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Westminster Hall

Thursday 8 June 2006

[Ann Winterton in the Chair]

Economic Partnership Agreements

[Relevant documents: Sixth Report from the International Development Committee, Session 2004-05, Fair trade? The European Union’s trade agreements with African, Caribbean and Pacific countries, HC 68; and the Government’s response thereto, Cm 6605.]

Motion made, and Question proposed, That the sitting be now adjourned.—[Mr. Thomas.]

2.30 pm

The Parliamentary Under-Secretary of State for International Development (Mr. Gareth Thomas): I am grateful for the opportunity to debate this issue under your chairmanship, Lady Winterton. It is an important topic that has concerned many in our constituencies, many of whom have been part of the Make Poverty History campaign, and it is of considerable importance to the developing countries that are part of the African, Caribbean and Pacific grouping.

Increasing trade will be essential to achieving the economic growth that is necessary to meet the millennium development goals and lift millions out of poverty. Trade Minister after trade Minister from developing countries emphasised that exact point at the World Trade Organisation talks in Hong Kong in December. Ghana’s trade Minister, for example, said:

A further example to support that point is the case of Malawi, which has a total Government budget of some $730 million. Donors provide a further $500 million. Realistically, that is nowhere near enough money if Malawi is to deliver the better health and education that its citizens deserve and which its Government want to provide for them. While donors can, and no doubt will, increase their aid budgets for Malawi, what it really needs in the long term is sustained economic growth to generate taxation revenues. To do that it needs the trading opportunities that are fundamental to economic growth. Clearly, economic growth and more trade are not enough. The distribution of the benefits of the economic growth and making sure that the growth is sustainable, are essential elements, too. However, greater trade will be fundamental if we are to see the progress that we want towards the millennium development goals.

An ambitious pro-development Doha round could of course also play a key role in increasing global trade, potentially by hundreds of billions of dollars. Work on the multilateral trade negotiations—the Doha development agenda—continues, as the House will be more than aware. The Government continue to press for the deadline for the Doha development agenda to be met, and for an ambitious pro-development outcome to the current round of talks. We continue, in
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particular, to urge all WTO members to play their part in ensuring that that opportunity to help developing countries will be seized.

Although the Doha round has generated most attention in recent months, the contribution that economic partnership agreements—EPAs, as they are affectionately known—could make to development and poverty reduction in African, Caribbean and Pacific countries must not be underestimated. Last year, the Make Poverty History campaign rightly highlighted the economic and social dislocation that poorly designed and over-speedy trade liberalisation can lead to. The Government have made it clear that we will not force trade liberalisation on developing countries, either through trade negotiations or aid conditionality. I believe, however, that for developing countries, trade reform that is carried out under the right conditions and is well integrated with poverty reduction strategies or national development plans can bring considerable growth opportunities and benefits for the world’s poor.

Economic partnership agreements between the EU and ACP countries are not simply regional trade agreements. They have the potential to be much more—to be genuine tools for development. The Cotonou agreement, which sets the framework for the EPAs, clearly states that the EU-ACP partnership will focus on the objectives of poverty reduction, sustainable development and the gradual integration of the ACP countries into the world economy.

Agreements in the different ACP regions are likely to take different shapes and forms. Countries, obviously, have varied interests, and national development plans have different focuses on occasion. To return to the example of Malawi, EPAs offer it the immediate prospect of greater regional trading links with its neighbours and, as a result, larger markets in which its business people and private sector can sell their produce. Malawi could also benefit from an agreement, as part of the EPA negotiations, making it less difficult to comply with the EU’s non-tariff barriers, such as high standards; or, indeed, it could perhaps benefit from relaxed restrictions on where its producers are allowed to source inputs for products that they are already good at exporting to the EU—the so-called rules of origin. A country such as Jamaica, which is in the Caribbean group, has strong interest in access to the service markets of the European Union, for example. Such access has the potential to increase the incomes of people employed in those sectors in Jamaica.

If the full potential of EPAs for development and poverty reduction is to be realised, it will be essential to negotiate them with the full co-operation of the Governments of the ACP countries and their regional bodies. They should be able to decide what is or is not included in their EPA, through analysis of what they can do in their own contexts, appropriate policy dialogue and consultation and informed choices.

When we made clear our position on EPAs in March last year, our position paper did not reflect, by any stretch of the imagination, the views of all European member states or indeed the Commission. However, more than a year later, I believe that our position paper has had a significant impact. By taking a strong public stance, we have brought much needed-attention in the European Union to the negotiations. Just over a year
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ago, EPAs hardly figured on the radar of most EU member states. That is not true now. We have raised the profile and importance of the negotiations. During our presidency, EPAs were discussed regularly in several different European groups, including a new technical expert group dedicated to EPAs alone. Those discussions, both formal and informal, have led to results in the form of Council conclusions on EPAs, which were agreed on 10 April by all 25 EU member states.

The conclusions highlighted again the need for the Commission to take into account the choices of the ACP countries in negotiating the agreements. That includes choice about any aspect, such as whether investment, services or competition should be included. The conclusions reiterated the need for flexibility to be built into the agreements and for the ACP countries, crucially, to receive substantial improvements in access to EU markets. They suggested concrete ways to take forward discussions on development assistance for supporting the implementation of EPAs. They also gave a steer on how the critical review of EPAs that is due this year should be conducted to be most effective. The motivation of all member states to put development at the heart of EPAs has now been made clear to all stakeholders in the ACP countries and in the European Union and, crucially, the Commission.

We are not complacent and do not think that those conclusions alone will deal with people’s concerns about the way in which the negotiations are going. We are working on other areas to ensure that the EPA process moves in a positive direction. First, we are using all the opportunities that we have to maintain close contacts with the ACP grouping and to hear from it directly its views and concerns about the process. My right hon. Friend the Secretary of State has met chief ACP negotiators, and I too have discussed EPAs with ACP Ministers—most recently on a visit to the Caribbean.

Our overseas posts also stay in close contact with their ACP hosts to ensure that we understand in detail how the negotiations are seen in developing country capitals and that we can identify and act on any particular needs that they have. For example, we recognise the concern about the capacity of ACP countries to engage in the negotiations. Through the in-country offices of the Department for International Development, we are supporting significant numbers of technical assistance programmes for many of the ACP countries and regions. We are supporting independent experts in the Caribbean region in deciding which goods are of interest to them in the EPA negotiations. That will include preparing analysis and facilitating technical discussions between regional negotiators and each of the Governments in the region. That will help the region as a whole, because Ministers will be presented with options and be able to make informed decisions about the negotiating positions that they should take.

I should make it clear that in providing support across the ACP regions, we are acting very much at the request of the countries involved. We will continue to make sure that our assistance is co-ordinated with what other donors are doing to support the EPA process.

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Secondly, we continue to build the evidence base for the negotiations. We are supporting good, high-quality and impartial research that helps to inform the approach taken by the ACP countries and the European Union to the negotiations on key development issues, and that has made a difference to the policy debate on EPAs. One recent piece of research that we supported, for example, highlighted the potential difficulties faced by ACP countries in each region in agreeing which EU imports are sensitive to them. As a result of that research, ACP negotiators are now working on how to take each other’s sensitivities into account in a way that will not undermine their goals for greater regional integration.

Thirdly, we will continue to press our position with the Commission and other European Union member states, particularly those with forthcoming presidencies, to build support for our position on EPAs. Fourthly, we are working closely with ACP countries, EU member states and the Commission to focus on the key milestone for the negotiations this year—the review process. Until 10 April, we were worried that some wanted only a brief technical review of the negotiations, but the Council conclusions that I mentioned earlier directed the Commission to use the review as the basis for a wider discussion of the challenges posed by all the trade and development aspects of EPAs, and that is a key success. The review is a key opportunity for the ACP countries to voice their concerns and for the European Community and member states to recognise and act on them well before the finalisation of any agreements. Clearly, addressing those concerns will be paramount if the negotiations are to be successful.

I should outline our three particular concerns about the state of play in the discussions. As yet, there is no cross-EC agreement on what could be offered to the ACP countries on rules of origin. Similarly, there is as yet no agreement on offering duty-free and quota-free access to all EPA groups—something that we continue to argue should be offered immediately to all ACP groupings. Our third concern is that negotiations have proceeded particularly slowly in the four African blocks, although, frankly, they are not racing ahead in the Caribbean or Pacific groupings. It is obviously important that we get the process right, but we need to bear in mind the consequences of not reaching agreement on EPAs or, indeed, an alternative, given that the WTO waiver comes to an end at the beginning of 2008.

Another key issue will be establishing whether any of the ACP countries will decide not to join an EPA and to request an alternative trade regime. If any ACP country does seek an alternative, we will work to ensure that that alternative meets the criteria set out by the Cotonou agreement and that no worse market access should be provided for that country. That will mean ensuring that the level of EU tariffs and preferential rules of origin, in EPAs or any alternative, are the same as, or indeed better than, those currently offered to the ACP.

Finally, it is also critical that we ensure that there is a productive partnership after the agreements are signed; we cannot just walk away from the EPA process when negotiations are finally concluded. We will therefore work with the European Union—particularly the
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Commission—and ACP countries to design the monitoring mechanism for EPAs that both sides have called for to ensure that the process is effectively implemented.

That was just an overview of the work ahead on EPAs for the Government and, more broadly, the Commission and member states. I hope that it provides hon. Members with a sense of the depth of our commitment to ensuring that EPAs are effectively designed and are genuine tools for development. They will help a large group of developing countries with which the EU has had a long-standing relationship to reap the benefits of participation in the global economy. I shall of course attempt to answer any questions that hon. Members raise.

2.45 pm

Mark Simmonds (Boston and Skegness) (Con): Like the Minister, let me say how pleased I am to serve under you guidance yet again, Lady Winterton.

The first thing that needs to be highlighted about economic partnership agreements is the ambitious nature of the proposals that have been put together. They are immensely complex, and the aim is to redefine the trade regime between different regional groups of ACP countries around the world. Most ACP countries—there are 78 in total in Africa, the Caribbean and the Pacific—need significantly increased trade to improve their economic growth rates and the well-being of many of their citizens.

As the Minister mentioned, it was recognised that many ACP countries were unable to profit from the Lomé agreements, which were redefined under Cotonou four or five years ago. In 2002, the ACP countries were at the top of the pyramid of advantages offered by the EU to its development partners, but they were none the less at the bottom of the list when it came to exports to European markets. Indeed, the situation was getting worse, not better. In 2003, just 3 per cent. of the EU’s imports came from ACP countries, compared with 6.7 per cent. in 1976.

Before I go into the specific questions that I hope the Minister will be able to answer, it is important that I put on record the Conservative party’s position and beliefs as regards international trade mechanisms. We obviously believe, as I think the whole House does, that aid and debt relief are important and make significant contributions, but they are not sufficient in themselves totally to alleviate poverty across the world, as we would like. If the least developed nations are to see a step change in their fortunes, there must be major reform of world trade rules. My hon. Friends and I agree with the World Bank, which states:

It must also be said that international trade has lifted millions of people out of poverty, particularly in south-east Asia and China. Tragically, Africa has been left behind, and its share of world trade has fallen from 6 to 2 per cent. in the past decade, despite the significant aid and assistance that has flowed into the continent.

The economic benefits of greater openness and freer trade are immense. Trade leads to faster growth rates,
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cheaper imports, new technologies and stronger political ties, and, as the Minister rightly said, it enables Governments in developing nations to generate revenue, which they can plough back into their public services, improving health and education for the very people whom they represent.

It must also be said that history is littered with protectionist follies. For every £1 that is given to developing nations, they lose £2 through protectionism. Development is hindered by protectionism—matching one protectionist bloc with another is not the solution. Currently, we have nothing like free trade in the world. When protectionism is removed, those industries that have been protected fail to compete internationally, and there are many examples from the past 40 or 50 years, including businesses in Latin America and the heavy steel industry in India. Countries that pursued a freer trade agenda grew faster than those that pursued protectionist agendas

Conservative Members understand that there needs to be a transition period, because total free trade cannot be established overnight. It must also be said that tariffs can be beneficial for developing nations, assisting the development of industry and generating revenue. The World Bank has estimated that offering the EU duty-free access would incur losses to sub-Saharan economies of 1 per cent. of their GDP and up to 10 per cent. of Government revenue, which would clearly be disastrous and not help sub-Saharan Governments to stand on their own two feet.

The Conservative party welcomes the objectives of EPAs. They are defined as the sustainable development of the ACP states—to which I shall return later in my remarks—their smooth and gradual integration in the world market, and the eradication of poverty. If all that can be achieved—as I said, there is tremendous ambition behind the proposals—EPAs will be of great benefit to least developed countries.

The World Bank believes that EPAs would encourage the

I hope that the Minister will say a little more about the arbitration of disputes and what discussions have taken place, between the EU and the regional blocs, and within those blocs. Clearly, different countries have different aspirations and priorities.

The United Nations Economic Commission for Africa has estimated that if EPAs were implemented as outlined in the Commission’s report, the gains to sub-Saharan Africa alone from regional integration could be as high as $1.2 billion. EPAs have attracted a great deal of criticism, particularly from non-governmental organisations and other organisations. Much of it is not justified, but several issues rightly raised by the NGO community and others who have an interest in this area require clarification.

It has been argued that EPAs have been criticised for not being development-focused enough, despite the fact that the negotiations include all but nine of the world’s LDCs. The European Commissioner for Development and Humanitarian Aid highlighted the importance of sustainable impact assessments alongside EPAs. Will the Minister explain the
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relationship between SIAs and EPAs, and whether the knowledge and evidence gained through SIAs is being used to forge and mould the EPA negotiations? Will he provide an update on their work and their effectiveness in ensuring that development remains at the heart of the negotiations? They should not just go down the road of liberalising as fast as possible. There needs to be a mechanism that ensures that the extra economic growth and wealth creation cascades down to the maximum number of people in the regions and the individual countries, thereby providing much needed poverty alleviation.

The other issue that was missing from the original EPA discussions concerned the mechanisms that are used to ensure monitoring of the negotiations. It would be helpful if the Minister said where the monitoring mechanisms have got to. It is also clear that the negotiations are significantly behind schedule. He rightly mentioned that in his opening remarks. It is alleged that there is no way that the target date of mid-2007—1 January 2008 at the latest—will be met. Will he say how far behind the negotiations are? What structures and thought processes have been put in place to speed them up? Of course, they must not be rushed through, and both they and the agreements that are reached must be right, particularly for the developing nations.

I shall now explore the subject of the ACP countries that do not specifically have negotiating capacity. Many of them are reliant on EU aid and funding for their negotiating teams, which may impact on their ability to negotiate objectively. There are also concerns about the ability of ACP countries simultaneously to participate with limited resources in negotiations for the Doha round, EPAs and the “Everything but Arms” agreements, which are still going on. As the Minister knows, in LDCs and ACP countries the same individual or small group of individuals who are responsible for international negotiations are often also responsible for internal trade. Many of them are much more focused on improving trade within their country—trying to get the infrastructure in place so that people can bring their produce to the markets—and, rightly, on inter-regional trade rather than necessarily on the global issues relating to the World Trade Organisation.

How will the EU ensure that ACP countries get a deal that benefits them? That does not necessarily occur, as was shown by the lack of take-up of the “Everything but Arms” agreements, where the Cotonou preferences were clearly better or easier to meet, and of greater significance and importance to the developing nations. That was primarily but not solely because of the rules of origin that were in place, which the Minister rightly mentioned. I was disappointed to hear him say that there were still disagreements within the European Union and that rules of origin preferences were not being resolved. Hopefully, the UK Government will continue to push for the UK view of the way that the rules of origin need to move.

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