What is a ratchet clause?
A ratchet clause refers to a commitment in a trade agreement that locks in any future increase in regulatory standards. This is a means to ensure fair competition, or a level playing field, between companies on both sides. It can work in a number of ways: either, when both sides raise their standards, those set a new floor below which neither side can regress without sanctions; or, if one side moves, the other is obliged to raise its standards to a similar level. The consequence of failing to abide by the conditions of the ratchet can leave the offending party liable to penalties from the other in the shape of tariffs or other forms of reduced market access. The EU has proposed a ratchet clause at various stages in the negotiations with the UK to allow their regulatory environments to ‘evolve’.