Would UK regulatory divergence hinder our exports to the EU? (1/4)

On 6 December 2019, ‘The UK in a Changing Europe’, an ESRC-funded ‘Initiative‘ at King’s College London, published a report on the implications of trading under World Trade Organisation (WTO) rules (without a Free Trade Agreement or Customs Union with the EU) in the event of a no deal Brexit. Chapter 7, by Sam Lowe of the Centre for European Reform, concerns non-tariff barriers to trade under WTO trading: 1

My purpose here is to address Lowe’s first question:

I confine myself to those technical regulations which come under the WTO Technical Barriers to Trade Agreement, rather than those covered by the WTO Agreement on Sanitary and Phytosanitary Measures.

‘Standards’ and ‘regulations’

While it is perfectly acceptable in everyday speech to speak of ‘regulatory standards’, it is not ideal in this context, since the term ‘standard’ is carefully distinguished from ‘regulation’ in much product safety legislation. The WTO TBT (Technical Barriers to Trade) Agreement requires WTO members to use international ‘standards’ as a ‘basis’ for their ‘technical regulations’.

Under the so-called New Approach to EU product safety legislation, essential safety requirements are laid down in EU Directives and Regulations. Harmonised standards, on the other hand, are developed by CEN, CENELEC and ETSI upon a request by the European Commission. Manufacturers of products destined for the EU Internal Market are obliged to satisfy the requirements, but adherence to the standards, on the other hand, is voluntary. However, products that adhere to the standards are presumed to satisfy the essential requirements. Adherence to the standards thus provides one way, but not the only way, in which manufacturers can meet the requirements, as the Commission’s ‘Blue Guide‘ on products rules explains:

The members of CEN and CENELEC are the national standard organisations, BSI in the case of the UK. It was agreed at the CEN and CENELEC General Assemblies on 23 November 2018 that BSI would continue to have its full member’s rights and obligations until 31 December 2020, irrespective of whether the UK leaves the EU with a Withdrawal Agreement or without one:

Regulations

It seems then that the UK will continue to implement harmonised standards as national standards, at least until the end of 2010. But if the standards remain the same, then in what ways could regulations diverge? Here are three possibilities:

i) adherence to a standard could be made compulsory rather than voluntary in the UK;

ii) the UK could require different procedures for demonstrating conformity with a standard. For example, we could require third party certification for products where the EU allows manufacturers’ self-declarations;

iii) Since the UK is not bound by the BSI’s obligations to CEN, the UK could make regulations that are at variance with the standards. For example, the UK’s Health & Safety Laboratory (HSL) considers (Section: ‘Is EN ISO 13287:2012 reliable’) the European test for anti-slip footwear to be inadequate, and has instituted its own rating scheme, based on an alternative test. As EU members we are obliged to give market access to CE marked footwear. Outside the EU we could make the UK test standard obligatory for anti-slip footwear, wherever it is manufactured. In such a circumstance, as I understand it, the divergence would be noted as an ‘A-deviation’ in the European standard. While the European standard would be published in the UK as a British Standard, it would not be effective here because the UK regulations would require use of a different test method. At least, that is my understanding.

Lowe’s first question:

seems to presage a discussion of barriers to trade arising from divergence in technical regulations. But in fact, all three barriers to trade that he identifies result not from such divergence but from the UK’s post-No Deal status as a third country. I consider these in the following three posts.

Lowe is concerned specifically with barriers faced by UK exporters in exporting to the EU:

but he does not explain why UK manufacturers exporting to the EU would be affected adversely by a change in the UK regulations. They are currently manufacturing products which conform to EU standards for both their EU-27 and their domestic market. If the UK were to weaken its regulations, then their product would probably continue to meet the requirements of both markets. If the UK were to impose more stringent regulations, then UK manufacturers might face a barrier in conforming to the domestic market, but the product would continue to conform to EU regulations, as Lowe himself acknowledges:

It might be objected that if the UK manufacturer were forced to have two separate production lines, one making their product to UK regulations and one making it to EU regulations, then this could be very costly to it. Indeed it could. But it would be a problem faced equally by any manufacturer, whether in the UK, EU-27 or elsewhere, producing goods for both the EU and the UK market.

In the vast majority of cases, however, manufacturers design a single product, which is capable of meeting all the various regulations of the countries to which they seek to export it. Bicycles provide an exception, even within the EU, where they are not subject to harmonised legislation. In some countries, the front brake is required to be on the right handlebar, while in others, it is required to be on the left. Where the manufacturer uses an assembly line, the product must presumably diverge at some late stage to produce the two versions.

But in general this is not so. To take the earlier example, if the UK were to strengthen its requirements for anti-slip shoes by making the HPL test compulsory, then manufacturers who were interested in the UK market would submit their existing shoe design to this test. 2 If it passed, then the shoe could be marketed in both the EU and the UK. If it failed then the manufacturer might seek to improve the design. This improved shoe would almost certainly continue to meet the EU requirements as well as the UK ones. It is very unlikely that a manufacturer would have to design one shoe just for the UK market and one for the EU market.

Most probably both the UK and the EU tests would be carried out by the same TIC (testing, inspection and certification) company at the same laboratory. While the new regulation was passing through its various stages from consultation to enactment, the TICs that do safety shoe testing would most probably acquire the HSL test equipment, if they didn’t have it already, for their laboratories, and be ready to certify products to both the UK and the EU requirements. 3

Indeed, the large TICs offer global market access. Intertek, for example, offers testing and certification of protective footwear to meet the requirements of the EU, USA, Japan, Canada and Chile:

If the UK were to adopt new regulations for anti-slip footwear then, given that its market must be at least as important as that of Chile and of Australia/New Zealand, a company like Intertek could be expected to add the relevant certification to those it already offers. The requirements would be the same for UK manufacturers sending their product to the Intertek laboratory in Leigh, Greater Manchester, as it would be for those employing the services of Intertek laboratories in Dhaka, Chennai, or Shanghai, as again it would be for EU-27 manufacturers employing the services of a local laboratory.

None of this constitutes any kind of barrier to the EU market. I am not sure that it is truly a ‘barrier’ to the UK market, as that word would normally be understood. Obviously, if we were to require safer non-slip shoes than the EU does, then there would be a challenge for manufacturers to meet. It’s not that we are trying to keep out anyone’s products. On the contrary we would be welcoming them, so long as they met our new regulations. Perhaps it’s more like a hurdle than a barrier per se.

To summarise, divergence of UK regulations from EU regulations:

a) could create technical hurdles to entry into the UK market; but

b) such hurdles would be the same for all manufacturers, wherever located;

c) UK divergence would not, so far as I can see, create any barriers to access to the EU market.

Notes:

  1. As is customary, I use ‘WTO trading’ as a shorthand for trading under WTO rules without a GATT Article 24(8) customs union or free trade area.
  2. Those products which currently carry the appropriate HSL ‘Grip’ rating would have already been tested to the HSL test standard.
  3. Alternatively, they could sub-contract the testing to the HPL or other suitably equipped laboratory.

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