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Brexit: a starter for ten

2017-07-21 06:24:31

One of the particularly prevalent myths in relation to the EU is the wrong-headed belief that because we already have "regulatory convergence" or "equivalence" with the EU (having adopted and implemented its acquis), concluding a free trade agreement will be a simple matter.

This is precisely the error made by Liam Fox who argued yesterday  on BBC Radio 4 that: "The free trade agreement that we will have to do with the European Union should be one of the easiest in human history". "We are", he says, "already beginning with zero tariffs, and we are already beginning at the point of maximal regulatory equivalence, as it is called. In other words, our rules and our laws are exactly the same".

Tariffs, as we have said many times, are not significant. But non-tariff barriers, mainly (but not entirely) expressed in terms of regulatory differences, are a major concern when concluding free trade agreements. Under normal circumstances, "regulatory equivalence" goes a long way to reducing them. But it does not eliminate them especially in the context of agreements with the EU.

Underlying the myth that regulatory convergence/equivalence gets you through the door as is so often the case with EU related issues is a fundamental misunderstanding of the way the EU works, and how it organises its affairs.

The root is the failure to appreciate the difference in the control regimes as between member states and external actors, such as third countries seeking to export goods to the territories of EU Member States.

The crucial difference is not so much in the controls applied, but in where the controls are applied. For EU Member States, border controls have been abolished, so control is exercised internally often at the point of production.

Looking at the meat industry gives as good an illustration as any of this system in practice, not least because this sector has the best developed example of Union controls and their enforcement.

For those wishing to market fresh meat, the system starts way back up the food chain, with extensive controls over animal feed, on rearing systems, on the pesticides that can be applied and the veterinary medicines used.

But not only are the controls specified, the methods of enforcement are set out, and the "competent authorities" are required to report periodically to Commission, giving evident of their enforcement activities.

And in the case of food products, the Commission has its own "police", in the form of inspectors employed by its Food and Veterinary Office. These officials can carry out inspections of any national systems, with complete access to records, personnel and premises, following which they produce reports setting out "recommendations" which national authorities are more or less obliged to implement.

Once animals reach the slaughterhouse, a new raft of controls apply, including prior approval and licensing of the premises and on-site supervision by veterinary officials. There is 100 percent ante-mortem inspection of animals and post-mortem inspection of all carcases, together with a mandatory test schedule for pesticides and veterinary medicine residues.

Temperatures of the meat are rigorously monitored and controlled throughout transport and storage. Carcase meat can only be boned out and jointed at approved cutting premises, again under veterinary supervision, and cold storage plants must be licensed and approved.

Through the system, copious records are kept, and then held by the national authorities, the details processed and routinely submitted to the Commission in Brussels. All meat has to be marked and labelled so as to identify its origins and the establishments in which it was processed.

But, because of this phenomenally complex (and intrusive) internal system of control, there is no requirement for border controls. These have been abolished, allowing free movement of goods throughout the Union.

And, as a final longstop, if any national authority fails in its duties to enforce EU law, the Commission can intervene, issuing warning letters, and taking infringement proceedings, up to and including taking the Member State to the ECJ, which has the power to impose draconian fines.

Now, when it comes to "third countries" exporting meat to the EU, in the interests of a level playing field, the controls imposed must be at least as rigorous as those applied to Union businesses.

However, there is a big difference. The Commission has no jurisdiction over the internal organisation and the enforcement of controls within the sovereign territories of third countries. It cannot take the governments to the ECJ and they cannot be fined for non-compliance with EU law.

Nevertheless, the EU will require as conditions for entry, compliance with EU production regulations, licensing of establishments and much more, in a graduated hierarchy of controls. But, to compensate for the inherent limitations of its power within the third country territories, the EU also imposes border controls.

When we thus turn to Article 229 of Regulation (EU) 2016/429, we see a five-tier control system in place, carried over from legislation already in force.

Firstly, goods must come from a country officially listed as permitted to export the relevant categories; secondly they must come from establishments which are approved and listed; thirdly, they must comply with all relevant animal health requirements laid down by the Union; and fourthly they must be accompanied by animal health certificates and by other declarations and documents as required.

Finally, the consignments must be presented to a Border Inspection Post (BIP) now called Border Control Post (BCP) where they must pass inspection. Only when the fees due are paid and the "Common Veterinary Entry Documents" are endorsed can the goods be presented for customs clearance.

Now the point here is that regulatory convergence is implicit in the country listing, in the approval of establishments and in complying with the relevant animal health requirements. But convergence is not an either/or requirement.

The Member State cannot argue that, because it is convergent, it can be exempted from other controls particularly border controls. Put simply, convergence is the "starter for ten" which gets your products as far as the border. Once there, the documentary and physical checks must be carried out.

Essentially, what it amounts to is that, inside the European Union, members "enjoy" a system of internal controls, which allows free movement of goods throughout the Union without border checks.

For those operating outside the Union, conformity with EU rules is still required, but additional checks are applied before the goods can pass through the external border to enjoy free circulation within the Union. Regulatory convergence/equivalence is a necessary but not sufficient condition for entry.

And while we have used fresh meat for our regulatory example, similarly complex arrangements apply in other sectors, to other goods. And in all cases, border checks will apply. Regulatory convergence/equivalence is not a "get out of jail free" card. It is merely a "starter for ten".