European Economic Area: UK Membership

Gareth Thomas Excerpts

Monday 6th November 2017 Commons Chamber

[Stephen Kinnock]

I will make some progress.

Carolyn Fairbairn of the CBI said only yesterday:

“We remain extremely worried and the clock carries on ticking down”.

As a result, she said, more

“and more firms are triggering their contingency plans to move jobs or change investment plans.”

Reality has finally bitten, even in the minds of some of the most deluded Brexiteers, that it was always a fantasy to think it would be possible to complete the divorce and the final trade deals in parallel. A solid cross-party consensus on the need for a transition deal has therefore emerged, as was made clear in the Prime Minister’s Florence speech. All parties in the House also agree that we must leave the EU by walking over a bridge rather than by jumping off a cliff, and the EU has welcomed the fact that the Government have finally started to show some signs that they understand the realpolitik of the negotiations.

Given that an off-the-shelf transition deal is inevitable, it is clear to me that EEA-EFTA is the only viable option. The EEA and EFTA are well-established and well-understood arrangements that offer the clarity, stability and predictability that the British economy so desperately needs in these turbulent times. Transferring from the EU to the EEA and EFTA would allow us to balance sovereignty and market access. Crucially, such a transition deal would buy us time for negotiate the final comprehensive trade and strategic partnership deal that will shape the terms of the UK’s relationship with the EU for decades to come, while also allowing us to enter into independent trade negotiations with third countries because we would be outside the customs union.

[Gareth Thomas (Harrow West) (Lab/Co-op)]

Is my hon. Friend’s point not all the more pertinent and timely in the light of the visit of the United States trade representative, Wilbur Ross? He certainly seems to be implying that a US-UK trade deal would take significantly longer than the 19 or 24 months to which the Government are clearly hoping to secure agreement for a transition deal.

[Stephen Kinnock]

I think that there is unanimity, almost, on the issue of the timing. I would add that the benefit of EFTA is that it is not a customs union but a free trade area, thus enabling us to connect with the vital single EU market but also to strike third-country deals with countries including, potentially, the United States.

--- Later in debate ---

[Sir William Cash (Stone) (Con)]

For a free trade agreement to be possible after Brexit, the interim period must involve no membership of the EEA, the customs union or EFTA, because that would remove the freedom we need to negotiate with third countries. That includes any period in the EEA, being party to the EEA agreement, like EFTA states, or a bilateral Swiss-style agreement. The EEA essentially means membership of the single market and commitment to the four freedoms—free movement of goods, services, capital and workers. Three EFTA states—Norway, Iceland and Liechtenstein—signed the EEA agreement in 1994, but the EEA agreement would mean insufficient freedom for us to be a credible partner in trade negotiations with others. The agreement means taking on the single market acquis, but having no vote on legislation.

Through the EFTA Surveillance Authority, regulation is being harmonised, with EFTA itself stating that

“the EFTA Surveillance Authority and the EFTA court… respectively mirror the surveillance functions of the European Commission and the Competences of the Court of Justice of the European Union”.

The EEA therefore does involve the harmonisation of laws in significant areas of the environment, social policy and so on, in those countries’ domestic economies. It involves the application of ECJ case law by the EFTA court, and I completely disagree with the assertion of the hon. Member for Aberavon (Stephen Kinnock) that it does not. The EEA also includes the free movement of persons. In other words, the European Court of Justice effectively prevails, and our influence over the EEA would be infinitely and hopelessly inadequate.

Let us consider the experience of Norway for a moment. The Norwegian Government commissioned a study of the EEA’s impact, and it found that Norway implements

“approximately three quarters of substantive EU law and policy”.

That makes a mockery of much of what the hon. Gentleman said. Furthermore, the cost of the EEA to Norway has increased tenfold since 1992, and nearly 12,000 EU directives and regulations have been implemented through the EEA agreement and have changed Norwegian society in a significant number of areas. We are told that, on the EU legal database, 17,000 regulations have come to us since we entered the European Union, yet Norway, which is in the EEA, has acquired nearly 12,000 EU directives and regulations.

[Gareth Thomas]

Can the hon. Gentleman tell the House when a Norwegian Government last proposed leaving the EEA?

[Sir William Cash]

The Norwegian Government have consistently made it clear that their position is to stay in but, in practice, the trend of attitudes in Norway is increasingly moving against that position. I was at a conference only last week at which a young Norwegian leader of the people’s movement made it clear that more than 70% of young people in Norway want to get out of the EEA and do not want to join the EU. That is the position, and the bottom line—I do not need to speak any longer on this—is that there is absolutely no case whatsoever for our joining the EEA. Joining is completely contradictory to the mandate that we received in the referendum, which is perfectly clear. It is impossible.

--- Later in debate ---

[Gareth Thomas (Harrow West) (Lab/Co-op)]

It is a pleasure to follow the hon. Member for Carlisle (John Stevenson), who made a number of interesting points, two of which I wish to follow up. He rightly noted that the outcome of the referendum did not determine the future basis of the UK’s relationship with the EU and that it was this House’s responsibility to do that in the months ahead of March 2019, when we leave the EU. He also rightly noted the huge amount of uncertainty at the moment, which is stalling many investment decisions and, understandably, worrying the business community up and down the UK. That has been underlined in graphic detail over the course of the CBI conference today and recently—notably by the Governor of the Bank of England just last week, when he highlighted the significant impact that Brexit is having our economic growth in the UK, at a time when, in his view, the British economy should be doing much better than it is.

I have to be straight with the House: I come to this debate having made it clear in the general election that I wanted Britain to maintain full access to the single market and having always thought that Britain was stronger through co-operating with our allies through the European Union and, in particular, its single market element. I have to accept that even though my constituency voted strongly in favour of remain, that relationship looks like it is going to change in the future, but it seems to me that continued membership of the EEA represents an opportunity—certainly in a transition phase, but potentially in the longer term as well—for the concerns of those who voted to leave and those of us who voted to remain to be squared.

It is striking that, notwithstanding all the concerns we heard from the hon. Member for Stone (Sir William Cash), Norway has consistently sought to stay in the European economic area, with the benefits of not only full access to the single market but control of agriculture and fisheries. Surely that is the beauty of the EEA at this time, as we look at the case for a longer-term transition deal than the Government are currently considering. It is part of an internal market with the single market. It replicates it, albeit with the two exceptions that I have outlined and that other Members have acknowledged, yet it comes without membership of a common defence, security and foreign policy, which concerned a number of those who voted to leave. Crucially, it allows member states to negotiate their own trade deals.

As a former trade Minister who watched and took part in many a long discussion about trade deals, I struggle with the idea that we could do quickly a comprehensive trade deal with, say, the United States, or even with India or Australia. Given the short timescale for a transition deal that appears to be envisaged by Ministers, and certainly by the EU, it is fanciful to think we will be able to sort out comprehensive trade agreements within that time. The EEA therefore surely represents a sensible transition arrangement. It is also worth considering for the longer term.

In the seconds I have remaining, I turn to the issue of whether or not we voted to leave the European economic area. I say gently to the hon. Member for Stone that I do not think we did. Notwithstanding the points that others have already made about a mandate, there was no reference to our leaving the EEA in the pamphlet that the Government published to explain the context of the referendum vote. I therefore think there should be a specific vote in the House on whether we should leave the EEA.