Richard North, 25/01/2018  

Speaking in the Spanish parliament on Tuesday, Michel Barnier has been saying a post-Brexit free trade agreement with the EU could be vetoed by Member States if the UK insists on the freedom to diverge from European standards and regulations.

This is hardly news. The UK-EU trade deal is expected to be a "mixed" treaty requiring the unanimous approval not only by the EU but also the Member States. And it thus follows that any one Member State (or regional parliament, where appropriate) will be in a position to veto the deal.

Up front will be the EU institutions and they will doubtless set the pace, declaring their support or otherwise for the deal, but one doesn't really expect a treaty with seriously objectional provisions to make it past the first cut.

Nevertheless the point is made that, in any trade agreement, the UK will be expected to maintain regulatory convergence and any attempts to loosen this will mean that difficulties are encountered in securing an agreement.

Obviously Barnier feels it necessary to make this point – otherwise he wouldn't have made it - but one wishes that he would occasionally broaden his scope. Many times on this blog I have pointed out that the overwhelming bulk of Single Market regulation originates at global level. As a result, the UK will find that it will need to comply with the bulk of regulation, inside of outside of the EU (or the Single Market).

One assumes that there remains within the UK government a rational element within the civil service that is aware of this and will ignore the "ultra" calls for deregulation, even if it is on the basis that we will have to meet our global commitments. To a very large extent, therefore, the point is moot. Given the march of globalisation, divergence from international norms is unlikely.

Thus, although Michel Barnier says that any deal which failed to preserve a level regulatory playing field would face "difficulties" in securing the ratification of national and regional parliaments in the remaining 27 member states, that would apply across the board. The fact of the matter is that the UK manufacturers would face "difficulties" in trading on the international stage or competing with imports if the UK did not maintain regulatory convergence.

However, although that convergence is largely maintained on a global level, there are some divergences between rules set by the United States and the EU, the classic example being chlorine-washed chickens which are permitted by the US but prohibited by the EU.

In such specific areas, the UK will need to ask itself which regulatory system it is going to have to adopt, a question that will doubtless be decided by relative levels of trade with the different blocs, and any price or other advantages that might accrue from buying supplies from the different sources.

Mr Barnier himself refers to the question of whether the British, as they leave the EU, will also leave its regulatory model in order to draw closer to the Americans or others.

He acknowledges that it will be an important question because it will determine the model for co-operation the EU adopts and the rules it will need to avoid regulatory competition or dumping. The crucial need, he says, is to find a way to guarantee what is called in English a "level playing field". And it is without that, he says, that the problems of ratification will arise.

This, though, might be some time in coming if at all. David Davis has been talking to the House of Commons Brexit Committee, telling them that the UK would "stay close" to the EU's regulatory regime after Brexit.

The UK, we are told, only wants the freedom to go its own way if it chooses in future. It’s quite possible that the UK will decide to replicate European regulations on financial services and other areas indefinitely, he suggested.

According to Bloomberg, Davis's comments represented the clearest statement so far on what Theresa May's government is planning to do after Brexit. Certainly, it suggests that the government is buying into the European Council's transition proposals.

This sign of the willingness to accept EU rules, says the agency, "will infuriate the Eurosceptic hardliners in her Conservative Party", and indeed it had Rees-Mogg railing about our proposed status as a "vassal state".

But said Davis, the aim of the transition exercise "will be to maintain the maximum possible access to the European market whilst at the same time exercising our own freedom over what we are going to do in the future". He sees as his task "creating that freedom". How far apart we diverge will be a matter for the government thereafter, he adds.

With all that, we are given to understand that Mrs May's Cabinet is currently finalising its plan for the so-called "end state" of Brexit - what kind of future trade partnership Britain hopes for at the end of this long Brexit process.

Here, it is interesting to see how easily the media accept that Brexit is a process, something which, in the early days, we had to work on to get people to accept. Now it seems to be taken as a matter of course.

Nevertheless, transition is now part of the process, leaving Davis to fend off accusations from Rees Mogg that the period, as proposed, was simply a "deferral" of Brexit. In fact, it doesn't take a genius to work out that that is precisely what it is, under the most unfavourable of terms.

Mogg wanted Davis to admit that it would be "more honest" to say that the UK was effectively staying in the EU for two years after Brexit day but, of course, honesty is not in the toolkit of the Brexit Secretary. Despite its truth, he denies it all the same.

No one pointed out, however, that it has been Mogg and his little gang of "ultras" who have been most voluble in resisting the one transition option that would deliver an equitable Brexit – the Efta/EEA option. Had there been any serious evaluation of the Mogg stance, the conclusion could only have been drawn that he and his gang were partly responsible for the situation into which we are descending.

Going back to Barnier, he thinks that it will be possible within the 21-month transition period proposed to finalise a trade deal. That remains to be seen, as does the shape of any deal that is finally agreed. And, the way we are going, the deferment of Brexit – where Single Market rules will be maintained – is going to create just the sort of cliff edge scenario that we so badly needed to avoid.

Looming behind all this though is the spectre at the feast, Mrs May's "implementation period" which has not gone away. Davis refers to it when he denies that the transition period is an extension, still trying to maintain the illusion that we are looking to implement a finished agreement.

Thus, we have Barnier on the one hand telling us that we can complete a deal by the end of the transition period while a strict interpretation of what Davis says requires that we believe the deal is sealed at the beginning of the period. Something is going to have to give here as this inherent contradiction can't last forever.

Understanding the nature of the contradiction – much less dealing with it – seems beyond the capability of Davis and the media don't even seem to have realised it exists. Therefore, the fog of incomprehension is set to dominate the debate for a little while longer.

As so often with select committees these days, we get more heat than light and nothing that takes us closer to understanding where we are going. And in this event, M. Barnier isn't being much help either, as he locks on to an issue which, in the final analysis, is going to solve itself. We will maintain convergence because it is in our economic interests to do so.

Yet, waiting in the wings is something that may blow the whole thing apart. The Irish broadcaster RTÉ is reporting that the EU is prepared to countenance a Brexit transition period longer than the two years initially envisaged.

Draft minutes to be attached to the final version of the negotiating directives will spell out that the directives "will remain under close review" and that member states will be "ready to update them when necessary".

This could be where the rock of the "extension" meets the hard place of the "cliff edge" and we discover that the leap from full access to EU markets to a Canadian style trade agreement is too big for us to take in one hit.

But then, if our own politicians seem unable to work out where we are going or where we want to go, it cannot be surprising that the EU starts taking decisions to fill the vacuum. Whether Mr Mogg likes it or not is really immaterial.

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