The European Commission proposals analysed

Almost two months ago, the European Union’s negotiators published their proposals as a draft treaty. It was at once rejected by the British negotiators – as well it might, as it was in flagrant breach of the terms agreed in the Political Declaration.

It has been observed that the standard European negotiating strategy is to haggle as in an eastern market: if you want a cow, you demand the herd and negotiate down from there. They must have for many years been puzzled that the British approach hitherto has been to hand the herd over without demur. Now that is not happening, which must be an even greater puzzlement to them.

Notwithstanding that the proposals are effectively dead in the water, they merit a look to see how the European Commission have approached the matter.

The Europeans’ proposals extend over 440 pages: 316 plus appendices, and the following summary is necessarily brief and on the main themes. The actial text is:

Initial observations

The major issues which have been raised are on continued one-way imposition of European Union rules and jurisdiction, unnecessary bureaucracy, and a proposal to bind Britain permanently to “non-regression” of regulation and to “the precautionary principle”. The principal examples of this are set out below.

The concept of “non-regression” has a fundamental intellectual flaw in it. The word “regression” is predicated on an idea that there is a subjective concept of progress. This is untrue. Regulations and changes of practice are value-neutral. The idea that one tendency alone is “progress” and reversing it is “regression” is a word-game to prevent dissentient opinion on the subject. In truth, it does not hold water.

The precautionary principle is explained at one point in the draft as follows:

Where scientific evidence is insufficient, inconclusive or uncertain and there are indications through preliminary objective scientific evaluation that there are reasonable grounds for concern that the potentially dangerous effects on the environment, human, animal or plant health may be inconsistent with the chosen level of protection, a Party may adopt measures to prevent such damage, in accordance with the precautionary principle.

In short, “ban everything, unless proven otherwise by unanimous consent”. It is no wonder that innovation really thrives only outside the European theatre. rejected the world over as unscientific and fatal to innovation, out of which all benefits to mankind arise.

The draft terms

Part 1: Common Provisions

The initial general provisions match what would be implied in any case, concerning duties of good faith an so forth.

To this though are added, in Title II, irrelevant and unnecessary obligations, for example to the climate change agenda. The provision requiring adherence to the European Convention on Human Rights is in the Political Declaration, but briefly (“the United Kingdom’s continued commitment to respect the framework of the European Convention on Human Rights”), but not in such detail as the proposals would impose: it emphasises the complete abolition of the death penalty and a new obligation to promote it worldwide and in dealings with other states (which could make trade deals with China and indeed most of the world somewhat sticky). That emphasis may be just to rile certain parts of the Conservative Party – restoring hanging domestically is very unlikely, but what it has to do with a trade treaty is incomprehensible. One might say the same for provisions on nuclear proliferation – though that is mentioned briefly in the Political Declaration and it is not controversial, just irrelevant. the control of small arms is at least a trade matter. So is data protection, detailed later in the draft.

The sting in the tail of all this is at the end of Title II, that the elements on human rights, climate change and counter-proliferation “constitute essential elements of the partnership established by this Agreement”. They may therefore be used as a lever to pull the plug on any “inconvenient” section of the final agreement later.

Title III, on principles of interpretation, has caused more objection than it deserves: that concepts defined in European Union law should be interpreted in accordance with what the European Court of Justice has said is understandable. The problem with this would arise if the Court, having shed the common-sense provided by its British judges, were to start adopting wayward interpretations that might be applied retrospectively to the trade agreement reached.

Part 2: Economy and trade

The declared aim is aim “providing a predictable regulatory environment and efficient procedures for economic operators, especially small and medium-sized enterprises” – one rather hopes it will be predictable and efficient for all enterprises.

“Each Party shall establish or maintain appropriate, proportionate mechanisms for responding to questions from any person regarding any laws or regulations relating to any matter covered by Part Two [Economy and Trade].” Does “go and ask a solicitor” suffice as an answer? That is all they will get.

As to providing impartial, efficient procedures judicial review of decisions on trade matters, that is taken as read in a British context – it would come as a shock to the French, Spanish or Italian judiciaries, but presumably it is just the European Court which is relevant on the European side. Over all, this Title II of Part 2 is nothing exceptional, and is to the point, even if much is unnecessary.

Title III is the problem: “Level Playing Field and Sustainability”. These sections render the whole proposal impossible. The concepts are presaged in a declaration requiring that the whole deal is to ensure that it:

prevents distortions of trade and unfair competitive advantages and contributes to sustainable development.

One of the major factors which drove the United Kingdom out of the European Union was that the latter imposes ridiculous, choking regulation, which stifles innovation, nurtures monopolies and puts British business at a competitive disadvantage against the world. The Europeans’ proposal is that British business cannot be advantaged by getting free of these burdens. This is detailed later on in the in proposal.

Britain will deregulate and remove many of the regulatory strangleholds. There is a way for European businesses to avoid being competitively disadvantaged by this, and that is for the European Union to remove those burdens too. A playing field can be levelled by talking the soil down, not just by pouring more dirt on.

In Title II Article 1 were have subtle, contradictory wording. Section 3 says that “Nothing in this Title shall affect the right of a Party to define or regulate its own levels of protection in pursuit or furtherance of its public policy objectives in areas ..”, but is preceded in Section 1 with “fundamental principles, including the precautionary principle, underlying its regulatory system”, which cuts the ground out from any idea that the parties are at all autonomous. The precautionary principle is one of the most damaging ideas of the 1970s-style regulatory system underlying the European Union. It cannot be included in a trade treaty without fundamentally upsetting the liberal idea behind Brexit.

Title III: Level playing field and sustainability

Title III has the detail of this illiberal regulation. It would enshrine as a fundamental of regulation the “precautionary principle”, which is summarised (and set out above). That precautionary principle is ridiculous and damaging.

Chapter 2 of this Part deals with state aid. This is an important field for trade and as such it is included in the Political Declaration. The specific clauses in the European proposal are oddly bureaucratic and appear to provide too much leeway, allowing a mechanism for state aid which distorts competition without retaliation. Provisions on state aid (or “corporate welfare” as the Americans like to call it) can be robust and appear in many international trade treaties. A standard international provision should be adopted, which is then enforceable in either direction across the Channel – not a provision which licences the European Union to ignore it. The French government is notorious for corporate welfare interventions and Britain must have an effective remedy if this is nodded through in Brussels.

Later provisions which come under “demanding the herd” include one in Article 2.6 of this part requiring that the British Courts refer matters for the decision of the European Court. That should not even be considered. There are non-contentious points, such as allowing the European Commission to be a party to judicial reviews of British administrative action: the same must apply in reverse though. Nevertheless, a decision by a European court that a new EU regulation is legal in terms of European Law should not mean that it cannot therefore be a breach of the trade deal – that would be to allow the EU to ignore all their obligations.

In Article 2.9 following, the European Union is to be empowered to take “interim measures” is they think the British side is not keeping to the bargain. There is no such provision allowing the British authorities to take measures against the EU for their breaches.

There follow provisions on competition and regulation of monopolies, which are relevant to trade. They are written from the perspective of Britain bowing to European ways though and stick in exceptions about state-owned enterprises, which should not be.

The subsequent provisions seek to apply rules against tax avoidance (which is hilarious in the context of the practices of Luxembourg for one, and as Daniel Hannan has said, when politicians talk of tax hamonisation, when do they ever mean harmonising down?) They then go on to declare a general non-regression principle, to the effect that Britain may not deregulate at all. This is vassalage squared. It is also a flat contradiction of the provisions of the Political Declaration so minutely negotiated and agreed.

There is a great amount of detail in Title III on the ways Britain’s hands are to be bound – all of it repugnant to the nation’s independence and proposed future direction, all contrary to the Political Declaration. There is little point looking at each of them.

These provisions alone render the whole European Union proposal as worthy only of the bin. If the proposal is predicated on this non-regression, as it is, then the proposal is worthless.

Title IV: Trade in goods

At last emerging at Title IV to this part we get to actual trade points. This is more like it. The British side has drafted better, so I understand, but at least it begins to follow principles.

Title V: Fisheries

A key area. Do not expect easy resolution.

[Commentary to be added here.]

Title VI: Services and investment

[Commentary to be added here.]

Part 3: Security partnership

Part 4: Participation in Union Programmes etc

Part 5: Institutional and horizonal provisions

Part 6: Final provisions

Annexes

[To be completed]

See also