Richard North, 24/02/2015  

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At the beginning of the month, we saw a report from the House of Lords EU Economic and Financial Affairs Sub-Committee, which delivered views on "the post-crisis EU financial regulatory framework".

This Committee thought that efforts by Europe to strengthen banking rules to avoid a repeat of the 2007-09 financial crisis were "admirable" but it also criticised the cost of the impact of the new laws and noted other flaws, saying Britain needed to retain direct involvement in decisions that affected one of its most important economic sectors.

Most significant of all, though, was the evidence offered by Professor Simon Gleeson who told us that, of the 40 different items of legislation produced by the EU in response to the crisis, with the exception of one and the partial exception of another, all were already being implemented in the UK.

Had Europe not existed, he continued, every single one of those directives would have been implemented here for exactly the same reasons that they were implemented at the European level, because they were part of a globally considered response to the crisis.

In the context, the primary drivers of financial legislation are the G20 and its operational arm, the Financial Stability Board (FSB), the OECD and, crucially, the Basel Committee on Banking Supervision.

Cut then to Ruth Lea in today's Times who concedes that much of the Brussels-originated financial regulation after the financial crisis would have been implemented even if Britain had not been an EU member. But, she implies, outside the EU, they can be repealed and/or amendment as circumstances change. Within the EU, she says, this is "all but impossible".

This is a line she also sought to convey in her speech on EU alternatives last week, one shared by a number of the speakers there who offered the vision of a regulation-free nation once we had left the EU – something, they asserted, that was entirely impossible while we remained in the EU.

Totally ignored, therefore, were the effects of globalisation and the fact that much of the rule-making that forms the EU acquis is initiated at global level. As a result, also ignored is the fact that – for a huge tranche of regulation covering a wide range of sectors, from financial services to automotive production and agriculture – leaving the EU would make very little difference. Most regulation would still apply.

The upside of this is that, outside the EU, we would be able to take a very much greater part in framing the regulation and, like Norway, would be in the interesting position of taking part in the process of developing regulation which would be adopted by the EU and then handed down to EEA members, including Norway.

To my mind, this is a better position than the simplistic view offered by Ruth Lea and her follow travellers, whose vision of a regulation-free nation is, to say the very least, unrealistic. In the absence of much of the current international/EU law, we would have to frame laws to replace it. Then, since we are global traders, much of that law would have to be harmonised with global laws, putting us right back where we started.

What seems to me to be happening, though, is that the "regulation-free" advocates are so wedded to their narrative that they are ignoring – or even denying – the effects of globalisation, and the fact that we would obtain little relief from trading regulation on leaving the EU.

However, in so doing, they are ignoring one of the most powerful arguments we have for leaving the EU – that rejoining the global regulatory community gives us more power and influence than we currently enjoy as members of the EU.

From there, we can then begin to understand why this same caucus is so opposed to the "Norway Option". But that creates a bizarre situation where they have common cause with the Europhiles who also oppose it, although for different reasons – precisely because it increases our power and influence, while giving us access to the Single Market.

Sadly, that puts us at odd not only with Europhile sentiment, but also with the eurosceptic "regulation-free" advocates. Yet, so strong is the globalisation argument that we cannot walk away from it, just for the sake of a false unity which would have the overall effect of weakening our case.

This then presents a further conundrum, as the "regulation-free" advocates are effectively bolstering the Europhiles, with the potential to weaken any coming EU referendum campaign. Effectively, even if unwittingly, they have joined the enemy ranks.

Quite how we then handle this, I am not yet sure, but the one thing we have to take into account is the importance of offering the uncommitted a credible exit plan. This, I suspect, may outweigh the effects of a false unity, in which case we have fewer allies in our cause than eve we imagined.

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