Brexit: flying under the radar

By Pete North - December 29, 2020

Yesterday on Twitter I postulated that instead of small ideas like Canzuk, the UK needs to forge an EU FTA “owners club” comprising Canada, Mexico, Japan, Korea, Vietnam, Singapore, UK etc, insisting on UNECE as the secretariat with a view to replacing bilateral systems in FTAs on matters of regulation.

I know of various cynics, leave and remain, who scoff at this idea, but I believe that not only would it be a good thing, and something that must happen, I think it is likely and something that is already happening. This deal we’ve struck is probably the crack in the dam.

We were told that there was a likelihood that we would become rule takers outside the EU. It was my working assumption that in the absence of Efta we would end up adopting tranches of EU law with some role for the ECJ if only as an adjunct for dispute panels. The EU attempts to export its own laws not only as a means to maintain control, but also to streamline its trade relations. It insists on using its own laws because it has the power – and it can.

This makes sense because if different rules are developed for every single complex relationship it has with a partner then sooner or later it begins to drown in the red tape of its external relations where every bilateral deal has widespread peculiarities unique to the agreement. Where it gets especially messy is Rules of Origin which is why the direction of travel is a single methodology for cumulation.

Britain, though is proving to be the fly in the ointment. The UK takes the view that signing up to EU rules with a role for the ECJ leads to an unbalanced agreement where the EU enjoys an inherent power advantage. This is not a wholly unreasonable point of view and politically it’s difficult to image the UK adopting regulation since that would be seen as BRINO. Any deal had to win the approval of ERG hardliners thus any alignment now or in the future will have to happen by stealth.

This is why I do not believe this agreement is the “thin deal” the Institute for Government et al insist on calling it. This is an F117 flying right through the gaps in their radar, wholly undetected – and anyone who does see it won’t know what it is. The deal has more outsourcing than the Tory Covid response. Instead of adopting “EU rules” we’re now cutting out the middleman and taking them directly from origin.

This is often where I have likened trade agreements to computer programming. Computer code often calls on functions and though a task is performed by only one line of code, the function call involves a massive resource hungry external library. That’s essentially what you’re looking at when an FTA invokes any external treaty or system of global standards. Were all that “code” ported into the main programme we would be looking at millions of lines extending to many thousands of pages.

Though the EU has the clout to pressure its smaller neighbours into accepting EU rules, through one convoluted system or another, to upscale trade the EU (like everyone else) has to relinquish a little control. In that regard it is relatively safe to outsource to global bodies being that the EU has a powerful voice within them. Perhaps less so without the UK, but all the same, some control over the agenda is better than none at all.

The reason I think we’re going to see closer cooperation in this regard among those who have FTAs with the EU is because they will be monitoring every development for preference erosion or to ensure that the MFN principles are upheld. It therefore makes sense for third countries to gang up on the EU so that they exert more pressure.

We already saw during negotiations how Frost took inspiration from other EUFTAs to establish precedents. As the agreement matures the UK won’t be the only one comparing notes, and eventually the penny will drop that a united front where parties have similar complaints, leads to more rapid resolution.

Though this has its own perils for the EU the alternative is to keep developing ever more elaborate bilateral relationship with bespoke annexes to the point where it is not only administering its own laws, it needs large and complex specialist organisations to administer each agreement it signs, chewing up ever more intellectual and diplomatic resource. There is a clear need to streamline and standardise its external relations. If this cannot be done by exporting EU rules directly, then international organisations and treaties are the next best thing.

As the circle of countries subscribing to global rules and conventions expands, eventually there will need to be a more formal and neutral harmonisation process. Though UNECE performs this function to a point, it does not enjoy the same public profile at the WTO but there is no reason why it couldn’t, particularly with the UK as its champion.

It is especially in the UK’s interests to invest heavily in a UNECE strategy being that UNECE methodologies and standards form the basis of the Single Window approach now being adopted worldwide as the basis of electronic customs documentation and trade facilitation measures. Having left the customs union and the single market, our need is acute.

I get the feeling now more than ever that the Efta option is dead. The TCA sets up a new continuum for the development of a deep bilateral relationship based on a similar principle of negotiated alignment, only we’re starting at an earlier point on the spectrum for political reasons. It marks a fresh start where we can avoid giving up more control than we would have liked under the EEA system. The EEA would have prevented a cliff edge, but the damage is now done, and I do not see the EEA as a shortcut to rebuilding from the outside.

Being that UNECE is a wider, though shallower body of rules, it makes it easier to export. If the UK has CPTPP ambitions, since it doesn’t have the clout to impose its own regulations on CPTPP, there is nothing stopping it taking UNECE to the table being that CPTPP members already subscribe to them to one extent or another. There is then greater potential to link up CPTPP with the EU and other regional trade agreements. We then have the building blocks of a global single market without the political dogma of supranationalism. What’s not to like?