Theresa May has managed to move the trade talks with the EU onto phase two. Whatever I have ever said to her discredit, I have to hand her that victory. It may have saved her premiership – although, as I’ve said many times before, I have my doubts about whether Tory MPs really would have brought her down had the talks failed to progress this month. Anyhow, such speculation is now academic.
The question turns to what “regulatory alignment” means – and whether it will require the UK to remain inside the Customs Union in order to fulfil the terms of the agreement reached this morning. Some argue that yes, the UK will have to end up inside the CU because it is impossible to leave the CU and still be able to provide “regulatory alignment”. Others say that nothing is stopping the UK from maintaining alignment with the Customs Union regulations while not actually being inside of the Customs Union, so what’s the big deal. Truth is, it all depends on how hard the EU pushes on the matter come the final UK-EU trade deal. Also, it in fact matters very little whether the UK is technically in the CU or not in any real sense and I’ll now explain why.
The real reason that the Brexiteers insisted we leave the Customs Union was two-fold: one, being inside would allow no divergence of regulation from what the rest of the Customs Union took up, meaning we’d be forced to take on regulation we had no say in; two, being inside the CU would exclude the UK from being able to strike third party trade deals. Being in the Customs Union means you simply have to take the trade deals as made by the EU, with no ability to arrange your own. This was anathema to the Tory Brexiteer notion of setting out on the high seas of trade, Britain once again a free agent.
However, the deal that has been reached this morning scuppers both of those things, regardless of whether we stay in the CU in name or not. In terms of diverging from CU regulation – the wording of the agreement is that we explicitly won’t do this. Call it “alignment”, call it anything you want, the fact is we’ve agreed not to diverge from CU regulation. This means accepting regulation from the EU over which the UK has no say. Whether you are technically inside the CU or not, if you’ve agreed to do this, you’ve agreed to do this.
Secondly, even if we were outside of the CU and technically speaking allowed to strike third party deals, there is no way we could do any of them comprehensively while not diverging from the CU regulations. Take a US free trade deal. Remember all that stuff about chlorinated chicken? Well, under the current arrangement to keep alignment with CU regulations, that deal would be unreachable. Why? Because allowing US goods into the UK that diverged from EU standards would mean that we had goods inside the UK that diverged, which would mean they could easily get across the border from Northern Ireland into the Customs Union – meaning we no longer have “regulatory alignment”. That’s just one example – I can’t think of a trade deal with any major country that wouldn’t rub up against a problem similar to this. Even if were possible – say, the EU had no problem accepting any product from New Zealand into the UK for fear it would find its way into the EU – in order to maintain regulatory alignment, you would have to check with the EU on every single trade deal the UK tried to sign. They will have to okay every one of them in order for regulatory alignment to be maintained. In effect, the EU Commission will have a veto on every trade deal the UK might wish to sign up to post-Brexit.
One wonders how long the hardcore Brexiteers will stand by this deal. So far, many have manned the pumps, defending it vociferously. I suppose they figure they have time to bring it crashing down if needs be.