European Free Trade Association

James Cartlidge Excerpts

Wednesday 7th February 2018 Westminster Hall

[Stephen Hammond (Wimbledon) (Con)]

I beg to move,

That this House has considered the European Free Trade Association.

It is a great pleasure to serve under your chairmanship, Mr Gapes, and to see so many colleagues from across the House here so early on a Wednesday morning, when there are so many Select Committees and other things going on.

We all know that this country voted to leave the European Union, and we accept that result. However, what that referendum did not say was how we should leave the European Union. That is what today’s debate is about. One of the great myths of that referendum was that this country also voted to leave the single market and the customs union. It did not. Leaving the European Union was the only option on the ballot paper. How we leave the European Union is the most difficult challenge facing this country, and it is up to us, the Parliament of this country, to decide how we do it.

I think both sides of the House agree that we need an exit and a deal that allow us to trade freely with our former partners and to sign new free trade agreements, and that provide a level of economic certainty to businesses and economic and security certainty to our citizens. I want to discuss an option I think should have wide appeal across the whole House—indeed, it was consistently supported by Brexiteers prior to and during the referendum debate.

There are a number of misconceptions about the European Free Trade Association that need to be addressed. Those misconceptions, I say frankly to those on my Front Bench, were repeated by one Minister last week. It was not the Minister who is answering the debate, but the level of miscomprehension in evidence was concerning.

Crucially, EFTA membership gives the opportunity to have, but does not automatically entail, membership of the single market. It does not envisage political integration. It is economically motivated. EFTA does not issue legislation or establish a customs union, and decisions are made by unanimity.

If we examine EFTA, there are three distinct benefits to the UK as we leave the European Union. It brings significant free trade benefits. On joining EFTA, we would automatically become part of the free trade area between the current EFTA four—Norway, Switzerland, Liechtenstein and Iceland—which covers trade in most goods and services and eliminates tariff barriers. In addition, we would be able to benefit from the free trade agreements they have already signed with third countries. We should not underestimate that; EFTA has 27 free trade agreements covering 38 countries and 900 million customers.

In text and context, many of those agreements are more modern than some of the deals the EU is signing with third countries now. Some of the analysis, certainly around services, would suggest that some of the free trade agreements being signed by EFTA and some of its existing free trade agreements are a much better fit for the UK economy than some of the EU’s, and are more comprehensive. For example, EFTA has a free trade agreement with Singapore and Hong Kong—two incredibly important markets for the United Kingdom, and areas without a completed EU deal.

[James Cartlidge (South Suffolk) (Con)]

My hon. Friend is making an excellent speech. Did he see the recent coverage in The Daily Telegraph noting that South Korea, and possibly other nations with which we have trade deals through the EU, would be looking to use our exit to potentially renegotiate the terms? Does he agree that, were we in EFTA, it would surely be in our favour that EFTA has trade deals with those countries, which would make the process far simpler for us?

[Stephen Hammond]

I entirely agree with my hon. Friend, and I want to make a point in a moment about some of the Government’s ambitions regarding their Trade Bill.

Joining EFTA would be a significant help when it comes to making up for the loss of EU free trade agreements. It would demonstrate to the world that the United Kingdom is not leaving Europe as it leaves the EU, and it would highlight our commitment to global trade. Joining EFTA does not in any way stop the Government’s plan to negotiate a deep and special bespoke arrangement with the EU. Indeed, if that is the Government’s ambition and they wish to achieve it, they should consider joining EFTA, because it would greatly assist that goal by framing it within an institutional set-up that the EU is familiar with.

The negotiations on the Comprehensive Economic and Trade Agreement show how difficult and time-consuming a UK-EU deal could be. CETA took seven years. It was the most ambitious EU free trade agreement so far negotiated, and the Government’s stated ambition is to go some way beyond it. The chances that they will be able to fulfil that ambition without a framework that the EU is familiar with strikes me as laudable but potentially difficult to achieve.

The EFTA court, the surveillance authority, the council and secretariat are all institutions understood and trusted by the EU, with well-established systems for information access and consultation. They can be used as part of any future UK-EU deal, to strengthen our commitment and avoid creating new institutions.

--- Later in debate ---

[James Cartlidge (South Suffolk) (Con)]

It is a pleasure to serve under your chairmanship, Mr Gapes. I will follow my hon. Friend the Member for East Renfrewshire (Paul Masterton) in being as brief as I can.

To my hon. Friend the Minister, I say that I, like most of my hon. Friends, want the Prime Minister to achieve a successful, bespoke deal, but the clock is ticking. To put it bluntly, levels of agreement are not optimal on the internal flank. I hope he can answer one question: if EFTA-EEA is such a bad idea, why are its four constituent countries among the richest and most successful on the face of the planet?

This is not project fear. We talk about hypothetical scenarios, such as what would happen if we left without a deal or under a soft or hard Brexit, but those countries are out there in the real world, not gazing at their navels, but negotiating trade deals and making a success of a trade bloc that we created with them in 1960. They have found a way to be sovereign countries, to deal with the huge behemoth of the European Union on their borders and to somehow retain that combination of prosperity, security and, yes, sovereignty.

Back in Westminster, we are in a hypothetical realm where we keep talking about all the possibilities that may emerge. If one were to be hypothetical and ask, “What deal could we possibly construct on which we could conceivably unite as a country?” it would have to do the following. It would have to please those on the Brexit wing by enabling us to negotiate our own trade deals from day one of leaving. EFTA does just that. For the Mayor of London, who wants us to stay in the single market, for the Scottish Parliament, which also wants us to stay in the single market, and for the many of us who think that that would be right for the City of London and services, we would have to stay in the single market. In EFTA-EEA, we stay in the single market. For everyone, there would have to be a control on unsustainable migration. In EFTA-EEA, we have the control that should migration surge again, article 112 and, importantly, article 113, which guarantees our right to negotiate free movement, would apply and have applied in practice in the real world.

[Vicky Ford (Chelmsford) (Con)]

The free movement issue is very sensitive. In the EFTA relationship, Liechtenstein has a cap on the total number of EU citizens it allows in each year. It is a much smaller country, but the principle is there.

[James Cartlidge]

Yes, the principle is there. The powers are there in black and white and they can be used unilaterally. There is simply no way to dispute that.

To return to the hypotheticals, from a Brexiteer point of view, we would want something that gives us visible signs of power back on day one. We would be out of fisheries, which is why Fishing for Leave supports membership of EFTA—it knows that next year, it could get power back for fisheries. We would be out of the common agricultural policy. We would be out of the serfdom of the ECJ and under the EFTA court.

I will finish by referring to the transition. Even as someone who campaigned for remain, I think the Government’s current proposal would mean a vassal transition where we had absolutely no control. To people in the Brexit camp, I say that surely the proposed transition, where we have literally no say in future laws, is far inferior to one where we go into EFTA next April, have powers back, and have the security of staying in the single market. That is the best transition, which would enable us to have a safe harbour to secure our long-term future, as other hon. Members have said.

A range of continental lagers are available, but if Carlsberg did an off-the-shelf, last-minute Brexit deal that pleased everybody, it would probably look an awful lot like EFTA-EEA.

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[Matthew Pennycook (Greenwich and Woolwich) (Lab)]

It is a pleasure to wind up for the Opposition and to see you in the Chair, Mr Gapes. I join other hon. Members in congratulating the hon. Member for Wimbledon (Stephen Hammond) on securing this debate and on the considered way in which he framed the issue.

The Labour party has continually made clear that we want to seek a deal with the European Union that secures all the benefits of the single market and the customs union and that involves no diminution of the EU-derived rights—employment rights and equality rights—health and safety standards, and environmental protections and standards that we currently enjoy.

Jobs and the economy must be the Government’s priorities in the next phase of the negotiations, so it is absolutely right that Parliament debates in detail the pros and cons of any and every means of potentially securing a departure from the EU that protects both. I echo what many hon. Members have said in the debate this morning: every option must be kept on the table.

It reflects poorly on the Government that Back Benchers have to bring Ministers to Westminster Hall and have only an hour to speak on issues of this importance. We should be debating the pros and cons of European Free Trade Association arrangements and other arrangements in great detail on the Floor of the main Chamber; that we are not doing so is a missed opportunity.

I very much welcome the attempt by the hon. Member for Wimbledon to convince the Conservative party to ditch the ideological baggage, and to drag with him the Government and the small group on the Government Benches who favour—for ideological reasons—the hardest of departures from the European Union.

There are misconceptions about EFTA, and they need to be challenged. We need to have an honest debate about what the trade-offs and the compromises involved in an EFTA arrangement, or other arrangements, would be. However, all options must be considered and, as other hon. Members have said, nothing should be taken off the table.

In the brief time I have available to me, I will sound a few notes of caution about the trade-offs when it comes to EFTA, or at least examine some of them. I will start with the transition period, because a number of different views have been expressed this morning about whether EFTA would apply in the transition or afterwards and about the variants that it might cover.

I fail to see how EFTA could work in terms of a transitional arrangement, and that is for two reasons. The first is that, as we have argued for some time, the Government must pursue transitional arrangements on the same basic terms as those that apply now, which includes membership of the single market and the customs union, and would involve the jurisdiction of the European Court of Justice. That is supported by businesses and trade unions, and—if people pay any attention to what the European Commission has been saying on the EU27, they will know this—it is also the only option that is available. I cannot see how EFTA, as a transitional vehicle, could be realistically negotiated.

Even more importantly, an EFTA transition would in a sense entail what the Government—and we agree with them on this—have explicitly sought to avoid. Businesses and individuals do not want two points of transition towards the end state. They do not want a situation whereby they would depart the EU and go on to EFTA terms, and then go on from EFTA terms to the final end state of a bespoke deal.

[James Cartlidge]

What the hon. Gentleman talks about as a transition is not really a transition; it is an extension of existing membership, and there is no point in trying to deny that. EFTA can be a transition in this sense—that we go into it, as others have said, as a safe harbour. However, he seems to be ruling out the idea that, once we are in EFTA, there would ever be any further change, when it would clearly be in our national interest to look at how we might, for example, strengthen co-decision making or consider divergence within parts of the single market. The point is getting to a safe position to do that. That is what a transition is—not an extension of our existing membership.

[Matthew Pennycook]

I disagree, because I do not see a transitional arrangement on those terms as an extension of membership; we would lose our voting rights and our representation in the European Parliament. However, that is the only transitional arrangement on offer, and the one that the hon. Gentleman is suggesting is not a serious possibility. Also, as I have said, it would involve two points of disruption for businesses and individuals. For that reason, we favour a transition on the same basic terms as now. However, if we are talking realistically, and we are talking about a post-transitional arrangement, EFTA membership is clearly something that the Government should consider.

I will just probe a bit of the argument that the hon. Member for Wimbledon made in terms of there being a range of viable options open to the UK within EFTA, each of which warrants consideration. It is difficult to see what would be gained by EFTA membership alone. I take the point that obtaining it would secure for us access to the EFTA free trade area and the four EFTA states, as well as participation in trade agreements with the 27 countries in the EU, but in no way would that make up for the loss of trade that would come from losing the 50 preferential trade deals that the EU has with third countries or the many other trade deals that it is negotiating. Moreover, EFTA membership alone would not secure for the UK preferential access to the EU internal market.

In the same way, it is difficult to see how the Swiss model, or a variant of it, would work for the UK. As hon. Members will know, Switzerland has only partial access to the EU’s internal market. We must also consider services, the future of which is integral to our country. I know that the hon. Gentleman has real concerns about them, and we both do, because of our constituencies. Services are covered only to a limited extent by the Swiss model. Crucially, Swiss bilateral agreements do not provide for cross-border access in financial services. So it is difficult to see how the Swiss arrangement would work for the UK, notwithstanding the issues that it has in terms of its sustainability or the length of time that it has taken to negotiate.

--- Later in debate ---

[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.

[James Cartlidge]

Will the Minister give way?

[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.