Regulatory autonomy from the EU is vital for independence and for growth

Regulatory autonomy from the EU is vital for independence and for growth

Despite a popular vote to take back control of laws, money and borders – and the Prime Minister’s statement in her Mansion House speech that alignment of the aims of regulations would not mean the alignment of regulations themselves – the Government’s White Paper means we can expect a so-called ‘common rulebook’ and the harmonisation of UK regulation with the EU.

Despite the Government’s claims, this cannot simply mean for goods. The UK will be forced to harmonise with swathes of Single Market regulation on services too. It will mean following EU rules not just on how all our goods are made, but in ‘horizontal’ areas like competition. This will cover all rules for goods on the Single Market, including on how they are produced, packaged and presented.

The White Paper will also scupper any advanced trade deals; the inability to set our own goods regulations will deny us leverage for vital services markets. When President Trump told us that this will wreck a US-UK free trade agreement, he was only adding to what representatives from Canada, Australia and New Zealand have already told us over the last month. It appears that the extraordinary opportunity of Brexit is truly being wasted.

In an IEA report released today, Freedom to Flourish, we describe the alternative. If the UK is to have the capacity to unleash the true potential for growth in its economy, to be able to set up free trade agreements with countries outside the EU – indeed, if it is to actually become a fully independent law-making state – the country must have regulatory independence, through an end to ECJ jurisdiction and complete control over how it makes regulation.

This is increasingly urgent. The regulations the EU produces are becoming steadily more damaging to economic growth, especially through the impact on SMEs and other disruptive innovative firms – in other words the most vital companies for our future. In just one example, the European Commission’s energy tests for vacuum cleaners gave an advantage to German manufacturers over Dyson’s more efficient designs, which demonstrates how the EU regulatory system has been skewed against both British manufacturers and towards existing incumbents with older technologies.

Under the Government’s proposals, what influence the UK had in the institutions that make these rules will be gone. We will simply become a rule-taker.

Instead, securing regulatory autonomy will allow the UK to determine its own regulation for both goods and services. To achieve this, we propose that a regulatory agreement with the EU must pursue five principles:

  • first, it must mean autonomy for the UK to make its own regulations (for both goods and services);
  • second, the UK needs autonomy to set its own standards;
  • third, we need autonomy for our system of conformity assessment (which checks that products, for example, meet these standards and regulations);
  • fourth however, the UK should make an open offer to unilaterally recognise the EU’s regulations, standards and its conformity assessment system; then
  • fifth, it should seek recognition by the EU of the same in the UK.

This autonomy, combined with an offer for mutual recognition, is uniquely achievable, given that the UK and EU have identical regulations up to this point through the Single Market. And the capacity to diverge does not mean one always will, so we can retain EU regulation where it is actually superior.

If the UK pursues a path of harmonisation, it will hobble its economy and prevent the British people achieving the great opportunity that Brexit represents. It will also lose its chance to reclaim its place as the free-trading nation, as advanced, free trade agreements with countries outside the EU are taken off the table.

The capacity to make pro-competitive regulation is vital for the UK economy. Perhaps more important still, without the return of regulatory control, we will not have returned our country’s sovereignty and withdrawal from the EU will be incomplete.