Africa: European Union Economic Partnership Agreements
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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.