European Free Trade Association
Debate between Stephen Hammond and Matthew Pennycook(6 years, 2 months ago)
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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.