Britain must apply for EEA status now

It’s clear the Conservative leadership election candidates — and business lobby groups — are solidifying around the position of Britain trying to remain a member of the European Economic Area.

The alternative — to cut loose and try to negotiate a bunch of separate trade deals — now looks so economically disastrous that its popularity is fading everywhere in mainstream politics.

Everywhere, that is, except the right wing of the Labour Party.

So spooked are Labour’s right wingers — a mixture of Blairites, Brownites and centrist MPs from the north of England — that they are hesitant to commit to an EEA application, in case it looks to their own constituents like an attempt to keep free movement.

But it need not be.

The UK should apply within days to remain in the EEA. Labour should support that.

EEA membership allows the UK to apply an “emergency brake” to free movement of workers once it leaves the EU. Labour could begin the design of a progressive and generous EU migration offer to be applied on exit from the EU — and that would be a big differentiator to what the Tories would propose.

But it can make the offer to apply for EEA membership in principle now — thus giving assurance to the Tory front bench that they can begin negotiations from a position of relative strength — and that Labour is not about to try to outflank them from the right on migration or EEA membership.

Labour could say: we are going to listen to our members and supporters on what they want from the new migration system, but that does not stop us signalling right now the need for a pro-EEA negotiating position.

EEA is a binary question. You either want to apply to remain in it, or — if not — to begin cutting individual trade deals. The third option, sabotaging the vote and trying to rerun the referendum, is undemocratic and a non-starter.

We need to say to the young people who went on the streets to demand “London stays” in the EU: thats not possible, but with EEA and a government of progressive parties, led by Labour, we can mitigate most of the negative impacts.

To those worried about the impact of going for EEA plus emergency brake in the pro-Leave working class heartlands: you need to understand how rapidly the position will change.

Once contracts are cancelled, recession hits and a massive hole appears in the public finances, the delusion that Britain can have a friction free exit from the entire single market will evaporate.

I think it may take six to nine months — but EEA+emergency brake on migration would be an effective weapon to fight UKIP in the Labour heartlands, especially if combined with the micro-economic offer Corbyn put on the table — a migration impact fund, rise in the minimum wage and clampdown on migrant-exploiting bosses.

The EEA option also mitigates the impact of Scottish independence. It means you don’t have a land border between England and Scotland, nor between the Republic and Northern Ireland.

What if the 27 EU states refuse this application? They would be crazy to do so, because if designed by a government of progressive parties it would be the best bet to retain relatively free movement alongside a relatively open market relationship.

In addition, the Conservatives are certain to offer massive extra austerity. Labour must offer the opposite — a fiscal and monetary stimulus to maintain jobs and investment, and cushion the shocks that are coming in the next few weeks.

Here again the candidates of the Labour right, once they surface, have to answer the question: faced with a fiscal crisis — as he capacity of the economy is permanently shrunk, requireing more action to balance the books — what do you propose? The Corbyn/McDonnell approach is clear: fiscal and monetary stimulus.