Share this article: Facebooktwitterredditpinterestlinkedinmail

23 May 2022

Peter Holmes is a Fellow of the UK Trade Policy Observatory and Emeritus Reader in Economics at the University of Sussex Business School

UK trade with Europe has significantly fallen off (see UKTPO BP 63 for an early assessment). UK GDP has fallen by 4%. If we cancel the Northern Ireland Protocol (NIP) – which is all the talk at the moment – the economic consequences of Brexit will get worse and let’s not even think about the political consequences. Is any of this fixable? Yes, if we look ahead to 2025 when the Brexit agreement with the EU—formally known as the EU-UK Trade and Cooperation Agreement (TCA) —is up for its 5-yearly review. UK stakeholders, including political parties planning their manifestoes ahead of the next UK general election in 2024, should consider their Brexit positions now – but it’s not a case of leave or remain, rather a case of ‘tweak the Brexit agreement to something that better suits us’.

The hard Brexit that the British Government chose in 2019 has been exactly that – hard. But unnecessarily so.


Currently, Prime Minister Boris Johnson is contemplating unilaterally cancelling the Northern Ireland Protocol (NIP), which is part of the 2019 ‘hard Brexit’ deal.  The basic issue with the NIP arises from the unavoidable fact that the choice of a hard Brexit created the need for either North-South border controls, dividing the Irish all-island economy, or East-West border controls, dividing Great Britain and Northern Ireland.

But the problem is not so much the existence of the border itselfthere has to be a border somewhere, by virtue of the very fact that the UK left the EUas the need for physical checks on goods at the border, wherever that is.  And it’s what the physical border checks symbolise and the slowing effect they have on trade that is the real issue.

There is a way to minimise or even get rid of the physical border checks without cancelling the NIP.  This seems to have been forgotten in the very polarised and politicised Brexit public debate.  In a nutshell, the more the UK aligns with EU rules, the fewer checks there have to be at any border, including between Dover and Calais.

In 2025, there is an opportunity to revisit the very shallow Free Trade Agreement agreed in 2020 under Article FINPROV.3: “Review of the TCA” which states:

The Parties shall jointly review the implementation of this Agreement and supplementing agreements and any matters related thereto five years after the entry into force of this Agreement and every five years thereafter. “

Ahead of this review, the UK needs to make a careful evaluation now about what divergence from EU rules could really profit the UK and also where agreeing to align with the EU brings no costs.  Once we’ve done that we will be in a good position to enter the 5 yearly review and negotiate improvements to the Brexit agreement that will suit the UK better.

‘Negotiate’ is an important word here. The review provision opens an opportunity for a UK Government willing to negotiate in good faith.  The key to the discussion is that the EU has relaxed its ‘all or nothing’ approach to market access.  For instance, it has offered an SPS (food safety) deal without agreeing to the whole ‘EU acquis’ (the set of rules that constitute the entire body of European Union law).  It has made it clear that the amount of risk-based checks at the border is going to be proportional to the degree of divergence of UK rules.

The UK will not be able to simply cherry pick which rules to keep and which not, as it wishes, but there is clearly scope for a trade-off: the more tightly the UK agrees to stick to align itself with EU rules, the less friction there will be. Any commitment would, in principle, be made for the next 5 years at a time.

Because of the UK general election upcoming in 2024, such negotiations would have to be with a new UK Government that had pre-committed itself to signing and complying with a new deal and was willing to abandon the idea that any commitment to alignment with EU rules was an unacceptable loss of sovereignty.

Even before the 5-yearly review comes up, the TCA provides for ongoing negotiations in a range of areas.  We are bound by reality to engage in ongoing discussions about day-to-day business such as Northern Ireland or Euro-tunnel border controls.  The 2019 Political Declaration, which accompanied the Withdrawal Agreement and the NIP, proposed a deep Free Trade Agreement with a close relationship including cooperation with EU regulatory agencies and more generally a commitment to a “level playing field. Unfortunately, these non-binding commitments were largely repudiated by Boris Johnson’s Government after the election.  Indeed, looking at this Government’s draft text of a free trade agreement in the run-up to the TCA, we can see that the UK had asked for an FTA that would have granted the UK generous market access to the EU with very few obligations; for example, mutual recognition of conformity assessment and rules of origin allowing simple assembly plants to benefit from tariff-free access to the EU.  When the EU said no, the UK just accepted this.  The review provides a chance to revisit this.  There was very little preservation of the single market in services beyond the UK and EU’s GATS commitments. The TCA review provisions allow for discussions on non-financial services.

Moreover, in the formal Brexit Withdrawal Agreement the UK has also agreed that in order to preserve the Good Friday Agreement, and no border on the island of Ireland, there would be a NIP requiring Northern Ireland (NI) to stay regulatorily aligned with the EU, while Great Britain (GB) was wholly free to diverge, thus necessitating GB-NI border checks, a point recognised in official Whitehall documents but denied by the Prime Minister.

The TCA signed on Dec 24th 2020 provides a framework for potential future negotiations, without modification of the overall Brexit agreement or even the prospect of rejoining.  It allows discussions on a range of areas including “regulatory cooperation”, closer alignment of rules on aerospace, UK participation in EU R&D programmes, and alignment of the UK emission control systems with that of the EU.  The latter is particularly important because it could secure exemption of UK exports from eventual Border Carbon Adjustment Measures by the EU including the paperwork needed to show equivalence with EU rules.

Clearly a negotiation is a negotiation. The EU will demand more alignment than the UK might wish to cede, but this is not a zero-sum activity. The EU has also relaxed its firm “No cherry picking” principle, but by how much remains to be seen.

What the EU would offer in any negotiation would depend on how serious the UK side appears to be.  Thus the government that emerges from the 2024 election would have to credibly commit to open serious negotiation. The record of past accession negotiations indicates that the UK would have most success if it unilaterally made some commitments, e.g. via its participation in European standards bodies such as CEN and CENELEC to align with the EU where this was economically rational rather than to hold out for “sovereignty” or “bargaining chips.”  The policy outlined here would not mean rejoining the EU or even the European Economic Area, therefore no political party that currently plans its manifesto would need to commit to that, though such options might still be open in the future The proposal here would reduce the costs of a hard Brexit including the Northern Ireland situation, improve trust with our neighbours and leave further choices open.


Disclaimer:
The opinions expressed in this blog are those of the author alone and do not necessarily represent the opinions of the University of Sussex or UK Trade Policy Observatory. This blog summarises the arguments in a paper written by the author published by the Progressive Economy Forum, whose support is gratefully acknowledged. See Peter Holmes ‘Reviewing the TCA: How to Salvage Something from the Wreckage of Brexit‘. 

Republishing guidelines:
The UK Trade Policy Observatory believes in the free flow of information and encourages readers to cite our materials, providing due acknowledgement. For online use, this should be a link to the original resource on our website. We do not publish under a Creative Commons license. This means you CANNOT republish our articles online or in print for free.

May 23rd, 2022

Posted In: UK- EU

Tags: , , , , ,

One Comment

Share this article: Facebooktwitterredditpinterestlinkedinmail

10 March 2022 Photo of Emily Lydgate

Emily Lydgate is Senior Lecturer in Law at the University of Sussex and Chloe Anthony is a Doctoral Researcher and Tutor at the University of Sussex Law School 

From chlorinated chicken to sausage wars, food law has been highly contested in defining the UK’s post-Brexit direction. Not only is it seen as vulnerable to deregulation through trade agreements, the UK has faced new trade barriers with the EU and between Great Britain and Northern Ireland. These have concerned regulatory issues and have had an enormous impact on food trade. While much attention has rightly focused on Northern Ireland, departure from the EU’s regulatory union has provided a steep challenge in the rest of Great Britain, too. Food law is a devolved matter and Scotland has passed legislation setting out its intent to continue aligning with EU law, including for food law.

In a new article (Modern Law Review, open access), we trace post-Brexit UK food law, asking: what has changed already, and what does this tell us about the UK’s emerging identity as an independent regulating and trading nation. We find that, so far, food standards (what our laws are) remain more or less the same. We still ban chlorinated chicken and hormone-treated beef, our pesticides residue tolerances are the same, etc. However, regulatory processes (how we make these laws) has changed completely. These regulatory processes determine our future standards – and changing them has become much easier. In other words, the UK hasn’t lifted its ban on chlorinated chicken, it’s just ensured that ministers can do so relatively easily if they so desire.

Of course, ‘taking back control’ of UK regulation from Brussels was one of the main aims of Brexit. But it’s also important to assess how the UK Government has taken back control. On leaving the EU, the UK incorporated much of EU law on the domestic statute book and created a new category of law called ‘retained EU law’. However, in retaining EU law, we provided Ministers with powers to change these rules. For food law, a key trend – noted in other areas as well – is consolidation of power to ministers. This seriously impacts public engagement and scrutiny.

So for example, though we still ban chlorinated chicken (same standards), ministers can pass further so-called secondary legislation that changes the permitted substances for carcass washes without a formal requirement for advice from the UK Food Standards Agency. Another example is pesticides regulation. We’ve inherited the same permitted maximum residue levels, and the same lists of approved pesticides, as we had in the EU (same standards), but ministers can change processes for approving new pesticides, or maximum residue levels, without the full parliamentary scrutiny that goes with primary legislation and with weakened requirements to take account of independent scientific risk assessment. We set out these, and other examples, in more detail in our article.

These changes consolidate power, but they also devolve it beyond what was permitted under EU rules: England, Wales and Scotland could all have their own separate permitted carcass washes or residue levels.[1] To help farmers and food producers cope with different requirements in different UK nations, and prevent border checks at Gretna Green or along the River Dee, the Internal Market Act (2020) requires the devolved nations to disapply their own requirements for residue levels for products coming in from other UK nations. This requirement also applies to products imported into a devolved nation. This gives devolved nations less control over regulation of food being sold in their markets. Devolved nations opposed the Internal Market Act, favouring instead a collaborative common frameworks approach. These are being developed alongside the Internal Market Act, but aren’t legally binding in the same way – many are identified, for example, as ‘non-legislative.’

Process changes are harder to grasp than standards changes. This probably explains why, despite the fact that the UK has totally reconfigured its regulation and internal market, there is a widespread perception that it hasn’t done much with its new regulatory freedoms. The UK Government itself has also positioned these changes as minimal and imperative, rather than structural and strategic – in retaining EU law, it committed to making only ‘minor or technical’ changes, and not policy or legislative change, and stated that the Internal Market Act was necessary to protect the continued functioning of the UK internal market. Of course, adapting the entire EU rulebook and ensuring the functioning of the internal market over a period of scant months is a huge challenge. However the concern is that this executive-led approach, which strips out many regulatory checks and balances, becomes the bedrock of post-EU law.

Now the UK Government has announced it will comprehensively review laws that it has adapted from the EU, with food law as a likely priority area. This includes not only reviewing the substance of the law but also revising its status and how it can be amended.

If we’re going to repeal massive amounts of EU law, we need to think seriously about what is going to replace it, both in terms of UK standards but also, crucially, UK legislative processes. We have argued that retained EU law is not a good basis for UK food law going forward. Instead, major areas of food law, including pesticides regulation, food hygiene and food labelling, merit primary legislation. Many have pointed out the limitations of so-called secondary (or delegated) legislation as a basis for UK law-making. There is limited debate, no prospect for amendments, and little public awareness. It simply provides too much discretion to central Government to change UK food standards. However, UK Government’s new policy paper, The Benefits of Brexit, does not seem designed to address this concern. Instead, it calls for ‘a tailored mechanism for accelerating [retained EU law’s] repeal or amendment.’

Clearly, UK food law should come with democratic legitimacy – it is the Parliament as a whole, representing the UK public, rather than simply UK ministers, who should be ‘taking back control.’ There is an opportunity for the Government to provide stronger democratic legitimacy for UK food law – otherwise the British people will have no more say than they did when UK regulation was led by Brussels.

Footnotes

[1] Interestingly, the Internal Market Act exempts pesticide approvals from this requirement, but not pesticide residue levels. The latter are what govern trade, so the exemption doesn’t seem to give devolved nations much additional authority.

Disclaimer:
The opinions expressed in this blog are those of the author alone and do not necessarily represent the opinions of the University of Sussex or UK Trade Policy Observatory.

Republishing guidelines:
The UK Trade Policy Observatory believes in the free flow of information and encourages readers to cite our materials, providing due acknowledgement. For online use, this should be a link to the original resource on our website. We do not publish under a Creative Commons license. This means you CANNOT republish our articles online or in print for free.

March 10th, 2022

Posted In: UK- EU

Tags: , , , ,

2 Comments

Share this article: Facebooktwitterredditpinterestlinkedinmail

Image of Alan Winters8 November 2021

L. Alan Winters is Professor of Economics and Founding Director of the UKTP0 and Guillermo Larbalestier is Research Assistant in International Trade at the University of Sussex and Fellow of the UKTPO.

Key Findings:

  • To date, the UK government has signed no new trade agreements relative to what it would have had as a continuing member of the EU.
  • The Government estimates that the two agreements in principle announced this year (Australia and New Zealand) will increase UK Gross Domestic Product by between £200 and £500 million annually – that is, 0.01% to 0.02% (one to two ten-thousandths) of GDP or between £3 and £7 per head of population – and that only after they have bedded down over 15 years or so .

We were asked to sum up the economic benefits of the UK’s new post-Brexit trade agreements. Our first observation is that if we take as a starting point the trade agreements that the UK would have been party to as a member of the EU, the government has, to date, signed no new trade agreements! (more…)

November 8th, 2021

Posted In: UK - Non EU, UK- EU

Tags: , , , , , ,

7 Comments

Share this article: Facebooktwitterredditpinterestlinkedinmail

Image of Alan Winters22 July 2021

Michael Gasiorek is Professor of Economics and Director of the UK Trade Policy Observatory (UKTPO) at the University of Sussex. L. Alan Winters is Professor of Economics and Founding Director of the UKTPO.

The UK Government’s command paper on Northern Ireland published yesterday (21 July 2021) is significant in four regards.

First, because it explicitly recognises – at length – that the Protocol is not working (at least not for the UK) and needs to be modified in form or in implementation. This is almost certainly correct. (more…)

July 22nd, 2021

Posted In: UK- EU

Tags: , , ,

100 Comments

Share this article: Facebooktwitterredditpinterestlinkedinmail

13 March 2021

Yohannes Ayele is Research Fellow in the Economics of Brexit, Nicolo Tamberi is Research Officer in Economics, and Guillermo Larbalestier is Research Assistant in International Trade at the University of Sussex. All are Fellows of the UKTPO.

On Friday 12 March, the Office for National Statistics (ONS) and HM Revenue and Customs (HMRC) released the UK’s trade in goods figures for January 2021, providing data for the first month following the end of the Brexit transition period. The ONS has provided their own interpretation of these data portraying a rather gloomy scene for UK trade. We have downloaded the raw data and here offer some initial thoughts on what we learn from the changes in trade flows in January 2021. (more…)

March 15th, 2021

Posted In: UK - Non EU, UK- EU

Tags: , ,

Leave a Comment

Share this article: Facebooktwitterredditpinterestlinkedinmail

Image of Alan Winters4 December 2019

L. Alan Winters CB is Professor of Economics and Director of the Observatory.

The Prime Minister seems to think that an ‘oven-ready’ Brexit deal is the best that we can choose from the menu of policy alternatives. It sounds neither appetising nor nourishing, but if it really were quick and easy, maybe it would be worth it.

But it’s not quick or easy: ‘oven-ready’ is just not true.

It is true that a Withdrawal Agreement exists and could be put to Parliament in December, but even that is not ready-to-go and passing the Withdrawal Agreement is not the same as Brexit. A couple of examples of how the Withdrawal Agreement is part-baked:

  • The financial settlement (the price tag) is not specified.
  • The Conservative manifesto promises Northern Ireland ‘unfettered access’ to the market in Great Britain. Launching it, two Cabinet Ministers said ‘There will never be any fees or tariffs on goods flowing between Northern Ireland and Great Britain and vice versa … .’ In fact, the Withdrawal Agreement clearly states that many goods flowing between Great Britain and Northern Ireland will face tariffs (at EU levels!) and the Brexit Secretary conceded in Parliament that there would be forms to fill for any goods flowing the other way.

Passing the Withdrawal Agreement and exiting on 31st January 2020, is just the start of a complex negotiation between the UK and the EU, which will be painful, long-lived and probably chaotic.

First, consider the parties.

For the EU, the negotiations will take place under Articles 207 and 218 of the Treaty on the Functioning of the EU, which govern negotiations with countries outside the EU, and which have a far more demanding process for approval than the Withdrawal Agreement. The member-states have to agree to any deal unanimously and if the deal spreads into areas which are still governed by the States themselves (some services and investment), each will have to go through a ratification process that may involve their national and regional parliaments. The EU’s agreement with Canada, which took seven years to negotiate, was held up for nearly a year because the Wallonian Parliament declined to agree.

On the UK side, there has been no effort to spell out the implications of the Free Trade Agreement (FTA) that Mr Johnson wants, let alone the one he will get. For example, Michael Gove claimed on 26th November that because there was effectively no EU Single Market in services, UK services firms will suffer no adverse effects from Brexit with an FTA. Wrong! OECD has shown that EU barriers to service imports from third countries are, on average, four times higher than those between members. Canada failed to get much in services from the EU after seven years negotiating; the same will apply to us.

Second, consider the commitment to get it all done by December 2020. Any deadline puts pressure on both parties, but particularly the one with more at stake (the UK). The default at the end of 2020 is not the status quo but a ‘no deal’ Brexit, so the cliff-edge that plagued the March and October 2019 deadlines will be repeated.

Third, the content: we may agree to keep zero tariffs on all goods, but there will still be border formalities. In order to claim tariff exemptions, UK exporters will have to prove that their goods are substantially made in the UK. Most commentators reckon that together these frictions add perhaps 4% or 5% to the cost of exports. We may be able to negotiate better conditions than average, but not by December.

Worse than tariffs will be regulations.

First, UK exporters will have to prove that their goods meet EU standards. It doesn’t matter that the UK says they do, they have to prove it. Where standards are critical, either the UK government will have to enforce EU regulations throughout the UK (which a Johnson government won’t) or exporters will have to obtain certification from an EU-approved inspection agency. If that task is to be done in the UK, it needs to be negotiated.

If the EU is to give up its tariff protection, it will want to know that UK firms are not obtaining ‘unfair’ competitive advantages through lax labour or environmental rules or through subsidies or violations of competition law. (These are the so-called level-playing field conditions.) The current government clearly hates such constraints, but the EU will not commit to free trade without some such commitments – result impasse. Mr Johnson’s casual suggestion on 29th November that the UK relax EU rules on state-aid to companies will make this doubly difficult.

Finally, there are issues strictly lying outside an FTA, but which will inevitably be bound up with it. For example, whether airlines based in the UK can fly between EU cities and whether EU fishermen get access to UK waters in return for the UK selling its fish in the EU.

You can’t help feeling that it is us, the British public, that is oven-ready, who are going to get ‘done’.

We will have a torrid 2020 deciding what we want of an FTA and a worse time getting even a part of it. Much will remain undone by December 2020, and so the subsequent years will be spent trying to patch up the holes, one-by-one from a position of weakness. The UK will spend five years trying to restore commercial relations with the EU and still end up with something a lot less satisfactory for traders than we have at present.

This blog was first published by Remain United.

Disclaimer:
The opinions expressed in this blog are those of the author alone and do not necessarily represent the opinions of the University of Sussex or UK Trade Policy Observatory.

Republishing guidelines:
The UK Trade Policy Observatory believes in the free flow of information and encourages readers to cite our materials, providing due acknowledgement. For online use, this should be a link to the original resource on our website. We do not publish under a Creative Commons license. This means you CANNOT republish our articles online or in print for free.

December 4th, 2019

Posted In: UK- EU

Tags: , , , ,

2 Comments

Share this article: Facebooktwitterredditpinterestlinkedinmail

Alasdair Smith, author17 October 2019

Alasdair Smith ian Emeritus Professor of Economics at the University of Sussex and is a member of the UK Trade Policy Observatory.

Most of us may not yet have found the time to read and absorb the text of the new Brexit withdrawal agreement, but we can read the texts which “a Number 10 source”, whom we non-journalists are allowed to call Dominic Cummings, has sent to journalists. These texts deserve critical scrutiny. (more…)

October 17th, 2019

Posted In: UK- EU

Tags: , , ,

3 Comments

Share this article: Facebooktwitterredditpinterestlinkedinmail

27 August 2019Alasdair Smith, author

Alasdair Smith ian Emeritus Professor of Economics at the University of Sussex and is a member of the UK Trade Policy Observatory

The adjective ‘undemocratic’ has for a few weeks now been mysteriously attached to the Ireland backstop provision in the Withdrawal Agreement. The prime minister’s letter of August 19th to Donald Tusk, president of the EU Council, at least explained why: the backstop is said to be undemocratic because it binds the UK after Brexit into EU trade and regulatory policies in which it will have no say.

This is not a new idea. From early on in the Brexit debates, many economists assumed there would be compelling economic incentives for a post-Brexit UK to remain in the European Economic Area (EEA). Alan Winters pointed out that this would mean the UK would have to pay (financial contributions to the EU) and obey (EU rules) but with no say (in setting the rules). The Irish backstop is not the same as the EEA, but ‘obey with no say’ is the ‘undemocratic’ objection.

The prime minister’s solution is that the backstop should be replaced by alternative arrangements for the Irish border which would allow the UK to choose its own different trade and regulatory policies. There is widespread agreement that no such alternative arrangements are currently available.

(more…)

August 28th, 2019

Posted In: UK- EU

Tags: , , , ,

One Comment

Share this article: Facebooktwitterredditpinterestlinkedinmail

15 July 2019

Dr Michael Gasiorek is a Senior Lecturer in Economics at the University of Sussex and  Julia Magntorn Garrett is a Research Officer in Economics at the University of Sussex. Both are Fellows of the UK Trade Policy Observatory. 

A favourite band (of at least one of the authors of this blog) from the 1980s was the Cocteau Twins (See, or rather listen to…Sugar Hiccup) – well-known for the dreamy unintelligibility of their lyrics.  Which of course leads to the dreamy unintelligibility of some of the promises being made around Brexit. Supporters of Brexit have argued that the UK need not be overly concerned with a ‘No deal’ Brexit. This ranges from positions that ‘No deal’ would not be “as frightening as people think” although there would be “some hiccups in the first year” (David Davies), and that although there may be “some disruption” Britain would “survive and prosper without a deal” (Jeremy Hunt), to arguments that the idea that ‘No deal’ would have a negative impact were “a fantasy of fevered minds” (Jacob Rees Mogg). (more…)

July 15th, 2019

Posted In: UK- EU

Tags: , , , , , , ,

Leave a Comment

Share this article: Facebooktwitterredditpinterestlinkedinmail

Image of Alan Winters03 July 2019

L. Alan Winters CB is Professor of Economics and Director of the Observatory.

Last week I was challenged twice for using the term ‘no deal’. There is no such thing, I was told, because, even if the UK does not ratify the Withdrawal Agreement of 25th November 2018, there will still be plenty of deals. At the time I thought, for several reasons, that this was wrong in substance if not literally, but more recently I have concluded that it is also dangerous.  Like we saw in the referendum campaign, it undermines informed debate by deliberately confusing the terminology.

‘The deal’ is an agreement between the EU and the UK ‘setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union’ (Article 50 – Treaty on European Union). ‘No deal’ is the absence of such a deal. For business and the economy, ‘no deal’ has come to mean the absence of a trade agreement under which the UK and the EU trade with each other on terms better than those provided for under the World Trade Organization. The former ‘no deal’ implies the latter – as I argue below – but the reverse is not true. (more…)

July 3rd, 2019

Posted In: UK- EU

Tags: , , , , , ,

5 Comments

Next Page »