Third stop on the road to Brexit

Mad Max – or Teletubbies?

The most striking line in the Davis' speech – designed to garner the morning headlines – is that the UK does not intend to turn itself into a “Mad Max-like dystopia” of deregulation. ‘Singapore on Thames’ is firmly buried in the Australian outback. Instead, Brexit will trigger a race to the top in regulation – as the UK finds smarter ways of achieving ever more demanding standards – on animal welfare, social protection and the environment for starters. And the UK is so committed to these standards that the EU should be prepared to accept our standards through a process of “mutual recognition”.  Then we can all have a big hug and live happily ever after.

Davis is right to give assurances – but he may be throwing away a negotiating card

There is a clear European worry that the UK – gone rogue and liberated after Brexit - might make EU levels of social and environmental protection (and the tax-take underpinning them) unsustainable. Those concerns were set out by the Commission last month – it seems likely that the EU will want to add provisos to any deal (even a Canada-style deal) as protection.

The UK seems to be conceding upfront that it won’t play the ‘doorstep competitor’ card. That may recognise the political reality – but Davis may be conceding the point too soon.

To stand any chance of success he will need to show how the UK will stick to those assurances

David Davis, Theresa May and Michael Gove may give assurances – but they cannot bind their successors. That, after all, is the point of “Taking Back Control”. And it’s far from clear that the rest of the Cabinet is with them. Last week Boris Johnson listed areas where the UK might want to do things differently. Meanwhile, Liam Fox is champing at the bit to do trade deals with the US – which will demand changes in regulation on agriculture as the price for a deal. 

The UK is already in the dock for not meeting existing EU commitments on air quality – and is regularly taken to the European Court over environmental protection. The UK has consistently tried to opt out of EU-imposed labour market regulation. And the Opposition has a domestic policy agenda which could bring it into conflict with other areas of European law.

So to be worth anything to the EU, it would need that commitment to be hedged around with mechanisms to ensure compliance and enforce sanctions. We set out what these might look like in Trade after Brexit.

The EU will have big reservations on importing mutual recognition from the Antipodes

At the heart of the Davis model is an extended mutual-recognition model – of the sort the Legatum Institute has been proposing – based on (arguably) the second most integrated transnational market after the EU: Australia and New Zealand. The Trans-Tasman Mutual Recognition Agreement allows Australia and New Zealand to trade on the basis of accepting each other’s regulations. But there are reasons to think that model may fail to travel well – and fail to meet expectations on closer inspection:

• It only applies to a limited range of goods (and not to services). Highly regulated sectors, such as chemicals and pharmaceuticals, are largely excluded;
• Both governments have a much more relaxed approach to regulation than the EU has ever shown – they share a very similar “no worries” approach;
• The agreement involves treating New Zealand as a de facto Australian state – sitting in the Council of Australian Governments when regulations are discussed. Replicating that with the UK would give us more of a say after Brexit than the EEA members or Switzerland. Unlikely.

But at least the UK is putting out some ideas

The Davis model may fly or may crash and burn. But the big plus of the speech is that we are finally getting some detail beyond “bespoke” and “deep and special”. That means we have a basis to start discussions with the EU – but we need to find more convincing arguments on why this meets European concerns than Davis has produced today.

The danger is that in the protracted battle to find something that will unite the Cabinet, we have forgotten that the real negotiation is with the EU 27. Just because we are getting closer to knowing what we want to ask for, doesn’t mean that they are any closer to buying it.