A tariff-free regulatory mutual recognition arrangement during transition would make perfect sense all round

A tariff-free regulatory mutual recognition arrangement during transition would make perfect sense all round

On the UK side in the Brexit negotiations, it appears there continues to be uncertainty or disagreement on the following two connected points (amongst others). First, there is the claim that new UK customs procedures will not be ready by the end of the currently-agreed “transition period”, in December 2020. Second, there is the claim that the procedures and technologies to allow the Irish border to operate with no stopping of products at the border will not be ready by December 2020. In both cases it is suggested the required technologies and procedures will not be viable until something like 2023 or 2025.

Personally, I don’t believe either of these claims. I don’t believe we need any new technologies (the claim we do is just blatant obfuscation) and I think the claim we cannot have viable systems operating is blatant delaying tactics. But let’s suppose, for the sake of our discussion here, that they were correct.

It is suggested that what should happen is for the UK to extend its period of “transition” to 2023, 2025, or on an open-ended basis “until the technologies and procedures are ready”. That would obviously be highly problematic, especially from the UK side, since the “transition” arrangements involve the UK accepting all the EU’s rules and paying into its budgets, but without a say in determining what the rules and budgets are and without being able to make its own new trade deals and set its own new regulations. It would be especially problematic in its open-ended form, in that there would be the risk of its becoming a permanent arrangement.

Why, though, if the issue is truly one of three to five years whilst we sort out the technology, isn’t the UK proposing the more obvious temporary transition period solution: that the UK and EU agree, for a strictly limited run-off period, a tariff-free regulatory mutual recognition arrangement? The UK could say that we will regard anything licensed for sale in the EU to be acceptable for sale in the UK and the EU could agree that anything licensed for sale in the UK would be licensed for sale in the EU. Then there would be no need for any new checks at the border – either at Dover or on the island of Ireland — and no restrictions on either side from developing new regulation or doing new external trade deals.

Obviously such an arrangement could not be long-lasting, otherwise it would undermine the EU’s Single Market. So that would give both sides every incentive to develop the relevant systems as quickly as they could.

Some will say: “But the EU will not agree”. But why should it be any more problematic for the EU to agree a run-off arrangement of this sort than for the UK to agree a transition period as a rule-taker forbidden from applying new trade deals?

Furthermore, in a negotiation, making your negotiating partner explicitly disagree with things is important. That sets out the parameters of the negotiation for your own internal audience as well as the external one. If the UK has proposed something that would obviously work, but the EU says no for its own reasons, UK opinion is more likely to see the EU side as obstructive than the UK side as incompetent or the problems as fundamentally insoluble. That is important for the coherence and unity of our own negotiating position, making us in turn better and more credible partners for the EU in ultimately doing a deal.

For what it’s worth, I’m not convinced the EU would, actually, see a strictly and credibly temporary arrangement of this sort as so impossible. But if there were a concern that the UK might then lack incentives to change things or to agree a subsequent free trade deal, we could as a compromise “sour the pill” for the UK, by saying the mutual recognition in the transition would not apply to services. That would mean the border crossing technology and procedures not being ready “issue” would be addressed but without creating a situation so comfortable for the UK that it lacked incentives to move on from transition.

I don’t believe there can be any reasonable claim that a temporary run-off no-tariffs mutual regulatory recognition deal, pending the developments and application of whatever new systems and technologies are said to be required for customs at Dover and a no-stops (“soft”) border in Ireland, could not technically work. I do not believe it certain the EU would turn down such a proposal, but if it did that would be useful in helping the coherence of the UK’s internal position. Furthermore, the UK would have the scope to compromise by agreeing that mutual regulatory recognition would apply only to goods, not services, thereby leaving us with strong incentives to develop and implement whatever new systems are needed and move on to a final comprehensive trade deal including services.

The UK should be taking the initiative here. Let’s try this, and see what the EU has to say in response.