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The European Economic Area offers an opportunity to stay in the single market and control movement of labour

9 min read

Labour MP Stephen Kinnock offers a potential solution to control freedom of movement into the UK and to retain access to the single market of 500 million consumers.

For almost eighteen months now the country has been grappling with the vexed question of how best to retain the benefits of the single market without having to accept the free movement of labour. 
We know that if we were to cut our economy off from the single integrated market of 500 million consumers on our doorstep this would have a catastrophic impact on jobs, livelihoods and communities across the length and breadth of our country. 

And we also know that the so-called ‘four freedoms’ which form the basis of the Single Market - ie the frictionless movement of goods, capital, services and labour across the EU - are indivisible. In other words, there can be no cherry-picking - if you want full participation in the Single Market then you have to accept all four of the four freedoms. 
And herein lies the rub, because opposition to the free movement of labour is so deep and widespread across the UK that it becomes very difficult to argue that the we should remain inside the Single Market in perpetuity, if doing so precludes us from reforming the free movement of labour. 

There can be no doubt that the UK benefits greatly from immigration, both in terms of our economy and our culture. However, as a democratic socialist I have deep-seated concerns about the negative impact that free movement of labour has at the low and semi-skilled end of the British labour market. 

As this Bank of England study shows a: “10 percentage point rise in the proportion of immigrants working in semi/unskilled services leads to a 1.88 per cent reduction in pay".
In addition to exerting downward pressure on wages at the low wage/low skill end of the labour market, free movement of labour also causes reduced hiring, training and apprenticeship opportunities for the local workforce. The causes of wage stagnation and under-investment in local workers are many and varied, and I would never contend that the free movement of labour is the only contributing factor. But it is clearly an important element. 

Rapidly rising levels of migrant workers from the EU have also had a disruptive effect on communities, and have impacted negatively on the overall public perception of immigration outside the major cities. 
In short the fact is that if we wish to re-build public trust in and support for immigration, then we must reform free movement of labour. 
Since the referendum I have therefore been arguing that the Labour Party should seek progressive reform of free movement of people and labour on the basis of sectoral quotas set through negotiation between trade unions, employers and government. 

So, is it possible to simultaneously argue for maximum access to the Single Market and for the reform of the free movement of labour? 
The received wisdom is that Brexit is defined by a binary choice: we either stay in the Single Market and accept free movement of labour, or we sacrifice market access on the altar of greater control. 
But the truth is that the choice is not binary. There is, in fact, a way to square the circle, and it comes in the form of the European Economic Area (EEA). 
The EEA is an internal market that is closely aligned the EU’s Single Market, but membership of the EEA is emphatically not the same as membership of the Single Market. 
Important examples of the difference between the EEA and the Single Market include that the EEA excludes the EU’s common agriculture and common fisheries policies, and that the EEA is subject to the jurisdiction of the EFTA Arbitration Court rather than to the European Court of Justice. 
But the most significant difference relates to the free movement of labour, thanks to articles 112 and 113 of the EEA Agreement. 
As an EEA member the UK could unilaterally suspend the free movement of labour by invoking Article 112, which allows for safeguard measures on any of the four freedoms on the basis of “economic, environmental or societal difficulties”. 
And there is legal precedent for this. Upon entering the EEA in 1993 Liechtenstein triggered Articles 112 and 113 of the EEA Agreement, suspending the free movement of labour, and ultimately agreeing, through deliberations of the EEA Joint Committee, a protocol that enabled the introduction of a reformed system based on industry-by-industry quotas for migrants from the EU. 
It would clearly be absurd to compare the substantive political and socio-economic challenges that the UK is facing with those of a micro-state such as Liechtenstein, but that is beside the point. The critically important facts in the context if the Brexit negotiations are that articles 112 and 113 are right there in the EEA Agreement, in black and white, and that the legal precedent has been set by Liechtenstein. 
And, moreover, a cursory examination of Protocol 15 of the EEA Agreement reveals that this exact same opt-out from free movement of labour was on offer to the Swiss, had they voted to join the EEA. 
Finally, let’s also recall that the EU agreed to give the UK the ability to suspend and reform free movement of labour back in February 2016, as part of the re-negotiation deal that was struck with David Cameron. The most salient passage of the EU resolution being: 
“... the United Kingdom would be justified in triggering the mechanism in the full expectation of obtaining approval.’’ 
Thus there is no legal or constitutional reason why the UK should not be able to become a non-EU member of the EEA and then promptly initiate suspension and reform of free movement of labour by invoking Articles 112 and 113 of the EEA Agreement. 
The Prime Minister’s approach to Brexit has so far been based on a combination of bluster, posture and fudge. The Joint Progress Report on phase one of the negotiations was a case study in constructive ambiguity. 
But she knows that she has kicked the can as far down the road as it can possibly go. The New Year will bring with it the need for clear choices about the future relationship between the UK and the EU, and EU leaders have stated unequivocally that there are only three templates on offer: 
• EEA; 
• Canada; 
• No deal/WTO 
The Canada model would enable the reform of free movement of labour. But it only offers tariff-free access for goods and would therefore be a disaster for the UK, given that the services sector accounts for 80% of our economy. Meanwhile the no-deal / WTO model is only being promoted by the most swivel-eyed of the Brexiteers. 
Thus it is patently obvious that the EEA template is the only model on offer that would enable the UK to both preserve maximum access for our goods and services to European markets, whilst also enabling us to suspend and reform the inward flow of labour from the EU. 
Full membership of the Single Market is not possible without being a member of the European Union, but in shifting to EEA membership we would unequivocally be leaving the EU and the Single Market, whilst retaining almost all of its key benefits. 
As a well-established and well understood international framework the EEA also offers precisely the security, certainty and stability that our country so desperately needs, in these turbulent times. 
Some have argued that the problem with the EEA is that you become a rule-taker, rather than a rule-maker. This is an absurd argument because if we wish to have any post-transition period engagement at all with the Single Market then we are going to have to broadly accept the body of law upon which it is based. The advantage of the EEA model is that the EEA-EU Joint Committee structure provides ample opportunity for officials from EEA member states to influence the development of new regulations and directives. 
Therefore the sooner that the Labour Party can confirm that the EEA is our preferred future relationship template the better, as doing so will demonstrate that we are the only political party that truly understands the devastating impact that further uncertainty and instability will have on the jobs and livelihoods of the very people that we were elected to represent. 
And committing to an EEA-based deal would have the added benefit of enabling us to flesh out our position on and plans for the reform of free movement of labour. 
This zombie government, led by an utterly discredited prime minister, is guilty of gross incompetence in office. The cabinet has spent far more time negotiating with itself than it has with Brussels, and the Brexiteers are seemingly intent on doing potentially irreparable damage to our economy, and to our broader national interest through the flippant, bombastic and childish way in which they think and talk about the EU. 
It is therefore absolutely imperative that the Labour movement unites around a settled position on our preferred post-transition template, so that we can signal to the British people, and to our European partners, that we are the only grown-ups in the room, and that we’re ready, willing and able to negotiate a principled and pragmatic deal. 
I am absolutely convinced that when it comes to the vote on the Article 50 Withdrawal Agreement in October there would be a clear cross-party parliamentary majority for an EEA-based deal, once MPs of all stripes have fully understood the significance of articles 112 and 113 of the EEA Agreement, and once they have internalised the fact that membership of the Single Market and membership of the EEA are two very different things. 
All parties should therefore come forward with a shared New Year resolution to commit to an EEA-based Brexit. Because the fact is that an EEA-based Brexit is the only type of Brexit around which our deeply divided country can re-unite. 
Stephen Kinnock is the Labour MP for Aberavon

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