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Trade Bill - Committee (4th Day)

Part of the debate – in the House of Lords at 5:30 pm on 4th February 2019.

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Photo of Lord Bates Lord Bates The Minister of State, Department for International Development 5:30 pm, 4th February 2019

I thank the noble Lord, Lord Lea, for setting out the rationale for his amendment. He was sincere in his attempt to persuade us and very thorough, as I would expect of a distinguished economist, in setting out in some detail his thoughts on where this option might go. Whether it is plan B, C, D or E, the reality is that it is a proposal that the Government take seriously and I want to respond to it in that manner.

As my noble friends Lord Finkelstein and Lord Trenchard have mentioned, the very topic of EEA membership was debated in another place in relation to the EU withdrawal Act on 13 June last year and again in relation to this Bill on 17 July. The outcome was clear: the EEA is not the right model for the UK.

Membership of EFTA and the EEA would mean accepting the continued free movement of people, which both Conservative and Labour manifestos pledged to end at the last election—which I suspect is why the noble Lord, Lord Stevenson, suggested that this might be a debate that the Labour Front Bench wished to sidestep; of course, on the Government Bench we do not have that luxury.

EFTA promotes free trade and economic relations to the benefit of its four member states: Iceland, Liechtenstein, Norway and Switzerland. In this context, it also allows its members to negotiate trade agreements with third countries, either as a bloc or as individual states. There are consequences to joining EFTA and the benefits are not automatic. Most significantly, joining EFTA also means accepting free movement of persons with its four existing members—which the Government had expressly set out their position against in the previous debate.

To gain the benefits of the 29 existing free trade agreements negotiated by EFTA, the UK would have to negotiate its way into each trade agreement with the relevant third countries. There is no guarantee that this will be successful and it could take a long time to achieve. EFTA is not an off-the-shelf model that would deliver ready-made trade deals.

EFTA’s trade agreements were not negotiated with the size and type of Britain’s economy in mind. Were the UK to join EFTA, it would constitute 71% of an enlarged EFTA’s economy. While we want to maintain our deep and historic relationships with EFTA states, the UK is in many ways different from them. EFTA is not the right model for the UK.

I now turn to the noble Lord’s proposal to rejoin the EEA agreement after the implementation period has ended. The EEA agreement effectively extends the EU’s single market to three EFTA members, Iceland, Liechtenstein and Norway. Once the UK has left the EU, and the EU’s existing trade-related agreements with third countries cease to apply to the UK, the EEA agreement will therefore no longer apply to the UK. The EEA agreement covers the four freedoms: of movement of goods, services, persons and capital. Seeking to remain in the EEA beyond the implementation period would not pass the test that the Prime Minister set out for our future economic partnership with the EU. It would not deliver control of our borders or our laws.

On borders, remaining in the EEA would mean having to continue to accept all four freedoms of the single market, including free movement of people from across the 30 EEA states. On laws, it would mean the UK having to implement new EU legislation covering the majority of sectors of our economy, including services and digital, and would make us a rule-taker and not a rule-maker. In contrast, we are making an up-front sovereign choice to commit to ongoing harmonisation with EU rules on goods, covering only those necessary to provide for frictionless trade at the border. Our proposal provides regulatory flexibility where it matters most for the UK’s services-based economy. Moreover, continued participation in the EEA beyond the implementation period would not be sufficient to enable our commitment to avoiding a hard border between Northern Ireland and Ireland. This is a key priority for the UK Government and we remain firmly committed to that objective.

The noble Lord asked whether the UK could remain in the single market through being a member of EFTA, a point also touched on by my noble friend Lord Finkelstein. Participation in the single market is possible through either EU membership, Pillar 1, or through EFTA membership by signing up to the EEA agreement, so-called Pillar 2. We have no plans to join EFTA and its free trade agreements. Those agreements were not negotiated with the size and type of Britain’s economy in mind. Similarly, we have no plans to join the EEA by moving from the current Pillar 1, EU, to Pillar 2, EFTA. Leaving the EU offers us an opportunity to forge a new role for ourselves in the world, as the noble Lord, Lord Stoddart, drew attention to, to negotiate our own trade agreements, as my noble friend Lord Trenchard mentioned, and to be a positive and powerful force for free trade.

The noble Lord, Lord Lea, and my noble friend Lord Trenchard spoke about Article 50. Any Article 50 extension would see the UK remain in the EU as currently, meaning that we would also remain as an EEA member by virtue of our EU membership and the separation agreement would not enter into force during the extension period. It is not the Government’s intention to extend Article 50.

To deal with the other points, the noble Lord talked about convening a meeting of the EEA Council and asked whether it would be possible. The UK will be leaving the EU. We will have control of our borders. That is not what he was asking about, but the terms and conditions for rejoining the EEA agreement as an EFTA member would need to be agreed with the contracting parties—the EU, the remaining EU 27 and the three EEA EFTA states, Norway, Iceland and Liechtenstein—through the EEA Council. It is not the Government’s policy to join the EEA because it is not the right arrangement for the UK’s economy and size. I hope the noble Lord will feel that we have responded to his serious proposal with some serious reasons why the Government are not able to accept his amendment, and I hope he will withdraw it.