Friday, 1 September 2017

Barnier on Mutual Recognition

The press conference speech by Michel Barnier following the third round of Article 50 negotiations  sparked plenty of confusion and debate, in particular the following comments:
".. protecting the EU legal order and protecting the integrity of the Single Market are core principles of my mandate. The UK decided to leave the European Union. The UK government decided to leave the Single Market and the Customs Union. We respect this sovereign decision. The Single Market, the EU capacity to regulate, to supervise, to enforce our laws, must not and will not be undermined by Brexit.
The UK wants to take back control, it wants to adopt its own standards and regulations. But it also wants to have these standards recognised automatically in the EU. That is what UK papers ask for. This is simply impossible. You cannot be outside the Single Market and shape its legal order."
Further to that, Barnier said some of the recent British proposals showed “a sort of nostalgia in the form of specific requests which would amount to continuing to enjoy the benefits of the single market and EU membership without actually being part of it”.

What does he mean ? Several alternative interpretations have been discussed:

1) The initial response was that Barnier was ruling out mutual recognition, despite the fact that the EU has mutual recognition agreements with numerous third countries. These agreements recognise third country Conformity Assessment Bodies (CABs) as competent to test products against EU standards  (and vice versa) and issue certificates of conformity.

Agreements on conformity assessment do not imply or require regulatory harmonisation - each party will maintain different standards and regulatory regimes. There is no recognition of each other's standards, merely a recognition of CAB's in each others territory. This means exported products undergo an assessment against relevant third country standards for export to the said third country, which is separate and different from the assessment undertaken for the domestic market.

2) It was then suggested "automatic mutual recognition of *divergent* regulations & standards" was the issue. But it's not clear the UK Government has suggested or is asking for such a thing. Certainly, there will be cases where the UK seeks mutual recognition of equivalent regulations with the EU - in line with existing EU-third country precedents.

The most obvious case is  agriculture / SPS regulations. Switzerland has an agriculture equivalence agreement with the EU which waives all border inspections for EU-Switzerland trade in agriculture. Although not in the single market, Switzerland informally harmonises its SPS regulations with the EU's. The EU also has agricultural equivalence agreements with other third countries (e.g. Chile, New Zealand) who are not fully harmonised with EU SPS regulations, but the EU has deemed the third country SPS regime sufficiently equivalent to allow much lower rates of border inspections.

In a recent paper on Data Protection, the UK Government has indicated it will seek to build on "adequacy" provisions in the EU's Data Protection law. The EU Commission can deem third country data protection standards are "essentially equivalent" to EU standards - countries such as Argentina,  Israel, New Zealand, Switzerland, Uruguay already have "adequacy" agreements with the EU.

It seems clear to me that Britain is seeking equivalence agreements based on existing EU-third country precedents. Of course, these require a continued close alignment or harmonisation of regulations - divergence will cause some or all of the agreement benefits to be lost. As far as I can see this is fully understood and I see no evidence that Britain is trying to circumvent that principle.

3) A clue to another possible explanation is in Barnier's reference to "recent UK papers / proposals". "Continuity in the availability of goods for the EU and the UK" was published by the UK Government on 21st August, effectively responding to the EU's paper  "Goods placed on the Market under Union law before the withdrawal date" published 28th June 2017.

The EU paper limits continued free movement of goods to those placed on the single market before the withdrawal date.  Market authorisations (for biocidal, plant protection and medicinal products) will need to be transferred to another competent national authority (i.e. within EU territory). Market surveillance co-operation and exchange of relevant information will cease on withdrawal date (with a case made for continued communication on goods already placed on the market).

The UK paper also proposes continued free movement of goods placed on the single market before the withdrawal date, But the paper also suggests business should not have to repeat compliance activities undertaken prior to exit. Type approvals, certificates and registrations issued prior to exit should remain valid. This is no small matter. Transferring authorisations on medicinal products to an EU-based authority is an expensive business (fees start at  approx. €280,000 per product) . Existing Car type approvals may be at risk, with a cost of £500,000 per model to re-test. The paper emphasises this proposal is set in the context of a smooth transition to a future relationship with the EU.

Here I think we see the heart of the problem. Although Article 50 calls for the withdrawal agreement to be concluded "taking account of the framework for its future relationship with the Union", statements from Barnier and the EU (on mutual recognition and availability of goods etc.) are based on application of EU law to Britain as a third country without any UK-EU agreements in place. It is as if Barnier/EU view the future relationship as no relationship at all. The EU stance to Britain is leave first, paying your exit bill, and then we may consider some trade arrangements.

However, while the EU cannot be compelled to enter into a Free Trade Agreement (FTA), it will be a lot harder to refuse requests for mutual recognition agreements.  The EU is a signatory to the WTO TBT agreement and Article 6.3 "encourages" members to enter into agreements on conformity assessment. Similarly, WTO SPS Agreement Article 4 "encourages" members to enter into agreements on agriculture and SPS measures. Also, WCO (World Customs Organisation) recommend members enter into AEO mutual recognition as part of its SAFE Framework (see page 28 of WCO SAFE Framework 2012 and section 5.5 on page 54 of WCO SAFE Framework 2007).


Claims that Britain is trying to enjoy the benefits of the Single market after it has left seem wide of the mark to me. Britain is seeking mutual recognition and equivalence agreements based on existing EU-third country precedents and is clearly seeking a smooth transition. Barnier is ignoring the EU's commitments to removing trade barriers in various international treaties and its own treaty. Moreover, such agreements will be of mutual benefit: protecting EU supply chains reliant on UK goods and protecting EU traders who export to the UK; costs for market authorisations and type approvals will apply in both directions.

Responses to Barnier's comments ranged from Hard Brexiteers saying "walk away now" to the usual Remain suspects praising  Barnier/EU and condemning Davis/Britain.  Portugal's former Europe Minister Bruno Macaes tweeted that Barniers' comments contradict the EU's position on trade:
  • For years the EU has stated that the "advantages" of the EU's single market can be enjoyed by third countries, as part of a more "Global Europe". 
  • In negotiations with the US for TTIP the goal was "frictionless" trade, which Barnier deems impossible for the UK.
  • Mutual Recognition is on the table in EU trade deals and is included in CETA, yet Barnier rules it out of future UK-EU relationship.

For myself, I think Barnier's comments are another manifestation of the impasse on exit bill versus trade talks arising from the EU's strict sequencing. Open Europe's Pieter Cleppe takes the view that the EU will have to start talking about trade soon - I hope he is right.

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