Lord Stockwood. Looking back, that was a really good, wide-ranging debate. I thought this would be a very narrow, rather simple statutory instrument to deal with, having looked at it—until my noble friend Lord Lansley got up. It may be that it applies only to continuity agreements, but thanks to the noble Baroness, Lady Bennett of Manor Castle, and the noble Lord, Lord Fox, we have entered a much wider debate. If I were the Minister, I would welcome that, because it gives him an opportunity to set the framework in the ways that my colleagues have outlined.
Having said all that, this instrument merely seeks to extend for a further five years the power under the Trade Act 2021. This power enables Ministers, including those in devolved Governments, to make regulations to implement the non-tariff provisions of continuity trade agreements with so-called partner countries—those that had agreements with the European Union before the UK’s exit. This instrument does not change the substance of the policy; it merely extends the time within which that power may be used from December 2025 to December 2030.
The rationale is that it will bring legal certainty and flexibility to implement existing and future agreements. I understood that it is particularly directed to those agreements under discussion with Switzerland and Turkey. I hope the Minister will be able to explain the context and answer the questions posed by my noble friend Lord Lansley. I would also like to know what has happened concerning the agreement under discussion with the Republic of Korea; the Minister may well be able to explain why he omitted to mention it.
Continuity and predictability in our trading relationships are indeed important for British businesses and exporters, particularly small and medium-sized operations. It is also sensible that the devolved Administrations can continue to use this power where matters fall within their competence. From paragraph 6.6 of the Explanatory Memorandum, on the legislative and legal context, I understood that the devolved Governments had been asked and were consulted on the power in Section 2(1). What happened in those consultations and what responses were received from the devolved Governments?
Then we have the whole question of parliamentary scrutiny of trade agreements, which has been raised in this debate. It would be very helpful if the Minister could give us some outline of what his approach will be and the approach of his department. I would also like to press him on several points of oversight and accountability.
First, the powers granted under Section 2(1) must always be exercised within the statutory protections set out in the Trade Act. I instance employment rights; environmental standards, already referred to; animal welfare; data protection; and the integrity of our publicly funded healthcare services. It would be really helpful if the Minister could give us assurances on those points. Secondly, I would like him to give us a little more context about how this five-year period has been calculated. It must be used wisely. The power was always intended to be a transitional mechanism following EU exit. From looking back at those debates, already referred to, it was never seen as a permanent feature of trade policy. We therefore expect the Department for Business and Trade to report in due course on how frequently the power has been used and whether a further extension beyond 2030 will genuinely be necessary.
Lord Stockwood (Lab)
I am very grateful to noble Lords for their generous welcome and continued acknowledgement of my novice status in quite a technical debate, alongside the comments and questions they have put to the Government. To reiterate, these regulations are crucial to the Government’s trade agenda. We anticipate that we will be required to domestically implement deals currently under negotiation that will greatly benefit UK consumers and businesses.
I turn to answer the questions raised in the debate, starting with the noble Lord, Lord Lansley, who asked about the necessity of the Trade Act powers in today’s legislative context, with regard to live negotiations. The question was whether the powers in the Trade Act are still necessary. The answer is that negotiations with partner countries are ongoing, and I would not like to pre-empt any future talks that may take place. The powers in Section 2 have been used for statutory instruments relating to procurement, but also for free trade agreement implementation—for example, the mutual recognition agreements—as well as for the Trade (Mobile Roaming) Regulations and the Chemicals (Health and Safety) Trade and Miscellaneous Amendments Regulations. We therefore believe that the ongoing management of our trade agreements justifies extending the power.
I should have said upfront, by the way, that if I do not go into enough detail I am happy to write rather beyond the narrow range of this debate. I look forward to having broader conversations outside the Room as well.
The second question was from the noble Baroness, Lady Bennett, about protections for phytosanitary standards in future trade agreements. During the passage of the Trade Act, my party worked hard to ensure the inclusion of robust safeguards in Section 2. These guardrails require that any regulations made under Section 2 must uphold existing UK statutory protections in key areas, including environmental protection. A full list of these guardrails can be found in Section 2(5) and 2(7). Preserving our world-class standards is a priority and we will not compromise on any of them for our trade policy.
A number of noble Lords raised a secondary question about future plans for democratic scrutiny of trade deals. We believe that the current statutory and non-statutory commitments governing the scrutiny of free trade agreements are robust and fitting for a country with our constitutional make-up. Our scrutiny arrangements are similar to and, in some areas, better than other Westminster-style systems, such as Australia, New Zealand and Canada, but our non-statutory commitments include, for new FTA negotiations, that the Government will undertake a public consultation or a call for input. Should a relevant Select Committee publish a report on these objectives and, should it request one, we will facilitate a debate, subject to parliamentary time.
Furthermore, during negotiations, the Government will publish regular updates and provide regular open briefings for all MPs and Peers. Post signature, the Government will—
Lord Fox (LD)
I am sorry—I can at least intervene at this point. The point that the Minister has made on a couple of occasions is not exactly right. The report that the International Agreements Committee put forward says that the idea that the way in which our democratic process is organised somehow means that countries that are like ours are the same as us is fundamentally not true. The evidence is laid out in the report that I mentioned in my speech. I ask the Minister to go and read it, and perhaps discuss it with his department.
On the subject of parliamentary time, without getting into too much detail on CRaG, the only way in which a trade deal can be delayed is by the Commons having a parliamentary debate, and the only way in which the Commons can have a parliamentary debate is by the Government granting them one. The evidence suggests that that does not happen, so it is a deeply flawed relief valve in the system and something that would, again, merit reconsideration.
Lord Stockwood (Lab)
I thank the noble Lord for his follow-up question. This Government are trying to go beyond the statutory requirements.
The noble Lord, Lord Fox, asked this question earlier: is CRaG inadequate in the modern context? I will go away and read the report so that I have a further written answer for him, but I come back to the idea that CRaG provides an effective and robust framework for the scrutiny of treaties that require ratification, including free trade agreements. Although it was formally legislated for in 2010 under the previous Labour Government, its origins date back more than 100 years. Under CRaG, the Government must lay relevant treaties before Parliament for 21 sitting days before it can ratify them. Parliament has the power to prevent ratification; in the case of the House of Commons, it can do so indefinitely.
In line with the Government’s commitment to transparency, we have gone well beyond the statutory requirements for CRaG and provided comprehensive information to Parliament to support its scrutiny of our trade policy approach. In addition, no trade agreement can in itself alter our domestic legislation, and any changes to our UK legislation that are required for trade agreements will need to be scrutinised and passed by Parliament in the usual way. However, I take the noble Lord’s comments on board; we will come back with a fuller answer.
On the noble Lord’s other points, which were about protections in trade agreements for human rights, animal welfare and the NHS, as I have said, preserving our world-class standards is a priority. We will not compromise them in our trade policy. Regulations 2, 5 and 7 contain safeguards in the areas mentioned by the noble Lord, Lord Fox; we will ensure that they are upheld. None of our FTAs, which are not covered by this power, has undermined our NHS or domestic standards. Parliament has debated this matter at length in its debates on the Australian FTA, the New Zealand FTA and our ascension to the CPTPP. Both required primary legislation.
The noble Lord, Lord Hunt, asked a question about devolution. DBT Ministers wrote to their counterparts in the devolved Governments on 11 August 2025 to inform them of our intention to lay this SI before Parliament. In keeping with our commitment to transparency, we also shared a draft version of the SI for comment. In addition, we committed to maintaining the safeguards around the Section 21 power, as laid down in the Trade Act 2021.
On the question about the use of this SI’s power, before laying the SI, the Government reviewed whether the circumstances were such that the power in Section 2(1) ought to be extended; this provided an opportunity for the power in Section 2(1) to be reviewed. It was HMG’s conclusion that an extension to the power would be necessary. It is possible that the power in Section 2(1) may be relied on to enable the effective domestic implementation of major forthcoming trade agreements with key partners, such as Switzerland and Turkey, but also for the ongoing maintenance of existing agreements.
Lord Lansley (Con)
The Minister has again referenced Switzerland and Turkey. Let us leave Switzerland to one side because there is a pretty comprehensive continuity agreement between the European Union and Switzerland, which we have replicated.
Where Turkey is concerned, I want to stick with the question of mutual recognition agreement on conformity assessments. As I understand it, the European Union’s agreement with Turkey does not include a mutual recognition agreement on conformity assessment, although the negotiations between the United Kingdom and Turkey around an extension of a free trade agreement in future might include such a thing; we do not have to decide whether it would or would not. If such an agreement were entered into with Turkey, that would create an agreement with Turkey beyond the scope of the agreement that constituted the continuity agreement because it would include something that was not in the original continuity agreement with the European Union. My question is, therefore, very simple. The Minister does not have to answer it now; he can take it away and have a think about it. If we were to agree with Turkey something that was not in the European Union-Turkey agreement and, hence, not in the continuity agreement that we signed way back in 2021, could it be implemented under the Trade Act 2021 or would that require additional primary legislation?
Lord Fox (LD)
We could extend the same question to the situation with Korea, where my understanding is that the current continuity agreement is being rolled over again prior to the negotiation of a new deal. Were a new Korea deal to be negotiated, the question would be the same as the one put by the noble Lord, Lord Lansley.
Lord Stockwood (Lab)
I thank noble Lords for those follow-up questions. I am reliably informed that both of those negotiations are under way at the moment, so I will come back with a full answer in writing, if that is okay. I am grateful for the support across the Committee for these draft regulations.