EU Referendum

Brexit: globalisation by treaty


As the EU's long-standing preference in international trade relations is for multilateralism, it should be hardly surprising that it has not been in the forefront of signing up third country candidates for new bilateral trade deals.

Since it changed policy in 2006 after the failure of the Doha round, it has concluded only five of its "new generation" trade deals, having failed to conclude a new agreement with the United States.

This much I recorded yesterday but, as we confront prime minister Johnson's avowed refusal to accept regulatory alignment in any new treaty with the EU, it is useful to explore the context of that refusal and what it might entail.

The headline issue is that UK is set on becoming an independent trading nation, determined to make its own independent trade policy, thereby refusing to accept "EU rules".

This is a mantra earnestly espoused by the fanboy gazette which has been for some time insisting that Britain "must sweep aside thousands of needless EU regulations after Brexit to free the country from the shackles of Brussels", estimating that they cost Britain "a total of more than £120 billion per year".

As far as the rhetoric on regulation from Johnson goes, when it came to his Greenwich speech, he spoke glibly of there being "no need for a free trade agreement to involve accepting EU rules on competition policy, subsidies, social protection, the environment, or anything similar any more than the EU should be obliged to accept UK rules".

Rather, Johnson wanted "a free trade agreement, which opens up markets and avoids the full panoply of EU regulation, like the Canada deal" (CETA). And, when it comes to looking at the broad thrust of the Canada deal, Johnson looks to be on safe ground.

While it has nearly a thousand references to regulatory matters, it does not specifically require Canadian businesses to adopt EU regulation. The focus is on the need for "regulatory cooperation", to which an entire chapter is devoted.

And here, in what must be music to Johnsonian ears, it talks about cooperation activities carried out "on a voluntary basis". "For greater certainty", the treaty says, "a Party is not required to enter into any particular regulatory cooperation activity, and may refuse to cooperate or may withdraw from cooperation".

Just to make absolutely sure, the treaty states: "A Party is not prevented from adopting different regulatory measures or pursuing different initiatives for reasons including different institutional or legislative approaches, circumstances, values or priorities that are particular to that Party".

However, as always, the devil is in the detail. When it comes to vehicle safety and environmental performance, for instance, you are taken away from the main body of the treaty into one of the many annexes. There, under what is actually the misleading heading of "Cooperation in field of motor vehicle regulation", we get a completely different picture.

There, the parties affirm their joint commitment to improve vehicle safety and environmental performance, and – crucially "to the harmonisation efforts pursued under the framework of the 1998 Global Agreement administered by the World Forum for the Harmonization of Vehicle Regulations (WP.29) (the “1998 Global Agreement”) of the United Nations Economic Commission for Europe (UNECE).

Canada, of course, is a fully-paid up member of UNECE and the Global Agreement – which has the effect of a binding treaty. And it is no secret to the readers of this blog that the WP.29 "UN Regulations" under the Global Agreement become the EU's own regulations.

Through its membership of UNECE and its participation in WP29, Canada has already incorporated UN Regulations into its own law and, with certain provisos, the effect of the Canada Deal is to require Canada to "continue to recognise the relevant United Nations Regulations". And since these are, in actuality, also EU regulations, Canada is locked into harmonising with them.

This is perhaps the most egregious and clear-cut example of the EU's ability to action its declared policy of using FTAs to serve as what it calls "a stepping stone for multilateral liberalisation".

A very similar provision is made in the EU-South Korea FTA, where the parties recognise that WP.29 "is the relevant international standard-setting body" for the products covered by this Agreement and commit to participating actively in the development of regulations in WP.29. They also agree to "cooperate for the adoption, without undue delay, of new regulations by WP.29".

Then, turning to the EU-Japan Economic Partnership Agreement, we see the same provisions and even some of the same wording. Effectively, though a network of individual FTAs, the EU is steadily building an enforceable multilateral agreement on vehicle regulation.

Returning to CETA, it cannot be said that regulatory harmonisation in most other areas is quite so advanced, but even on broad-brush regulatory cooperation, the EU adopts a multilateral approach. Rather than reinvent the wheel, if lifts the WTO Agreement on Technical Barriers to Trade (TBT Agreement) and incorporates it into the deal. Thus the parties are obliged to adopt the WTO code, within the enforcement regime set out in their trade treaty.

As to the detail, the Parties undertake to cooperate "to the extent possible", to ensure that their technical regulations are compatible with one another. And then, where one party prepares a technical regulation that it considers to be equivalent to a technical regulation of the other party, "having compatible objective and product scope", it may request that the other Party recognise the technical regulation as equivalent.

Interestingly, and perhaps highly significantly, when it comes to criteria by which "equivalence" shall be determined, all the treaty can offer is this: "To be agreed at a later stage". And, in the absence of specific guidelines – as Canadian meat producers are finding" - the EU's idea of "equivalence" is that it should effectively mean the same as EU regulations.

That notwithstanding, the same approach to the TBT Agreement is found in the EU-Japan Agreement and indeed in the EU-South Korea Agreement (Article 4.1). Through this means, the EU is considerably strengthening the WTO's multilateral regime, giving it real bite in terms of enforceability.

Drilling down into the detail of these treaties, there is much complex detail on technical and regulatory cooperation, but the direction of travel is always the same – cooperation on the production (or adoption) of common standards at an international level.

This is explicit in the EU-Japan agreement on financial regulation, where the parties agree to "work together bilaterally and in international bodies with the objective of further strengthening global financial stability…".

In their regulatory cooperation, the treaty says, "the Parties shall base themselves on the principles and prudential standards agreed at multilateral level", which goes so far as to state:
Each Party shall make its best endeavours to ensure that internationally agreed standards for regulation and supervision in the area of financial services are implemented and applied in its territory. Those internationally agreed standards are, inter alia, the standards and principles issued by the Basel Committee on Banking Supervision, the International Association of Insurance Supervisors, the International Organization of Securities Commissions, and the Financial Stability Board.
True to its principles and declared policy, therefore, the EU is using its FTAs as a means to an end, creating a "Global Europe" through a skein of treaties which have strong multilateral dimensions.

It is not clear whether Johnson is even aware of this agenda, or whether he realises that the EU is going far beyond bilateral accords to build a global network. He will find that, far from casting off the "shackles of Brussels", he is confronting what we earlier called the "double coffin lid" phenomenon,* and is being asked to buy into a global agenda.

Like it or not, a "Global Britain" will have to adopt global rules. And, without him knowing it, "Global Europe" seems to have got there first. He could merely be leaping from the frying pan into the fire.

* Back in 2013, I compared Britain with the victim in a horror movie, trapped alive in an as-yet-unburied coffin. Having broken through the lid in a bid to escape, he finds to his consternation that there is another lid over the first. This "double lid" is, on the one hand, the EU treaty obligations and, on the other, global rules. The main effect of breaking through the EU/EEA legislative layer is to reveal the second "lid".