David Davis writes for the Financial Times about the importance of being able to diverge from the EU’s rules after Brexit
As published in the Financial Times:
Britain must be able to control all regulations after Brexit
Last week, the government’s Brexit white paper told the country it could look forward to a “common rule book” with the EU. We now face continued harmonisation with the bloc’s rules on goods. Unfortunately, this jeopardises the opportunities offered by Brexit.
Under this plan agreed by the cabinet at Chequers, the prime minister’s country residence, Britain would have to obey EU regulations, follow EU rules on how all goods are made, and on a huge range of interconnected areas such as environment and food production.
The chance to become a credible trading partner will be compromised and we will be unable to strike free trade deals. As Donald Trump aptly pointed out, it would “kill” the prospect of a US-UK deal. Without control over goods, we would lack the crucial leverage to open up the UK’s export of services to the rest of the world.
Not controlling our own regulation is far from an arcane technicality. It would mean that the UK is simply not running its own economy. How laws are made is also a central indicator of whether we have a functioning democracy. If parliament determines laws, we have one; otherwise, we do not.
If British democracy is now at stake, so too is our future prosperity. Much of the regulation that emerges from Brussels favours incumbent firms — keeping smaller, innovative entrants out of the marketplace. That is why the EU fails to create rivals to the great innovative companies such as Microsoft and Facebook that were born in the US.
Tying ourselves to EU regulations in goods without any say would mean that any new innovative UK company using artificial intelligence or biotechnology to develop life-changing products could find itself facing regulation that makes it uncompetitive to the rest of the world.
If the government follows its present course, it will stifle innovation and stymie economic growth. It would be profoundly dangerous to leave the EU but remain subject to regulations made by institutions in which we have no say, as a forthcoming paper from the Institute of Economic Affairs argues. Brexit can be an opportunity to become a much more competitive economy — not a halfway house that will stifle wealth generation.
Being more dynamic requires being able to craft regulations to release the anti-competitive burdens strangling UK firms. It also means that we must be a credible trading partner for the US and the Trans-Pacific Partnership countries, such as Australia and Japan. We will not be credible if we cannot make changes to the regulations affecting swaths of the economy.
Of course, where a sector prefers EU regulations, it can and should use them. Having the freedom to diverge does not mean we will — and the UK should remain open to goods made to EU standards. Yet while we might choose EU rules and standards when they suit us, it goes against our economic and democratic interests that we would have to harmonise to single market rules.
Precisely because we have been a member of the single market, regulations will be identical on Brexit day. That creates an opportunity for the UK and EU to recognise each other’s rules, allowing low friction trade with a mechanism to manage differences. No one denies that there will be costs, including in customs clearance and regulatory divergence.
But these will be massively outweighed by both the domestic economic opportunity and Britain’s capacity to be a serious trade partner.
This freedom to run our own economy is vital. As the second-biggest exporter of services in the world and fifth-biggest importer of goods, the UK has a unique opportunity to connect with the world’s most dynamic markets in North America and Asia. Regulatory autonomy and pro-competitive regulation is crucial to that mission. Success in Brexit means significant economic gains for all. But it also means a change in attitude; a revival of entrepreneurial spirit, and optimism triumphing over fear.