The EU has the advantage not just because of its economic heft, but because of its regulatory infrastructureby Ian Dunt / May 8, 2018 / Leave a comment
Jacob Rees-Mogg has a rather unpleasant knack for delivering threats as if they are supportive platitudes. He was at it again in the Telegraph today, telling readers about why the European Union would prefer Theresa May to Boris Johnson.
“The EU knows if they don’t support and help Theresa May to get a deal, there is the risk of having somebody much, much more aggressive, which they don’t want,” he said. “I think that’s helping her. By being a Remainer, by being moderate, by being courteous, she is doing a highly competent job in negotiations. I don’t think they would like to have Boris Johnson, do you?”
The supportive comments are of course a thin veil for an ice-cold threat to dethrone May if she refuses to do his bidding on post-Brexit customs. The idea that Britain should assert itself more strongly is fairly common among Brexiters on the Conservative benches. They are infuriated by the government’s continued capitulations. They think that if only someone really tough, someone with the proper bulldog spirit of Brexit in them, went into those negotiations, the grey bureaucrats of Brussels would blink first. Faced with the true grit of an Englishman, cowardly Europeans would run a mile.
It couldn’t really be any other way. For decades eurosceptics imagined the EU stifled Britain’s ingenuity and can-do attitude. It therefore follows that when these cultures meet in opposition, the European side will surely wilt.
In reality, any team, under any leader, from any country going into these negotiations with the EU would lose if they were operating under these constraints in terms of both politics and time. It is not about being tough, or clever, or daring. It is simply about the cards you have in your hand. A country leaving the EU is in a weak position for lots of reasons. Its small relative economic size for one thing. But there is also another very specific reason, less discussed but just as important: infrastructure.
Once you’re in the EU, you share regulatory infrastructure. You’ve entered into a regulatory web designed to make things easier to trade and run around the continent. Drugs are licensed by the European Medicines Agency. Intellectual property rights for new plant varieties are granted through the Community Plant Variety Office. The safety checks for airplane parts are recognised by the European Aviation Safety Agency. The legal oversight for the transportation of nuclear materials is provided by Euratom.
If you leave Europe without a deal in March 2019, you lose access to these regulators. The consequences are sci-fi level bad. They are basically just not conscionable. No government with even a bat-squeak of responsibility would allow such a thing to pass.
The first thing most civil servants want to do is replicate EU membership with these agencies. We’d come up with some kind of associate membership of Easa and Euratom, for instance, and incorporate plant variety rights in the new European patent system we’re signed up to. But there is no agreement from the EU on this. If it continues to refuse our pleas, the British government will be forced to create a whole new regulatory infrastructure from scratch.
Setting up a new regulator takes a lot of time and money. You need to lease a building, set up a management structure, hire and train thousands of members of staff, and develop complex technical expertise. In the case of medicines it is possible, but not on this timescale. In the case of something like aviation it requires such a massive and expensive replication of activity for so little benefit that no-one at all seems in favour of it.
No new drugs on the market, no right to control your intellectual property, no flights from Britain to Europe, no import of radioactive isotopes from Europe for use in cancer screening and treatment. It seems alarmist, but it is the true implication of no deal. That is the default outcome unless something changes before next spring.
This is not true for the EU. In trade, both sides lose—albeit the UK more substantially as a percentage of its economy than the EU, simply due to the difference in size. But in the world of regulators, all the consequences are on the UK side. The EU would have a regulatory system on 31st March 2019 which functioned exactly the same as the one on 30th March, except for the absence of the UK. Britain would have a black hole.
But actually, the problem of infrastructure covers trade too. In the absurdly named war cabinet, ministers will spend the next week or so debating the UK’s customs arrangements. It is equivalent to playing chess and calling it military campaign. There is no infrastructure being built to enact the demands that they are making.
A new customs infrastructure requires new roads to be built, new checkpoints to be installed, new IT systems to be designed and implemented, and countless new officers to be hired.
This is the problem of Article 50’s eye-wateringly tight timescale, even with a few months chucked on the back end for transition. The political decisions which are being made are of such a magnitude that they entail huge infrastructure commitments, of the type which take years to set up.
It makes no difference who walks into that negotiating room. It could be May, or Johnson, or Sun Tzu. They’ll all get the same outcome for one simple reason: the default option of no deal in March 2019 leaves one side broadly unaffected and the other side devastated. If Brexiters had spent more time acknowledging this fact rather than denying it, their project would have had a greater chance of success.