Monday, 12 December 2016

Leaving the single market means risking it all for nothing

In place of EU membership we will need a comprehensive framework for doing business with our closest neighbours, and one the recognises the fact that we have been in the EU for forty years. There is no cut and run solution. The table above shows that any bespoke agreement is likely to take a number of years and building an agreement which fully replaces EU membership is likely to take several years.

Brexit Tories think it is as simple as a mutual recognition agreement after the Great Repeal Bill which transposes EU law into British law. If only it were that simple. The base assumption is that we can over a number of years dismantle that law in place of our own.

There are several problems with this approach in that it means developing a regime for domestic production as well as the export standard. In some more modern production lines that is possible and practicable but for SMEs that means more red tape, requiring specialist knowledge of both - for no real advantage. It also means that produce failing to make the export grade can be dumped on the domestic market, thus making the export standard a marketable brand, in which case consumer demand makes the domestic standard redundant.

In any eventuality Britain will not be legislating in a vacuum. If we seek equivalence in order to maintain mutual recognition then we will as a matter of fact need a mechanism to submit legislation for EU review so that their views can be taken into account. The decision to ignore their view may well be a decision to depart from regulatory equivalence, making exports for certain sectors more expensive. The idea that we can legislate completely independently is for the birds, not least in those areas where there are transboundary concerns - ie much of the single market body of law. In any case we are, like the EU, obliged to adopt global standards by way of the WTO agreement on Technical Barriers to Trade. Deregulation is a vast red herring.

To understand Conservative opposition to regulation one must understand the impact of adopting EU regulations in 1992 under the Single European Act. The process was rapid, badly executed and singularly unfair, killing a number of SMEs across a number of sectors. Now that we have a settled regulatory regime, reversion would cause as much, if nor more pain. The process of change is more damaging than the regulation itself.

Arguably one could say that EU regulation was in 1992 inferior to UK standards but as systems of regulation have matured, it is unlikely that ours would be vastly different. Certainly not to any extent that it would warrant a departure from the single market.

Should we elect to leave the single market we will find that a comprehensive agreement would require that we opted into more things than leavers had hoped, thereby taking a pick and mix approach to the single market. This can only cause considerable confusion if not applied to entire sectors assuming such an approach is even permitted. Further to this, any agreement would require a surveillance and arbitration mechanism (a court), as indeed do most comprehensive trade agreements. The Brexit settlement will by no means be straightforward and that is without taking legacy considerations into account.

In any eventuality Britain will continue to be a recipient of European and International law, and the concept of absolute sovereignty as many understand it is unlikely and wholly impractical. Brexit doesn't deliver full sovereignty nor especially does leaving the single market. At best it gives us the right to say no but in so doing we accept the consequences, some of which prove expensive.

That is not to say that having that kind of veto is not inherently desirable. The enhanced ability to shape international regulation and technical rules free of the EU is one of the more appealing Brexit arguments. One this blog has given a good airing.

That, however, is not much use without a degree of domestic reform. Irrespective of the EU, we adopt a large body of international law by way of statutory instruments where there is little, if any, parliamentary scrutiny. The shaping of such rules is very often entrusted to delegates and officials and largely ignored by politicians who are barely aware such even exists.

The danger there is that we ignore the fact that this kind of regulation is central to modern trade. Just today we note that endocrine disruption in relation to pesticides, arcane though it may be, is a sticking point for CETA. Without full engagement in the global process it lacks transparency and if not given adequate scrutiny then the UK loses a considerable opportunity to influence trade deals without even being a party to them.

Without a greater level of awareness as to the non-EU origin of trade rules, we will still be stuck in the dogmatic quagmire of the EU debate, assuming we can sweep away "bent banana" rules and those minimum heat standards on oven gloves which so offend the Ukip tendency.

The fact is that regulation is a facet of modern life and it is here to stay. For the most part, most people, including our politicians do not care where it comes from and would not wish to tie up parliament with such tedious minutia. But that means the entire regulatory sphere is on autopilot. At least while we are in the EU there is at least some awareness that we are an importer of law. Brexit makes the already obscured even more invisible. We must be mindful of this so that regulation does not slip off the radar entirely.

The unfortunate truth is that deregulation is a eurosceptic mirage, and though there are considerable benefits to leaving the EU, given that EU rules are now much the same as the default global standard, there is no economic or commercial advantage to leaving the single market. Effectively what that means is turning away from an advanced interface into the EU's internal market in favour of inferior access.

What we pay to the EU is a means of reducing duplication and combining our resources in order to reduce the cost of government. Though some would have us take back control of everything at any cost, there is no value in turning our noses up at cooperation. We should only seek to take back control in those areas where there is an obvious advantage to doing so. To my mind the EEA agreement is as good as any to avoid a long and protracted negotiation where we effectively reinvent the wheel to give us the continuity of cooperation.

The presence of country specific annexes in the EEA agreement means we can opt out at a pace of our choosing over a number of years while at the same time giving us the continuity to avoid a cliff edge. It reduces the possibility of introducing errors and bugs into the system where presently none exist. The EEA agreement exists so that non-EU members can enjoy the best level of EU internal market access. To say that we do not want it is to say that we do not want the best level of access possible - which is actually contrary to the government's own rhetoric.

If we are not seeking to stay in the single market then we are looking at staying in the EU for considerably longer (possibly forever) while something else entirely is negotiated. That notion may please remainers but as a leaver I would prefer that we take what is most immediately achievable and sort the rest out later. At least then we are out of the EU. It would be a dreadful pity to drag this out, increasing the risk of remaining for longer for a deregulation agenda that was unlikely in the first place.

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