Draft European Union (Definition of Treaties) (Economic Partnership Agreements and Trade Agreement) (Eastern and Southern Africa States, Southern African Development Community States, Ghana and Ecuador) Order 2018

Bill Esterson Excerpts

Wednesday 31st October 2018 General Committees

[Bill Esterson (Sefton Central) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Betts.

The four agreements that we are discussing will form the basis for future UK deals with the countries covered by the four agreements. The Trade Bill, which is still going through the Lords, prevents us from discussing the contents of the agreements after today’s debate. Having further parliamentary scrutiny, including of any amendments, once those agreements are rolled over or renegotiated—whichever happens after we leave the European Union—will be entirely for the Secretary of State to decide, so we need to take advantage of today’s proceedings and challenge the Government, because there will not be another opportunity.

Reports suggest that the three economic partnership agreements that we are discussing were agreed under significant pressure. It is therefore highly likely—notwithstanding what the Minister said when he quoted one of his counterparts saying that they are ready to roll the agreements over—that there may be a desire to renegotiate. South Africa’s deputy Trade and Industry Minister when the agreements were signed, Dr Rob Davies, said that they were signed “under duress”, at the risk of having tariff-free access to the EU withdrawn. For those reasons, it seems highly likely that these partners will try to renegotiate, so today’s debate is extremely important.

The statutory instrument relates to four multi-country trade agreements, as the Minister said, which we are party to as a result of being members of the EU. There is one free trade agreement and three EPAs, which relate to trade with developing countries. The objective of the agreements is to increase trade and investment opportunities. The explanatory memorandum lists the advantages of developing nation partners as

“providing duty and quota-free access for exports to the EU; more integrated regional markets; more flexible, simpler rules of origin; no undue competition and a context of wider reforms and helping to address broader trade issues such as technical barriers to trade and labour rights.”

Could the Minister let us know what is meant by technical barriers to trade and labour rights? I could not find any further detail on that point. The explanatory memorandum then moves on to the benefits to

“consumers and workers in Europe by the removal of trade barriers, the promotion of exports from developing countries resulting in wider choice, lower prices, better value and wider ethical choice options.”

The benefits to UK businesses are listed in the impact section of the explanatory memorandum. The estimated increase to UK GDP of £24 million as a result of Ecuador’s accession to the EU-Andean EPA is given as an example of the opportunities presented by removing barriers to trade. The Ecuador protocol of accession includes a chapter on public procurement, and the explanatory memorandum suggests that there may be an impact on UK public services as a result. Can the Minister tell us what that impact is likely to be?

The impact assessment of Ecuador’s accession refers to the relationship between trade openness and economic growth. It then quotes the fall in the poverty rate since China opened up its economy as a “striking example”. China may well be a striking example, but it is also strikingly different from Ghana, Ecuador and the Eastern and Southern Africa states, and the Southern African development community states. They do not have the opportunity of modernising their industries by keeping their borders closed, as happened in China, nor do they have the economic power of China.

The impact assessments each make the point that trade is beneficial. Indeed, paragraph 1.3 of the Ecuador impact assessment states:

“Free and fair trade is fundamental to the prosperity of the EU, the UK and the world economy.”

The key point is that it needs to be fair, not just free.

The impact assessments also demonstrate the benefits of free trade agreements. As my right hon. Friend the Member for Wolverhampton South East said, we are of course a member of a free trade agreement, in a market with 500 million consumers—the European Union. It covers 60% of our trade, either directly with the other 27 countries of the EU, or indirectly through agreements that the EU has with other countries, including those we are discussing today. The EPAs under discussion have already been provisionally applied, of course.

The Ecuador impact assessment says:

“the evidence suggests that FTAs enhance trade flows”,

as our membership of the EU has proved. Significantly, the Ghana impact assessment admits:

“There is very little quantitative evidence on the impact of EPAs.”

We support the objectives of supporting trade with the developing nations, boosting their economies and prosperities, and doing so while boosting our own economy, but we must explore whether these agreements will deliver the proposed objectives. It is telling that the Government acknowledge in paragraph 10.1 of the explanatory notes that there had been criticism of the agreements, but that reference is all they have to say about the criticism. There is the slight exception in that three of the four impact assessments contain an index that refers to section 8—“Sensitivity analysis & risks”. Curiously, in each of the three impact assessments that list section 8 in the index, after section 7, “Impact Tests”, the next items are annex A and annex B—“estimated one-off costs” and “most-traded product lines”—followed by a blank page. There is no content for the “Sensitivity analysis & risks” sections in any of them. The fourth, by the way, does not have a section 8.

Will the Minister explain those omissions and tell us what was meant to be in those section 8s? Failing that—or perhaps in addition—will he tell us what the criticisms of the agreements, which are referred to in the explanatory notes, are? I am afraid I was unable to find any reference to them anywhere in what the Government have written.

To give the Minister time to find answers to those questions, I thought it would be sensible to go through some of the concerns that have been raised. Perhaps he might want to say something about that when he responds. Concerns have been raised about the impact on developing nations and about the regional impact of economic partnership agreements. A common criticism is that “most favoured nation” clauses restrict the ability of developing nations to reach trade agreements with their neighbours, as the same benefits, or better, in such agreements have to go to the EU. Instead of opening up trade for developing nations, the concern is that economic partnership agreements risk restricting trade.

I said earlier that the Government admitted in the impact assessments that there is a lack of quantitative evidence about the benefits. The longest-running economic partnership agreement is in the Caribbean. It started in 2008, but according to the European Commission’s impact assessment from 2014, there has been minimal domestic growth in the Caribbean since the EPA was implemented.

According to the International Monetary Fund, the uncompetitive nature of poultry farming in Ghana has left Ghanaian producers unable to deal with the lower cost of imported food following trade liberalisation. Those are the IMF’s words, not mine. The IMF’s Independent Evaluation Office report on international trade policy from 2009 says that the poultry sector in Ghana was much more vulnerable to competition from imports than IMF staff believed. The IMF forced the Ghanaian Government to reverse the Ghanaian parliamentary decision to raise tariffs to protect the poultry industry, with disastrous consequences for poultry farming in Ghana and for the communities that depended on that farming and its economic benefits.

The experience in a number of African countries has been of moving from self-sufficiency, or near self-sufficiency, in food to reliance on imports. Economies have moved from domestic production of food to foreign-owned production of cash crops such as cocoa, coffee, peanuts, sugar, cotton, rubber, palm oil and tobacco. They have moved away from the production of food and towards a reliance on imports of food.

Let us look at the experience of countries such as Tanzania, where the EU already has an agreement. Fish prices have gone up to such an extent that locals are unable to afford fish that has been caught in Lake Victoria; such fish are now almost exclusively caught for export. Some 49% of fish from Tanzania goes to the EU, and most of the rest is exported elsewhere. Locals have to rely on so-called fish skeletons—the remnants from fish that are caught in the Nile or in the lake and exported. The experience in east Africa is of produce being exported to the EU, driving up prices and undermining food security. In this case, the suggestion is that far from helping trade from developing nations, the east Africa economic partnership agreement has restricted it and made industrialisation and growth harder to achieve. The case of Tanzania and the east Africa EPA is a cautionary tale of what can happen if these agreements are not applied with care.

As we leave the EU, we will, as a result of our EU membership, be party to 70 or so trade agreements that we will need to renegotiate. The four agreements covered by this statutory instrument will need to be agreed again. The Trade Bill, which is slowly making its way through the Lords, makes provision for what the Government call the roll-over of these agreements, but the roll-over depends on whether the third-party countries to the agreements want to sign the same agreement or take the opportunity to revisit it. Given the concerns that I voiced at the start of my remarks, we should not be surprised if that happens with some or all of the agreement we are considering.

[Hannah Bardell (Livingston) (SNP)]

The hon. Gentleman will know that significant concerns have been raised by the devolved nations, particularly Scotland, about the lack of transparency, consent and consultation on trade agreements. I have no doubt that the Government will have to face up to and think about that carefully.

--- Later in debate ---

[Bill Esterson]

I feel as though we are revisiting the debates we had in the Trade Bill Committee, but the hon. Lady is absolutely right. I think the Lords will revisit the points she just made. I reiterate that if the Trade Bill goes through unamended, today will be the only opportunity for Members of either House to consider any renegotiation that may or may not come about on these four agreements, or on any of the 70 agreements that will be affected.

Perhaps the Minister can tell us what the impact of a no deal Brexit will be. In the case of agreement with the EU on the terms of Brexit, there will be a transition period, which suggests that there will be an opportunity to renegotiate these agreements. As we said in the Bill Committee, however, it might take a little longer than the 21 months from 29 March 2019 to 31 December 2020 to renegotiate 70 international trade agreements. That may partly explain the Prime Minister’s hint about the need for a longer transition period. It will not be a case of a cut-and-paste roll-over if any of our partners take the opportunity to renegotiate terms.

Regardless of what the Minister said in his opening remarks, there is every chance that that is exactly what will happen in these four agreements. What happens in the case of no deal? What will the status of these four agreements be from 29 March onwards? That is an important question for the Minister to answer. We have consistently heard just how much time and effort is going into the Government’s planning for the disastrous no deal outcome.

As we consider taking on, in our own right, the economic partnership agreements included in this draft statutory instrument, and as we consider how we apply them as members of the EU, I hope that everyone in this room agrees that it is incredibly important that we take our support for countries in developing parts of the world seriously. Concerns about these economic partnership agreements are very real and need to be addressed.

The importance of listening to all voices is clear when we look at what representatives of affected countries say about the EPAs. Carlos Lopes is the High Representative of the African Union, which supports member states in trade negotiations with the EU, and a former executive secretary of the United Nations Economic Commission for Africa. He said:

“Africans have serious concerns about how the EPAs would affect their industrial development and the African Continental Free Trade Area...Uncertainty arising from Brexit has not helped matters.”

That is first time we have referred to the African continental free trade area, which demonstrates my previous point, namely that the most favoured nation clauses in the order restrict the ability of other African nations to benefit. There are 55 nations in negotiations to conclude the African continental free trade area, and their ability to maximise the benefits of trading with other African countries will be seriously restricted by the need to give European countries the same benefits. Carlos Lopes went on:

“In most areas, the EPAs will actually hurt intra-African trade, weakening trade revenues and undermining trade-driven industrialization in Africa…If the EU is to seize the opportunities that Africa offers in a way that is mutually beneficial, it will need to work with the continent’s leaders to build a new kind of partnership that treats African countries as equals.”

I cannot imagine that anybody would disagree with the call to treat African countries as equals, so we need to be very mindful of exactly how these agreements might be applied.

Vera Songwe—the executive secretary of the United Nations Economic Commission for Africa, and formerly a country director and a senior economist at the World Bank—said that

“there should be a strategic pause on the EPA negotiation processes until the finalization”

of the African continental free trade area. We are not in a position to deliver that strategic pause because of the part of the process that we have reached, but we need to think seriously about why these requests are being made.

I ask the Minister to respond to the concerns raised by those who speak on behalf of the people of Africa, and to tell us how he and the Government intend to ensure that these economic partnership agreements are delivered in a way that benefits African people, and does not disadvantage them in the ways my examples have demonstrated. We should not be reaching economic agreements that disadvantage developing nations; we should be well past that point now, in 2018 in the United Kingdom. For the United Kingdom to benefit in the long term, we need trade to be fair, too. Unless our trading partners benefit, and unless their industries and workers thrive under such agreements, they will not be able to buy our goods and services, any more than they will be able to sell to us. For growth to happen, trade must be reciprocal and win-win, not the win-lose of President Trump.

We in the Opposition accept that these agreements should proceed, but we also see the need for their application to be more supportive of those in developing nations than the experience of Ghanaian poultry farmers or Tanzanian fishing communities would indicate has been the case thus far.

[George Hollingbery]

I will try to take the points made by the hon. Member for Sefton Central in order; I will be brief on some and perhaps develop a couple a little further, but hon. Members present should be confident that I will not take forever.

First, the hon. Gentleman stated that he felt the Trade Bill prevents us from discussing these issues any further, but that is absolutely not the case. Clause 2 of the Trade Bill was considerably amended on Report in the Commons, which means there is now very full discussion of any changes that are to be enacted by statutory instrument. Indeed, a report will be produced on the effects and changes in any free trade deal that is transitioned.

During the debate on the affirmative instruments, there will be a supporting explanatory memorandum, which will point to exactly the changes identified in the report that have been made by that statutory instrument. Therefore, the House has every right, every ability and every chance to debate those changes, and no doubt will do so.

The hon. Gentleman said that it was entirely for the Secretary of State to decide whether something is ratified. For the same reasons, that is absolutely not true. The House will have any number of opportunities to debate all the small changes, or even larger changes—we hope very much there will be no larger changes—in these transitioned agreements. He asserted that EPAs have been agreed under pressure.

[Bill Esterson]

The process that the House will be able to use is to delay, using the Constitutional Reform and Governance Act 2010. The House cannot amend the agreements, can it—unless the Minister is telling me that the Government will table further amendments to the Trade Bill in the Lords?

[George Hollingbery]

As the hon. Gentleman will know, the House can actually delay indefinitely through the CRAGA process, but if it decides not to pass essential modifications that enact the practical legislative effects of any agreement, it will make that agreement difficult to operate. The House will have full opportunity to discuss those SIs in Committee. It is certainly not the case that the Secretary of State gets to decide; nothing could be further from the truth.

We were talking about the EPAs being agreed under pressure, but that is just not true. If it were true, I suspect there would be very little appetite among nations with whom we have these agreements to replicate them, but I can be clear with the hon. Gentleman that there is an appetite to replicate them. As for Rob Davies, the Trade Minister in South Africa, I met him in August and he was keen that we replicate the agreement. We agreed, around a table with officials, that we should instruct our officials to ensure that that was done in a timely fashion and as soon as possible; so either he has changed his mind, or he did not believe that in the first place.

I am not quite sure I understood the hon. Gentleman’s question about the technical barriers to trade, but I am very happy to provide him with some illumination about what they are. We can talk about customs and all sorts of different issues—those are the technical barriers to trade. Technical barriers to labour rights may, I suspect, be legislation within individual jurisdictions.

[Bill Esterson]

Paragraph 7.6 of the Minister’s explanatory memorandum refers to addressing

“broader trade issues such as technical barriers to trade and labour rights.”

I was asking him to explain what he meant by

“technical barriers to trade and labour rights.”

[George Hollingbery]

In that case, I meant exactly what I just said. It is not technical barriers to trade and technical barriers to labour rights, but technical barriers to trade, such as poor customs systems and so on and so forth, which the Department for International Development has very considerable programmes to address. The TradeMark East Africa programme has been enormously successful, for example in reducing the time taken for items to clear customs by 32% over the life of the programme. By “address…labour rights”, we mean that it is also our intention to tackle the issue of labour rights. I hope that will satisfy the hon. Gentleman.

On the reference to public services, EU publicly funded services are excluded from liberalisation in all free trade agreements. That is an absolutely standard clause in all EU free trade agreements, and we are clear that in the free trade agreements we sign, we will also be protecting our public services from private competition. The right to legislate in the public interest in public services will be enshrined in our FTAs.

The hon. Gentleman made the not unreasonable point that the EPAs are not of the same scale as China and so on. That is the whole point of the EPA programme. There is a 20-year period in which liberalisation happens. There are also all sorts of breaks and control mechanisms, and indeed mechanisms for discussing certain issues if they arise and are acute for any particular country at any particular time. I am convinced that the mechanisms that sit around these agreements allow for modification, for change and for emergency procedures to be brought in, to deal with real difficulties that individual countries might face.