In my previous two posts (here and here), I have been examining the concern that has been expressed, notably by Andrew Tyrie MP, about the obstacles UK manufacturers might face in exporting to the EU under the WTO option, because of the need to ensure that their products continue to conform to EU product legislation, and because of a need moreover to be able to prove that conformity. I have been confining myself to products covered by the New Approach legislation, and have focussed on the form which that legislation has taken since the introduction of the New Legislative Framework in 2008. My main conclusions so far have been that:
As the government prepares for the Article 50 withdrawal negotiation, and (probably) a parallel negotiation on the UK’s future relationship with the EU, it becomes increasingly important to form an accurate assessment of the consequences of failing to reach a trade agreement before the two years are up (and of failing also to agree an extension to the talks). If, as some say, the results would be disastrous, then we would be in an extremely weak negotiating position. Better, it is sometimes said, to join EFTA and the EEA, despite the admitted drawbacks of such a course, than to risk the WTO option. In particular, it has been argued that an extra requirement to prove the conformity of their products to EU product safety legislation would greatly hinder UK exporters.
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.
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. 1
- 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. 2
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.
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.
One of the priorities for our Leave campaign is to develop coherence in our analysis of Brexit options. Once we are clearer about the options, I think there is still a possibility that something like a dominant majority position could emerge in favour of the Free Trade Agreement option. This is my own position, clearly, and I recognise of course that there is a strongly held alternative view that the EFTA-EEA option is preferable. But we cannot hope to resolve this issue until we have a good understanding of it.
Today, I want to address an element of confusion that seems to exist about the relationship between EFTA and the EEA. I discussed this before in my series on Iain Mansfield’s winning IEA Brexit Prize entry, and now want to look at Murray and Broomfield’s Brexit plan, which gained the runner-up’s position, and in which there is further evidence of incomplete understanding of EFTA and the EEA.
In its leaflet, on page 8 of the pdf, the Government claims that no country has so far:
managed to secure significant access to the Single Market, without having to:
• follow EU rules over which they have no real say
• pay into the EU
• accept EU citizens living and working in their country