Comment

The risks of Labour’s EU strategy

Joël Reland / Jul 2024

Rachel Reeves. Photo: Shutterstock

 

Rachel Reeves recently told the Financial Times that Labour’s manifesto commitments on the EU are not ‘exclusive’. At first sight this suggests Labour in government may be willing to go further on EU trade than Labour in campaign mode. Yet, reading between the lines, there are reasons to be sceptical about this.

Labour’s manifesto contains only three specific proposals for improving the UK’s trade with the EU – new agreements on veterinary standards and professional qualifications, and improved travel terms for UK touring artists. This is a thin agenda, which stands in contrast to David Lammy last year promising to go through the UK-EU trade deal ‘page-by-page’ seeking a much broader sweep of changes.

Reeves, however, noted that the manifesto contained only ‘examples’ of Labour’s ambitions. What else, then, could the party have in mind?

The one additional example Reeves gave was a ‘bespoke’ agreement on chemicals. What is striking about this is that Reeves eschewed many more ambitious proposals which Lammy outlined last year – ETS linkage, mutual recognition of conformity assessments – in favour of something very narrow and technical.

Though few details were provided, Reeves’ proposal could mean simplifying the design of UK’s post-Brexit regime for chemicals regulation. The bureaucratic cost to businesses of registering substances under the current model is estimated at £2bn.

Alternatively, it could mean establishing systems to more swiftly replicate EU regulatory decisions on chemicals, so as to avoid divergence which can create new trade frictions. The gap in restrictions has been growing since Brexit.

Either way, this suggests that the extra ideas Labour has up its sleeve will focus on unilateral measures rather than negotiated agreements. It’s easy to understand the appeal: there is no need for tricky and time-consuming negotiations with the EU, and, technically speaking, unilateral measures involve no sacrifice of ‘sovereignty’.

Options would include technical fixes to the UK’s own systems – for instance improving the processes for checking EU goods arriving at the border – and systems to replicate EU regulations, be it on chemicals, food or medicines.

Yet the challenges to this approach are twofold. For one, the economic gains on offer are marginal. The most significant costs created by Brexit come from being outside the single market and customs union – for instance the new checks on goods moving into the EU, and upcoming export tariffs under the EU CBAM.

You cannot unilaterally align your way out of these. UK exports will not be granted simplified access to the EU market simply because the UK shows that it matches EU rules in relevant areas. It will have to sign binding agreements with the EU which formally lock in regulatory alignment in those areas, probably involve EU oversight, and may involve some payments. The only such agreement which Labour has countenanced so far is on veterinary standards.

The second challenge with unilateral alignment is that it is very hard to implement in practice. Life would be easier for businesses if UK rules on packaging, for example, were updated to match the EU’s sweeping new reforms – companies wouldn’t need separate production lines for different markets with different rules.

But, in order to replicate the legislation, you would first need to horizon-scan and conduct impact assessments to work out which rules are worth copying. Then you would need to produce the necessary legislation, get it through Parliament and bed in any necessary associated systems. And even then, there is likely to be a time gap before the UK catches up, and there are risks of small differences in regulation which create complications anyway.

Ultimately, it is a lot harder to replicate EU rules from the outside than to adopt them by default as a member state, and there is a serious question about whether this strategy would be a good use of government time.

There is also a another, less tangible risk that comes with such an approach. Voluntary alignment has more than a hint of ‘cakeism’ about it. It effectively says to the EU that the UK wants the benefits of closer trade, but only in areas of UK interest, and with as few new obligations as possible.

It wants to follow EU rules on chemicals, but without having to rejoin the EU’s chemicals regime. It wants improved mobility provisions for qualified professionals and touring artists, but has ruled out a deal on youth mobility, which the EU wants.

Such cakeism marred the Brexit negotiations. EU figures felt that UK interlocutors were unrealistic in their demands and ignorant of EU interests, and this dissonance in perspectives polluted the wider atmosphere. Labour looks like it could quickly fall into some of the same traps.

Reeves was clear that Labour wants to ‘reset’ Britain’s international image. But Britain’s image is not just built on public engagements. Arguably more important is demonstrating, behind the scenes, that it is a reliable and constructive partner which balances its own interests against those of others.

If Labour adopts a UK-first approach to EU relations, it will struggle to win many new friends.

Joël Reland

Joël Reland

July 2024

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