Economic Partnership Agreement: Kenya
(3 years, 9 months ago)
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Lord Goldsmith
That this House takes note of the Economic Partnership Agreement between the United Kingdom of Great Britain and Northern Ireland, of the one part, and the Republic of Kenya, a Member of the East African Community, of the other part, laid before the House on 17 December 2020.
Special attention drawn by the International Agreements Committee, 2nd Report.
Lord Goldsmith (Lab) [V]
My Lords, I am grateful for the opportunity to debate the International Agreements Committee’s second report, which covers the economic partnership agreement between the United Kingdom and Kenya. As the committee’s chair I extend my thanks to the members of the committee for their important contribution to this report, as well as to the staff. I also thank the noble Lord the Minister for his constructive engagement with the committee, both publicly and in private, and for facilitating this debate.
Before I turn to the contents of the report I will take a few moments to make some general comments on the scrutiny by Parliament of international agreements. The House will have heard me say before that international agreements—treaties—affect us all. They can affect important aspects of our lives: the economy, goods and services, our security and our rights. Scrutiny by Parliament must therefore be not an afterthought but an integral part of the overall treaty-making process. As we all know, at the moment Parliament’s role is limited and focused on the end of the process, when a treaty has already been signed.
I have said before that I believe Parliament should have a role at an earlier stage: when the objectives for negotiations are set. This is particularly relevant for trade agreements, and it happens in other countries such as the United States, and in the European Union. So I welcome the two commitments that the Minister made in this House during last week’s debate on the Trade Bill. They were made in response to a Motion put forward by a member of the committee, the noble Lord, Lord Lansley, whom I thank for his efforts in this regard.
I am pleased that the Government have agreed to facilitate a debate on draft negotiating objectives for trade agreements, subject to parliamentary time, if it is requested by the International Agreements Committee, and that the Government will not ratify a trade agreement until a debate has been held, provided it has been requested by a relevant committee in good time.
The subject matter of the report is the UK-Kenya Economic Partnership Agreement—EPA for short. It is, on the one hand, a standard rollover trade agreement that seeks to ensure continuity of trade relations after the Brexit transition period. It replicates the treaty arrangements between the EU and Kenya.
On the other hand, however, it is not a straightforward rollover agreement. First, the underlying agreement—the EU agreement with the East African Community partner states, of which Kenya is a member—is not actually in effect. Instead, Kenya enjoys duty-free access to the EU through something called the EU’s market access regulation.
Secondly, and most crucially, the underlying multilateral EU agreement has been turned into a bilateral one, even if states belonging to the East African Community can apply to join it later. In signing a bilateral agreement with the UK, Kenya has effectively followed a go-it-alone approach. There were clear incentives for the Kenyan Government to do so. As the only country within the EAC not classed as a least developed country, it does not qualify for zero import duties under the general scheme of preferences for least developed countries. As Kenya is a lower-middle income country, it can expect reduced rates of import duty on only some goods. Considering that the UK is among Kenya’s top five export markets, one can see why it could be considered to be in Kenya’s immediate interest to sign a bilateral trade agreement with the UK to avoid import tariffs.
There are, however, issues and questions about what this agreement does to regional coherence. There are concerns that it could have disruptive political and economic consequences for the wider East African Community. For example, the EAC partner states have agreed to a common market protocol which commits them to co-ordinate trade relations among themselves and between the bloc and third parties. The UK EPA appears to undermine this obligation. Also, the EAC has been a customs union since 2005, applying zero customs duties on goods and services within the bloc and applying a common external tariff to imports from countries outside the EAC. The UK-Kenya agreement could undermine this arrangement, as Kenya would be applying a separate and more generous tariff regime for UK imports. While the committee acknowledges in its report that the UK-Kenya EPA could indeed have been the most efficient option for maintaining Kenya’s preferential access to the UK market, we would welcome an assessment from the Minister of the potential disruptive consequences for the EAC.
We would also like to ask the Minister that, were similar concerns to emerge in future agreements, they would be more clearly spelled out in the explanatory materials. The Written Ministerial Statement made by the Minister in response to our report helpfully explains that the UK’s overall objective remains to secure a regional deal with the whole of the East African Community. It also acknowledges that some EAC members
“were not ready to enter into negotiations with the United Kingdom”
at the time. The Statement concludes by saying that it is the Government’s intention that the EPA be a “stepping stone” to stronger regional integration. So I would welcome it if the Minister could specify what steps the Government are taking to make sure that regional integration remains a priority for the UK Government and is not undermined through the bilateral agreement with Kenya.
Conscious of time, I will leave it here for now, having set out the two broad themes of parliamentary scrutiny on the one hand and the impact of the UK-Kenya agreement on regional cohesion on the other. I know that colleagues on the International Agreements Committee speaking this afternoon will reflect on other points of detail raised in the debate. I look forward to what I hope will be a constructive debate. In particular, I look forward to the maiden speech of the noble Lord, Lord McDonald. I thank him for choosing this debate in which to make his maiden speech. I welcome him to the House. I worked with him in government and I remember being hosted by him when he was the ambassador to Israel a few years ago, and I am therefore very keen to hear what he has to say now. However, I am also keen to see the huge contribution that I am sure he will make to the House, given his considerable experience and expertise. I beg to move.
Lord Oates (LD)
My Lords, it is a pleasure to follow the noble and learned Lord, Lord Goldsmith. I have the privilege of being a member of the International Agreements Committee, which he chairs so adeptly. I also look forward to hearing the maiden speech of the noble Lord, Lord McDonald of Salford. Although I have not met him before today, I have a strong connection to him because my nephew James worked for him and my father married him—I should stress that my father is a clergyman.
I join the noble and learned Lord, Lord Goldsmith, in welcoming some of the movement by the Government on the issues of scrutiny, in particular on what I believe has already been dubbed the “Grimstone rule”, by which the Government have agreed that where the IAC has requested a debate on a treaty, the Government will not ratify it before time has been provided for that debate. Some would say that that is the absolute basic minimum requirement that any self-respecting Parliament could accept, but it is welcome none the less.
In the short time I have available, I will focus briefly on two things. The first is the impact on regional integration in east Africa of the decision by our Government to embark on a bilateral agreement with the Government of Kenya rather than pursuing an agreement with the East African Community as a whole. I understand, of course, as set out in our report, that Kenya had a particular issue, being the only country that was not classified as a least developed country. However, as paragraph 13 of the IAC report highlights, the Government have failed to explain adequately what other options they considered for ensuring continuity of trade with Kenya other than by concluding a bilateral EPA, which inevitably has caused huge concern to other EAC members. I hope that the Minister will take the opportunity to explain this in his response.
The agreement causes serious difficulties in the region and appears to place Kenya in breach of its treaty obligations to the EAC. We know, of course, that the UK Government briefly toyed with the idea of breaching our own treaty obligations with the EU, but at least they had the sense to draw back from such action. It is regrettable that, by pursuing the approach they have, the Government have placed Kenya and the EAC in such a difficult position.
Secondly, I hope that the Minister will be able to tell us more about the Government’s overall approach to trade agreements with developing countries. Many of us have been concerned about the approach that the EU took in the past to developing countries. The Minister may be aware of the APPG for Africa’s excellent report on the lessons learned from the EU EPAs with Africa; that report raises a number of issues, including the constraints that they place on development policy space for African countries. I hope that the Minister can address those points.
Baroness Sugg (Con) [V]
My Lords, I welcome the EPA’s focus on development and the commitment to continue to provide duty-free and quota-free access to the UK market for Kenyan goods. This will assist Kenya in seeing the growth benefits from international trade, aided by the appointment of Theo Clarke MP as trade envoy to Kenya and programmes such as TradeMark East Africa, which help promote trade between our two countries.
I appreciate the difficulties that there were in negotiating an EAC-wide agreement before Brexit. However, I share the concerns of the International Agreements Committee and civil society groups that the signing of individual EPAs could risk disruptive economic and political impacts and undermine some of the development objectives, particularly regional integration in east Africa. I would be grateful for my noble friend the Minister’s comments on that.
I am speaking before the maiden speech of the noble Lord, Lord McDonald of Salford, whom I had the pleasure of working with at the FCDO towards the end of his lengthy and loyal service. I agree wholeheartedly with his remarks yesterday that the cutting of our international development budget—moving in the opposite direction to the rest of the G7—is a strategic and regrettable mistake. I look forward to his experienced contributions to this place on that and other international issues.
This economic partnership and our broader relationship with Kenya—indeed, with the continent of Africa—is at risk due to the planned cut in international development. There are reports of our bilateral programmes in Kenya being cut by between 50% and 70%. Can my noble friend the Minister tell me what conversations his department has had with the FCDO about the impact of these cuts? Will the important trade programmes to which the Prime Minister recommitted last year at the UK-Africa Investment Summit—such as the successful TradeMark East Africa programme, which has a budget of $155 million up to 2023 in Kenya alone and has already allocated this funding to 36 projects—be fully protected? These projects are delivered in close partnership with the Government of Kenya, the EU, Ireland, Denmark, Finland and the United States. Will we uphold our commitment to them? Has an impact assessment been made of how the cuts in Kenya will affect our trade relationship?
Finally, does the Minister agree that one department trying to increase trade with Kenya while another undermines our bilateral relations and trade programmes through massive budget cuts is not exactly joined-up government?
The Deputy Speaker (Lord Duncan of Springbank) (Con)
I welcome and call the next speaker, the noble Lord, Lord McDonald of Salford.
Lord McDonald of Salford (CB) (Maiden Speech)
I rise to address your Lordships’ House for the first time. I feel I should introduce myself. Noble Lords know my name and can guess that Salford is important to me. I was born and brought up there. Family is the centre of my life. Every day, I remember family members who are no longer here—today, my dad and my brother, Dominic, in particular.
After completing school in Salford, I studied history at Cambridge. After graduation, I joined the Foreign and Commonwealth Office, where I worked for 38 years. For five years, I was the Permanent Under-Secretary, which explains why international relations will be one of my main interests in your Lordships’ House.
No matter what any of us thought about leaving the European Union, our shared objective now is to protect and promote the interests of the United Kingdom outside the EU. Part of that task is to replace trade agreements from which the UK benefited as an EU member. Time has been short. In future, it will be better when Parliament is consulted by the Government when framing objectives for trade negotiations.
The economic partnership agreement with Kenya is one of the first wave of trade agreements. As a lower middle-income country in a customs union with least-developed countries, Kenya finds itself in a bind. All its neighbours enjoy duty- and quota-free access to the UK. For now, its neighbours are not interested in signing a trade agreement. Kenya’s horticultural exports are vital to its economy and the UK is one of its largest markets. To help our key partner, I believe we should not impose tariffs on Kenya’s flowers, fruits and vegetables. To achieve that in a way that is compatible with World Trade Organization rules, the agreement we are debating today is the best option available.
To support the work of the UK overseas will be my main objective in your Lordships’ House, but I shall not confine myself to foreign affairs. My other interests are the environment and the governance of the UK—the union, the regions and the Civil Service. It is my honour to be the latest Foreign Office PUS to join your Lordships’ House; three of my distinguished predecessors are already noble Lords. My only regret in joining now is that I shall not be able to work with a fourth predecessor, the late Lord Wright of Richmond, but I think of him today and honour his memory, as his successor and son-in-law.
Having spoken for the first time, I plan now to listen carefully before disturbing your Lordships again. Meanwhile, I thank your Lordships for making me feel young and naive for the last time in my life, and for listening to me today.
Lord Kerr of Kinlochard (CB) [V]
What a pleasure it was to hear the noble Lord, Lord McDonald, and what a good foretaste of what he will bring to our debates. It is obviously a great pleasure to follow him. We have heard how well he manages suaviter in modo; I can assure the House that he is also pretty good at fortiter in re. He is quite tough: after all, he endured a couple of years working for me in Washington. He went on to hold very senior jobs across Whitehall, not just in the Foreign Office, and to be a distinguished ambassador in Israel and Germany. He may well have got the suaviter bit from Patrick, Lord Wright of Richmond, his father-in-law, who was so liked and is so much missed here in this House. Like Patrick, and like me, he served five years as Permanent Under-Secretary. His were more challenging times than mine. He brings us considerable wisdom and experience, and I welcome him very warmly to this House.
I am very glad that we are having this little debate on the agreement with Kenya before it is ratified. Like the noble Lord, Lord Oates, I thank the noble Lord, Lord Grimstone, for his assurance on 23 February on the Floor of the House that it would be inconceivable in future that we should not have a pre-ratification debate if such a debate were recommended by the committee of the noble and learned Lord, Lord Goldsmith. I have long envied American negotiators their ability to argue, during a negotiation, that however admirable a suggestion from our side was, “It will never fly on the Hill.” Our negotiators now have a comparable weapon in their armoury.
In the time allowed to me, I can make only two very brief points about the agreement itself. First, of course the cohesion of the East African Community matters and, as the noble and learned Lord, Lord Goldsmith, said, the compatibility of this new agreement with Article 7 of its common market protocol is not at all clear, but I do not believe that in practice the agreement threatens the cohesion of the EAC. Under the agreement, tariff reductions by the Kenyan Government, which might create a perceived need for customs checks inside the EAC, will start only seven years ahead. By then, I would hope that all five other members of the EAC would have acceded to this agreement or a comparable, improved version of it. I very much hope that the Minister will be able to confirm that that is indeed the Government’s aim.
Secondly, the IAC report drew particular attention to the scrutiny of amendments to agreements. It is important, if we are to avoid future disputes, to devise clear criteria for determining when an amendment—or, indeed, a memorandum of understanding, an exchange of letters or an agreed minute—is of sufficient weight to trigger CRaG scrutiny. I am encouraged by the sympathetic hearing that the noble Lord, Lord Grimstone, has so far given to the concept of a criteria-based approach, and I urge him not to weary in well doing.
Lord Boateng (Lab) [V]
My Lords, it is a pleasure to speak in the maiden debate of the noble Lord, Lord McDonald. I had the honour of serving with him as a Minister and then as a colleague. He may be young compared to many of us, but he was never naive—at least not in my experience.
I welcome the opportunity to have this debate and commend the work of my noble and learned friend Lord Goldsmith and his committee in giving this agreement much-needed scrutiny. I particularly support the call, and concerns expressed within it, for the implications of this agreement for economic regional integration. Successive Governments of all political hues have long supported regional economic integration in Africa as one of the best means of lifting people out of poverty. It would be a tragedy if these agreements—this is the first of a number—were to undermine the real progress that has been made in the development and economic integration of the regions of Africa, not least as this is the first year of the African Continental Free Trade Agreement. This free trade agreement creates the largest global free trade area in the world by country number, aims to be a model of cross-border co-operation—something that DfID, as it was, and the current department have long championed—and, importantly, offers a real prospect for a continent currently facing a pandemic that has caused it up to $79 billion in output losses in 2020 alone. Africa has never needed economic integration more than now. The World Bank estimates that the African Continental Free Trade Agreement will boost regional income by 7%, or $450 billion, speed up wage growth for women and lift 30 million people out of extreme poverty by 2035.
If regional integration does not come to pass on the continent, we face the real prospect of holding it back and increasing still further the number of people who will fall into poverty as a result of Covid. I therefore urge the Minister to respond positively to the request in the report that the Government should provide an assessment of the risks posed by the agreement to the East African Community Customs Union, as well as an assessment of the implications of any bilateral agreement for regional integration in East Africa. This is important today, since Ghana has signed—in the Locarno room—a post-Brexit trade agreement with the UK. I commend the hard work of Ministers on both sides for all they have done in that regard. If that hard work is to be turned into benefits for farmers, young entrepreneurs and small and medium-sized businesses, it requires that this report and its implications are taken seriously by the Government so that, when we come to consider Ghana’s free trade agreement with the UK, it will enhance rather than damage regional integration.
Lord McNally (LD) [V]
My Lords, there are times when debates in this House make one feel very old. Between 1974 and 1979 I was a special adviser to Jim Callaghan, working closely with the much-missed Lord Wright of Richmond, the father-in-law of our new Peer. It is also worth remembering that at the time the bright, young Private Secretary to the Permanent Under-Secretary, Sir Tommy Brimelow, was the noble Lord, Lord Kerr. There is one last thought on which the noble Lord, Lord McDonald, might ponder: when Tommy Brimelow came into the House, he joined the Labour Benches. The noble Lord does have a choice.
Kenya is important, not only as a trading partner, as has already been pointed out, but as a country in its own right. It is a member of the UN Security Council and a senior member of the African Union. We have already heard about its membership of the East African Community and, of course, it is a key member of the Commonwealth. It is important that the relationship is endorsed and supported by this House.
Some real worries have already been expressed in this debate. In seeking the new bilateral treaties, the UK must not become a disruptor of existing partnerships, as the noble Lord, Lord Boateng, warned us, which are so important to development in Africa. Although, like my noble friend Lord Oates, I accept that the concessions about parliamentary scrutiny are the basic, minimum requirement, if the Government are sincere in their pledge about bringing sovereignty back not to the Executive but to Parliament, they should look at radical reform of the Constitutional Reform and Governance Act 2010. That would show their real intention to give Parliament the kind of scrutiny that trade and other international relations treaties deserve. We must make sure that they are seen in the wider context of regional stability, our ambitions for climate change targets, development goals and support for human rights, as well as squeezing bribery and corruption out of trade altogether. That is what we want to hear from the Government.
I look forward to the Minister’s reply. Again, I welcome the noble Lord, Lord McDonald, to the House and look forward to his future contributions.
Viscount Trenchard (Con)
My Lords, I thank the noble and learned Lord, Lord Goldsmith, for introducing this debate. Along with other noble Lords, I most heartily congratulate the noble Lord, Lord McDonald of Salford, on his entertaining maiden speech. Your Lordships’ House will gain a great deal from his experience and perspectives as the global Britain programme accelerates.
During the last few weeks of the implementation—or transition—period, all eyes were on the discussions with the EU, led by my noble friend Lord Frost. I trust that we are likely to see rather more of him in your Lordships’ House in future. He successfully concluded the trade and co-operation agreement with the EU on Christmas Eve, a wonderful Christmas present for the British people.
Little attention has been given to the impressive performance of my right honourable friend the Secretary of State for International Trade and her team in sorting out a large number of continuity free trade agreements during December. As of now, the UK has secured continuity or enhanced continuity trade agreements with almost all the 70 countries with which we had previously signed up to free trade agreements as members of the EU. Last month it was announced that we have applied to join the CPTPP, a free trading area with a combined GDP of £9 trillion. This is very exciting and enormously significant for global Britain.
It is also to be celebrated that we have now signed up to seven free trade agreements covering 14 African countries. Important among those agreements to which we signed up in December was that with Kenya. In terms of volume of traded goods, it was perhaps not the most important, but in terms of geostrategic significance I submit that it was rather more important. Some observers have said that the agreement may have a negative effect on economic integration among the members of the East African Community. However, under Article 143 of the agreement, the other members of the EAC are entitled to make an accession request to the UK-Kenya EPA Council.
The International Agreements Committee of your Lordships’ House asked why the Government did not transition the market access regulation into UK law. It seems clear that the reason no other partner state of the EAC chose to ratify the EU-EAC EPA is that they could enjoy duty-free and quota-free access through the EU’s market access regulation. Beyond this, all the other partner states had an additional incentive not to ratify the agreement, as they are least developed countries and, as such, already benefit from duty-free, quota-free access under the EU’s generalised scheme of preferences LDC framework.
Kenya has seen sustained growth for over a decade, rooted in fundamental reforms which have made the Kenyan economy competitive and increased its attractiveness to international investment. I welcome this agreement.
Lord Hannay of Chiswick (CB) [V]
My Lords, I too welcome the maiden speech of the noble Lord, Lord McDonald of Salford, and in doing so express my sadness that his late father-in-law, Lord Wright of Richmond, was not here to see him make it. I worked once for someone who said he was a founder member of the son-in-law club. He was a former Leader of this House, Lord Soames, and his father-in-law was Winston Churchill, of course. He always used to say, “the son- in-law also rises.”
In so far as the UK-Kenya agreement we are debating is one of the category that the Government call continuity agreements—perhaps more clearly described as rollover agreements of the terms which already existed between the UK and Kenya when we were a member of the EU or in transition out of it—there is probably no need to go into too much detail, which is fortunate since, as usual, we have no time to do so.
Perhaps when the Minister replies to the debate he can identify any elements in the agreement which provide better access to our market than Kenyan exporters already had, or provide our exporters of goods or services with better access to the Kenyan market than they already had. What we are talking about, therefore, is running to stand still. I am not denigrating that; it is certainly better than nothing and better than regressing to straightforward third-country treatment of each other. But it is still light years removed from what was promised by the promoters of Brexit once we had shaken off what they described as the “shackles” of EU membership.
That brings me to a wider point, which was raised forcefully in the report of your Lordships’ International Relations and Defence Committee on the UK’s relations with sub-Saharan Africa—a report published last July and still languishing undebated. It is now nearing five years since the Department for International Trade was set up in the aftermath of the 2016 referendum to establish the outlines of the UK’s new independent trade policy, yet to this day not a word has been revealed about what that policy should be towards Africa —a substantial proportion of the world’s population, containing many rapidly growing markets. Not one word has been said about those African countries’ improved access to our market, which must surely be an integral part of any serious partnership between the UK and Africa.
This failure to identify and to promote the countries of Africa as a priority part of our new trade policy is surely a lamentable one which must be remedied. However, the Government’s written replies to our report’s recommendations—two attempts were needed—were vapid and imprecise, and contained no sense of urgency. Clearly, pursuit of the mirage of a UK-US agreement and that of an agreement with the Pacific grouping, with seven of whose 11 members we already have free trade agreements, were crowding out any consideration of Africa. I hope that the Minister can say that this will not continue to be the case and give us chapter and verse on how that lacuna will be filled, at the latest when the report on sub-Saharan Africa is finally debated.
The Deputy Speaker (Lord Duncan of Springbank) (Con)
I call the next speaker, the noble Baroness, Lady Wheatcroft. I beg your pardon, the next speaker is the noble Viscount, Lord Waverley.
Viscount Waverley (CB)
It has happened many times before; not to worry.
My Lords, the maiden speech by the noble Lord, Lord McDonald of Salford, was one of the finest.
The Kenyan agreement should become a beacon of best practice, promoting inclusion, sustainability and green growth, and, importantly, should be based around delivering African priorities. However, the UK’s recent push to sign continuity agreements with African states has drawn criticism for being overly focused on the UK’s needs and not those of the continent. There is an excellent opportunity to reset the trade relationship with Africa and seek an agreement that centres on the priorities of that continent: the African Continental Free Trade Agreement, which aims to boost intra-African trade. This would tie in well with Commonwealth objectives to boost intra-Commonwealth trade, a significant proportion of which should be in Africa, a point borne out in Nairobi at the Commonwealth summit hosted by the Secretary-General, the noble and learned Baroness, Lady Scotland.
However, as a broader strategy of approach, emphasis should not be just on anglophone Africa. The UK’s ambition to be the lead investor in Africa should be seen within the context of opportunities in francophone and lusophone countries, and the Hispanic Equatorial Guinea. Being an international centre for mobile technology, digital trade ought to be prominent and include financial services. The UK should be seeking to agree a modern digital trade corridor, on par with those agreed with Japan and Singapore, with free movement of money, data supporting inward investments services and trade in goods.
Notwithstanding a round of development cuts, we should be seeking to better utilise our diminishing funds to build resilience and capabilities in key areas such as digital connectivity, climate, health and skills. I conclude by saying that we should be mindful too of UK-EU-Africa supply chains—the east African flower trade being a case in point, as has already been referred to. This Kenya agreement should strengthen these things and not have the negative effect of disrupting and undermining them; although, as an aside, I have long been a proponent of the establishment of greater east-west transport corridors.
The Deputy Speaker (Lord Duncan of Springbank) (Con)
I thank the noble Viscount, Lord Waverley. I will not forget again. I now call the noble Baroness, Lady Wheatcroft.
Baroness Wheatcroft (CB) [V]
My Lords, I commend the impressive maiden speech of the noble Lord, Lord McDonald of Salford, and welcome that he is clearly intent on being an active Member of this House. I thank the Minister for giving us the Grimstone rule, to which reference has already been made. It is a small concession to parliamentary democracy, but a welcome one.
This agreement demonstrates why Parliament needs to be involved in formulating these agreements. I love Kenya and have spent many happy times there. It is a country rich in natural resources, but it has a massive problem, which I wish to concentrate on today: corruption. It ranks 124th in Transparency International’s index of 180 countries.
When Kenya’s Ethics and Anti-Corruption Commission was launched in 2016, its director said that Kenya was losing a third of its state budget—around $7 billion a year—to corruption. Sadly, things have not improved since then. A succession of scandals in public procurement have been exposed, year after year. Some have involved massive contracts and some just a consistent pattern of graft. Such corruption deprives the people of the wealth that they could be enjoying and that Kenya, without corruption, would be well placed to deliver. Currently, there are investigations into alleged corruption over Covid-related contracts—although that is of course not unique to Kenya.
So could we not have been more ambitious in pushing Kenya towards transparency in public procurement contracts? The agreement states that the parties will aim to conclude negotiations on transparency in public procurement within five years. I ask the Minister: why did we not push for something more demanding on this vital issue?
The Earl of Sandwich (CB) [V]
My Lords, as a rollover agreement, the UK-Kenya EPA has had rather a bumpy ride through Parliament, both here and in Kenya. This stems mainly from the cavalier treatment of the other EAC members, which are assumed to go along with it since they already benefit from LDC and EBA preferences.
Like other members of the IAC, I have been especially concerned about whether any countries were consulted as individual nations, as well as via the EAC itself. Nairobi has always had the monopoly of communications, as well as of trade, in east Africa; that is a fact of life. But Tanzania, Uganda, Rwanda, Burundi and even South Sudan, and the new applicants DRC and Somalia, all have strong interests in trading with the UK. They do not want any disruption. Even in Nairobi, several MPs complained that their Government had failed to consult fully with their own stakeholders on the agreement, with the result that parliamentary debate was held up and the deadline for ratification missed.
There were some deep-seated civil society and farming concerns that the EPA, like its EU-ACP predecessor, tended to treat Kenya as a supplier of raw materials and primary products, rather than encouraging its SMEs and businesses to develop its manufacturing base. For some, this recalls the UK’s neo-colonial links with Africa and is still a long way short of the vision of fair and sustainable trade that helps the poor. The noble Lord, Lord Boateng, made powerful points on that as well.
There is a real risk that the EPA could destabilise the EAC itself by negotiating with only Kenya and the bloc rather than with individual members. The community was founded in 1999 and is still the strongest regional association in Africa. It held its 21st summit last weekend. It has achieved a degree of integration, but its members still control their own foreign policy. The Minister has claimed that the DIT kept in touch with individual states, but perhaps he could give details today. The fact that they have been formally invited to join the agreement after the event hardly makes a difference if they each have different policy objectives.
I do not blame Brexit for all this directly, but I can point a finger at the last-minute arrangements devised by the Government to patch up a lot of these important trade agreements. The Minister might argue that this was a cunning plan to ensure that the agreement went through just in time, but most people would think, and perhaps Ministers would admit, that it was a messy consequence of doing things in too much of a hurry.
I welcome the noble Lord, Lord McDonald, to our Cross Benches, and thank him for his unambiguous support for our aid programme.
Lord Purvis of Tweed (LD)
My Lords, I am grateful to the committee for its Motion allowing us to debate this agreement and for its work under the noble and learned Lord, Lord Goldsmith. I am also grateful for the opportunity to have heard the maiden speech of the noble Lord, Lord McDonald, who gave evidence to the committee that I sat on in this House. He should feel fully liberated after 38 years. We have the evidence of his two amigos as former Permanent Secretaries who are hardly inhibited in providing their views to the House—so we look forward to the noble Lord doing exactly the same, because he will have much to offer. He will find, as I have over the seven years I have been here, that this House is great for making you feel perpetually young.
I welcome this first application of the Grimstone rule—that we will not ratify agreements before they have been debated if a committee has asked for that debate to take place. I welcome the fact that the Government has ensured that this debate has indeed taken place, as my noble friend Lord Oates highlighted in his remarks. He also referred to the tension there now is within the EAC over the moves to have a bilateral agreement, and I will refer to that.
We know that the European EPA has not yet been ratified by all members of the EAC, as the noble and learned Lord, Lord Goldsmith, said. But, importantly, he highlighted that there are other elements of preferential relationships, and the partnership mechanisms of Aid for Trade and economic development in that EPA, for which we have not provided any continuity with Kenya. Now that this is the mechanism which the Government have said that other countries will be invited to accede to, they will not be acceding to any continuity that had been in existence in the European agreement.
So what is the Government’s intention? Is this an agreement which other countries will be invited to accede to? Or, if a country chooses to enter into an agreement with the UK, within the aegis of the EAC, will we reopen negotiations with those other countries to afford them all of the different partnership and trade for development policies? The MoU that accompanies the agreement will give Kenya and the UK a much greater say than other countries in the EAC acceding to this agreement. It is almost insulting to other members of that community to say that if they wish to have the same arrangements with the UK that they had previously within the EU, they will have to join this agreement. Why was the previously discussed bridging mechanism for Kenya rejected? This was not clear in the Government’s evidence to the committee.
Like the noble Lord, Lord Boateng, I am pleased that the final agreement for Ghana has now been agreed, after two months of applying tariffs to Ghanaian products. As we have heard, the concern of farmers and the rural community in Kenya, who are now seeking legal remedy from their own Government over this agreement, shows that there are deep consequences of our arrangements with these two countries.
With regard to the Kenya agreement, the wider partnership elements are the essence of these agreements. EPAs are not simply tariff agreements or FTAs; they are genuinely partnership agreements—that is the essence of them. Therefore, we need to look at the wider, non-tariff areas of relationships, deliberately framed not to be purely about tariff measures for middle-income countries, or codifying the Everything But Arms approach for other countries in the different categories.
As the noble Baroness, Lady Sugg, said in her very informed and powerful contribution on development support, this is not a continuity agreement. In Annexe 3A of the EU’s Aid for Trade agreement there is a matrix of 23 pages of costed, specified projects for increasing trade, competition and finance from the European Union through its European Development Fund and the members of the EAC and Kenya.
This annexe has been removed from the UK agreement, with no replacement. Indeed, the section on development co-operation in the Government’s report has two paragraphs and leads with what I find are chilling words. Paragraph 57 starts—the noble Lord, Lord McDonald, will have to forgive me, but this is perfect Civil Service speak—with the words:
“In line with the different approaches of Britain and the EU to programming for development cooperation”.
What does that mean? What are “different approaches” to programming for development co-operation? It means, by the last sentence, that while parts of this agreement reflect the ambitions of the parties, they
“do not create any obligations on us to provide financial or non-financial support in specific areas.”
So aid for trade and development support have been stripped out entirely from this agreement.
None of the commitments is binding in Parts III to V. In Part V, the 27 articles have the rider, of course, that there will be no financial commitment or obligations. Technically, under this agreement, which we are being asked to ratify, there is no commitment for a single pound in facilitating aid for trade or trade for development support. Can the Minister clarify what is the aid for trade development support with this agreement? Let me be clear what it is. It relates to food standards and upgrading laboratories. It is connected to all of the areas where we would seek to facilitate UK trade to develop even further. This is sending a very strong negative message.
This leads me to the point that the noble Baroness, Lady Sugg, mentioned with regards to TradeMark East Africa, which has been highlighted by respective Governments over the past decade as a very significant success for the UK. Our support for TradeMark East Africa facilitates $100 million to the benefit of UK businesses, making trade easier and, as the noble Baroness, Lady Wheatcroft, highlighted, tackling corruption and bureaucracy, reducing trade costs by 30%, increasing competition, improving transport corridors for trade, and increasing jobs and prosperity. But TradeMark East Africa now has a sword hanging over it. It has already been asked to make 20% cuts last year by the FCDO, reducing its staff to a four-day week, and now it could see a cut of 50% of its work, which in effect would make it inoperable. You can only cut programmes so far before they are unable to be delivered. This is a flagship project. Such a cut could create significant long-term reputational damage for the UK, putting at risk longer-term projects that we have secured with our partners.
The final point I would like to make to the Minister is that it is not too late to reverse the trajectory. If we are to have better digitisation, anti-corruption measures, better procedures, better standards, policy development and support for women traders, which should be the essence of these EPAs, we cannot see cuts to TradeMark for East Africa. It would be inconsistent with the wider approach and inconsistent with what we are told should be an Africa strategy in the fastest growing, and what is likely to be the biggest, trading area in the world. It is not too late. I hope the Government will persuade the Secretary of State to change course.
Lord Collins of Highbury (Lab)
My Lords, let me start by echoing the remarks of other noble Lords in welcoming the noble Lord, Lord McDonald. He showed remarkable ability in being able to say so much in such a short period of time. I hope he will continue with that record.
I also echo the comments of the noble Baroness, Lady Sugg, which complemented those of the noble Lord, Lord McDonald, on support for the Government’s commitment to ODA. I saw first hand last year the in-country programmes in Kenya, in particular on nutrition and agriculture, which is what this agreement could particularly impact, and the diversity of agriculture which is necessary to ensure proper nutrition. One of the problems with the focus on trade is that often those agricultural products that we import are not delivering for the people of Kenya in the way that they should in terms of nutrition. I hope that we will return to that subject later on.
This continuity agreement is one of 10 that came into effect on 1 January, and it is the only one that has been subject to any form of debate in either House. This illustrates how the CRaG process is totally inadequate in guaranteeing proper parliamentary scrutiny of new trade deals before they come into effect. Like other noble Lords, I welcome the changes that were made in the Trade Bill; I understand that they will now be called the “Grimstone protocols”, which is great news, as I can keep repeating that name.
The Minister may well say that this is just a rollover agreement but, as we have heard in this debate and as the analysis by the International Agreements Committee shows, this is not the case. There should have been a proper discussion before this deal came into effect, given its implications for the rest of the East African Community. As the noble Lord, Lord Oates, highlighted, I hope the Minister will respond in full to the committee’s request to explain what other options were considered for ensuring continuity of trading arrangements with Kenya, and why they were not pursued. In particular, what representations were made by the other EAC members and stakeholders, and how have the Government sought to evaluate those and address their concerns?
As the noble Earl, Lord Sandwich, noted, we know that Kenya’s Parliament failed in December to ratify the trade agreement with the UK, calling for a supplementary report on the economic partnership agreement. Last week, the Kenya Small Scale Farmers Forum sued the Kenyan Government, arguing that the process of the deal’s ratification was extremely flawed as no public participation was conducted by the Kenyan Government before the document was proposed in the Kenyan Parliament. In a statement, the farmers said that
“an open market with heavily subsidized tariffs for the UK farm products like chicken, pigs and maize”
would have
“the dangerous potential to destroy local production of the very same products”.
We had a debate on the EU EPA in this House, in November 2016, when all these issues were raised in relation to the development project and, in particular, the question of how we would deliver on the 2030 agenda to build sustainable development.
One other issue I want to raise, in addition to those identified by the committee, and which I focused on during debate on the Trade Bill, is human rights provisions in the Kenya deal. We have all heard the mantra of Ministers that these agreements simply maintain the status quo from the EU agreements that came before them. In some cases that is certainly true; for example, the agreement with the Ivory Coast signed by the Government in November 2020 and published in sufficient time for it to receive the full 21 sitting days of parliamentary scrutiny before taking effect on 1 January. Annexe 3 to that agreement replicates the effect and language of the EU’s Cotonou Agreement with the African, Caribbean and Pacific states, committing both parties to uphold human rights and the rule of law as an essential element of the agreement, spelling out the process and consequences that would follow any violation of that commitment. The Kenya agreement contains the same Annexe 3 as that of the Ivory Coast but removes the entire section dealing with the consequences of any violations of the human rights commitments. There is no explanation as to why; I hope the Minister will be able to explain that tonight.
I have argued in this House that we should use continuity agreements to strengthen the provisions in trade agreements relating to human rights—but here, in the Kenya agreement, there is a clear example of where the Government have actually done the opposite. One reason that this matters is that, as other noble Lords have pointed out, other East African Community countries will be able to join the EPA—countries that, according to Amnesty International, have a clear poor human rights record. We should focus on the implications of that.
Regional press reports this week say that Burundi, Rwanda, Tanzania and Uganda have demanded the extension of the negotiation period by one year so that they can sign the agreement as a bloc. I hope the Minister will be able to tell us exactly what the implications of that are.
Finally, as the Minister doubtless knows, Africa is home to 30 of the world’s 40 most climate-vulnerable countries, and Kenya ranks 152 out of 181, with an increasing prevalence of droughts and floods. Where once the rains marked the predictable changing of the seasons and could be relied on by smallholder farmers for their livelihoods, climate change and plagues of locusts are wreaking deadly havoc.
However, in the hustle and bustle of Nairobi, Kenya has hope for a bright and green future, planning a new sovereign green bond. The UK’s development budget has been very actively involved in encouraging Kenya’s green transition—so what assurance can the Minister give that the UK’s support for Kenya’s climate ambitions will be protected from the spending cuts that the Chancellor has imposed on this vital work?
The Minister of State, Department for Business, Energy and Industrial Strategy and Department for International Trade (Lord Grimstone of Boscobel) (Con)
My Lords, I thank the noble and learned Lord, Lord Goldsmith, for tabling this debate, and I welcome the opportunity for an informed discussion of the UK-Kenya Economic Partnership Agreement and the Government’s wider approach to securing continuity in our trading relationships with the whole of the East African Community. Of course, this work is so important to UK and east African citizens and businesses alike. In view of the time constraints, I will restrict my comments to the substance of the debate.
It is a great pleasure to see parliamentary scrutiny in action in this debate, living up to the commitments that we made during the progress of the Trade Bill—in particular, following what I like to think of as the “Purvis convention” in the way that we approach these matters. I thank all those who have contributed to this debate, and I will try to respond to the many insightful and well-informed points that have been raised. In particular, the expertise and commitment of the IAC members never fail to inspire me. If I do not fully respond to all the points, I will of course write to noble Lords after the debate.
What a pleasure it is to have a noble Lord choose this debate as the occasion for his maiden speech. The noble Lord, Lord McDonald of Salford, made an observant, judicious and eloquent speech, befitting his nearly 40 years of illustrious service to this country’s diplomacy at the highest levels. I know I speak on behalf of all noble Lords in saying that we not only welcome his presence but eagerly anticipate his future contributions, to the advantage of the quality and expertise of this House’s proceedings.
I also thank the House of Lords International Agreements Committee and its officials for the detailed examination of our continuity agreements, as set out in its Scrutiny of International Agreements report. In responding, I will cover three main points: the UK’s approach to trade continuity with Kenya, our ambitions for a regional deal with the whole of the EAC, and our approach to the ratification of this agreement.
First, as I know this was a matter of concern to a number of noble Lords, I reiterate the UK’s objective of achieving a regional trade agreement with the whole of the EAC. We remain absolutely committed to building a strong trading relationship with the whole EAC that will create jobs and prosperity in east Africa. It is very much our intention that the agreement we have signed with Kenya is a stepping-stone towards even stronger regional integration in future.
Let me give a little of the background to how we ended up where we are today. Back in January 2020, the former Minister for Trade Policy wrote to the EAC’s secretary-general to reinforce the UK’s ambition to work in partnership with the EAC secretariat to build a strong trading relationship that will create jobs and prosperity in east Africa. In so doing, he proposed a meeting in February 2020 between the UK and representatives from the secretariat and all partner states to find a way to replicate the effects of the EU’s current trading arrangements between the UK and the EAC, and to avoid any disruption in our existing trade with the EAC partner states.
We have continued since that date to engage with the secretariat and partner states, but during these discussions the EAC informed us that some partner states were unable to begin negotiations with the UK because of some domestic preoccupations. However, they understood the need to maintain trade continuity and provide certainty for businesses and citizens in all partner states as we approached the end of the transition period. It was therefore on this basis that the UK and Kenya decided to negotiate this agreement, ensuring that our discussions were open to all EAC partner states to join. The fact is that no partner state chose to join these discussions, but I reassure noble Lords that we have left the door firmly open.
In accordance with article 143 of the agreement, any state that is a contracting party to the Treaty for the Establishment of the East African Community is able to accede to this agreement in future. Indeed—some news hot off the press—noble Lords may have seen that on Saturday the EAC Heads of State held their annual summit. One of the things they considered was participation in trade agreements. The Heads of State provided approval to an approach enabling some partner states to proceed to implement the EU’s agreement with the EAC ahead of others.
I am happy that this pragmatic approach by the Heads of State is exactly in keeping with the approach that we have taken in our EPA, and reassured that such a style of approach has now been approved at the EAC Heads of State level. If that is what the Heads of State have decided, I gently say: is it right for us to question this approach? I hope this will put at rest the mind of the noble and learned Lord, Lord Goldsmith, and those of other noble Lords if they feel that we have somehow been a disruptive force in the EAC in these matters. The noble Lord, Lord Boateng, and the noble Earl, Lord Sandwich, were also concerned about this point.
The agreement we have secured will ensure that companies operating in Kenya, including British businesses, can continue to benefit from duty-free quota access to the UK market for a range of important products, including vegetables and cut flowers. It will support jobs and economic development in Kenya and avoid possible disruption to UK businesses such as florists, which will be able to maintain tariff-free supply routes for Kenya’s high-quality flowers. It will also benefit many of the approximately 2,500 UK businesses exporting goods to Kenya each year, including many UK suppliers of machinery, electronics and technical equipment, where continued tariff-free access will be guaranteed.
I turn to the UK’s approach to ensuring trade continuity with Kenya in response to the committee’s request for further detail on the options considered. As one of the largest economies in east Africa, Kenya is of course an important trading partner for the UK. However, as the only EAC partner state that is not a least-developed country, it faced the imposition of new tariffs if we had been unable to secure a deal at the end of the transition period. Kenya faced reverting to less preferential trading arrangements under the UK’s generalised scheme of preferences. Without a deal in place, assuming that the current patterns of trade remain unchanged in future, the annual increase in duties on our imports from Kenya was estimated to be around £10.5 million in 2021. In contrast, as least-developed countries—and this is the important point—all other EAC partner states’ duty-free, quota-free access to the UK was guaranteed under the GSP.
In its report, the committee asked the Government to explain why the UK had decided not to replicate the EU’s market access regulation. The agreement that we have signed allows for the effects of that regulation to be replicated in all material respects with regard to Kenya. Providing permanent duty-free, quota-free access for Kenyan exports benefits UK-Kenyan trade, which was worth £1.4 billion in 2019. The agreement, taken together with the GSP, ensures that trade continuity is guaranteed for all EAC partner states.
While the UK had proposed a no-deal transitional protection measure to Kenya in 2019, that had been developed only to provide an additional 18 months to conclude trade negotiations with certain partners who faced the imposition of new tariffs in the event of a no-deal EU exit. However, as the withdrawal agreement reached between the UK and the EU in October 2019 included an 11-month transition period until December 2020, that gave us the additional time that we needed to conclude outstanding negotiations. The no-deal transitional protection measure then became no longer appropriate.
I turn to the Government’s approach to the ratification of the agreement. In my letter of 9 February 2021, I outlined the steps taken by the Government in accordance with the statutory process for laying agreements under the Constitutional Reform and Governance Act 2010. The Government believe that the explanatory materials published alongside the agreement on 17 December were sufficient and we therefore made the decision not to extend CRaG, which concluded on 10 February. However, I can confirm—and this was absolutely the right thing to do, in accordance with the commitments that I made from this very Dispatch Box during the passage of the Trade Bill—that the Government have not yet ratified the agreement, which we have delayed deliberately until after today’s debate in order to ensure that Parliament has had the opportunity to effectively scrutinise the text.
The UK-Kenya Economic Partnership Agreement provides stability and certainty for UK and Kenyan businesses alike. It guarantees permanent duty-free, quota-free access to UK markets for one of the largest economies in the region. Without it, Kenya would have been left behind through no fault of its own while the other partner states continued to benefit from duty-free, quota-free access to UK markets. That unfairness was an unacceptable outcome for the UK. However, I reiterate that the agreement does not prejudice our approach towards the other EAC partner states. I confirm to noble Lords, particularly the noble Lord, Lord Kerr, that we remain ambitious in our desire to expand the agreement in future, and we have ensured that the agreement contains a clear process for accession.
Before I conclude, I will deal with a point made by my noble friend Lady Sugg and the noble Lord, Lord Purvis. I reassure noble Lords, with regard to the effect of the funding of previous ODA programmes, that trade and economic development—and building future trade and investment partners, including through helping countries to trade—is one of seven ODA priorities. No final decisions have been made on budgets or allocations to individual programmes, but I am happy to reassure noble Lords that we intend to ensure that TradeMark East Africa can continue its important work in promoting trade to east Africa. I will write to the noble Lord, Lord Purvis, and send copies to the committee and the Library, on his point about the differences between this report and the EU report, and his points about the MoU.
The noble Lord, Lord Collins, raised an important point about human rights. I hope I can reassure the noble Lord: Annex III of the UK’s economic partnership agreement with Kenya replicates language from the Cotonou agreement, and the effect of the Cotonou references to the EU’s economic partnership agreement with the East African Community will make sure that respect for human rights, democratic principles, the rule of law and good governance, which are so important to all in this House, are made essential and fundamental elements of the agreement.
In conclusion, therefore, I reiterate my thanks to the committee for its examination of this agreement—which, I repeat, has not yet been ratified—and I respect the committee’s desire for further time, which we have granted today, to enable full scrutiny of its provisions. Our ambition for this agreement was to ensure continuity for Kenya, and I like to feel that we have achieved that ambition.
Lord Goldsmith (Lab) [V]
My Lords, I thank all noble Lords who have taken part in this debate. It has been very valuable, and although noble Lords had only a short time for their contributions, those have all been significant. I too congratulate the noble Lord, Lord McDonald of Salford, on his maiden speech, which was, as anticipated, eloquent and impressive.
I welcome the Minister’s assurances that this was not intended in any way to disrupt the arrangements for the rest of Africa. I thank him for his explanation. We will watch what is said: we will watch closely to see if other countries accede, as he has explained is now possible, and we will look at that closely.
The other issue raised by noble Lords is parliamentary scrutiny. That is important to the International Agreements Committee, as I have said. Whether it is the Purvis protocol, the Grimstone rule or even Lansley’s law, we are pleased with the changes that are taking place: we are edging towards greater parliamentary scrutiny, which is important because we should not be just paying lip-service to it. We will continue to watch that.
I thank the Minister for what he said about not ratifying. The department could perhaps have said that it would extend the time, but I suppose the effect has been the same. With that, I beg to move.