We must not get stuck in an EU thicket
Boris Johnson’s victory in the General Election means Britain will now, finally, after three years of dithering and obstruction, be free to set out on its own path of trade-energised growth and prosperity.
Rather surprisingly, the UK’s political classes and business seem shocked that the UK will not be aligning to European regulations. They overlook the blindingly obvious fact that the PM resigned from the government over Chequers which was a high alignment model.
We do have to be careful that we do not get ourselves enmeshed in an overgrown thicket of EU regulations and economic declinism that has gripped the continent — and which they seem intent on imposing on everyone else.
The political, academic and media experts who lacked faith in our people and institutions pre-Brexit haven’t changed their stripes.
Those same people will tell us post-Brexit that the trappings of independence may be very well and good, but those who know better think that our future still lies in tying our regulations and policies ever more tightly to Europe.
They are wrong. As EU growth sputters toward recession and innovative companies flee across the Atlantic, Brussels is simply doubling down on its anti-growth policies that make its products uncompetitive in world markets. Rather than reform, Europe is using so-called free trade negotiations to undermine the competitiveness and growth of its trading partners.
You wouldn’t know it from the press, but the world increasingly sees the EU as a major malefactor when it comes to trade — not as bad as China, perhaps, but getting there.
In recent meetings of the World Trade Organization, nations from North and South America, Asia and Africa united to condemn the EU’s draconian and anti-scientific regulations on sanitary and phytosanitary (SPS) products.
One target of these regulations is the new gene-editing technologies that are already producing safer, healthier and more environmentally beneficial crops.
Another is the infinitesimal and harmless residues of modern pesticides that farmers around the globe depend on to grow the world’s food — food that Europe must increasingly import, largely because EU regulations have so undermined the productivity of its own farmers.
The WTO nations lodging these complaints and accusing the EU of jettisoning international scientific norms — including Canada, Australia, India, Brazil, the United States — are Britain’s most promising trading partners post-Brexit. Not the downward-trajectory economies of the EU.
The SPS regulations are symptomatic of a much larger problem: the anti-science, growth-killing policies increasingly embraced in Europe, starting with EU REACH chemicals regulation and achieving a dubious landmark with the General Data Protection Regulation (GDPR).
The EU seems to have recognised that its increasingly prescriptive rulemaking leads to damaging consequences for its own economy.
Unfortunately, rather than shift to a more pro-competitive approach, EU politicians and negotiators are
feverishly trying to twist proposed agreements with Canada (CETA) and South America (Mercosur) into anti-growth pacts to curb the productivity of its trading partners — just as they attempted to use Brexit negotiations to hamstring our nation after independence.
Moreover, a significant part of the European approach to agriculture seems to be based on responding to consumer concerns. But a recent paper in the European Management Journal, by Ryan and others shows that 95 per cent of all the internet activity in the anti-GMO space leads back to two pro-conspiracy and alternative health (anti-vaccine) sources.
These disinformation campaigns greatly harm consumer understanding of science, and make it impossible for governments to make rational, science-based policy.
The entire post-war world trading system is based on regulatory recognition, adequacy and equivalence arrangements.
WTO rules say that as long as regulatory goals are the same (health and safety of humans and animals for example), and as long as the regulatory systems of both parties objectively achieve those goals, then they should recognise each other where possible.
Critically, this allows a healthy competition in regulation that advantages the most efficient, pro-competitive (but equally protective) regimes.
The EU has thrown this idea overboard. By insisting that its trading partners “harmonise” their regulations with the EU’s GDPR and SPS regulations, the EU acts much like China, which forces firms to give up protections on intellectual property and other rights if they want access to its market.
Should other nations accede to this bullying, the result will be the destruction of global wealth on a massive scale. This is the real race to the bottom.
Post-Brexit, the UK can join with other nations who see the danger this poses and have a vested interest in maintaining the liberal economic order.
Canada and the Mercosur nations are already pushing back on the EU. The US has made it clear that the EU’s SPS barriers are a deal breaker. Australia and New Zealand, with which the EU is presently negotiating trade agreements, have large agricultural sectors and are both vocal champions of regulatory recognition approaches.
The UK will shortly be negotiating its own comprehensive FTA with the EU and will soon begin official trade negotiations with many of the others.
Don’t let the experts gain-say the strength of the UK’s position going forward. It is the EU that is the odd man out in the world today, isolated and beset by its own bad decision-making. Brexit is looking less and less like a “leap in the dark,” as some suggested.
It’s looking more like we jumped off the sinking ship of continental decline and landed firmly on the winning side of history.
Shanker Singham is chief executive of Compere and head of trade at the Centre for Economic and Business Research