A not entirely accurate map Credit - Wik

The Confederation of British Industry is telling us that the costs of Brexit will outweigh any benefits from our doing so. More specifically, the costs of different regulatory systems will be higher than the benefits of not having to follow every jot and tittle of European Union regulation. This is not exactly so if we’re honest about it and the reason why is that the CBI hasn’t understood how regulation works.

They should understand it but then there’s not getting a man to believe what his prejudices insist cannot be true, is there?

The economic benefits for diverging from EU rules and regulations will be “vastly outweighed” by the costs of Brexit, the CBI has warned in its latest call on the Government to push for a soft Brexit.

Well, no.

Any deal must push for more than the alignment of rules or mutual recognition of standards laid out in David Davis’ Vienna speech. Instead, businesses needed “ongoing convergence – where rules remain in lock-step over time” the CBI said.

Really, no.

There are a number of British businesses which export to the US. Or China, Japan and so on. Where regulatory regimes are different from those in the EU. Yet business does manage to export to them, doesn’t it? Sure, there are costs to such different regimes but they’re obviously not insurmountable.

But it’s the other part of this which they’re not getting. OK, so, the EU’s the main market for something. Just imagine. Great, so, a business exporting to the EU will be following those EU regulations, won’t it? Dyson won’t be selling those vacuum cleaners with engines too large for Europeans will it? But GB regulation being different means that Dyson can if he wishes in GB sell those large engines. Which he’ll only do if he thinks that the benefits of doing so outweigh the costs of running two different production lines.

That is, we can entirely agree with the CBI that differential regulation won’t, for some to many products, be the efficient outcome. But we don’t have to do anything stupid about this, like remaining in the customs union. What Brexit allows us to do is go ahead with having that differential regulation – and we can leave market forces to work out for us when it’s worth producing to different standards. For EU regulation will always remain as an option for people to work to and they will do so when that makes economic sense. And just as importantly they won’t when it doesn’t.

That is, as the CBI doesn’t understand, a market in regulatory standards leads us to adopting the most efficient set or system of standards for each different product and or part of the economy. Exactly what we desire and just what EU membership, customs union membership perhaps, doesn’t allow us.