European Free Trade Association

Lord Callanan Excerpts

Tuesday 27th February 2018 Lords Chamber

[Lord Lea of Crondall]

To ask Her Majesty’s Government whether remaining in the European Single Market, post-Brexit, would require the United Kingdom to retain membership of the European Economic Area and associated European Union agencies through re-joining the European Free Trade Association.

[The Minister of State, Department for Exiting the European Union (Lord Callanan) (Con)]

My Lords, the Government’s position is clear: the United Kingdom is leaving the EU and will no longer be a member of the single market. As such, we have no plans to join EFTA in order to continue to participate in the EEA agreement beyond the implementation period. Instead, we are seeking a bold and ambitious economic partnership that is of greater scope and ambition than any existing agreement.

[Lord Lea of Crondall (Lab)]

I thank the Minister for that helpful Answer. The customs union and the European single market are, from a practical and industrial perspective in the advanced economies, intertwined—technical standards being a good example. Is not the way to make the best of a bad job to move from where we are now, in Pillar 1 of the European Economic Area—namely, the EU—to Pillar 2, namely EFTA? We would not be at the EU table, it is true, but to make that complaint on the way out is palpably risible. Is not one indisputable advantage that EFTA is a vehicle which actually works, as opposed to one which has not yet been designed, let alone road tested? It has been a nice runner, without any engine or transmission failure since 1959, and we would get it for half price or, to use a different metaphor, for half the annual subscription and country membership.

[Lord Callanan]

I was not totally clear what the noble Lord was asking me there, but of course not all of the EFTA countries are in the EEA: Switzerland is not. We will clearly want to continue our relationship with the EFTA countries afterwards, as they are close friends and neighbours. After the end of the implementation period, we will of course want to continue our association with them.

[Lord Forsyth of Drumlean (Con)]

My Lords, could my noble friend confirm that Donald Tusk’s words—

“Nothing is agreed until everything is agreed”—

also apply as far as we are concerned, in particular to the contribution of money to the EU?

--- Later in debate ---

[Lord Callanan]

My noble friend is of course correct. It is a basic factor of all EU negotiations that nothing is agreed until everything is agreed. Having said that, we are a law-abiding country, and when we make agreements, we do not rat on them.

[Baroness Hayter of Kentish Town (Lab)]

My Lords, I am sorry I ran into the Chamber, but it was because I had been to inspect the border between Camden and Westminster. When I told my noble friend Lady Blood that this morning, she was delighted—she cannot wait for the Tube to be put there, from northern to southern Ireland. Is this level of understanding in the Minister’s department about how a border between north and south would work actually the level of discussion going on there?

[Lord Callanan]

I am not aware that anybody in my department has said anything of the sort. The point the noble Baroness is referring to is that of course we want no border in Ireland between the north and the south. We are committed to the Good Friday agreement. It has been the basis of lasting peace and prosperity in Ireland, and it is important that we come up with suitable arrangements in future negotiations with the EU to ensure that there is no border.

[Baroness Ludford (LD)]

My Lords, can the Minister give a precise definition of “ambitious managed divergence” and the other new buzz-phrase, “European traded goods area”? Can he also explain the three baskets, which sectors are in which baskets and whether suppliers to a sector, such as the textile-makers of a car seat, are permanently or temporarily in a basket? Does he agree that so-called EU red tape ain’t got nothing on the bureaucracy involved in the Government’s plans?

[Lord Callanan]

I am tempted to make a comment about a basket case but that is probably not a good idea. The noble Baroness is referring to the point that when we leave the EU, we will start off with identical rules and regulations, as she well knows. The issue then is how we diverge in the future and how that divergence should be managed, should the EU want to adopt different regulations or should we want to do so. If we do and it does not affect the functioning of the ambitious free trade we want between us and the EU, why should we not be able to? Clearly, there needs to be a mechanism to manage that.

[Lord Garel-Jones (Con)]

My Lords, now that the leader of the Labour Party does not seem to believe any longer that the European Union is a capitalist conspiracy against working people, does my noble friend the Minister agree that his support for the single market can serve only to undermine the standing of this rather successful organisation?

[Lord Callanan]

I am slightly confused about what the Labour Party’s position is this week. Last week, they were against the customs union; this week, they seem in favour of it. Perhaps next week they will be in favour of a single market, then against it again the following week. I can say only that I agree with Barry Gardiner, their international trade spokesman, who said in another place that,

“in voting to leave the EU the British people voted to leave both the single market and the customs union”.—[Official Report, Commons, 5/9/16; col. 47-48WH.]

He then went on to write an article in the Guardian—a well-known journal of record—saying that retaining membership of a customs union would be “deeply unattractive” because it would stop us negotiating our own trade deals. He is supposed to be their trade spokesman.

[Lord Dykes (CB)]

My Lords, bearing in mind that more and more people now think that staying in the customs union is a very good idea—led by that subversive body, the CBI—what on earth will the Government say on Friday to reassure an increasingly desperate public?

[Lord Callanan]

I am sure that we all await with interest what the Prime Minister has to say in her speech on Friday, but the point about joining a customs union is a serious one. We are the fifth-largest economy in the world and the normal state of affairs in the rest of world is that large countries negotiate their own trading arrangements. It baffles me why people want to contract that out to the European Commission. We collect tariffs that we would then send to the European Commission; we would be totally in its control. Surely, if anything, the EU referendum means that we need to take back control in this country and do not want to contract out our trade policy to another organisation.

[Lord Monks (Lab)]

My Lords, can I ask about the three baskets? It seems that there is detached, semi-detached and alignment. Which of those baskets will take employment rights and workers’ rights? Can we please be told?

[Lord Callanan]

I think the noble Lord will have to wait to see what the Prime Minister has to say about the issue on Friday. I am building up the sense of anticipation.

[Lord Newby (LD)]

My Lords, the Irish Government believe to have a frictionless border, we have to be members of both the single market and the customs union. On what basis do the British Government disagree with the Irish Government on that matter?

[Lord Callanan]

We think the Irish Government are wrong on this matter. There is already a fiscal border in Northern Ireland but we have been very clear that we are not going to impose a hard border. We set out in a paper last year how we think this could be achieved by various electronic and technological means. However, we accept that this has to be the subject of further discussion, and we look forward to having those discussions. The Taoiseach of Ireland has accepted that that has to be part of the end-state agreement.