Brexit position paper: Continuity in goods, part 2

David Davis with slogan, EU regulations are great

Position papers are coming thick and fast from the Brexit government and today sees two new ones. Here we will review the paper on Continuity of availability of goods. The proposals themselves are pretty mundane and surprisingly sensible, a welcome progression from last week’s trip into Northern Irish Narnia. Brexit nonsense is in there but mostly as an introduction and we’ve covered that in a separate article.  Added surprise comes from the unrestrained praise of EU regulations that sets the scene for the UK’s proposals. Following on from some of the admissions in last week’s papers it’s almost as if the Brexit ministry is finally waking up to the enormous benefits of the EU. Almost.

Shared regulations

“Citizens across the EU also benefit from this close relationship and the integrated regulatory systems, which enable the supply of safe products across the EU and the UK, as well as reduced costs, increased variety, flexibility for supply chains, benefits for patients, and higher quality and innovative products”

This statement by the UK government flies in the face of Brexit dogma by acknowledging that harmonised regulations are excellent for consumer protection, business growth, innovation and patient safety.

In the paper, the basic proposal is that the UK will copy and paste all the helpful, beneficial EU regulations into UK law and will probably just continue to monitor and duplicate those regulations for the foreseeable future.

Brexiteers might to be unhappy at this because it risks duplicating bureaucracy as well as accepting the EU’s directives after giving up a say on them. However, the UK also includes proposals that would allow some drift in regulation while still allowing UK businesses to trade in the Single Market. The EU is likely to have a problem with that side of things.

The 4 principles or proposals

A) Goods on sale today, shouldn’t be taken off the shelves on 1st April 2019
The UKGOV has a fairly sensible suggestion – anything that’s been given the stamp of approval for sale while the UK is still in the EU, should still be allowed to be sold after the UK leaves. This is the kite-mark equivalent of a transition period. Things that take a while to sell, like Sofas or cars perhaps, could stay in forecourts and showrooms for the year or so after Brexit until they are finally sold.

There needs to be some negotiation and agreement on the technical aspects of this- what constitutes a good that is ‘already on the market’ for example?

It seems like the EU would likely to agree to the basic premise of this but there may be arguments over how long such transition agreements last and for businesses that sell products that have quick turnover or regular upgrades to their processing pipeline, they may find they have a much shorter transitions period than others.

The real concern for the UK is stated clearly by the author, “Over 70 per cent of the UK’s annual agri-food imports come from the EU”. This is an enormous percentage of products that are vital for households (and businesses) up and down the country. If they suddenly need to go through a new regulatory step, the UK will be in crisis. Of course, as part of negotiations, this strengthens the EU’s hand.

B) Businesses shouldn’t have to redo compliance after Brexit
Naturally accompanying part (A), the UK government proposes that businesses, as well as goods, should keep their approval for selling goods after Brexit.

An example would be that some EU-based care retailer may have pre-ordered the new model of cars from a UK-based manufacturer who in turn has already submitted air quality readings for the model. Rather than have the manufacturer duplicate these tests before they can complete the sale post-Brexit, they could keep their EU stamp of approval for some time after the UK leaves.

This still makes sense but perhaps faces more of a debate than the previous proposal for goods. How long will businesses be considered to have joint approval? Will it be a set time limit or will it be until the two sets of regulations have drifted significantly apart?

The UK seems to be suggesting that this transition period would be for ‘the lifetime of the product’ which could be several years for cars or maybe as low as six months for some electronic components that are quickly superseded.

The UK is particularly concerned about the movement of staff and skills to the EU and wants special consideration given to compliance officers in UK companies who might normally have to be based in the EU to fit with EU regulations. The UK is already losing several regulatory bodies as part of Brexit (the EU’s pharmaceutical regulator and the banking industry regulator) and several companies have started setting up bases in EU27 states and are preparing to move jobs there.

It doesn’t really benefit the EU to accede to the UK’s request regarding the location of compliance officers so, again, it may become part of a temporary transition arrangement.

C) Continued oversight of goods
When the UK pharmaceutical industry sells new drugs to the EU27, it’s important it receives feedback on any adverse side-effects and similarly, when the UK buys German cars, we ought to report any faults we find in any particular model. This proposal by UKGOV simply says we should agree to keep doing this.

This should really be acceptable to everyone. The only area of discord might be that it requires data sharing agreements which could include sensitive information such as patients’ medical details. The EU is quite keen on harmonised data sharing regulations, the Brexiteers traditionally aren’t.

As we said at the top of this article however, it sounds like the UK government has finally recognised that harmonised regulations are great… for the transition period at least.

D) Services supplied with goods.
The UK is a service provider more than a manufacturer. It is no real wonder then that the position paper on goods makes a special mention of the service sector.

In this context, they want services that are supplied alongside goods, to be given the same transitionary agreements as the goods themselves.

An example might be that a company buys some computers (goods) alongside a tech support contract (service), but perhaps more important for the UK’s heavy reliance on the financial services sector, it could include someone buying some financial software and receiving brokerage services alongside it.

The UK points out that staff providing services often have to pass exams set by some regulatory body and it wants these qualifications to remain recognised (and the staff to remain qualified) by both sides after Brexit.

Again, this seems fairly sensible up to a point. For basic service contracts (supporting IT goods for example), it makes sense to have a transition period for those that have bought into a contract before the Brexit date. But with the rising importance of FinTech the EU may see this as a backdoor to passporting rights for some of the UK’s financial service sector – and that’s a really sticky subject in the negotiations.

Summary
This position paper is actually a lot more sensible in substance than the previous ones. After you get past the wilfully deceiving fallacy about the UK being more important to the EU than the reverse, the UK government is essentially praising the benefits of the EU’s harmonised regulations and simply asking for a varied and long-term transition deal.

It is surprising to hear this love of EU regulations and directives so clearly stated seeing as how the majority of lead Brexiteers have long waxed lyrical about the ‘red tape choking Britain’. From Priti Patel  to Jacob Rees Mogg, UK government spokespersons have talked about slashing regulations the moment we’re ‘free’ – including Daniel Hannan’s misty-eyed vision of the UK becoming the ‘Hong Kong of Europe‘ – presumably with Hong Kong’s world beating Gini coefficient too.

The desire to have a long-term, all encompassing transition deal seems to reflect that the reality that the EU is very important to UK prosperity. The spectre of difficulty may be seen in the UK’s wish to have divergent regulations in the future but for UK-based companies and staff to still be allowed to sell wares into the EU’s harmonised market.

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