Africa: European Union Economic Partnership Agreements

Lord Collins of Highbury Excerpts

Thursday 17th November 2016 Lords Chamber

[Lord Collins of Highbury (Lab)]

My Lords, I too thank the noble Lord, Lord Chidgey, for initiating this debate. Free trade has been a very useful tool against poverty globally. It has helped to pull millions of people out of poverty. However, as we have heard in this debate, it is not a panacea and some sectors of society lose out.

When the UK joined the European Economic Community 43 years ago, it transferred all authority for its trading arrangements to the EEC. In 2014, the UK’s $1.1 trillion in trade was channelled through these clear and predictable legal and institutional frameworks. For Africa this included the Cotonou agreement, as the noble Lord, Lord Chidgey, said, which expanded preferential access to EU markets while setting up the economic partnership agreements through which Africa was to gradually open up 75% to 80% of its own market to the EU.

The aspiration of the EU for EPAs between it and African, Caribbean and Pacific countries has been, as we have heard, to contribute through trade and investment to sustainable development and poverty reduction. But as my noble friend Lord Boateng said, African countries are caught in the dilemma of losing their preferential market access for the few products they export to the EU if they do not sign the EPAs, versus their longer-term development prospects if they sign them. The threats of the EPA, as the right reverend Prelate said, include significant tariff revenue losses; loss in policy space and threats to local industries; unemployment; serious disruption of existing or planned customs unions; and, as we have heard from all noble Lords in the debate, the displacement of existing regional trade and regional production capacities.

Over recent years many of the African economies have also seen an economic boom. However, at the same time inequality is extreme and increasing. Africa faces the additional costs of mitigating and adapting to climate change, despite being among the least responsible for causing the crisis. African Governments are in desperate need of new and additional public finance not only to fill financing gaps in their budgets but to invest in the future SDGs. International finance policies have resulted in African countries haemorrhaging billions of dollars in taxable financial resources. These potential tax losses could have been invested in reducing inequality and poverty and developing jobs and prosperity. Surely global agreement on tax must be the top priority for all countries.

European Commission officials highlighted some of the achievements of the EPAs, including 80 grants made to infrastructure projects across Africa under the EU-Africa infrastructure trust totalling some €6.5 billion and €55 million set aside under the African Union support programme to develop AU institutions. Despite misgivings from African policymakers, the EU remains determined and positive about the EPAs and is keen to deliver as many as possible. The SADC of Botswana, Lesotho, Namibia, South Africa and Swaziland signed the EPA in June of this year. The southern African markets will open only partially to EU exports, gradually over time, providing their industries with the intermediary goods they need to support growth.

As we have heard, in east Africa the tensions are more obvious. Members of the East African Community—Kenya, Uganda, Tanzania, Burundi and Rwanda—were due to sign an economic partnership agreement to ensure that the five nations continued to export goods to the EU without incurring quotas or tariffs. But Tanzania withdrew because of,

“the uncertainty in EU after the exit of UK”,

according to a government statement, which also said:

“But more important is to protect the economic interests of our countries by empowering the manufacturing industries”.

We have also heard recently that Uganda’s President Museveni then pulled out, saying that the deal needed further discussions, even though his Government had already agreed it. The trade deal has been under negotiation for nine years and was initialled by all parties in October 2014. All the countries apart from Kenya—as we have heard, the region’s largest economy—will be largely unaffected if the deal lapses because they are classified as least developed countries by the EU. But Kenya, as a wealthier developing country, will face tariffs of 4.5% to 19.5%, according to the chief executive of the Kenya Flower Council; flowers are an incredibly important part of Kenya’s economy.

The announcement by Tanzania is merely the most recent example of delay and backtracking on implementation. Could Brexit herald the unravelling of EPAs? Following the vote to leave the EU on 23 June 2016, a new trade policy will have to be designed. In doing so, attention needs to focus on how this can contribute to development. It will need to recognise the differences that exist among developing countries. Many of the least developed countries depend on preferences in the UK market. They need certainty in the same way that UK manufacturers need certainty. Will the Minister confirm that his department is fully engaged with the Department for International Trade in the design of new trade policies? Will he reassure the House that the UK Government will move quickly to confirm that existing arrangements will remain in place for a certain period of time following the UK’s departure from the EU?

Linked to this, the UK needs to put transitional arrangements in place to minimise disruption. As we have heard, the value of the preferential access that developing countries receive to the UK market through the EU’s GSP, and particularly its EBA element, is considerable. They save least developed countries exporters €385 million per year, non-LDC ACP exporters €205 million and Commonwealth exporters €715 million. As the noble Lord, Lord Chidgey, asked, what discussions are the Government having with the Commonwealth to establish a dialogue on trade and new trade arrangements?

As my noble friend said, there are opportunities in these risks, and a new UK trade policy can be made more development-friendly by going beyond tariffs to include new provisions on services, investment, rules of origin and standards. In crafting its trade policy approach to Africa, three principles should underlie the UK’s trading engagements with the whole of Africa: support for Africa’s regional integration priorities; pro-poor and pro-development trade arrangements; and market-access continuity.

The United Kingdom Government face a considerable range of negotiating priorities. I hope tonight that the Minister will be able to reassure the House that Africa, as a rapidly developing and historically linked trading partner, will not be overlooked in these discussions.