The UK is pulling the short straw in the EU reset, which risks exposing us to retaliation from existing trade partners, writes David Collins
The planned EU “Reset” poses a serious threat to the UK’s sovereignty and must be abandoned before it jeopardises some of the country’s hard-won Brexit freedoms.
Dynamic alignment with the EU law on agrifoods and emissions trading runs the risk of violating several of the UK’s key trade agreements, including the 12-nation Comprehensive Progressive Trans-Pacific Partnership (CPTPP) which went into full force for the UK at the beginning of this month.
Unlike EU law which is grounded in the risk-averse Precautionary Principle (over-regulate to avoid even the most unlikely dangers), the CPTPP requires that agrifood regulations must be based on sound scientific evidence and genuine risks. This difference would almost certainly have a negative impact on a future UK-US trade agreement since the US favours the CPTPP approach. US Trade Rep Jameson Greer said as much last week.
Dynamic alignment on agrifoods is designed to reduce or remove border checks on agrifood products by creating a common regulatory area between the entirety of the UK and the EU. Under this arrangement when EU rules change, as they are wont to do, the UK must update its own laws correspondingly even though it has no say in their creation. It subjects the UK to the jurisdiction of a foreign court (the European Court of Justice) whereas other trade agreements are typically enforceable by neutral international tribunals.
EU exceptionalism
This mirroring of another country’s trade policy is unheard of in international trade law – no other trade partner in the world requires it except the EU. Even the US’s purportedly unacceptable demands on Canada, which prompted Canada to walk away from negotiations earlier this month, didn’t contemplate this degree of vassalage.
The decidedly one-sided US agreements on reciprocal trade, concluded over the last year with a number of smaller economies, compel alignment with the US on anti-dumping and national security trade policies. But even these agreements contain some room to accommodate signatories’ sovereign interests and the US’s trade partners remain free to establish their own product standards. Not so when it comes to the UK-EU Reset where the EU calls all the shots.
The EU Reset further obliges the UK to follow the EU’s unwieldy carbon emissions trading scheme. This means that the UK must adopt the EU’s new carbon-border adjustment mechanism (CBAM) through which tariffs are imposed on imported goods in a manner that supposedly reflects the carbon intensity of their production. In addition to raising prices for its consumers, the UK’s treaty partners might claim that the CBAM amounts to discrimination based on origin if the EU’s tariff calculation methodology does not adequately recognise equivalent climate policies in exporting countries.
It is doubtful that the EU’s CBAM would survive challenge under the UK’s trade treaties with third countries or World Trade Organization rules because the EU’s CBAM calculations, while plausibly designed to address climate change, could easily be viewed as arbitrary protectionism.
The EU Reset consequently risks exposing the UK to retaliation from its existing trade partners and could frustrate future bilateral trade negotiations with new ones. It represents a bizarre prioritisation of the UK’s trade relations with the low-growth EU over those with other faster-growing economies in Asia and elsewhere. The Reset is also an affront to international law, a source of authority which ironically appears to hold much sway over the current government, even in situations when it more readily conflicts with national interests.
David Collins is professor of international economic law at City University