My Lords, I know that we are under some time pressure, so I shall keep my remarks to the minimum.
Africa is a key UK interest and we are committed to working with European Union partners to find ways to bring peace, security and sustainable development to the continent of Africa. With that in mind, in October 1999 the EU concluded this trade, development and co-operation agreement with the Republic of South Africa. The agreement offers a number of benefits to South Africa and will serve to increase its co-operation and integration with the EU.
The first aspect of the TDCA relates to trading arrangements, and its key element is the establishment of a free trade area between the EU and South Africa. The UK believes that trade access and integration into world markets is vital for achieving sustainable development. The EU is already South Africa's main trading and investment partner, and the agreement will strengthen the relationship, giving South Africa better access to European Community markets and giving the EU better access to South Africa. The agreement covers about 90 per cent of current trade between the EU and South Africa.
The free trade area established under the agreement contains measures to protect South Africa, as well as advantages over other similar arrangements. The South African economy is being restructured, so the EU will open up its markets more quickly and extensively than will South Africa. The EU will liberalise around 95 per cent of imports from South Africa in the course of 10 years, while South Africa is expected to liberalise around 86 per cent in the course of 12 years. The TDCA will be fully compatible with WTO rules.
Certain products and sectors have been excluded because of their sensitive nature to either side. On the EU side, those are mainly agricultural products, while South Africa was concerned about the export of European industrial items. Those products account for a low percentage of trade between the two, and some sectors have been liberalised to access EU markets to some extent. Nevertheless, the UK realises the importance to the developing world of access to EU markets for agricultural products; that is especially true of Africa. We are committed to working together for further reform of the CAP and towards the opening up of EU markets.
The EU provides most of its development funding to South Africa through a bilateral programme: the European programme for reconstruction and development. The first multi-annual allocation covered the period between 1995 and 1999, and had an annual budget of around 125 million euros. It was targeted at improving the living conditions of the poorest sectors of the South African population, and at combating poverty.
For all those reasons, the UK supports fully the trade, development and co-operation agreement between the EU and the Republic of South Africa. We believe that it will play a vital role in South Africa's continued development and its further integration into the world economy. I commend the order to the House.
My Lords, I am grateful to the noble Baroness, Lady Crawley, for setting out the purposes of this order. We welcome the broad principles behind it and the prospect of the expansion of freer trade to the benefit of South Africa and its neighbours. However, there is a need for caution in examining the possible knock-on effects of the trade, development and co-operation agreement.
There could be major beneficial implications for South Africa, but we must remember that the pattern of southern Africa is one in which South Africa is only one part. It is part of the South African Customs Union, which consists of a number of other counties that I shall mention in a moment, and the larger Southern African Development Community, which has aspirations to be a free trade area in due course. The first important question is about the benefit that better access to European products, which may only be manufactured goods but the provisions could extend to processed foods as well, will have for smaller countries that are part of the South African Customs Union—notably, Botswana, Lesotho, Namibia and Swaziland. What happens if they find that their markets into South Africa are removed or undermined by European goods which may be subsidised in some areas if they are related to agriculture? There could be dangers there, together with damage to poor countries and infant industries, which will need to be safeguarded very carefully. I believe that the order made mention of infant industries, albeit those in South Africa.
Therefore, of course we are in favour of freer trade because we on these Benches believe strongly that free trade, along with good governance, the rule of law and property rights are the keys to development and social prosperity—much more so, frankly, than the large transfers of government-to-government aid, which generally have done so badly for South Africa. Perhaps it is already having an encouraging effect. Indeed, the Minister in another place brought out a statistic which I found so heartening that I can hardly believe it to be true—that is, since this agreement was provisionally applied a couple of years ago, exports to the European Union from South Africa have risen by 50 per cent.
That is the background. In a moment, I want to return to the concern about other countries which may be hurt and not helped by the order. I have a few questions for the Minister. First, why are we debating the matter only now when the agreement was signed on 11th October 1999? I am sure that there is a perfectly good explanation for that.
Secondly, how will the order affect all the new members of the European Union which are about to join or will join next May? How will their various sectors, which could be in direct competition with exports from South Africa, be impacted upon?
Thirdly, as the noble Baroness explained, although a large number of products are included, some agricultural products are still excluded. It appears from the literature that the burden of adjustment is slightly heavier on the South African side. Forty per cent of all traded goods in South Africa appear to be affected, but in the European Union that figure is only 25 per cent. Therefore, it will not be roses all the way for South Africa. Some heavy adjustment in South Africa will have to take place, quite aside from adjustments in the neighbouring part of the South African Customs Union.
Then there is the question of how the dark poison of Zimbabwe and the impact that it is already having on the whole region will be affected by this aspiration for freer trade. Only last week, a senior Commissioner of the European Union travelled to the region and pointed out that the Zimbabwe effect was poisoning the whole development impetus of the region and undermining all the hopes that we have invested in the new economic plan in NePAD. How will that help? Will it help at all, or will it be undermined by the continuing deterioration of the Zimbabwean situation as it plunges towards total catastrophe and starvation?
I return to where I started—that is, to the immediate impact on the other members of the South African Customs Union. Botswana, Lesotho, Namibia and Swaziland are fine countries. They are doing their best to move forward. They export substantially to South Africa and now have a new competitive rival. Competition is good, provided it is handled in a socially understanding and sympathetic way. As a result of trying to do good on this front, we must not find that we damage and weaken many people who are already in an extremely disadvantaged state. Those are the questions that I wanted to raise in relation to the order.
My Lords, this is unfamiliar territory for me, but this is a non-controversial measure, which we on these Benches welcome. We very much welcome the agreement on trade development and co-operation between South Africa and the European Union. As we heard, the European Union is South Africa's main trading and investment partner. Therefore, it is wholly appropriate that the agreement will greatly benefit both South Africa and the EU with better access to markets.
I have only one question for the Minister. Is she able to tell us what infant industries the Government believe should be exempt from incorporation into the treaty? Because we are short of time, I shall be happy if she gives her response in writing.
My Lords, I thank noble Lords for the extremely interesting but short debate on this significant agreement. The noble Lord, Lord Howell of Guildford, asked a number of important questions. First, he talked about the importance of the agreement—or perhaps, he thought, the threat within the agreement—for the South African Customs Union countries. South Africa's neighbours within the customs union should benefit from the cheaper imports which will enter South Africa as a result of the agreement. Furthermore, the rules of origin, which, as he knows, are flexible within the agreement, should allow South Africa to export customs union goods as South African. Therefore, if they are made in Namibia or Swaziland, they can still be exported into the EU as South African goods because the rules of origin have been made flexible specifically for this agreement.
He also asked why we are ratifying the agreement only now. Again, that question is quite proper. The UK hopes shortly to join the six other member states that have ratified the agreement. The agreement between South Africa and the EC was reached in late 1999, as the noble Lord knows, and has been in provisional application since 2000. In order for it to come into full force, all member states, as well as South Africa, will have to ratify. The delay has been caused, in part, because of complications over the position of our Crown dependencies in relation to the agreement. We hope that other member states will ratify fully as soon as possible.
The noble Lord also asked about candidate countries. Those countries will become party to the agreement when the treaty of accession comes into force. If the noble Lord wishes me to respond further, I shall be happy to do so in writing.
Our relationship with South Africa covers far more than Zimbabwe. It would be wrong to allow key bilateral issues in trading relations between the European Union and South Africa to be affected adversely by what has happened with Zimbabwe. As the noble Lord knows, the EU last agreed to extend sanctions in September this year. Seventy-nine people are now on the travel-ban list and half a million assets belonging to named people in Zimbabwe have been frozen in 28 accounts in the UK. Therefore, we are doing everything that we can to support Zimbabweans and to isolate the regime. But we do not wish the difficult situation with regard to our relations with Zimbabwe to influence in any negative way our agreement over this TDCA.
I thank the noble Baroness, Lady Harris, for her remarks and I shall indeed write to her on the matter of the infant industries.