There are two
types of obstacles to ‘frictionless trade’, which is the stated goal of the UK
Government in the negotiations with the EU.
The first type is tariffs, and although it can take months and years of negotiations,
abolishing or reducing tariffs is the easy part. If by ‘free trade’ the government actually
means ‘tariff-free trade’ (which is the way things look at times), then an
agreement ought to be perfectly possible, even if the desired timescale is more
than a little optimistic. The second
type of barrier is about rules, regulations and standards. Ensuring that goods
and services from one jurisdiction are being produced on a ‘level playing
field’ before allowing them to be freely sold in another jurisdiction is one of
the issues which leads to the creation of a so-called ‘hard’ border. And it isn’t just about things like quality
of the finished goods, it also includes things like whether different countries
have different standards for environmental protection or health and safety –
lower standards can reduce costs and therefore provide a potentially unfair
advantage. Regulatory alignment is much harder than tariff alignment, and takes longer to achieve - the best way of avoiding such
problems is to adopt a common set of rules and regulations, arrived at by
agreement. (We could, perhaps, call it
something like a ‘single market’.)
But given two
different sets of regulations, does it necessarily follow that there need to be
controls and checks on goods and services crossing from one to the other? The UK Government’s position appears to be
that it does not, and that if the EU imposes such checks it is the EU erecting
new barriers to trade. This seems to be
the general gist of Liam Fox’s speech
this week. He explicitly referred to the
possibility of ‘Europe’ “erecting
barriers to trade where none yet exists”.
It chimes with one of the regular themes of the Brexiteers that we don’t
need border checks and controls, and if we end up having them, it’s not the UK’s fault, it’s
all the faulty of those nasty vindictive Europeans. There is a sense in which the core message
there – leaving out the name-calling – has an element of truth about it. If you have two countries or groups of
countries with different regulatory regimes covering goods and services, and if
one of those regimes sets high standards whilst the other sets out to abolish
as many standards as it can, which of the two is the one that it going to want
to impose controls over goods entering its territory? Not the one with low standards, naturally –
if someone else wants to send them goods produced to higher standards, why
wouldn’t they let them in? But seen from
the other perspective, why on earth would the more highly regulated country
want to allow in goods produced to lower standards which can undercut the
prices of its own manufacturers? So
there’s a sense in which it’s true that it could be the EU that will end up insisting
on border controls.
And that brings
us to David Davis’s little contribution
yesterday. Despite all the hype from the
outset about ‘freeing UK businesses from unnecessary EU rules and regulations’,
he seemed to be saying, in effect, that far from reducing standards, the UK
will in fact set higher standards. There
will be no race to the bottom in terms of regulations and standards. It’s a U-turn that, if he’s really serious
about it (and I have my doubts), many consumers will surely welcome. And if UK standards really are better and
higher than the EU equivalents, there should be a lot less difficulty in
allowing UK goods and services into the EU, which was the thrust of his
argument as I understand it. Hold on a
minute, though. If in this wonderful new
world that he now seems to envisage, UK companies are committed to
more regulation and higher standards than their competitors in the EU, doesn’t
that give those EU companies an unfair advantage, allowing them to undercut UK
prices? In those circumstances, isn’t it
the UK which needs hard borders to protect itself from unfair competition?
Two speeches,
but not really a lot more clarity or honesty.
And the confession? That came
from David Davis when he referred to an ‘Anglo-Saxon’ race to the bottom. What is that, if not an admission that Brexit
is really all about England?
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