As the Brexit vote recently had its 7th anniversary, it may be worth looking at how the UK has fared. It turns out that the British have mostly suffered disruption as a result of Brexit, without taking advantage of the benefits.
The disruption is pretty evident, and clearly the reason why the number of British that would vote to join the EU again is enjoying up to a 20% lead now. Whether this is politically realistic, and whether the EU will be willing to grant the UK all of its opt-outs again, is a different question. In any case, it has become much harder to trade between the EU and the UK, and that is of course a bad thing.
But it was always known that this would be the result, and even Brexiters accepted this outcome, as many of them considered Brexit a second-best option compared to persuading the EU to take British concerns seriously.
Brexiters always claimed that any downsides of Brexit would be compensated by the greater upsides. Apart from gaining back some cash from the EU budget and obtaining more control over immigration policy, the upsides that were cited pertained to the fact that the EU market is shrinking as compared to the increasing trade opportunities that exist elsewhere. Moreover, Brexiters argued that UK would no longer be subject to increasingly burdensome EU regulations, which the European Commission itself had admitted were a problem when it embarked upon its “better regulation” agenda back in 2014.
As a means of exploiting the newly won Brexit freedoms, Prime Minister Rishi Sunak promised last year to embark upon a “bonfire” of EU laws, a project that was recently abandoned. The main reason not to go through with this, apart from an ideological cross-partisan wariness of deregulation, was the simple fact that many British businesses were not keen on it, having made all the investments necessary to comply with regulation. In addition, from the standpoint of businesses, burdensome regulatory requirements also come in handy to keep foreign competition out. It was always evident that any UK regulatory divergence would come instead from the UK ceasing to copy updates of EU regulation, thereby sacrificing part of their market access to the EU. A very similar trade-off needs to be made by the Swiss now, who are debating how to continue their rocky relationship with the EU, as bilateral sectoral deals about market access in return for regulatory alignment are lapsing one by one.
Modest UK regulatory divergence
Still, the UK has already started to diverge in modest ways from the EU regulatory rulebook, for example, in the UK’s decision to join the “Comprehensive and Progressive Agreement for Trans Pacific Partnership” (CPTPP)—an agreement that encompasses about half a billion consumers or 15% of world GDP.
Since the UK already has good trade deals with nine of the eleven CPTPP countries, the key attraction of the partnerships, apart from its symbolic value, lies in trade with one of the remaining two, namely Malaysia, which is a prime exporter of palm oil. Palm oil producers are currently facing heavy new EU regulation. If the UK would have copied the EU here, it would not have been accepted into the CPTPP.
In contrast to the EU, which is about to impose a lot of extra bureaucracy on palm oil importers with its new deforestation regulation, the UK simply accepts the regulation of its trading partners when it comes to palm oil. The British government has also pledged to recognise the Malaysian Sustainable Palm Oil (MSPO) certification. As opposed to the extra bureaucracy the EU wants to impose, small palm oil farmers are able to comply with this.
On top of that, the UK also promised to cut its tariff on importing palm oil from 12% to 0% immediately. All of this was decried by ‘green’ activists, but that’s shortsighted. As even the World Wildlife Fund has pointed out, palm plantations have impressively heavy yields, producing more oil per land area than any other equivalent vegetable oil crop. Alternatives like soya bean, coconut, or sunflower oil require between four and ten times as much land, contributing to environmental degradation elsewhere. It should not surprise us then that the EU’s approach, supposedly to fight deforestation, is rumoured to be inspired by protectionism on request of the European seed oils lobby.
British and EU trade success compared
It speaks well for the UK that it does not follow the EU’s very restrictive approach, which caused Indonesia and Malaysia to freeze trade talks with the EU at the end of May. Meanwhile, the EU is also struggling to make progress on opening up trade, as it continues to fail to agree a trade deal with Australia, due to its refusal to grant more market access to Australian agricultural products. In contrast, the UK already managed to sign a free trade agreement with Australia at the end of 2021. Perhaps these modest successes will inspire the UK to focus more on the opportunities offered by Brexit. Meanwhile, in the EU, some signs of introspection can already be witnessed. German Chancellor Scholz recently urged for rapid completion of trade deals that would not become mere ‘colonialism,’ following complaints by African countries in particular that the EU was engaging in “neo-colonialism and regulatory imperialism” by linking greater openness to trade with demands on workers’ rights, food safety, and climate policy. Some of Europe’s African trade partners even threatened to look to China instead. Scholz argued that “if we continue to negotiate new free trade agreements for years without success, others will dictate the rules in the future—with lower environmental and social standards.” Nothing much need be added to that.
Post-Brexit UK Struggles to Strike the Right Balance on Trade Regulation
As the Brexit vote recently had its 7th anniversary, it may be worth looking at how the UK has fared. It turns out that the British have mostly suffered disruption as a result of Brexit, without taking advantage of the benefits.
The disruption is pretty evident, and clearly the reason why the number of British that would vote to join the EU again is enjoying up to a 20% lead now. Whether this is politically realistic, and whether the EU will be willing to grant the UK all of its opt-outs again, is a different question. In any case, it has become much harder to trade between the EU and the UK, and that is of course a bad thing.
But it was always known that this would be the result, and even Brexiters accepted this outcome, as many of them considered Brexit a second-best option compared to persuading the EU to take British concerns seriously.
Brexiters always claimed that any downsides of Brexit would be compensated by the greater upsides. Apart from gaining back some cash from the EU budget and obtaining more control over immigration policy, the upsides that were cited pertained to the fact that the EU market is shrinking as compared to the increasing trade opportunities that exist elsewhere. Moreover, Brexiters argued that UK would no longer be subject to increasingly burdensome EU regulations, which the European Commission itself had admitted were a problem when it embarked upon its “better regulation” agenda back in 2014.
As a means of exploiting the newly won Brexit freedoms, Prime Minister Rishi Sunak promised last year to embark upon a “bonfire” of EU laws, a project that was recently abandoned. The main reason not to go through with this, apart from an ideological cross-partisan wariness of deregulation, was the simple fact that many British businesses were not keen on it, having made all the investments necessary to comply with regulation. In addition, from the standpoint of businesses, burdensome regulatory requirements also come in handy to keep foreign competition out. It was always evident that any UK regulatory divergence would come instead from the UK ceasing to copy updates of EU regulation, thereby sacrificing part of their market access to the EU. A very similar trade-off needs to be made by the Swiss now, who are debating how to continue their rocky relationship with the EU, as bilateral sectoral deals about market access in return for regulatory alignment are lapsing one by one.
Modest UK regulatory divergence
Still, the UK has already started to diverge in modest ways from the EU regulatory rulebook, for example, in the UK’s decision to join the “Comprehensive and Progressive Agreement for Trans Pacific Partnership” (CPTPP)—an agreement that encompasses about half a billion consumers or 15% of world GDP.
Since the UK already has good trade deals with nine of the eleven CPTPP countries, the key attraction of the partnerships, apart from its symbolic value, lies in trade with one of the remaining two, namely Malaysia, which is a prime exporter of palm oil. Palm oil producers are currently facing heavy new EU regulation. If the UK would have copied the EU here, it would not have been accepted into the CPTPP.
In contrast to the EU, which is about to impose a lot of extra bureaucracy on palm oil importers with its new deforestation regulation, the UK simply accepts the regulation of its trading partners when it comes to palm oil. The British government has also pledged to recognise the Malaysian Sustainable Palm Oil (MSPO) certification. As opposed to the extra bureaucracy the EU wants to impose, small palm oil farmers are able to comply with this.
On top of that, the UK also promised to cut its tariff on importing palm oil from 12% to 0% immediately. All of this was decried by ‘green’ activists, but that’s shortsighted. As even the World Wildlife Fund has pointed out, palm plantations have impressively heavy yields, producing more oil per land area than any other equivalent vegetable oil crop. Alternatives like soya bean, coconut, or sunflower oil require between four and ten times as much land, contributing to environmental degradation elsewhere. It should not surprise us then that the EU’s approach, supposedly to fight deforestation, is rumoured to be inspired by protectionism on request of the European seed oils lobby.
British and EU trade success compared
It speaks well for the UK that it does not follow the EU’s very restrictive approach, which caused Indonesia and Malaysia to freeze trade talks with the EU at the end of May. Meanwhile, the EU is also struggling to make progress on opening up trade, as it continues to fail to agree a trade deal with Australia, due to its refusal to grant more market access to Australian agricultural products. In contrast, the UK already managed to sign a free trade agreement with Australia at the end of 2021. Perhaps these modest successes will inspire the UK to focus more on the opportunities offered by Brexit. Meanwhile, in the EU, some signs of introspection can already be witnessed. German Chancellor Scholz recently urged for rapid completion of trade deals that would not become mere ‘colonialism,’ following complaints by African countries in particular that the EU was engaging in “neo-colonialism and regulatory imperialism” by linking greater openness to trade with demands on workers’ rights, food safety, and climate policy. Some of Europe’s African trade partners even threatened to look to China instead. Scholz argued that “if we continue to negotiate new free trade agreements for years without success, others will dictate the rules in the future—with lower environmental and social standards.” Nothing much need be added to that.
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