Sir Nicholas's Question to the Prime Minister following her Statement on the

UK/EU Future Economic Partnership

Monday 5^th March, 2018

House of Commons

Sir Nicholas Soames (Mid Sussex) (Con)

Will the Prime Minister confirm that the Commission is now in full possession of all the issues upon which we are to negotiate, and thus that there is no good reason why these talks should not now proceed apace in an orderly and friendly fashion?

The Prime Minister The Prime Minister (The Rt Hon Mrs Theresa May MP)

Absolutely. The European Union asked for more detail to be set out. I said that I would do that at the appropriate time. I have now done so both on security and on our economic partnership. My message to the European Union in relation to the negotiations is, “Let’s get on with it.”    [column 36]

Statement by the Prime Minister on the

UK/EU Future Economic Partnership

House of Commons

Monday 5^th March, 2018

The Prime Minister (Mrs Theresa May)

With permission, Mr Speaker, I shall make a statement on our future economic partnership with the European Union.

In December we agreed the key elements of our departure from the EU, and we are turning that agreement into draft legal text. We have made clear our concerns about the first draft that the Commission published last week, but no one should doubt our commitment to the entirety of the joint report. We are close to agreement on the terms of a time-limited implementation period to give Governments, businesses and citizens on both sides time to prepare for our new relationship, and I am confident that we can resolve our remaining differences in the days ahead. Now we must focus on our future relationship: a new relationship that respects the result of the referendum, provides an enduring solution, protects people’s jobs and security, is consistent with the kind of country that we want to be, and strengthens our union of nations and people. Those are the five tests for the deal that we will negotiate.

There are also some hard facts for both sides. First, we are leaving the single market. [Interruption.] In certain ways, our access to each other’s markets will be less than it is now. We need to strike a new balance. However, we will not accept the rights of Canada and the obligations of Norway.

Secondly, even after we have left, EU law and ECJ decisions will continue to affect us. The European Court of Justice determines whether agreements that the EU has struck are legal under the EU’s own law. If, as part of our future partnership, Parliament passes a law that is identical to an EU law, it may make sense for our courts to look at the appropriate ECJ judgments so that we both interpret those laws consistently—[Interruption] —as they do for the appropriate jurisprudence of other countries’ courts. However, the agreement that we reach must respect the sovereignty of both our legal orders. That means that the jurisdiction of the European Court of Justice in the United Kingdom will end. It also means that the ultimate arbiter of disputes about our future partnership cannot be the court of either party.

Thirdly, if we want good access to each other’s markets, it has to be on fair terms. As with any trade agreement, we must accept the need for binding commitments, so we may choose to commit some areas of our regulations, such as state aid and competition, to remaining in step with the EU’s.

Finally, we must resolve the tensions between some of our objectives. We want the freedom to negotiate trade agreements around the world. We want control of our laws. We also want as frictionless a border as possible with the EU, so that we do not damage the integrated supply chains on which our industries depend, and do not have—[Interruption.]

There are tensions in the EU’s position, and some hard facts for it. The Commission has suggested that an “off the shelf” model is the only option available to the UK, but it has also said that in certain areas, none of the EU’s third country agreements would be appropriate; and the agreement envisaged in the European Council’s own guidelines would not be delivered by a Canada-style deal. Finally, we need to face the fact that this is a negotiation, and neither side can have exactly what we want. However, I am confident that we can reach agreement, so I am proposing the broadest and deepest possible future economic partnership, covering more sectors and involving fuller co-operation than any previous free trade agreement.

There are five foundations that must underpin our trading relationship: first, reciprocal binding commitments to ensure fair and open competition, so that UK business can compete fairly in EU markets and vice versa; second, an independent arbitration mechanism; third, an ongoing dialogue with the EU, including between regulators; fourth, an arrangement for data protection that goes beyond an adequacy agreement; and, fifth, free movement will come to an end. But UK and EU citizens will still want to work and study in each other’s countries, and we are open to discussions about how to maintain the links between our people.

We then need to tailor this partnership to the needs of our economies, and we should be absolutely clear this is not cherry-picking. Every free trade agreement has varying market access depending on the respective interests of the countries involved. So if this is cherry-picking, then so is every trade arrangement. What matters is that our rights and obligations are held in balance.

On goods, a fundamental principle in our negotiating strategy is that trade at the UK-EU border is as frictionless as possible, with no hard border between Northern Ireland and Ireland. This means no tariffs or quotas, and ensuring that products only need to undergo one series of approvals in one country. To achieve this, we will need a comprehensive system of mutual recognition. That can be delivered through a commitment to ensure that the relevant UK regulatory standards remain as high as the EU’s, which, in practice, means that UK and EU regulatory standards will remain substantially similar in future. Our default is that UK law may not necessarily be identical to EU law, but it should achieve the same outcomes. In some cases, Parliament might choose to pass an identical law. If the Parliament of the day decided not to achieve the same outcomes as EU law, it would be in the knowledge that there may be consequences for our market access. And we will need an independent mechanism to oversee these arrangements, which I have been clear cannot be the European Court of Justice.

We also want to explore the terms on which the UK could remain part of EU agencies, such as those critical to the chemicals, medicines and aerospace industries. That would mean abiding by the rules of those agencies and making an appropriate financial contribution, and the UK would also have to respect the remit of the ECJ in that regard. Parliament could decide not to accept these rules, but with consequences for our membership and linked market access rights.​

Lastly, to achieve as frictionless a border as possible and to avoid a hard border between Northern Ireland and Ireland, we also need an agreement on customs. The UK has been clear it is leaving the customs union. The EU has also formed a customs union with some other countries, but those arrangements, if applied to the UK, would mean the EU setting the UK’s external tariffs, being able to let other countries sell more into the UK, without making it any easier for us to sell more to them, or the UK signing up to the common commercial policy.

That would not be compatible with a meaningful independent trade policy, and it would mean we had less control than we have now over our trade in the world, so we have set out two potential options for our customs arrangement: a customs partnership where, at the border, the UK would mirror the EU’s requirements for imports from the rest of the world for those goods arriving in the UK and intended for the EU, or a highly streamlined customs arrangement, where we would jointly implement a range of measures to minimise frictions, together with specific provisions for Northern Ireland. Both would leave the UK free to determine its own tariffs, which would not be possible in a customs union.

Taken together, the approach we have set out on goods and agencies, and the options for a customs arrangement, provide the basis for a good solution to the very specific challenges for Northern Ireland and Ireland. My commitment to this could not be stronger: we will not go back to a hard border between Northern Ireland and Ireland; nor will we break up the United Kingdom’s own common market with a border down the Irish sea. As Prime Minister, I am not going to let our departure from the EU do anything to set back the historic progress made in Northern Ireland; nor will I allow anything that would damage the integrity of our precious Union. The UK and Irish Governments and the European Commission will be working together to ensure we fulfil these commitments.

That approach to trade in goods is important for agriculture, food and drink, but here other considerations apply. We are leaving the common agricultural policy and the common fisheries policy, and will want to take the opportunity to reform our agriculture and fisheries management and regain control of access to our waters. I fully expect that our standards will remain at least as high as the EU’s, but it will be particularly important to secure flexibility here to make the most of our withdrawal from the EU for our farmers and exporters. We will also want to continue to work together to manage shared stocks in a sustainable way, and agree reciprocal access to waters and a fairer allocation of fishing opportunities for the UK fishing industry.

On services, we have the opportunity to break new ground with a broader agreement than ever before. For example, broadcasting and financial services have never previously been meaningfully covered in a free trade agreement. We recognise that we cannot have the rights of membership of the single market, such as the country of origin principle or passporting, but we should explore creative options, including mutual recognition, to allow broadcasting across borders. My right hon. Friend the Chancellor will set out more detail on financial services later this week. We will also look to agree an appropriate ​labour mobility framework that enables travel to provide services in person, as well as continued mutual recognition of professional qualifications. Finally, our partnership will need to cover agreements in other areas, including energy, transport, digital, civil judicial co-operation, a far-reaching science and innovation pact, and cultural and educational programmes.

We cannot escape the complexity of the task ahead. We must build a new and lasting relationship, while preparing for every scenario, but with pragmatism, and calm and patient discussion, I am confident we can set an example to the world. Yes, there will be ups and downs over the months ahead, but we will not be buffeted by the demands to talk tough or threaten a walk out, and we will not give in to the counsels of despair that this simply cannot be done—for this is in both the UK and EU’s interests. As we go forwards, foremost in my mind is the pledge I made on my first day as Prime Minister: to act not in the interests of the privileged few, but in the interests of all our people, and to make Britain a country that works for everyone. My message to our friends in Europe is clear. You asked us to set out what we want in more detail. We have done that. We have shown we understand your principles. We have a shared interest in getting this right, so let us get on with it. I commend this statement to the House.

Hansard
05 March 2018
Volume 637
No 104
Columns 25-28