Leaving the EU: No-deal Alternatives

Stephen Kinnock Excerpts

Wednesday 21st February 2018 Westminster Hall

[Antoinette Sandbach]

No. The consequences of a WTO Brexit mean that we fall back on rules that require the imposition of tariffs, unless we waive them as a most favoured nation status for all other countries. That would then expose our manufacturing, farming and other industries to competitors with far lower standards than us, some of which have far cheaper labour costs, when we have very high quality products in this country. That is the consequence of WTO terms.

[Stephen Kinnock (Aberavon) (Lab)]

I congratulate the hon. Lady on securing this debate. One of the common misconceptions is that the EEA and the single market are exactly the same thing. That is not the case. There is no common fisheries policy and no common agricultural policy. The writ of the European Court of Justice does not run to the full EEA; there is the EFTA arbitration court. Articles 112 and 113 of the EEA agreement allow for safeguard clauses suspending things such as free movement of labour. So it is important that in this debate we clarify that the European economic area and the single market are not synonymous.

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[Stephen Kinnock (Aberavon) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Sharma. I congratulate the hon. Member for Eddisbury (Antoinette Sandbach) on securing this important debate.

As the Government’s own analysis shows, a no-deal outcome would mean that growth would be 8% lower nationwide, 10% lower in Wales and 12% lower in the midlands, Northern Ireland and the north-west—and the north-east would take a huge 16% growth hit. Tariffs would be 10% on every movement along the supply chain of an industry such as the automotive industry, which is so vital to the steel industry in my constituency. It would crush not only that industry but connected industries.

[Kevin Hollinrake]

Anybody—any hon. Member—can see those figures in the Treasury report, but the report caveats them by saying that that is without any other Government interventions or reaction of businesses in adjusting to a new world of trade with the European Union. Does the hon. Gentleman accept that?

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[Stephen Kinnock]

Clearly, the figures are a forecast, which is more of an art than a science, but the fact is that leaving our largest market—where 43% of our exports go—will inevitably have a negative impact on growth. Whatever remedial measures businesses attempt to take, they will always be playing catch-up with the impact of that seismic event. It seems inevitable to me, therefore, that there will be a contraction in the economy.

At the end of last year, the head of HMRC told the Brexit Committee that preparing for Brexit is set to cost £1 billion over the next five years—and that is on the basis of our securing some kind of deal. That tells us that no deal is simply not an option, as the hon. Member for Eddisbury so eloquently set out. It also underscores the importance of the final part of the Brexit negotiations, in which the framework for the future relationship will be set out. If this House wishes to shape that, we must move quickly.

Today’s debate could not be more timely, because we are in a race against time. Later this month, the EU will publish the legal text of December’s joint progress report. In mid-March, the European Parliament plans to publish a resolution to be adopted ahead of the European Council meeting on the future relationship. That will be akin to the 3 October resolution, which made it clear that there would be no regulatory divergence across the Irish border, and that transition could

“only happen on the basis of the existing European Union regulatory, budgetary, supervisory, judiciary and enforcement instruments and structures”.

That must sound familiar to hon. Members, and it means that we cannot dismiss it as just white noise. The October resolution was effectively the blueprint for the deals that have followed. That will also be the case for the resolution that will be passed in March about the negotiating guidelines for the future relationship.

When it comes to the future relationship, Michel Barnier has been clear: our options are a deal based on the Canada model or one based on the European economic area. Once that basic model has been agreed, there will be some scope during the transition period to add or subtract from it, but to all intents and purposes the choice will be made, and it will be binary—and it is coming very soon. That matters because the Canada model offers little on services, which make up 80% of the UK economy and almost 40% of our exports. As Mr Barnier has said, there is no place for services, because

“There is not a single trade agreement that is open to…services. It doesn’t exist.”

The Canada model also leaves us without a customs partnership, which is incompatible with the desire to have a frictionless border in Ireland.

Our conclusion must be clear: our preferred model—the only conceivable model, in fact—for the future relationship is one based on EEA-EFTA membership. EEA-EFTA offers the best possible terms of exit by providing the maximum possible access to the single market from outside the EU while allowing for differences that preserve our desire for greater control and self-determination. The EEA ends the principle of direct effect, so this House would have to pass all rules relating to the EEA internal market into law. It ends the jurisdiction of the European Court of Justice. Instead, we would move to the governance of the EFTA court, which frequently forges a path different from that of the ECJ, and which would have British judges on its bench if the UK were an EEA-EFTA member.

In EEA-EFTA, we could shape the rules of the single market, of which only 10% are relevant to the EEA. With the right of reservation, we would possess a veto over anything we considered inappropriate. That is not being a vassal state; that is not an empty vessel. The Norwegians have used their veto almost 20 times, most recently in rejecting the third postal directive, for which they suffered absolutely no repercussions.

Articles 112 and 113 of the EEA agreement allow for suspension—

[Mr Virendra Sharma (in the Chair)]

Order. I call Paul Masterton.

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[Suella Fernandes]

We are not working towards a no-deal scenario, if that is what my hon. Friend is implying. As I have set out just now, we want an agreement based on tariff-free access, reducing our non-tariff barriers and with the ability to strike our own free trade agreements, but it is clear that we are a founding member of the WTO and plan to take up our seat at that organisation in due course.

[Stephen Kinnock]

The Minister has set out all the reasons why the Norway option does not work, but has also said that the UK wants collaboration on trade and security; access for services, which are a vital part of the economy; the ability to strike our own free trade agreements; and no ECJ jurisdiction. The Norway option ticks every one of those boxes.

[Suella Fernandes]

I disagree with the hon. Gentleman because Norway, although part of the EEA and EFTA, does not have much say on rules and regulations that come to it through the EEA agreement.