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Mr. Banks: Would the hon. Gentleman also care to acknowledge the role of the Council of Europe? Applicant countries joined the council and benefited from a democratic training ground that now qualifies them and their institutions for entry into the European Union.

Mr. Taylor: I am trying not to be selfish about my praise. The Council of Europe has an equal share in terms of its great achievements.

The problem for us is not only the way in which we reform our institutions. This is not a debate in which we should explore that in detail. I was one of the active members of a group led by Lord Brittan which made a submission to the Convention that was signed by many Conservatives and endorsed by the former Prime Minister, John Major, proposing an approach radically different from that of my right hon. Friend the Member for Wells. I commend that submission to hon. Members; I know that the Government have read it, because they have referred to it in debate from time to time.

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I believe that there should be a constitution—I do not resile from that word—but the question is what it should contain. I would fiercely oppose some proposals and I hope that the Government would so as well. The idea that foreign policy should be kept as a separate institutional pillar, but with a veto, is obvious and common sense, and it should be kept. I believe that we should maintain a veto over certain taxes, including those that are not directly related to single market measures, such as value added tax, and those that are related to the governance of the country, such as direct taxation and most elements of corporation tax, although business itself would clearly like to remove some of the anomalies that exist in the tax base, as opposed to the tax rate.

I issue those two big caveats, but the rest is open to discussion, and we must await the outcome. Certainly, in some instances, we shall want the power assigned to European Union institutions to be exercised properly, efficiently and rapidly. At present even good results take too long to emerge from the process. We want more effectiveness, but there is little doubt that the Commission will be too large with at least 25 members.

Of course there must be reform, but we can discuss that in other debates. Amid all the excitement, there must also be some awareness of the problems that will arise. We shall need to explain why, as a result of doing our duty and bringing in countries that were formerly vulnerable, economic and competitive developments will involve certain costs—costs that we must bear and sort out.

I was fascinated to read the findings of one survey, according to which economic convergence to within 75 per cent. of the EU wealth average might take between one year and—in the case of Romania—34 years. That may be a static analysis with hidden depths, but it is clear that if we want certain countries to be considered serious applicants—and that already includes Romania—we shall have to make great sacrifices. We shall have to ensure that budgetary arrangements and assistance for such countries are commensurate with the challenges that Romania faces, as long as it shows its political will.

The problems, however, should be dwarfed by the overall benefit of a single market for 500 million people. That is twice the population of the United States, although I agree with the right hon. Member for Llanelli that nothing anywhere near the same gross domestic product per head is involved: that is an ambition for the future. The single market has huge potential, some of which has already been realised in the case of countries that were obviously going to join. UK trade with the 10 new member states has increased by more than 400 per cent., compared with a 43 per cent. increase in our trade with the rest of the world since 1990. We are seeing the benefits of that, and of the integration of our economy with the economies of those countries.

There is no doubt that further benefits will result; but I ask the Minister to bear in mind in his public utterances outside this place that we must prepare people for some of the negative developments that may result, and explain why the sacrifices may be necessary.

I shall not say much about asylum and the movement of people, but I will say that the problem of asylum in this country can be solved only on a European Union

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basis. That does not mean that we should not have our own policy, but it does mean that we must try to find ways of helping countries at the perimeter of the EU, which may not have sufficient controls, to ensure that uncontrolled population movements do not happen. There is no point in trying to do that at Calais, at Dover, or at any fortifications in the south of England. This must be seen much more as a European Union issue. We must ensure that such measures as the Dublin convention are more effective, rather than going on and on about dangers posed to this country. Let us take some European Union action.

We need to prepare for other events. I believe that the next EU budget review will take place in about 2006. The current budget is capped at 1.27 per cent. We have so far failed to persuade the French that there should be a proper reform of the common agricultural policy, although there has been some movement on a sliding scale. We really must tackle that: our failure to do so constitutes a huge failure of EU willpower. It is not enough for us to say, "Let us write off the European Union as hopeless". Certain things in this country should be changed, and we have not tackled them. Such problems are problems for the European Union. We must play a constructive part in securing change, and continuing to work for it.

It ill behoves President Chirac to tell off the Poles about foreign policy, but I would advise the American Administration not to start saying that France is picking on various EU member countries on a whim. Incidentally, it may not decide to pick on us at all times. I do not believe in forcing a single European foreign policy or even that a credible defence policy would work, but we must strive as far as possible to have common objectives in Europe on some of the dangers that face us in the rest of the world.

4.15 pm

Mr. Mark Hendrick (Preston): The European Union is now preparing for its biggest enlargement ever in terms of scope and diversity. As we know, 13 countries have applied to become new members. Ten of those countries—Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, the Slovak Republic and Slovenia—are set to join on 1 May next year. The historic treaty was signed in Athens last year. Following ratification, enlargement will take place on 1 May next year. I look forward to that, as I am sure many other hon. Members do, and indeed to the accession of Bulgaria, Romania and eventually Turkey.

I would like to address the issue of accession from the economic, foreign policy and political perspectives. On the economic side of things, many studies have shown the economic benefits for incumbent members as well as for new entrants. About 14,000 British firms currently trade with central and eastern European countries. Enlargement will benefit the British consumer, allowing access by suppliers of goods and services to many of those countries. It will provide benefits to the British consumer in the way of much cheaper prices.

As has been mentioned, the applicant countries will receive about £25 billion from 2004 to 2006. That is only 0.1 per cent. of Europe's GDP but will bring huge benefits. Their GDP is estimated to be set to rise by approximately 19 per cent. in the medium term. Pre-

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accession aid as set out in the current financial perspective will benefit accession countries by about Euro1.6 billion per annum.

As we have seen, qualified majority voting has helped the European Union to achieve a stronger and more liberal negotiating position. A Europe of 25 must have QMV in as many areas as it needs. For example, QMV is necessary on the tasks and rules of the structural and cohesion funds to stop net recipients blocking efficiency and cost savings, which addresses the point made by the right hon. Member for Horsham (Mr. Maude)

Enlargement will remove barriers to trade. As I have said, UK companies will benefit from a more than 40 per cent. increase in the size of the single market, which will have more than 500 million consumers: the biggest single market for trade and investment in the world—larger than the United States and Japan.

Enlargement will increase economic growth in the current 15 member states and could increase UK GDP by £1.75 billion as UK goods and services flood into the accession countries. In my region in the north-west of England, about 400,000 jobs are linked to membership of the European Union and access to the single market. In the next five years, it will receive about £1.5 billion in EU structural funds.

Enlargement is a very good deal both for EU incumbents and for new members. For central and eastern European countries, enlargement will involve the elimination of tariffs, quotas and the adoption of a common external tariff, while gaining from single market access. Central and eastern European countries will have to establish the four freedoms—freedom of movement of goods, services, capital and people—which are a principal concern of this Bill. At the same time, they must recognise health, safety, industrial and environmental standards, the adoption of common competition and state aids policies, and the removal of frontier controls. Those countries will gain most from their own liberalisation. Importantly, new political and economic stability will boost external investment as risk premiums in those countries drop.

Single market competition rules will cut trade-distorting tariffs, which average some 6.5 per cent. in central and eastern European countries, compared with about 3 per cent. in the European Union. Moving towards better competition will certainly provide increases in imports, lowering the cost of consumer goods and therefore increasing welfare gains for the accession countries. Although there will be initial barriers to trade such as product harmonisation, over the long term those barriers will lead to gains, which is the central long-term benefit of enlargement for the central and eastern European countries.

As we know, in October 2002 a Franco-German compromise enabled the EU to agree on ways of financing the common agricultural policy after 2007. The Heads of Government agreed that between 2007 and 2013, the overall ceiling for CAP market support expenditure will rise by no more than 1 per cent. per annum on the 2006 level. That will mean that the budget for this part of the CAP for the EU 25 will be able to rise to just over Euro45 billion in 2006, and to about Euro48.6

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billion by 2013. This is not the reduction that many of us would have liked; nevertheless, it is a step in the right direction, because it could have been much greater.

The EU agreed to offer a phasing in of direct aid to accession countries: some 25 per cent. in 2004, 30 per cent. in 2005 and 35 per cent. in 2006, rising to 40 per cent. in 2007 and increasing by 10 percentage points in each ensuing year, reaching 100 per cent. by 2013. I know that that was not the ideal scenario for many accession countries, but it is a step in the right direction. Cutting the CAP will benefit the UK and accession countries, as it is a distortion to trade. The Prime Minister and the Government are working hard to achieve those cuts, and by engaging more in Europe the UK will be in a stronger position to achieve further liberalisation and reductions in the CAP.

It is very important that current EU member states support the accession countries in meeting European environmental targets. For example, Poland has recently expressed concern that it will need an extra Euro40 billion to meet the necessary environmental criteria by the 2015 deadline. It is important that we co-operate as much as possible in order that such targets are met.

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