UK Politics

Idealistic Brexiteers need to give it a rest: regulatory alignment makes sense for Britain

BY Ben Kelly | thescepticisle   /  8 December 2017

Post-referendum, a relatively small band of influential and rigidly ideological Eurosceptics have exerted their influence and ensured that no Brexit solution should include free movement or Single Market membership. Fine, even as a fan of the Single Market and advocate of an EFTA/EEA Brexit, I can accept the strength in the argument that free movement violates the result of the referendum.

Still, leaving the Single Market means British businesses will face more trade barriers selling into the EU, and this is a clear economic negative. If we accept that there are red lines we cannot cross, and that the politics has moved on, then we must look at how we can simultaneously maximise the benefits of Brexit and minimise the disadvantages of leaving the Single Market.

The latest exasperating objection is, however, a step too far. Some Leavers are now claiming that maintaining regulatory alignment across key sectors as a means of facilitating trade with our European partners (representing 45% of our exports) is unacceptable politically, and even disadvantageous economically.

The notion that this violates the EU referendum mandate is laughably dubious, and the assertion that it will be harmful to our economy and trade policy is unevidenced and argued without detail.

‘Why do we need regulatory alignment with the EU? Canada doesn’t, and it sells into the Single Market!’

As the concept of ‘CETA+’ is the new darling of the Eurosceptic movement, this is a good example. CETA is a decent achievement as Free Trade Agreements go, and it will enhance the trading relationship of the EU and Canada over time. Still, CETA is limited in scope, and Canadian exporters still face barriers to their goods which are difficult to overcome because of alignment between Canada and its most important trade partner; the USA.

Take red meat as an example, CETA has not removed many barriers to shipping into Europe due to regulatory divergence. Two key technical barriers, health mark labelling and antimicrobial intervention, are reducing the commercial viability of accessing the European market. Put simply, meeting EU standards would not only lead to logistical issues, but it would risk raising barriers to its exports into the US market. Exporters therefore choose to meet US standards because that’s their most important market and running two production lines isn’t feasible.

Our most important market? The EU. Are you seeing the parallel here?

Trade between the US and Canada is not “frictionless”, and as we are set to leave the Single Market and will no longer be in a Customs Union, trade between the UK and the EU will not be “frictionless” either. However, in order to facilitate trade the US and Canada have been cooperating on a process of regulatory alignment. The Canadian public initially expressed unease about integration with the larger market next door, considering alignment with a regulatory superpower a potential infringement on national sovereignty.

Wait a minute, this sounds familiar…

The compromise on national sovereignty was considered worth it for the clear economic benefits, thus the Canada-US Regulatory Cooperation Council fosters alignment between the regulatory systems of the two countries. They are still two separate regulatory systems with their own agencies, but they cooperate closely to reduce costs and promote “free” trade. It’s actually rather a good idea and one that any believer in free trade and open markets should be all for.

Britain will face very similar compromises and complications when it regains control of its trade policy. There are opportunities to come in our future, but a comprehensive trade agreement with the United States – vastly over egged as the great prize of Brexit – is problematic.

The much reported on issue of chlorinated chicken is a good example here. Setting aside whether the lowering of food standards would make it through the domestic political debate (a new issue of our regained democratic rights), it’s not as easy as saying we can simply accept these US imports and assuming that as long as exports to the EU meet the relevant standards everything is hunky dory.

Introducing chlorinated chicken into our supply chain would be a red flag to the EU, and as such, exports containing chicken would face more checks at the border to ensure compliance. The fact is that the EU and the US are two regulatory super powers with very distinct regimes, and we will align with the EU as it is a far more important market.F

Contrary to objections of some eurosceptics, aligning with EU regulation will not hamper our trade policy. In-fact, compliance with what are often the most stringent standards in the world will maximise access to far more markets. Crucially, maintaining alignment will make it far easier to grandfather the agreements we are currently party to via EU membership. Such agreements facilitate trade by creating a greater degree of regulatory alignment funnily enough.

Furthermore, with an EU-Japan trade agreement becoming a reality, the UK will look to negotiate a tailored UK-Japan agreement but this will be dependent on existing regulatory arrangements. The Japanese government have made it very clear that they want the UK to stay close to current trade arrangements. The same goes for Australia. Alignment with the world’s biggest single market is not a hindrance.

People who decry the prospect of regulatory alignment generally fail to say where exactly we should be unaligned.

Car standards? No. EU car regulations are based on UNECE regulations, the global standard harmonising vehicle regulations internationally which feature in most EU trade agreements, including the Singapore deal and the draft Japan deal.   To conserve our automotive industry and maximise future trade prospects we will likely replicate current arrangements on regulation and tariffs.

Food standards? As discussed, lowering food standards wouldn’t necessarily make it past the domestic debate. Even if it did it wouldn’t be desirable as it would cause disruption to the food chain which would lead to higher prices for consumers. That would hardly honour the referendum promises of cheaper food made by Michael Gove and Vote Leave. It’s a not a goer.

So where? Financial regulation is the only possible advantage that may pay dividends in the future. Aside from that, there is no decent argument against regulatory alignment with our most important trading partner.

The main advantage of Brexit is to maintain a close trading relationship with the EU while ending our political union and repatriating major policy making powers; regulatory alignment achieves this.