Considered in Grand Committee
My Lords, I beg to move that these regulations, which were laid before the House on 12 May 2021, be approved.
The statutory instrument we are debating today implements important aspects of international trade agreements within the Government’s trade continuity programme, ensuring continuity for UK businesses. This includes certain mutual recognition agreements that have been signed with the USA, Australia and New Zealand along with a free trade agreement with Korea that contains relevant conformity assessment provisions. The UK-Japan Comprehensive Economic Partnership Agreement and the UK-Canada Trade Continuity Agreement also include protocols on the mutual recognition of conformity assessment. From hereon in, I will refer to the mutual recognition elements of all of these agreements as MRAs.
These MRAs support trade in goods between the UK and its partners by reducing technical barriers to trade. Importantly, they do so in a way that protects the UK’s robust product safety system. The UK’s product safety legislation requires certain products to be assessed to ensure that they meet requirements in that legislation; sometimes, this assessment is required to be done by third parties. MRAs can reduce barriers by allowing this conformity assessment to be undertaken by a body based in the UK for export to the relevant country. We make the same arrangements for our partners under the agreement so that procedures carried out by recognised overseas CABs are accepted for our domestic regulations.
This SI also implements one aspect of the UK’s free trade agreements in the broader trade continuity programme. As part of the UK-Japan Comprehensive Economic Partnership Agreement, we will give greater flexibility to importers of a traditional Japanese spirit called single-distilled Shōchū. The SI amends specified quantity requirements applying in Great Britain so that bottles of single-distilled Shōchū may be placed on the market in Great Britain in one of the traditional Japanese bottle sizes of 900 millilitres.
Let me now address each of these areas in more detail, starting with the measures we are taking both to recognise overseas bodies and to appoint UK bodies under these MRAs before moving on to the measures we are taking for single-distilled Shōchū bottle sizes.
To begin, let me address provisions for goods in scope of the UK’s MRAs that are assessed by UK conformity assessment bodies for export overseas. This SI provides for the Secretary of State to designate CABs as competent to assess that certain goods comply with the regulatory requirements of our partners under the MRAs as set out in a schedule to the SI.
For example, this means that where a UK-based CAB would like to be recognised by the Australian authorities as capable to assess goods under Australian machinery requirements, the body can apply to UKAS, the United Kingdom Accreditation Service, to be accredited as fit to test against those Australian requirements. The Secretary of State may then designate the body under the UK’s MRA with Australia to assess machinery for export to Australia. As a result, a UK manufacturer that uses the services of that UK CAB can now use the same body to do its accreditation for the Australian market and does not need to identify and start contracting with a CAB actually operating in Australia. Therefore, manufacturers are able to place products on the Australian market more cost-effectively, potentially passing those savings on to consumers.
I now move on to consider provisions for goods coming into the UK. Under the MRAs, the UK recognises the results of conformity assessment procedures carried out by recognised overseas CABs against domestic regulations. This SI makes it clear that assessments carried out by a recognised body based in one of our partner countries should be treated as equivalent to those carried out by a UK-approved body when relevant products are sold in Great Britain. These regulations do not change the detail of the requirements for third-party assessment, nor do they amend any requirements related to a product’s specifications. This means that the UK will maintain its robust product safety protections while continuing to reduce barriers to trade with our partners. The benefits are potentially significant here: trade with our MRA partners in radio equipment alone amounted to nearly £2 billion in 2019, although, of course, not all of these products will have required conformity assessment by a third party.
The regulations also provide for the Secretary of State to create a register of CABs that the UK recognises under the MRAs, defined as MRA bodies. This is communicated via the UK Market CAB database, a publicly available resource that can be used by businesses and regulators to verify quickly the status of CABs. These regulations also provide for Canadian accreditation bodies recognised by the UK under the UK-Canada Trade Continuity Agreement to be listed on the Government’s website.
This SI also provides that the Secretary of State, or a person authorised to act on their behalf, may disclose information to the other party to an MRA where required by an MRA. For example, we may communicate information regarding goods from the USA which have been suspended by UK enforcement authorities, as part of our co-operation commitments in the MRA with the USA. Disclosure will be made in accordance with data protection legislation.
This SI provides for a product known as single-distilled Shōchū, a spirit which is single distilled, produced by pot still and bottled in Japan, to be placed on the market in Great Britain in an additional bottle size, 900 millilitres. Prior to the UK-Japan Comprehensive Economic Partnership Agreement, single-distilled Shōchū bottled in Japan had been permitted in Great Britain, but only in quantities of 720 millilitres or 1,800 millilitres, in addition to the usual specified quantities for prepacked spirits. Providing for sale of this traditional bottle size was very important to Japan during negotiations of the UK-Japan Comprehensive Economic Partnership Agreement. This artisanal product is already on sale across the UK in other bottle sizes, so this change should not have a significant impact on consumers in Great Britain.
I shall now speak to the territorial scope of these regulations. For some provisions, the regulations will make amendments for Great Britain only, while others extend to the whole of the UK. Regulations 4 and 5, relating to recognition of conformity assessment by relevant overseas CABs, extend to Great Britain only. Northern Ireland will continue to recognise the results of conformity assessment procedures done under the mutual recognition agreements between the EU and the relevant third country. This is in accordance with the terms of the Northern Ireland protocol to the withdrawal agreement. Regulation 6, relating to the Secretary of State’s power to designate UK-based bodies under these agreements, will extend to the whole of the UK. CABs across the UK can therefore be designated under the MRAs.
Regulation 7, relating to information sharing, will also extend to the whole of the UK, to enable the Secretary of State to share relevant information required under the MRAs. Regulations 8 and 9, amending the permitted bottle sizes for single-distilled Shōchū, extends to Great Britain only. In accordance with the Northern Ireland protocol, single-distilled Shōchū will continue to be permitted on the Northern Ireland market in 720-millilitre and 1,800-millilitre bottle sizes, in addition to the usual specified quantities for prepacked spirits.
In conclusion, we are introducing these regulations to give effect to provisions which keep our barriers to trade low with some of our significant trading partners. As I have said, we do this while preserving our robust protections for product safety, as a responsible Government. This SI will provide certainty on the UK’s approach to recognising and designating CABs for certain products under the MRAs, as well as making necessary amendments to allow the 900-millilitre bottle size of single-distilled Shōchū to be placed on the market in Great Britain. I therefore commend these regulations to the House.
My Lords, I am glad to follow my noble friend the Minister, who set out the purposes of these regulations fully and clearly. First, I draw attention to the register of interests in that I am the UK co-chairman of the UK-Japan 21st Century Group. As that may imply, I wish to speak only to Part 3 of these regulations, which relates to Shōchū.
I raised an issue relating to this towards the conclusion of the passage of the then Trade Bill—now the Trade Act 2021—because of the implications of timing. Before I get to that, my noble friend explained Shōchū, which is a distilled liquor that is stronger than sake but not as strong as whisky. As he said, it is an artisanal product in Japan. The bottles in which it is prepared and sold there are an integral part of its overall presentation, so I completely understand why this was something that our Japanese friends particularly wanted to see made available in this country in the same way as it would be sold and marketed in Japan.
For those who are of a certain turn of mind, I realise that I have 10 minutes but I promise not to take up all the time available. One of the perversities of our Hybrid Sittings is that the less you have to say, the more time you have to say it. Last week, I had to talk about the carbon budget in seven minutes, but by contrast I now have 10 minutes to talk about Shōchū. Such is life.
Those with an interest in the media may recall the 1956 American film “The Teahouse of the August Moon”, with Marlon Brando and Glenn Ford, which looked in a whimsical way at the American occupation of Japan after the war. Of course, the teahouse in fact purveyed not tea but sweet potato Shōchū—and a successful film it was, too.
The question that came up in the Trade Bill debates was that, in the UK-Japan Comprehensive Economic Partnership Agreement, the relevant Annexe 2-D—for the benefit of those who want to go and look for it, it is on page 693 of the agreement—makes it clear that the United Kingdom is obligated to make the traditional bottle of five gō available in the United Kingdom; one gō is 180 millilitres, so five gō is the 900-millilitre bottles. The relevant footnote to that obligation says:
“The United Kingdom shall expeditiously take necessary steps to ensure the fulfilment of this obligation and shall notify Japan no later than 90 days after the date of entry into force of this Agreement of the completion of its domestic procedures necessary for the fulfilment of this obligation.”
The point at issue then was that the Trade Bill was going beyond 90 days. In the event, the 90 days were up on 30 March this year, the Trade Bill did not receive Royal Assent until 29 April, these regulations was laid on 12 May and we are approving them on 15 June. I think no harm is done, and our Japanese friends have been entirely understanding at each stage that we have trespassed beyond the 90 days and of why we have done so. For the benefit of those writing trade agreements in future, it would probably be best if they put timetables in and related them to the completion of the parliamentary procedures rather than the entry into force because the entry into force was done under a provisional application prior to parliamentary scrutiny.
The only other point I want to make is that, as my noble friend said, there is a different territorial aspect to this. By virtue of the Northern Ireland protocol, we cannot in this agreement, which is a continuity-plus agreement, vary the rules as they apply in the European Union single market, so the traditional five-gō bottle will be available in Great Britain but will not be available in Northern Ireland. As it happens, this is not strictly consistent with the text of the UK-Japan Comprehensive Economic Partnership Agreement, which states:
“Single distilled shochu … produced by pot still and bottled in Japan, shall be allowed to be placed on the market of the United Kingdom in traditional bottles of four go … five go … or one sho.”
One shō is 1,800 millilitres. There is a discontinuity between the text of the agreement, the treaty as such and what we are able to fulfil in our domestic procedures. That is a pity. Given that this is the first time we have had a continuity-plus agreement implemented into legislation, it has in a very modest way illustrated the complexity of the problems that we will have to encounter if the Northern Ireland protocol continues to impose these kinds of distinctions between the Great Britain market and the Northern Ireland market.
My Lords, I am grateful to the Minister and the noble Lord, Lord Lansley, for their contributions thus far to this debate.
As we have heard, these regulations give effect to mutual recognition agreements between the UK and the USA, Australia, New Zealand, Canada, South Korea and Japan. The regulations also allow specific products assessed by those bodies in countries recognised under MRAs to be placed on the market in Great Britain and enable the Secretary of State to designate and monitor UK conformity assessment bodies to assess products against the other party’s requirements.
The Secondary Legislation Scrutiny Committee noted that these regulations are the first use of the power to implement free trade agreements under Sections 2 and 4 of the Trade Act 2021. As the noble Lord, Lord Lansley, commented, the instrument also implements Annexe 2-D of the UK-Japan Comprehensive Economic Partnership Agreement by allowing single-distilled Shōchū to be placed on the market in the UK in the new quantity of 900 millilitres. I recognise that this an important statutory instrument for both businesses and consumers, with continuity and certainty even more important now as we look ahead to 19 July and our hopes for the beginning of the end of the current restrictions. I would therefore be grateful if the Minister could provide some clarity on a few areas.
In relation to UK policy on conformity assessment and accreditation of the situation under EU law as it applies in NI, the regulations set out the requirements for the accreditation of market surveillance as it applies in EU law to the Northern Ireland protocol. That continues to be the basis for accreditation policy. If there are any changes to the UK policy in future, will they require an assessment of the implications of any trade barriers between Great Britain and Northern Ireland, and how is that being considered?
In respect of registers of MRA bodies, the statutory instrument states:
“The Secretary of State may … compile and maintain a register of … MRA bodies … their MRA body identification numbers … the activities for which they have been designated; and … any restriction on those activities”.
Can the Minister confirm where he has outlined, or whether he will outline, the activities for which MRA bodies have been designated and what restrictions there are on those activities? The Secretary of State will also be able to designate a conformity assessment body—CAB—to assess products against other countries’ requirements. What criteria will the Minister use to consider whether the body is capable of fulfilling those functions and to ensure that it meets the requirements of a designated body? What parliamentary oversight will that body have?
The statutory instrument states:
“To the extent that these Regulations contain provision in the areas of the protection of human or animal life or health or environmental protection, the provision is consistent with maintaining UK levels of statutory protection in that area.”
However, in Section 2(7) of the Trade Act, UK statutory protection also extends to
“plant life or health … animal welfare … employment and labour”.
Do these regulations not cover those areas?
The Explanatory Memorandum states:
“The main direct cost to business will be the familiarisation cost associated with these Regulations; these are a one-off cost, estimated at £205,000.”
Does this fall equally on large companies and SMEs?
On divergence, the UK MRAs replicate the previous EU MRAs in substance, with the only substantive divergence from the EU being in the permission to allow the additional bottle size for single-distilled Shōchū. This poses the broader question of whether the UK could take a different approach to conformity assessments in future.
On 1 January 2021, the UK introduced its own product safety mark, which broadly mirrors the EU’s CE mark. According to the law firm Bird & Bird, the UK conformity assessment regime
“follows essentially the same principles as the previous CE marking regime, but with the safety and compliance standards, authorised representative/responsible person and notified body requirements all now being valid for the UK only.”
Despite being a UK ask, the EU-UK deal did not include an agreement on the mutual recognition of conformity assessments. This means that most goods produced in the UK that require certification for sale in the EU will have to go through a secondary conformity assessment in the EU in order to be eligible for export, resulting in extra costs to trade with our main trading partner. A lack of MRAs is unusual for comparable deals such as those between the EU and Japan, Canada and Switzerland, which all have MRAs. Even countries such as Australia and the US, which do not have trade deals with the EU, have MRAs. Does the Minister regret not having an MRA in the TCA? Will the UK continue to share information on CABs with the EU? I look forward to the Minister’s response.
My Lords, first, I thank both noble Lords for their valuable contributions to this debate.
It is clear from what I said initially and from the contributions that this SI will maintain our robust product safety framework at the same time as reducing barriers to trade with some of our key trading partners. It does this by providing for the recognition in Great Britain of overseas conformity assessments for certain products under an MRA, while overseas bodies will be recognised in Northern Ireland under their country’s MRA with the EU; providing for the Secretary of State to designate UK CABs to assess against the requirements of our trading partners for certain products under an MRA; and amending rules in Great Britain to allow a traditional Japanese spirit to be imported in a 900-millilitre bottle size. In supporting this SI, we keep our trade restrictions low so that our manufacturers and consumers benefit from arrangements to minimise the duplication of conformity assessments.
My noble friend Lord Lansley noted with regard to Part 3 of the regulations, on Shōchū, that that amendment has been delayed beyond 30 March. As he pointed out, we let the relevant Japanese Ministries know that we were unable to implement the obligation by 31 March. As a fellow parliamentary democracy, Japan understood that it was important that the UK Parliament be able to appropriately debate the Trade Bill before we could introduce that provision. On my noble friend’s question about the distinction between Great Britain and Northern Ireland, he is correct that 5 gō bottles of 900 millilitres may be placed on the market only in Great Britain. I can tell my noble friend that there is express provision in the UK-Japan CEPA that applies in the event of inconsistency between the CEPA and the Northern Ireland protocol.
The noble Lord, Lord Lennie, asked whether changes in accreditation policy would affect Northern Ireland trade. The Secretary of State will consider the UK body’s competence against the partner country’s legislative, regulatory and administrative requirements. In making this judgment, he will of course consider the expert advice of the UK’s national accreditation body. The Trade Act provides for product safety and labour recognition, et cetera, and are they captured, to answer his other question. He noted that there are specifications in the Trade Act, and this SI maintains UK statutory protection. Where the specified regulations relate to protection of human health, human life, animal health or environmental protection, foreign CABs must assess against our existing domestic requirements. This is in accordance with our previous approach to MRAs.
The noble Lord also asked whether the UK could take a different approach to conformity assessments in future. In relation to MRAs, this SI is all about providing continuity for businesses. The UK is able to make its own policy decisions on conformity assessment and accreditation now that we have left the EU. Any future changes would be based on the UK’s best interests, with due consideration, of course, of any impact on the UK’s internal market. The noble Lord asked about the trade and co-operation agreement with the EU. Despite the UK ask, the EU-UK deal did not include an MRA. This is regrettable and will result in an extra cost to trade. As he noted, the UK sought such an agreement, but we were unable to secure it there.
I hope that that answers all noble Lords’ questions on this legislation, and I therefore commend these draft regulations to the Committee.
The Grand Committee stands adjourned until 4 pm. I remind Members to sanitise their desks and chairs before leaving the room.