Article Published September 2nd, 2020
When the United Kingdom (UK) finally left the European Union (EU) earlier this year, it did so on the basis of a Withdrawal Agreement, attached to which was a Political Declaration. This latter text included within it a shared goal of establishing a Free Trade Agreement (FTA). The two parties hoped an FTA could provide a framework for the continuation of trade between them without the application of quotas or tariffs. This goal, if achieved, could reduce (but not eliminate) the economic harm that Brexit is likely to bring about, both to the EU and the UK.
The Political Declaration also envisaged a Level Playing Field. It was devised to address concerns on the part of the EU that, outside the EU, the UK would pursue policy measures designed to provide it with a competitive advantage over the organisation of which it was formerly a member, through loosening regulatory requirements. The Level Playing Field was intended to ensure sustained consistency between the two parties, precluding the introduction of market distortions. It does not extend to requiring adherence to all European product standards, but simply to maintain the general principle of fair competition. The core objective is to preclude the UK from subsidising domestically produced goods for export into the European Single Market. The EU maintains that securing agreement to what it regards as a satisfactory Level Playing Field package is necessary to the avoidance of the introduction of quotas and tariffs. It is in this sense an anti-dumping measure. The EU has held that the provisions of the Level Playing Field must be made part of a binding treaty commitment and be subject to enforcement mechanisms that operate within the UK, and that these mechanisms should use EU regulations as their basis. The EU has appeared in its approach to negotiations to envisage at least some role for the European Court of Justice as a resolver of Level Playing Field related disputes.
The areas that the Level Playing Field was intended to cover are taxation policy, employment rights, competition policy, environmental measures and state aid. Of these various fields, the final item, state aid, has become the most controversial single issue. In the other areas, the EU has held that the UK only needs to maintain current EU regulations. However, as regards state aid, it wants the UK to remain in alignment with EU rules as they change in future, an idea to which the UK seems to be particularly resistant. State aid has become an increasingly complex issue lately. The decision to lessen internal EU restrictions in this area, thereby facilitating coronavirus recovery programmes, will not necessarily reduce the need for regulation, and could in fact make it a more charged subject. Further general controversy surrounds objections from the UK to the very idea that rules of this type should form part of a treaty, and that they should be subject to enforcement mechanisms. It is difficult to reconcile the Brexit platform – which emphasised the idea of the UK resuming ‘control’ of its destiny – with devices designed to ensure its continued congruence with important aspects of European regulations. Furthermore, the UK government may not have clear ideas as to what its future competition policy will be, consequently making it difficult for it to provide binding assurances in this field even if it wished to. If agreement cannot be reached over the Level Playing Field, then FTA talks might fail, and the UK could find itself outside the UK with no deal at the end of 2020. The following discussion considers the significance of the Level Playing Field to the Brexit project as a whole, and the implications of the tensions that have developed.
For a number of decades, even preceding UK participation in the European integration project, advocates of UK membership of what became the EU often dwelt on the pragmatic components of this cause. A prominent part of this case was the claim that, in practice, the UK would have little choice but to adhere to a range of European regulations, whether or not it was a Member State. To do otherwise would be to undermine the material prosperity that arose from a close trading relationship with what developed into, and remains, the largest trading bloc in the world. One way or another, a desirable level of access to the European market would come at a price of some degree of adherence to its rules. The position of Norway is often cited in such accounts. While not part of the EU it is subject to binding, enforceable commitments to maintain compliance with various European regulations.
The argument therefore ran that it is better to be inside, helping directly to shape the rules, than to be outside, but required to abide by them anyway. This argument was presented partly as a counter to claims that participation in the EU was an unacceptable abrogation of the sovereignty of the UK. It suggested that rather than achieving greater autonomy through non-membership, the UK would in fact become subordinate to the EU. This case in favour of membership failed to make for the most inspiring of rhetoric; and in some senses conceded (or at least failed directly to challenge) an important part of the Eurosceptic premise: that participation in a common regulatory system was inherently detrimental to the UK. The broad impression of such claims was that failure to take part was the worse of two undesirable options. Indeed, the utilisation of such logic was indicative of the historic weakness of the European movement in the UK, with its advocates often unwilling or feeling unable to present a more positive narrative that drew together the various political, cultural and economic benefits, instead of dwelling on the minimisation of problems.
Eventually, this pragmatic argument failed. The ‘leave’ result seems to have come about partly because enough voters were willing to accept alternative outlooks, however dubious. During the lead-up to the vote of 23 June 2016, the ‘remain’ side set out as a central plank the case outlined above. There was not a single coherent ‘leave’ programme, before or since the referendum. But a prominent claim made on this side was that the UK – because it was such an important export market for EU member states – would be in a sufficiently strong bargaining position to insist upon full market access combined with a freedom to ignore EU rules if it chose.
It is important to note that this argument formed an important and visible part of the public debate that preceded the referendum. A contrast can be drawn in this respect with complications that have arisen over Northern Ireland. These difficulties were not given remotely the same level of attention as those directly pertaining to access to the European single market and adherence to its regulations. The subsequent discovery of the possible economic and political damage that departure from the EU might inflict upon the island of Ireland is evidence of lamentable lack of forethought on the part of those (on both the ‘leave’ and ‘remain’ sides) who supported the holding of the referendum. However, the ability of the UK to follow its own regulatory path without consequences for its right to export into the Single Market was integral to the leave project as presented in 2016. Failure to achieve this goal would by extension discredit a core premise of the Brexit enterprise.
Standing in the way of this objective are the primary objectives of the EU, as expressed in the form of the Level Playing Field. Having initially agreed to it in principle in the Political Declaration, the UK has sought to distance itself from the Level Playing Field, with spokespeople challenging not only the particular implementation, but the concept itself. In his speech of 27 February, for instance, David Frost, the UK chief negotiator, referred to ‘the so-called level playing field issues’. They have pointed to other arrangements, including those between the EU and Canada; and between the United States and Mexico, as evidence that the UK need not be subject to clear, enforceable limitations set out in a treaty. Members of the UK administration have insisted that it can be trusted to pursue courses of action compatible with a satisfactory trading relationship with the EU, with no need for binding constraints.
There are logical and practical flaws in this approach. First, the analogies used are misleading. The UK is in an internationally unique position in its relationship with the EU. It is moving away from a position of full integration into a single market; while other Free Trade Agreements (such as that between the EU and Canada) point in the opposite direction, towards greater cooperation. Geography is important. The EU regards a territory with such close proximity to itself as posing a greater potential threat than it would if more physically remote. Furthermore, the extent to which the UK economy is integrated with that of the EU, especially given nearly half a century of membership of it and its precursor organisations, makes the possibility of competitive divergence more of a threat given the heightened exposure of EU markets to the UK. The UK government has since the referendum held that – because of characteristics such as those outlined in this paragraph – it is entitled to, and will be granted, a bespoke deal, unlike that provided to other EU trading partners. It was, in a sense, probably correct in this assumption. However, the particularities of the arrangement likely to be on offer must reflect the risks as well as advantages from the point of view of both the UK and the EU arising from the distinctive nature of the connection between the two parties. The UK will be able to receive special treatment, but it will not always be of the sort for which it hoped. Special privileges will bring with them special responsibilities. Recent references the UK has made to other trade deals suggest that it would now favour – at least as it perceives it – a more regular deal.
There are political as well as technical dimensions to these observations. For obvious reasons integral to its continued viability as an organisation, the EU needs to avoid the development of the perception that departure from it is a beneficial exercise. Leaving must come at cost – preferably by the UK agreeing to limitations on its regulatory freedom of manoeuvre in the form of the Level Playing Field, or – failing that – loss of access to the Single Market. Some within the UK – including the present Prime Minister during his time as Foreign Secretary – have complained that this approach amounts to punishment. But however it is described, it is a rational approach pursued by an entity that, given its economic magnitude, is in a relatively strong position to press its requirements upon the UK.
In public pronouncements, members of the UK government have become increasingly prone to asserting its rights as a sovereign state, free to make its own decisions and pursue its own interests. The extent to which this outlook is reconcilable with the reality of international relations and the co-dependency they inevitably entail is debatable. But in choosing to embark on a more individualistic, competitive approach to foreign policy, the UK can expect other players – including the EU – to behave similarly in its interactions with it. Indeed, UK conduct may be prompting the very hard bargaining it objects to. Arguments deploying the concepts of fairness or democratic self-determination might find a receptive domestic audience, but they are less likely to impress the EU. When the UK was a member of the EU, it obtained various opt outs and concessions, partly designed to strengthen the case for continued UK membership. Whether this approach ever served the interests of the EU or the European cause within the UK is doubtful. Ultimately it failed even to avert Brexit, let alone to create a more hospitable environment to the EU within the UK. That the EU will attach special significance to the sensitivities of sections of the UK public and the needs of UK politicians in managing them post-Brexit is harder to conceive. The EU is and will continue to be flexible with regard to the way in which it meets its core concerns. But enabling the Johnson government to meet the political objectives of the Brexit programme is not part of its agenda.
Furthermore, the UK proposition that it can be trusted to refrain from policies to which the EU will object, without need for an enforceable treaty commitment, is problematic. The behaviour of the Johnson government to date has failed to dispel the reputation for unreliability that he acquired among European governments (and more generally) during his career up to this point. For instance, he appeared for a time to deny the obligations with regard to Northern Ireland that were contained within the 2019 revised Exit Agreement that he had agreed to. The Political Declaration attached to this document contained a more explicit statement of the Level Playing Field principle than was included in the previous text of the previous year. That the Johnson government has consented to and subsequently appeared to disassociate itself from this commitment has probably helped confirm on the EU side the view that there is a need to subject the UK to firm, clear and formal requirements as contained in the Level Playing Field. The volatile political style of the present UK government has probably added to continental distrust.
In the period since the 2016 referendum, successive UK governments have been forced to recognise that full market access without firm commitments on competition might not be attainable. This realisation encouraged the development of the UK position that, if it could not achieve such an outcome, then it would sever itself from the EU with no deal at all. This idea sometimes appears more a negotiating tool intended to force concessions on the part of the EU than a genuine objective. An arguable problem with this approach is that, given the relative sizes of the EU and UK economies, ‘no deal’ is likely to be more damaging to the UK than the EU, and is therefore not necessarily a convincing threat to the latter. Others espousing ‘no deal’ as an option depict it more as a desirable goal, that would achieve the abrupt exit they regard as necessary, achieving a clean break and enabling the UK to refocus on trade links elsewhere. The latter view of ‘no deal’ has stronger support among Conservative backbenchers than government ministers. Within the latter group, there is probably a significant degree of concern about the economic and political damage that such an occurrence is likely to mean for the UK, compounding current unprecedented degrees of global insecurity. But members of the former group are likely to resist any agreement with the EU that, in their view, makes a travesty of the Brexit project. In such circumstances they are likely to receive significant levels of support for their cause from Conservative Party activists and some sections of the media (perhaps accompanied by a revival in the perceived threat of the Brexit Party). Concessions sufficient to satisfy the Level Playing Field requirements of the EU are likely to meet such a definition of betrayal.
The Boris Johnson administration came to and has retained power principally on a basis that it could make a success of Brexit on the terms of those who supported ‘leave’. But such a goal might not be attainable, or even logically coherent. If they cannot deliver an agreement with the EU that provides maximum access with minimum responsibility, Johnson and his inner circle could face a difficult choice. One option would be a compromise with the EU likely to prove immediately politically problematic, and undermine the key platform on which Johnson took office. Another would be to favour ‘no deal’ over an imperfect deal. This course of action would amount to an act of denial, avoiding short term political discomfort but in the process aggravating the medium term difficulties, and causing material damage to interests within the UK. Eventually, the UK would probably need to come to some kind of terms with the EU. It is doubtful that the experience of a ‘no deal’ would lead to a stronger relative bargaining position for the UK. The Level Playing Field – or a similar manifestation of the underlying requirements it represents – would then be likely to resurface. Agreement to such a package, whether it took place sooner or later, would make the ultimate failure of the Brexit project increasingly difficult to conceal.