The future of trade regulation after Brexit - a moving feast?
December 15, 2017
Two weeks ago, I chaired the latest in our series of podcasts on Trade Matters, focusing this time on the Future of Regulation and what it could look like once the UK leaves the EU. I was joined by PwC's Michael Moore, Senior Adviser on Brexit, Jo Pisani, UK Pharma & Life Sciences Consulting Lead, and also the Head of Trade at the British Chambers of Commerce, Anastassia Beliakova to discuss discuss how the current regulation works, what might change and whether there is anything we can do to prepare now?
At the time of recording, the pervasive mood was one of suspense with the outcome of the pending EU Summit hanging in the balance. The talk was as much about the negotiations faltering as about the chance of a breakthrough. Clearly since then there has been a big step forward. But how far has this actually taken us forward in the debate on the future of regulation?
The UK has now committed, if necessary, to maintain “full alignment with those rules of the Internal Market and the Customs Union, which, now or in the future, support North-South cooperation, the all-island economy and the protection of the 1998 Agreement”. All these alignments will need to operate across the UK but the qualifier could turn out to be significant. It quite specifically narrows the scope of ‘full alignment’ to those areas of most relevance to the Ireland/NI relationship. So while agriculture, goods and energy are key focus areas, at the other end of the spectrum, financial services really aren’t. In fact much of the full scope of the EU/UK relationship, which is heavily service-focused, probably isn’t covered.
So there is still much to negotiate before we get real clarity on the overall shape of our trade relationship with the EU, and the regulatory structures that will support it. International standards will help. They are often industry-led and standard setters work to harmonise standards across countries for ease of trade. Where international standards are well-established in an industry, regulatory differences tend to be a lot less of an issue in practice. The UK is, and looks set to stay, a key player in the standard setting machinery. But standards only take you so far.
Our speakers thought the best case scenario would be based on a ‘mutual recognition’ type of arrangement, with the EU accepting that UK regulation, and regulators, are equivalent to the EC and European agencies and fulfil the relevant regulatory objectives - and vice versa. The UK’s ‘Canada Plus Plus Plus’ model would need to rest on that sort of model of far reaching regulatory equivalence. We would need to take the EU with us, well beyond its current most advanced model of external free trade agreement. The ‘Norway Minus’ option that is also being talked about rests on regulatory alignment, but with the UK very much a “rule-taker”, accepting EU regulations and ECJ jurisdiction.
At the other end of the spectrum a worst case ‘no deal’ scenario remains a possibility for critical sectors of the economy, with automatic WTO rules and the risk of regulatory divergence.
In the bigger picture the recent outcome on the Ireland challenge does suggest that the EU and the UK Government are aiming to remain aligned. But neither the technicalities nor the politics will be easy, and negotiators will be working to a tight deadline on highly technical issues. It is still all to play for, with no guarantee of a full solution. We’ll be watching developments with interest.
Listen to Michael, Jo and Anastassia on the Future of Regulation podcast, available on our Trade Matters page, and look out for future episodes.