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The British government’s White Paper for a new UK -EU partnership edges its way around the strict red lines of a hard Brexit in order to address the complaints of business and keep jobs in this country.    It does look rather like a bespoke form of trade agreement. But in trying to frame the  proposal such that it could be accepted by the deeply divided Conservative Party,  the paper seems to please no-one.  So how should we read it?

This post considers whether the White Paper addresses  the concerns of British businesses. It suggests  that the ‘common rulebook’  may be a problematic metaphor in an inter-connected  21st century business world.

The government’s White Paper, released at lunch time  today, and  entitled The Future Relationship Between The United Kingdom And The European Union, is a bid to break the deadlock in the EU withdrawal negotiations. The stated aim of the White Paper is to protect the ability of British manufacturers and retailers  to continue with their just-in-time arrangements, and maintain EU-based supply chains for perishable food. It follows in the wake of public statements by firms such as Airbus and John Lewis, that any Brexit deal that would give rise to customs checks and freight vehicles being stopped at the border, would be economically damaging.

The White Paper defines a free trade area for  goods only, as determined by “common rulebook”  to be maintained by both the EU and the British government for all goods including agri-food. It commits Britain to agree a new  treaty for the  ongoing harmonisation of British laws with EU rules, and incorporates a joint institutional framework for dispute resolution (and replacing the role of the Court of Justice in this regard). The proposal is ringfenced, so that only those rules necessary for a frictionless border would be included in the common rulebook.   Parliament will legislate on all those rules.

Overall, the proposal looks a bit like the government wants to make a positive appearance of leaving the EU, but knows that for the economic health of the country, it actually needs to stay inside it.  And contrary to much of the pre-publicity, it includes a proposal for 'new arrangements' on services where the government is trying to “buy back” some of what we will lose.

The notion of a “common rulebook” gets across the idea that Britain will be aligning with EU rules, and this is underscored by a statement we will ‘make an upfront choice to commit by treaty to ongoing harmonisation’.

However, the “rulebook” metaphor is problematic, and arguably too simplistic. Trade in the 21st century  is not just a matter of  goods, tariffs and quotas. Trade today  is a  vast inter-connected  global system that is  controlled by a framework of regulation. This is not an  ‘evil empire’ construct of the EU creating laws with the intention of obstructing industry trading freely. On the contrary,  trade is able to flow freely, precisely because it is governed by common rules that function across borders. Those rules ensure safety and utility of goods, protect  public health and national security, and they are administrated via electronic systems that span multiple jurisdictions. The rules therefore are necessary for trading  systems to operate. ( See Sir Ivan Rogers lecture of May 2018).

Companies  are regulated by the EU  in order to ensure that medicines are safe, that  toys do not poison children with lead, and  that food labels must  give us information on the chemicals used in processing ( and by the way, the idea of food labelling actually comes from the United States (as discussed in Michael Schudson: The Rise of the Right to Know) . 

Any company that wants to sell toys, for example, in the EU, has to ensure that their toys comply with EU rules, regardless of where they are manufactured. But the point is, that once they do comply, they can import them into one EU country and sell them in all 28. It is one set of rules, not 28 sets of rules. That cuts the red tape and costs for businesses, and it  is why companies who, to be fair, do not always like EU regulation, are now saying they want  Britain to stay in the EU.  ( See  Financial Times UK companies prepare EU bases in the lead up to Brexit).

These rules are there to protect the good of society, not to irritate business and damage trade. However, it is one of the tensions of modern society that people in a business capacity may not like rules, but in a private capacity they are often grateful to have the regulatory safeguards.

The EU is one of three regional trading  blocs that has come to  dominate trade regulation on a global level – the other two being  the US and China. EU regulation is frequently regarded as being of the highest standard – notably data protection – and copied by others. It has been pointed out by experts that Britain has no chance to lead regulatory development if it goes out on its own ( Sir Ivan Rogers lecture  May 2018).  Companies which are not under any obligation to follow EU rules will do so, because they see a  benefit. Even  Chinese toy manufacturers comply with EU standards because they can then sell them anywhere in the world. Hence, British manufacturers  will have to maintain alignment with EU rules after Brexit, whether or not the British government chooses to, because it will be in their commercial interest to do so.

But here’s the rub. The EU rules on goods exist within the Acquis Communitaire -    a framework of  laws that inter-relate with each other, and have been adopted by the European Parliament (directly elected representatives), and by the Council of Ministers (Member State governments). This framework has been updated over time since the start of the Single Market in 1992, to address the changing nature of business and industry. Each new EU law refers to previous laws that address the relevant policy area. In many cases, a new law will be part of matrix of laws, that sit within a framework law for the policy area.

Take the example of Airbus. In its Brexit Risk Assessment, Airbus  highlighted how its product  manufacturing  must comply with safety legislation under the European Aviation Safety Agency (EASA). EASA oversees certification of airworthiness, and it oversees aspects of air operations and air traffic control. It oversees the certification of organisations that are allowed to design aircraft and aircraft parts, for all different kinds of aircraft, and who may do major or minor repairs to aircraft.  The rules that govern aircraft components include a range of safety issues including the competence of a firm to undertake manufacturing or maintenance.  Airbus has stated that “every single supplier” will need to be certified.

This creates a technical difficulty in establishing such a “common rulebook”. If Britain wants to separate out rules for goods only, and moreover, it seems to want only those goods  that  are relevant  for British manufacturers, then it going to have to pick out  those rules sit within the individual directives and other legal instruments that comprise the Acquis.  And those rules would have to be kept in a special file and updated every time the EU updates its own legislation.

This “rulebook” could be  written up in the form  of Free Trade agreement (FTA), which seems to be what the White Paper is suggesting.   However, the amount of work involved will require a lot of painstaking detail and will take years finalise. Moreover, if or Parliament then wanted to exercise its right to reject a rule, it would erode trust and risk the entire agreement.

There is also the question of services. In fact, contrary to the impression given in the 3-pager issued last week at Chequers, the White Paper does include proposals for services, which comprise almost 80% of  the British economy. However, the UK is suggesting new arrangements for services, and asking for the ability to diverge from EU rules. The priority is to get something for financial services.

Any such arrangement would be going backwards for businesses, and  it is unlikely that  this proposal would meet the  requirements of the EU, which has been clear all along that goods and services are indivisible components of  the Single Market.   In 21st century trade, goods and services are frequently inter-twined , and trying to separate them out could be like trying to take the egg out of the proverbial omelette. Communications are being integrated into cars, for example. Does this qualify as part of the  ‘goods’  or is it an information society service? Or both?

The White Paper calls for bespoke arrangements, but the EU  chief negotiator, Michel Barnier,  has been clear that it will not damage the Single Market just to help Britain.  

In some cases, the White Paper relies on Britain being able to retain access to certain EU agencies.  This brings us to the underlying problem with  this White Paper, namely  the institutional divorce. This is  Britain's exclusion from EU Agencies,  as established in the Transition chapter of the EU Withdrawal Agreement, Article 123.  The institutional divorce  is the reason why Britain will become a rule-taker and not rule-maker. Article 123 means  is that Britain  will be out of all the EU agencies, bodies and institutions from 29 March next year (See EU Withdrawal Agreement: a deep and special loss of influence ).  From the beginning of the ‘Transition’ Britain will outside of all the regulatory bodies that either propose rules, advise on them, enforce them.

The institutional divorce creates a problem for  industry. In many cases it means that firms will  have to transfer elements of their business into the EU 27 so that they can comply with regulatory supervision requirements.

Going back to  the example of airworthiness certification, EASA is an EU Agency. Britain will no longer be a member of EASA after 29 March next year. That means that the  UK authorities  will no longer be able to  issue airworthiness certificates and manufacturers of aircraft or aviation equipment will not be able to go to the British authorities to get the necessary approvals.  The certification will have to be done inside the EU27.

The same applies to any other companies in other sectors that need European approval. For businesses, it means that their position will change overnight on 29 March 2019. Instead of being  insiders, with a domestic market of some 500 million people, they will become outsiders, beset by  new non-tariff barriers. It will not be frictionless.  This is prompting companies  to move parts of their  business out of the UK, as outlined in this Financial Times article.

The White Paper recognises this issue.   In response, it is trying to get back in to those authorities that it is, by its own agreement, being forced out of.  

Sadly, the government has been hoisted by its own petard – just as it has been with the Galileo satellite programme (see Galileo satellites illuminate EU-UK divorce tensions ). The central role played by EU agencies means that Britain has a lot to lose. If Britain wants to play role in those Agencies in future, it will need a new set of Treaties – one per Agency. This is  likely to be one of the biggest hurdles in the negotiations.

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This article was amended on 27 September 2018 to clarify the position regarding services.

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For new Iptegrity  readers, I have been analysing EU policy for over 10 years ( see 10 years of Internet wars ), and have considerable experience of interpreting EU documents and "compromises".  I also have many  years' experience of the telecoms and technology sectors.

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Iptegrity.com is the website of Dr Monica Horten. She is  a trainer & consultant on Internet governance policy, published author& Visiting Fellow at the London School of Economics & Political Science. She served as an independent expert on the Council of Europe Committee on  Internet freedom. She has worked on CoE, EU and UNDP funded projects in eastern Europe and beyond.  She was shortlisted for The Guardian Open Internet Poll 2012. Iptegrity  offers expert insights into Internet policy (and now Brexit). Iptegrity has a core readership in the Brussels policy community, and has been cited in the media. Please acknowledge Iptegrity when you cite or link.  For more, see IP politics with integrity

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