Leaving under the Withdrawal Agreement / Political Declaration leaves the Services Industry with a problem: The new relationship resulting from the PD will be based off the template of the WA, and that does not include Services. So any new Services relationship will be starting from scratch, which will reduce access compared to the status-quo, increase uncertainty, and result in investment/jobs being redirected to other regulatory environments to maximise the efficiency of those organisation. Bummer.
But I don’t believe this justifies immediately junking the WA/PD in favour of Norway+:
I accept the premise above, in that leaving a largely blank page on Services bilaterals we will end up hurting Services exports to the EU, no least because there is no way to achieve the services passport as a third country.
However, I do note the absolute silence from EEA advocates on Services regulation. In particular, the absurdity of being the EU Services titan and yet with no regulatory control over those very Services in which we are dominant.
Good make up just 15% of the economy, and only 50% of our exports unlike almost every other EU country. This because the UK does nearly 50% of its exports in Services, which is a huge proportion relatively, and of course services in one form or another make up the vast majority of the total economy.
So when we talk about the common rule book for goods I don’t care very much:
> i’m not gonna die in a ditch over common aubergine standards
> much goods regulation is actually international (like UNECE), and merely packaged locally by the likes of the EU
> as mentioned earlier it is only 15% of the domestic economy
But when people talk about making the EU our Services regulator I come out in hives:
> the major EU nations are not friends of the Anglo-Saxon economic model of light touch regulation/taxation
> it is frankly bloody inappropriate for the EU to regulate london when london [IS] Europe’s financial/legal markets
> london is a strategic weapon, so don’t give the keys away
This is a difficult one, as there seems little way to square the circle on this one:
> by leaving we’ll lose market access
> by leaving we’re threatened with the possibility of not self-regulating a strategic industry
> by leaving we’re threatened with the EU’s standard equivalence model, which is a EU guillotine
But, one can’t ignore that the ECJ is an activist court, more than happy to contort EU social/environmental/employment flanking policies where necessary to define new areas of regulatory competence as falling under the aegis of Single Market regs.
I can’t blame HMG for feeling that they had no alternative but for the UK but to negotiate from zero on Services.
Yes, in principle; if brexit withers away the UK financial/legal/tech services industry to the point where it is no longer dominant in the EU, then the worry over whether it is appropriate for the EU to regulate those industries becomes a moot point.
However, I do seriously question whether the level of relocations will ever reach a torrent whereby this is a serious possibility.
London remains one of the world’s only two ‘full service’ hubs for financial/legal/tech industries.
Even where there is damage the consequence in relative terms will not be to significantly strengthen EU hubs vis-a-vis britain.
It will go to America and Asia.
So, yes, it will in ‘principle’ be destructive, but probably has no impact on the question over the appropriateness of letting the EU be the UK’s regulator for Services.
Now, you might say this is all very well, but the danger involved in a no-deal is substantial to the point where we should probably not take the risk.
Fine. But I do not support no-deal, and I do not believe no-deal will be the outcome.
I support the WA/PD, imperfect as it is, and I have an enormous amount of confidence in 350 years of constitutional and political evolution to provide a compromise, and thus avoid rupture.
And under a WA/PD, where we will have to build up a Services relationship ad-hoc that allows (imperfect) access while maintaining regulatory sovereignty, there is not a snow-ball’s chance in hell of UK Services dominance being so throughly eroded vis-a-vis the EU that we shrug and say:
“well, it wasn’t worth dieing in a ditch over EEA, because now we have NO substantial financial/legal/tech services industry anymore!”
Ain’t gonna happen, ever.
And why am I so confident that we will build up an ad-hoc Services relationship in a WA/PD scenario?
Because, we are two years away from the next global down-turn, and:
> circa 3/4 of EU FDI arrives via London.
> circa 3/4 of EU derivatives market is managed via London.
> the eurozone still has 9% unemployment – at the peak of the economic cycle!
> the eurozone still has negative interest rates
> the eurozone still has 3/4 of a trillion euros in non-performing loans
In short – it’s a train crash and with the eurozones anaemic growth at the peak of the cycle – the EU needs access to London.
The message should be:
“if you want economic growth then you’d better come up with a Services FTA that allows [YOU] decent access of global FDI, legal services, and de-risking financial products like derivatives. oh, and it better be managed by a bilateral system of arbitration for determining continued equivalence. if you don’t want it, fine, london will shrink and adapt to the new reality, but you’ll suffer for it in just a couple of years time…”
As a final point on my confidence that a robust services agreement will be delivered on top of the bones of the WA/PD; I hold to the view that a tory government isn’t emotionally invested in restricting immigration. They will merrily trade away ‘preferential access’ for EU workers in return for deep Service access, and why would they not?