Here’s the remedy, what’s the disease? How the government gutted the Trade Remedies Authority

Many governments find it desirable or expedient to impose temporary restrictions on imports that are being sold unfairly (dumped in your market below cost or subsidised) or which are causing serious unforeseen disruption in domestic industries (where the restrictions are known as safeguard measures). The restrictions are often referred to as trade remedies. Insisting on fairness seems uncontroversial and protecting the vulnerable while they adjust to import shocks at least seems reasonable. All, however, amount to blocking imports when they increase competition at home and create the obvious danger that firms will prefer protection to adjustment and that governments will give in to them when it is politically convenient. Too much of this is a recipe for undermining international trade and causing economic stagnation.

The World Trade Organization (WTO) includes a number of limitations on trade remedies to try to ensure that they are applied only where necessary and then only with the necessary severity. Procedures for ensuring this are left to members to determine, but experience and the principles of public policy have led many to place investigation of the need for and level of remedy with an arms-length body, with the government stepping in only at the last moment to take the final decision.

Following Brexit, the UK created the Trade Remedies Authority (TRA) as such an arms-length body with fairly pro-trade regulations, as one would expect from a market-oriented government keen to reduce red tape. One relatively unusual feature was that the TRA had to apply an Economic Interest Test  to see if the measures were in the overall economic interest of the UK.  In fact, however, from its first month of operation, government action reduced the TRA from a useful administrative instrument to a fig leaf for a political process for granting protection to petitioners. First, there was an unlawful and WTO-inconsistent overrule of part of a TRA recommendation. Then a change in regulation to substitute government decision for TRA analysis in part of the TRA’s domain, and the premeditated use of this to override UK obligations to the WTO. And in March 2023, the TRA’s teeth were fully pulled by plans to allow the government, inter alia, to ask the TRA to correct alleged errors in its analysis, adopt alternative remedies to the TRA’s recommendations and ignore the Economic Interest Test.

I wrote about round one of the TRA’s undermining in July 2021, but concluded that maybe it was just teething trouble. It concerned safeguard protections on steel which the UK had inherited from the EU, and which the Government asked the TRA about extending. The TRA said ‘yes’ to some and, with good reason, ‘no’ to the others, but the Government chose to convert some of the ‘no’s to ‘yes’s contrary to its own regulations and WTO rules. It also instituted a review to see if the TRA was ‘fit for purpose’, less than one month from its inception. This blog summarises rounds two and three, with more detail available in a Working Paper.

On 9th February 2022 the Government laid a statutory instrument before the House of Commons, (No. 2022/113) stating that where the TRA has not completed its investigation of a measure inherited from the EU, the Secretary of State for Trade will decide matters in relation to the issue.1 Moreover, s/he ‘may do anything that [s/he] considers appropriate for the purposes of making a decision’, notably define the timescale for representations to be made on the issue and seek information from whomever s/he wishes. The TRA must analyse the evidence and its views must be ‘taken into account’, but may be ignored.

On 22nd March, the Secretary of State ‘called in’ the decisions on a further extension of the safeguards on steel on which it had overruled the TRA the previous year and also redefined the way in which the TRA was to reach its (non-binding) advice. The latter reported on 23rd June and, rather bravely, stated that while its original mandate would lead it to reject an extension of those measures, analysis under the revised instructions suggested that they could be extended.

On 29th June, the Secretary of State duly announced the extension of the measures, and perhaps more importantly, added that ‘The Government wishes to make it clear to Parliament that the decision … departs from our international legal obligations under the relevant WTO agreement. …. . However, from time to time, issues may arise where the national interest requires action to be taken which may be in tension with normal rules or procedures.’ Moreover, we know she spoke on behalf of the government, because Prime Minister Boris Johnson had asked his ethics advisor to bless the breach of international obligations in advance! (The latter refused and resigned, ostensibly over this issue).

In sum, the government used secondary legislation where primary legislation (full consideration by Parliament) was appropriate, altered the rules to get the answer it wanted, and it was happy to violate WTO commitments. But this related to only a smallish part of the TRA’s brief.

On 9th March 2023. The Secretary of State for Business and Trade announced that the review of the TRA was completed (but not published or debated) and that it had concluded that new regulations for trade remedies giving Ministers more power were required. These extend to the whole of the TRA’s domain. She said:

The proposals I am announcing today maintain the TRA’s expert independent analytical and investigative role, while also giving Ministers greater power to look at wider public interest considerations and flexibility to make decisions that balance the interests of UK producers, importers and consumers.

More specifically, the updated framework will do the following.

1. Require the TRA to notify Ministers before initiating new investigations.

2. Provide Ministers with the power to request the TRA to reassess a recommendation to apply a trade remedy where there is justification to do so. For example, where there is new evidence which the TRA has not previously considered or to correct an error.

3. Give Ministers the flexibility to apply an alternative remedy to that recommended by the TRA, where there is supporting evidence to do so, and it is in the public interest.

4. Give the power to the TRA to provide alternative options within its recommendation to Ministers, where justified.

5. Make the TRA’s assessment of the economic interest test (EIT) advisory so that the Ministers will still be able to apply measures if the TRA determines that the EIT is not met.

6. Give Ministers the power to revoke trade remedy measures without the need for a TRA recommendation if retaining a measure is no longer in the public interest. Ministers may request that the TRA provide advice, support and assistance before deciding to revoke measures.

Paragraph (1) is just a bit of bullying; (2) says the government trusts its own judgement above that of the independent specialists; (3) permits a straight over-rule – no ‘due process’ for the exporters whose goods are shut out; (4) invites TRA complicity in finding politically convenient solutions (because they will come anyway); (5) ensures that aggregate gains/losses will not impede support for politically significant interests; and (6) gives the government leverage over UK firms which may lose their trade remedy protection.

According to the press release, there will be meetings with ‘interested stakeholders’ to ‘explain’, but not to consult on, the new regime.

It is interesting that, with the exception of the steel safeguards discussed here, the Government has accepted every other recommendation made by the TRA. So, for what problem is all this the remedy? Does the announcement reflect the accumulation of unfettered political discretion just in case; that the government plans to change tack; or that the current institutional structure really did constrain it?

The government is now working on the legislation to implement these proposals. It has a majority of around 70 in the House of Commons so they will pass into law. Politicians rarely give power away, and so until they have got themselves into trouble a few times they will not appreciate the benefits of having a technical and independent cut-out between them and interest groups. For the foreseeable future, UK trade remedies will result from political rather than investigatory activity.

On a larger canvas, this is a story of unlawful action knowingly taken, the ad hoc modification of laws and the eventual gutting of an independent institution in favour of political control. If a relatively narrow issue like trade remedies can be treated so cavalierly, what message does that send about other issues in which economic agents seek stability and assurance in policy areas that do not suit fluctuating political tastes?