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.