European Union (Notification of Withdrawal) Bill

Debate between Baroness Quin and Lord Lea of Crondall

Committee: 1st sitting (Hansard): House of Lords
Monday 27th February 2017 Lords Chamber

[Lord Lea of Crondall (Lab)]

My Lords, I think that one of the themes of these two days in Committee will be that there are no easy answers to the dilemmas we all now face in the United Kingdom. There are upsides and downsides to every option for Brexit and the country’s future. That includes membership of the European Economic Area.

Perhaps I may remind the Committee that we can retain our membership of the single market without membership of the EU only through maintaining our membership, which of course we have already, of the EEA. To spell it out, membership of one or the other is required; that is, either of the EU or of EFTA. That is why I need to say a little more about how we would work within EFTA, which currently comprises three countries: Norway, Iceland and the Duchy of Liechtenstein. We cannot, as we sometimes seem to be doing, rule out all of the options before us, and certainly not rule them out prematurely. Rather, we should look at the pros and cons of each, as has been done in the outstanding report of the joint sub-committee of the European Union Select Committee on Brexit and trade options, chaired by my noble friend Lord Whitty.

We were members of EFTA from its inception in 1960 until we joined the EEC in 1973. I declare a retrospective interest, having chaired the last meeting of the EFTA consultative committee, which was made up of national employers and trade union organisations in consultation with the Council presidency. The meeting was held in Vienna in December 1972. The EEA has a two-pillar structure: the EU on one side and EFTA on the other. They meet together in the EEA council at government level, with various joint committees on particular points, along with a joint parliamentary committee and the EEA consultative committee.

The substance of consultations with the EU depends to an extent on the weight of the member states involved, but I am told by contacts in Norway that these are not without value, and I think that something like this was also the burden of the message sent by the Norwegians who gave evidence to parliamentary committees in both the Lords and the Commons. On the objection to this approach, there is of course the constant complaint that plan B, C or D falls because, “We would not be at the table”. I have to point out that the famous 52% asserted—or supposedly asserted, if they knew what they were doing, which we assume they did—that, without equivocation, they did not want us to be at the table. So that can hardly be a drawback to where we go from here: end of story, full stop. Surely we can all agree that we have to balance influence on the one hand and freedom of action on the other.

EFTA has its own court of adjudication on issues such as interpreting the EFTA treaty and its application of rules of origin, technical standards et cetera. So we will be bound by the rules of EFTA consequent on the relationship with the single market, but obviously there is a great deal of legal alignment with the EU. The four freedoms can themselves be interpreted in different ways. For its part, the Commons Select Committee noted in paragraph 122 of its report that the Secretary of State for Brexit had indicated on 1 December last year that the Government,

“give very high priority to both tariff-free access and access without tariff barriers … that may or may not include membership of the single market”.

The Lords committee report stated in paragraph 82 that in trade terms, becoming a non-EU member of the EEA,

“would be the least disruptive option”,

providing free access to the single market in services and partial access to it in goods. The trade agreements are often negotiated advantageously by EFTA itself. I believe that there is a score of such agreements rather than agreements with individual member states.

I turn now to freedom of movement, border controls, work permits et cetera. Every facet of this debate has now been opened up more than it has been for many years—and by “open” I mean open and not closed down in advance. There is a considerable degree of variance among EU countries on how free movement is interpreted. In Belgium, there is a requirement for a job to go to, it is necessary to pay the rate for the job and no job advertisements can be placed in eastern Europe without being placed also in Belgium. Our Secretary of State seems to have come up with a new form of words about the guarantees for people who are already resident and working in this country. I would simply say that this is an area where we all know that constructive thinking needs to go ahead on a bipartisan basis.

Regarding attitudes in Norway, Iceland and Liechtenstein towards our application to become members once again, which have to be thought about, it is fair to say that we have very close relations—with a possible question mark in the case of Norway about something that happened 1,000 years ago—notably because of the North Sea energy fields from Shetland through to Aberdeen and further south, in particular in the north-east of England and down the east coast. This is true for the UK as a whole in a great variety of ways, including through the activities of the Norwegians’ well-managed, energy-based sovereign wealth fund, which is now worth £250 billion. A lot of that investment is deployed via London, as we were told in a recent briefing by the fund.

Without being presumptuous, and while recognising that EFTA would change its internal dynamics and, to some degree, its character and profile, the advice generally is that one would not expect hostility in Norway—the largest of the three—to any hypothetical application from the UK to rejoin the association. Positives would also arise from this for Scotland, Wales and Northern Ireland, compared with the alternatives. This is becoming more and more obvious as the weeks go by.

In paragraph 58 of its report, the Lords committee observes:

“Various studies had shown that from the EU’s perspective, ‘the EEA is the most preferred model’ of association for third countries”.


That is not a consideration to be underestimated, and it may influence attitudes among the EU 27 countries. These options for trade, investment, tariffs et cetera have to be the subject of not just theoretical argument but practical experience, such as was given by a Mr Emerson, who pointed out in evidence reported in paragraph 70 of the report that the advantage of the EEA option is, inter alia:

“It is a system that exists, offers legal clarity and actually works. It is closest among other options … to the status quo in economic terms and it would avoid uncertainty and thereby minimise damage to the UK as a destination for foreign investment aimed at the EU market”.


These are among the reasons why it would be counterproductive to leave the EEA, certainly prematurely. I know that going down the route I am advocating would entail Ministers eating some words. But I am sure that their digestive systems will be up to it once they have all run a few times around St James’s Park. I beg to move.

[Baroness Quin (Lab)]

My Lords, I support the amendment moved by my noble friend as a way to probe aspects of the Government’s approach to our future trading relationship with the European Union. The EEA was created when the UK, Denmark and Ireland changed from being members of EFTA to members of the EU, but the scale of their commercial relations with the other EFTA countries made it necessary to abolish customs barriers between the two groups of countries. A similar imperative will operate in the current situation as far as the UK market is concerned, given the scale of our trading with the EU. Obviously, in many ways the EEA would not be my preferred option because I would prefer to be in the single market—indeed, I would prefer to remain in the EU. However, given where we are after the referendum, I certainly think it is worth the Government considering and responding to the points that have been made.

My noble friend referred to the excellent report by the European Union Committee on Brexit: the Options for Trade and the fact that paragraph 5 of the conclusions says:

“EEA membership would be the least disruptive option for UK-EU trade, not least because it would maintain membership of the Single Market for services”.


I specifically ask the Minister whether this paragraph of the report, highlighting the importance of services to our economy and the way that that can be handled within an EFTA-type solution, has been discussed with the City of London, and what kind of response was made by the City to the point in the report.

Obviously, we will have a further chance to look at the report when it is discussed in this House on Thursday, but it is very germane to the discussions this afternoon, both on the EEA and on the single market. Therefore, it is quite right to highlight it today and I take this opportunity to do so. Certainly—this point has been made many times—whatever people voted for in the referendum, we are all pretty sure that they did not vote to make themselves poorer. As a result of that, exploring the best deal possible, in looking at all the possible options, is going to be vital. I believe that the Government need to take the amendment and the report very seriously.