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10 Sep 2020

Relationship with the EU

Union

On 9 September 2020, the government published its UK Internal Market Bill which is intended to provide the post-Brexit regulatory framework that will ensure free movement of goods and services across the four nations of the UK after the end of the transition period on 31 December.

In its July White Paper, the UK government expressed concern that without this legislation there would be a real risk of new barriers to trade between the different nations of the UK.

To address this risk of market fragmentation clause 2 of the Bill proposes to enshrine in law a new Mutual Access Commitment. Seeking to maintain regulatory integrity across the UK’s nations, in order to allow goods to move freely, this aspect of Bill’s proposals have already proved controversial.

During the consultation period on the White Paper both the Welsh and Scottish governments raised objections of the potential impact that these proposals may have on the exercise of their legislative powers under the devolution settlements.

The Bill includes two key regulatory principles that will underpin the UK Internal Market – mutual recognition and non-discrimination. Adopting these principles suggests a copy of the EU’s approach to its internal market where these principles are essential for market access between the member states.

For non-harmonised goods, for example foodstuffs, the EU adopts a system of mutual recognition in that if goods meet the required standards of one member state then they are deemed to be fit for sale across the EU.

Clause 2 of the Bill broadly adopts this regulatory principle for the UK by proposing that any goods which meet the rules and standards required in one of the UK’s nations should be able to be sold in any of the four nations.

Within the EU’s internal market mutual recognition is underpinned by a principle of non-discrimination, and here Clause 3 again broadly follows the understanding and application of this principle within EU law.

In the EU’s internal market non-discrimination ensures that member states should not discriminate against goods or services based on their geographic origin or place of residence.

Clauses 5 – 8 propose that the principle of non-discrimination apply to goods and covers both direct and indirect discrimination meaning that, for example, origin cannot be used as justification for restricting access to goods.

Similar provisions on non-discrimination would apply to the provision of services within the UK (Clauses 18 and 19) and the mutual recognition of qualifications (Clause 26).

Both mutual recognition and non-discrimination need to be essential principles of the UK’s post-Brexit regulatory framework to ensure regulatory integrity and uniform market access across the UK’s nations.

But, unlike in EU law where these principles are considered as ‘EU regulatory principles’ there is a risk that within the operation of the UK internal market it will be English rules that dominate.

The English economy is substantially bigger by comparison with the Scottish, Welsh and Northern Irish economies, which is likely to prove significant in the UK internal market because what England may decide in regulatory terms could have a significant effect on the regulatory choices of the other nations.

Perhaps the most politically controversial part of the Bill concerns the potential effect on the operation of the Northern Ireland Protocol within the UK-EU Withdrawal Agreement.

A crucial part of the Internal Market Bill, and therefore the Withdrawal Agreement, the Northern Ireland Protocol aims to avoid the introduction of a hard border on the island of Ireland in the event of a no-deal Brexit.

The Protocol states that Northern Ireland will remain part of the UK’s customs territory, so if the UK signs a free trade deal with another country, Northern Irish goods would be included.

However, under the Protocol, Northern Ireland continues to also apply some EU rules to allow goods to move freely into the Republic, but the government has argued that this could have an impact on the UK concluding future trade deals and the Bill seeks to address this.

To this extent, Clauses 41-43, on unfettered access between Great Britain and Northern Ireland, requires appropriate authorities not to exercise their functions in a way that would result in new checks, control or administrative processes on the movement of qualifying Northern Ireland goods from Northern Ireland to Great Britain.

As the government set out in its Command Paper on 20 May 2020, the UK has for some time considered the disapplication of the requirement for export declarations for goods moving from Northern Ireland to Great Britain, by reaching an agreement in the UK-EU Joint Committee which oversees the operation of the Withdrawal Agreement.

The measures in this Bill go further and would provide a power to disapply or modify the requirement for export declarations or other exit procedures, retaining the ability to act as necessary if a negotiated outcome with the EU in the Joint Committee should not prove possible.

The government argues that this is a safety net and necessary for it to conclude new trade deals but has been criticised for breaking international law by seeking to disapply the provisions of a Treaty.

The Bill will be politically controversial and has been described as an ‘assault on devolution’ by the Scottish and Welsh governments, and both are likely to withhold legislative consent under the Sewel Convention.

Furthermore, the parliamentary timetable is tight and the opportunity for effective scrutiny within the Chamber and select committees will be limited.

In terms of Northern Ireland, the Bill would appear to place the UK on collision course with the EU on the operation of the Northern Ireland Protocol.

Clauses 41-43, if enacted, may lead to physical trade barriers between Northern Ireland and the Republic of Ireland, and in doing so the UK may break its commitments under international law.

However, as a first step to taking back control and exercising legislative competence, the Bill sends out a message from the UK government that with the end of the transition period Brexit really does mean Brexit.

By Professor Adam Cygan is Professor of EU law at the University of Leicester and former research By leader at the UK in a Changing Europe.

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