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An extensive new IEA report released yesterday sets out an alternative roadmap to the Brexit White Paper that will deliver regulatory autonomy and unleash the competitive potential of the UK economy.

To harness the opportunities Brexit has to offer – including setting up free trade agreements with countries outside the EU – the UK must have regulatory autonomy such that it is able to be a credible trading partner and can improve its own domestic system.

EU regulations have become more damaging to consumer welfare and economic growth, and the direction of travel is deeply concerning. Harmonisation of regulation through alignment, as suggested in the Government’s White Paper through a ‘common rulebook’, would box the UK into a corner. It would force Britain to become a rule-taker without any representation during the process of rulemaking.  Other countries would only be able to secure concessions in trade agreements with the UK by dealing with Brussels.

The vital first step away from this path is to secure regulatory autonomy, allowing the UK to determine its own regulation for both goods and services. This report finds that if the Trans Pacific Partnership countries, plus the UK and US, undertake regulatory reform to reduce distortions by 30 per cent over the next 15 years, GDP for the region could be increased by 7.25 per cent.

To deliver such a boon to the UK economy, the regulatory agreement with the EU must deliver the following five principles: 

1. Autonomy for the UK to make its own regulations (for both goods and services).
2. Autonomy for the UK to set its own standards (for both goods and services), which can include using global standards.
3. Autonomy for a UK system of conformity assessment (able to assess conformity to UK and EU standards and regulations).
4. Unilateral recognition by the UK of EU regulations, standards, and its conformity assessment system
5. Seek recognition by the EU of the UK’s regulations, standards and its conformity assessment system

Examples of harmful EU regulation:

Vacuum cleaner labelling

• Energy tests for vacuum cleaners were required by the EU Commission to be performed in such a way to give an advantage to German manufacturers over Dyson’s more efficient bagless designs

• EU law does not permit Dyson to display supplementary information about its own tests alongside the officially required (flawed) EU energy tests

This example demonstrates how the EU regulatory system for goods can be skewed in favour of Continental interests against British manufacturers, and more importantly, in favour of existing technologies against innovators.

GDPR

• Implementation of General Data Protection Regulation (GDPR) has driven numerous privacy policy updates and shifts in the way many businesses operate

• But some changes being made are not simply to comply with the new regulations, but are anti-competitive steps to increase incumbents’ advantage

Example: Restricting Google’s DoubleClick campaign management and suspending third-party ad serving on YouTube have been followed by Google offering substitute features only measurable in Google Analytics 360.

• This would essentially mean that consumers will still be tracked, but all measurements will be controlled by Google.

Benefits of autonomy and pro-competitive regulation:

• Will allow the UK to forge advanced, free trade agreements with countries outside of the EU – without this the benefits of Brexit cannot be realised.

• Will allow the UK to import with fewer restrictive barriers, nurturing competition and the creation of the UK’s own domestic, pro-competitive regulation.

• Prevents entrenched market incumbents from using the regulatory system to block out competition or damage challenger businesses – as seen in the Dyson and GDPR examples.

• Will reduce costs for businesses in some areas.

• Autonomy will allow for liberalisation of regulation in areas where the EU has previously blocked trade – such as GDPR and the limits it imposes on data transfer.

Commenting on the report, Shanker Singham,  Director of the IEA’s International Trade and Competition Unit, said:

“Pro-competitive regulation is essential for the UK economy, and the vital first step is regulatory autonomy. Unfortunately, the Chequers deal as it is would prevent the UK creating its own regulation and signing advanced trade deals. It would badly hinder economic growth.

“In order for the UK to be able to seize the benefits of Brexit, which are in the execution of its independent trade policy and improving its own regulatory system, it is crucial it have regulatory autonomy so that it can be a credible trading partner.  This paper illustrates how that can be achieved and describes the offers the UK should make to the EU.”

Notes to editors:

For media enquiries please contact Nerissa Chesterfield, Communications Officer: nchesterfield@iea.org.uk or 0207 799 8920 or 07791 390 268

To download a copy of ‘Freedom to Flourish: UK regulatory autonomy, recognition, and a productive economy’, please click here.

The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems and seeks to provide analysis in order to improve the public understanding of economics.

The IEA is a registered educational charity and independent of all political parties.