LONDON – After a night of negotiating drama, the three trickiest and most immediate issues in the process of Britain leaving the European Union treaties have been settled — as, given a bit of goodwill, they were always predicted to be (see this column on Aug. 22).
The rights of EU citizens residing in the United Kingdom have been assured (as have those of U.K. citizens on the continent); the finances of the so-called divorce have been agreed, and spread reasonably over many years ahead; and despite much media excitement and some political maneuvering, the apparent need for a new border between the Republic of Ireland (in the EU) and the province of Northern Ireland (in the U.K.) has been found to be avoidable. Physical borders like the Irish one, it turns out, can nowadays be largely replaced by online checks and permits and a good dose of practical common sense.
So far so good, but what comes next? Discussions are now scheduled to begin on the precise arrangements for continued and smooth flows of trade and exchange between the member states of the EU and the whole of the U.K. after March 2019, when the U.K. officially withdraws from the main EU treaties.
And here the argument between the factions continues.
The “leavers” (or Brexiteers) want Britain to be completely free of both the EU single market and the Customs Union, and trade with the EU like “any other country,” maybe with some special trade agreement if possible. The “remainers” want either a reversal of the whole Brexit policy or, at the least, the closest conformity with the rules and regulations that they believe prevail throughout the EU and make it, in their view, such a powerful bloc and potential political power from which the U.K. will be excluded at its peril.
Both sides like to accuse each other of being trapped in bubbles of illusion. And in a sense both are right. The leavers’ bubble is a world in which, in an entirely interdependent and superconnected age, individual nations can somehow act independently. This of course is nonsense. A nation like the U.K. is bound by hundreds of treaties, obligations and international jurisdictions, in or out of the EU. In a networked world its whole structure of security and prosperity rests on a dense web of linkages with which it has to comply to survive.
The remainers’ bubble is filled with just as much fantasy, although some find it harder to see. Their belief is that the whole union is one seamless market of free movement, a nirvana of unimpeded trade in an integrating united entity in a dangerous world. The chief standard-bearer of this view is the London-based, although worldwide distributed, Financial Times.
All along the FT columnists have insisted that the EU operates as an increasingly cohesive bloc on inviolable principles of free movement of persons, capital goods and services. But this is pure theory. These may be aspirations, but in practice almost every EU country has checks and controls on all entries, and these are getting steadily tighter as the tide of migrants from Africa and the war-torn Middle East swells. Checks on both goods and capital across frontiers are also frequent, as anyone who tries to move money from one jurisdiction to another soon discovers.
As for services, now a key component of international trade, just try setting up a new law office or consultancy from one EU country into another and you will meet a thicket of licensing procedures and local rules to stop you. In truth, no EU single market in services exists, and never has, despite British efforts over 40 years to campaign for it.
As anyone who travels around the 28 countries of the EU soon finds out, it is a patchwork of different regulations, standards, taxes and procedures. In many places border checks, while light, are highly visible, although ironically there are few or none between EU countries and Switzerland — a nonmember.
The onset of the digital age has widened these variations. Slotting into all the world’s growing supply chains has become more important than fitting into one-size-fits-all Brussels-made rules.
All this still hangs together thanks to the principle of mutual regulatory recognition — introduced by a British EU commissioner back in the 1980s. As long as broad aims are agreed, member states can use their own policy measures to get there. This is a far cry from full alignment and strict conformity of all rules between states. Indeed “alignment” in these conditions can mean everything or nothing.
This explains why, for example, England, Scotland, Wales and Northern Ireland all with varying types of local regulations — and in Scotland’s case with different tax powers — work harmoniously within the single U.K. market, and why for 40 years the whole U.K., despite all its opt-outs and numerous differences, could just about fit without too much difficulty into the so-called EU Single Market .
More importantly it explains why being strictly in or out of the EU Single Market protective (and restrictive) cocoon now matters far less than many have been led to believe. And it explains why the North-South border issue in Ireland has been a fuss about very little.
Each country has its own systems. Some will have higher standards than others, in health and hygiene or safety at work, for instance. And all have constantly to comply with the varying, and often shifting, standards, laws and preferences of the different markets to which they wish to export. So trade standards become highly flexible and constantly evolving — far away from the old ideas of centrally fixed and imposed standards and regulations across the whole 28-member EU.
All countries anyway will have to adapt to the basic rules of the World Trade Organization if they want to trade seriously at all.
So both the dedicated remainers longing for the U.K. to stay in the Single Market on the one hand, and “clean break” leavers on the other hand, will be disappointed by the eventual outcome of the Brexit negotiations. Both their goals are dreams — bubbles indeed that will burst when pricked by reality. There will be no necessity to adhere to a Single Market that barely exists, but no complete freedom either to act unilaterally, which the arch-Brexiteers yearn for.
That’s bad luck for them, but it is good for the rest of us — and offers a future bulging with opportunities.
David Howell is a Conservative politician, journalist and economic consultant. He is chairman of the House of Lords International Relations Committee.
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