Sunday, 5 November 2017

Legatum gets it badly wrong

A report published yesterday by Legatum Institute has made a fundamental error in saying conformity with EU rules will allow the UK to trade freely with the EU.

The Single Market is a regulatory union. For this to work effectively, there have to be two fundamentals: common regulation and common (coordinated) surveillance and enforcement – including record-keeping.

Subscribing to common (or equivalent) regulation is not sufficient. The crucial additional element is that members commit to the same level and style of market surveillance and enforcement, harmonised under the jurisdiction of Union institutions.

Because of this, it can be assumed that goods produced by enterprises subject to the Single Market regime will automatically conform with union regulation. There is, therefore, no need for conformity assessment at the internal borders. Goods can be traded without border checks or other formalities.

When goods are produced outside the regulatory union, different provisions apply. Although they might (either by agreement or via WTO agreements) be produced to common (or equivalent) regulatory standards – which can be verified – the enforcement regimes are not necessarily the same and EU institutions have no jurisdiction over them.

Therefore, in the absence of common or uniformly-applied surveillance and enforcement, the Union cannot assume that regulatory conformity is necessarily equivalent to the EU's provisions. Therefore, at the external border of the Union, goods entering from third countries are subject to varying levels of border checks.

For stable, mass produced goods (i.e., were items are identical and are not likely to change during distribution and transport), the checks can be minimal, amounting sometimes to no more than documentation checks – especially where there are agreements on the mutual recognition of conformity assessment.

This is not the case though with perishable goods, and particularly those of animal or vegetable origin. There are highly variable goods and can deteriorate through the production and distribution chain, which means the quality (and safety) of even similar products may vary substantially.

Such goods are produced extensively by third countries and exported to the EU. Many are subject to the WTO Sanitary and Phytosanitary (SPS) Agreement, where regulatory equivalence may be claimed. There may even be harmonised standards.

However, in the absence of common surveillance and enforcement measures and the fact that any measures applies lie outside the jurisdiction of the EU, full conformity of inherently variable products cannot be assumed. Therefore, the EU insists on carrying out its own conformity assessment at its external border. To do so is entirely compatible with the SBS Agreement, and therefore the EU procedures are considered to be WTO compliant.

On that basis, the UK – when it leaves the EU – might be able to claim that it has full regulatory harmonisation at the time that it leaves. It may even retain similar enforcement standards. But it cannot implement common enforcement and systems as these have to be fully integrated and coordinated with Union institutions and other members of the Single Market. This is not possible outside the Single Market.

Therefore, while the EU may continue to recognise UK product and SPS regulation and conformity assessment, that does not prevent it carrying out detailed border checks of UK products, once the UK has assumed third party status.

To suggest that conformity alone is any solution is to completely misunderstand how the system works.

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