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Summary: A level playing field or loaded dice? What the EU is really up to.

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Written by David Blake

This blog is a summary of David Blake’s major report Ensuring a Genuine Level Playing Field with the EU elsewhere on the BfB site

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The EU claims that it wishes to negotiate the future trading relationship with the UK on the basis of a ‘level playing field’. However, the EU’s published negotiating guidelines actually seek to force the UK to play with loaded dice. This amounts to ‘cherry picking’ by the EU which UK negotiators should vigorously resist.

The EU’s idea of a ‘level playing field’ post-Brexit is:

  1. Continue to have tariff-free access to our markets for its goods (where it has a huge trade surplus).
  2. Impede access to our trade in services (where the EU has a deficit) by making them subject to home state approval in each member state.
  3. Impede our financial service exports by making them subject to equivalence approval which can be removed at short notice with no negotiation.
  4. Treat UK citizens less favourably than EU citizens by restricting their right to work only in the member state where they currently work, whereas EU citizens can work in any of the UK’s four constituent countries.
  5. Use the new mobility arrangements to re-establish free movement by the back door.
  6. Continue to have access to our fishing grounds on the same basis as it currently has.
  7. Continue to use state aid to protect its own industries, while attempting to block the UK’s use of state aid, despite the UK spending less than the EU on average.
  8. Force the UK to align its tax regime to that of the EU where high personal and corporate taxes are used to finance its increasingly unaffordable social-economic model of high state welfare and pension benefits.
  9. Force the UK to adopt and keep in dynamic alignment with the EU’s labour and social protection standards and its environmental standards after Brexit.
  10. Adopt a governance framework that gives the European Court of Justice a role in determining disputes rather than using international arbitration as is standard in in international agreements.
  11. Prevent ‘dumping’ by the UK, while continuing to dump its products in the UK as result of a persistently undervalued euro.
  12. Allow the UK to be disadvantaged by the sequencing of the negotiations.

In short, the EU wants to maintain the status quo when it comes to activities where it has a significant advantage – as in demanding free access to our fishing waters – but it does not want to maintain the status quo where it has a trade deficit – as in services and particularly financial services.  It also chooses to operate as a single entity when it suits it, while choosing to be 27 separate states when it doesn’t. In addition, it wants certain agreements – such as the fishing agreement – to be concluded and ratified as soon as possible – by 1 July 2020.  Yet it wants to keep the negotiations on other agreements where the UK has an advantage such as services hanging in the air until the end of the negotiating period at the end of 2020.

This is not a level playing field, it is ‘cherry picking’ – something the EU has constantly accused the UK of wanting to do and says it will prevent in the Brexit negotiations.

The UK’s negotiators should insist on a genuine level playing field that must:

  1. Give the UK the same access to the EU’s service market as the EU wants access to the UK goods market, i.e., EU-wide not on a country-by-country basis. Either the EU is a trading bloc or it’s just a collection of individual states – it can’t be allowed to pick and choose.
  2. Allow the mutual recognition of standards in financial services.
  3. Treat EU and UK citizens equally when it comes to work in the UK and across the EU.
  4. Treat EU and rest-of-the-world citizens equally when it comes to mobility arrangements.
  5. Treat the UK’s fish stocks symmetrically with EU products. Just as we can’t walk into an EU factory and drive away a car, so EU fishing boats can no longer take our fish.
  6. Ensure full mutual transparency concerning state aid, based on WTO commitments.
  7. Allow for full tax sovereignty, while recognising that dealing with tax havens and unfair and distortionary taxes is a matter for international agreement.
  8. Allow for full autonomy on standards, while recognising that goods and services entering each other’s markets must conform to local standards, while other standards (e.g., on the environment) should be set by international agreement. In other words, there is no need for the harmonisation or dynamic alignment of standards. Rather standards should be mutually recognised, with a dispute mechanism to assess whether one party’s standards have too far out of line with what the other party originally accepted.
  9. Allow the agreement to be subject ultimately to international arbitration not the ECJ.

We need to turn Michel Barnier’s level playing field argument completely on its head and make it work in our favour and not against us. If we do not do this, we will find ourselves in another one of his traps which he so skilfully set over the last 3 years for our previous useless set of negotiators.

This is essential if Boris Johnson wishes to achieve the objectives he laid out in the Greenwich speech on 3 February 2020: There is 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. I hope you’ve got the message by now. We have made our choice: we want a comprehensive free trade agreement, similar to Canada’s. But in the very unlikely event that we do not succeed, then our trade will have to be based on [World Trade Organisation terms]’. He also emphasized the ‘need for full legal autonomy, [because] the reason we do not seek membership or part membership of the customs union or alignment of any kind, is at least partly that I want this country to be an independent actor and catalyst for free trade across the world’.

It really is time to walk away from this increasingly ludicrous institution.

 

Dr David Blake is a Professor of Finance at Cass Business School, part of City, University of London.  He is a member of Economists for Free Trade.

 

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David Blake

Professor David Blake is at Cass Business School