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The Parliamentary Under-Secretary of State for Exiting the European Union (Mr Robin Walker)
I start by congratulating my hon. Friend the Member for Wimbledon (Stephen Hammond) on securing this important debate on the European Free Trade Association, to which I am delighted to respond. I note that he beat our hon. Friend the Member for Eddisbury (Antoinette Sandbach) in securing this debate, but as my hon. Friend and colleague at DExEU, the Member for Wycombe (Mr Baker), said in the House on 1 February, a number of colleagues have suggested EFTA membership as a possible option, and it is important that we debate it.
Although we recognise the benefits of ensuring continuity in our relationships with the EFTA states, we do not plan to seek membership of EFTA, for four key reasons. First, EFTA membership in and of itself does not deliver any market access to the EU. As my hon. Friend the Member for Wimbledon pointed out, there are some misconceptions. It is important to delineate the difference between the EFTA agreement and the EEA. EFTA is a trading bloc between four European countries: Switzerland, Norway, Iceland and Liechtenstein. Three of them participate in the EU’s single market through the EEA agreement, while Switzerland participates in some areas through a series of bilateral arrangements with the EU. As such, joining EFTA does not say anything about our future economic partnership with the EU.
Those calling for us to join the EFTA need to be more specific, as my hon. Friend was, about whether they mean joining the EEA, or attempting to copy the Swiss agreement, or negotiating a different bespoke agreement. The Prime Minister has been clear that participation in the EEA agreement would not work for the UK because it would not deliver on the British people’s desire to have more direct control over the decisions that affect their daily lives, and it would mean accepting the continued free movement of people, which both the Conservative and Labour manifestos pledged to end at the last election. Switzerland, on the other hand, has a patchwork of agreements with the EU that fall short of the ambitious economic partnership we are seeking. Neither model strikes the balance of democratic control and mutual market access we want for our future partnership with the EU.
Secondly, our ambition as a global trading nation goes beyond the scope of EFTA’s existing free trade agreements with third countries. Leaving the EU offers us an opportunity to forge a new role for ourselves in the world, to negotiate our own trade agreements and to be a positive and powerful force for free trade. Alongside new FTAs, we are also committed to achieving continuity in our existing trade and investment relationships with third countries by transitioning the EU’s free trade agreements. It is worth noting that EFTA’s network of preferential trading arrangements falls short of our ambitions.
Thirdly, EFTA membership means accepting free movement between EFTA members—that principle is underpinned through the legal framework of the EFTA convention. While we do not regard the referendum result as a vote to pull up the drawbridge, it must be a priority to gain control of the numbers of people who come here from Europe.
Finally, while we want to maintain our deep and historic relationships with EFTA states, the UK is in many ways different from those countries, as the hon. Members for Greenwich and Woolwich (Matthew Pennycook) and for Glenrothes (Peter Grant) pointed out. Our population is around 65 million, while the EFTA states together make up roughly 14 million people. In 2015, the EFTA bloc’s collective GDP amounted to £710 billion as compared with the UK’s £1.9 trillion. The UK’s participation in EFTA would fundamentally change the nature of that group and would not be an appropriate model for our future relationship with the EU or those countries.
Antoinette Sandbach
Some have proposed that EFTA should be a plan B in the event that the Government do not achieve the ambitions they are outlining, instead of WTO rules. What does the Minister say to that?
Mr Walker
We are absolutely focused on achieving a deep partnership between the UK and EU. Of course we need to look at our contingency plans, and I am sure Ministers will take note of this debate in that regard, but we want to focus on achieving a partnership that in many ways goes beyond the EFTA arrangements we have discussed.
Mr Walker
No, I need to make a little progress because I have got quite a lot to try to cover.
Membership of EFTA alone does not automatically guarantee UK access to the EU single market, and EFTA states have the different trading relationships I have described. In this debate, most people have spoken about the EEA and EFTA. The EEA, which is sometimes referred to as the Norway model, would mean the UK having to adopt automatically and in their entirety new EU rules over which we would have little influence and no vote. As the Prime Minister has said, such a loss of democratic control could not work for the British people. It would also involve continuing to pay substantially into the EU budget.
Chuka Umunna
Does the Minister not accept that if we are to do the free trade agreement that he and his colleagues in government keep talking about, we are going to have to comply with European standards anyway? We have much more chance of having some influence—albeit, I accept, not a vote—if we do so through EFTA and EEA membership. The hon. Member for Wimbledon (Stephen Hammond) has been clear he is arguing for that.
Mr Walker
The Government are ambitious about the extent of the trade agreement we can do with the EU. The EU has a number of trade agreements with other countries where there is mutual recognition and regulatory alignment, but not the absolute harmonisation of rules. I do not accept the premise of the hon. Gentleman’s argument.
I will not be able to cover all the comments, so I want to focus a little more on international trade. Members have asked why we do not plan to rejoin EFTA as a way of continuing our trading relationships with its members and trading with the wider world through the adoption of its existing free trade agreements. As I have already stated, EFTA has a network of 27 free trade agreements as compared with the EU’s 40 FTAs. While many of those agreements significantly overlap, EFTA agreements still focus on traditional areas of market access and therefore tend to be less comprehensive and more goods-focused than those of the EU. It is also notable that some EFTA FTAs specifically exclude trade remedies that the UK may seek to have as part of our independent trade policy. The UK is in many ways different from those countries.
Paul Masterton
Is the point not that by joining EFTA, we can roll into the existing EFTA trade agreements and agree a new bilateral trade deal at the same time? We would be protected while striking out our own trade deal.
Mr Walker
My hon. Friend makes an interesting point. It is certainly true that a number of the EFTA states have those bilateral arrangements, but it is important to note that even if EFTA members were to welcome us back—as the hon. Member for Glenrothes pointed out, that is not a certainty—we would not have immediate or automatic access to their 27 FTAs. Our entry into each one would need to be negotiated individually with the third countries involved. That process would take time, with no guarantee of success. EFTA is not an off-the-shelf model that would deliver ready-made trade deals, as some have suggested. Instead, as I said earlier, leaving the EU offers us an opportunity to forge a new role for ourselves in the world: to negotiate our own trade agreements and to be a positive and powerful force for free trade. As Members know, we are committed to delivering continuity in the EU’s existing trade relationships with third countries.
Mr Walker
I will not right now. We want continuity, rather than the replacing of agreements with their mostly shallower EFTA counterparts. We are already in discussions with third countries over how to put the arrangements in place upon exit, and I will come back to that point.
Mr Walker
I cannot give way right now because I have to cover a few more points.
Another important drawback of EFTA membership is that it requires free movement between its members. A number of Members have touched on that. It is true that Liechtenstein has a derogation from the principle of free movement of people under the EEA, but Members will agree that the UK is in many respects different from Liechtenstein, which is a country with a population numbering less than most of our constituencies—in 2016, the population totalled some 37,000. It is also worth noting that in 2016 more than a third of Liechtenstein’s population were not Liechtenstein citizens.
We of course want the UK to remain an open and tolerant country. It is important to note that the Prime Minister has written to EFTA citizens and EU citizens to assure them that we want to reach agreements that protect their right to achieve settled status in the UK.
Finally, I reiterate that there can be no question of our ties of friendship with our EFTA friends and neighbours, nor of our commitment to them. Taken together, the EFTA bloc of states is our third largest export partner in goods and services after the EU and the USA—that is larger than India and China combined. We receive 5% of our imports by value from them, making EFTA our fourth largest import partner. Norway and Iceland were also founding members of NATO. I reassure Members that we are seeking to maintain our excellent relations with EFTA states, with whom we have long-standing cultural and economic ties, as well as crucial trading relations. The Prime Minister wrote specifically to EFTA nations.
I do not have a great deal of time to go into the implementation period, but it is important to note, as the hon. Member for Greenwich and Woolwich said, that we are seeking only one set of changes. It is crucial that business does not face two sets of changes. With that, I give my hon. Friend the Member for Wimbledon the floor for a chance to respond.