May's Brexit ambition appears far from Brexiteers' American dream

7 March 2018 3:00pm
US and UK Flags

6 March 2018. By Matthew Holehouse.

Theresa May's address last week on the UK’s post-Brexit future ran to 6,820 words, but one was noticeably absent: America.

For some members of her government, striking a trade agreement with the United States — and embracing a move toward less regulation that such an accord would drive — was Brexit’s raison d'être.

Yet, the prime minister’s pitch to remain a de facto participant in in high-value sectors of the EU's single market by sticking close to its standards, including in food and chemicals, cuts directly across the US Department of Commerce’s shopping list for a British deal.


Officially, it’s UK government policy to pursue a free-trade agreement with the US. The two sides have started to “prepare the ground” as well as seek to replicate EU-US agreements in nuclear materials, aviation and other fields.

But the US Department of Commerce officials have made it plain that it sees EU standards in food, services and manufactured goods as protectionist, with the bloc’s decision making closed to external influence, excessively opaque and resistant to scientific evidence.

In a recent address in London, US Commerce Secretary Wilbur Ross told British business leaders the administration would expect the UK to “solve” these “key hindrances” to securing a trade pact.

In particular, the US regards the EU’s adoption of regional harmonized standards in toys, medical devices and machinery, and the internal market’s network of national testing and licensing bodies, as a serious barrier to entry for US manufacturers. It also regards the data-reporting requirements under Reach, the EU’s chemicals registration regime, as “onerous” and “simply unnecessary.”

In food and agriculture, the US continuously seeks revisions to the EU’s rules on meat processing, nutritional labelling, geographical indications, hormone treatments, genetic modification and flavorings.

May’s vision

The model that May presented last week would see the UK continue to participate in the EU’s single-market systems of product licensing in sectors such as chemicals, cars, aerospace and medicines.

UK product authorizations in these sectors would continue to be recognized inside the bloc, and the UK would continue to take part in the European Medicines Agency, the European Chemicals Agency, and the European Aviation Safety Agency, May said.

The UK Parliament would therefore voluntarily adopt new EU legislation in these fields, and UK courts would continue to follow the rulings of the bloc’s top court when handling questions of EU law, the prime minister suggested.

In addition, to help mitigate the need for customs checks on the UK-Irish border, the UK intends to cleave to EU sanitary and phytosanitary standards. The EU regards this as an essential component of any agreement to avoid a hard border in Ireland.

In principle, future parliaments would be able to ditch this arrangement in favor of new markets.

But even May acknowledged that moving away from this approach could lead to disruption to integrated supply chains. This implies that a deal with the US on the terms it is seeking would — under her leadership, at least — be very unlikely.

Multiple pressures

May’s proposed model of partial participation in the single market has been met with deep skepticism in Brussels.

Attempting to peel off sectoral regimes in chemicals, cars and medicines from the wider internal market and its cross-cutting rules on state aid, company formation, labor rights and so on simply couldn’t work, it has been argued.

Even if it did, EU figures fear it would be an invitation to other states to take a pick-and-choose approach to the sectors that suited them.

“What we have been struggling with is the idea that we could somehow reproduce the single market’s benefits, either sector by sector or in some new mechanism,” said Stefaan De Rynck, an adviser to EU chief negotiator Michel Barnier in London yesterday*.

“If you say there will be two legal orders, that the UK Parliament can reject EU laws any time even after closely aligning, you automatically come to the model of a free-trade agreement.”

Even if the UK fails to secure an agreement that maintains its role in the internal market’s regime of mutual recognition, how far can it drift from the EU rulebook?

The Irish border will be one serious constraint, May acknowledged. Businesses will be another: “Businesses who export to the EU tell us that it is strongly in their interest to have a single set of regulatory standards that mean they can sell into the UK and EU markets,” she said.

Public opinion is also skeptical. Echoing the rhetoric of the opposition Labour Party, which is against a deal with the US, May said there’s “no serious political constituency in the UK” for a “race to the bottom in the standards and protections we set.”

“In practice, we are unlikely to want to reduce our standards: not least because the British public would rightly punish any government that did so at the ballot box,” she said last week.

This signposts the prospect of the UK falling between two stools: out of the EU’s internal market, and yet unable to embrace a deep and meaningful trade relationship with the US.

* ”The Brexit Negotiations: the View from Brussels,” London School of Economics, March 5, 2018

	Eliot Gao