So now we get to – having agreed that Brexit is going to happen – having to decide what the new trade deal is going to be. At which point there are all sorts of people insisting that we shouldn’t have regulatory divergence. Yet gaining that regulatory divergence is the very point of our having Brexit. We want to be able to do things differently than the European Union.
Thus this sort of worry is thinking about it the wrong way around:
Brexit is nearly done, but don’t expect an easy ride on trade. The EU is terrified of regulatory divergence
We are still very much in the early honeymoon period of the new Government, when flush with a stunning election victory all things seem possible. Even the traditionally hostile Financial Times seems to have been partially won over by the infectious optimism that for now flows through the nation’s veins, warming to some of the opportunities for positive change that Brexit may allow.
Yet at some stage, with the feelgood mood colliding with harsh realities, there is going to be a comedown. The first of these awakenings is likely to centre on trade.
In reaching a trade deal with the EU by the end of the year as promised, the Government will either have to compromise on scope for regulatory divergence,…
The point being that since the divergence is the very thing we want it’s not the thing to compromise upon.
Start from the very basics. There is no version of voluntary trade that is worse than autarky. There are versions of trade that are better than simple unilateral free trade. Like, for example, the other people adopting unilateral free trade too.
So, our baseline starting point for any negotiation on trade is that any trade is better than none, but we must measure any specific proposal against the effects of unilateral free trade. If it would be better to have this extra thing then all well and good, let’s have it. But if the conditions attached to that make the overall deal worse than the unilateral position then we should not have it.
For example, UK farm goods gaining tariff and quota free access to the EU would be a nice thing to have. But a likely cost of that is that British consumers would not be allowed tariff and quota free access to the farm goods of the rest of the world. The cost of that second is greater than the benefits of the first – we don’t do it therefore.
On regulation much the same becomes true. The negotiating stance at least. What would be the paradisical effect of a system of perfect regulation? Not that one exists nor ever will but that’s what we need to imagine. Then, anything we’re asked to accept which is worse than this has to be tested for whether what we lose from the restriction is worth what we then gain elsewhere.
Given EU regulation this is always going to lead to the answer “No”.
At which point we simply agree that whatever we try to export to the EU must meet EU regulations. Just like whatever we export to the US does. We already have that CE system by which people can mark that their products do meet such standards. And what we do internally is up to us.
To give a trivial example. The EU has rules on the size and suckiness of vacuum cleaner engines. It’s entirely fine that Dyson only sell into Europe those which meet this standard. There is no benefit to us of not being allowed to buy vacuums of greater suckiness. So, we do not accept the EU vacuum cleaner regulations for local consumption.
This then goes on throughout all such regulation. Light bulbs, chemicals and REACH, working hours on lorries, everything.
And of course the EU is right to be petrified of this. For if we free ourselves of these rules and then prosper – I would insist prosper by freeing ourselves from these rules – then this will emphasise the cost that all of Europe is paying to be burdened with these rules. It will no longer be some Far East island that is 50% richer, it’ll be Singapore on Thames that is. And having the English that much fatter, happier and richer only 26 miles off the coast is going to make a lot of continentals unhappy with the costs exacted from them by Brussels.
Which is, of course, why the EU doesn’t want it to happen. And also, equally of course, why we must do it. For us leaving the EU isn’t the end stage, not at all. True freedom will come when we liberate Europe once again.