Central America: Trade and Investment

Viscount Waverley Excerpts

Monday 19th December 2022 Lords Chamber

[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?

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[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—

[Viscount Waverley (CB)]

From the trade commissioners.

[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.