Africa: European Union Economic Partnership Agreements
(8 years, 1 month ago)
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Lord Chidgey
To ask Her Majesty’s Government what is their assessment of the impact of Economic Partnership Agreements negotiated between the European Commission and economic regions of Africa on the agricultural economies of the African countries concerned.
Lord Chidgey (LD)
My Lords, the events leading to the development of the economic partnership agreements—the EPAs—go back to the 1960s, with the signing of a series of co-operation agreements to give ACP exports preferential access to European markets as part of a broader development strategy. These had to be replaced by a GATT-compatible trading system by the end of 2007, and the Cotonou agreement provided for the EU to open negotiations with six regional groups, four being in Africa, with the objective of agreeing a series of economic partnership agreements before the end of 2007. That may have been the grand plan but, while all the African regional agreements have been made and provisionally applied, as of October 2016 the ratification process for individual countries was still ongoing.
In 2014, the EU Directorate-General for External Policies reported that the EPAs, while supposedly intended to promote trade and development, regional integration, sustainable growth and poverty reduction, remained deeply controversial. He said:
“There are fears they may be actually undermining the sustainable and long-term development of ACP countries and their regional integration processes”.
This was underlined by Dr Carlos Lopes, UN Under-Secretary-General and executive secretary of the Economic Commission for Africa, at meetings in Addis Ababa and London, and by a recent fact-finding delegation to South Africa and Namibia by the Africa APPG, of which I am a co-chair.
The EPA negotiations continued to drag on and the EU allegedly began to bully African countries by deciding to remove unilateral trade preferences by 1 October 2014 for countries that had not signed or ratified the EPAs. This created tremendous pressure and tension in various countries and regions. Meetings at a Finance Ministers’ conference in Addis Ababa, with Ministers from Namibia, Tanzania and Uganda, confirmed that African countries were—and some still are—caught in a dilemma of losing preferential market access for the few products they export to the EU if they did not sign the EPAs versus losing long-term development prospects. Many countries were threatened with significant tariff revenue losses, serious disruption of existing or planned customs unions, disruption of regional trade and regional production capacities, and unemployment.
The directorate-general’s study concluded that major changes would be needed before the EPAs could be a development model suitable for Africa. The EPAs called for sweeping liberation of African markets, and that was seen as reminiscent of the discredited World Bank and IMF neoliberal structural adjustment programmes that were so destructive in the 1980s.
Under the EPAs, to maintain duty-free access to Europe, African countries had to remove tariffs from at least 80% of imports from the EU—in some cases removing trade barriers from as much as 96% of imports. This left local producers and manufacturers with no buffer against cheaper and often subsidised European economies during their industrialisation process.
Despite misgivings from African policymakers, the EU Trade Commissioner resolved to force through as many EPAs as possible before the Africa-EU summit in April 2014. A sustainability impact assessment, however, begun in late 2002 by PricewaterhouseCoopers and completed in 2006, produced a series of conclusions and recommendations to help ensure that EPAs promoted development and supported economic, social and environmental sustainability. In particular, it was recommended that all ACP countries should retain duty-free and quota-free access to the EU market and that access to the EU should be improved for the few products not yet fully liberalised.
In 2015, Sir Ronald Sanders, the ambassador of Antigua and Barbuda to the USA, and formerly to the EU, presented a paper to an EU ECOWAS conference in Abuja assessing EPAs in the context of the African Union. He emphasised that an EPA is not an agreement between the 28 nations of the EU collectively and Africa as a whole but a legally binding bilateral contract between the 28 nations of the EU collective1y and each country in Africa individually. In the event of a dispute arising from the terms of the EPA, individual African countries, most with very scarce resources, would have to contest against the combined capability of the 28 nation states of the EU collectively. The inequality that arises in any dispute is stark, and any mechanism for dispute resolution would have little value.
That brings me to the key question: do EPAs allow Africa to conduct policies for its own development or for the development of Europe? African countries should be able to ensure that the EU provides sufficient aid and trade development assistance to implement these agreements with robust monitoring procedures for their delivery and effectiveness.
It is not surprising that the European Commission has recognised that the moves to set up the series of regional EPAs have faltered. A senior European ambassador to the EU reported as recently as last month that the EPA negotiations started late and were prolonged, controversial and marked by ill feeling. Bitter accusations were made by some ACP negotiators and European development organisations about the objectives and negotiating style of the EU.
They alleged that the EU used the negotiations to pursue its commercial advantages, which in some cases conflicted with the development strategies of the ACP countries. They alleged that the EU put ACP countries under heavy pressure to accept negotiations on a much wider agenda, such as trade in services, public procurement and competition policy—the so-called Singapore issues. They alleged that the EU’s approach did not take sufficiently into consideration the regional integration objective, and in some cases even threatened it. EU negotiators were accused of using divide-and-rule tactics and being more concerned with big company interests than with the needs of their EPA partners. Their style was overaggressive, putting ACP countries under heavy pressure to sign up to EPAs before the 2007 deadline, preventing consultation with their parliaments and stakeholders because of the time constraints.
At present, there is little, if any, consideration of civil society and the role of parliaments in the EU-SADC EPA. That is incomprehensible given the increased political importance of the trade agreements in Europe. That brings me to my final point: Brexit and its implications for the ACP EPAs. The UK is currently a major contributor to the EC trade and development fund. If the UK leaves the EU, the market access provision will no longer apply to the UK. In the absence of any specific action to establish alternative trade regimes, the UK could have no alternative but to impose the most favoured nation—or MFN—duties on imports from ACP countries. This will have the greatest impact on agro-food products, since this is the sphere in which the UK’s inherited EU MFN duties are likely to be highest.
The prospect of establishing new trade agreements with the UK is, of course, hampered by the fact that the UK cannot enter into any new trade deal agreements until it leaves the EU. The ACP countries therefore face the prospect of being at the back of a long queue of countries trying to conclude alternative trade agreements with the UK, while facing crippling most favoured nation duties on exports to the UK, on a daily basis.
Perhaps the challenge is for the UK initially to prioritise its future conduct of bilateral negotiations. Will the Minister agree that that could allow the internalisation of ACP concerns within these policy discussions? Will the Minister also agree that every opportunity must be taken to allow current market access arrangements to continue from day one of the UK’s departure from the EU? Does the Minister accept that part of the plan should be to engage through an alliance of the Commonwealth ACP countries, since within the UK body politic, the ACP as a group tends to be seen as an EU construct? This would suggest that there will be a crucial role for Commonwealth ACP high commissioners to the Court of St James. For example, exploiting opportunities presented in a range of UK parliamentary hearings and inquiries in hand into the impact of Brexit on the UK’s external relations could prove highly effective.
Lord Boateng (Lab)
My Lords, I begin by thanking the noble Lord, Lord Chidgey, for his continued championing of the cause of Africa in this House. I declare my interest as chairman of the African Enterprise Challenge Fund. I have an immediate and continuing interest because in many ways I owe my education to African agriculture. As a boy in the Gold Coast and then in Ghana I was the recipient of a cocoa marketing board scholarship. I was christened in a rural village in eastern Ghana. My paternal grandparents were farmers of cassava and cocoa. I saw at first hand the significance and the importance of agriculture in Africa. It accounts for 32% of Africa’s GDP. It is Africa’s most inclusive employment sector, employing some 65% of its labour force, 60% of whom are women. My grandmother was a cassava farmer and they are to be found all over Africa—women toiling in the fields but not always the beneficiaries of the product they produce. But that is a familiar story the world over.
Despite the fact that Africa has agriculture so very much at the heart of its economic, social and cultural life, the reality is, I fear, that farmers’ yields are among the lowest in the world. Per capita, Africa’s agricultural output is only 56% of the world average. When we look at the continuing reliance of Africa on imported food, the story is even worse—1.7 times the value of exports and rising, to feed the appetite now of a growing middle class. Africa is now importing so much more than it exports and paying so much more for that—upwards of $40 billion every year. That is the cost of failing agriculture in Africa.
The issue raised by the noble Lord, Lord Chidgey, about the impact of the EPAs is essential, because they provide the policy context within which African Governments relate to the agricultural community. Smallholder farmers in particular need a policy environment that encourages them to modernise and scale up production, encourages improvements in access to higher-yield seeds and quality fertilisers, thus enabling agribusiness to thrive. It needs to address issues around research and development, infrastructure and transport logistics. All these things are necessary if African agriculture is to be a driver of development on the continent.
EPAs therefore have to be judged, I would submit, in the context of the extent to which they help or hinder this process—and I fear that the jury is out on that point. There is little evidence to suggest that the forced liberalisation of markets in Africa actually works or that it enables support to be provided for indigenous African agribusiness, processing and manufacture. On the contrary, EPAs could well hinder them, and there are many examples where they have. So countries in Africa have understandably been cautious in their approach to EPAs. Some, like Tanzania and Uganda, have used Brexit as an opportunity to stall the process altogether, for they see little that benefits them and much that may well do harm. In west Africa, Nigeria has stood out specifically against EPAs because it fears the impact on its nascent manufacturing industry. Again, Nigeria has good cause to do so because when we look at the progress of the tiger economies of south-east Asia, we see that they have benefited from a process that would actually have been hindered by EPAs.
I would argue that Brexit provides an opportunity for us to take stock and to build a trading relationship with Africa that puts development at the heart of that relationship. It should draw on the best of existing and global practice and build into our new trading agreements the sort of arrangements that will enable Africa to develop its own processing sector, that will enable links to be developed between smallholder farmers and both regional and global value chains, and that will recognise that a degree of protectionism for local industry is probably necessary in order to promote the development of agribusiness on the continent. That in turn will provide opportunities for British companies. They will have an opportunity to assist in the development of capacity in Africa, to improve R&D and yield, and to provide the machinery and know-how that will enable Africa to grow its agribusiness and enhance its own value chains.
Ethiopia provides a classic example of how that can work in practice. The Ethiopians have resisted the imposition of external agendas and external solutions to their challenges. They have targeted science and innovation alongside support for rural farmers through nurseries, as well as the development of co-operatives. They have supported agri-industrial parks for the production of leather goods and other products related to agriculture and they have brought enhanced and added value to their own specialist coffee brands. All of this has been done in a way that has assisted smallholder farmers.
It has also been done in a way that has provided real opportunities for British business. Diageo is a classic example of that. It has developed its processes in both Ethiopia and in South Africa in a way that links smallholder producers of sorghum and other contributors to beverages directly to its factories. That has enhanced and added value and has enabled smallholder farmers to become stakeholders, and it has added shareholder value to those who invest in Diageo by increasing foreign direct investment in Africa. That is the way forward for Africa and for the UK.
In conclusion, I make a simple request—well, it is not simple, because it is quite a complicated process. I hope that the Minister will respond in a way that gives us heart, as I am sure he will, because DfID and the Secretary of State, to their credit, have been in the forefront of bringing some reassurance to Africa in this area. I ask that Britain continues to provide EBA—everything but arms—and GSP trade benefits for Africa; that we seek to conclude duty-free and quota-free market access arrangements at least with non-LDCs and in particular those that have long-standing trading links with our country; and, most importantly, that we maintain MFN WTO tariffs on sensitive products of particular importance to African countries and exclude such products from preferential trading arrangements with other regions that are low-cost competitors—for instance, in South and central America. The classic example here is Brazil and sugar. It is likely that the Brazilians will be up there on the list for early trade negotiations. If they are given preference at the cost of sugar producers in Malawi and in Swaziland, the consequences for smallholder farmers will be disastrous.
So there are challenges ahead, but there are opportunities. One should have no doubt about that when one looks at DfID’s increasingly high-profile investment in agriculture, when one looks at the interests of the Secretary of State in promoting a private sector role in development, and when one looks also at this House, where friends of the African smallholder farmer are to be found on all Benches—I do not think that there is a legislative body in the world that contains more friends of the small African farmer than this one. I hope that the small African farmer, who is at the heart of development and of Africa’s search for dignity and success, will continue to find friends and solace in this place.
The Lord Bishop of Winchester
My Lords, I too thank the noble Lord, Lord Chidgey, for securing this debate. With Malawi on the brink of a major humanitarian crisis, there is no better time to highlight the challenges facing Africa today. I declare an interest as the chair of a small charity supporting education and development in Africa.
The welfare of the east African nations is of particular importance to me. I was born in Tanzania and spent some of my teenage years in Kenya. In the 1990s, I was the principal of a small college in Nairobi—indeed, we still keep a home situated on an old coffee farm near Thika. Through this previous experience and from regular visits, I have observed the finely balanced life which Kenyan agricultural workers live. Smallholdings are a significant element in the agricultural sector of Kenya. Many city dwellers also have a smallholding upcountry. A severe drought might mean the end of their children’s education. It may also result in families being unable to afford even the most basic medicines or in workers having to resort to desperate means of generating income to support their families.
The economic partnership agreements that we discuss today may have as much of an impact on the livelihoods of east African smallholders as a bumper harvest or a deadly drought. We have heard from the noble Lord, Lord Chidgey, a sample of the difficulties caused by EPAs. I want to highlight two issues which could specifically affect the smallholder in Africa.
First, while the tailor-made free trade agreements between the EU and African countries seem on paper to indicate a real determination to encourage development in Africa, they could actually manifest in a very different way when countries such as France, with a vast agricultural surplus, are able to export enormous amounts of produce into African economies. This could be an effective death sentence for African smallholder co-operatives: local farmers’ markets supplied by smallholders cannot respond to bulk imports. How could a farmer, even one in a co-operative with a combined holding of some hundreds or thousands of acres, compete with shipping container after shipping container full of mass-produced, genetically-modified produce arriving from Europe? We have all enjoyed Kenyan beans and flowers, but these are the products of large-scale farming enterprises; reversing the process will hit the smallholder and further weaken existing co-operative farming arrangements.
The second problem I wish to highlight is one of government spending. Due to the difficulties of income taxation in several African countries where a large proportion of the population does not pay tax, one of the main ways that a Government fund public services, infrastructure and defence is through tariff revenues. The problem becomes all too obvious. To abolish tariffs in a country such as Kenya, with all its well-developed horticultural trade, through revised arrangements under the economic partnership agreements, would effectively slash substantial amounts of potential government revenue, meaning less money for hospitals, schools and roads. These are the very services smallholders require in order to make a contribution to the development of African countries.
Imagine these two effects combined; the result could be devastating to developing economies. Large numbers of smallholders would come under new pressures as they fail to compete with European markets; meanwhile the Government begin austerity measures in response to a fall-off in revenue. This is different from a trade dispute between two highly developed economic trading blocs. It is not TTIP, or Schengen arrangements within the well-developed EU market. Large multinationals will not suffer the consequences of a poorly negotiated trade deal. Neither will European citizens. It will be poor African farmers who will bear the brunt of the EPAs if the right course of action is not taken.
Much of what Paul Collier spoke of in his book The Bottom Billion has been acknowledged. New international trade arrangements are needed, accompanied by good governance and international law. Yet 5 billion or even 6 billion of us are still on track to improve our prosperity while the final billion have been left behind. There are many things which need improving if trade, rather than aid, is to be the basis for the relationships between developed and developing countries, but the last thing we want is to encourage instability and insecurity in economies where good governance is truly needed.
In the Church, partnership means working together as one towards the common good. From what I understand of EPAs, they are not quite the kind of partnerships that are envisaged. I will be reassured if we keep in mind the reality of life for the bottom billion and seek to establish partnerships that will lift people out of poverty on the basis of fairer trade agreements.
Baroness Sheehan (LD)
My Lords, I thank my noble friend Lord Chidgey for securing this important debate. On the face of it, economic partnership agreements between the EU and economic regions of Africa should be a welcome development for Africa, purporting, as they do, to promote trade and investment between African, Caribbean and Pacific partners and the EU, with the laudable aim of contributing to sustainable development and poverty reduction. Furthermore, we are told that EPAs are tailor-made to suit specific regional circumstances; that they will open up EU markets fully and immediately, but allow African, Caribbean and Pacific countries long transition periods of up to 25 years to liberalise up to 80% of their markets to EU imports, while still providing protection for sensitive sectors.
EPAs are also touted as drivers of change that will help kick-start reform and contribute to good economic governance, helping ACP partners attract investment and boost their economic growth. One would think that, with such benefits, ACP countries would be champing at the bit to sign on the dotted line. However, the October 2014 deadline left many countries in a dilemma, causing tensions in various states. Some of their concerns have already been addressed very ably by my noble friend Lord Chidgey. Some felt that if they did not sign, they would lose their preferential market access for the few products that they did export to the EU. However, others felt that their longer-term prospects would be jeopardised if they signed the EPA. For them, the threats included significant tariff revenue losses, loss of policy space, threats to local industries, increased unemployment, serious disruption of existing or planned customs unions, and the displacement of existing regional trade and production capacities.
I thank the House of Lords Library staff for producing an excellent briefing for this debate. I found their inclusion of the Round Table article by Sir Ronald Sanders, The EU, Economic Partnership Agreements and Africa, very useful in giving me a perspective of EPAs from a recipient’s viewpoint. I will read part of the abstract because it is succinct and to the point. It says:
“Africa has been divided into four groups of states by the European Union in the negotiation of Economic Partnership Agreements (EPAs) that will define the relationship between Africa and Europe in the future. The EPAs are unfair. They demand reciprocity between the EU countries collectively and each African country individually”.
That last sentence makes a nonsense of the concept of reciprocity. Reciprocity can exist fairly only when practised between partners of equal stature. I borrow again from Sir Ronald’s article when he tells us that Aristotle, in his monumental work Nicomachean Ethics,
“propounded the doctrine that: as between unequals, equity requires not reciprocity but proportionality”.
It is patently clear that unless trade agreements between rich and poor countries recognise the fundamental principle of proportionality, they can never be deemed fair. The right reverend Prelate also made this point.
I returned from a visit to Sierra Leone this Monday, so naturally I was interested in the trade figures between the EU and the Economic Community of West African States. I was rather surprised at what I found, given that the EPA was signed in 2014. It showed a drop in EU imports from the west African states of 28% from €38.3 billion in 2013 to €27.4 billion in 2015. Over the same period, exports from the EU to the west African states dropped by just 4%. This represents a trade balance in favour of the west African states of €8 billion in 2013 being transformed to €1.6 billion in favour of the EU in 2015. Some of the reasons behind this trend may well have been touched on by the noble Lord, Lord Boateng. In my view, the EPAs are a cause for deep concern. Perhaps the Minister will take up my concerns with the Directorate-General for Trade.
In concluding, I will move away from EPAs and focus for a moment on the implications of Brexit for trade relations between Europe and Africa. Of course, we do not yet know what Brexit will mean in detail but it is important that the UK should prepare for the potential disruption of trade between the UK and Africa and at the same time actively seek to ensure that our trade policy towards Africa also promotes Africa’s development. This will be in our national interest but also in Africa’s interest. I note the challenges that the Brexit timetable is going to pose in reaching those trade agreements.
I commend the recent report of the expert panel, which included two members of this House, under the umbrella of the APPG on Trade Out of Poverty. The report looked at potential future UK support for the Africa Free Trade initiative and its recommendations will, I believe, not only promote economic growth in Africa but help to pull significant numbers of poor people, women in particular, out of poverty as they are able to trade and move freely across borders. This will make a real contribution to progress towards the sustainable development goals and the aspiration to leave no one behind. At the same time, of course, we will be helping to create a larger and more open market from which British companies can benefit.
We have traditionally played an important role within Europe in arguing for open and fair trading relationships with developing country partners. The implications of Brexit for trade relations between Europe and Africa are potentially serious. I hope that it is part of the Government’s plan for Brexit to actively seek opportunities to be even more open and support Africa’s own efforts to move towards a more sustainable future.
Lord Collins of Highbury (Lab)
My Lords, I too thank the noble Lord, Lord Chidgey, for initiating this debate. Free trade has been a very useful tool against poverty globally. It has helped to pull millions of people out of poverty. However, as we have heard in this debate, it is not a panacea and some sectors of society lose out.
When the UK joined the European Economic Community 43 years ago, it transferred all authority for its trading arrangements to the EEC. In 2014, the UK’s $1.1 trillion in trade was channelled through these clear and predictable legal and institutional frameworks. For Africa this included the Cotonou agreement, as the noble Lord, Lord Chidgey, said, which expanded preferential access to EU markets while setting up the economic partnership agreements through which Africa was to gradually open up 75% to 80% of its own market to the EU.
The aspiration of the EU for EPAs between it and African, Caribbean and Pacific countries has been, as we have heard, to contribute through trade and investment to sustainable development and poverty reduction. But as my noble friend Lord Boateng said, African countries are caught in the dilemma of losing their preferential market access for the few products they export to the EU if they do not sign the EPAs, versus their longer-term development prospects if they sign them. The threats of the EPA, as the right reverend Prelate said, include significant tariff revenue losses; loss in policy space and threats to local industries; unemployment; serious disruption of existing or planned customs unions; and, as we have heard from all noble Lords in the debate, the displacement of existing regional trade and regional production capacities.
Over recent years many of the African economies have also seen an economic boom. However, at the same time inequality is extreme and increasing. Africa faces the additional costs of mitigating and adapting to climate change, despite being among the least responsible for causing the crisis. African Governments are in desperate need of new and additional public finance not only to fill financing gaps in their budgets but to invest in the future SDGs. International finance policies have resulted in African countries haemorrhaging billions of dollars in taxable financial resources. These potential tax losses could have been invested in reducing inequality and poverty and developing jobs and prosperity. Surely global agreement on tax must be the top priority for all countries.
European Commission officials highlighted some of the achievements of the EPAs, including 80 grants made to infrastructure projects across Africa under the EU-Africa infrastructure trust totalling some €6.5 billion and €55 million set aside under the African Union support programme to develop AU institutions. Despite misgivings from African policymakers, the EU remains determined and positive about the EPAs and is keen to deliver as many as possible. The SADC of Botswana, Lesotho, Namibia, South Africa and Swaziland signed the EPA in June of this year. The southern African markets will open only partially to EU exports, gradually over time, providing their industries with the intermediary goods they need to support growth.
As we have heard, in east Africa the tensions are more obvious. Members of the East African Community—Kenya, Uganda, Tanzania, Burundi and Rwanda—were due to sign an economic partnership agreement to ensure that the five nations continued to export goods to the EU without incurring quotas or tariffs. But Tanzania withdrew because of,
“the uncertainty in EU after the exit of UK”,
according to a government statement, which also said:
“But more important is to protect the economic interests of our countries by empowering the manufacturing industries”.
We have also heard recently that Uganda’s President Museveni then pulled out, saying that the deal needed further discussions, even though his Government had already agreed it. The trade deal has been under negotiation for nine years and was initialled by all parties in October 2014. All the countries apart from Kenya—as we have heard, the region’s largest economy—will be largely unaffected if the deal lapses because they are classified as least developed countries by the EU. But Kenya, as a wealthier developing country, will face tariffs of 4.5% to 19.5%, according to the chief executive of the Kenya Flower Council; flowers are an incredibly important part of Kenya’s economy.
The announcement by Tanzania is merely the most recent example of delay and backtracking on implementation. Could Brexit herald the unravelling of EPAs? Following the vote to leave the EU on 23 June 2016, a new trade policy will have to be designed. In doing so, attention needs to focus on how this can contribute to development. It will need to recognise the differences that exist among developing countries. Many of the least developed countries depend on preferences in the UK market. They need certainty in the same way that UK manufacturers need certainty. Will the Minister confirm that his department is fully engaged with the Department for International Trade in the design of new trade policies? Will he reassure the House that the UK Government will move quickly to confirm that existing arrangements will remain in place for a certain period of time following the UK’s departure from the EU?
Linked to this, the UK needs to put transitional arrangements in place to minimise disruption. As we have heard, the value of the preferential access that developing countries receive to the UK market through the EU’s GSP, and particularly its EBA element, is considerable. They save least developed countries exporters €385 million per year, non-LDC ACP exporters €205 million and Commonwealth exporters €715 million. As the noble Lord, Lord Chidgey, asked, what discussions are the Government having with the Commonwealth to establish a dialogue on trade and new trade arrangements?
As my noble friend said, there are opportunities in these risks, and a new UK trade policy can be made more development-friendly by going beyond tariffs to include new provisions on services, investment, rules of origin and standards. In crafting its trade policy approach to Africa, three principles should underlie the UK’s trading engagements with the whole of Africa: support for Africa’s regional integration priorities; pro-poor and pro-development trade arrangements; and market-access continuity.
The United Kingdom Government face a considerable range of negotiating priorities. I hope tonight that the Minister will be able to reassure the House that Africa, as a rapidly developing and historically linked trading partner, will not be overlooked in these discussions.
The Minister of State, Department for International Development (Lord Bates) (Con)
My Lords, I thank all who have contributed to this excellent debate, particularly the noble Lord, Lord Chidgey, for leading it off. I also pay tribute to his work as the co-chair of the all-party parliamentary group. He has done a lot of work in this area, including his undertakings and research into the overall effectiveness of EPAs. We will certainly be following that very closely and welcome the opportunity to have dialogue with the noble Lord. I will begin by making some general remarks and then, in five minutes or so, deal with some of the key points that were raised during the debate.
Free, fair and open trade is fundamental to the prosperity of the United Kingdom and the world economy. Trade is a driver of growth and development, and growth is one of the most effective means of raising incomes, creating jobs and reducing poverty. More than a decade of fast economic growth has helped cut poverty rates in sub-Saharan Africa from 56% in 1990 to 43% in 2012. This growth benefits sub-Saharan Africa, but also British business, as it gives opportunities for investment. It is for these reasons that the UK is committed to ensuring developing countries can reduce poverty through trading opportunities. The right reverend Prelate the Bishop of Winchester spoke about the importance of education and economic development. We would say the combination of those two elements is the surest possible route out of poverty.
Agriculture, which several noble Lords referred to—particularly the noble Lord, Lord Boateng, based on his personal experience—will be a major source of growth in many countries, accounting for an average 15% of GDP and 30% of employment, 60% of which is women’s. We are taking an increasingly commercial approach to the development of agriculture in Africa by strengthening the commercial viability of smallholders and accelerating investment in agribusiness. We are working to ensure that women—a particular concern raised by the noble Lord, Lord Boateng—are economically empowered across the sector, that land tenure and other property rights are secured, that investments are responsible and resilient to climate change, and that our support across the food system is helping to deliver our nutrition goals. Domestic and foreign investment in agriculture is growing, but more is needed for sub-Saharan Africa to realise its potential. Trade can help unlock that potential.
The noble Lord, Lord Boateng, also talked about the historic poor yields in African agriculture. African countries rightly aspire to add more value and to raise those yields by investing in the latest technology. This will require greater integration into global trading systems. Regional and global value chains, especially for horticulture, which the noble Lord, Lord Collins, mentioned, function on the basis of quick and efficient trade logistics, and for most of Africa this will require substantial improvement. By providing additional access to the markets of developed countries to sell their produce to, and access to global and regional supply chains, we can create vital opportunities for the world’s poorest people to work their way out of poverty.
UK leadership has ensured that the EU offers the world’s most generous package of market opening for developing countries. Some 75 countries, 44 in Africa, currently enjoy duty-free access to the EU market of half a billion people through the EU’s Everything But Arms trade preference scheme provided for the least developed countries, as mentioned by the noble Lord, Lord Collins, or the negotiated economic partnership agreements. The UK is a long-standing supporter of the EU’s EPAs as development-focused trade deals. They can put our trading relationship with African partners on a more equitable, mature and business-like footing, immediately opening up EU markets on a permanent basis, providing support to help countries use the advantages and, over time, opening up access to quality products and technology from European firms.
However, as the noble Lord, Lord Chidgey, rightly pointed out, these negotiations have taken too long. For now, EPAs are applicable to only 13 of the 48 candidate countries, with eight having been finalised only in the last couple of months. The noble Lord, Lord Boateng, said that the jury was still out. One of the reasons why the jury is still out is that it has just gone out. A lot of these deals have only just come into effect in the past couple of months. We need to keep their benefits under review but the length of time is clearly a concern. Concerns have also been expressed, as the noble Lord, Lord Chidgey, mentioned, about the fear of negative impacts of EPAs in Africa, but the UK Government believe that where these agreements are correctly implemented and supported they can provide a lasting framework in support of sustainable growth and poverty reduction.
The World Bank estimates that over recent decades, income grew three times faster in developing countries that opened up their markets than in those that maintained barriers to trade. I welcome the noble Baroness, Lady Sheehan, to her new role; we are both new to the issue, but we both care passionately about it. She talked about the importance of evidence, and asked where the evidence was that the increase in living standards that we want is actually being delivered. We believe it exists in the fact that the economies that opened up grew faster. Greater access to EU intermediary goods, equipment and machinery will help African firms’ competitiveness. A reduction in fertiliser tariffs, for instance, should help to support agriculture efficiency. African businesses can benefit from lower input prices to help to realise a net increase in profits.
At the same time, we must of course be mindful of the different stages of development that our partners face, a point made by the noble Lord, Lord Collins. That is why the EPAs allow 12 to 20 years for the gradual and controlled removal of our African partners’ tariffs, a point that the right reverend Prelate the Bishop of Winchester was particularly concerned about, and rightly so. These are not directly comparable; they are asymmetric, with a bias to development from the poorest countries. It is right and proper that that should be so. Even more, the EPAs exclude agricultural products and other strategically important sectors, as chosen by our partners, from any requirements to lower tariffs at all. For example, west African negotiators chose not to lower tariffs to EU products such as meat, poultry, fish, dairy, vegetables, cocoa, apparel, pharmaceutical products, cars and many more. The noble Baroness, Lady Sheehan, referred to the trade imbalance between west Africa and the EU, but within the EPAs there are certain guarantees that in our opinion will help.
EPAs also contain safeguards against possible excessive EU competition; the noble Lord, Lord Chidgey, went somewhat further and talked about the strong, almost threatening approach that was taken. African Governments can take actions such as temporarily raising tariffs or applying quotas to protect domestic businesses, producers and food security. In addition, the EU has agreed not to subsidise any of its agricultural exports under an EPA. African states have agreed to extend to each other the same levels of liberalisation as the EU and EPA, aiming to encourage regional integration and prevent increased imports from the EU displacing imports from neighbouring economies.
In addition, EPAs provide for further co-operation on issues such as customs, standards, trade and services, agriculture, fisheries, investment and business environment. Opening dialogue in these areas allows EPAs to provide greater depth and scope for wider benefits than one-way trade preference schemes.
I turn to the EU referendum, which was rightly raised by many noble Lords. Leaving the EU offers a major opportunity—in fact, I think that term was used by the noble Lord, Lord Boateng—for the UK to send a positive signal that our markets are open and that we are determined to promote business with the developing world. The noble Baroness, Lady Sheehan, asked me to reference this, but we now have a Department for International Trade, which is charged with promoting UK exports in goods and services to support a growing economy that creates wealth for all. That is its job remit; we have a department for that. It will obviously be taking the lead in ensuring that these types of trade arrangement happen.
In similar vein, several noble Lords, including the noble Lord, Lord Collins, referenced the importance of the Commonwealth. We recognise that many Commonwealth countries are current or potential members of EPAs, with nine currently in Africa, such as South Africa, Botswana, Ghana, Cameroon and Mauritius. If the EPAs in east and west Africa are implemented, that number will rise to 15. We have set as a priority to increase Commonwealth trade and investment. Commonwealth trade is estimated to surpass $1 trillion by 2020, but it could be more, and we believe that EPAs could be part of that.
On the specific point about the process, of course, at the moment the UK remains part of the EU and we therefore remain governed by the EPA arrangements that are in place. The EU still supports the EPAs, and while the UK is still a member of the EU, all rights and obligations will apply, including our commitments to developing countries through the EPAs. The UK enjoys strong trading relationships with many developing countries, and we will look to strengthen those ties in future. That will be part of the negotiation package as we move forward.
Time is moving quickly, but let me deal with a couple of issues which I have not yet touched on. We accept absolutely that partnerships have been literally at the heart of EPAs. They must be partnerships: the right reverend Prelate was right to mention that. The Cotonou partnership agreement in 2000 was the start of this, and it is essential that the spirit of partnership continues. We believe that tax revenues lost can be raised through increased exports to the EU, which will increase the revenue into the area. In relation to the Africa Free Trade initiative raised by the noble Baroness, Lady Sheehan, the All-Party Parliamentary Group on Trade Out of Poverty launched its inquiry in March 2016, and Ministers have been asked to participate. The final report was issued in October, we support it and DfID intends to keep working in each of the main thematic areas—primarily cutting trade costs, connecting markets, enhancing productive capacity and using trade to drive inclusive economic growth.
Time has gone. I undertake to read the debate very carefully with officials to ensure that we have adequately addressed the points raised. I again thank the noble Lord, Lord Chidgey, for giving us the opportunity for this timely explanation of this very important economic and development relationship with Africa.