Despite high hopes, the UK’s post-Brexit trade remedies regime is off to a rocky start. The newly established Trade Remedies Authority (TRA) commenced operations a little over a month ago, and in that short time has had its recommendation regarding steel safeguard measures overturned by the Secretary of State for International Trade ('the Trade Minister'), a move that has many questioning the TRA’s authority. The Trade Minister is also facing scrutiny from the courts, with the High Court recently deciding that her decision to remove tariffs on sugar imports may be subject to judicial review.
Trade remedies for steel – pre- and post-Brexit
The TRA officially commenced operations on 1 June 2021, with a mandate to investigate unfair trade practices and to make recommendations on appropriate measures to the Trade Minister.
Prior to Brexit, the European Commission carried out trade remedy investigations on behalf of the UK. Accordingly, the TRA’s establishment marked an important step in developing the UK’s own, independent trade policy.
While the UK was part of the EU, safeguard measures were introduced on 19 categories of steel products. The measures take the form of a tariff rate quota, in terms of which a certain quantity of goods is allowed to be imported into the UK tariff free, after which a tariff of 25 per cent becomes payable.
Under the UK’s new, independent trade regime, the TRA is responsible for undertaking transition reviews for purposes of determining whether to continue to apply specific trade remedies that were imposed pre-Brexit. Transition reviews must be initiated prior to the expiration of the corresponding EU measure, and the steel safeguards imposed by the European Commission were set to expire in June 2021.
Accordingly, following a transition review last month, the TRA recommended only maintaining safeguard measures on 10 of the 19 categories, meaning that imports of certain wire rods, stainless-steel bars, tin mill products, and certain railway material would enter the UK tariff-free. The TRA relied on a range of justifications for the recommendation to remove the safeguard measures applicable to nine of the categories, including that there was no significant increase in imports or that the imports did not cause serious injury to the domestic industry.
In respect of stainless wire rods, however, the TRA recommended the removal of the safeguard on the basis that it did not meet the economic interest test – a test in which trade remedies are weighed against the potential harm they may cause to the country. The equivalent of the test in the EU – the union interest test – has rarely been relied upon, making the TRA’s use even more significant.
Steel safeguard measures retained under new law
The TRA’s recommendation was welcomed as a bold step by a number of industry experts, signalling to the world that the UK now has its own, independent trade remedy authority, distinct from the EU. However, the triumph was cut short by the Trade Minister, who quickly moved to rely on the Taxation (Cross-border Trade) Act 2018 ('the 2018 Act') to retain the safeguard measures in place for five of the nine categories that the TRA recommended be removed.
The 2019 regulations governing recommendations made by the TRA provides that the Trade Minister must either accept or reject the TRA’s recommendation – she cannot change it. However, following this law would have prevented the Minister from retaining the safeguard measures on some (but not all) of the nine product categories in respect of which the TRA recommended removing the tariff rate quota.
She therefore circumvented the provisions of the 2019 regulations by creating new regulations governing steel safeguard measures, under the powers conferred upon her by the 2018 Act. These new regulations allow her to make a public notice applying tariff rate quotas to particular steel products – which she did with effect from 1 July 2021.
The move arguably demonstrates the pressure facing the UK government by the local industry, which was up in arms following the TRA’s recommendation. Although her move is certainly supported by the British steelmakers, who will now benefit from the tariffs that the TRA recommended removing, the TRA will no doubt be facing an identity crisis in the light of the Minister’s actions.
Tariff rate quotas for raw sugar cane also in the spotlight
Meanwhile, the Trade Minister has found herself in a sticky situation with the High Court.
In 2020, the UK government established a tariff rate quota to allow for a set volume of raw sugar cane to enter the UK tariff free. The intention behind the establishment of the tariff rate quota was, according to the government, to 'balance support for UK producers, processers, and consumers whilst maintaining preferential trade with developing countries and supporting the UK’s ambitious free trade agreement (FTA) trade agenda.'
Following public consultations, the tariff rate quota came into effect on 1 January this year and is set to apply for 12 months. It allows 260,000 tonnes of raw cane sugar to be imported into the UK tariff free – once the quota has been filled, a tariff of £28.00/100kg is payable. In 2019, the UK imported approximately 430,000 tonnes of sugar from all countries other than the EU (mainly raw cane sugar for refining).
British Sugar reportedly instituted legal proceedings on the basis that the measure effectively amounts to a state subsidy for its competitor, Tate & Lyle Sugars. This is because Tate & Lyle uses raw sugar cane (imports of which benefit under the measure) to manufacture refined sugar, whereas British Sugar uses homegrown sugar beet. This would appear to flow from the assertions made by various respondents in the public consultation process that the quota for raw cane sugar would lead to domestic beet sugar refiners having to reduce their prices in order to compete with imports.
According to reports, British Sugar argued that the measure contravenes the state aid clauses in the Northern Ireland Protocol as well as the EU-UK Trade and Cooperation Agreement. The High Court determined that the government’s decision could be subject to judicial review, setting the scene for the first significant legal challenge to the UK’s post-Brexit independent trade policy.
This is only the start of what will be a precedent-setting period in UK trade. And given the recent developments, it certainly looks like the TRA and the UK government more generally are in for a bumpy ride.