European Free Trade Association

Antoinette Sandbach Excerpts

Wednesday 7th February 2018 Westminster Hall

[Antoinette Sandbach (Eddisbury) (Con)]

It is a pleasure to serve under your chairmanship, Mr Gapes. Last week at DExEU questions, the Under-Secretary of State for Exiting the European Union, my hon. Friend the Member for Wycombe (Mr Baker), challenged me to table a debate on EFTA. I am grateful to my hon. Friend the Member for Wimbledon (Stephen Hammond) for having the considerable foresight to have already done so. I know that he and others have been at the forefront of the push to get EFTA onto the Government’s agenda. I listened carefully to his contribution and share most—in fact all—of his perspective. His timing could not have been better, because it is vital that we have an evidence-led debate on this subject and on the broader subject of the UK’s relationship with the EU.

The main focus of my remarks will be the transition and how best to manage our departure, should a deal not be achieved before Brexit day. At the end I will address EFTA membership in the longer term and how this can be in our national interest. I will be brief, because I have discussed this recently. If hon. Members wish to know my thoughts in more detail, they can check the Hansard record of the debate on 22 January.

The Government do not have much time left to strike a deal, as Michel Barnier reminded us all yesterday. The time is coming when the Government must make tough choices, and those need to be based on evidence rather than on ideology—particularly an ideology that can be seen at the fringes of our party. The Government are also delaying several key pieces of work that will prepare us for the world post being in the EU. The road haulage Bill has been delayed, and the immigration White Paper has been delayed and may not be published until the end of the year.

I have consistently called for Ministers to be given the time that they need to think through their decisions. This is, as others have said, one of the most complex tasks the country and its Administration have faced in decades, and the timeframe for making decisions should reflect that, but under the current arrangements, we will have to restructure our entire relationship with the world in just a couple of years. Roy Jenkins once compared Tony Blair’s approach to winning high office to that of a museum curator carrying a Ming vase across a polished marble floor. I cannot help but think that Ministers may sympathise with that image as they hold on to something as precious as the democratic choice of the public while having to deliver Brexit in a manner that does not harm the economy, wear away at the social fabric of this country or damage our standing abroad. To do that, I ask Ministers to make up their minds on all the best available options, and to respect the wishes of all our constituents, not just either the 52% or the 48%.

There are considerable merits of EFTA for a longer transition period. I support the Government’s ambition for a deep and enduring partnership with the EU. Given our shared history and geography, it would be wrong to adopt CETA wholesale. To propose an entirely new arrangement is ambitious, but I welcome that ambition. Our partnership must be deeper than the EU has with any other third party, and it must include a deal on services, which make up almost 80% of our economy and are therefore essential to our prosperity.

I am aware of the pressure that the Government are under to strike a deal soon, and this is where the first benefit of EFTA should become apparent. If we were able to expedite rejoining EFTA it would provide a soft landing should the Government fail to strike a deal before the deadline. Currently, failing to strike a deal would see us ejected from the EU with no alternative to WTO terms. EFTA should be that alternative. Last week’s Treasury estimates, which are the best data we have at this point, suggest that WTO terms would cost us 8% of GDP growth over the next 15 years.

[Kevin Hollinrake]

My hon. Friend is making an excellent speech. To take her back to her earlier comments on a transition: is she proposing this scenario as a transition or a permanent state?

[Antoinette Sandbach]

It is the option that gives us the leeway to negotiate. It is an important staging post. Given the severe impacts that the WTO alternative would have, it is a safe harbour, if I can put it that way, with all the benefits that my hon. Friend the Member for Wimbledon has already outlined.

The reality is that if we do not take advantage of the opportunity that EFTA membership would give us, we are facing a cost of 8% growth in our GDP. That is a very significant cost that will have a significant impact on tax revenues and employment prospects in this country. By comparison, EEA membership through EFTA would allow us to recoup 6% of that lost growth, which is important for the Government to consider. I note that this month the UK Trade Policy Observatory has published an important briefing paper on the sectors most vulnerable to Brexit, looking at the different options. Perhaps those who are not convinced by the Treasury analysis can look at independent analysis—although I think the Treasury analysis is independent—published by a third source.

EFTA also allows the Government to meet their existing commitments, particularly around having no hard border between Northern Ireland and the Republic of Ireland. It seems to me, from the provisions in paragraphs 49 and 50 of the agreement made in December, that that is a crucial ambition that we need to step up and achieve. We need to examine whether EEA membership and continuing membership of the customs union is the only way to deliver that promise. Even if it is not, it gives us the time to look at what other options are available.

I listened with interest to the concerns expressed by the noble Lord Bridges in the debate on the European Union (Withdrawal) Bill last week that transition needed to be a bridge to the future, not a gangplank into thin air. EFTA offers that bridge: a graduated transition that sees us leaving the EU, regaining control of swathes of policy areas, but retaining the vital trading and economic links that have built up between the UK and Europe, until a better deal can be struck. I know that some Members are concerned that this is a route to allow mischievous remainers to get back into the EU, but that is not correct: it is not the intention. Leave won; some leavers still need to get used to that. Those who have fought for decades to secure our departure from the EU have far more to fear from a badly executed Brexit than they do from using EFTA to bridge any potential gaps.

Like my hon. Friend the Member for Wimbledon, I think that the long-term benefits of EFTA will become clear should we apply to rejoin, as I hope we will. He has already outlined the potential market access to more than 900 million people. From a sovereignty perspective, EFTA decisions require unanimity; we would still have the power of our veto. We would take back control of farming and fisheries. We would be rid of ever closer union and there would be no prospect of the single currency. EFTA would address a huge part of the public and political concern about the EU, while still allowing the UK to benefit from the single market.

I do not want to revisit the details I discussed a fortnight ago, but I do want to add two points. I have faith in the Prime Minister’s ability to strike a deal, but if we do not reach agreement with the EU regarding the Irish border, EFTA would allow us to extend the existing commitment we have made into the longer term. The breathing room that EFTA arrangements provided would strengthen the Prime Minister’s hand in negotiations. In the event of no deal, the UK faces significant detriment from WTO terms.

EFTA offers a route that will allow Ministers to respect the referendum result, our commitments on the Irish border and the needs of our economy. In a number of areas, it would allow considerably greater freedom of action than we currently enjoy. It would ensure that the most complex parts of our negotiation with Brussels—the issue of the Irish border—is resolved in the short term, and it would provide more time to create a bespoke solution. It allows us to minimise the risks of no deal and strengthen our hand in negotiations. If Ministers disagree so vehemently with the Treasury analysis, what are their own assessments of the impact of no deal? What deficiencies do they identify in not only the Treasury analysis, but much of the analysis by independent think-tanks that are external to the UK civil service?

EFTA constitutes the best arrangement for a plan B in the unlikely event that plan A fails. I believe that it is a good deal for Britain in the longer term, and ask that colleagues rethink this issue and recognise how EFTA can offer us a safer, more secure route out of the EU and into the world.

--- Later in debate ---

[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.