EU Trade Agreements: Replication

Pat McFadden Excerpts

Wednesday 13th February 2019 Commons Chamber

[Dr Fox]

It seems that the country is caught between the irrational pessimism of those who fail to be reconciled to the referendum result and believe that everything to do with Brexit will be disastrous for the UK and those who are irrationally optimistic that it would be no problem whatever to leave the European Union with no deal. The truth is that we would be better off with a deal, which is why the Government want to get that deal with the European Union across the line. I still urge Opposition Members to support it. If we do not achieve it, we will end up with the uncertainties that they have identified today.

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

As the Secretary of State rails against irrational pessimism, I assume that he will tell us that the rest of the world is looking at the United Kingdom right now and saying that Brexit is a great example that it must follow.

I wish to go back to the point that the right hon. and learned Member for Rushcliffe (Mr Clarke) raised yesterday, which is that, under our current arrangements, UK businesses will be part of one of the biggest trade deals ever negotiated between the EU and Japan, but, under the Secretary of State’s policy, UK businesses will not be part of that agreement and we will have to start again. We are told that Tokyo’s trade negotiators are under instruction to extract every advantage possible, as we would expect them to do in a tough trade negotiation. Will he promise UK businesses that their market access to Japan under any deal that he manages to negotiate will be as good as it is under the EU-Japan trade deal, which has already been negotiated?

[Dr Fox]

As I have already said, the Prime Minister and Prime Minister Abe have both indicated that they want a close trading relationship for our countries after we leave the EU, but the Japanese Prime Minister has been very clear that he is hugely encouraging of the UK’s accession to CPTPP, which would then become a trading bloc of almost exactly the same size as the European Union itself. As for his first point, many people are looking to the United Kingdom and saying what a great example it is of democracy that a country wants to take control of its own constitutional future.

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

Pat McFadden Excerpts

Wednesday 31st October 2018 General Committees

[The Minister for Trade Policy (George Hollingbery)]

I beg to move,

That the Committee has considered the 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.

It is an enormous pleasure to be serving under your chairmanship today, Mr Betts. I have done so extensively in the past but not in recent times. I am delighted to be here today to debate the European Union economic partnership arrangements with Southern African Development Community states, the Eastern and Southern Africa states, and Ghana, as well as the accession of Ecuador to the EU-Andean free trade agreement.

The Government remain committed to supporting the EU’s ambitious trade agenda, including its development aspects. Trade is an important tool in the fight against poverty. Over the last few decades, around 1 billion people have been lifted out of poverty and international trade has played a significant part in that. I welcome the opportunity to set out why the Government support these EU agreements, which will bring benefits to partner countries and the UK.

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

The Minister has opened by saying that the Government support the EU’s international trade objectives. Is not the very purpose of leaving the EU to divorce ourselves from those international trade objectives?

[George Hollingbery]

The right hon. Gentleman will know perfectly well that there are many motivations for leaving the EU, although we do not need to discuss those today. The Government are very keen that the free trade agreements that exist between the EU and third-party countries should be continued with as little change as possible. That is good for us, good for business and good for consumers.

By championing global free trade, we support economic development, which helps drive growth and jobs in a way that aid spending alone cannot. While the UK remains an EU member state, the Government remain committed to working with Parliament to ensure that is facilitated through scrutiny of EU trade agreements. This debate ensures that Parliament has the fullest opportunity to scrutinise the agreements.

I will first address the economic partnership agreements. The UK is a long-standing supporter of the EU’s EPA programme. EPAs are trade agreements with a development focus, which is not found in conventional free trade agreements. This House has already scrutinised and passed several other EPAs. EPAs take into account the socioeconomic circumstances of partner countries and provide for development co-operation and assistance. EPAs secure immediate, duty-free access to the EU for developing country products. In return, those countries liberalise their markets gradually by reducing duties on around 75% to 80% of imports over a period of up to 25 years. Trade liberalisation is therefore strongly asymmetric in favour of developing countries.

EPAs are of course negotiated agreements. They promote increased trade and investment by putting our trading relationships with African partners and others on a more equitable, mature and businesslike footing, supporting sustainable growth and poverty reduction. The EPAs we are considering today can deliver real benefits for manufacturers and farmers in developing countries and in the communities in which they operate. Specifically, the EPAs eliminate tariffs on processed and manufactured goods, allowing more of the product value chain in developing countries, and providing more opportunities for growth and skilled jobs where they are most needed.

The EPAs offer a more flexible and simpler set of rules of origin, so that in most cases, when a producer in one African, Caribbean and Pacific country uses inputs from another, they do not have to pay customs duties when they export their final product to the EU. Both the Southern African and the Eastern and Southern Africa EPAs contribute towards regional economic integration by joining up smaller markets, benefiting African exporters by boosting trade between neighbouring countries and regions. The EPAs provide development co-operation to help our African partners to address broader issues affecting trade, such as technical barriers to trade, labour rights, the environment and poor infrastructure or inefficient customs and border controls.

EPAs also bring advantages to EU businesses and consumers. They can help to promote the export of new products from African countries by providing EU businesses with key inputs and consumers with more choice, better quality and lower prices, including for beef from Botswana, wine from South Africa, bananas and cocoa from Ghana, and fish from Mauritius. Over their lifetime, the agreements will bring new opportunities for UK exporters as EPA partners gradually liberalise their economies. We estimate that UK exports to the Southern African EPA states will increase by £35 million by 2035 and that imports will increase by £37 million.

Let me turn to South America. Ecuador’s accession to the EU-Andean agreement is estimated to be worth £37 million annually to UK GDP in the long run. UK imports are due to grow, especially in important commodities such as fruit and vegetables, which could mean that consumers benefit from lower prices and businesses benefit from reduced input costs. UK exports will also increase; indeed, the impact assessment suggests that they have already increased since the agreement’s provisional application to Ecuador in early 2017.

The EU-Andean agreement covering Peru and Colombia has delivered demonstrable benefits to businesses and consumers, as outlined in the EU’s annual reports. I am confident that the benefits of the FTA can be enjoyed by importers and exporters of any size. British business will be free to tap into the Ecuadorian market with even greater ease, benefiting from greater access across a range of service sectors and the Government procurement market, and from the removal of remaining tariffs in key industries, including chemicals, textiles and telecoms.

Although it is not the subject of this debate, it is important to say that as well as ratifying the agreements, the Government seek a seamless transition to replicate their effects and ensure continuity when we leave the EU. Under the terms of the draft withdrawal agreement, the UK is to be treated as a member state for the purposes of international agreements for the duration of the intended implementation period. That would provide certainty and confidence that, as we move into the implementation period, there will be no disruption to existing relationships underpinned by international agreements. However, the Government continue to plan for a range of possible scenarios to maintain existing trade relationships after our exit from the EU. We therefore continue to work towards bilateral agreements to ensure continuity in all circumstances.

We are making good progress on ensuring continuity for the SADC, ESA and Ghana EPAs. The process involves making only those technical changes that are necessary to ensure that our new agreements are operable after we leave the EU. That will include replicating the effects of provisions within the EPAs that refer to the EU-ACP Cotonou agreement, but it will not mean replicating the whole Cotonou agreement.

Our partners have broadly welcomed our approach and are keen to work towards a lasting set of agreements with the United Kingdom. For example, on 28 August in Cape Town, I signed a joint statement with Botswana’s trade Minister, Ms Kenewendo, to confirm that trade agreements between the UK, the five Southern African Customs Union countries and Mozambique will be ready to come into force as soon as the EU EPA ceases to apply to the UK.

Likewise, the EU-Andean agreement, now including Ecuador, will apply to the UK during the implementation period. Of course, the Government continue to work towards new bilateral arrangements with the Andean community that would ensure continuity of the effects of the EU-Andean FTA in any event, via a straightforward technical process.

I further note the successful visit of my colleague Baroness Fairhead to Peru and Colombia over the summer, and the UK’s presence—in the form of the Prime Minister’s trade envoy, my hon. Friend the Member for Fylde—at the inauguration of the new Colombian President, President Duque. I hope my pronunciation is correct.

--- Later in debate ---

[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.

[Mr McFadden]

May I ask the Minister to rewind 30 seconds? He said that the UK intended to replicate in any future FTAs the public service provisions that currently exist in European Union negotiated trade agreements. For my own benefit—I may have missed it—is this the first time that that has been said, or has it been said elsewhere by the Department for International Trade? If so, where?

[George Hollingbery]

All I can say is that it is absolutely the intention of the Department, when negotiating free trade agreements, to ensure that there is an understanding in those agreements that UK public services will be the province of the Government and the Government alone. There will be, as there have been in the various free trade agreements that have come through recently, an understanding in such agreements that there is a right for partner nations to regulate their own public sectors in the way that they see fit. I believe that I am repeating something that has been said in the House many times before.

As we know, there is a system in the European Union for conducting EPA reviews. This has not yet been finalised or finally thought through, but the UK intends to ensure that where we have EPA-type provisions under UK law, we will look at them regularly to see whether we can improve them. We have real ambitions for these agreements and believe we can do more with them. Statistics indicate that where free trade agreements—EPAs are a form of free trade agreement—have been negotiated, over time there is a consequential increase of up to 32% in trade between partners. That probably applies more to direct FTAs without the EPA envelope, so we are talking about a different category of partner, but nevertheless it demonstrates that free trade considerably increases trade between partners.

It is true that for a large number of partners within EPAs, the access they get to European markets is far superior to what they would achieve through unilateral systems of preferences. For many, there would be no access without the EPA, and certainly not on the terms on which they are currently engaged. The mere fact that they are signed up to EPAs suggests to me that they find them useful.

The hon. Member for Sefton Central made considerable reference to issues relating to undermining the economic prosperity of regions by doing individual deals with individual countries. The EU has always sought to do EPA deals with regional blocs as they define themselves. Those interact considerably across the continent of Africa, in particular, with members being members of more than one bloc, and that can create difficulties. It is sometimes also difficult when individual regional political issues force disagreement between the partners in these unions and agreements. Therefore, the EU has taken the view that it is better to do deals with individual countries that wish to be involved than not to do so at all. That is why it pressed ahead, for example, with the Ghanaian agreement.

It is worth reflecting that the Eastern and Southern Africa programme was itself a reaction to the fact that the Lomé convention and the deals that were set up under preferences for a number of these countries were found not to be WTO compliant. The ESA programme was a reaction to make sure that the absolute minimum that needed to be done to be WTO compliant within development frameworks was done.

I will correct the hon. Member for Sefton Central on a couple of the more emotive examples he gave. He talked about Tanzania and fish skeletons. Tanzania is not a partner to an EPA agreement with the European Union. He also talked about chicken production in Ghana and the difficulties that the EPA had caused. It is also the case that chicken is specifically excluded from liberalisation in the Ghanaian EPA. I hope that that will give him some reassurance.

Finally, I turn to the issue of a no deal Brexit. The Department is working incredibly hard, as the hon. Gentleman said, to ensure continuity if and when that happens. I re-emphasise to the Committee that is something that many of us hope very fervently will not happen. We hope that we will have a free trade agreement or a future economic partnership with the European Union, and that there will be an implementation period. The Government have to recognise that there is a possibility that no deal will occur, and we must plan for all circumstances. We are negotiating at length with our bilateral partners with that in mind, and progress is very encouraging. We cannot be certain in every case exactly what we will achieve and when, but we have made detailed progress on the vast majority of the agreements and I believe that come a no deal Brexit—if it should come—we will be in a good position.

Question put and agreed to.

Resolved,

That the Committee has considered the 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.