The deal: first thoughts

By Pete North - December 26, 2020

Like just about everyone else I earnestly announced I would not be speculating on the deal until I had seen and digested the the legal text. I then proceeded to spend the next twenty four hours speculating about it.

Having been emotionally invested in the EEA Efta option I was about as scathing as one might expect. Being out the single market means a great many complications and a major reduction in exports. This is a suboptimal outcome.

Without seeing it, we could make assumptions about its character with David Frost announcing that it “restores Britain’s sovereignty in full. EU law ceases to apply; the jurisdiction of the European Court of Justice ends; there is no alignment with EU rules; and our Parliament sets all laws for our country once again”.

If we were not to incorporate EU laws in the way that Ukraine and Switzerland have then it follows that our levels of market participation would go only marginally further than any other third country.

What it is, though, is a reset. It creates the framework for future dialogue and cooperation which will see us rebuild our trade over time where instead of EU regulations we pivot toward toward global organisations and treaties. This is particularly evident in the chapter on customs and trade facilitation. Though we are no longer to use EU frameworks, we agree to create mutually compatible systems based on the Customs Data Model of the World Customs Organisation.

The parties, it says shall shall develop cooperation, strengthening their cooperation in the field of customs in international organisations such as the WTO and the WCO, and exchanging information or holding discussions with a view to establishing, where possible, common positions in those international organisations and in UNCTAD, UNECE.

This builds on an earlier article stating that each Party shall endeavour to establish a single window that enables traders to submit documentation or data required for importation, exportation, or transit of goods through a single entry point to the participating authorities or agencies. In recognition of the high volume of sea-crossings and, in particular, the high volume of roll on, roll off traffic between their respective customs territories, the Parties agree to cooperate in order to facilitate such traffic as well as other alternative modes of traffic.

Taken in the round this means we are to collaborate with a view to restoring trade that is as frictionless as possible without being a member of the single market and/or customs union. With the advent of the Union Customs Code, encompassing digital declarations, and the formal adoption of the UNECE Single Window system, it is reasonable to assume trade friction can eventually be ironed out and routines established to minimise its impact. This, though, does no imply a seamless transition from one state to the other. There is a long and rocky road ahead. The damage to UK trade comes from the absence of a long term transitional mechanism.

With the UK having refused to adopt EU regulations, the full array of global regulation has been brought into play (in line with EU trade policy), where the annexes give the game away. In the area of motor vehicles both parties shall promote the recognition of approvals based on approval schemes applied under the agreements administered by WP.29. “WP.29” means the World Forum for Harmonisation of Vehicle Regulations within the framework of the United Nations Economic Commission for Europe (“UNECE”) – along with the 1958 Agreement concerning the Adoption of Harmonized Technical United Nations Regulations for Wheeled Vehicles, Equipment and Parts.

The Parties shall refrain from introducing or maintaining any domestic technical regulation, marking, or conformity assessment procedure diverging from UN Regulations. The the formal instruments of mutual recognition do not exist in this deal, the foundations are there so that it can happen in the future once trust is established – and the EU can see the overall direction the UK is heading in.

We see much the same elsewhere in the agreement where each commits to acting consistently and complying, as appropriate, with the relevant UN and Food and Agriculture Organization (“FAO”) agreements, the United Nations Convention on the Law of the Sea, and those elements relating to the conservation of fish stocks.

Elsewhere we see the Parties shall continue to promote trade and investment policies that support the four strategic objectives of the ILO Decent Work Agenda, consistent with the 2008 ILO Declaration on Social Justice for a Fair Globalization, including the minimum living wage, health and safety at work, and other aspects related to working conditions. We can bin the Social Chapter, but the principles underpinning it must be upheld.

The whole agreement is pregnant with this kind of tract which shall be overseen by a “partnership council”. Being that there is no role for the ECJ the EU has elected to refer disputes upstairs. In respect of matters related to multilateral standards or agreements covered, the panel of experts should seek information from the ILO or relevant bodies established under those agreements, including any pertinent available interpretative guidance, findings or decisions adopted by the ILO and those bodies.

Though this is not binding in quite the same way as a direct role for the ECJ in dispute settlement, it is most certainly politically binding, where refusal to adopt or accept expert rulings will result in a failure to resolve disputes thereby seeing the imposition of tariffs. The process, though, is to be multithreaded diplomatic horse trading. Authority is removed from the EU.

As it happens, I never had quite the same phobia of the ECJ as most leavers. It is a technically competent body and in an FTA it would preside over arcane technical rules nobody particularly cares about, but having taken an ideological stance against such an arrangement (for understandable reasons) we are left with a similar process albeit with less clarity and much less formal. Ultimately the EU is happy to outsource so much of the regulatory content of this agreement being that these international organisations provide the EU with the basis of its own laws.

In that respect, Frost is telling the truth when he says “there is no alignment with EU rules” but “EU” in this context is a qualifier. We continue to align with the conventions, norms and standards central to EU rules. Thus when Frost asserts “our Parliament sets all laws for our country once again” this is not strictly true, and is likely never to be the case ever again. Thus “sovereignty” by their definition (doing whatever we please and diverging at will) remains a grey area.

Taken in the round, though there is scope for divergence now, our policies still have to stay in line with the philosophies and norms of EU and international law, where the majority of our technical regulation will stay more or less the same. We have greater freedom in deciding how we draft and implement those rules but we are still constrained by the need to maintain compatibility.

This to me rather outlines the futility of leaving the single market being that the EEA acquis is simply a formalised version of this compendium of global rules and standards but one that confers far greater single market preferences. Our departure means we shall end up using this framework agreement to gradually rebuild EEA levels of market participation over the next twenty years. We’re looking at a lost decade of trade at the very least.

No doubt I will have more to say as I read more of the deal, but we now know, at the very least, the character of it if not the destination. There is no point attempting to compare it with other FTAs. This is very much a unique agreement. Though it presently isn’t a comprehensive and deep agreement, over time it will become so. It will gather rust down the ages. There will be greater levels of bilateral discourse in this agreement than on any other FTA, not least because of our proximity and shared regional interests.

These negotiations were only ever a matter of choosing where on the continuum we begin that journey. That we have chosen a hard reset means it’s going to hurt more than it ever needed to.

In that respect, Brexit isn’t over. Or rather arcane technical discussions about fish, state aid and rules of origin are now a permanent fixture in the political landscape – and though this may be met with weary groans by those who are bored by it, this is a good thing. Technical governance is back where it should be instead of invested in anonymous grey buildings in Brussels where no-one is looking.

The most immediate conversations will be over what we have in this deal compared with what came before. To what extent will the UK be able to continue exporting services and which authorisations are still valid. These are matters of immediate economic importance, but less important than the overall implications whereby Britain and Brussels have shifted the regulatory focus from Brussels to Geneva, where the UK may enlist the support of its allies and fellow EU FTA holders to bring pressure to bear on the EU.

The longer term implications of this means the EU weakens its grip on technical governance to become more of a political and monetary union, the type that Britain could never be part of. We wish them the very best in their endeavours and look forward to working with them, but in international organisations we shall sit as sovereign equals rather than subordinates.

Looking at the whole of the agreement, both sides are to be commended for concluding this is just twelve months. It is an achievement in strictly technical legal terms. In that regard, such an enormous document of such magnitude precludes detailed scrutiny in time for ratification, and one sincerely doubts MPs or even MEPs will know how to interrogate this deal. No doubt they can’t see the wood for the trees and are involved in their own political games.

The debate will centre on whether it’s a good or bad deal, but I don’t think it can be looked at in such simplistic binary terms. If we look at it exclusively as a trade deal, comparing with what came before then, yes, it is a bad deal – terrible even, and far worse than the one we could have had in other circumstances.

But this is not exclusively an economic question and it never was. In the wider context, it successfully changes our relationship from being a subordinate of a supranational authority to a sovereign equal in a wider community of technical regulation. Fears we would become a “vassal state” were unfounded. We continue to be influenced by the EU but that was always going to be the case.

In that regard, it does what I wanted it to do. It does not settle the Brexiteer sovereignty argument and Brexit was never likely to. It is a bigger, more complex dilemma of globalisation where technocracy at the regional and global level is here to stay. The question is one of how it is best tamed. Repatriating the decision making is a good start though.

We are not going to see sunlit uplands. Brexit cannot undo fifty years of globalisation or technological progress. Grimsby will never be what it was. Liverpool neither. Closing the cultural and economic gap between London and the regions isn’t going to happen. There is no £350m Brexit dividend. There isn’t a regulatory blank slate. Britannia can unchain herself from the ECJ, but not from the reality of global trade.

In the end, all “Brexit” really deals with is the end of our membership of a supranational project (one we should never have joined), and reasserts Britain as a national entity – separate to, but partnered with the EU. The rest is now down to our own politics. At the very least, we have now removed the excuses.