As the July 1st deadline on whether to extend the Brexit transition is nearing, the last round of EU-UK talks has amounted to nothing. Negotiations are really starting from a blank page from July on. Germany’s ambassador to the EU, Michael Clauss, openly confirmed that “no real progress” has been made so far and that “we work under the assumption the United Kingdom is not going to ask for an extension. That means a deal needs to be struck in the next six months”. He considers the effective deadline for an agreement now to be the end of October.
In an important development, the UK government also just declared it will not fully introduce new EU rules on “green finance” just yet. These so-called “taxonomy” rules impose a “green investment classification system”. Last year, the European Banking Federation warned this kind of political interference in investment decisions could lead to unsafe lending.
The rules are due to become EU law in the next few months and would therefore need to be taken over by the UK, as the country is bound to take over EU rules during the Brexit transition period.
The fact that the UK refuses to enshrine those into national law is of considerable importance, even if the actual entry into force is only foreseen for later. It signals that Britain is willing to exploit the opportunities offered by Brexit to become a more attractive place for investment, especially in an area where it currently already is a world leader: finance.
Whether to ban menthol cigarettes is politically controversial. Due to opposition, the European Parliament inserted to delay the ban for a number of years.
The underlying idea is that menthol-flavored cigarettes would seduce young people into smoking, which is an assumption lacking concluding scientific evidence. The ban truly is a big thing. For the first time, not just advertising for cigarettes or where one can smoke is being banned, but a specific kind of cigarettes. It affects some countries more than others. Menthol cigarettes are more popular in the UK and Scandinavia. Also women are more into them than men.
In the UK, not less than 1.3 million people apparently smoke menthol cigarettes, so the question is whether it is normal that such an important piece of legislation is being implemented during the last months of British regulatory vassalage. More fundamentally, even the most avid opponent of tobacco should reflect whether an outright ban on such a popular product isn’t going a little far. Surely, some would love to ban alcohol, excessive sugar and other harmful products as well, but where does this all end?
Is there a way for the UK to avoid these kind of EU bans that go straight against UK consumer wishes and disproportionately restrict UK consumers?
Not according to the letter of the exit agreement Britain has concluded with the EU. However, the UK could negotiate that the EU will not be pursuing legal action against it whenever it fails to implement new pieces of EU legislation into law during the course of 2020.
It’s true that this would not be legally clean, but what is the point of putting energy into enforcing new EU rules in the UK and then tussling over the lack of implementation when in half a year the UK is free to choose which rules to adopt?
Several models are being floated for the future EU-UK relationship. One is for the UK to remain in the single market for goods for an extended period so that an “ambitious” free-trade agreement can be negotiated, while securing an orderly exit for other sectors such as services and finance. Such an arrangement would mimic the Swiss-EU relationship, which has been working fine for 20 years but has been deemed by EU apparatchiks to be a “threat to the single market”, if it were to be granted to the UK.
Part of the Swiss-EU deal is that there is no so-called “dynamic alignment”, meaning that the Swiss are not obliged to automatically take over new EU rules in areas where they have opted to take over existing EU rules in return for market access. The EU has been pushing the Swiss to change this arrangement for a few years now, but without success so far.
The UK’s unwillingness to take over EU green finance rules signifies that the EU should forget already about forcing “dynamic alignment” on the British. Trading with other democratic jurisdictions includes accepting that these other jurisdictions may prefer to make different policy choices.
Both the EU and the UK are currently preparing more legislation designed to stop heavily state-subsidised competition from companies supported by the likes of China, so it would be fair enough to also include a ban on state aid in the EU-UK deal, to the benefit of consumers on both sides of the Channel. But the whole idea of a “level playing field” should be limited to ruling out protectionism, not threatening trade disruption unless the trading partner takes over all of one’s rules.
If the European Commission would truly care about the single market, it would stop Germany splashing out excessive amounts of Covid support to companies, which have received more than any other country in the world in terms of GDP. Guess what? It’s not doing that. Instead, it is working to promote a new 750 billion euro spending scheme that will enable other European governments, that are much more indebted than the German one, to distort fair competition as well. Also, the EU is suspending trade preferences for Cambodia, which will hit the country hard, just when tourism has come to a standstill. The EU is doing this to promote democracy and human rights, but meanwhile China is trying to fill the gap.
To put it in the EU’s own language, it’s very much “picking and choosing” when to prioritise the single market and trade.
Amid the Covid crisis, so much Brexit-related stuff needs to be sorted out this year: never mind implementing the Brexit deal in Northern Ireland, an arrangement needs to be sorted out whereby the UK gradually recovers regulatory sovereignty, all while avoiding damage for supply chains and industry. Forcing through new drastic EU rules should now not be the priority and the UK should therefore resist attempts to do that.
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