[Ann Winterton in the Chair] — Economic Partnership Agreements

Part of the debate – in Westminster Hall at 2:45 pm on 8th June 2006.

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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.