Wednesday, 4 March 2020

A question of sincerity

In what is emerging as a series of posts on CETA (assuming that is our preferred landing ground) I'm looking deeper at the regulatory aspects of it. It's interesting that EU environmental groups criticise CETA for not going far enough. For all the EU's much vaunted clout, I happen to agree with their assessment that CETA is pretty toothless as regards to level playing field provisions. As noted previously much of it calls upon international agreements and global standards. This is particularly true of its provisions on trade and the environment.
"Parties recognise the right of each Party to set its environmental priorities, to establish its levels of environmental protection, and to adopt or modify its laws and policies accordingly and in a manner consistent with the multilateral environmental agreements to which it is party and with this Agreement"
Like the references to the WTO TBT agreement on standards under technical barriers to trade, it does not go far beyond the WTO baseline. Similarly with labour "protections" it references the ILO quite a bit.
Each Party reaffirms its commitment to effectively implement in its law and practices in its whole territory the fundamental ILO Conventions that Canada and the Member States of the European Union have ratified respectively. The Parties shall make continued and sustained efforts to ratify the fundamental ILO Conventions if they have not yet done so. The Parties shall exchange information on their respective situations and advances regarding the ratification of the fundamental as well as priority and other ILO Conventions that are classified as up to date by the ILO.
Each Party shall ensure that its labour law and practices promote the following objectives included in the ILO Decent Work Agenda, and in accordance with the ILO Declaration on Social Justice for a Fair Globalization of 2008 adopted by the International Labour Conference at its 97th Session, and other international commitments:
(a) health and safety at work, including the prevention of occupational injury or illness and compensation in cases of such injury or illness;
(b) establishment of acceptable minimum employment standards for wage earners, including those not covered by a collective agreement; and,
(c) non-discrimination in respect of working conditions, including for migrant workers.
In effect, the UK could sign a CETA style deal and wouldn't have to lift a finger to satisfy the provisions therein being that our existing standards far exceed even the EU's hard coded legislation. 

It should be noted, however, that the effectiveness and success of regulatory cooperation efforts (in terms of achieving greater regulatory coherence between the participating states) depend – according to an OECD study – only to a limited extent on the existence of a binding legal framework but rather on the following factors:
  • high-level political commitment to regulatory cooperation, 
  • embedding regulatory cooperation in (internal) regulatory processes, 
  • appropriate consultation mechanisms, 
  • common language and definitions, 
  • high level of compliance with the decisions taken,  
  • regular evaluation of the cooperation efforts, and 
  • flexibility to adapt regulatory cooperation to changing circumstances.
As noted previously CETA is really just a framework document and from the EU perspective it's easy to see why they want tougher provisions in that for a "Canada style agreement" to be worth the paper its written on, both parties have to be sincere about developing the relationship. There is no outward sign that the UK intend to collaborate with the EU on regulation. A CETA type FTA would not provide the necessary assurances the EU needs to grant the enhanced preferences the UK is requesting. The UK could have had the "bare bones" deal it originally requested had it sent out more emollient signals. It has done the precise opposite.

As regards to alignment, the "rule taking" largely comes after implementation of the agreement where the rule taking is notionally voluntary but commercial pressures are as such that the parties request recognition of equivalence and in the case of requesting such from the EU, that means adopting their regulations verbatim where any exceptions have to be agreed through the governing institutions of the agreement. The UK could start off with the intention of keeping it to a minimum but as its requirements for access start to snowball, so will the "regulatory dialogue".

So while Tories point out that CETA does not have much in the way of regulatory demands, it is something of an ambush. The EU is leaving it for us to realise in our own time that alignment is necessary. Though the agreement has mutual recognition of conformity assessment, that is no silver bullet as regards to border "friction" which can only be eased by further adoption of EU rules.

As regards to state aid and other competition clauses, the EU will require tougher up front commitments. There are no prior UK-EU agreements due to membership so it follows that a UK-EU FTA must go further than the standard EU FTA to match the effect of CETA. CETA builds on previous agreements between the EU and Canada (still in force) which taken as a whole is comprehensive. This could be a show stopper.

The nature of CETA, though, really depends on what prism it is viewed through. Like for like comparisons are not useful. It's possile to say two entirely contradictory things about CETA and both can be right. It's a question of degrees. Brexit, however, is a unique set of circumstances, with its own context with its own political and geographic considerations - not least since the UK, unlike Canada, shares a land border with the EU. As much as it must take into account the geographic proximity, it must also be compatible with the Northern Ireland protocol in the withdrawal agreement. The EU's negotiating posture will be influenced by the UK's attitude to upholding that agreement. 

With the UK still claiming that no checks are required in the Irish Sea, with inadequate preparations, the EU will no doubt harden its position making a deal even less likely. If we are now headed for a no deal situation, destroying all remaining good faith, the next time we approach Brussels for an FTA, the opening demand will be considerably more robust. Failure now could mean a decade out in the cold for British exporters.

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