Richard North, 19/01/2020  

The thing about politicians who come up with fatuous and misleading statements is that it is sometimes difficult to work out precisely what we're dealing with. In some circumstances, it could be said that they are lying and in others, they might be genuinely mistaken.

There is a phenomenon, though, which we might call "culpable ignorance". This is particularly applicable to senior politicians of high rank, where they deliver statements which are manifestly wrong (or untrue), where the context is such that they should know what they are saying is wrong.

With that in mind, what does one make of Sajid Javid, the Chancellor of the Exchequer, and his latest interview with the Financial Times, in which he tells business that there will be no regulatory alignment with the EU after the end of the transition period, set for 31 December of this year? 

"There will not be alignment", he told the FT. "We will not be a rule taker, we will not be in the single market and we will not be in the customs union - and we will do this by the end of the year". Instead, Javid thus urges companies to "adjust" to the new reality.

Then, asked how regulatory divergence might impact industries such as automotive and pharmaceuticals with intricate supply chains spanning Europe, Javid came up with the jaw-dropping assertion that, "Japan sells cars to the EU but they don't follow EU rules".

If Javid genuinely doesn't know that his claim is false, then it drops immediately into the category of culpable ignorance. As Chancellor of the Exchequer, he should know that he is delivering an egregious falsehood – just supposing one accepts that a man in such a position really can be that ignorant.

As it stands, the EU rules applicable to the approval of motor vehicles have just been extensively revised, with standards currently set out in a massive 218-page tome entitled Regulation (EU) 2018/858 "on the approval and market surveillance of motor vehicles and their trailers, and of systems, components and separate technical units intended for such vehicles".

Strictly speaking, though, not even the EU adopts EU rules on motor vehicles. As it points out in Recital 48, the Union is a Contracting Party to the United Nations Economic Commission for Europe (UNECE) technical agreements on motor vehicle standards and in Regulation (EC) No 661/2009 it repealed its specific type-approval Directives and replaced them with the obligatory application of the relevant UN Regulations.

In order to reduce the administrative burden of the type-approval process, where appropriate, manufacturers of vehicles, systems, components and separate technical units are allowed to seek type-approval by obtaining approval under the relevant UN Regulations. These, the EU has adopted into its own legislation, together with a mechanism for updating the law as more UN Regulations are produced (or amended).

This is, in fact, an important development in the history of the Single Market, where the EU has delegated the standard-making authority in the motor vehicle sector to the World Forum for Harmonization of Vehicle Regulations, known as WP.29, established under the aegis of UNECE. It no longer makes its own technical rules but relies on WP.29 to do the job for it.

As regards Japan, even the likes of Sajid Javid might be dimly aware that the EU and Japan have recently concluded an "ambitious and comprehensive" Economic Partnership Agreement, with the text set out here, entering into force on 1 February 2019.

Unsurprisingly, given the extent of trade in the sector, motor vehicles and parts form a prominent part of the agreement, with the details set out in Annex 2-C, running to some 46 pages.

The central part of this agreement is that both parties recognise that the WP.29 is the relevant international standardising body for motor vehicles and parts, and that UN Regulations and general technical regulations (GTRs) are the relevant international standards.

Each party then agrees to accept in their markets any products which are covered by a type approval certificate made in accordance with UN Regulations. As long as the products are compliant with domestic technical regulations and conformity assessment procedures, in the area regulated by the relevant UN Regulation, they can be accepted "without requiring any further testing, documentation, certification or marking".

What has happened here, therefore, is that Japan and the EU have agreed to align their motor vehicle regulations on the basis of joint acceptance of harmonised UN Regulations, with the parties also agreeing to work with WP.29 in amending and extending UN Regulations.

This, for the EU, is now its standard trading model, which means that if a trading partner is looking for EU recognition of its standards, "without requiring any further testing, documentation, certification or marking", then they must adopt UN Regulations and procedures.

For the UK, this should not actually present a problem. We are founding members of UNECE and WP.29 and party to all its motor vehicle agreements and regulations. And, as it stands, we have perfect alignment with relevant EU legislation.

Apart from settling quota issues and rules of origin, therefore, the UK should not find it at all difficult to come to an agreement with the EU on trade in motor vehicles, simply by maintaining its relationship with UNECE and the adoption of UN Regulations.

If, however, we are to take the Javid line, what does that mean? If there is to be no alignment and we cease to be a "rule taker", does that mean we drop out of UNECE and WP.29, despite the fact that we take part in making the rules, and will continue to do so after Brexit?

If we do that, of course, then the only way the UK can export cars to EU Member States is if their manufacturers apply for "type approval" for each of the models they produce, which must be gained from one or other of the Member State national approval agencies, where standards and procedures must comply fully with UN Regulations.

There is no question, therefore, of UK car manufacturers avoiding alignment. Even if the UK goes to the absurd extent of producing its own, unique technical regulations, exporters would have to comply with UNECE/UN Regulations to gain access to European (EEA) markets.

There is then the further question as to what part of Javid's "new reality" companies must "adjust". Whether it is automobiles or car parts, chemicals or pharmaceuticals, or the whole raft of manufactured goods covered by the CE marking scheme, regulatory alignment is the minimum condition of entry.

On the face of it, Javid would appear to be setting up a dual-standard system, where manufacturers will have to produce to a domestic standard for sale in the UK, and then a different standard for the EEA – and for those countries which also adopt "EU rules", such as Japan.

All we are getting from the Chancellor, it seems, is incoherence bordering on the absurd. I almost liked him better in May 2016, when he wrote in favour of continued membership of the EU, in order to stay within the Single Market.

Even then, he was fully aware that – as he wrote of countries outside the EU: "Unless the exporting country submits to the importing country's rules and local regulator, access will be denied". There's no doubt about it, Javid wrote, "remaining in the EU is good for business".

Whether or not that was (or is) the case, what cannot be disputed is that this irrational pursuit of "non-alignment" with the EU certainly is not good for business. It does not make any sense and to hear it from Sajid Javid rather suggests that we have a man totally unfit for office.

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