Tug of war over internal market

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The issue of who gets what powers post-Brexit is generating some friction

  • Plans for a British internal market, post-Brexit, are causing a lot of constitutional friction, and there’s not much time to resolve disputes about the way it’s being set up.
  • Much is being made of the ‘power grab’ or ‘power surge’ of which powers go where after leaving Europe’s single market, but the way the market works could be as important.
  • Any internal market requires a way of resolving disputes. The plans lack any, which suggests it’ll be for Westminster to decide.

Boris Johnson made his name as a journalist in Brussels attacking, ridiculing, exaggerating and fabricating stories about the European Commission’s efforts to create a single market.

With more than a hint of karma, he’s now in a rush to construct one in Britain, giving one month of consultation ahead of legislation. The Europeans have been piecing theirs together for more than 30 years.

Why the rush? The need for replacements for Europe’s internal market rules was clear as soon as the Brexit result came in, more than four years ago.

Business needs clarity if it is to operate across boundaries within the UK, and it would like minimum divergence. This applies to people as well, and their ability to take their qualifications with them to get jobs in other parts of the UK.

Perhaps a single UK market was being taken for granted. Whitehall’s white paper waxes lyrical about it built up over centuries, painting word pictures of Welsh hill farmers walking their sheep to English markets. Yet 47 years inside Europe have set ever more complex and multi-layered rules, and outside Europe, the absence of those rules leaves a large hole.

So with an end to transition in less than six months, it’s time to catch up. Quickly.

Different viewpoints

One element that has changed a lot since joining Europe in 1973 is the divergence of devolved powers across the UK. Whitehall would need only light touch rules if everything in the kingdom were united, happy, glorious and harmonious.

But it’s not. And this issue exposes the asymmetry of dominant England, without its own government, and smaller partners which have those government powers, and a different political dynamic. Scotland is the most unsettled partner, but there are clearly tensions elsewhere.

Northern Ireland is a special case. With trade into the republic and Europe guaranteed, it’s also supposed to be in the UK single market. How does that work? The white paper doesn’t say. That’s a puzzle that defeated Theresa May, and it’s yet to be solved.

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Food standards has proved a hot topic in the Brexit debate

The other driving factor is the push to get trade deals outside Europe. HM Government is in talks with the USA and Japan, as well as the EU. And I’m told they’re asking: if we do a deal with you, can we be sure to get access to all the UK market?

The obvious problem area is in food standards, which is not unusual in trade talks, but in this case, specifically the demand from American trade negotiators for Britain to adopt American standards, including growth hormones in beef, the famously chlorine-washed chicken and so on.

If Downing Street were to agree such a trade deal, what if Holyrood says “no, we won’t allow those goods into the Scottish market”.

The SNP says this single market plan is to prepare for capitulation to American demands. It likes the way Europe set rules, and for the most part, it liked the rules on food standards and the environment, even though that meant constraints and obligations on Holyrood.

It doesn’t like that primary role shifting to Westminster, either because of the rules it suspects are on the way, or for the way the rules will be made.

The UK government expressly rules out allowing these controversial farming methods, and its white paper details ways in which Britain has higher standards than it needed to have within the EU (something that journalist Boris Johnson apparently failed to notice).

(By the way, one part of this playing field that’s not level is that America does not have a fully integrated single market. A British firm wanting to sell beer or insurance into the USA will find 50 different markets for each.)

Much has been made of a long list of Brussels powers being distributed to devolved administrations. It’s either a “power surge”, says Whitehall, or a “power grab”, according to St Andrews House. Apart from that, two contentious factors stand out in the white paper.

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Quality if an important factor in the marketing of Scottish goods

Mutual recognition: meaning, for instance, that Scotland can set its own standards for food, but it will have to accept that food produced to other (perhaps lower) standards in other parts of the UK can be sold in Scotland. That could lead to a lowering of food standards.

The upside is that it guarantees that Scottish produced food can be sold throughout the UK, as it can throughout the European Union until the end of the year.

The other is state aid. Brussels has set and policed rules on how much a government can support a firm or an industry, before it becomes a subsidy that undermines fair competition. Scotland and Wales want to set their own rules for that. This week’s white paper says it’ll be reserved to Westminster.

And that’s where the white paper has its most glaring omission: how to resolve disputes. In any market, that has to be clear.

In Europe, it’s the European Court of Justice. In America, litigation is a sort of national sport – part of the pursuit of happiness. In trade agreements, there has to be a way of resolving disputes.

But in this white paper, there’s discussion of some monitoring committee, which looks like it would be accountable to Westminster. The only clarity is that there won’t be a way of resolving disputes that overrides Parliament, the way the ECJ has done. And without a court or arbitration panel, we can assume that disputes will be resolved on Westminster’s terms.

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