The EU is evolving – and shows why we cannot remain in the EEA or Customs Union

The EU is evolving – and shows why we cannot remain in the EEA or Customs Union

Hailing the proclamation of the ‘European Pillar of Social Rights’ (‘Social Pillar’) as a landmark moment for Europe, Jean-Claude Juncker addressed the Gothenburg summit late last year by emphasising European unity and the European social model.

At the birthplace of the Social Pillar, he reminded us what the EU is about:

“Our Union has always been a social project at heart. It is more than just a single market, more than money, more than the euro. It is about our values and the way we want to live.”

Those Brits who observed the summit might have felt there was something unnerving about three unelected bureaucrats ‘asserting common values’ at the stroke of a pen. Many might have been tempted to look askance, but they would have been ill-advised. The EU is actually changing.

The proclamation is not rhetoric aiming to make Europeans ‘feel’ unified and social. It sits atop various initiatives and new EU competences in the so-called ‘social dimension’ of the project. This dimension extends to the European Economic Area (‘EEA’) by virtue of the four freedoms.

An example of these new competences is the EU Commission’s proposal for a European Labour Authority, whose remit will be to enforce labour mobility rules.

Though unclear at present, the European Labour Authority will most likely cover the EEA because the free movement of people is a basic principle of its agreement.

Furthermore, it makes sense. If Norway, for example, did not fall within its scope, then it would undermine the integrity of the internal market.

As we prepare to leave the EU in pursuit of global Britain, we cannot lose sight of the political and legislative developments on the continent, given that some regulatory alignment will be instrumental to trade.

The Social Pillar, for example, must feature in the debate about whether the UK should aim to remain in the EEA or aim to enhance the Comprehensive Economic and Trade Agreement (‘CETA’).

Juncker describes it as a ‘deliberately chosen’ first milestone on the road to Sibiu, where on March 30th 2019 the summit ‘on the future of the EU’ will be held. Curiously, this date coincides with the UK’s exit from the EU under Article 50 of the Treaty on European Union, irrespective of the outcome of the negotiations.

If the Social Pillar is only the first milestone, then we have to keep an eye on the others as they should feature in the deliberation over the extent of our regulatory alignment to the EU.

Also, we have yet to see how the Social Pillar will translate into policies, how those policies will shape the single market and, by extension, how we will be indirectly affected in terms of trade and regulations.

Given the EU’s direction, it is more prudent for the government to stick to its original aim for a free trade agreement (FTA) within the framework adopted by trading partners all over the world.

Many chapters of FTAs are devoted to achieving regulatory coherence between trade partners, whereas the EU and UK already have it. So, an agreement should be easy and swift, in principle.

However, managing regulatory divergence is where we may expect hurdles. But the first milestone en route to Sibiu shows us the EU is evolving, so the onus to preserve a degree of convergence for trade is not wholly on the UK.

It is also worth noting that this milestone comes on the heel of what we may describe as an indirect diplomatic exchange between Michel Barnier and Wilbur Ross about the UK’s choices in respect to regulatory alignment.

Clearly the UK is a sought-after and respected trade partner with many stakeholders beyond Europe. Not only can we play a role by bilaterally and multilaterally shaping the direction of international trade, but inadvertently we are already doing so before we have left the EU.

The above diplomatic exchange seemingly puts the UK at a crossroads.

To the left is the European ‘social’ model, which according to Mr Juncker places ‘values’ and a ‘way of life’ before money and markets.

To the right is the US model, which according to Mr Ross prefers bilateral agreements for their speed and because they tailor to individual needs.

However, this is a false dilemma. Following decades of EU integration and after centuries of championing free trade and market forces, our political history and culture are rich enough to carve a new path. But, this requires the UK to be ambitious, studious, positive and confident about playing its role in international trade.

So, we should heed the Chancellor Philip Hammond’s call for embracing technological change, carving new markets and seeking regulatory innovations. None of which is possible if we remain in the EEA and-or the customs union.