European Free Trade Association

Stephen Hammond 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.

[Dr Rupa Huq (Ealing Central and Acton) (Lab)]

As a fellow London MP, I am sure the hon. Gentleman receives numerous representations from constituents on EU citizens and financial passporting rights. Those people probably think the best course of action would be not to leave at all. Since that is not realistic, will he do all he can to exert pressure on the high command of his party and his namesake the Chancellor—sadly, he is not in the high command anymore—to ensure we have a pragmatic, not a purist Brexit? That way, if the arrangements are ready-made, some of the bumps can be avoided.

[Stephen Kinnock (Aberavon) (Lab)]

rose—

[Stephen Hammond]

I see the hon. Gentleman also wishes to intervene. If he does so at this stage, maybe I could answer both points.

[Stephen Kinnock]

I thank the hon. Gentleman for giving way, and he is making a powerful speech. Is it not the case that the European economic area option ticks many of the leave boxes—no European Court of Justice jurisdiction, the ability to control the inward flow of immigration and the ability to strike trade deals with third countries—but also delivers the certainty that business is so desperately calling out for, because it is a well-established, well-understood agreement that has existed since 1993, but with no ever closer union built into it? Is it not by definition the form of Brexit that ticks the boxes in line with what the vast majority—we might call it the silent majority—of the British people want in this debate?

[Stephen Hammond]

In response to the hon. Member for Ealing Central and Acton (Dr Huq), it is, of course, not my decision who is in the high command, but I understand her sentiments. I absolutely hear her point about financial services. That is why I was very pleased to see the Government taking the initiative and offering unilateral passporting to financial services. Of course, that will work to the greater benefit only if we are able to ensure that the European Union agrees the terms as well, but it was a good start. I wholeheartedly agree with her that the Government’s commitment on EU citizens must be made real and be part of the deal.

The hon. Member for Aberavon (Stephen Kinnock) is absolutely right. In terms of my hon. Friends who are Brexiteers—a few of them are in the Chamber today—I was discussing with one of them last night that the EFTA arrangements are something we can build a consensus around in this country. That is a sensible option, suiting both sides of the argument, and I would welcome any of the pragmatic leavers, including a number who advanced this case during the referendum, joining the cause and arguing for EFTA.

[John Stevenson (Carlisle) (Con)]

This is a really important debate and I congratulate my hon. Friend on securing it. I completely agree with his point that EFTA is understood by all parties; that is one of its great strengths. Does he agree that its true strength, and the one that could be the basis for our negotiations and unite all parts of the debate, is the fact that it has great flexibility within it?

[Stephen Hammond]

My hon. Friend is absolutely right that it has great flexibility. That is why I am putting it forward. There is not only one option. I had a chunk in my speech about what one colleague said in response to the question last week from my hon. Friend the Member for Eddisbury (Antoinette Sandbach), which cited the Switzerland option. Of course, that still allows for bilaterals, and some of those are still available, but there is a panoply of options within the EFTA arrangements.

There is some misconception about whether we would be welcomed back into EFTA, and I make the point that it is not only a flexible arrangement but one we would be welcomed back into.

[Dame Caroline Spelman (Meriden) (Con)]

I congratulate my hon. Friend on securing this timely debate. Is it not the case with EFTA that it does not have the pooling of sovereignty that is currently a big issue in our relationship with the European Union? Most importantly, it affords the flexibility of excluding agriculture and fisheries. We all know that the CAP does not fit well with our large farm structures and that the common fisheries policy has proved very contentious. Those two important industries would benefit from greater flexibility.

[Stephen Hammond]

My right hon. Friend is completely right. I am grateful to her for making that point, because such points need to be heard loud and clear so that the misconceptions can be fought off.

[Peter Grant (Glenrothes) (SNP)]

I was a bit concerned when the hon. Gentleman referred to pragmatic Brexiteers and pointed at me; I may be pragmatic, but I would certainly not call myself a Brexiteer. I am interested in his suggestion that the UK would be welcomed into EFTA. Can he give us his basis for that? Three expert witnesses appeared before the Exiting the European Union Committee yesterday—I understand three more will appear today—and all of them thought it extremely unlikely that the four EFTA members would want the UK to join, partly because the UK’s population is about four times bigger than the current total population of EFTA, and there would be significant concerns about upsetting the balance of EFTA. What indications has he had from the four Governments of the current EFTA countries that they wait with open arms to welcome the United Kingdom in?

[Stephen Hammond]

I apologise if I, with a sweeping hand gesture, put the hon. Gentleman into the Brexit camp, which he does not wish to be in; that was certainly not my intention. I have had lunch with the president of the EFTA court, and I had lunch with the ambassador to the United Kingdom of one of those countries yesterday, but let me quote the Norwegian ambassador to the EU:

“We would maintain an open-minded stance in the event of an application for EFTA membership. Overall, it is in Norway’s interest to maintain as close trade policy cooperation with the U.K. as possible”.

There is a lot of scaremongering about this point, yet it is clear from speaking to any of the ambassadors that the reality is that they would welcome our application.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

My hon. Friend is making an excellent speech. Does he propose EFTA membership as a transitional or a permanent state?

[Stephen Hammond]

I certainly see EFTA more as a potentially permanent state, rather than transitional. I know a number of my Brexiteer friends would probably see it as more of a transitional arrangement, but I see it as potentially long term, partly because of the point I have been making—that membership in no way undermines the Government’s ambition to secure a long-term, bespoke deal with the European Union. There is nothing within the EFTA structure that would prevent that. Given that our ambition is to be global Britain, we should take every opportunity we can to be so, and EFTA will fulfil those ambitions and objectives.

[Jeremy Lefroy (Stafford) (Con)]

Does my hon. Friend agree that there is, as I think he alluded to, a cultural element to this as well? The UK is making it quite clear that, while we may be leaving the EU, we are not leaving Europe. This would send an absolutely clear statement of that, and that we are still very much European and very much committed to our friends and neighbours in Europe.

[Stephen Hammond]

My hon. Friend and I must be of the same mind, or he must have read or have had foresight of my speech. I was going to make the same point in a few moments’ time, but given he has made it for me, I shall cut my speech down. He is, of course, absolutely correct.

[Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)]

The hon. Gentleman is making an interesting and strong case for EFTA and the EEA. Does he agree that there is a fundamental issue at stake: that the kind of potential end state he talks about, and indeed many of the others we have debated, show that there are many options for how we leave the EU? There is not just one way. That is the real issue at stake. Unfortunately, there are some in this place who would like to close the debate down and say there is only one alternative and no others. In fact, there are many ways in which we could go forward, and it is up to us as a country and as a Parliament to choose.

[Stephen Hammond]

The hon. Gentleman knows that I do not always agree with him, but he is absolutely right on this matter. That is why it is important that there is a consensus from us, as a Parliament, when speaking to the British people, pointing out that there are a range of options. We should not close any of them down as we look for the best solution for this country.

[Sir Christopher Chope (Christchurch) (Con)]

It is implicit in what my hon. Friend says that he is against our remaining in a customs union. Switzerland, which is in EFTA, is outside a customs union and has the freedoms that go with that. Do I take it from my hon. Friend’s speech that he accepts that we should leave the customs union?

[Stephen Hammond]

First of all, nothing in EFTA implies a customs union; there is no customs union with EFTA. That myth is being perpetrated. My hon. Friend is absolutely right that Switzerland is not in a customs union, and nor are any of the other EFTA members. I accept that we are likely to leave the customs union, but as he will know, it is the Government’s stated policy, in the Prime Minister’s Lancaster House and Florence speeches, that the possibility of a customs union is left open. Nothing has changed in terms of Government policy, so I am entirely in line with Government policy on that.

[Mr Dominic Grieve (Beaconsfield) (Con)]

On that point, it is also clear that the first-stage agreement that we reached in December, concerning the border between Northern Ireland and the Republic, must imply the maintenance of a form of customs union. What form that might take is clearly open to some level of debate, but as my hon. Friend may agree, it is quite explicit that it must follow that there is regulatory alignment to prevent the need for customs checks.

[Stephen Hammond]

As ever, my right hon. and learned Friend makes the point rather better than I can. It is absolutely clear that that is implicit and, based on the evidence we heard in the Treasury Committee, explicit in what the Government signed or agreed to at the end of phase 1 of the negotiations in December.

EFTA provides a great deal of flexibility, as we have explored in a number of interventions. It keeps open the option of joining the EEA agreement, which I think would be the right thing to do. However, it must be right that, as we leave the EU, we keep our options open. I say to the Minister in all sincerity that there is a lack of clarity over exactly what type of deal the Government want. We talked about CETA and beyond, and as I said a moment ago, CETA is the most advanced trade agreement that the EU has yet signed with a third country. I understand that the Government want to go beyond that, but the clock is ticking, and in trying to spend a huge amount of time carving out a middle ground between CETA and the EEA, the chances are that we may end up with nothing at all, or with something well below the Government’s ambitions.

It seems to me that an EFTA-style EEA relationship—the Norway option—could be achieved rapidly and will go much further than CETA goes at the moment. That is a route we could pursue for the UK’s best interest, and it must not be allowed to be dismissed without proper analysis and consideration.

[Chuka Umunna (Streatham) (Lab)]

I congratulate the hon. Gentleman on securing this important debate. First, with regard to CETA, one reason why that kind of relationship would not be appropriate for the UK is that CETA substantially covers goods, whereas 80% of our economy is services. Secondly, as he may come on to, one of the objections raised to our being part of EFTA, and using that as a way of accessing and being part of the EEA, is that we would be a rule receiver as opposed to a rule maker. Does he agree that it is wrong to say that EEA and EFTA members have no influence on the rules that apply? Does he also agree that if we want to access the single market, we will have to comply with its rules, and that we are more likely to be able to frame those rules if we are part of the EEA, through EFTA, than if we are sitting outside and simply accessing the single market through a free trade agreement?

[Stephen Hammond]

I of course agree with the hon. Gentleman. I am about to make exactly those points, because it is important that they are made loud and clear. As he will know and will have observed, I have spent a lot of time in the Chamber over the last two years making the case for services, which is one of our biggest tax generators. The public services that we all enjoy will not be able to be funded in the same way if we do not protect those services. As he will have wanted to point out, the EFTA arrangement covers services in many cases, whereas CETA, for instance, does not. That is a clear issue that the Government will have to confront.

The EFTA-EEA framework is motivated purely by the economy and not the pursuit of a political objective such as ever closer union. It is crucial that people remember that. The EEA would give the UK the same access to the single market as it has now for most goods and services. It is an off-the-shelf, already tested model that would provide businesses and our citizens with the most certainty that we can give them as we leave the EU. Yes, we would be subject to EEA regulation, but as my right hon. Friend the Member for Meriden (Dame Caroline Spelman) pointed out, it does not cover the controversial common agricultural and common fisheries policies or justice and home affairs. From the outset—to allay the concerns of some of my hon. Friends—we would have control of those policy areas.

[Daniel Zeichner (Cambridge) (Lab)]

Will the hon. Gentleman give way?

[Stephen Hammond]

I will just finish the point, because it is relevant to what the hon. Member for Streatham (Chuka Umunna) said. He is of course right: regardless of any deal with the EU that we choose to do, domestic businesses hoping to trade with the EU and the rest of the world will have to comply with what are often called laws but in reality are trading standards, and most of those are international trading standards, so there would be no change there.

[Daniel Zeichner]

Does the hon. Gentleman agree that a further advantage of the EEA-EFTA arrangements is access to EU programmes such as Horizon 2020 and Erasmus, which is of crucial importance to science and research and the universities sector?

[Stephen Hammond]

The hon. Gentleman has clearly read the EFTA arrangements correctly. I concur with him.

[Kevin Hollinrake]

Can my hon. Friend also confirm that EFTA/EEA does not cover taxation, so we would have an independent VAT policy, for example, if we joined EFTA/EEA?

[Stephen Hammond]

My hon. Friend has clearly also read the EFTA agreement and arrangements, and he is of course correct. There is no principle of direct effect with EEA-EFTA membership. As he has pointed out, that means that all laws must be approved by domestic legislatures. The UK would participate in drawing up proposed EEA legislation by serving on relevant committees. That is more of an input than is currently planned by the Government for their transition or implementation period—call it what you will. And certainly EFTA would have more of an influence collectively over the process with the United Kingdom as a member. We would regain our seats on global regulatory standard-setting organisations, on which much of EEA law is based, and ultimately we would retain a right of reservation.

This would all be supervised by the EFTA Surveillance Authority and the EFTA court, not the EU institutions. That would preserve for the Government the red line of avoiding ECJ jurisdiction.

[Anna Soubry (Broxtowe) (Con)]

I congratulate my hon. Friend on his excellent speech. I am sorry that I cannot stay for the full duration of what I anticipate will be an equally excellent debate. Has he explored whether it is possible for any arrangement that we come to with the European Union by way of a free trade agreement to be in effect docked? If we join EFTA, it could be docked in EFTA and therefore the EFTA court could have some role in relation to that agreement, which, again, gets away from any of the concerns that many right hon. and hon. Members have about the ECJ.

[Stephen Hammond]

My right hon. Friend is of course a lawyer and I am not, but I have had conversations with the president of the EFTA court, Mr Baudenbacher, and he would agree that her interpretation is correct and what she describes would be possible. That is only one opinion, but it is that of the president of the EFTA court and therefore it clearly carries some weight and some merit.

The EFTA court has made divergent decisions from the ECJ on numerous occasions. In fact, because the EFTA court deals with cases more quickly, it often hears the novel cases first, and in some cases the ECJ follows the EFTA court. The EFTA court’s rulings are only advisory domestically, so it cannot overrule our sovereign court, the Supreme Court. Again, the point is that we would be heavily involved in influencing.

[Nicky Morgan (Loughborough) (Con)]

I, too, congratulate my hon. Friend on securing this very important debate. Does he agree that one reason why many people voted to leave the European Union was that they wanted the UK to take back control? He has just brought up the very important word “sovereignty”, which for many people in the debate is at the heart of why they voted the way they did in June 2016; many people wanted to go back. Of course, the UK was a founding member of EFTA in 1960, so does he agree that the EFTA-EEA arrangement would meet the test of looking back to a day when we were happy with our relationship with the European Union and, of course, the UK would take back control?

[Stephen Hammond]

My right hon. Friend, the Chairman of the Treasury Committee, is right. One great virtue of what we are talking about today is that we are looking at where the UK is at its best, in that we are looking at the economics rather than becoming obsessed with ideology about some of the political points. This proposal solves many of the legal arguments and gives economic certainty to businesses and citizens, which is clearly what the House wants.

[Nigel Dodds (Belfast North) (DUP)]

I, too, congratulate the hon. Gentleman on securing this important debate, and I thank him for his generosity in taking so many interventions. Can he clarify that his position is to join EFTA in order to remain or be part of the EEA, or does he contemplate being part of EFTA without EEA membership?

[Stephen Hammond]

One point that I am making is that there is a range of options for us as a Government and a country to consider. Personally, I would argue for the EFTA-EEA arrangement, which I think gives us a huge number of advantages. It gives some certainty to British business. It allows us to do what the Government want to do in having a bespoke EU-UK deal and would allow that to be negotiated in a timely way. It would give us advantages in relation to free trade. We will not be in “the” customs union. If we chose to do so, we could establish “a” customs union. It seems to me that the EFTA-EEA arrangement is absolutely a good place for the United Kingdom to start as we leave the EU. Whether that is the choice of the House, if it comes to be discussed on the Floor of the House of Commons, is another matter. My point is that there is a range of options. Personally, I will argue for the EFTA-EEA arrangement; I think that is the best arrangement.

Let me deal with the point that the right hon. Member for Belfast North (Nigel Dodds) may have wished to come on to—I am getting close to the end of my remarks, Mr Gapes, but you will have noticed that I have taken a fair number of interventions so that colleagues can be heard.

Understandably, free movement of people will be a concern for many, notwithstanding the fact that EU migrants are net contributors to our economy and that the last set of figures available—official statistics—showed that net EU immigration was down to about 9,000 a year. It is true that, under protocol 15 and articles 112 and 113 of the EEA agreement, EFTA states can suspend free movement of people on a reciprocal basis. It is important to remember that. Some will say that that is only theoretical, but it is important to remember that the European Commission agreed, during the pre-referendum negotiation, that the UK would be justified in applying the proposed emergency brake for similar reasons. Therefore, the protections enshrined in articles 112 and 113 of the EEA agreement would undoubtedly apply should we choose to join EFTA, because the precedent has already been set.

As for EU budget contributions, which would be another concern, they would of course be subject to negotiation, and we have already conceded the concept of paying for access if we deem that to be in our interest. The EFTA-EEA countries make a financial contribution to the EU in two ways. They contribute, first, towards European cohesion efforts and, secondly, towards the programmes in which they participate. The House of Commons Library has been frequently quoted by hon. Members on both sides of the House to justify their position, so I would guide people to the Library’s estimate that if the UK were to join the EFTA-EEA arrangement, the contributions to the EU would be 25% less than any contribution that we make now or would make during any transition period.

The concern has been expressed that the current EFTA members might have reservations about one of the big G8 economies joining. However, as I said in response to an intervention, the indications that I have had, from quite powerful authorities, are that we would be welcome in EFTA. It would be a chance for EFTA to be renewed and revitalised, with better prospects and new aspirations for arrangements with other countries. The argument that the EU is trying to tell Norway not to move forward—as we have seen from what the Norwegian ambassador to the EU has said—may be a bit of a game and role play, but the reality is that the United Kingdom would be welcomed back into EFTA.

I ask the Minister to ensure that the Government keep open the option of re-joining EFTA. I see no reason why it would not fulfil the Government’s ambition. It provides the Government with the flexibility they say they require—and I agree—in negotiating to get the best deal for Britain, but I remind hon. Members that there is nothing in EFTA membership that seems to go against any of the plans the Government have set out so far.

Finally, in a national crisis—and this is a national crisis—the British political class has always had the ability to put aside ideology, reach a national consensus and act in the national interest. Surely that is in the ability of this generation’s political class. We must be able to stand up and show that we can match our forefathers. We should be seeking to build that national consensus and achieve the best outcome for Britain. It is abundantly clear to me that there is no model that will satisfy all sections of the British public. I believe—I have said this many times—a no-deal scenario would be bad for our economy. However, this approach would fulfil the result of the referendum. It would satisfy a large—I think overwhelming—majority of the British public and perhaps, importantly, this House of Commons, and go a long way to healing the divisions that were there. I recognise that EFTA is not a universal panacea, nor does it have all the benefits of membership of the single market and the customs union, but I believe, and I hope this whole House believes, that Britain’s negotiating position and its economic position post-Brexit will be improved by joining EFTA.

[Several hon. Members rose—]

--- Later in debate ---

[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.

[Stephen Hammond]

The hon. Gentleman is, of course, laying out the range of options I said were available and making the point about all their pros and cons. However, I think it was pretty clear from my speech that I think that the EFTA/EEA arrangement, which is what I argued for consistently throughout my speech, is the option, one, that I prefer and, two, that the Government should look at.

[Matthew Pennycook]

In a sense, the hon. Gentleman reinforces my point, which is that the realistic debate that we should be having is about the EEA/EFTA option. I do not think that the other options are particularly practical or desirable, for a variety of reasons, so that option—the EEA/EFTA one—is what we should concentrate on.

When it comes to the EEA/EFTA model, the Opposition recognise that it undoubtedly has a range of advantages.

[Matthew Pennycook]

The Opposition’s policy is that a full customs union with the EU remains on the table; it should be an option that we explore, and I will come to the reasons why.

Despite the advantages that EFTA provides, it also has some inherent limitations. One of the most serious, which we have to grapple with if we are going to seriously consider and debate the advantages of the EEA/EFTA model, is what it would mean for the border in Northern Ireland. Unless that model is complemented with a customs union or customs arrangement of some kind, I do not necessarily think that EFTA alone would solve the problem in Northern Ireland.

That is because the agreements that the EFTA members have struck with third countries involve the collective dropping of tariffs. I do not think that those agreements can be supplemented with a customs union or customs arrangement in a way that would solve the problem in Northern Ireland. Earlier, the right hon. Member for Meriden (Dame Caroline Spelman) mentioned agriculture. There are issues within EFTA where there is explicit freedom to diverge, which I think makes the Northern Ireland border situation complicated, and it is certainly not clear that it would be solved by straight-up EFTA membership.

In addition, there are the concerns that have been raised about freedom of movement and payments into the EU budget. Neither of those issues is insurmountable, but we need to have a really honest debate about how we would reconcile the concerns that were raised in the referendum, and that undoubtedly lay behind the vote in the referendum, and the economic conditions that are required in the country going forward.

There are also very practical reasons why the EEA/EFTA option could be challenging. It is clear to me that the majority of the legal opinion on this shows—Professor Baudenbacher would say this himself—that the UK ceases to be a member of the EEA when we leave the EU. We cease to be a contracting party; article 1.26 of the EEA agreement says that very clearly. It is not clear—this needs further explanation—whether we could seamlessly join EFTA in a way that allows us to remain a member of the EEA agreement continuously. As a number of hon. Members have said, there are also real questions about whether the EFTA states—in particular, Norway—would be happy to have us join.

[Stephen Hammond]

They would.

[Chuka Umunna]

They would.

--- Later in debate ---

[Stephen Hammond]

I thank the Minister for his response. Like my hon. Friend the Member for Wellingborough (Mr Bone), I of course support the Government’s ambition to have a bespoke deal. Nothing I have set out this morning would in any way prevent that. The Minister, whom I regard as a thoughtful politician, will understand that I am disappointed by his response. Although this Chamber has had the chance to consider the motion, the feeling I detect from the Chamber is that the whole House would like to have a chance to reflect on the matter. I therefore say to the Minister that I have decided to provide that by tabling later today a number of amendments to the Trade Bill to be debated on Report. That will give the whole House the opportunity to discuss EFTA on the Floor of the House.

Question put and agreed to.

Resolved,

That this House has considered the European Free Trade Association.