HL Deb 01 July 1985 vol 465 cc1006-14

6.21 p.m.

The Minister of State, Foreign and Commonwealth Office (Baroness Young)

My Lords, I beg to move that the draft European Communities (Definition of Treaties) (Third ACP-EEC Convention of Lomé) Order 1985, which was laid before this House on 23rd May, be approved.

The Third Lomé Convention, or Lomé III as it is commonly known, governs relations between the European Community and the African, Caribbean and Pacific group of developing countries for the period 1985 to 1990. I do not think that I need go over the background to the negotiations on the new convention, which was admirably set out in the report of the Select Committee on the European Communities entitled A Successor to the Second Lomé Convention, published in March 1984, a report which was debated in your Lordships' House about a year ago.

The draft order in council to which the Motion refers was laid before Parliament on 23rd May and approved in another place on 24th June. It would, if also approved by your Lordships, be made under Section 1(3) of the European Communities Act 1972. The order provides for the specification of Lomé III and the associated Internal Financing Agreement as Community treaties as defined in Section 1(2) of the Act. This will allow effect to be given to the provisions of the convention in United Kingdom law. This in turn opens the way for ratification of the convention by the United Kingdom. The convention will come into force when it has been ratified by all the member states, the European Community and two-thirds of the ACP states.

I welcome this opportunity of informing your Lordships of the outcome of the Lomé III negotiations and outlining some of the ways in which the new convention differs from its predecessors. I am conscious that when I last spoke on the Lomé Convention on 6th June last year in response to the debate on the Select Committee's report the negotiations were still under way, and I was therefore unable to give a clear indication of the likely outcome. I did say, however, that there was scarcely a recommendation in the Select Committee's report with which the Government would wish to disagree. Many of these recommendations have now been reflected in the text of the convention finally agreed with the ACP group and signed in Lomé on 8th December last.

The new convention is much longer than its predecessors, containing 294 articles against 191 in Lomé II and only 94 in Lomé I. This reflects the ACP's desire to include new sectors in the text. Fisheries, transport and communications, trade and services and cultural and social co-operation now have their own chapters. It also reflects the Community's desire to make its aid more effective. There is a new introductory section setting out the main objectives; tighter procedures for planning European Development Fund aid; strengthened provisions for the appraisal and evaluation of projects; a new provision to allow for fast disbursement of aid to maintain existing investments—something to which we all attach great importance—a new chapter on drought and desertification; more stress on investment promotion; and throughout there is a welcome strong new emphasis on food production and agricultural development. This reflects the priority given by the Government in the negotiations to food security. We originally pressed for a separate chapter on food, as recommended by the Select Committee, but the final text incorporates most of the substance of what we proposed.

The main principle underlying these improvements is that the Lomé partners share a common interest in following policies which lead to much better rates of economic growth and more balanced forms of growth than we have seen in the past. There is no sense in pouring large sums of money into projects which are plainly unsuited to the economic, geographical or climatic conditions of the country concerned. Nor is it very productive to provide aid in sectors where mistaken policies are being pursued or where overall economic policies counteract any beneficial effect the aid may be intended to have.

Last June, I underlined the importance attached by the Government to the proposal that there should be a dialogue with individual ACP states on their sectoral economic policies. This proposal was fully endorsed by the Select Committee. But I also emphasised that this was a sensitive area. The ACP states rejected the Community's initial proposals, fearing that they would result in what they felt to be unwarranted interference in their internal policies. The wording eventually agreed is a compromise. Whether or not it enables the Community to concentrate its aid in those countries and on those sectors in which viable economic policies are being pursued still remains to be seen. The task of programming European Development Fund aid is, however, now well under way, and we shall continue to support and encourage the Commission in their efforts to ensure that projects funded by the EDF form part of a coherent and viable economic strategy in the recipient states.

The emphasis throughout Lomé III on the greater effectiveness of Community aid has resulted in a move towards Community support for key sectors or policy programmes rather than individual projects. Food strategies are one example. The fight against drought and desertification is another. Both areas are given prominence in the convention with a complete new chapter being devoted to long-term efforts to combat drought and desertification.

I should stress that this part of the convention is not designed to deal with the sort of emergencies which Ethiopia and Sudan are now experiencing. But the convention is intended to help such countries to avoid these disasters in the future. Indeed, 94 per cent. of commitments from the fifth European Development Fund (under Lomé II) have been to Africa.

The shift of focus from individual projects to policy programmes is also reflected in the way the convention stresses the importance of regional co-operation and programmes intended to help more than one ACP state Again, the fight against drought and desertification is an area where such co-operation can prove effective. The Community, itself a group of sovereign states, may often be better placed to provide assistance for such schemes than individual member states acting alone.

Not surprisingly, the size of the sixth EDF was, for the ACP states, the central feature of the final negotiations. At 7.5 billion ecu, which is equal to £4,438 million, the Community's offer is remarkably generous. EDF VI will be 60 per cent. larger than EDF V. This represents more than maintenance of value in real terms at a time when most other multilateral aid organisations have been obliged to restrain or cut back their budgets. In addition, up to 1.1 billion ecu (£651 million) will be made available to the ACP states in the form of loans from the European Investment Bank's own resources.

6.30 p.m.

Another sensitive issue which was not solved until the very end of the negotiations was the question of human rights. A number of Community member states, including the United Kingdom, felt that it would be wrong to dissociate entirely the granting of Community aid from respect by recipient countries of elementary human rights. The ACP countries, for their part, argued strongly that it is only a small step from withholding aid on human rights grounds to widespread interference in a country's internal affairs. The final text agreed with the ACP states clearly reaffirms the contracting parties' adherence to the principles of the United Nations Charter and their faith in fundamental human rights. This represents a firm basis on which to build. We were also able to reach agreement with the ACP states on a joint declaration, reiterating our deep attachment to human dignity and reaffirming our commitment to work to eliminate all forms of discrimination. These texts will not of course, in themselves, bring about a radical improvement in the human rights situation in many ACP states: given the need for predictability in planning development it would not necessarily be in the interests of the peoples involved if the disbursement of aid were influenced by changes in the degree to which human rights are observed. But the texts are now part of the Lomé contract and can therefore be invoked in the most flagrant cases in which elementary human rights are abused.

The importance of trade in the development process has long been acknowledged. The Select Committee recognised that the Community's existing trading arrangements with the ACP states are already the most liberal on offer to any group of developing countries and that the scope for further improvement was limited. The Government argued throughout the negotiations for further improvements in access to Community markets for ACP goods and for the removal of all remaining duties on agricultural products. Most member states were prepared to see a relaxation of controls on some products, though not in cases where member states' agricultural produce competes most directly with that of the ACP countries. The Government were, however, able to achieve agreement that in future ACP requests for improved access for particular products will receive a more rapid response, and that in considering these requests the Community will take account of concessions granted to other developing countries. We shall work hard to make a reality of this undertaking.

The Government were also able to obtain some relaxation and simplification of the convention's rules of origin. Technical though it may be, this was seen by the ACP states as a priority area for improvement. I should also mention in passing that the special trade arrangements for sugar, bananas, beef and rum, which are of particular importance for Commonwealth ACP states, have all been consolidated or improved in the new convention.

Private investment also has an essential role to play in the development of ACP economies and during the negotiations there was a much greater awareness than ever before amongst the ACP states of the need to create and maintain a stable investment climate. This attitude is reflected in the provisions of the investment chapter of the convention, which is much more substantial than its predecessor. It reaffirms the importance of bilateral investment promotion and protection agreements. This will, I am sure, be welcomed by British firms who are keen to establish themselves in the ACP states, to exploit new markets and contribute to local development. The outcome of the negotiations represents a fair balance of advantage for both sides and should provide a good basis for the continuing relationship between the Community and the ACP states. I beg to move.

Moved, That the draft order laid before the House on 23rd May be approved. [23rd Report from the Joint Committee.]—(Baroness Young.)

Lord Oram

My Lords, on behalf of my noble friends I can certainly welcome this Third Lomé Convention, which the noble Baroness has outlined to us. It is not that we believe it to be a perfect arrangement, but it continues for a further period of five years a unique contractual arrangement concerning aid and trade between two very different groups of states, one of which has well developed and comparatively rich economies and the other of which has newly developing and comparatively poor economies. That, I think is its distinctive feature, as, indeed, it was the feature of Lomé I and Lomé II. Those two arrangements have proved to be sufficiently successful for it to be wholly desirable that this third agreement should be reached and ratified so as to build upon the achievements of those earlier agreements. But at the same time they were in some respects disappointing. There have been defects which have been analysed, and that made it important that this new convention should embody some important improvements.

The noble Baroness in her speech indicated many of the changes which have been negotiated. In my view there are some important improvements which have been made, but at the same time I think there have been some opportunities which, regrettably, have been lost. I shall deal first with those which strike me as particularly welcome, and then go on to say why I think Lomé III could and should have been bigger and better.

First, I very much welcome the emphasis that is given in the new convention to agriculture and rural development and, in the following chapter, to the related problem of the encroaching desert in Africa. During the 10 years that have passed since Lomé I was signed in my view there has been a very considerable change of opinion among policy makers in these matters. I recall that a decade or more ago agriculture used to be very much the poor relation in development programmes, but today there is a much readier acceptance of the view that priority should be given to agriculture and particularly to the improvement of life in the villages in third world countries. That is why I welcome the fact that in this third convention much more detailed attention is given to the production of food than was the case in the two previous agreements.

It is also welcome that there is a special chapter in the convention devoted to the problem of drought and the encroaching desert. The events of the past year and the devastating effect of the drought, particularly in Africa, make this subject an obvious one that needs to be tackled in any development programme.

In this document Articles 38 to 43 spell out no only the nature of that serious problem but also the nature of the operations which the ACP states need to undertake if they are to beat this problem. Article 43, I am glad to see, is in effect a pledge that the Community countries, the rich countries, will give financial support to those operations designed to stem the problem of the drought.

In another section I was glad to see also that the promotion of small and medium-sized enterprises is given much more detailed attention in this document than in the second convention. It is a subject on which I have spoken before—the need for these small and medium-sized enterprises, which can get much nearer to the people who need to benefit from our policies. After all, the great majority of the people in the third world, including those in the ACP states with which we are concerned this evening, are villagers; they are peasants. It is therefore in the village that development must take place, if they are to achieve a better life. They certainly will not find it in the huge shanty towns which are such a sad feature of the third world. For this purpose, it is important that resources must be directed, as the convention states on page 90, to public bodies, local authorities or co-operatives with a view to developing the artisanal, commercial and agricultural sectors, and to creating or strengthening guarantee funds for credit to small and medium-sized enterprises. That I believe to be a most important statement which is an improvement in this document compared with the preceding ones.

One of the most distinctive features of the Lom£ framework as we have seen it over 10 years is STABEX, the system whereby ACP states can claim compensation for loss of earnings from the export of certain agricultural products. Although very imaginative in its conception, this has unfortunately been only partially successful. This is partly because the states which have received that compensation have tended not to apply it as was intended to the direct benefit of peasant farmers. They have used it very often for much more general purposes. But more important as a reason why STABEX has been disappointing is the fact that insufficient finance has been available to the STABEX scheme to meet claims which are quite justified according to the criteria of the convention.

In this new convention an attempt, I see, is being made to ensure that the funds are used for the right purposes. That is a welcome feature. But I would only utter the hope that by introducing administrative restraints for that purpose there will not be any slowing up of the process of compensation. It was one of the good features of the STABEX scheme in the last 10 years that it was quicker in action than some of the other processes. It would be a pity if the consequence of making sure that the money goes into the right channels was a slowing up. I hope that that will not be the case.

But it also seems to me that the problem of adequate financing of STABEX, to which I referred, is not being tackled as it should be. I did a little calculation and found that its funds are still only 12 per cent. of the whole. That is what they were under the previous convention. Despite what the noble Baroness said, I believe that the total funds available under this convention in real terms will be found to be less than the previous funding.

That brings me to the more general question of the resources which are being provided in this new convention. The noble Baroness referred to the examination by the Select Committee on the European Communities a year or more ago. I had the privilege of serving, under the chairmanship of my noble friend Lord Brimelow, on the committee which examined that problem. We heard evidence from the ambassadors in Brussels of the ACP states. We went to Brussels and talked to them there. They came over here for a more formal hearing. I remember clearly that the problem that was uppermost in their mind was the volume of resources that would be available at the end of the negotiations. Much of their discussion was hampered by the big question mark: how much money will there be? They made it clear that they did not expect an early announcement of the actual sum, but they wanted to establish the criteria by which the adequacy of the resources could be measured.

6.45 p.m.

They had in mind not just a straight maintenance of value of money to take account of inflation, but such problems as the increased population in their countries since the earlier Lomé Conventions. They had in mind—and spelt this out somewhat dramatically—the greatly increased price of the manufactured goods that they needed to import and the fall in the price of their own agricultural exports; and on the basis of those considerations they calculated that at least 11 billion ecu were necessary to meet their needs and to bring the new convention into line with what was available under Lomé II. In fact, as the noble Baroness has indicated this evening, what is being provided is only 7½ billion ecu.

Therefore, although, as I have said, I welcome this convention, it is my fear that, just as under Lomé II the STABEX scheme has achieved less than had been hoped because of lack of resources, so now there is a danger that the whole operation of Lomé III may be less successful than it should be, particularly having in mind the vastly more serious problems which are facing the ACP countries today, especially those in Africa. I have in mind not only the drought, to which I have referred, but the problem of indebtedness, which has become so much more severe in recent years.

As I have said, this convention contains many good provisions and I welcome it. I believe that the balance of its propositions is superior to that of the two preceding conventions. But I end on this note: that I believe that the chances of successful application of this convention would be very much greater if the resources available were more nearly matching the needs of the ACP countries.

Lord Banks

My Lords, I should like to thank the noble Baroness, Lady Young, for her explanation of the purposes of this designation order. As she said, the object is to enable the Third Lomé Convention to take effect in United Kingdom law. It is perhaps not the occasion to debate in great detail the contents of the convention, but we have the opportunity to welcome most warmly the successful conclusion of this third set of negotiations. In saying that, I am at one with the noble Lord, Lord Oram. These negotiations are inevitably complicated and take a long time. The EEC Council has to negotiate with the EEC member states. The EEC Council has then to negotiate with the EEC Commission. There has to be negotiation between the ACP states, and then finally between the ACP and the EEC.

The First Lomé Convention was hailed as a great advance in co-operation between developed and developing countries. It certainly produced some novel schemes including the scheme referred to by the noble Lord, Lord Oram; the STABEX scheme. The Second Lomé Convention passed though a period of disillusionment, recession and inflation, population outstripping food production, high interest rates and increasing debt which created an unfavourable climate. STABEX twice ran out of funds, as the noble Lord, Lord Oram, indicated. There were complaints that the European Development Fund was under-funded; and there were complaints also of bureaucratic procedures. Perhaps most disappointing of all, the ACP countries did not maintain their share of the European market.

It is all the more encouraging, therefore, that Lomé III has been successfully negotiated and promises some modest improvement. The funds available, it seems to me, are much the same as for Lomé II once inflation is taken into account, and some of us would have preferred to see a larger amount made available for the Lomé Convention.

There has been a clash between those in the EC who wanted to restrict aid but put the emphasis on trade and private investment, and those who would have increased aid but were concerned about home market protection. Of course the ACP countries wanted both increased aid and greater access and, on the figures involved at the moment, greater access is far and away the more important to them. The result inevitably is a compromise, with perhaps some fudging of the issues. Questions of policy dialogue are far from settled, but the eventual outcome, in spite of great difficulties, was certainly a happier one than at one time seemed possible.

However, we have to bear in mind that the scope of Lomé is limited. The 65 ACP countries represent only 15 per cent. of world population and the financial aid provided through Lomé is very small when compared with the total international aid effort. For some EC countries, it merely means a redirection of resources which would have been available in any case. But the scope of Lomé III, though limited, is wider. There are some new areas of co-operation, as the noble Baroness made clear, and some new procedures; and that we welcome. I shall resist the temptation to look at these in detail and will simply conclude by saying that, while Lomé III is not as far-reaching as many of us would like to see, yet it represents an important developing relationship which we must hope to strengthen in the future. I support the Motion for approval of the order.

Baroness Young

My Lords, I am grateful to both the noble Lord, Lord Oram, and the noble Lord, Lord Banks, for their general welcome for this order. I particularly welcome the remarks of the noble Lord, Lord Oram, who very fairly set out what he saw as the improvements which come under Lomé III. He listed quite a number of improvements that he saw, particularly the emphasis on agriculture, the work that is to be done in both drought and the advance of the desert, and the promotion of small and medium-size firms. These are very valuable developments.

In relation to the small and medium-size enterprises, I fully agree that the increased emphasis in the new convention, and in particular in Article 67, on the development of small and medium-sized enterprises is to be welcomed. As I said in my opening remarks, too much attention has in the past been devoted to over-ambitious industrial projects which were not well adapted to the basic needs of the local population. I think that is very much what the noble Lord was referring to in his remarks.

He then turned to the question of STABEX and asked whether, although there are to be improvements in this way of helping ACP countries under the new system of administration, the speed of payments would be rapid enough to meet the needs of those countries. The noble Lord quite rightly pointed out that the rules for operating STABEX have been tightened and improved in this convention. Article 168 of the convention provides for precise timing by which the Commission should respond to requests for compensation by ACP countries, and these requests, we believe, should be met more quickly than has been the case hitherto.

The noble Lord, Lord Oram, also referred to a number of difficulties and I think his concern, and that of the noble Lord, Lord Banks, was over the whole question of funding for Lomé III and whether or not the size of the EDF VI is adequate to meet the needs. The noble Lord, Lord Oram, set out many of the arguments which were given in the Select Committee's report to the House on criteria. Of course we greatly respect the views of the committee and what it had to say on this matter, but we believe that the size of the new EDF VI represents an increase in real terms on the finance that was available under Lomé II.

The fact is that the amount of aid provided must take account of the need to control Community expenditure. Nevertheless, we believe it has been possible to maintain the real value of the European Development Fund, which demonstrates the Community's commitment to the whole concept of Lomé. So far as the United Kingdom is concerned, the fact is that none of the member states was prepared to finance as big a fund as the ACP countries requested, but we are not alone in regarding the fund, which maintains the real value of EDF V, as both fair and generous. So we are confident that EDF VI represents a real increase in the amount of finance available for the new Lomé III over Lomé II, and we believe that this will be a very valuable contribution to helping these countries.

As I indicated in my opening remarks, the new convention shows a number of improvements over Lomé II and I am very grateful that the noble I ord, Lord Oram, and I think the noble Lord, Lord Banks, have acknowledged these improvements. It is of course true that the scope of Lomé III is limited to ACP countries and that the total number of countries is small in comparison with all the numbers of countries in the world requiring aid out of our total aid efforts. Nevertheless, it has been proved to be of great value to these countries and has been much welcomed by them. We hope that in making our decisions we have made a real contribution to helping development in these countries and to being able to use our money more effectively in the future.

On Question, Motion agreed to.