Introduction: a debate re-opened?
The Financial Times reported on 26 July that there is:
a ‘live debate’ in government about whether Britain should quit the customs union
The FT points out that staying inside the customs union:
could restrict Dr Fox’s ability to strike new trade deals[,] or prevent them altogether.
In my last post I began to examine the extent to which, in the event of Britain leaving the EU, and in the absence of an agreement on the mutual recognition of conformity assessment procedures, there would be technical barriers to trade in industrial goods. I outlined the Old and the New Approach to EU Product Safety legislation, and showed that under the New Approach with CE Marking, British manufacturers could continue much as before. In the worst case, it is possible that they might have to change the Notified testing laboratory they employed to one belonging to a company established in the European Union, but I argued that even this could well be made unnecessary in most cases by means of subsidiaries of British testing and certification companies, or through subcontracting.
In this post I want to begin to examine the situation that would pertain in the Old Approach sectors, which include foodstuffs, biocides, motor vehicles, chemicals, cosmetics, detergents and pharmaceutical products. Whereas, in the New Approach, a whole sector may be covered by a single Directive or Regulation setting out the broad safety objectives, and a multiplicity of harmonised standards set by the European Standard organisations (CEN, CENELEC and ETSI), in the Old Approach the detailed requirements are contained in the EU legislation itself. Today I look at chemicals, of which UK exports amounted to £24.7bn in the 12 months to November 2014, and of which exports to EU countries increased by £0.7bn in 3 months between January and April 2016.
Before continuing to examine the possible outlines of a post-Brexit Mutual Recognition Agreement on conformity assessment for products traded with the European Union, it occurs to me that it would be appropriate, and indeed logically prior, to consider what the situation would be without any such agreement. I have seen very different estimations of the extent of the problem of Technical Barriers to Trade in the absence of any such agreement. On the one hand, in Flexcit, Richard North has warned (p. 69, referring also to barriers related to Sanitary measures for trade in animal products) that in the absence of such MRAs the UK would:
In my last post, I explained how Switzerland, having rejected in a referendum in December 1992 the EEA Agreement which it had signed in May, and having thereupon suspended its membership application to the European Community which it had made in the same month of May 1992, then found an alternative means of participating in the EU/EEA single market. First, it further developed the practice, which it had begun in 1988, of the autonomous adoption of EU law into its own domestic legislation; and second, it successfully negotiated with the EU a series of bilateral agreements, building upon the already extant 1972 Free Trade Agreement, which have given Switzerland a degree of access to the single market almost certainly greater than that of any other state outside the EU/EEA, but without the peril of being obliged (I am discounting here the virtually unusable right of reservation contained in Article 102 of the EEA Agreement) to adopt new EU legislation as it issues forth from the Commission.
I have written previously about the challenge that the Single European Act of 1987, with its objective of creating a single market by 1992, presented to the EFTA states. In August 1988, the Swiss Federal Council published a Report on European Integration, in which it rejected EC membership as incompatible with its neutrality policy, in current conditions at least, but advocated instead ‘an active integration policy’ aiming at the establishment of ‘conditions as similar to the internal market as possible’.
In May 1988, the Federal Council decided to examine all reports and proposals submitted to parliament to ascertain their compatibility with European law. The goal was ‘to ensure the greatest possible compatibility of our legal provisions with those of our European partners in all areas having a transborder dimension (and only in those)’. Thus began the process known as autonomer nachvollzug (‘automomous enactment’) by which Switzerland has voluntarily adapted its own legislation to conform in greater or lesser degree to Community legislation.
The EEA-EFTA nations have to adopt new single market EU acquis without having a vote on its enactment in either the EU Council or the European Parliament. Clearly, this is a major drawback to the EEA-EFTA (or ‘Norway’) Brexit option. But equally clearly, just how big a drawback this is depends greatly on how much of the total EU acquis we would have to adopt, or perhaps more to the point, on how much of the acquis we would have to adopt compared to how much we currently adopt, given our various opt-outs.
Some of the estimates that have been given are:
- 6.5%, from David Oddson, Icelandic Minister for Foreign Affairs, 2005.
- 9%, from Nei til EU, the Norwegian anti-EU campaigning organisation. See their articles here and here.
- 21% from Richard North here.
- 28% from the 2012 Norwegian government report ‘Outside and Inside’, at page 795 of the Norwegian edition.
- ‘Approximately three-quarters’, from the same Norwegian report, at page 6 of the official English version of chapter 1, here and here.
- 80%, from Halldór Ásgrimsson, Icelandic Minister for Foreign Affairs, 2003.
Jean-Claude Piris, formerly Legal Counsel of the European Council and of the EU Council, has claimed that if the UK were to leave the EU and join EFTA, we could not simply remain in the EEA, but would have to make a fresh application to join it according to Article 128 of the EEA Agreement. Article 128 reads:
1. Any European State becoming a member of the Community shall, or becoming a member of EFTA may, apply to become a Party to this Agreement. It shall address its application to the EEA Council.
2. The terms and conditions for such participation shall be the subject of an agreement between the Contracting Parties and the applicant State. That agreement shall be submitted for ratification or approval by all Contracting Parties in accordance with their own procedures.
The European Free Trade Association was founded in 1960 by Austria, Denmark, Norway, Portugal, Sweden, Switzerland and the United Kingdom. When the UK and Denmark left EFTA and joined the EEC on 1 January 1973, the remaining EFTA states entered into bilateral Free Trade Agreements with the Community (except that the FTAs of Iceland, which had joined EFTA in 1970, and of Norway, followed later in March 1973, and July 1973, respectively.)
By 1984, the process of removing tariffs and quotas between the EFTA states and the EC had been completed, and in April at an EFTA-EC Ministerial meeting in Luxembourg, it was agreed to strengthen cooperation with a view to creating a ‘dynamic European economic space’.
Michael Gove claimed this week that there exists a European free trade zone. He said:
There is a free trade zone stretching from Iceland to Turkey that all European nations have access to, regardless of whether they are in or out of the euro or EU. [his footnote n. 26] After we vote to leave we will remain in this zone. The suggestion that Bosnia, Serbia, Albania and the Ukraine would remain part of this free trade area – and Britain would be on the outside with just Belarus – is as credible as Jean-Claude Juncker joining UKIP.
His only supporting reference for this claim, as given in the above document, is this map from the EU:
What is at stake is our freedom as a nation. The economy is not the main issue, nor even is immigration for that matter. What matters is that we are a free people at heart and long to be free in our country again, to rule ourselves and not to be ruled by others. This is very simple, and the point cannot be over-emphasised.
That said, we can consider the effect on our economy of a Brexit, in a form which does not involve continued subjugation to the dictates of Brussels. Once we are out, or rather, as we are on our way out under Article 50, we should attempt to obtain a Free Trade Agreement with the EU, and it is reasonable to expect that we could reach an agreement by which we continued to trade in industrial goods without tariffs. Non-tariff barriers, especially in services, are liable to prove more of an obstacle.
It is obvious, when one thinks about it, that trade will be easier if everybody keeps exactly the same rules. The only way for everybody to keep the same rules is for there to be a single authority which sets and enforces them. If we desire to be free, and not be subject to such an authority, then there will be divergences in rules and regulations, and trade is likely to become a little harder. That is a price of freedom, and it is worth paying in my opinion.