Monday, 6 November 2017

Brexit Briefing - Technical Regulations

As part of a continuing series of posts examining the Single Market and Norway/Flexcit option (as expressed in a "Brexit Briefing" blog post by Pete North). this post will examine the claims made for EEA technical regulations and their relation to global standards.

EEA Technical Regulations versus Global standards

A central argument for the Norway/Flexcit option is the claim that EU/EEA regulations are increasingly based on global standards and since an independent UK would base domestic regulations on the same global standards, there is no point in leaving the Single Market. While this means the UK remains a "rule-taker" with respect to the EU, it is also claimed that the UK can use its new freedom in international organisations to shape global standards and so influence the EU/EEA regulations it is still subject to. A seductive argument, but is it true ?

EEA technical regulations make up 1,972 of the 5,591 regulations in the EEA acquis, i.e. approximately 35% (as of 6th November 2017). The EU's 2016 standards bodies report provides a measure of how aligned EEA regulations are with global standards: 58% of CENELEC standards cited in EEA technical regulations are identical to IEC standards; 24% of CEN standards cited in EEA technical regulations are identical to ISO.

The US Trade Department Report for 2016 provides insight to the EU's attitude to international technical standards. While in theory the EU allows producers to use international (non-EU) standards to demonstrate product safety, in practice it is prohibitively difficult and expensive. US exporters feel compelled to use harmonised European (EN) standards "...even if the U.S. products are produced according to relevant international standards providing similar or even higher safety levels."

The same report also illustrates that even the US has little influence over harmonised European (EN) standards  "..when a U.S. producer uses an EN it is likely using a standard that has been developed through a process in which it had no meaningful opportunity to participate. This is particularly the case for SMEs and other companies that do not have a European presence."

This reality is is in stark contrast to the claims of "global regulations" used to support the Norway/Flexcit option. EEA technical regulations are EU-centric rather than global and are not open to outside influence or directed by global bodies (if anything, the EU looks to upload its standards to ISO rather than the reverse). The EU erects barriers against use of recognised non-EU international standards. WTO TBT Agreement Article 2.4 (encouraging use of international standards) does not appear to be the redundancy notice for the EU's Single Market that Norway/Flexcit advocates suggest.

Continued UK participation in European standards organisations

BSI (British Standards Institute) aims to retain membership of CEN and CENELEC post-Brexit, even after leaving the Single Market (EFTA states including non-EEA Switzerland, EU accession states and recently Turkey are also members with voting rights). membership would provide the UK with a continuing voice and vote on European (EN) standards, but requires EN standards are adopted as national standards and any conflicting standards are withdrawn.

Similarly, UKAS (UK Accreditation Service) are aiming for continued membership of EA (European Accreditation) in addition to membership of global accreditation bodies ILAC and IAF. This would maintain recognition of UKAS as the UK National Accreditation Body and recognition of certificates issued by UKAS and and UKAS accredited organisations (i.e. UK Notified Bodies) throughout the EU.

However, both CEN/CENELEC membership criteria and EA membership criteria requires EU/EFTA membership, or candidate for EFTA/EU membership with established target date for accession. The UK has rejected EFTA membership and the Single Market, so continued UK membership of CEN/CENELEC and EA must be open to question.

Future UK-EU trade relationship

EEA membership or even just membership of CEN/CENELEC requires continued harmonisation with EU standards, without divergence.  However, being locked into EN standards prevents the UK from using or recognising alternative international standards - which in turn raises technical barriers with non-EU countries, notably the US. Nor are EN standards superior to other standards. For example, Andrew Chapman's blog post on Technical Barriers to Trade looked closely at anti-slip footwear regulation (EN ISO 13287:2012) and found evidence that the test is not a reliable indicator of the safety of footwear, so much so that the British Health and Safety Laboratory uses an alternative human-based ramp test.

Some argue that because the EU is our largest market (outside the domestic UK market), we must inevitably remain yoked to the EU's technical standards and regulations. But why not allow or recognise other international standards provided they meet the essential safety objectives ? Businesses focussed on the EU market will continue to use EN standards and demand the same from their supply chain, but other businesses may develop with a different focus. In some instances or sectors, the UK domestic market and/or overseas markets may exceed the value and demand of the EU market. It seems to me we should let the market decide which standards to use. While some commentators worry about  a lack of "regulatory coherence" countries such as South Korea (who have FTA's with both the EU and the USA) seem to be managing quite nicely.

Conformity Assessment is the main anxiety of Norway/Flexcit advocates. But as I explored in an EU Question blog post, this is easily navigable by using EN standards and an EU-based "importer". Some sectors have "pre-approval" requirements (e.g. pharmaceuticals, chemicals etc), but the solution is similar, with registrations to be held by a recognised EU based representative.  For the small number of manufactured products that required third party assessment, UK notified bodies can be used provided they have a subsidiary or sub-contract relationship with an EU-based body. Consignment checking is based on risk analysis and it is unlikely that products/manufacturers/importers with a good track record of compliance will suddenly face a higher inspection rate - even without a UK-EU agreement.

A Mutual Recognition Agreement on Conformity Assessment will allow UK-based Notified Bodies to continue to be recognised in the EU (and vice versa), without needing a sub-contract or subsidiary relationship (note that WTO TBT Agreement Article 6.3 encourages members to enter into MRA's on conformity assessment).  A regulatory co-operation agreement covering market surveillance would continue existing co-operation and assist targeting of consignment checking by customs authorities. Such agreements are common to FTAs and are found in CETA (Canada's FTA with the EU).

A Canada style FTA with the EU would seem to offer the best solution for technical regulations. Regulatory freedom from EU-centric technical regulations combined with agreements that minimise trade friction.

8 comments:

  1. Paul this is another very good briefing.

    On the topic of using an EU importer and getting a CE mark I have heard suggestions of late that these processes will be expensive/onerous for smaller firms. What is your take on this?

    On EFTA membership - I personally have no problem with us applying for this, with the obvious rider that it is not a lead up to EEA. Would the recently proposed associate EFTA status also do the trick in terms of maintaining membership of the standards bodies?

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  2. EU "importer" need not be expensive, obligations are limited. There will already be operators inside EU who offer this service to businesses from 3rd countries who export to EU. There is an opportunity for someone (Govt / trade body / private sector) to set up an office in EU and offer service to SME's who want to export to EU.

    Where costs may be higher is for sectors requiring registrations to be held in EU, e.g. REACH requires Chemical products to be registered with an "only representative". Transferring existing UK based registrations (~6,000) to EU-based only representative will cost €1600 per registration, but it is a one-off cost and EU chemical companies will face same issue for exporting to UK, assuming we replicate REACH in UK legislation.

    I wondered about EFTA associate membership and standards bodies (and lots of other European agreements, e.g. EASA, Common Transit Convention etc). I suspect it's a grey area and will depend on how the EU chooses to interpret matters. If it did do the trick, EFTA associate membership would be very useful for access to European institutions and as as a framework for EFTA-UK trade.

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  3. An interesting article - any chance of links to the facts and other articles you state?

    As someone 'from the North'- to coin a a phrase - is there not an argument for the setting up of UNECE as the 'standard-setting' body for Europe; would such a body not have more clout on the international stage, thus possibly negating the chance that other 'standards' are needed?

    That last question does not mean that innovation would be stifled because it is through innovation that standards are 'honed' and thus improved, is it not?

    Just a request/comment/question..............

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  4. There are hyperlinks in the article to source references for figures etc. For example click on the text "EU's 2016 standards bodies report" in the post and you will be directed to the report.

    I'm aware of the arguments from the North camp for UNECE but I see absolutely no evidence that it is happening (I've covered before how UNECE WP.29 represent EU colonising UNECE, not the reverse, and will cover again soon in another post). It is also clearly not in the EU's DNA to sacrifice legislative power. The acquis is how it extends the empire.

    RE Innovation, the EU's regulations are very much anti-innovation and based on the precautionary principle - probably a central reason why the EU lags the rest of the world in innovation. Allowing varied regulatory approaches to achieving the essential regulatory objectives promotes innovation. This is in fact another bone of contention the US has with the EU's regulatory system (and it is undoubtedly true that the US leads the EU by a country mile in innovation).

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    1. Thanks your response. Could not any links be 'highlighted as it is time consuming to follow text with the cursor when reading an article - just a suggestion.

      Re UNECE: You will not see any change and obviously realise why there has been no change, but is that a reason to dismiss the idea, something you appear to be doing? Again, just asking.

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  5. I used to highlight links until another former member of team flexcit suggested it made the page look busy. Perhaps I should take a vote ?

    UNECE: I don't understand your comment "You will not see any change and obviously realise why there has been no change". Everything I see suggests power is flowing the other way. I cannot see why anyone would reasonably believe UNECE is ever going to take over the EU's Single Market. Regarding the topic of this post, is UNECE going to subsume or replace CENELEC? Of course not.

    It seems folly and fantasy to me to base a Brexit strategy on accepting EU regulations, because of a blind optimism that at some stage UNECE will take over from EU legislation. There is simply no evidence to suggest it is happening or will ever happen - in fact the opposite seems likely.

    UK will of course retain its place in UNECE post-Brexit. Whatever capacity UNECE provides to influence or shape regulations will be available to UK - regardless of whether we take the EEA option.

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  6. Sometimes differences in technical regulations make it impossible for a product to meet both at once - I believe this is true of EU and US car headlights for example. And UK and continental EU push bikes - their right brake goes to the rear wheel.

    But more often I think, you can design a product to meet more than one set of technical regulations at once. Maybe it will involve the same test or tests but to different criteria; or maybe there will be different tests. But either way, a manufacturer can normally get all its certification for a product done by a single testing and certification company (eg http://www.intertek.com/hvac/safety/electrical-testing/).

    Somebody who made medical devices in Oxford told me they designed to American standards, which were higher than European - and then they would automatically meet European standards too (would still need European certification of course).

    Andrew

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  7. My impression is that CEN and CENELEC will bend over backwards to keep BSI in because we do so much of the work, chairing a great many of the technical committees etc. I was also told that from a very practical point of view, we are much needed for drafting in good English. Andrew

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