EU Referendum


EU politics: fighting the wrong battles


24/04/2014



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The more you know, the less you know is something of a cliché – but that doesn't make it not true. Hence, if you look closely when I smile at some earnest amateur pontificating on the value of free trade agreements, you will actually see a grimace, as I wonder if the chap really has the first idea what he's talking about.

The point – there's always a point – is that there are many different types of free trade agreements as there are varieties of ice cream in an ice-cream parlour, each with different reach and levels of success. And just as an aside, one of the key determinants of success is the dispute resolution system.  The acid test is what happens when things go wrong, and how well the system deals with it.

Hence yesterday I spent an inordinate amount of time looking up and reading about international trade arbitration systems, particularly in the context of UNECE and the possibility of it expanding its role. Thus one learns of the delights of the European Convention on International Commercial Arbitration of 1961, and then the UNCITRAL Arbitration Rule, which was revised in 2010 and now underpins much of the current trading regimes.

For all that, it earned just one paragraph in our expanding EU exit plan, which now stands as Flexcit v.06 comprising 129 pages and 37,000 words – and growing daily. It is that sort of detail, though, that makes or breaks an exit plan. General approximations will take you only so far, before you have to get deep down into the detail, and understand the mechanics of the multifarious systems involved.

This does not, of course, mean that the message you end up popularising has to be dull and technical. Simply, before you get there, you have to have done the spadework, to ensure that what you are saying is sound and can withstand a challenge at any level.

No more so is this true than with the allied and contentious issue of international standards for products and (increasingly) services. These define the Single Market but also underpin the entire global trading system, not least the WTO multilateral trading regime.

It is an example of this, though, that brings Douglas Carswell into the fray with a piece so remarkably ill-informed that one is tempted to brand it "stupid", but for the fact that it will attract the usual rash of critics who will mark me down for my intolerance and intemperate language. The one person who will never react, of course, is Douglas Carswell, who is far too important actually to learn anything and thus remedy his own ignorance.

Anyhow, the Carswell homily for the day concerns the supposed perils of the EU's Single Market and its rules and regulations. Far from "opening up Britain for business", he declares, rules that take effect on 1 July this year threaten to shut down dozens of steel fabricators across the country.

EU regulation, brought in under the auspices of the single market, we are told, mean that perfectly good, reliable and safe steel fabrication firms "will soon only be able to fabricate steel if they comply with regulations". Fail to tick the boxes, regardless of any other consideration, and you cannot fabricate steel, huffs Carswell.

Unfortunately for the man, his case isn't helped by one of his links pointing to the wrong place, taking us here instead of to details of one of his stricken firms.

There we learn about the EU's Construction Products Regulation and the mandatory requirement for CE marking of steel construction products. We also learn that "this has not caused any disruption in the supply of material as manufacturers, such as Tata Steel … had been CE Marking their products for a number of years in anticipation of the CPR requirement".

In fact, there is no reason at all why the new standards should create any undue problems. For as long as I can remember, such products have been subject to external certification, not least the old BSI standards, complete with their kitemark.

However, for just as long, there has been an awareness that the basic standards have been inadequate. With building construction, not only the quality of the product matters, but how it is handled, how it is fitted, and the application. The right joist in the wrong position can cause absolute mayhem.

To that effect, for many decades we have had a voluntary system which certifies product use and application, administered by the British Board of Agrément. This was incorporated (to my memory) in Building Regulations as early as 1963. The advantage of this system is that it testifies to conformity with what are known as "deemed to satisfy" provisions in the regulations, easing the approval of such works by local authority building inspectors, making the site process quicker and cheaper.

What is happening now is that the CE marking system is codifying and updating these arrangements. As such, there can in fact be no rooted objections to them - not in principle, even if you disagree with the detail. If you are investing hard cash in expensive building works, you will want to know that your structural steel is up to spec, and fitted properly.

This, though, is not good enough for Carswell, who is whinging about the standards applying to domestic companies, that do not export. He asks why an Essex business, that sells exclusively to UK customers, has to comply with rules that are introduced supposedly to facilitate trade with France and Belgium.

Yet, there is a reason for this - and a good one. Construction services are traded internationally, and if you are going to have free trade in services – of which I am sure Mr Carswell would approve – then it makes sense to have harmonised standards. That way, a British firm can set up shop in Germany and bid for building contracts, without being defeated by incomprehensible local laws which would otherwise make such operations impossible.

That, of course, means that a German firm can also set up in Essex, to bid for work, But, unless I am mistaken, Mr Carswell is in favour of that as well. More competition serves the customer, and the last thing we want is discriminatory regulatory standards which feather-bed local suppliers. Two-tier standards can themselves become barriers to trade, more costly and limiting than tariffs.

When it comes to those standards, however, it is here that Carswell is completely adrift in blaming the Single Market. If he looks at the Regulation, which I doubt he has done, he will see (in Recital 18) that the CE marking is based on the European Committee for Standardisation (CEN) codes, ostensibly developed for application in EU member states.

But if he then takes a closer look at these Eurocodes, he will find that they are formulated in association with the International Standards Organisation (ISO) and thus have not only Europe-wide but global application.

Furthermore, this high degree of co-ordination does not happen by accident. It arises through the little-known but massively important Vienna Agreement of 1991, where effectively the EU (through CEN) recognises the primacy of international standards (stipulated notably in the WTO Code of Conduct), as set out by the ISO. This pre-empts our old friend Article 2.4 of the WTO TBT Agreement.

What the EU is doing, therefore, is gradually upgrading its own standards to meet relevant ISO standards, application of which then gives British products and services access not only to the European but to the global market.

The downside is that Mr Carswell's local firms are going though some expense and inconvenience in meeting the new standards, and they are quite possibly more rigorous and bureaucratic than we would prefer or strictly require.

Here, Mr Carswell might have had a point, had he chosen to make it. The formulation of these international standards is far from transparent, and would benefit from much greater scrutiny. There are major elements of the CE system which we believe to be flawed – as with toy safety and breast implants - and there is much room for improvement.

That said, the end result of this standards-making process is not that much different from what we would have had to devise anyway, in a notoriously lax industry with elements known for cutting corners  They need to be regulated because the consequences of failure are often extremely expensive, and can be fatal. Well defined standards simplify the task of the specifier, give certainly to the builder, provide reassurance to the client and protect the public. They also make enforcement easier, cheaper and more effective, paving the way for risk-based systems. 

Of course, we can always improve systems, but Mr Carswell, in pinning this on the EU, is fighting the wrong battle. Even under the aegis if the WTO, outside the EU, we would probably be working to very similar standards, under more or less identical conditions. Our battle is at global level, and that is where we need to be. That is the argument Carswell needs to be making, but he doesn't have the knowledge or understanding to equip him for the task.

I suppose we should not call that stupidity. But it is ignorance, and in afflicting our political classes, there is something more profound. Whatever it is, there is no getting away from it - Mr Carswell is a very ignorant man. We need better from him and our other paid servants.

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