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19 Oct 2023


UK-EU Relations

Joël Reland highlights that divergence from the EU has all but stopped due to its disruptive economic impact, meaning that there is now a general consensus between the Conservatives and Labour on non-divergence. Find out more in the latest edition of the UK-EU Divergence Tracker.

Last month, footage emerged of Keir Starmer telling a conference in Canada that “we don’t want to diverge” from EU rules and regulations. This was reported as a major scoop, demonstrating a more ‘dove-ish’ Labour approach towards Europe.

While his tone may have been unusually frank, what Starmer said was hardly revelatory. He leads a party that actively wants closer alignment with the EU in a range of areas. By definition, that is a rejection of divergence.

What’s more, Starmer’s words in effect describe the position of the current government. Though the Conservatives retain a rhetorical commitment to the pursuit of ‘Brexit opportunities’ and deregulation, in practice the divergence agenda has all but ceased.

In what is a recurring trend since Rishi Sunak took power, our latest Divergence Tracker finds very few cases of active divergence by the UK in recent months. On top of that, in another repeated theme, the most significant upcoming cases of divergence have been delayed or abandoned entirely.

New border controls on EU imports have been delayed – for the fifth time – until January 2024, while the requirement that manufactured goods bear a ‘UKCA’ mark, rather than an EU ‘CE’ mark, from 2025 has been scrapped.

In both cases government is explicit that the decisions were taken in close consultation with business. The new import controls risked augmenting inflation and causing goods shortages in the run-up to Christmas, while no longer accepting the CE mark risked major gaps in sectoral supply chains.

Therein lies the reason why divergence has all but stopped: its disruptive economic impact. Invariably, businesses prefer being able to operate to the same standards in the UK and EU, as it simplifies their operations. Divergence, with separate rules or systems for each jurisdiction, almost always entails additional operational costs.

In the immediate afterglow of the Brexit deal it was possible for Boris Johnson to talk up these frictions as temporary turbulence worth riding out in order to realise the full opportunities of Brexit. But, in the current economic climate, controlling inflation and boosting growth are the priorities – and divergence serves as a drag anchor upon both.

Non-divergence is thus the new consensus in British politics, even if Rishi Sunak dare not say it as candidly as Keir Starmer.

The new dividing line, however, lies in how not to diverge. It is one thing to stop actively deviating from the EU’s regulatory course, but it is another thing altogether to try and follow in its footsteps.

The Conservatives’ position falls into the former camp. Active divergence which disrupts business is being (largely) avoided, but little effort is being made to minimise ‘passive’ divergence where the EU makes regulatory changes which the UK does not replicate, even though this has the same effect of creating new administrative barriers to trade.

To an extent, the government seems to have faith in the invisible hand of the (single) market to address the problem. In many cases, British business will voluntarily align with new EU regulations, even if they are not enshrined in UK law, because they want access to the EU single market. New EU standards on vehicle emissions, and restrictions on chemicals and food additives are all good examples.

But there are cases where business alone cannot plug the gap. For instance, the EU is introducing new rules to ensure imported goods are not linked to deforestation, requiring enhanced evidence from importers. British businesses must comply with the rules to continue importing to the EU, but, because they are not subject to the regulation, they have no means of compelling their suppliers to meet the necessary requirements, leaving them ‘uniquely exposed’.

Similarly, the EU has just introduced its carbon border adjustment mechanism, which requires exporters of certain goods to the EU to declare their embedded carbon emissions – adding significant new administrative costs. From 2026 they will also have to pay the equivalent of the EU’s carbon tariff, and the obvious way that British exporters can avoid these costs is by the UK actively linking its emissions trading scheme to the EU’s.

There are plenty more areas where closer alignment in order to smooth trade friction could be sought under the auspices of the TCA – many of which Labour has already proposed.

The challenge for Labour is that, in advancing these arguments, it will have to reopen the pesky question of sovereignty. If Brexit was an exercise in taking back control, Labour will need to convince the public that sovereignty is not an absolute concept – it is possible to sacrifice some limited control for the good of the economy, while remaining meaningfully outside the EU’s regulatory orbit.

This is tricky territory, especially when many Leave voters believe the full potential of Brexit has not yet been fully realised. Rishi Sunak’s conference speech made clear that the Conservatives will paint Labour’s agenda in black and white: as wholesale EU alignment and an abandonment of the “opportunities of Brexit”.

The good news for Labour is that very few people are likely to cast their vote at the next election based on Brexit. And the fact that non-divergence is now the status quo makes it easier to implement some limited alignment with EU regulations, without it looking like a radical change of direction.

By  Joël Reland, Research Associate, UK in a Changing Europe.


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