Be warned, the problem is the common rule book

Be warned, the problem is the common rule book

by Eben Wilson
article from Monday 15, October, 2018

A LEGAL BEAVER friend of mine, married to a medieval historian and a fan of modern industrial history himself after a career spell in Glasgow, once surprised me by expressing a deep-felt sentiment about a milestone of the European Union. 

It was at the moment of signing of the 3000 pages of the 2007 Lisbon Treaty.  “This” he said, “marks the end of the British legal heritage; from here on we have to adopt the continental approach to law. I feel very sad about that”. 

Understanding the tortuous nature of today’s Brexit negotiations requires us to recognise this insight.   The UK is enmeshed in a battle to resolve that hoary old Oxbridge interview question as to whether it is better to be rational or to be reasonable.  

Our legal traditions stretch back to medieval kings who “depended on maintaining a delicate approach which paid close attention to local sensibilities” according to Michael Wood, the Anglo-Saxon historian, also quoting King Edgar in 963 AD who, struggling with Danes, Anglo-Saxons, Welsh Britons and Cornish interests, said: 'It is my will that secular rights be in force among the Danes according to as good laws as they can best decide on... Among the English, however, whatever I and my advisors have added to the customs of my ancestors for the benefit of all the nation (should prevail).' Reasonable pragmatism helped develop a peace made secure, through time, by trade. 

This context of recognising localised sovereignty is the Gordian knot that has to be unravelled through Brexit; but in that domain the Napoleonic rationalism of an EU that needs a 3000 page constitutional document is a block.  It circumscribes the 900 page annexe of the Combined Nomenclature of the Common Customs Tariffthat defines the regulatory marketplace in EU trade and the Rules of Origin set by the EU in specific legislation based on WTO frameworksand then the technical and regulatory standards that apply in each industrial sector , for example in electrical goods. 

In the above you can grasp the mischievous nature of the term “common rule book”; a layered melange of impositions required by what F A Hayek (pictured) called “rational constructivists” intent on planning not just the boundaries but the process of commercial trade.  In the modern world, these intrusions are only rarely based on democratically agreed legislation; they are imposed by bureaucrats who administer the rule books. 

And here lies the issue for Britain. Can these strictures be seen to be “reasonable” in any practical sense from the point of view of trade between nations and King Edgar’s “benefit of all the nation”?  I say “practical” and avoid the use of the word “pragmatic” which, having been adopted by the proponents of the Chequers plan as a smokescreen to hide what is essentially a capitulation to the status quo above, does not seem to argue a case for UK sovereignty at all. Jacob Rees-Mogg et alhave stressed this repeatedly.

To answer this, we need to consider the political economy of choices made by the bureaucratic agents who run the rule book.  These agents consist of a hidden “parliament” of diverse special interests centred on Brussels.

First, the legislating civil servants of the Berlaymont who wish to preserve their control over the way trade is carried out. While made real through an essentially planned mercantile approach, this in practice means avoiding the risk of consumer harm that might affect their reputations, supporting faddish progressive lobby interests such as environmentalists and the food police that allow them to enjoy new policy missions, while not upsetting business interests as much as possible.

Second, and linked to the previous item, the corporate interests who want trade to be controlled for their benefit. Thus, Brussels is awash with trade associations and lobbyists, “helping” to design legislation, regulations and standards. In general these are representatives of larger companies who by definition work in areas where they are selling existing products into existing markets, and so have the spare cash flow to support lobbying manoeuvres in Brussels.  True innovators are disliked among bureaucracies; they disrupt the status quo and create new commercial outcomes and processes that change cosy power-sharing structures within planned trade. Think Amazon.

Third, vested interests of the non-profit sector. In today’s world I would lump together environmentalists, social collectivists, health sector plaintiffs, academics and scientists and, indeed, politicians into this group of agents and agencies. They are very powerful in an age of social media and its instant response requirements for the body politic.  If you study the work of the EU parliament you will find its “democracy” is genuinely thin; rather it is a conduit for a fatter rule book based on the incentives of the agents and agencies cited here.  

This cabal of interests is the authoring committee of the common rule book. They make the rules, they write the book, claiming their measures are fully rational in intent while the rest of us just have to lump it as we do not have access to centralised EU power. “We” here includes 28 state governments who jostle for a share of budgets, but with no clarity or coherence in policy choices; horse trading rules. Without any constitutional restraint on the intrusion of Berlaymont style “government” by the EU  across its territory; without the localisation of reasonable diversity to allow freedom to do things differently, we face increasing democratic danger and economic decline.  Why?

The answer is money, innovation and knowledge.  Let’s take an example of a low voltage electrical device that is governed by a certificate of conformity under the low voltage directive (LVD) of the EU. To protect consumers, devices are meant to be marked with a “CE” mark. This does not necessarily mean that a device has been tested to a particular standard, but rather that the producer has stated that compliance to various standards is in place.  If you read the guidance by the LVD working groupyou will find that there is an additional requirement that two digits of the year of conformity should be put onto the device label.  Market surveillance authorities (that’s the underfunded and overworked UK trading standards officers) are allowed to force withdrawal of a product from the market if this condition is not satisfied. These by the way are devices from which you cannot get a painful electrical shock; most are 12 volts, many are 3.4 volts. 

However, this enforcement has to be done in a “proportionate manner” defined by something called the “Blue Guide” on the implementation of rules.  One suspects the corporate lobbyists got into the working group proceedings and shouted foul. This is a 156 page document which is “intended to contribute to a better understanding of EU product rules and to their more uniform and coherent application across different sectors and throughout the single market”. That is, it isn’t anything to do with low voltage devices; it’s a document about how to centrally plan commerce. 

If, by now, you are getting confused, you make my point; this is how the EU common rule book “operates”. You can see why the detail of negotiations is proving so tortuous.  Worse, I am not convinced any of the back room negotiators know what they are trying to achieve.  If I import 12 volt power supplies from South Korea that are not correctly CE labelled by EU standards but are for use within the UKafter Brexit, should I expect a Trading Standards officer to appear in my factory and tell me to desist? If a system part has a new cheaper solution outside of the common rule book, am I allowed to use it? Are UK trade associations allowed to change the rule books post-Brexit for internal UK sales or exports? No-one seems to know. 

In his work “Law, Legislation and Liberty” F A Hayek said that when legislation becomes so obscure that those to whom it is directed no longer understand it or have the time to study and understand it, this becomes a deep intrusion on liberty with potentially dire consequences as ordinary individuals turn away and ignore laws.  Democratic consent to be governed is deeper than a simple vote once every few years; we have to consent to the rules imposed on us.

Tens of thousands of these impositions that have been manufactured across the EU rationalist codifying agenda.  In this attempt at regulatory harmonisation, the very detail demanded creates a vast array of sub-rules and required permissions that can be used to preventtrade taking place – even between EU members. Wherever, you have such rules and bureaucrats you will have paperwork, and where you have paperwork you will have clerks who need to make sure the paperwork is correct, especially in countries where low level administrators are earning the only good salaries and pensions available.  UK business has for many years engaged in a crusade to streamline paperwork; we are rather good at it – a trading nation on an island has had to become so. 

The downside? This all costs traders a fortune, and they sell less.  But more than this, it makes business more risk averse, a new product means new paperwork.  So commoditisation of simpler models, avoiding high-value-added specialist sales, overseas warehouses swallowing working capital, and late payment cash flow engineering become normal business practice.  Trade growth and value declines as the EU’s recent economic record shows.  Europe’s knowledge of how to innovate is evaporating because of the cost of the common rule book, which has become a political tool of the EU unification project. 

The oddity is that easy importing offers a vital economic advantage. Contrary to the commonly held view that it is exporting that matters, importing cheaper goods helps consumers live better and they often spend more on other locally made items. Importing better goods that producers can see consumers buying tells manufacturers what to make; competition then lowers prices.  Free trade is a win-win arrangement as nearly all economists will tell you. 

The idea that the EU is going to cut its own throat by denying us our imports of drugs, air flights or cars is farcical.  They live off our spending.  We should not fear moving towards a free trade agreement, even under WTO rules.  The one thing we really do want to avoid is sticking with the so-called “common rule book”. It’s a real barrier to growing our world trade and the creation of wealth.

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