Central America: Trade and Investment
(1 year, 6 months ago)
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Baroness Hooper
To ask His Majesty’s Government what plans they have to improve trade and investment relations with countries in Central America.
Baroness Hooper (Con)
My Lords, this is a short debate but an important one as it is the first to be focused on central America for a very long time—and that is not for want of trying. I am happy to have the opportunity this evening and most grateful to all those participating in the debate, as well as to those sufficiently interested to have remained in the Chamber to listen. I welcome our relatively new Minister to his first outing on Latin America. I hope—indeed, I will make sure—that it will be the first of many. I declare interests as a former president and now vice-president of Canning House, as president of the Central America Business Council, part of the Caribbean Council, and as current vice-chairman of the Latin America and Central America All-Party Parliamentary Groups.
My intentions in asking this Question for Short Debate are: to draw attention to this important and dynamic region of the world, where we have historic as well as current links on which to build; to emphasise some of the opportunities for trade and investment in the region for UK entrepreneurs, given that the balance of trade is not in our favour at the moment; and to refer to my role as trade envoy to Panama, Costa Rica and the Dominican Republic, which have been identified as target countries within the region by the Department for International Trade.
I was shocked recently to hear from the British Chambers of Commerce that only 10% of British companies export their products. I believe, therefore, that we should be working hard to encourage small and medium-sized enterprises in particular. I feel that they would find it easier to take their first steps in a relatively small country.
Central America as a region consists of seven countries: Guatemala, Belize—which, of course, is also a Commonwealth member—Honduras, El Salvador, Nicaragua, Costa Rica and Panama, which, together with the Dominican Republic, have a system of integration known as SICA, of which Guatemala currently holds the pro tempore presidency. Each country may be relatively small in terms of population, but the SICA countries have a combined population of 60.7 million, a substantial market for our exports; and the population is young, dynamic and digitally aware.
I wish to emphasise, however, that, in spite of the integration system and a common language, each country has a very individual sense of identity. A UK-Central America association agreement was signed in January 2021, post Brexit, setting provisions on trade in goods and services, intellectual property and general procurement. It also includes provisions on preferential tariffs, tariff rate quotas, rules of origin and so on, to ensure continuity with the previous European Union agreement.
CABEI, the Central American Bank of Economic Integration, is the banking arm of SICA, based in Tegucigalpa in Honduras. It aims to promote the economic and social integration and development of the region across sectors such as infrastructure, renewable energy, agriculture and commerce, as well as to reduce poverty and inequality. The United Kingdom was invited to become a non-regional member of CABEI, which has recently opened a European office in Madrid. Could my noble friend the Minister tell us what the current relationship is between the UK and CABEI, given the benefits that a strong and vibrant collaboration could bring?
With all that as background, with our embassies in-country at the ready, with the Department for International Trade providing back-up services such as UK Export Finance, British expertise, helplines and roadshows, and with an active trade commissioner based in the wider Latin America region, it seems to me that the stage is set for progress, especially in priority sectors such as education—edtech in particular—infrastructure such as airports, roads and water treatment, and services, where I want to highlight the issue of green finance.
In saying that, I appreciate that central American countries are still recovering from the consequences of the Covid pandemic, just as we are, while natural disasters, increased by climate change, have taken their toll; for example, in Honduras. I appreciate also, and I understand that others may speak to these, the issues that have to be faced, such as human rights abuses, violence and corruption, which certainly exist in some of these countries.
In the few minutes that I have left, I shall touch on the three countries for which I act as trade envoy, and which I visited in that capacity in May this year. Happily, I had been to them all previously, which has been an advantage. I shall start with Costa Rica. When we think of Costa Rica, we may think of delicious pineapples and other tropical fruits, and even coffee, but very few realise that medical devices are Costa Rica’s main export, or that AstraZeneca recently opened its splendid regional headquarters in San José, the capital.
We may also think of Costa Rica in terms of ecotourism, without realising that Costa Rica’s green credentials extend to an exemplary reforestation programme and that it won the first Duke of Cambridge Earthshot award in the “protect and restore nature” category last year. The support from its then President—incidentally, a former Chevening scholar—for COP 26 was very much welcomed by this country, especially my right honourable friend Alok Sharma, so British companies would be pushing at an open door in the whole environmental field, especially perhaps in the area of green finance.
In Panama, where many major British firms are already established in the free zone area, I was able to sign a memorandum of understanding with the Foreign Minister on clean and sustainable growth. We had fascinating meetings between the Panama Canal Authority and British companies about the recycling of freshwater in the canal locks, and other technical matters that we hope will lead to further collaboration. Education, particularly edtech, is also a top priority in Panama.
I must mention Buddi, a British invention that was originally a wristband to monitor elderly people but is now established in El Salvador by its inventor as an electronic monitoring device in prisons, and looks set fair as a project to be taken up now in Panama. In relation to Panama, perhaps the Government could also be persuaded to support the Panamanian candidate to be secretary-general of the International Maritime Organization here in London, as a new appointment is about to materialise.
Last but by no means least, I refer to the Dominican Republic, the fastest-growing economy in the region. Last month saw the eighth Dominican Republic Week in the UK, when the largest, most senior and most diverse delegation of business leaders and investors came to London and Edinburgh to forge new, and enhance existing, links—a most successful event. Again, there are huge possibilities in the education sector and in infrastructure projects, especially water treatment, while we have much to learn about the successful management of free zones from the Dominican Republic.
I understand that we have slightly more time than originally anticipated so there are two unexpected facts that I wish to mention. The first is that I discovered that more mozzarella cheese is imported into the Dominican Republic from the United Kingdom than from Italy. Think of that.
Secondly, a meeting with the Minister of Industry and Commerce revealed the problem, caused by climate change, of the sargassum seaweed that is invading the Caribbean, fouling the beautiful beaches and having a major impact on the thriving tourist industry in the Dominican Republic and elsewhere. Upon inquiry, I learned that both the National Oceanography Centre at Southampton University and Exeter University are working on this issue, and that a plan is under way to take a group of British experts and companies to the Dominican Republic to discuss ways of solving the problem and perhaps recycling this noxious weed for energy, cardboard and other useful purposes.
My time is up. I wish to say simply that much has been achieved and, if the Government could now free up the visa requirements affecting those countries and encourage more direct flights, we could be well on the way to doubling that 10% figure for companies exporting to central America.
Baroness Coussins (CB)
My Lords, I congratulate the noble Baroness, Lady Hooper, on securing this debate. It is a welcome and rare opportunity to debate a region of the world that is so often overlooked when it comes to foreign policy, trade, investment and security.
I recently returned from an IPU delegation to Mexico so I will focus my contribution on that country. Of course, I am aware that Mexico defines itself just as much as north as central America, although the term “Mesoamerica” encompasses Mexico as well as the central American countries. In addition, drug cartel activity and people trafficking from central America through Mexico en route to the US have implications for legitimate trade and investment. As His Majesty’s Government are currently engaged in negotiations on a free trade agreement with Mexico, a topic also covered in the helpful Library briefing for today’s debate, I hope noble Lords will agree that Mexico is relevant to this short debate. I have a number of questions for the Minister but, if he was not expecting to answer questions on Mexico today, I would be grateful if he might write to me in due course and place a copy in the Library.
First, I know that the second round of the UK-Mexico trade talks have been held but do the Government still expect them to be concluded by mid-2024, as originally announced? I ask this because I am aware that the Mexican ministry of economy has recently fired all its senior officials involved in the negotiations. Does that mean starting over again? What, if anything, does the Minister expect to be different with a completely new set of negotiators?
Secondly, and for me this is by far the most important point, I want to ask about the relationship between trade and investment and human rights. I ask the Minister to set out clearly the Government’s rationale for removing all consideration of a human rights clause from this free trade agreement, and indeed all such new agreements? The original FTA to which the UK was party as an EU member included a human rights clause, as did the continuity agreement. I for one was hoping that our bilateral agreement would go further and better than the merely declaratory clause that we had through the EU, and instead we would want to demonstrate our much-vaunted global leadership in this field and underpin the clause with a mechanism for monitoring and accountability. Sadly, on the contrary, it seems that no human rights clause will form part of the UK-Mexico FTA but that a separate, parallel human rights “dialogue” will take place. The trouble is that although we have already had two rounds of trade talks, the human rights dialogue has not even started and, as far as I know, no start date is in sight. Will the Minister please tell the House why not?
I am familiar with the standard line that establishing a free trade agreement then puts us in a better position to raise human rights concerns with new partners, but this seems a very weak chicken-and-egg sort of argument, and it clearly did not apply in any case when we were happy to include a human rights clause in our previous deals. A more robust and defensible stance would be that being up front on human rights would be a stronger incentive for trade and investment. At the very least, I would welcome a date for the start of a genuine human rights dialogue with Mexico, but I also hope that the Minister will agree to take this issue back and reconsider incorporating a human rights clause in the negotiations.
Should anyone be in any doubt, human rights in Mexico is a critical problem that needs an awful lot more than mere dialogue; it needs urgent action with strong international leverage behind it. Our embassy team in Mexico does sterling work, continuously raising human rights issues and individual cases and contributing to training and other technical assistance. Over 106,000 people are currently known to have disappeared in Mexico—“disappeared” is largely a euphemism for kidnapped and/or murdered. These are mainly journalists, human rights defenders and environmental and indigenous campaigners. Perpetrators enjoy almost complete impunity. In addition, there are hundreds of thousands of forcibly displaced people, some of them having been forcibly removed by companies seeking access to natural resources.
This brings me to my next question: does the Minister have any information on whether any British companies are or have been involved in such displacement activity? What specific measures or programmes does the DIT have in place to ensure that UK companies doing, or hoping to do, business in Mexico comply with the UN Guiding Principles on Business and Human Rights, sometimes known as the Ruggie principles? On a related point, what happened to the Pacific Alliance, of which Mexico is a member and with which our Government have said in the past that they were committed to deepening our involvement? For example, do the UK Government still support what they used to call high value campaigns—HVCs—to support British companies in exporting and investing across the sectors where UK industry could add most value?
Finally, can the Minister update the House on what language and cultural support his department provides to UK companies looking to build export growth in central America and Mexico? How many DIT officials and negotiators are competent in Spanish, or are taking Spanish courses at the FCDO language centre?
Baroness Anelay of St Johns (Con)
My Lords, I too congratulate my noble friend Lady Hooper on securing this short debate. Her timing is fortuitous in the light of the announcement, made by the Foreign Secretary just last Monday, that the Government will develop stronger relations with increasingly influential countries in Africa, Asia and Latin America. I welcome that statement, but the only Latin American country he referenced in his speech was Brazil, and that was simply to support the idea that the UN Security Council might be reformed and make Brazil a permanent member.
I have four questions for my noble friend the Minister. First, what new measures will now be taken to cast a spotlight on Latin American countries in central America with which we have signed an association agreement, of course not forgetting Belize, which is governed by the separate CARIFORUM-UK economic partnership agreement? It was a privilege to meet the members of CARIFORUM when I was a Minister at the FCDO and attended one of its sessions. Additionally, I made ministerial visits to several other countries in central America, primarily in my role as the Prime Minister’s special representative for preventing sexual violence in conflict. I also met representatives of UK companies in business in the region. They impressed upon me how they face significant hurdles when they compete for contracts, which are then often routinely awarded to non-UK businesses that have a record of failing to deliver the kind of quality, timeliness and reliability of work that would have been provided by the UK companies.
Over a year ago, the then CEO of UK Export Finance announced that the UK was entering a new era for trade with central America. So my second question is: can my noble friend the Minister please tell the House what increase in support and advice was given, as a result of that announcement, to UK businesses seeking to secure contracts in central America? What new steps will now be taken to build upon that work? By the way, I notice that UKEF currently has an interim CEO; can my noble friend the Minister inform the House when the Government expect to make a permanent CEO appointment?
My third question ventures into the fields covered by trade commissioners and trade envoys. I would be grateful if my noble friend put on the record the respective roles and lines of accountability for both trade commissioners and trade envoys. The Latin American trade commissioner is based in São Paulo, and his deputy is located in Mexico City. Of course, as my noble friend Lady Hooper mentioned, they also cover the Caribbean region. That is quite a stretch for their enormous amount of work. My noble friend Lady Hooper declared her work, for which she is very highly respected, as trade envoy for Costa Rica, Panama and the Dominican Republic. Select Committees of this House would benefit greatly from hearing from such experts as trade envoys.
However, I have to inform the House that, when the International Relations and Defence Committee, which I chair, sought to take evidence from one of the trade envoys to Africa in the course of our inquiry into the UK’s relations with the countries of sub-Saharan Africa, the Government refused permission for them to give evidence. That surprised us, to say the least. We had hoped to benefit from learning about their work and achievements on behalf of the UK. I would therefore be grateful if my noble friend could tell the House whether the Government’s policy of preventing trade envoys giving evidence to the committees of this House has changed. If it has not, will they consider changing it? If my noble friend is not in a position to answer any of my questions tonight, I would be grateful if he wrote to me and gave a copy of the letter to the House.
My final question refers back to comments made by both my noble friend Lady Hooper and the noble Baroness, Lady Coussins, whom I hope I may call a noble friend. Can my noble friend the Minister reassure me that all those who give advice on trade and investment to companies on behalf of the UK Government will bear in mind the human rights records of countries in central America when doing so? Will he reassure me that they are fully informed of the importance of the Ruggie principles?
Lord Mountevans (CB)
My Lords, I add my congratulations to the noble Baroness, Lady Hooper, on securing this long overdue and important debate. In addition to her service as trade envoy, she is a distinguished former honorary president of Canning House, as she mentioned. As the current holder of that position, it gave me, and all of us at Canning House, intense pleasure to award the Canning medal to her this summer, in recognition of her outstanding service to UK-Latin American relations and to Canning House. I also pay tribute to the noble Baronesses, Lady Coussins and Lady Anelay of St Johns, two formidable and steadfast advocates.
Central America is part of an increasingly important region of the world for business, and I for one would have been delighted if the noble Baroness had chosen to examine trade and industry opportunities for all of Latin America. As the excellent Michael Stott of the Financial Times reeled off at a Canning House event last week, addressing the whole of Latin America, the region has an economy of $5.5 trillion more than Japan; its area is 19.2 million square kilometres, almost as much as China and the US combined; it has 27% of the world’s forests, 30% of the fresh water and 25% of the arable land; it is home to some 650 million people, 81% of whom live in cities and towns, making it the most urbanised region in the globe after North America; it has 58% of the world’s lithium and 41% of its copper. Of course, Spanish, which is widely spoken in Latin America, is the world’s third-most spoken language. It is a region militarily at peace with itself and with an absence of war.
Latin America will be of increased importance because of resources—and, as usual, China sees the potential there. It contributed to 0% of global trade in the noughties, but it now exceeds Europe’s share and is approaching that of the US, which is declining. It is vital that the Government recognise the importance of central America—and, indeed, of Latin America in its entirety—and allocate resources accordingly. I am sure that we will hear good news of the progress on FTAs. I am very pleased that we have a DIT team that seems to mean business, but I very much endorse the question about the extent of the resources at their disposal. Last week, I met with Cristina Irving Turner, the department’s number two, and was suitably impressed. The region consists of friends, so can anything be done about high university fees, which is a real issue?
I am partly Norwegian, so I know that the Norwegian foreign service expects its ambassadors to be front-line salesmen for Norwegian industry and businesses. Can the Minister consider prioritising information and training for His Majesty’s ambassadors to play a role in growing our exports?
It is not only for the Government to increase their activity and ambition in the areas that earlier speakers have noted and that my successors will note; business must also engage fully with those challenges. There are opportunities for business in many areas, including pharma, infrastructure, food and drink, healthcare, energy, finance and especially fintech, agriculture, mining and education, among others. I want to impress on business the need to visit and visit and visit. A long-term commitment and approach is needed, because nothing else will work; this is not the area for quick results. When I was the lord mayor, all too often I heard the refrain, in different parts of the world, “We love you, Brits, and we love your products, but we don’t see you here often enough”. My experience of travelling internationally throughout my career is that there is enormous good will towards the UK and UK business. I also point out that the smaller countries in central America represent an ideal opportunity for SMEs, a potential that the noble Baroness, Lady Hooper, acknowledged.
Despite a reputation for inefficiency and procurement opacity, there are many ways in which international expertise can meet the needs of Latin American countries. Latin America—including, not least, some countries in central America—continues to be a region that carries risks with security and corruption, all of which can be managed with careful planning and due diligence. As someone recently said to me, it is easy to overestimate the risks and underestimate the rewards. I believe that Britain now has the strictest anti-corruption legislation in the world, and the right person at the right time might be able to suggest to a potential client that business with UK firms speaks to the highest standards and governance. If the DIT wants to build a roadshow to talk to businesses and trade associates about the opportunities in central America—or, indeed, in wider Latin America—I would be willing to join that enterprise and crusade.
In conclusion, Far Eastern business has the problem of an increasingly assertive China on its doorstep, while eastern Europe has the problem of an aggressive and vindictive Russia on its doorstep. I say to noble Lords, as well as to government, industry and business, that now is the time to engage with the huge potential of Latin America. We must get on with this urgently.
The Earl of Dundee (Con)
My Lords, I join your Lordships in thanking my noble friend Lady Hooper for introducing this timely debate.
I will briefly link together three themes: our scope for building up trade and investment relations with countries in central America, while also bearing in mind Brazil in Latin America; the challenges to protect the environment, to reduce poverty and to uphold human rights, as was already highlighted by the noble Baroness, Lady Coussins, and my noble friend Lady Anelay of St Johns; and, in spite of those challenges, the United Kingdom’s present opportunity to take a positive lead within a consensual international community.
In addition to the main trade in food and drink, and as correctly identified by World Bank analysis, there is now a significant potential for United Kingdom companies to export goods and services in other sectors, including those of infrastructure and clean growth. Not least, those future prospects have already inspired a partnership and memorandum of understanding between UK Export Finance and the Central American Bank for Economic Integration.
Following that, for the next five years, which higher percentage figures do my noble friend the Minister and his department predict? What different pattern of exported and imported goods and services does he thus anticipate? Given that, at the moment, the lion’s share is with Costa Rica, to which my noble friend Lady Hooper has referred, to what extent does he expect a reinvigorated deployment of trade and investment affecting the United Kingdom to be spread more evenly over other central American countries? Equally, over the next five years, and considering the same future trade prospects—from infrastructure to clean growth and certain other sectors—from their separate current base, what trade percentage rises does my noble friend the Minister forecast between the United Kingdom and the principal bloc of Latin American countries, in particular Brazil?
Then, to help facilitate this process at all, what assessment have the Government made of certain measures which they might pursue, ranging from encouraging investment, perhaps through regional as well as central banks, to focused, well-advertised and adapted government incentive schemes to be taken up by United Kingdom business and industry?
The EU-Mercosur deal should have begun in 2019 but instead has remained on hold due to European concerns about Amazon deforestation and Mr Bolsonaro’s authoritarian rule in Brazil. His recent defeat, officials claim, has removed those obstacles, while President-elect Lula has said that a trade deal could be established within six months between the European Union and South America’s Mercosur bloc, which covers Brazil, Argentina, Paraguay, Uruguay, Bolivia and Chile. Meanwhile, regarding our own enhanced trade partnership proposals with Brazil, Lula has requested that the United Kingdom should revise the component which would impose restrictions on importing Brazilian meat products, especially beef.
If handled in the right way, Brazil’s change of regime can cause dramatic changes for the better, benefiting not just that country itself but also most others within both central and Latin America. These include preservation of the Amazon rather than its piecemeal destruction and a much-improved level of respect for human rights, democracy and the rule of law. Both the United Kingdom and the European Union have a key role to play. This begins with establishing good relations with the new regime in Brazil.
Does my noble friend the Minister therefore agree, first, that in order to achieve these more important wider objectives, we should now renegotiate our ETP terms so that through their revised acceptability the UK starts to gain the confidence of the Brazilian Administration? Secondly, does he assent that thereafter, in co-operation with the EU and countries within both central and Latin America, including Brazil, we should emphasise the priority of this shared and wider agenda? Thirdly, does he concur that, along with other states, the more the United Kingdom is seen and known in South America to put that agenda’s ethical and mutually advantageous international aims first, the more its own, as well as the trade and investment levels of those other states, will also increase, diversify and consolidate?
Viscount Waverley (CB)
My Lords, a simple premise for today’s world must surely be that entry into lesser marketplaces by midsized SMEs must be a priority—not just those markets on the beaten track nor those the preserve of big business.
Therefore, the noble Baroness, Lady Hooper, is to be supported in her endeavours in the central American region, which build on the high regard in which she is held in South America. Proponents of natural trade corridors might wish to continue the trajectory on from the Caribbean, in which the Dominican Republic sits—a part of the remit of the noble Baroness, Lady Hooper, who is a trade envoy of the Prime Minister—and continue to central America and include Mexico.
I would be curious to know the rationale behind the selection of the 20 FCDO priority countries and would be grateful if the Minister would write to me on this, along with a sense of whether trade corridors might not be a better way to go. Are the DIT and other government departments aligned, for example?
On the question of human rights, my understanding is that an introduction of human rights has been downgraded as an aspiration. Am I right in that regard?
I do not wish to be unseasonal but the view of some is that the Government have adopted a fragmented approach to trade, with no long-term vision, and are short on intrinsic strategic planning. I venture some innovative thinking and that to think holistically, away from the British trait of silo mentality, would do no harm.
A recent discussion with some clear-sighted professionals arrived at two conclusions: first, that things cannot continue as before; and, secondly, that a clearer whole-of-government vision on trade is needed, together with a fully integrated approach across Whitehall to drive global growth in key sectors.
The APPG for International Trade and Investment, which I happen to co-chair, together with the Future of UK Freight and Logistics APPG, are building on the principle of identifying trade corridors. We will be conducting a review of all aspects of the United Kingdom’s export promotion strategy, looking at the role of government, the chamber of commerce movement and regional promotional bodies, including regional champions such as Midlands Engine and Northern Powerhouse, and LEPs, to name but a few. We need the rationale and criteria for trade envoy selection to be explained as some strategically important countries have none.
For the record, these are in addition to the empowerment of intra-UK trade, including supply chain issues. Through my engagement with the International Trade & Investment Center—ITIC—of Washington DC and the International Trade Council, I am working on making available the provision of information and dissemination of multiple datasets, using overlays for analytics of markets and supply chains. These allow for forecasting and prediction of market behaviour, thus allowing for a deepening of relations with New World countries.
That should greatly assist companies searching out and forecasting new markets and UK entities seeking to validate their supply chains, understand market pricing, monitor competitors and assist in locating priority investment FDI targets. Additionally, many emerging countries welcome issue focus, often in the format of round tables and implementing public/private sector workshops on capacity building, tax policy and fiscal economics, with practical initiatives that can make a real difference. Stakeholder engagement is key when on a course to win friends.
It is about co-ordinating individual local content development programmes that can be adopted by investors and government agencies, combined with utilising tax and customs data and the like, to which I have referred, with skills-based professional development and gap analyses.
In concluding, there is an urgent need for government to promote the provisions and benefits globally of the enabling electronic trade process currently on its legislative journey in the UK. What is being done in that regard?
Lord Brennan (Non-Afl)
My Lords, respecting the time constraints in the gap, I have three broad points to make. The first is on the need for international trade and investment for this country. Increasing trade is of the highest importance generally and in the dire economic circumstances that we are in in the moment—and, particularly, because of our Brexit responsibilities. Secondly, as part of this, surely, we should co-operate with international development banks which cover regions. They have the experience, the money and the will—CABEI in central America in particular.
Next, let us do something about it. In August 2021, the then CEO of UK Export Finance, Louis Taylor, signed an understanding with CABEI to co-operate—well over a year ago. He chose to describe it as a robust means of co-operation. What has happened, and what is going to happen this coming year, 2023?
Lastly, surely, we should co-operate with the areas in which we have long-term interests. Belize is a central American country that is a member of the Commonwealth, and it would welcome our participation. After Australia and India—one through complications and the other through delay—let us see action, if not this day, then at least this coming year. Central America and the Panama Canal is a centre of world focus economically. We should be there with them.
Baroness Hooper (Con)
I am told that I am remiss in not having declared my interest as a trade envoy in Panama, Costa Rica and the Dominican Republic. I thought that I had made it quite clear—but if it is necessary, I hereby declare an interest.
Lord Purvis of Tweed (LD)
Well, there is no harm in embellishing the point. The noble Baroness, Lady Hooper, has been rightly congratulated on bringing this debate to us on a neglected issue, but one that she does not neglect. She leads for us on this.
I am a member of the Selkirk Merchant Company, established in 1694 and one of the two remaining elements of the Company of Scotland—I am sure that the noble Earl, Lord Dundee, is aware of this. If the Darien scheme on the Isthmus of Panama had gone differently for Scotland, the story of our nation would have gone differently. Our history as a country is entwined with that region, but we continue to punch below our potential weight for our trading relationship.
The noble Baroness, Lady Hooper, introduced the debate so well and set the scene. I have been very fortunate to visit Latin America with her, and with the noble Baroness, Lady Coussins. The closest that I get to accompanying a royal party is whenever I accompany the noble Baroness, Lady Hooper, on a visit in Latin America, or to a Latin American embassy. She does us credit.
The focus of this debate, however, should be on what the Government are doing to promote businesses to take advantage of the potential that is so obviously there. It was referenced earlier that Canning House’s LatAm Outlook process has been illustrative in highlighting the real potential for central America and the Spanish-speaking Caribbean. As it puts it, this is a market of 45.5 million people with a GDP of over $800 billion. It outlines key areas where there is a market and where we should take advantage of that market. This is a region that is demonstrating leadership in green economies, for example, and an eagerness to collaborate with international partners such as the UK. In particular, it highlighted an area that I thought was really interesting: it is seeking companies with expertise in project management and delivery of infrastructure projects to take advantage of that green investment. This is where UK businesses should have an opportunity. Costa Rica is receiving a $700 million loan from the IMF, so there are funds available.
The next area it highlighted was the Inter-American Development Bank, the Central American Bank for Economic Integration—or CABEI, as the noble Baroness referenced—and the Corporación Andina de Fomento. In my view, if the UK took the opportunity to become an early shareholder in the Asian Infrastructure Investment Bank and be part of it from the outset, controversial as it is now, the case to be part of those as willing partners is equally strong. With Costa Rica, the Dominican Republic, El Salvador and Guatemala investing in rail infrastructure, there are enormous opportunities for the UK here, as well as in water and sanitation projects such as the Dominican upgrades to their infrastructure. The list goes on. The opportunities are there.
The challenge we have now is how to meet that opportunity given that in some respects—regrettably from these Benches—we are now a competitor with the EU and cannot take advantage of wider EU opportunities. Of course we have the rollover association agreement which the noble Baroness referenced, but it is now a decade old. I would be very interested to hear from the Minister whether there is consideration of moving the association agreement into an FTA with central America.
One area where we lost in the move from the EU association agreement to the UK stand-alone one was the removal of the number of committees and sub-committees that were part of the EU agreement that we were party to. There were the Board on Trade and Sustainable Development, which is so critical in that region, the committee on SPS and the very important committees on technical barriers to trade, customs and rules of origin, public procurement, market access and intellectual property rights. Interestingly, there was also a civil society forum. All these have met the EU through CIRCABC, as it calls it, within this year. I would be grateful if the Minister could say whether there is any equivalent to those committees in our trade dialogue with central America, especially on civil society and technical barriers to trade. All these are fundamental if we are to see the potential grow.
Reference has been made to Mexico. I have a question about that but, first, I want to say that I am grateful as the Lib Dem spokesperson to receive correspondence from the Secretary of State’s office with very welcome updates on negotiations. The new Secretary of State has been very consistent in providing this, for which I am grateful. She also offered the International Agreements Committee of this House private briefings with the chief negotiator after each round, which is fairly innovative and, I hope, signals openness. I served with great pleasure under the chairmanship of the noble Baroness, Lady Anelay, at the start of the inquiries. I could sense her frustration around trade envoys, which was shared around the table. Hopefully, the sign from the new Secretary of State is one of openness, which we can take advantage of with regard to trade envoys.
It was interesting to hear from the noble Baroness, Lady Coussins, that it is not just Mexico that fires its top people in charge of trade, as I think I am now on my seventh Minister. I am not saying that they were all fired, of course—quite the reverse. I hope that there is no disruption to the Mexico agreement, but clarity on when we can expect to see it finalised will be important. With Anne-Marie Trevelyan as Secretary of State, on the India agreement, having a deadline to work towards was vital; now with Kemi Badenoch as Secretary of State, deadlines are not helpful. Which is it? I would be grateful to know what the Minister thinks is a realistic time for us to see something taken forward with Mexico.
The final issue I wish to raise, which has been raised a number of times, is human rights. Since I have been covering trade in this House, the Government have always said that trade is not at the expense of human rights—that we have tried and tried and will continue to try to get a trade and human rights policy and real clarity as to what role human rights will play. If the noble Viscount, Lord Waverley, is correct that this has been downgraded, and if the noble Baroness, Lady Coussins, is correct that dialogues are not even taking place, that is an unwelcome sign. I very much hope that the Minister can give us a positive response, and that when it comes to critical areas of trade with this region, human rights and relationships with civil society in the region will be at the core. We will not be able to see trade grow in a sustainable way unless people are involved in that process as well.
Lord Collins of Highbury (Lab)
My Lords, I thank the noble Baroness, Lady Hooper, for securing this debate and for her enduring commitment to the peoples of Latin America. As the noble Baroness, Lady Coussins, said, our values, human rights and the protection of human rights must be central to our relationship with the region; they are not secondary. Also, if we focus on cultural, educational and other links and, as the noble Lord, Lord Purvis, said, sustain those civil society relationships, that will help improve trade; such protections will make it more sustainable and secure. Of course, growth in central America since the early 1990s has primarily been driven by the growth of the labour market, the rate of which is projected to decrease severely, mainly because of the issues the noble Baroness, Lady Hooper, highlighted. The global challenges we face as a country are certainly faced by all the countries in central America. In order to sustain growth, productivity and capital will need to increase, and we need to know how the uncertainty of this happening impacts the UK’s consideration of future trade with the region. Can the Minister be more explicit about what role UK Export Finance will play in ensuring that capital investment maintains this growth?
As the noble Baroness, Lady Hooper, said during her introduction, we have not debated central America for some time, but we did have an excellent report from the International Relations and Defence Committee on Latin America, the coalition and how we support the Pacific area. We focused a lot on trade and the various opportunities, and I think it was reflected in this debate that there are lots of opportunities we have not been focusing on. Like other noble Lords, I want to ask the Minister about the priorities we now set. Of course, we are going to be re-examining the integrated review regarding our diplomatic efforts, because diplomacy, as the noble Lord said, is an important ingredient of sustaining and introducing trade. I would like to hear from the Minister about that.
Trade between the UK and central America is heavily concentrated on food for import and drink for export. Are the Government’s plans for trade with this region focused on further boosting that sector; or, as the noble Baroness, Lady Hooper, said, on refocusing on some of the new opportunities, particularly technological ones? Certainly, the e-commerce side of things could be expanded.
As the noble Earl, Lord Dundee, reminded us, there are large country-by-country discrepancies in the market size of UK trade in central America. The largest export market, Panama, is over twice the size of second placed Costa Rica. In terms of imports, the Costa Rica market is about three and a half times the size of the second placed Honduras. What plans do the Government have to increase imports, and particularly exports, where current markets are significantly smaller? How do we address the discrepancies the noble Earl talked about?
Of course, there are differences between the EU-central America agreement and the current UK-central America agreement. I heard what the noble Lord, Lord Purvis, said, but would be keen to hear from the Minister whether there are any plans to negotiate.
The other area we addressed when looking at the International Relations Committee’s report on Latin America was the potential impact of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership—I will not use the initials, because I always trip over them. What assessment has the department made of the impact of our decision to join any future trade negotiations with central America?
Talking about the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the DIT’s report on the latest round of talks in October confirmed that negotiations covered
“market access on trade in goods, services and investment, financial services, Government procurement, temporary entry of businesspersons and legal and institutional issues.”
The DIT says that “good progress” has been made, with talks
“set to continue during the rest of the year.”
Have there been further talks since those in Sydney in October? If so, have any different topics come out? The Government previously said that they hoped to conclude these talks by the end of 2022. Assuming that we would know by now if that was still the case, do they have a revised expectation of when the talks will conclude? As with other trade agreements, the advantages of joining the CPTPP will have to be assessed once we see the terms of the offer.
Noble Lords also mentioned Mexico and the continuity agreement which came into force in June 2021. Mention has been made of Kemi Badenoch saying:
“Round two of the UK-Mexico trade negotiations took place from 31 October to 11 November 2022”.
She said that discussions had “remained positive” and reflected the UK and Mexico’s
“shared ambition to negotiate a comprehensive agreement which is better suited for the 21st century and one which strengthens our trading relationship”.—[Official Report, Commons, 28/11/22; col. 26WS.]
Like other noble Lords, I ask: what is the timeframe for this? When can we expect stronger and better progress?
I echo my opening remarks about how we ensure that human rights and other relationships are central to those discussions. As the noble Baroness, Lady Coussins, highlighted, there are human rights issues, with one of the biggest being media freedom and how journalists have been attacked or disappeared. I know that it is not necessarily within the Minister’s remit to talk about these issues, but it is very important that when we are trying to offer preferential arrangements, we do not ignore our values in those discussions. I hope the Minister will be able to respond on that important point.
The Minister of State, Department for International Trade (Lord Johnson of Lainston) (Con)
My Lords, I am extremely pleased to conclude this short debate highlighting the Government’s work to improve trade and investment relations with central American countries. I am grateful for the comments made by the noble Lord, Lord Purvis, about the number of Secretaries of State that he has been engaged with. I think I am not just the fifth Investment Minister, but the sixth as well in the last few months; I hope that position will last a little bit longer. I sense a great sense of urgency about the opportunities that present themselves, and I am very aware of this. In the light of declaring interests, I refer noble Lords to my register of interests, though I do not believe there are any specific interests that cause conflict in this debate today.
I thank my noble friend Lady Hooper for tabling this debate and putting the spotlight on this unique region, and for her dedication to developing our relations with the region and the wider Latin America. As the Prime Minister’s trade envoy to Panama, Costa Rica and the Dominican Republic, she has done huge work—and I have heard this discussed today—not just in terms of trade but in advancing our quest to grow greater cultural ties and more work for civil society. I thank her profusely for that and I will come on a little bit later to talk about some of the specific work that she has been doing. I would also like to be part of her royal party if ever the occasion so arises.
I should point out that, for the purposes of this debate, when I talk about central America, I am referring to Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, Panama and the Dominican Republic, and as a result of the DIT’s operations and our trade envoys’ portfolios, but I am very happy to have a broader debate. It is extremely important—and I am going to cover Mexico and Brazil in my closing remarks—but, yes, we should talk about Latin America, the whole of Latin America, from Mexico down to the southern tip of Argentina. The opportunities there for this country are significant, and the DIT is very well aware of that.
Central America is home to just over 62 million people, with a combined GDP of $918 billion. This represents a sizeable opportunity for UK businesses, as we have discussed, and increasing numbers of British firms are realising this potential. The UK’s trading relationship with central America was worth around £2 billion last year. I have heard your Lordships’ views on how we can forecast further the expectations for our trade with central America and I am happy to revert back to noble Lords on that, but the long and the short of it is that we expect it to grow significantly.
UK firms also do quite well in central America: businesses operating in fields from pharmaceuticals to food and drink have accomplished significant exporting and investment achievements across the region. I was about to go on to talk about recent great successes, but the question I am being asked is: what are we doing particularly to help promote exports to central America and, to some extent, investment from there into the United Kingdom?
The fact is that the Department for International Trade, which I have the privilege of serving in, is totally committed to improving the UK’s relationship with these vibrant markets, and we work hard to enable our firms to access them. We have over 150 people in LATAC, under the excellent leadership of Jonathan Knott—I think my noble friend Lady Anelay mentioned that she had recently met the deputy HMTC and was very impressed, I am grateful for that and will make sure that this is passed on. We have 16 people in central America and 25 people in Mexico, and our international markets teams based across Latin America and the Caribbean are the first point of contact for UK businesses looking to engage with trade opportunities in the region. They are also available to support businesses where DIT may not have a physical footprint—not every country has DIT coverage, and I am sure that noble Lords are aware that we have to differentiate the markets, as has been discussed—but they are then covered by other countries. We have developed a network of relationships with local chambers of commerce and other partners to help UK businesses. On top of that, we have nearly 400 international trade advisers based in the UK.
There was a discussion from the noble Lord, Lord Mountevans, about the analysis of markets and the opportunities that we can present through that analysis; I would be very grateful to see more of that. I have not seen the report that the noble Lord was discussing, but as a Minister for Investment I would be extremely keen to see that work if he could share that with us.
There was a discussion about the involvement of ambassadors and the diplomatic element involved in promoting our trade. I am very pleased to say that, as I am sure my colleagues will know themselves, the ambassadorial teams in the FCDO are more focused now on trade than they have ever been. At every embassy I have been to, I have been struck—as I am sure the noble Lord, Lord Mountevans, was as a previous Lord Mayor—by the extraordinary level of support that we get. I very much hope that, if any of your Lordships do play a role as trade envoys or visit any of these countries anywhere in the world, you will call upon the ambassadors; they are literally our trade ambassadors as much as they are our diplomatic ambassadors.
A successful trading relationship is a win-win. AstraZeneca is a great example—not only is it exporting to the region, but it has also opened new offices in Costa Rica, representing an investment of $8 million into that country, which will create many jobs in the market. Rapiscan, another great example, provides security scanners for several airports in the region and has recently won a contract in the new Palmerola airport in Honduras. Diageo is a great example of the expansion in Panama, and I was very interested to hear about Buddi, the tagging system for prisoners and also the call system for pensioners; I am sure that many Members of this House will have call to use its services at some point—although, hopefully, the pensioner elderly alarm system rather than the prison tagging system. I know for a fact that we have supported Buddi in the DIT significantly in expanding its sales.
We work with companies of all sizes. I think there was a mention of what we do with SMEs. We are not just helping the multinationals; we really are helping the SMEs. We published a refreshed export strategy in November 2021 which is designed to focus on the barriers faced by SMEs. This is a 12-point plan to support exporters. It includes supporting business to trade with central America in the UK through our innovative Export Academy, a network of over 400 export champions across the country, giving businesses knowledge and confidence to enter new markets thanks to on the ground exports, as well as our “Made in the UK, Sold to the World” marketing campaign. This is very important. SMEs are vital for us.
I have heard a number of comments about culture and the need to encourage people to export in general. I hear that, as does the DIT, and we work hard on that through our various campaigns, but particularly through export champions, who provide invaluable help from one businessperson to another. UKEF, which came up a number of times in this debate, has 24 export finance managers, known as EFMs, based across the UK. These are regional representatives of UKEF, who can act as a local point of contact for exporters and businesses with export potential.
We have dedicated in-market support for buyers in central America. Our LATAC international market team export support service is the region’s universal entry point for UK businesses. Once companies express interest, our teams on the ground can help explain how to enter the markets, highlight potential distributors, partners and customers, and, where feasible, provide direct introductions to help UK firms win and expand their business in the region. This is important. We have a number of people on the ground, and in the UK, who are paid by the taxpayer to help support our businesses to export to central America. I am always keen to hear further advice and suggestions from any Member of this House on how we can do more and how we can do better, but the support is there; it is extremely welcome and the feedback is very good. I am not sure whether or not they can all speak Spanish, but all those I have met do, so I will confirm their language skills to the noble Baroness, Lady Coussins.
I will say a few more words on UKEF. The Government are determined to ensure that no viable UK export fails for lack of finance or insurance. My department’s partners in UK Export Finance are focused on making sure that nothing prevents British businesses accessing global markets, and central America is no exception. In advance of this debate I met the acting CEO and was hugely impressed with the team—some of them have been there for an incredibly long time—and the indication he gave to me was that, at some point in the relatively near future, the new CEO would be announced, although that is not confirmed. What is important is that we have a risk appetite of up to £4 billion in some of these markets, so clearly it is incredibly important.
We are discovering ever more varied ways of supporting businesses. For instance, last August—this is important, and it was mentioned today—we signed an MoU with CABEI, the Central American Bank for Economic Integration, which is the leading regional development bank in central America. This allows UKEF to support business in all CABEI member countries and to work together to identify joint financing opportunities.
The question of why we have not joined CABEI has been raised. I think my noble friend raised that point. It was a decision taken last year by the Foreign Secretary. However, this does not stop the UK working with CABEI. We have a number of positive engagements ongoing with the bank which I cannot comment publicly on, but we are working very closely with companies in order to joint finance with CABEI in the partnership with UKEF. I take a personal interest in this, so I will come back to your Lordships at a later date, and I will do what I can to support this.
As I have already mentioned, we are fortunate to have my noble friend Lady Hooper as the Prime Minister’s trade envoy for Costa Rica, Panama and the Dominican Republic. Her excellent work has succeeded in increasing the profiles of British businesses in central American markets through a programme of visits and engagements, and I thank her for that.
It is important to note other things we are doing. My noble friend works alongside two other trade envoys who champion the wider Latin America region. The Minister for Americas and the Caribbean, Minister Rutley, has invited the UK’s trade envoys to Latin America to discuss their recent visits to the region—tomorrow morning, I believe. He will meet my noble friend Lady Hooper, Mark Menzies and Marco Longhi. No doubt he will reflect on his own visits to Colombia, Panama and the Dominican Republic last month during that meeting. I was very interested to hear the comments on the Dominican Republic and its free zones, and the enormous quantity of mozzarella it imports from us.
I commend noble Lords on their engagement with Canning House, the UK’s leading forum on all cross-cutting Latin American issues, and congratulate the noble Lord, Lord Mountevans, on his work leading that organisation.
I will touch on two other areas that came up. The first is education. We know that Governments across the region are investing heavily in education. We are supporting UK firms with expertise in English language tuition to seize these opportunities; for example, Pearson is working in Costa Rica with local government to develop a programme, “English for Employability”, helping students achieve the necessary skills to become more employable.
The second is clean growth, raised by the noble Earl, Lord Dundee. Countries in central America are acutely aware of the risk posed by climate change and are developing plans to have greener economies. The UK has the potential to become the partner of choice in central America for activity relating to clean growth and, alongside this, we are doing an enormous amount of work on infrastructure, particularly related to clean water supply. In May, the UK signed a memorandum of understanding with Panama on sustainable growth, looking at areas such as marine pollution, energy transition and water management. I thank my noble friend Lady Hooper again for her involvement in getting the MoU signed, in her capacity as the PM’s trade envoy.
I also mention something that I think the noble Lord, Lord Mountevans, would like to be involved in: the annual Latin America and the Caribbean UK roadshow, which will be returning in March 2023. The teams will be visiting London, Belfast and Bristol to share the commercial opportunities for UK businesses across the region, including in central America and the Dominican Republic. Going back to my point about how we get more companies to export, I ask your Lordships to act as champions, to sing from the rooftops the opportunities that we have as exporters to this region.
We successfully secured trade agreements for central American countries through our continuity programme, which was discussed during the debate, the UK-central America association agreement. We have also signed the CARIFORUM economic partnership agreement, which includes the Dominican Republic. Both provide important continuity and certainty for businesses by maintaining the UK’s access to preferential tariffs and facilitating access to businesses from the region in the UK. I am pleased that the FCDO will host the first central American association council, inviting Ministers to the UK, and that DIT will host the first ministerial joint council, under the CARIFORUM economic partnership agreement. A huge amount is being done in these international fora.
There are two more countries to focus on. Mexico was raised by the noble Baroness, Lady Coussins. We are now in round two of our FTAs. It is very important that we do not rush to a false conclusion. My esteemed Secretary of State, Kemi Badenoch, has already said very clearly that we do not need to set artificial deadlines. As far as I am aware, the entire firing of the negotiating team has had no effect on our plans to come to a conclusion over the next few years. That is a reasonable timeframe in which to conclude this FTA. It was mentioned that in Brazil the political environment allows us to have new discussions with the Government. I am pleased to say that we will be. Officials will engage with Lula’s new team once they are appointed, to understand the new Government’s position on an ETP.
I will finish by talking about the challenges in the region. This is not a region that is completely straightforward. On human rights, I stress that we have not downgraded the Government’s commitment at all. We are clear that more trade does not have to come at the expense of human rights, and we continue regularly to address, support and engage, through support for projects and local partners, public diplomacy and diplomatic dialogue, on a broad range of human rights topics, bilaterally and in the multilateral fora. However, we do not necessarily believe that FTAs and trade agreements are the best mechanisms for aligning our values on human rights. We have been assiduous in working to ensure that individuals whom we believe are particularly culpable have had sanctions taken out against them.
Regarding corruption, the UK takes very seriously allegations of corruption. My noble friend Lady Anelay spoke about businesses finding it difficult to compete in local markets where there is a high degree of corruption. This is often the case in many emerging markets, but we have worked extremely hard; in this instance, to sanction two Venezuelans under the global anti-corruption sanctions regime. We work closely with local Governments to reduce levels of corruption and UKEF complies strictly with anti-bribery and corruption policy.
I will come to a conclusion. As I have set out today, central America is a region bursting with potential. As George Canning famously proclaimed, let us call in the New World,
“to redress the balance of the Old”.
The Government are doing all they can to take their trading relationship with the region to new heights. In turn, this work will enable British companies to share their expertise, enjoy the opportunity presented by these markets, and provide lasting economic and social benefits.
Viscount Waverley (CB)
Before the Minister sits down, he made the point that taxpayers’ money is used to compile assessments. It is not for the want of trying over the years. Will the Minister request the Secretary of State to finally release the trade commissioners’ annual reports, which should be public information and would help assess exactly where and what the opportunities are? I have been trying for years to have this achieved, with absolutely zero results.
Lord Johnson of Lainston (Con)
I thank the noble Viscount for that request. The Department for International Trade produces a plethora of reports—
Lord Johnson of Lainston (Con)
The trade commissioners contribute to the statistics that we provide as a department. If he has time, I would be perfectly happy to sit down with the noble Viscount and go through the statistics that we produce. If we can find a way to provide more valuable insights, I am sure that we will be delighted to do so.