European Free Trade Association — [Mike Gapes in the Chair]

Part of the debate – in Westminster Hall at 10:39 am on 7th February 2018.

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Photo of Matthew Pennycook Matthew Pennycook Shadow Minister (Exiting the European Union) 10:39 am, 7th February 2018

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, 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.