[Ann Winterton in the Chair] — Economic Partnership Agreements

– in Westminster Hall at 12:00 am on 8th June 2006.

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[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.]

Photo of Gareth Thomas Gareth Thomas The Parliamentary Under-Secretary of State for International Development, Party Chair, Co-operative Party 2:30 pm, 8th June 2006

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:

"It is no longer a matter of public debate anywhere in the world that trade is indeed the most powerful engine of growth, particularly for poor countries."

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 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 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.

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 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.

Photo of Mark Simmonds Mark Simmonds Shadow Minister (International Development) 2:45 pm, 8th June 2006

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:

"Current trade restrictions are the biggest impediment to economic advancement and poverty reduction in the developing world".

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, 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

"liberalisation of services, provide for common product standards, and set up the negotiation of investor protections, based on state-to-state ad hoc arbitration of disputes."

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 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.

Photo of Gareth Thomas Gareth Thomas The Parliamentary Under-Secretary of State for International Development, Party Chair, Co-operative Party

Let me be clear about why we believe that there has not yet been progress on the rules of origin. It has been because there is an impact assessment being made of the rules of origin in the review process which the European Commission has rightly put in place. Frankly, that has taken longer than we would have liked. We believe that we need to move forward with other member states and with all the different bits of the Commission to reach agreement on the negotiating position for the Commission on the issue. I hope that that additional clarity is helpful.

Photo of Mark Simmonds Mark Simmonds Shadow Minister (International Development)

As always, the Minister is helpful and constructive in his intervention. He will be aware of the urgent need for us to find a resolution to the issue. It is hindering both development from within the developing nations and inward investment by the developed nations that wish to invest in those countries that they deem suitable.

I was interested in the Minister's choice of words when he mentioned the Doha development round. There seems little doubt that it is faltering—to put it politely. Many in the trade world believe that there is little chance of reaching a comprehensive agreement, even within the new time scale, which keeps being pushed back. I think that our deadline is now either the beginning or end of July. Indeed, some countries have begun negotiating bilateral trade agreements outside the mechanism of the Doha trade round. The Asian countries are doing that, as is the United States. The Minister and his colleagues in the Department of Trade and Industry seem to be confident that they will reach a solution, so why is the EU Trade Commissioner announcing that he has ambitions to start negotiations for agreements with the countries in the Association of South East Asian Nations, which I understand is conditional on Burma's rightly being excluded?

What does the Minister think are the chances of success for the Doha development round, given the EU's reluctance to lower its steep barriers against trade in farm products? I know that the Minister does not agree with those; nor do the UK Government. There is still an enormous amount of resistance from other European countries on that matter.

One of the drivers for reform of the Lomé and Cotonou conventions was to ensure that EU-ACP trade agreements were compatible with the WTO. However, as I said, it looks like the Doha round will fail in some areas, if not in totality. Is it possible that the EU-ACP agreement may exceed, in terms of liberalisation, what was agreed by the WTO? That would cause problems elsewhere in multilateral trade agreements.

Two sets of negotiations are taking place simultaneously, despite the fact that it has been generally agreed that it would be desirable to complete the Doha round before beginning the EPA negotiations and discussions. If the WTO round fails, would it be possible to build on where we have got to on Doha—even if there has not been a total agreement—rather than try to pre-empt and second-guess the conclusions? Does the Minister think that there is a potential conflict between the Doha WTO round and the EPA negotiations, and to which one do the Government give priority?

The Minister will hopefully be aware that there has been concern that the Cancun WTO negotiations broke down because of the so-called Singapore issues: competition policy; transparency in Government procedure; trade and investment; and trade facilitation. The EU has rightly been criticised for trying to include those issues in EPAs. Will the Minister assure us that they will not be included in any form and that they will be removed from the EPA negotiations?

Photo of Gareth Thomas Gareth Thomas The Parliamentary Under-Secretary of State for International Development, Party Chair, Co-operative Party

We have made clear our view that unless the six negotiating blocs want the Singapore issues to be part of the negotiations, they should not be part of them. It is clear that all the negotiating blocs are keen to discuss trade facilitation, which is one of the Singapore issues, and that at least one bloc—the Caribbean—wants a discussion about investment. It must be for the negotiating teams of the six blocs to decide whether they want to discuss the so-called Singapore issues. If they do not, we are clear that they should not be forced to have those discussions. That is the position that, increasingly, other member states are taking. However, when negotiating teams are up for those discussions—and given the benefits that agreement on those issues could bring to their economies—they should be supported in their negotiations. It is for the negotiating teams to make that call.

Photo of Mark Simmonds Mark Simmonds Shadow Minister (International Development)

I am grateful for the Minister's clarification, but it is interesting that not all EU countries in the new structure that must be brought on board are in agreement with what the Minister said about the Government's position. We agree with the Government's position and hope that the Minister and his colleagues will continue to try to persuade those in the EU who require persuading to follow the Government's position rather than their own agendas.

The Trade Commissioner said that there will be a new monitoring mechanism to oversee capacity-building, technical expertise and logistics projects that are part of the EPAs. Again, it would be helpful if the Minister could say when those monitoring mechanisms will be established, what sort of bodies will have an input, and whether they will be independent. Hopefully, the monitoring bodies will have significant input from the developing nations. How will the Government ensure that they identify areas where eradication of poverty has been hindered rather than helped by the issues that I mentioned earlier and about which the Trade Commissioner talked?

The Trade Commissioner also said that EPAs will include significant development aid and technical assistance both from the EU budget and individual member states. It would be helpful to know whether that is the case and, if so, what funds DFID intends to put into the EPA system for the development aid proposals. Will it be an increasing programme over a number of years—the thought process may still be going on—and what will be the time scale? Will it begin in 2008 and will it happen prior to the agreements being reached, if they are reached?

I want to explore one or two other areas and the first is asymmetric liberalisation. The EU has stated that the opening of ACP markets to EU goods and services will be on an asymmetric basis, which means that ACP countries will be able to open their markets to the EU at a slower rate than the EU will open their markets to ACP countries. How will that rate be decided and on what time scale will the markets be opened up? Does the Minister have a view on how that should be done? Will it be industry by industry, region by region or country by country?

Every country will have different industries that they want to benefit from the proposal. It will be an enormously complex challenge to reach an agreement between countries in a region and for them to agree on their relationship with the EU. Clearly, that must be evidence-based, but the original time scale is challenging. Five years from 2002 is the end of 2007, although I understand that the Trade Commissioner has said, ambitiously, that he wants agreement prior to that date, so that means the summer of 2007. It will be extremely challenging to get that agreement by then.

We recognise that "Everything but Arms" is a non-reciprocal agreement, unlike EPAs, but the two agreements affect many of the same countries and the EBA agreements cut across the EPA regions, offering countries within EPA regions different deals. Where have the thought processes got to in unravelling that complexity? The best explanation that I heard was the Trade Commissioner's describing the complexities as a Russian doll—when one layer is removed, another appears underneath. Does the Minister agree that EPAs and EBA agreements could cause conflict and confusion, or is there a strategy to try to unravel those two areas of trade negotiation and agreement?

The ACP countries must create the conditions in which a market economy can develop and thrive: the rule of law, stable Governments and the establishment of private property rights. In our view, EPAs hold great promise and could be extremely beneficial to the ACP countries involved. However, the success of EPAs depends on negotiating a fair deal that does not disadvantage developing nations and creates a system in which developing ACP nations have confidence. It is necessary to wrap up within the EPAs targeted aid aimed at building trade capacity and infrastructure, such as reliable energy sources, well maintained transport networks and increasing technical expertise. All are essential if the trade agreements are to work.

The Conservatives support the objectives of EPAs, but they must be used to help ACP countries access world markets while maintaining their individual developmental and economic priorities, especially facilitating and enabling inter-regional trade, which is one of the main areas that has not been focused on sufficiently to date.

Poverty around the world is at unacceptable levels. Nearly half the world's population live on less than a dollar a day, 1 billion people do not have access to clean water, 100 million children do not go to school, and 40 million people live with HIV/AIDS. All of us in the House have a moral duty to take action. Trade is the best means of alleviating poverty in a sustainable way in the developing world. If the Government lobby hard to ensure that the developing world gets the best deal from the proposed agreements, they will have our support.

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Foreign and Commonwealth Affairs) 3:07 pm, 8th June 2006

Thank you for calling me, Lady Winterton. It is great pleasure to participate in this important debate.

I start by saying on behalf of the Liberal Democrats that there is a lot of consensus on this subject, and the Government, and perhaps the Opposition parties, deserve some credit for approaching it in that frame of mind. In many ways, Britain has taken a lead among developed countries in promoting the agenda. That is to our collective credit as a group of politicians here in Parliament.

The Liberal Democrats instinctively support free trade. We have done so for many decades and generations and do so today. It is the best means of lifting people out of poverty because it increases prosperity through increasing production.

Clarks shoe company, near my constituency in Somerset, has closed down its production facility, although it still has people in administrative positions there. All its production facilities have been exported to other parts of the world and, sadly in many ways, no Clarks shoes are produced here in Britain. Someone who supports more being done to alleviate poverty in the developing world said to me recently that that is terrible—that it is exploitation. I replied that I was not so sure, because it cannot be bad for Somerset that we have lost the jobs and bad for the countries where factories are opening. It must be good for someone, and I think that it is probably good for the countries to which the jobs have gone, because it has given people new opportunities and prospects for prosperity in relative terms to what they enjoyed before.

Globalisation is often given a bad press and many features of it cause discomfort, but the story is not uniformly bleak—far from it. Globalisation and free trade in goods and services has provided opportunities for people, most notably in big and expanding developing economies such as China and India, to gain access to income and prospects that are far better than those that their parents and grandparents enjoyed. My party starts from the assumption that free trade is a beneficial consequence of political activity, and we seek to promote it as far as that is possible.

In that regard, I have much sympathy with the position put forward jointly by the Department for International Development and the Department for Trade and Industry in their submission to the International Development Committee's inquiry. The Government said:

"The Government's view is that in the longer-term, prospects for economic growth and development in ACP countries will be boosted if they open their own markets. Poor consumers in ACP countries stand to benefit from cheaper imports, from other ACP countries as well as from the EU, as do ACP businesses. These gains will not accrue if ACP states fail to liberalise their economies."

That is a clear-cut position, reflecting a reasonable consensus in this House. The Departments continue:

"However, neither will they materialise if liberalisation is implemented without careful consideration of the poverty and social impact of trade reforms. Social safety nets and transitional assistance will be essential to cushion the most vulnerable and to assist ACP producers exploit new trading opportunities."

The reason I mentioned the second part of that submission is that it brings us to the nub of the debate. We accept that free trade is beneficial and that it is a route to greater prosperity for people in the poorer parts of the world as well as those in more advanced countries. However, there are many caveats and qualifications to that, and I shall run through some of them.

The British Government and the European Union have a variety of objectives that can conflict, or at least do not always align. The EU, rightly, has a goal of trying to increase the prosperity and well-being of people who live in the European Union. The EU's share of world prosperity, projecting decades ahead, is to fall dramatically. Within a few decades, the EU is likely to enjoy only half of its current percentage of the world's overall wealth. That must be important, and even of concern, to Governments within the EU and to the EU collectively.

Part of the European Union's business must be to ensure that we improve living standards in Europe. That is an EU objective. Another EU objective is, rightly, to try to foster and assist poverty alleviation in parts of the world where, relative to us, people live in desperate straits, and to be an outward-looking rather than an inward-looking organisation. Those two objectives do not always align.

It is also important for the EU to recognise that when it interacts and deals with other countries throughout the world, that is not a partnership of equals, because those countries are far less likely to be able to bring weight to bear on proceedings than member states, especially when we work collectively. In support of that, I shall quote a telling passage from the Committee's report:

"There appears to be an assumption within the UK Government and the European Commission that the ACP can sign up to, or reject, whatever they wish. This is not the case. The ACP states remain recipients of EU aid, some of which funds ACP negotiating capacity. The ACP nevertheless lacks the negotiating capacity of the EU and is stretched to negotiate simultaneously in the WTO and other regional negotiations. The ACP is also economically weak compared to the EU: it has very little to offer the EU and potentially much to gain from the negotiations. The collective ACP stake in the partnership negotiations is therefore significant. The negotiating process should be undertaken with this disparity in power in mind."

We are entering a process to find a good deal and a mutually beneficial deal, but we are not doing so as though we were negotiating with a partner that has equal presence in that debate. A balance needs to be struck, and it requires skill and political sensitivity.

I should like the Minister to touch on a few other areas when he winds up the debate. The transitional period was what the Conservative spokesman, Mark Simmonds, called the time between the current arrangements and absolute free trade. Most people, even the most enthusiastic exponents of free trade, would accept that if one opens the markets in one go, one potentially swamps the countries that, as part of one's policy, one seeks to assist. The consequences might be the opposite of what one intended when one embarked on that policy.

Will the Minister provide us with an accurate timetable for the transition? As I understand it, some people have talked about 10 years, and others 20 years. We might not be able to be definitive, but it would be interesting to receive an indication of how long the process will run. Some people might be concerned that it will never end, and that we will end up with a halfway-house arrangement. In many ways that might be beneficial for a long period, but I should be interested to know the end point that the Minister seeks to reach, and how long he anticipates it will take to reach it. I should also be interested to know what progress the Government have made on the issue in discussions with other EU member states, and whether there is any consensus in the EU about how long the transitional arrangements will ideally exist.

On a separate point, it is also important that we in the developing world do not think of opening up free markets as a solution in itself. When I talk to people with considerable expertise in the field, I am always struck that countries with low GDP have difficulty developing their economy's infrastructure, a proper banking system and proper accountancy methods. They all involve professions that countries such as Britain occasionally take for granted—in fact, we occasionally scorn those who undertake such jobs, considering them to be mundane. However, they are important for any economy to function effectively, and without those procedures, legal frameworks, and banking systems, and without people having property rights, it is difficult for them to borrow money and get companies up and running.

Too often, when we discuss developing countries, people's first idea is farming and agriculture. In many countries farming is important, and for anybody with a low income, it is the most important industry of all; however, no country will prosper in the long term if it thinks of its economy in those terms. We must also try to develop a range of economic sectors—wealth-generating parts of their economy that require more than subsistence farming, but instead require people to invest and borrow money, employ staff, pay their taxes and administer themselves effectively, so that they are in a position to export and produce goods and services that we in more prosperous countries throughout the world wish to buy. Often, the benefits that the EU, the United States and elsewhere can bring to bear take the form of expertise rather than the other skills that we might seek to export instead.

I do not know whether the Minister would like to touch on this final point, but about a year ago there was much debate about the role of good governance in the increasing prosperity of countries with low GDP. In the past few weeks the inflation rate in Zimbabwe, to pick the most obvious example, has reached 1,000 per cent., and unemployment, by some estimates, is as much as 70 per cent. By any criteria, that is an economy that is in total and utter disarray.

I have a personal interest, because I lived in Zimbabwe for a year and a half when I was a child of 10 and 11, so I have an emotional attachment to the county. In every way, it ought to be a successful country. The arguments have been rehearsed in this Chamber many times, and I shall not rehearse them again, but my point is that there can be as much free trade, as much export of expertise and skills in the areas that I mentioned, such as banking and accountancy, and as much direct financial aid as possible, but if it is squandered, the likelihood is that people in that country will not benefit. In Zimbabwe, where, according to all indicators, people are living in wretched circumstances and abject poverty directly as a result of the actions of their own Government, we have a moral duty to intervene. In the case of Zimbabwe, I appreciate that that is easier said than done; it is difficult to bring pressure to bear on Zimbabwe in a meaningful way, as there are all kind of practical obstacles.

None the less, there is a wider point about encouraging good governance, not only in countries that are resistant, such as Zimbabwe, but in the many other countries that would actually like assistance with their infrastructure, administration and government. We in this country may be able to assist in making sure that the money that they raise through improving trade—or through aid, for that matter—is spent more effectively and is more likely to benefit the recipient. That would be a valuable aspect of Government policy.

I conclude with the thought that we in this country have a duty to provide aid for countries that need our assistance; everyone accepts that. The Government are to be congratulated on establishing a Department devoted purely to that task. The issue has been afforded much more attention than was the case five or 10 years ago. I have been a Member of Parliament only for just over a year, and I am struck by the amount of correspondence that I receive on the subject. I have also met a lot of delegations, made up of people who take a keen interest in this area of government, who have come to Parliament all the way from my constituency, 150 or so miles away. The Government deserve to be congratulated on having played a part in raising those levels of consciousness and stimulating them further, for being imaginative in their support for aid policy, and for trying to progress the debate on trade and growth.

I wish the Minister and the Government well in their dealings with the European Union. I hope that they will continue to take what it is reasonable to describe as a leadership role, but will also take some of the points raised in this debate, and use them to be still more effective in future.

Photo of Mark Lazarowicz Mark Lazarowicz Labour, Edinburgh North and Leith 3:23 pm, 8th June 2006

This is indeed an important debate on an important subject, particularly for developing countries. It is fair to say that if a network of economic partnership agreements is eventually established, it will be probably be more significant for relations between the EU and ACP countries than the original Lomé convention, which was drawn up some decades ago.

I agree with everything that has been said about the potential gain for developing countries, including the poorest, from an expansion of trade. There is no doubt that developing countries stand to make a particular gain from an expansion of trade, and such expansion will be important if we are to have any hope of reaching the millennium development goals. Free trade can be an immense opportunity for developing countries, but as has been mentioned, free trade also has to be fair trade, and the relationship must have beneficial, not negative, consequences for developing countries.

In some of the time available this afternoon, I want to put on record issues that, as I am sure that the Minister and the various Front-Bench spokesmen will be aware, have been raised by developing countries and non-governmental organisations concerned with these matters. I hope to get a response in those areas, and some expansion as to Government policy in them.

Let us not forget what is being asking for. Ultimately, we are asking producers in ACP countries to put themselves in direct competition with European competitors, who in many cases will have had decades of subsidies, support and protections from their Governments, in which they have been able to build up strong, competitive industries. We want ACP countries to be able to compete on fair terms with those producers, and it is important that the transition to that new trading relationship benefits the ACP countries. We are all aware of the danger that, if we simply open up markets in developing countries, products from Europe will flood those markets, and even existing industries and producers in ACP countries will lose out; it will be a question not of benefit to those developing countries, but of actually setting the relationship back.

The issues about which many developing countries and NGOs are concerned have been made well known to Members of the House, so I shall not set them out in great detail, but will describe them in headline terms. There is concern in some quarters that even the loss of tariff income could be important for some ACP countries, because it would have an effect on their Governments' expenditure on social provision, particularly health and education. There is a concern that once ACP countries have entered into economic partnership agreements, their ability to change their own trade and development strategies in future to take account of changing circumstances will be limited.

Above all, I have already referred to the concern that ACP countries could find themselves unable to protect their domestic producers and infant industries from EU imports—not just imports without any EU subsidy or assistance, but imports that are actually subsidised in various ways, whether indirectly or directly, by EU countries. The consequences for infant industries and domestic producers in ACP countries could be severe.

Concerns have been expressed about what can be described as the premature lowering of import tariffs in Ghana and Senegal on products such as tomato paste, chicken parts and meat. It is suggested that there was a subsequent flood of cheap European products undercutting locally produced goods, causing factories that added value to local produce to close, and causing hardship in poor rural communities where livelihoods depended on the sale of surplus food.

Concern has already been raised about the Singapore issues. I certainly welcome the Government's clear statement that they will not take an approach that insists on the Singapore issues as part of negotiations, but I am sure that the Minister will appreciate that it is one thing to make that statement at European Council meetings, and another for it to be immediately put into effect. When a series of detailed negotiations is taking place, the Singapore issues can be pressed much more strongly than the Government would wish, through the back door.

Concerns about the capacity and ability of some trade negotiators, including regional secretariats and ACP trade negotiators, to engage in equal negotiations with the EU have already been mentioned. I know that the Government and the EU have given some support to try to level the playing field for those negotiations, but more needs to be done. It would be interesting to hear today what steps the Minister thinks can be taken to secure a level playing field in the negotiations not only for the EPAs but for the World Trade Organisation, and to hear how some levelling of the playing field can be achieved by providing resources to the negotiators from the ACP fund.

It has already been suggested from across the Floor that one of the issues is who leads for the EU in negotiations. The suggestion has certainly been made by some in the development lobby that the development wing in the EU institutions—to put it in those terms—does not have the same input as those concerned with trade policy. Those are important concerns, which mean a substantial review is required of the approach taken to the EPA to date. That is why I welcome what the Minister has said regarding the review of the EPA negotiation process and it would be interesting to hear—either today or later—about the terms that the Government think the review must comprehend to ensure that it is not just a "light" review, as the European Commission originally described it. We want to know a bit more about how extensive that review process can be.

It is a difficulty in all negotiations about the EU's relationships with ACP countries and the developing world more generally that there is a tendency for the Government or others in the EU to take a position about the direction in which they want to go, only for it to change somewhat when it comes to detailed negotiations. We then have to wait for an intervention by the Secretary of State or someone else to get the negotiations back on course. I am interested to hear how the Minister envisages the development of the review process. Will he reassure us that as far as possible, the Government, along with our European partners, will keep a grip on the review process?

I shall make my final point briefly because some of my original points have already been made. I would like to know how we can meet the objective of the Cotonou process to ensure that the development of the new relationship between the EU and the ACP countries involves not just Governments and institutions, but civil society and parliamentarians at all levels—particularly those in the developing countries, but those in the EU as well. That is an area where some progress still has to be made.

Britain is perhaps an exception as far as the involvement of civil society in debates on this issue are concerned. Like Mr. Browne and most other hon. Members, I know that the public's interest in these issues is deep, wide ranging and considerable, and it forms one of the largest single elements of the correspondence and contact I have with constituents. That is not the case in all EU countries, and an important task must therefore be undertaken to ensure that these discussions and negotiations involve wider civil society.

I shall make one further point, if I may, given that there is a bit of time available, about the process that we take part in during such debates, and the involvement of wider civil society in the terms to which I referred. I am not sure at whom my comments should be directed—the Government or even the Chairmen's Panel—but I note that our position in discussing this Select Committee report is not untypical. The report began in the Select Committee in November 2004 and reached the end of the Committee process in March 2005. The Government responded quickly in June 2005, but for all sorts of reasons, we have finally got round to debating it in the House in June 2006.

As it happens, that may have caused a problem—not a substantial one, because, fortuitously, there is already a debate on the issues. I have raised concerns elsewhere about the way in which we ought properly to discuss such matters. I will not press the point further, but if we are talking about involving parliamentarians in the wider process, as well as Government, it may well be salutary for us, as parliamentarians, to consider that.

Photo of Gareth Thomas Gareth Thomas The Parliamentary Under-Secretary of State for International Development, Party Chair, Co-operative Party 3:34 pm, 8th June 2006

With the leave of the House, I shall try to answer some of the questions and points raised during the debate. I hope both Opposition spokesmen will forgive me if I start with the contribution of my hon. Friend Mark Lazarowicz, because he articulated a number of the underlying fears of many of our constituents—particularly in the NGO community—about how EPAs might turn out in practice. I hope to mention one or two things that will address the perhaps understandable scepticism about the direction of travel of EPA negotiations.

One of the reasons why the Government sought this debate—I am grateful to Mr. Speaker for allowing it to take place—is to allow the House to understand and discuss the way in which negotiations have developed since our position paper was published in March last year. Given that the Doha round of negotiations has understandably taken considerable precedence in media, NGO and Government activity, we wanted to use the debate to set out the considerable amount of work that has been going on, often behind the scenes, to ensure that the EPA negotiations genuinely deliver the development outcome that we think they can.

I shall give some additional reassurance on Singapore issues. I have made clear our position up front. We sought to persuade the vast majority of EU member states and the Commission that forcing the discussion of Singapore issues would not be possible, and would not be desirable in any case. I believe that we have been successful in that. Our officials who tracked the negotiations across Government—whether in the Department for International Development, the Foreign and Commonwealth Office or the Department of Trade and Industry—and the Ministers with responsibilities for the negotiations in those Departments, are monitoring whether there has been any attempt to force discussion of Singapore issues by a back-door mechanism. If there were, we would oppose it. Our position, which I believe has prevailed, is that it is genuinely for the negotiating teams of the six blocs to decide which, if any, of the Singapore issues they want to be discussed. As I say, trade facilitation is being discussed in all groups at their request, and the Caribbean and the Pacific groups want to discuss investment, too.

My hon. Friend the Member for Edinburgh, North and Leith is right to say that there was a genuine concern that some wanted just a light-touch review of how negotiations have gone, as I outlined earlier. We made it clear that we wanted a much fuller review of the negotiations, and the EU Council conclusions from 10 April have made it clear that it wants a much fuller review. Our position led to that genuine success and I welcome the support that we have had throughout all member states.

Regarding how the review might progress, it is for ACP regional blocs, member states and the Commission to feed in their assessments of it. One of the things we discussed with at least one regional negotiating bloc country, which might help in the review process, is the carrying out of independent work in each of the different regional areas—if the negotiating blocs want it—to feed into the review so that no one can say that it is simply a further negotiating position by the regional bloc or the EU. It will be genuinely independent. If the regional negotiating teams want that, we are willing to consider supporting such a process.

I hope that that provides further reassurance about the seriousness of our intent in relation to the importance of the review. It is a cross-Government position, so my right hon. Friends the Minister for Trade and the Secretary of State for Trade and Industry, as well as Ministers in the Foreign and Commonwealth Office, are also engaged in watching how the negotiations proceed.

I come to the usual battery of questions from Mark Simmonds. His first concerned how—and, indeed, whether—arbitration of disputes would be needed. Let me be clear that, to date, there are no such apparently intractable differences of opinion between the EU and the ACP. If there were, we would think that the best way to resolve them would be through independent negotiation, perhaps facilitated by an independent arbitrator. I bring the hon. Gentleman back to the review that will take place this year, which will again provide an opportunity to see how matters are moving forward. I hope to continue to build consensus around the direction so that there will be no need to resolve such disputes.

The hon. Gentleman also asked about the relationship between sustainable impact assessments and economic partnership agreements. He may be aware that the need for sustainable impact assessments is specifically mentioned in the Council conclusions to which I have referred. Some such assessments have been conducted. Those that were done for the ACP are confidential to the ACP grouping, and neither we nor the Commission have seen their results. They are clearly designed to inform the negotiating position of the ACP grouping. Some have been done for member states and the Commission, which we have seen but which, frankly, were not terribly informative. We are trying to work with the Commission to come up with a more effective methodology for further such assessments for precisely the reasons outlined by the hon. Gentleman, so that we can properly understand what certain negotiating positions and agreements might mean.

The hon. Gentleman also asked how we will ensure that the benefits of the extra trade that EPAs might deliver will be spread down to the very poorest. Obviously, in the context of the specific EPA negotiations, it is difficult to put in particular benchmarks. That is where the wider context of development discussions with each developing country becomes important and where work on national development plans and poverty reduction strategies becomes crucial. That wider development dialogue seeks, in effect, to extend the benefits of growth to the very poorest in developing countries. That is where we can make sure that the benefits of trade and economic growth are spread to those who most need them.

The hon. Gentleman also asked about monitoring mechanisms and whether they will be independent. A key outcome that we secured in the Council conclusions was the recognition that further work needs to be done on the design of the monitoring mechanism, with not only the European Commission but ACP Governments and stakeholders, for that very purpose. We expect that to be ready by the time that any EPA comes to be negotiated. Obviously, I will continue to keep hon. Members up to date on the ongoing discussions on EPAs.

The hon. Gentleman asked how negotiations might be speeded up, for want of a better phrase, and how they linked to the Doha development round. He is right to say that the Doha round negotiations are an important backdrop to the EPA negotiations and will have a considerable impact on them, not least in the context of the discussions on special and differential treatment, which are very important in relation to whether particular problems will develop from the food security issues that have been the concern of some in the NGO community and some in-country capitals. The current discussions on that in the Doha round will be particularly important in the EPAs dimension.

The hon. Gentleman's broad point was about how we can speed up the process. That is one reason why it is crucial to have an extensive and full review of EPAs this year and not just a light-touch review. We need to consider what further progress is needed and what member states and the Commission can do to support the negotiations more effectively, so that, if possible, we get them to a stage at which they are ready for implementation by the time the WTO waiver comes to an end.

The hon. Gentleman is rightly worried about the overload on the negotiators in each of the various developing countries. Mr. Browne also raised that issue, and they are right to raise that concern. The pressure on a number of key Ministers and key officials in developing countries is considerable, not least because of their importance to the Doha round, EPAs, internal trade discussions, and bilateral trade agreements that might be being negotiated within each region or with key developed countries. We have sought to ease that capacity dimension through our trade-related capacity building support. We have given £1.6 million to support the Caribbean regional negotiating machinery in that process. We have also given £8.9 million to the southern and eastern Africa regional trade facilitation programmes, and various other financial supports to the other negotiating blocs, precisely to try to help with some of the capacity constraints that hon. Members and people in the NGO world have understandably drawn to our attention.

The hon. Member for Boston and Skegness also asked whether I still think that the Doha round will be a success, and mentioned a speech made by Commissioner Mandelson. There is no doubt that we are getting close to the wire with the Doha round. It is clear that all the key blocs in the negotiations know that there is potentially a huge prize with a successful outcome to the Doha round, and that they recognise that all blocs will have to give further ground. Clearly, it is necessary to make some progress on the sequencing of revealing more details of the final position of each country or bloc, which needs to happen quickly. My right hon. Friends the Prime Minister, the Secretary of State for Trade and Industry, the Foreign Secretary, the Chancellor and other key Government members have all been involved in seeking to move those negotiations forward. Commissioner Mandelson has made it clear that he is still hopeful that there will be a successful outcome to the Doha round, and we continue to work for such a conclusion both within our discussions in Europe and, more broadly, on the international stage.

I do not believe that there is a conflict between the EPA negotiations and the Doha round negotiations, which is another concern that the hon. Gentleman raised. Multilateral negotiations are always better for individual developing countries, because developing countries coming together to negotiate their positions inevitably strengthens them against the big, regional negotiating blocs. Bilateral agreements offer potential for countries to be bullied, and can mean that the best possible outcome for those developing countries is not secured. Our position is very much that multilateral negotiations are the best way forward, which is why we continue to put as much political and official effort into trying to secure the Doha round outcome that we want.

All Members present asked about development assistance to support the implementation of EPAs. I suspect that we will continue to provide increasing development assistance to support the implementation of EPAs. It is difficult to say how much will be required until we see what the negotiations bring forth. As I indicated, we have been spending an increasing amount on building trade-related capacity to support negotiations across a variety of settings and on implementing the outcome of those negotiations.

We will provide money bilaterally, and money will also be made available through the European development fund. Hon. Members may know that the latest development fund negotiations—EDF 10—were successful, with a 15 per cent. real-terms increase in the size of the total. How those extra resources will be allocated has yet to be decided, but there is clearly a potential for further resources to be made available to implement the EPAs once they are finally negotiated.

The hon. Member for Taunton asked about the timing of any asymmetric liberalisation—how much time developing countries would need in order to decide the pace at which they wanted to open up their markets. Our policy to date—in a sense, it was alluded to in the Commission for Africa report—is that 20 years is the essential time frame, and that that time might be needed. It is possible that complete opening up by ACP countries cannot be envisaged. Inevitably, the length of time that it takes for markets to be opened up will vary in each ACP group, so that is an important part of the negotiations.

World Trade Organisation rules provide some flexibility. Part of our negotiating position in the current round of WTO talks is to press for further flexibility, but we know that there is likely to be resistance to that from developing countries that are not taking part in the EPA discussions, so we have to be realistic about the level of flexibility that might be available. The EU Council conclusions that we secured on 10 April reinforced the need for more flexibility and asymmetry in the final outcome—an important point to bring home to negotiators.

I hope that I have provided further reassurance to hon. Members about how the negotiations are going, about the way in which Departments across Government are following those negotiations and the seriousness with which we are taking those discussions, and about the fact that we are working to persuade other member states and the Commission of our position. We believe that EPAs have a huge potential for good. They will help to facilitate economic growth, which is crucial for tackling progress on the millennium development goals. However, it is by no means a done deal, which is why the review later this year will be so important. We will keep hon. Members and people outside the House up to date on our progress.

Question put and agreed to

Adjourned accordingly at seven minutes to Four o'clock.