Richard North, 21/02/2018  

It is a little bit difficult to decide which is more offensive: the stupidity of a Secretary of State who believes that mutual recognition of standards is the answer to EU market access, post-Brexit, or the gullibility of those people who give him a free pass, and treat this as a credible option.

If there was any justice, David Davis would have been openly mocked for his performance in Vienna yesterday. Why did he have to go all that way to deliver such a ridiculous speech?

But it was he who did the mocking, playing down fears that there could be "an Anglo-Saxon race to the bottom with Britain plunged into a Mad Max-style world borrowed from dystopian fiction". Instead of a "regression from the high standards we have now", he anticipated a "race to the top". But, from thereon, though, it was all downhill - all the way to the bottom.

In the official version of his speech, this started with a familiar litany of error. "We start from a position of total alignment, with unprecedented experience in working with one another's regulators and institutions", Davis said. Therefore, "The agreement we strike will not be about how to build convergence, but what we do when one of us chooses to make changes to our rules".

We've heard the like of this before and it is as wrong now as when it was first uttered. Yet Davis keeps trotting it out, despite the fact that it isn't true. The process of leaving the EU is in itself a divergent action. The UK not only steps outside the framework of EU law, it removes itself from the market surveillance system and the entire regulatory infrastructure.

But to demonstrate quite how slender his grasp of reality actually is, Davis then uses as an example a car produced in Austria to be exported to the United Kingdom. Currently, he says, that vehicle only has to undergo one series of approvals, in one country, to show that it meets the required regulatory standards.

Noting that those approvals are accepted across the European Union, he then goes on to say that, "that's exactly the sort of arrangement we want to see maintained even after we leave the European Union".

However, that is precisely the system which is not going to carry over when we leave the EU. This we know because the Commission has already said so in its Notice to Stakeholders - a document clearly unread in the Department of Brexit. Had they cast an eye over it, they would have found that, after Brexit, vehicles approved by the UK authorities will not be approved for sale in EU territories.

For an illustration of where we need to go in order to recommence sales, the EU-South Korea Agreement is as good as any. Annex 2-C applies (page 1,144 et seq). This requires that vehicles produced in Korea must conform in their entirety with UN ECE Regulation, as adopted by the EU for its own code.

But this is not what Mr Davis has in mind. He claims that the European Union "has a number of mutual recognition agreements with a variety of countries from Switzerland to Canada to South Korea" which, supposedly, cover "a huge array of products - toys, automotives (sic), electronics, medical devices, and many, many more".

In Mr Davis's view, the "crucial part" of these agreements "is the ability for both sides to trust each other's regulations and the institutions that enforce them. With a robust and independent arbitration mechanism". Such "mutual recognition", he asserts, "will naturally require close, even-handed cooperation between these authorities and a common set of principles to guide them".

Yet virtually everything Davis says here is false. Mostly, it is pure, unadulterated fantasy. In the context set by Davis, the European Union does not have "a number of mutual recognition agreements with a variety of countries from Switzerland to Canada to South Korea". This is because he mistakenly implies that the "mutual recognition" applies to standards. Such as do exist are very, very limited. They do not cover "a huge array of products".

It almost beggars belief that the Secretary of State for Brexit could be so wrong, or make such a basic, "rookie" mistake, but he is confusing mutual recognition of standards with mutual agreement of conformity assessment.

Aside from provisions on conformity assessment, the only mutual recognition agreement in CETA covers mutual recognition of certain professional qualifications. In a separate agreement on conformity assessment between the EU and Canada, it specifically states that it, "shall not be construed to entail mutual acceptance of standards or technical regulations of the Parties and … shall not entail the mutual recognition of the equivalence of standards or technical regulations".

Similarly, the two agreements with Switzerland (here and here) cover only conformity assessment. There are no separate MRAs on standards.

When it comes to mutual recognition of standards, we have already pointed out that the EU accepts this only between Member States, within the context of the Single Market. Mutual recognition of standards does not even extend to the Efta/EEA states. 

More generally, the EU prefers to work on the basis of harmonisation of standards. There is in fact, a hierarchy of arrangements. At the top of the tree is harmonisation. Lower down is the "approximation of laws", then comes regulatory equivalence, and only then mutual recognition.

Yet, despite this, the Independent has Davis calling for what amounts to an entirely unrealistic agreement based on mutual recognition. Britain, the paper reports him as saying, wants a Brexit trade deal that gives it free, unrestricted access to EU markets but where it was "not required to obey European rules".

To achieve this, Davis - we were told - rejected the idea that the UK has to stay aligned with EU regulations to avoid trade barriers. As an alternative, he called for "mutual recognition" between the two regulatory regimes to avoid cutting British firms off from the continent, wrongly believing that the EU will permit this..

Questioned by Vicky Young of BBC News, he then repeated the error. Young asked him whether "we have to stick to the rules if we are to have frictionless trade", whence Davis again referred to the examples from Canada, South Korea, Switzerland, "which are outside the European Union".

These, he said, are "not required to obey European Union rules but have mutual recognition standards. And that's something that every free trade agreement has, some method of recognising the quality standards, the outcome standards, safety, emissions – not the way you do it, not what your laws are that have to harmonise with the European Union and so on".

All Mr Davis might actually achieve is a very limited form of acceptance of some UK standards, under what is known as "regulatory equivalence" – a concept very different from the portmanteau mutual recognition of standards, where partners' laws are accepted unconditionally.

Equivalence applies when the EU is prepared to accept that a trading partner's laws in a specific area achieve the same effect as the EU's laws. But any such arrangements are made only sparingly, on a case-by-case basis, and can hardly form the basis of a trade agreement. There are no generic equivalence agreements.

All we are left to do, therefore, is to wonder how David Davis can be making such a mess of his brief, to the extent that he is placing at the centre of his EU trading strategy something which is simply unattainable. One can only surmise that he is being unduly influenced by the Legatum Institute, which has foolishly been promoting the idea of MRAs on standards.

If we are to progress, the Secretary of State needs to break away from this false counsel and join the real world. We are not going to get the EU to accept mutual recognition of standards and the sooner we recognise that, the better. To gain market access, we will have to remain tied, for the time being, to the Union's harmonisation programme.

We could have done that the easy way, by retaining membership of the EEA. But, if we are going to be on the outside, then ministers (and MPs) need to reconcile themselves to the consequences and stop pretending that there is a magic solution called mutual recognition.

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